Anyway, since it can't be hidden that Mr. Buffett hoards silver, it seems prudent to imitate what he does, not what he says. This seems to be what
you are saying in the larger context.
ever hear of the Hunt brothers? If not, you'd enjoy reading about their attempt to corner the silver market in the 70's. They lost billions, and
drove several of their arab clients to the brink of bankruptcy.
I don't think this thread is about making big bucks is it?
I've already said that hedging and profiting amout to the same thing. Mr. Buffet defnitely is trying to make big bucks. If that's not your goal,
then you almost certainly don't want to emulate his tactics.
You have confidence in the dollar in spite of almost no policing of corporate activity or misconduct? I know for a fact that insider trading happens
all the time without reprisal. What kind of future exists for a nation which doesn't police its institutions and then also exports that flawed
monetary policy to the third world in an effort to control those poorer nations?
I wouldn't say I have
confidence in the dollar. Maybe a better way to say it is that I am sceptical at the news of the dollar's eminent
demise. I suppose I'm confident that its value will not go to zero before I can unload it on someone else. Along with my Elvis plates and civil war
chess set.
Anyway, all I am saying is that no nation can act in a fiscally irresponsible manner forever without paying a penalty. It seems to me like the US is
being set up for a fall economically.
I agree with everything you just said.
The problem is, what to do about it. And remember that if you spend a lot of money on precautions, and then later turn out to have been wrong, then
you'll have paid a huge "opportunity cost" for wasting your efforts when you could have been enriching yourself.
See, it's not just a question of whether your instinct is right or not, it's a question of "what is the price of being wrong?" So you'll want to
tailor your plans so that, even if you're wrong, and nothing horrible happens to the world, you still go right along with you savings intact. Sound
right?
I'll give you and example: Y2K. I talked to a number of experts, who assured me that 'nothing can go wrong.' I had faith in their abilities, but
not in their omniscience. What if things went wrong? Maybe not TEOTWAWKI, but say, the power went off for a couple of weeks, there was social
unrest, and no more gasoline. Frau Dr. and I had a long talk, and I convinced her to prepare for it. But she made me promise not to buy anything we
would not use anyway, and not to tie up our finances in stuff that would be worthless if the world
didn't end.
So I made preparations, and turned out not to need them. And the price of gasoline
did go up, so we had saved money by using my stockpile in
the shed. We drank all the bottled water. And we finished the pallet of toilet paper about a month ago. (just kidding.) But the fact is, I was
prepared, and didn't put my family out. In fact, we still use the barbecue grill, and love to go camping with the gear we purchased. So, I got
prepared, and had confidence, with little "opportunity cost."
Now, if you go sticking ingots under your bed, and nothing goes wrong, what will happen? Well, you'll be paying 10 dollars an ounce this week, which
is well above the average price of the last decade. So you may have a pretty lumpy mattress for a decade or two, if things don't nose dive, and you
end up waiting for inflation to appreciate your stockpile for you. But, I guess you could go into casting your own jewelry, or dentistry, or
something in the meantime. (note: I'm not saying there's NO silver under my own mattress, btw)
***
I don't want to spend the rest of my life posting about this stuff, and most people here probably don't want to spend a thousand hours of their
lives reading a bunch of economics textbooks; so I'll tell you what advice I give my relatives, and the folks I eat lunch with after church.
There is a thing called the "Harvard Plan." You won't find it on the web (I just checked) or in any textbook printed after 1960. Because there is
no way for a broker or certified financial planner to make any money off of you. I use a modified version of the Harvard Plan for my retirement
savings, and would suggest you do, to. In fact, if you go to a CFP, they'll give you the same thing, with bells and whistles to make you think
you're paying for the "perfect balance" of investments.
The Harvard Plan is how Harvard University got so rich. (25 billion, according to wikipedia), starting with a few hundred pounds in 1780. Now before
you say, "sure,
I could be a billionare if you give
me 227 years, too;" keep in mind that there have been a revolutionary war, a civil
war, two world wars countless smaller wars as well as countless recessions, depressions, and bank collapses (especially in New England!) since then.
A lot of other institutions from those days are gone. But HAH-vahd is still trucking.
The plan is this. You divide your money in thirds. With one third, you buy US government bonds. Not civil or corporate bonds, but governement bonds
(T-bills, as soon as you can afford them). The next third, you buy the Dow Jones 30 stocks. The final third you keep in cash.
Now, every quarter, you pull out your receipts and a newspaper, and you balance the numbers. If your bonds have been stagnant, and your stocks shot
up, then you
sell enough stock to buy enough bonds to equal things out. The same with the cash. If your bonds are worth $100, your stocks are
worth $150 and you have $200 in cash, you take $50 and buy bonds, so that all three are worth the same $150. You blindly do this, every quarter,
regardless of what newspapers say.
The magic of this system is that it keeps you doing the OPPOSITE of the other investors. When stocks are going up, you're slowly getting out of
them. When bonds depreciate, and are relatively cheap, you are buying them the whole time.
Now, don't diss this system until you've done it for 3 years (enough to test it over the hump of a market cycle).
What you'll find is, while you take hits, you also keep buying through the cheap times, and get out when things are overpriced. This is the OPPOSITE
of what the crowd does.
For instance, notice that this thread was posted, about silver being hoarded by buffet, only AFTER silver has declined from $13 to $10/oz. In other
words, people chasing the high. (Not that I'm recommending either a buy or a sell).
I modify the plan, since I want to own some bullion, at home in case of catastrophe. So I subdivide my "cash" envelope into a third
"gold/silver," a third euros, and a third USD. Not because those are "long term stores of value," but so that I have my bases covered in a
hurricane. In the long run, NOTHING is a long-term store of value.
I even have a formula for adjusting my gold to silver ratio, but that's getting a bit arcane, for anyone who doesn't want to watch the price of the
metals all day.
This system will do several things for you:
1. It gets you to quit watching the markets all the time. most losers overtrade.
2. It turns you into a contrarian, even while you actively increase your stake in the market.
3. It prepares you for sudden recession.
If you study the onset of recession (I have) you'll see that the downturn in stocks is followed by an upsurge in bonds (usually referred to as "a
flight to quality" or some such.) When the cash is routinely worth more than the other two, you are approaching the market bottom. A handy
indicator, that.
The harvard plan makes you buy stocks as their value plummets, and sell bonds right when demand is the highest. Then as cash becomes king again, you
end up buying, and the market cycle starts over.
Now, why is this a preparation for TEOTWAWKI?
1. You're holding a lot of bonds. The super-rich hold bonds. Which means if America is going down the tubes, the govt will pay its bond dues NO
MATTER WHAT. (They always have, without fail. Because the rich insist on it.) You'll hold a rare instrument of value right when people want it.
2. In a collapse, you functionally won't be able to buy stocks fast enough to balance your portfolio. And so you won't be "chasing the bottom,"
like all of the panicked people trying to balance their portfolios on an hourly basis.
3. You always hold cash (and bullion, if you're like me). So you're prepared for a REAL disaster, like a hurricane or some such.
Yes, you'll lose some value. Of the 3, two of your envelopes will be worthless in a financial collapse. But by definition, the remaining envelope
will be able to feed your family for a couple of years.
What if NONE of it has any value? Then none of it mattered, and the aliens will dictate how you will serve your new galactic overlords, regardless.
Listen, I was convinced in the early 90's that a collapse was eminent. I had gotten friendly with some militia members, I was trying to stockpile,
etc. But a good friend turned me on to the Harvard plan. And in '97 and 2000, I made absolute killings. And I was out of the market in 2001,
during that sickening decline. And in the process, of rebalancing my stocks, I found a way to price non-volatile stocks so they wouldn't change
rapidly and force me to rebalance my portfolio all the time.
note: I do not advocate the ownership of specific stock, or suggest whether the market will go up or down from here. The harvard plan is how I invest
my retirement, not my speculative portfolio. The best insurance against being wiped out in a collapse is to be making money and watching out for
danger.
I'm tired of typing for a while.
.
The simple fact for me, and I would guess many, many
people, is that the subject of money and particularly investing, is over my head. I simply don't know much about it other than I never seem to have
enough and that I just keep blindly putting it into my 401K with the hope that some day I can retire comfortably. I know that's not smart but I
don't know jack about it and feel I would be doing more harm than good by trying to predict which way the market's going to turn. 
