# Just Entered Into



## techrun (Nov 7, 2012)

a meeting how to invest and who to lend money to over the next 24 months. 

the bank is taking recession measures to approach lending strategies the next several years. 

one type of company were aren't investing in or lending money to is most of the servicing companies. 

as the economy degrades, individuals and companies will cut cost by eliminating many of the services they currently pay for. 

this will only deepen the recession

in addition, we are looking at how deflation will affect our collateral values. 

i can tell you, we are not investing or lending money to anyone who builds houses. 

some expect a 15-25% deflation of home values in many parts of the country. 


just thought i'd share a viewpoint from inside the brain trust, or lack thereof...:factor10:


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## Gians (Nov 8, 2012)

techrun said:


> .....some expect a 15-25% deflation of home values in many parts of the country......


Interesting percentages, we're just beginning to see a turn around in our area of NorCal. I've read that most of the buying that is fueling the current rise is being done by investors and folks who lost their homes earlier in the 'great recession' and are trying to get back into a home. Seems first timers with enough cash would make out best.


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## horseman09 (Mar 2, 2010)

JMHO, but while we will certainly see deflation in certain sectors of our economy, hyperinflation will be the real killer.

Just wait until people see their dollar buying less and less (that's already happening) until the point is reached were a choice must be made between paying the electric bill or buying food; or paying the heat bill and paying your rent/mortgage; paying for your prescription drugs or paying your property taxes. The result will be lots and lots of very angry people.

Those on unearned entitlements (welfare, foodstamps, heaters' assistance, renters' assistance, wic, enhanced wic, section 8 and all the other freebies) will start the rampage in the streets, and those on earned entitlements (Social Security, Medicare, VA, pensions, 401ks, etc) will, understandably, join in.

Those people investing in paper (only to find the paper saying you own 5000 ounces of silver is worthless) will certainly join the rampagers -- with very good reason also. Who doesn't get very, very angry when they find they have been swindled out of their entire life savings, even if the swindler is the United States Government?

Back to the OP, perhaps the best investment strategy might be those *tangibles* with intrinsic value?

Just a thought.


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## Bobbb (Jan 7, 2012)

House value, ultimately, boils down to a multiple of a person's income. If incomes fall then house prices have to fall as well otherwise the pool of eligible buyers gets smaller and smaller.

I think that the deflation protection policy is a pretty wise tactic to use to safeguard bank's capital.


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## Indiana_Jones (Nov 15, 2011)

I have an old hunting and fishing buddy who recently retired from his life-long career as investment counselor, business economics professor at Ohio State University, and probably several other investment/economics jobs down through the years.

At a get together with friends last weekend he told us that he is advising people to pull their money out of any self directed retirement funds, 401K accounts, annuities, insurance savings accounts, etc.

He studies the US economy very seriously as well as the world economy and his findings at this time in our history is that all private savings accounts are in grave danger. He and his colleagues think that we are on a razor thin edge of total financial collapse (not this fiscal cliff that everyone is talking about). Due to our national indebtedness we are at a point of vulnerability never before experienced. The USSR experienced a tiny bump-in-the-road several years ago and it nearly toppled their entire nation into chaos. Our situation is 1,000 times more dangerous and we seem to be ignoring all the signs.


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## techrun (Nov 7, 2012)

Bobbb said:


> House value, ultimately, boils down to a multiple of a person's income. If incomes fall then house prices have to fall as well otherwise the pool of eligible buyers gets smaller and smaller.
> 
> I think that the deflation protection policy is a pretty wise tactic to use to safeguard bank's capital.


Agreed, personal income can be dropped by inflation, lack of raises and many other factors.

I used to have my cell phone paid for directly by my employer. Now, they have to run it through payroll, which means I pay tax on it now. Great, I just lost a certain % of my overall income.


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## labotomi (Feb 14, 2010)

horseman09 said:


> JMHO, but while we will certainly see deflation in certain sectors of our economy, hyperinflation will be the real killer.
> 
> Just wait until people see their dollar buying less and less (that's already happening) until the point is reached were a choice must be made between paying the electric bill or buying food; or paying the heat bill and paying your rent/mortgage; paying for your prescription drugs or paying your property taxes. The result will be lots and lots of very angry people.
> 
> ...


Usually when hyperinflation occurs, wages adjust somewhat accordingly. Wages probably won't keep up and purchasing power will decrease, but supply and demand still affects pricing. This in no way implies that it won't be painful.

If the Federal Reserve ever loses it's "independence", expect hyperinflation very soon. The Board of Governors is going to increasingly call for budget restraint. They've been vocal already, but if the deficit isn't addressed soon, expect them to become more vocal and critical of fiscal policies.


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## BillS (May 30, 2011)

A lot of companies are moving into survival mode. Cutting unnecessary expenses, unnecessary people, and hoarding cash. Corporations are at all time high in cash reserves. It shows the out right fear about the economy. The companies with the deepest pockets have the best chance to survive this.


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## horseman09 (Mar 2, 2010)

labotomi said:


> Usually when hyperinflation occurs, wages adjust somewhat accordingly. Wages probably won't keep up and purchasing power will decrease, but supply and demand still affects pricing. This in no way implies that it won't be painful.
> 
> If the Federal Reserve ever loses it's "independence", expect hyperinflation very soon. The Board of Governors is going to increasingly call for budget restraint. They've been vocal already, but if the deficit isn't addressed soon, expect them to become more vocal and critical of fiscal policies.


But wages aren't entitlements. Entitlements will lag far behind inflation, particularly hyper-inflation.

As for wages, the cost of health care will cancel out COLAs, IMHO.


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## VoorTrekker (Oct 7, 2012)

horseman09 said:


> ...Those on unearned entitlements (welfare, foodstamps, heaters' assistance, renters' assistance, wic, enhanced wic, section 8 and all the other freebies) will start the rampage in the streets, and those on earned entitlements (Social Security, Medicare, VA, pensions, 401ks, etc) will, understandably, join in...QUOTE]
> 
> I disagree. The Communists in government will fund their proxies no matter what the destructive cost to our country. A complete collapse and destruction of our economy would play into their hands to "reform" the system to communism and national socialism.
> 
> The rest of us will suffer and be held in involuntary servitude until we are liberated by a third party outside force.


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## techrun (Nov 7, 2012)

VoorTrekker said:


> horseman09 said:
> 
> 
> > ...Those on unearned entitlements (welfare, foodstamps, heaters' assistance, renters' assistance, wic, enhanced wic, section 8 and all the other freebies) will start the rampage in the streets, and those on earned entitlements (Social Security, Medicare, VA, pensions, 401ks, etc) will, understandably, join in...QUOTE]
> ...


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## labotomi (Feb 14, 2010)

horseman09 said:


> But wages aren't entitlements. Entitlements will lag far behind inflation, particularly hyper-inflation.
> 
> As for wages, the cost of health care will cancel out COLAs, IMHO.


I don't think it's anything like COLAs.

Look at what has happened in countries that have undergone hyperinflation. Prices aren't considered to be stable even for a single day. Wages were negotiated weekly or even daily, paid in cash and that was immediately spent on anything tangible that was available because next week that money would be worth far less.

As for the entitlement bunch... I have no idea how that would be handled or not handled.


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## horseman09 (Mar 2, 2010)

labotomi said:


> I don't think it's anything like COLAs.
> 
> Look at what has happened in countries that have undergone hyperinflation. Prices aren't considered to be stable even for a single day. Wages were negotiated weekly or even daily, paid in cash and that was immediately spent on anything tangible that was available because next week that money would be worth far less.
> 
> As for the entitlement bunch... I have no idea how that would be handled or not handled.


The *unearned* entitlement bunch are the ones who, IMHO, could be the spark that plunges the country into anarchy and violence on a massive scale. Many of them have never worked, nor have their pappies nor their pappies' pappie. They truly believe we makers are put here on earth to provide for them -- the takers.

But they would just be the spark that ignites the country. Or....maybe the country will continue on as it always has?


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## invision (Aug 14, 2012)

BillS said:


> A lot of companies are moving into survival mode. Cutting unnecessary expenses, unnecessary people, and hoarding cash. Corporations are at all time high in cash reserves. It shows the out right fear about the economy. The companies with the deepest pockets have the best chance to survive this.


Yes but what will all that cash truly be worth, if the USD is further downgraded and devalued???


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## labotomi (Feb 14, 2010)

horseman09 said:


> The *unearned* entitlement bunch are the ones who, IMHO, could be the spark that plunges the country into anarchy and violence on a massive scale. Many of them have never worked, nor have their pappies nor their pappies' pappie. They truly believe we makers are put here on earth to provide for them -- the takers.
> 
> But they would just be the spark that ignites the country. Or....maybe the country will continue on as it always has?


Those on entitlements can set things in motion, but luckily they aren't likely to be prepared (for anything). If things go bad, they'll continue to expect the gov to bail them out and will run out of just about everything before it dawns on them that they're screwed.

I think a huge majority of those won't make it past a month if the money stops becomes insufficient due to inflation. Without money for gas they won't travel very far either.

At least those who actually work will have some negotiating power


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## labotomi (Feb 14, 2010)

invision said:


> Yes but what will all that cash truly be worth, if the USD is further downgraded and devalued???


More than a business venture that loses money due to cap and trade/obamacare/epa regulations etc.

Companies aren't going to gamble with the uncertainty surrounding a president intent on destroying capitalism.


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## techrun (Nov 7, 2012)

labotomi said:


> Those on entitlements can set things in motion, but luckily they aren't likely to be prepared (for anything). If things go bad, they'll continue to expect the gov to bail them out and will run out of just about everything before it dawns on them that their screwed.
> 
> I think a huge majority of those won't make it past a month if the money stops becomes insufficient due to inflation. Without money for gas they won't travel very far either.
> 
> At least those who actually work will have some negotiating power


Most of them are what I call 'centralized'. They all live in a certain part of each city. They will turn on each other rather quickly.


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## labotomi (Feb 14, 2010)

techrun said:


> Most of them are what I call 'centralized'. They all live in a certain part of each city. They will turn on each other rather quickly.


That's why it's funny when they riot. Just sit back and watch them destroy their own neighborhood, they'll get bored in a few days and it'll be over. If outsiders get involved, the rioters get sympathy from other areas of the country and it spreads.

Nothing good comes from getting involved in riots unless you absolutely have to.


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## Bobbb (Jan 7, 2012)

labotomi said:


> That's why it's funny when they riot. Just sit back and watch them destroy their own neighborhood, they'll get bored in a few days and it'll be over.


You noticed that too, huh? I never could understand the stupidity of firebombing your own neighborhood in a riot. If I was a riot leader I'd get everyone into our cars or take a bus/subway, and head to the rich, liberal, part of town and spread some diversity love over there and leave it looking like Beirut after some shelling.

The whole point of a riot, most times, is to exert the power of the people and to influence some political decision. Flexing the people power muscles by destroying the neighborhoods of the high and mighty will get their attention and make them more willing to bend to your wishes than would be the case if you burn yourself out of your own neighborhood and leave the power brokers all safe and cozy in their homes watching the evening news as you destroy your poor neighborhood.


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## nomadjanet (Mar 28, 2011)

Indiana_Jones said:


> At a get together with friends last weekend he told us that he is advising people to pull their money out of any self directed retirement funds, 401K accounts, annuities, insurance savings accounts, etc.
> 
> .


So where can you put the money? We have substaintial money in annuities, did your friend say how these would be affected negatively other than the fact that inflation might eat up the value of the draws?


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## invision (Aug 14, 2012)

nomadjanet said:


> So where can you put the money? We have substaintial money in annuities, did your friend say how these would be affected negatively other than the fact that inflation might eat up the value of the draws?


Well considering annuities are funds that insurance companies invest for you, in an economic collapse they will most likely be as valuable as what their investments have done. For example, say the funds are invested in the market, and the market collapses, then your investment has collapsed as well value wise...

I wouldn't remove them due to penalties and such, but I would look at other investment opportunities with any access income, such as on hand gold & silver...


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## invision (Aug 14, 2012)

labotomi said:


> More than a business venture that loses money due to cap and trade/obamacare/epa regulations etc.
> 
> Companies aren't going to gamble with the uncertainty surrounding a president intent on destroying capitalism.


Very true, but what I mean is companies like say Cisco and Apple with Billions of cash on hand... They are preparing for bad times, stocking up on cash to survive a second recession, however if the USD collapses, hyperinflation occurs, SHTF basically... All that cash on hand is worthless... That is why at end of month, instead of keeping revenue in my business account I am buying silver and gold on hand... It is a little gamble, PMs could go down and I could lose on it, but I am betting on the historical hedge that valuation of the commodity will go up in value...

I don't see Cisco or apple doing that.... So could these billions be wasted?


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## labotomi (Feb 14, 2010)

invision said:


> Very true, but what I mean is companies like say Cisco and Apple with Billions of cash on hand... They are preparing for bad times, stocking up on cash to survive a second recession, however if the USD collapses, hyperinflation occurs, SHTF basically... All that cash on hand is worthless... That is why at end of month, instead of keeping revenue in my business account I am buying silver and gold on hand... It is a little gamble, PMs could go down and I could lose on it, but I am betting on the historical hedge that valuation of the commodity will go up in value...
> 
> I don't see Cisco or apple doing that.... So could these billions be wasted?


You're betting on the USD collapsing wich is a HUGE "IF"

I know the reason my employer is sitting on billions in cash and it's not recession related. The last recession we went on a spending spree and bought up several companies large and small that didn't have the cash to weather the storm. We have that opportunity again right now, but aren't going to take a chance. We use the best pollution controls available, but the Cap and Trade/Carbon Credits could put us at a huge disadvantage when competing with imports from countries who do little if anything regarding pollution. Why add more capacity that would be subject to Cap and Trade?

As far as hyperinflation is concerned, there's less of a chance of that happening right now than deflation. Interest rates are still at extremely low levels and the economy is still stagnant. The Fed is still trying to keep the economy from contracting.

When taxes increase, there will be less disposable income for just about everyone. It's possible that it will spark a deflationary cycle.

It's not easy to predict the future. I know a lot of talk on these boards is hyperinflation because of the Quantitative Easing, but that easing hasn't triggered hyperinflation because we're still hovering on the edge of deflation. It's a fine line and if we're lucky, we can slowly step away from the edge instead of falling in either direction.

You're purchasing of gold and silver could be a good decision or it could be a bad decision, but that's the nature of speculative investing. I have quite a bit of silver and a decent amount of gold, but I'm in a holding pattern. I don't plan on adding more in the near future.


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## invision (Aug 14, 2012)

labotomi said:


> You're betting on the USD collapsing wich is a HUGE "IF"
> 
> I know the reason my employer is sitting on billions in cash and it's not recession related. The last recession we went on a spending spree and bought up several companies large and small that didn't have the cash to weather the storm. We have that opportunity again right now, but aren't going to take a chance. We use the best pollution controls available, but the Cap and Trade/Carbon Credits could put us at a huge disadvantage when competing with imports from countries who do little if anything regarding pollution. Why add more capacity that would be subject to Cap and Trade?
> 
> ...


I do expect a collapse of the USD and economy in the next 3-4 years... The debt level can not be maintained, and it is only time that is the factor that will determine when it happens... The country is to decided on opinions to fix things... Heck, just look at Obama's position on raising taxes yet refusing to cut spending... While republicans want total opposite.


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## labotomi (Feb 14, 2010)

invision said:


> I do expect a collapse of the USD and economy in the next 3-4 years...


Very well.

I expect economic hardship bordering on if not in an actual collapse. This doesn't mean I expect hyperinflation. Look at what's happening in Europe. Some countries are in very bad shape economically and have had to take some very hard measures, but hyperinflation hasn't taken over.

I guess we'll know in 3-4 years.


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## invision (Aug 14, 2012)

labotomi said:


> Very well.
> 
> I expect economic hardship bordering on if not in an actual collapse. This doesn't mean I expect hyperinflation. Look at what's happening in Europe. Some countries are in very bad shape economically and have had to take some very hard measures, but hyperinflation hasn't taken over.
> 
> I guess we'll know in 3-4 years.


I think that an event could trigger the hyperinflation... Take for example, a few terrorist attacks on key oil refineries in US, cyber attacks on power grid, or melt down in Middle East... Anything that could inhibit gas usage, would cause costs to soar getting supplies to stores... In addition, dumping US debt by foreign nations, removing USD world currency for oil and gold values would cause massive devaluation of USD, which in turn would cause costs of services and products to skyrocket... The bottle of coke being $1.25 today would still be $1.25 only if the dollar had same value, instead it could cost $3.25 or higher...

Don't you agree?


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## Startingout-Blair (Aug 28, 2012)

I've wanted to invest in gold as well, but seeing it at an almost all time high, I fear making the purchase and losing half the value or more if/when PM prices drop. Silver, on the other hand, may be a good purchase. Even if the prices drop, unless I purchase a massive amount, the loss could be better handled


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## labotomi (Feb 14, 2010)

invision said:


> I think that an event could trigger the hyperinflation... Take for example, a few terrorist attacks on key oil refineries in US, cyber attacks on power grid, or melt down in Middle East... Anything that could inhibit gas usage, would cause costs to soar getting supplies to stores... In addition, dumping US debt by foreign nations, removing USD world currency for oil and gold values would cause massive devaluation of USD, which in turn would cause costs of services and products to skyrocket... The bottle of coke being $1.25 today would still be $1.25 only if the dollar had same value, instead it could cost $3.25 or higher...
> 
> Don't you agree?


I agree that if those events were to happen it probably would result higher inflation due to the imbalance between supply and demand. However, hyperinflation is the erosion of purchasing power due to an excessive growth of the money supply. These are similar but distinctly different situations.

The first group of scenarios you present would cause prices to rise, but it would be due to supply and demand.

The second group would erode purchasing power of the USD in comparison to other currencies. The cost of a foreign item would become more expensive while the domestic item would remain relatively constant. This would cause a decrease in imports and increase in exports which is actually good for an economy.

Look at China and how they keep their currency value low compared to the dollar. If they let it rise to it's natural level, it would hurt their export driven economy.

I know that the Federal Reserve is not concerned much about the possibility of excessive inflation but rather the possibility of entering into a deflationary period. Whenever their is an inflationary concern, interest rates rise. Those rates are being kept at extremely low levels due to the higher risk of deflation.

Here's a chart that predicts the probability of beginning a deflationary cycle. There are many assumption used when creating these predictions so basically their an educated guess using the numbers they consider pertinent.









I know the hot topic is hyperinflation because it's more pronounced over a shorter time, while deflation is a long drawn out scenario. I'm not saying that hyperinflation won't happen especially with the increase in the monetary supply created to combat deflation. Most believe the Federal Reserve can't really cause or prevent inflation or deflation, they can only react in an attempt to limit the severity.


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## Gians (Nov 8, 2012)

Startingout-Blair said:


> I've wanted to invest in gold as well, but seeing it at an almost all time high, I fear making the purchase and losing half the value or more if/when PM prices drop. Silver, on the other hand, may be a good purchase. Even if the prices drop, unless I purchase a massive amount, the loss could be better handled


I agree, silver in small denominations is a safe start...for the same reason you give. In the late 70s I made a note that people(supposedly in the know) were saying Gold would hit $2,000 in a short time. Instead, due to several factors, the SHTF in precious metals(PM) starting in early 1980. Personally I think the current metals market is overdue for a correction, and when it occurs it may be some time before it starts climbing again. Lots of companies are making a killing on selling metals, that's fine, except for the folks who may need to cash in at an inopportune time.

added: if you can....don't buy high and sell low


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## BadgerPeak (Sep 25, 2012)

With real inflation at about 6%, gold and silver aren't just good for if the SHTF, in fact, they may be more important now. Without gold/silver, right now, your money is losing 6% of its value per year. It doesn't take too many years of that till you don't have much left to be eroded by hyperinflation.

Even if gold/silver drop by 50%, in the long run, that's better than your cash will do. In the long run, you *can't* lose money on gold and silver in a country that maintains inflation as a way of life.

FWIW, we consider silver the better investment of the two.


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## techrun (Nov 7, 2012)

If the euro is done away with like many speculate, the almighty dollar will soar again. Gold/Silver will drop like a rock. 

But that is speculation.


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## BadgerPeak (Sep 25, 2012)

techrun said:


> If the euro is done away with like many speculate, the almighty dollar will soar again. Gold/Silver will drop like a rock.
> 
> But that is speculation.


In the short run, you are correct. In the long run, our economic problems won't go away because of another nation's problems.


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## techrun (Nov 7, 2012)

BadgerPeak said:


> In the short run, you are correct. In the long run, our economic problems won't go away because of another nation's problems.


Correct. There will come a time when the can gets too big to kick down the road.


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## Immolatus (Feb 20, 2011)

techrun said:


> If the euro is done away with like many speculate, the almighty dollar will soar again. Gold/Silver will drop like a rock.
> 
> But that is speculation.


Hmm. I'll buy the basic premise, but I'm not so sure. I would think that maybe in the extreme short run the dollar would rise in value, but...
If the Euro collapsed/disappeared, the assumption made here that there would be a massive 'flight to quality' (hah) into dollars/UST's whatever, but that flight would also go into pm's, no? Yes, not enough to offset the flight into dollars, but there would be a lot of renewed interest in gold.
Also, you have to assume that if the Euro collapses because of the massive debt incurred by the periphery which now includes France, some would take a harder look at the situation here and decide that maybe its fiat currency in general thats the problem.
I guess it kinda depends on how it goes down. If the Euro just falls apart under its own weight then the whole system collapses, dollar included. If theres some kind of orderly dismantling process (unlikely but possible) then maybe theres very little effect on the dollar.


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