Which brokers do you recommend?

I'm pretty agnostic on this, but I'd pay attention to whether or not they have any housing exposure.

If you're under the SIPC limits I'd not be all that concerned unless you are daytrading (where a lockout for a day or three would kill you); in that case I favor the guys like Think as they're far less likely to get buried under a derivative ****storm.

Sorry folks. You're talking about Defcon 1 on my get through the grief plan.
I'm at Defcon 3. The Bernanke Move vs E*Trade kept me from going to Defcon 2.
If you think a major disruption "could" happen buy a clue--get a plan.
Talk to someone who lived through the depression. My 85 year old inlaws were a great help. And they are spot on Defcon 3 as well.
I'm not a survivalist. Like Karl I'm not planning on a total crash I just want to be prepared. Call it a trailing stop.
I bought soap and washing supplies two years ago.

What about ETFs where JP Morgan is custodian?

In all, 9,000 banks failed during the decade of the 30s. By 1933, depositors saw $140 billion disappear through bank failures. (google)

It's been a while since I studied FDIC but probably a good time to read up. My understanding is the system relies on the banks themselves to insure eachother. The paper I read a while back made a great case for this system being totally worthless in times of a real crisis.

Just the fundamentals of a fractional reserve system make me inclined to believe FDIC can't work.

As for T-Bills being the answer (and I own a bunch right now), you really have to consider the possibility of an Argentina type dollar devaluation which could have you waking up to a 50-70% decline in the real value of those bills. In the extremely leveraged world full of derivatives, who's to say it can't happen.

So I know Karl is not a fan of gold but had he lived through the Argentina episode he'd probably feel differently about its role in a crisis.

You're assuming you will be able to legally own Gold during that crisis.

I am assuming that if Gold is the only safe place to hide, the government will confiscate any meaningful amount of it.

Now what?

In a true hyperinflationary blowup I want to be in equities and levered to the balls, because equities will appreciate roughly as fast as the dollar goes down (real dollar terms, no change)

Karl,

What do you predict would happen to gold futures contracts in a financial armageddon situation? I own DGL that invests in gold futures and have not really considered the doomsday scenario of the implications of the government confiscating gold.

Credit Risk

When the Master Fund enters into futures contracts, the Master Fund is exposed to credit risk that the counterparty to the contract will not meet its obligations. The counterparty for futures contracts traded on United States and on most of foreign futures exchanges is the clearing house associated with the particular exchange. In general, clearing houses are backed by their corporate members who may be required to share in the financial burden resulting from the nonperformance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearing house is not backed by the clearing members (i.e., some foreign exchanges), it may be backed by a consortium of banks or other financial institutions. There can be no assurance that any counterparty, clearing member or clearinghouse will meet its obligations to the Master Fund.

I would expect that in Armageddon the only commodities worth a damn are physical delivery of shotguns, shells and soap.

In that case, you can keep your houses, I'll be on a sail boat with a small arms cache and a chest of gold coins for bartering...YARRR

If you think I'm taking worthless dollars for those 3S you're mistaken. Jewelry, silver, gold and that's it. Ops. Add gem stones or high grade gem rough. I cut them myself.

KD, what are your thoughts on Munis? I have a bunch of my money at Vanguard in a muni money market fund that I never touch. It is tax free and my principal is secured. Though I know if we truly had a depression-style problem, even those mm funds would be in danger, but I think the chances are slight and there will be enough time to move if that happens. I have a chunk of money sitting my brokerage muni money market sweep right now, but if I move it into t-bills, I will have to pay federal tax on the interest. What are your thoughts on tax-free options, or is it best to just bite the bullet and go for the taxable treasuries?

I have a bunch of cash in Munis.

The NAV has been shellacked over the last couple of weeks and IMHO that's totally unjustified. I wouldn't be concerned about them at the present time.

My view on this may change, but right now, I'm still sitting on 'em.

as gen notes, during the 1930s, the fed outlawed and confiscated private gold ownership.

citizens were not able to own gold again until 1970s.

That doesn't tell the whole story.
An amount of gold was allowed.
Much gold was hidden and hoarded. There are current government court arguments about the ownership of gold coins in estates which date back to that time.
Records of gold ownership at present are incomplete.
Remember, in the 30's the government also forced farmers to bring wheat to market and paid a pittance for it.
Doctors (MD's) are buying gold. Bet if you needed medical attention gold would do the trick.

Physical gold is the last place left where you can privately own an asset. You can walk into a gold dealer and purchase up to $10,000 per person (and i'd say per day) without any ID. It's accepted worldwide. It's protected many people throughout history to man made crisis'.

My guess is gold will re-enter our monetary system before its made illegal again. But if it is made illigal again I'm also guessing I'll have plenty of warning in this information age to get it out of this country if its not already. Capital controls is a bigger worry to me then gold controls.

Respectfully, I don't think you leveraged equity idea holds as much guarantees. It wouldn't have worked in Weimar or more recently in Zimbabwe. The markets held their nominal value but not real values.

Also, why do you want to hold muni's when tax receipts are about to fall flat?

Not trying to be arguementative its just that you are very biased against gold and I think some of the newer guys on this board looking for advise aren't getting both sides of the story to make a more informed decision to protect themselves.

Golds been one of the best investments in the last 7-8 years but is still ignored. Says bull market to me.

Karl: Is there any benefit/drawbacks in taking delivery of T-notes over the Govt holding numbers in an online account?

Also, are you familiar with the provision that exempts numismatic (slab) coins from confiscation?

Thanks.

Blackhole,

Not completely in the know but apparently "St. Gaudens" were expempted from the last confiscation due to their "art" value. They do trade at a hefty premium because of this but also go up in multiples in times of gold demand.

They didn't confiscate gold jewelry in the 1930's either. I wonder why??

I suspect that there will still be a black market for gold even when our wonderful guvment says that it is illegal to own gold and that owning a rapidly depreciating currency is the way to go.

In fact, they'll probably outlaw guns (via gun control), too. But will that stop people from owning guns?

Gold is a fiat currency? Yes. It was the fiat currency of choice during the fall of the western Roman Empire and in the ensuing Dark Ages.

In a truly horrific shizstorm, real money (as in Gold and Silver) will be king.

Wiley, I'm with you on the gold. As you say, people should read both sides of an argument, and make their own decision. One of my friends, a gold bull, recently sold all his gold because Market Ticker recommended it. What happens if gold is the only asset that holds its value or even increases in value during a financial crisis? We just don't know what will happen, so I choose to diversify my cash between Tbills, gold and silver in various forms, dollars, yen (FXY), etc.

I sold my CA municipal bonds, as they can lose value. See what happened in the 1990s. State revenue is falling rapidly as property and sales and income taxes fall. What happens to CA bonds if the yield doubles because Moody's downgrades them? And read the prospectus - the investments range from hospitals to power plants to housing finance agencies and much more, so it's plausible that some will be downgraded or unable to roll over their commercial paper and the yield rises.

I don't care if my gold goes to $600. It may be the only thing of value when the dollar is devalued, and it may end up being my only asset.

It is true that gold will be sold off, as margin calls are met. But isn't it also likely that the dollar and munis and Tbills fall in value as foreigners fail to show up at the Treasury auctions?

Bill Fleckenstein recommends Tbills for now, and is chomping at the bit to get back into what he says "he loves", namely gold. I took a different path from him, namely I did not sell any of my gold.

And just so you all know, I am not a diehard gold bull, but a new convert to understanding its value. I was so skeptical of gold, but a couple posters on the piggington forum,including wiley, made me see the value of it.

Quote:

One of my friends, a gold bull, recently sold all his gold because Market Ticker recommended it.

That's hardly a reason to buy or sell anything.

Ok, let me rephrase: Is holding a bond in one's name the same as having a treasury acct with numbers in it that says you are owed that amount? I dont see any difference, but I wonder if there is an analogy to the difference between holding gold physically and having shares in a gold trust. I would think that since its the Govt, it would make no difference whether i have the paper or the # in an online acct. Only concern i could see is possible hacking of govt computers (that actually happens?!) and your numbers go missing. Any kowledgeable voices out there? Thanks

i think what they mean is gold is not lucrative at the current price, that if we hyperinflate, or stagflate, or recess, or depress. first the price of gold will go down. that is the time to get into it. then after the smoke clears it should track up according to exactly how bad it gets. just like anything else out there you don't want to buy it at a top.

Blackhole,
Not quite sure if your referring the "gold trust" being some part of a gov't deal but as far as I'm aware there isn't a gold trust associated with our gov't. That being said anytime you trust anyone to hold something for you your taking a risk. We all do it and must to an extent but having some physical gold and dollars in possession does make you feel better. Look back through financial history and its riddled with exchanges and trusts defrauding investors or changing the rules to hide their misdeeds.

This is a pretty good read someone posted in another thread here...

http://goldmoney.com/en/commentary.php#c....

With respect to gold in the near- to intermediate-term, you also have to look at opportunity cost.

Let's say you think the stock market will roach, causing the Fed to eventually cut rates, devaluing the dollar and causing gold to double in 12-18 months. What's the best opportunity for your capital?

You could double your money if you park it in gold and let it sit there for 12-18 months. Or do you try to capitalize on the roaching of the stock market or dollar index (perhaps even leveraging a bit)? I think the opportunity on the mortgage lenders / HB (and potentially other sectors) is significantly higher than a double in 12-18 months. How about a 10-bagger on BZH puts.

When the risk/reward on the downside burns out and it's time to start parking cash or going long, if you miss out on half of the gold run up it's not that bad -- you've built a much larger capital base.

Gold is not either/or... you should just consider what the best use of your capital is at any point in time.