Cheat Sheet Q&A:
Today’s topic: Buying gold incase of hyperinflation
I want to purchase a few ounces of gold just in case hyperinflation becomes a reality...can you give me some direction? What kind...coins?..jewelry?...bullion? and from who?
Bottom Line: I’m about the last person you want to ask this question of because I don’t personally believe in investing in non-producing assets. I’ll explain. To begin with there isn’t a direct connection between the US dollar and gold. The last time that relationship existed was the early 1970’s when we still had a “gold standard”. The gold standard mandated that the US could not produce additional US dollars in excess of the value of the gold that we had stored. Once that standard was broken so was the connection between the two. However in recent years many, including many in talk radio, have suggested that as we do inflate our currency via Quantitative Easing that gold necessarily will be a sound investment that will appreciate significantly and retain value if our currency were to collapse. That’s anything but certain.
To be clear there are no certainties with regard to the future of gold prices regardless of what happens with the US dollar. Historically gold has actually risen at a lower annual rate than inflation in the United States (about 1.8% annually vs. near 3% annual inflation). Additionally in recent years gold has been promoted in such a way that suggests that as long as the Government is printing more US dollars - gold would rise in value. That seemed to work from 2008 until the second half of 2011 when gold reached an all-time high of more than $1900 per ounce. Remember hearing the commercials from companies citing “experts suggesting that gold would go to $2500, $3500 or even $5000 per ounce as Federal Reserve would continue to pump out more money? Unfortunately many bought that premise and were hurt significantly by it – many sent me their stories. Despite the Federal Reserve continuing to produce more dollars monthly via QE since 2011, gold is in the $1200+ range today. That should demonstrate that there is no direct link between the two. So what does this mean?
It’s up to you to decide what’s best for you. Gold very well may be worth significantly more in the future whether we have hyper inflation or not but at best it’s a guessing game. When investing I want assets that produce earnings and generally dividends so I can benefit from the investment whether the nominal value of the company or entity appreciates or not. For that reason I’d be more inclined to invest in a gold miner than gold itself. Now for your questions…
Locally I can recommend a conversation with South Florida Coins and Jewelry. Goldline has a good national record. Coins/bullion are the most efficient way to own for the purpose of future exchange. Jewelry is less efficient.
Best wishes on your decision whatever it may be.
If you have a topic or question you’d like me to address email me: email@example.com
Florida's job growth continues to shine:
Bottom Line: Yesterday we received the state by state job numbers from the ADP private sector report. In Florida we continue to dramatically outperform the rest of the country in job growth. Here are the numbers:
- Florida added 17,280 jobs in May
- 660 in the Goods sector
- 16,620 in the Service sector
Compared to the country:
- 179,000 total private sector jobs were added
- Florida accounted for 9.7% of all job growth compared to having just 6.1% of the countries population
Don't do it! 8.4% of people taking out mortgages are likely making a big mistake:
Bottom Line: Mortgage rates are still near historic low levels. The average 30 year fixed rate mortgage right now with good credit is at 4.2%. For context here is historic info on 30 year fixed rate mortgages:
- The all-time high mortgage rate was 19% (1980)
- The all-time low mortgage rate was 3.3% (2012)
- The average mortgage rate historically is 8%
So at 4.2% you can see that we’re still at about half of the average historical mortgage rate and that virtually all of the risk (using history as a guide) is to the upside in mortgage rates. With that as the backdrop… 8.4% of all mortgages originated last night were adjustable rate mortgages. That just doesn’t make good financial sense. The current 5 year adjustable rate mortgage is 3.4% (or .8% less than a 30 year fixed). The only reason it makes any sense to take out an adjustable rate mortgage is if you are absolutely certain you’ll pay off the mortgage before it adjusts.
Service sector folks listen up - Amazon is about to hire you:
Bottom Line: For some time I’ve recommended that local companies engaged in ecommerce should craft strategies to engage customers via Amazon, EBay, Groupon, etc. rather than fighting the online freight train they represent. But what about a service sector business?
Over the next year Amazon will be rolling out, market by market, a local service sector marketplace. You can think of this as Amazon’s version of Angie’s List. As they mentioned yesterday in their release, from babysitting to handyman services, Amazon will facilitate the transaction between service providers and customers. If you have a service business you should be planning to become a leader in the new Amazon marketplace. The odds are that it will be successful and it could create a tremendous opportunity for you.
Comcast is turning every home internet router into an internet hotspot by the end of the year:
Bottom Line: If you use Comcast/Xfinity for internet service and you use and Xfinity router for your internet service; you’re going to instantly become a hotspot by the end of the year. It won’t cost you anymore and you won’t have to ask for it… At some point this year you’re router will have 5 additional hotspot connections available at all times. Each will be individually encrypted meaning that if someone accessed one of your hotspot connections they wouldn’t be able to tap into the internet connection you’re using. Comcast says that this will pretty much always ensure that people will have Wi-Fi access wherever we go (in their service areas). They all pointed out that when you have friends and family visit you’ll no longer have to have find that security code and give to everyone to access the internet.