Are you well endowed with a large stack?
By Dr. Jerome, TFMetalsReport:
As a young ignorant professor, I accepted a position at a college that offered me a job as an “endowed chair of mass communication.” They made verbal promises that the endowment would be funded. Well you know what happened… they never endowed it. The “benefactor” had not made the large donation promised and the contract specified it would not be made until she passed away. I had lunch with her one day. She was not that old and in fine health. I should have called CALawyer for advice at that point.
But that small branch of a larger university really wanted to be noticed, so they set up the position anyway. I used to ask for money each year. I told my department chair, “I have this professorship, but I am not well-endowed. He chuckled and then said, “Yes, but in this case, size matters.”
Size also matters with getting ready for the future. This past weekend Gamble put the question to everyone, “How much physical is enough? I thought I was good until I saw a picture of someone’s stack, I think there was over a hundred ounces!”
First of all, it is never good to compare your metal endowment to pictures others. It can be depressing and guys shouldn’t do that. When I was in college my roommate was a body-builder and he would look at pictures of the muscle-bound hunks flexing their tanned oiled bodies, and it inspired him to work out more. Well in his case, that inspiration was effective because he had a body type that responded to weight-lifting. He was born with it! In my case, no matter how much I worked out (and I did lift with him every day after class), my biceps remained “unimpressive,” as the girls termed it. But I did get strong. Some guys just have a body that will bulk up, and some do not. As for stacking silver, no matter how much I gaze at piles of the shiny metals in my monthly subscription to Stacker magazine, I am unable to get more fiat into my budget to enable a trip down to the LCS without some work or a sensible business deal.
Fortunately, our metals endowments that we are building for ourselves and our families depend not on our body type or someone else’s gift, but on our own desire, needs, and ingenuity in earning the fiat to make the endowment grow.
But a couple of members provided some concrete answers for Gamble:
Erewenguy offered a formula for old guys: “Personally, I am about 65% paper, 25% pm, 10% cash, but then, I’m an “old” guy. At this point in my life living expenses are pretty modest and most new free cash goes into metals for savings rather than for insurance.” I’ll second that formula. My budget is about the same 55% in real estate, 40% in PMs and 5% cash & prep. If the cash grows, it will be allocated appropriately
Icarus also provided a sensible formula for anyone: “your stack times 5 (the estimated appreciation in purchasing power) should be enough to cover all your expenses with a 4% withdrawal rate, assuming that all your government pensions go away.” Simply figure in how many years you’ll need to be supported by that stack and work it in the formula.
Many of us are on a budget and building up a nice stack is not easy. At least it is cheaper these days. A few months after I began in late 2010 I was lamenting that I couldn’t get any silver for under $30 per ounce, that I would have bought much more at $25 if I had only known. When I go to the LCS, I want to be a big player, talk about silver prices and seem important to them. I want to feel the heft of the larger bars, or inspect the gold coins. But as soon as I drift to the cull box of old Morgans or look at the odd generic rounds, they turn remind me to hurry up and make my selection.
But is having the largest stack possible always the best? My wife is far less concerned with the size of my endowment than other factors. She wants to pay off the house and store away enough food and other necessary goods so that we do not struggle to survive. She would rather stock up on toilet paper, toothpaste, her special feminine cabinet in the bathroom, cleaning supplies, an extra broom, detergent, bleach and other such stuff. But my vain heart would much rather go to the coin or gun shop to get things I may need, rather than Wal-mart to get things I will need.
Dr Jerome: Hey honey, how about tonight we go out to dinner, a movie, and then, you know, the kids will be at their friend’s apartment, and we can, you know …
Mrs Jerome: Well, Romeo, we could do that if you hadn’t spent all our money on silver, cutting short our “personal pharmaceutical” budget, you know… with the next one, you get to nurse and change all the diapers.
So clearly we need to prepare in other ways to augment our stacks of metals. The prices of some goods will inflate as the dollar declines, but the prices of other goods may remain somewhat stable or even deflate. As a part time real estate investor, I am expecting the price of homes to continue to languish and perhaps even fall. I will be waiting with my modest stack when they hit bottom again. The family is growing. My son has a serious girlfriend. And while I may refuse to answer the door in our new economy when certain in-laws come knocking, I won’t turn away my kids and their new families. But more people under the roof will require more beds and at least a little more room. So I value diversity in investing—metals are good, but not neglecting everything else we need to feel civilized and care for those we love.
Even though I already said that size matters, it might be best to diversify rather than having the biggest stack possible, because size isn’t everything. Lately, I have had more time than fiat, so we are continuing to prepare our home, building a small storage area off the back porch, still working on my solar system. The materials can be found on Craigslist or at a used building supply near the home, making the projects very affordable. But If I drop my extra fiat for the month on metal, my tools sit idle and the home remains unfinished.
The problem of metal storage seems to be taken seriously here. In response to Gamble’s query, hindsight101 asked, “One issue for me is safe storage. Banks aren’t safe. Is one’s home safe? How well can it be hidden? How likely are you to reveal the hiding place with a gun to your head?”
Those are good questions for all of us to think about. We have all heard the stories about home invasions. As I get older, I am not so sure I want to challenge a gang of thugs who kick down my door, even with a self-protective gear. I have been wondering if a “faux stack” (imported from China perhaps) in a poorly hidden safe would satisfy a burglar while my real stack is hidden elsewhere.
Silver stacks are heavy. Getting it off the bottom of my pond is a real chore, requiring me to dive down, feel around in the mud until I find it, come back up for another breath, go back down, tie on a rope, then get my son in a second boat to help me haul it up. The silver I hid up in the tree is easier to get down, but took me all day to get it up there. My next project is creating a watertight container that I can lower down into my septic tank. Maybe I should just install a “dummy” double switchbox labeled “security lights” by the back door and keep my gold coins in it.
My best protection is secrecy. I don’t want to call attention to my home or let anyone know I am storing anything of value in my pond, tree, or septic tank.
So we are trying to find that balance between accumulating sufficient metal of an unknown quantity that will ease our transition into the new economy. We had some wise advice posted in the thread the other night that I hope will be reiterated here. How much of stack you should have depends on several factors
- Silver or gold? Silver has more upside potential. Gold is more stable.
- How old are you?
- How many people will be depending on you and how old are they?
- Do you believe the collapse will be fast, total and disastrous? Or will it be slower, partial, and simply force us into a lower standard of living?
- Will current debt be written off? Will you get off the hook for your mortgage, or will a bank come take your home after the new economy begins?
- Will bankruptcy laws still apply? Better not count on it.
- What do you want your standard of living to be?
Personally, I am working to settle my debts before a collapse. The last thing I want are banksters hounding me after a new economy begins—especially if they suspect I am holding out a stack somewhere based on my IP address and participation here. We have no guarantees that your bank loans will be forgiven or written down. If my mortgage company collapses, the note will be purchased nad the new holder will seek repayment—perhaps in revaluated currency. We should expect that the banks will survive and will still have government lapdogs to help them squeeze their debtors. And if you don’t like our government now, just wait until they improve it (for your own good) after the next collapse.
I am stacking and prepping in stages. We initially stacked with all we could (at high prices, I might add) and then started prepping. Later, after the price fell, we switched to stacking more. These days we are back to prepping for the lifestyle we want, with the perspective of our age and trajectory of our children’s lives.
As for metals trading, I have been trading JDST (short 3x ETF) and JNUG (long 3x ETF) with some success, taking profits when I call it right, holding on for the ride when I am wrong. So far so good. I just can’t seem to get trading out of my blood. It keeps me engaged in the site and the metals world more than just simply stacking. Besides, what else will I do with my employer IRA? BTATFH?* I suspect the fund will be MyRA’d* someday no matter what I do with it.
Well, I have asked more questions than I have answered here, but the answers are different for all of us.
As for stacking, yes, bigger is better. You will be thankful for every ounce you were able to add to your endowment. But do not neglect the toilet paper and a roof over your head.
“Hey honey, about that date?”
* Buy the all time f—ing high.
* the act of government herding of all IRAs into T-bills someday
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