Golden Gamble

I want to live, I want to give,

I’ve been a miner for a heart of gold.

It’s these expressions, I never give,

That keep me searching for a heart of gold,

And I’m getting old.

            Neil Young 1972

          My morning starts the same every day.  Whatever time it is, it feels like 4:00 A.M.  I reach over to my night table, grab my cell phone, and with eyes barely open check the price of gold.  I do this every hour from that moment until when I go to bed, and sometimes every 5 minutes.  It’s my beautiful obsession.

There's a reason for this. About 3 1/2 years ago I took every penny I had and invested it all in gold.  By all I mean all.  There was also a reason for this.  I was drunk at the time (that's a joke).  Actually, there were a lot of reasons that I decided to go all in like a hyper aggressive hold 'em player.  In the next few blogs I'm going to discuss the reasons and a bunch of other things related to gold, including predictions for the future.  Of course by the end I might have lost all my readers, but as we discussed here, I'm okay with that.

So far, the decision to go all in has worked out.  As of today, gold has gone up about 80% since I bought it.  Of course, I can't really pat myself on the back, because if I was really smart I would've bought it 11 years ago when it was selling for $250 an ounce (It's now about $1,600).  So the first question is, why has it skyrocketed and gone up for 11 years in a row? 

The first answer is inflation.  As discussed here, inflation makes the price of everything go up, whether Coke or gold.  The Obama administration and mainstream media try to avoid the topic, but prices have risen about 3 1/2% in the last year. In a related story, your savings are worth 3 1/2% less than they were last year.  Congratulations.  However this alone does not explain the rise of gold, which has gone up approximately 17% annually in those 11 years, far more than the CPI.

To understand why, we have to destroy a common myth.  Inflation actually means the expansion of the money supply, not high prices.  High prices are just the inevitable result of expanding the money supply.  The US government has expanded the money supply by printing money, the most by far of any time in our history.  Many people, including myself, expect this printing of money will ultimately lead to completely unsustainable levels of inflation.   When that happens, that dollar in your pocket is going to lose value so fast it will make your head spin.  Better to keep an ounce of gold there, which can’t be printed out of thin air like paper currency.  So people have flocked to gold to avoid this dollar destruction.  

The second reason is the lack of good alternative investments.  For the first time in my life I can't think of anything besides gold that will make money in the near future.  You can’t invest in CDs or treasuries, because they earn virtually nothing, far less than the inflation rate (this is called a negative real interest rate).  This means that you are losing a lot of money any time you keep money in the bank or in a CD.  Real estate?  Please.  You know what's happened to it.  I may do a few blogs about real estate soon, but here's the short version: it's gotten killed and will continue to go down for at least the next 2 years. Sorry.  I own a house too.

How about putting your money in stocks?  The stock market has hardly moved in the last 10 years, which again means that because of inflation it's actually lost money (I really hope people understand this concept).  If you're like me, and think that we are soon going into a deep recession, you can’t invest in stocks.  Even if the upcoming close to hyperinflation causes the market to go up in nominal terms, that same inflation will cause it to go down in real terms (same concept).

The next blog will be about some myths about gold, and the last one or two will be about my predictions for the future.

Have a good night everyone.

                        JR

           

Dying Words

I don't need you to worry for me cause I'm alright

I don't want you to tell me it's time to come home

I don't care what you say anymore, this is my life

Go ahead with your own life, leave me alone

They will tell you, you can't sleep alone in a strange place

Then they’ll tell you, you can't sleep with somebody else

Ah, but sooner or later you sleep in your own space

Either way it's okay to wake up with yourself

            Billy Joel 1978

You're dying (don't worry, we’re playing make believe tonight).  You have a teenage son.  Unfortunately, you only have time to tell him one last thing.  (I know this is a random thing to blog about, but I have an excellent defense: I have random thoughts running through my brain 24/7). So what piece of advice would you give him? Take good care of your mother? Be a good Christian/Jew/Muslim? Don't sleep with strangers?

Good ones all.  For me, though, it would be this: Don't worry about what other people think.  From what I've seen, this is the single biggest impediment to happiness and fulfillment.  First, I have never met a truly successful person who cares about what others think.  Never. Second, it paralyzes people from doing what they really want to do in life.  The fear of being perceived by others as a failure (which is not the same as being a failure), leads to inaction.  This fear is so strong that for most people it overwhelms the potential reward of living the life that they dream about.  Most of all, the lifelong worry of what others think and subsequent failure to act leads to the cruelest disease of all - regret.

So take a swing, friend.  Start your own business, you’ve been thinking about it long enough.  Your kids won’t starve.  Your wife will respect the fact that you’re taking a chance for the family.  Trust me.  And if it doesn't work out? The people who count will understand how hard it is to do.  And you’ll just be more motivated to try again. 

So tell her that you love her. You may lose a friend but you may gain a wife.

Maybe living in Paris or Jerusalem for a year is not so crazy after all. 

Whatever “it” is, it needs to happen, and it can’t be based on what others think.  No one knows you better than you do.

Have a good night everyone.

                                                JR

Music Time

Well surprise, surprise, surprise

Yeah surprise, surprise, surprise

Well surprise, surprise, come on open your eyes

And let your love shine down

                                    Bruce Springsteen 2009

A few years ago I decided to transfer all my CDs to an iPod.  That was innocent enough.  CDs had been dying a slow death, eclipsed by MP3 players, which give you the ability to have every song you ever liked fit in your pocket.  But then things got a little crazy.  I decided to enhance my collection a little bit and then realized through Amazon you can get almost every album on a CD for dirt cheap, and then download it to your ipod.  Seriously, some were a penny.  It turned into about a year long project, with the result that I got just about every album and song from my past that I wanted, along with a bunch of new stuff.  The great thing about it was it took very little time; 95% of the listening was in my car and getting albums off Amazon is super quick.

So tonight I'm going to talk about the surprises.  I'll try and stay away from the obvious ones (the Beatles have a lot of good songs? Really?)  The biggest surprise for me was Lucinda Williams. This was because I had barely heard of her and she has a strong country influence in her music.  (Remember in the 80’s when everyone used to walk around saying “country sucks”?  Man, the 80’s were great).  But her songs are fantastic and stay with you. They are a unique blend of rock, blues, and country.  The predominant theme is  broken relationships, and she's about the only singer that I can think of who makes me feel her pain (He slept and ran again? Don't worry, the next one will be your soulmate).  She puts out albums less frequently than just about any artist, but at the end of the day, my iPod says I like 37 of her songs.  Not bad.

 Another big surprise was John Hiatt.  He was another guy I never listened to in school, but he's been consistently solid, and sometimes great, for over three decades.  I was shocked when I saw 69 songs.  Listen to the songs “Perfectly Good Guitar” and “Have a Little Faith in Me” and you’ll be a fan.  John Mellencamp was also a surprise.  I wasn't really into him in college, which was strange considering we both lived in the small town of Bloomington, Indiana at the time, I saw him occasionally, and I dated his kid’s babysitter.  But over the years he has grown on me, and has had a long, impressive career.  I didn't expect 48 songs; consider him a poor man's Bruce Springsteen.

Probably the most underrated band I dug up was Drivin N’ Cryin, a group based out of Georgia who had their heyday in the 90s.  For some reason I largely ignored them, even though I was living in Atlanta at the time.  That was a mistake.  35 songs, and I've got a few albums to go.  Others that I didn’t know had so many good songs were Cracker (37) and the Bodeans (40).

For a lot of the surprise bands, I noticed a similar pattern.  They would have a popular stage for about 4-8 years, and then most of the casuals fans left.  But they were good enough to keep the hard-core fans, and financially and artistically justified in continuing to make albums.  Anyway, there were a few more surprises, but my hour is up.  Maybe I’ll do a blog of the surprise disappointments next.

Have a good night everyone.

                        JR