Wow. This thread has exploded. I can't address all the questions and comments, but a few things are starting to gel in my mind.
First of all, I have lived through the Arabs taking over the world in the 70s, the Japanese taking over the world in the 80s, and I think we'll squeak by China too. Come to think of it, I even survived The Red Menace. The Space Race seems so quaint now, just like the air raid drills we had in grade school (did you know that hiding under your desk will help you survive an atomic bomb?).
We are blessed with incredible natural resources, fertile lands, a temperate climate, and a fantastic river system that few countries will ever enjoy. In addition, we have extremely strong private property and human rights protection (although it seems to be eroding, especially in Michigan where the cops are now downloading your cell phone contents). No one wants to be an entrepreneur in a country where the government might take away your business or personal property. Look at the vast success of Venezuela under Comrade Hugo.
Asia might eventually ascend but they have huge geopolitical problems (and what have they been doing towards world domination the past 5,000 years?). They are not endowed with either the climate or geography we have. They have severe human rights and property rights problems. Their governments are even more corrupt than ours.
China has a centrally-run economy. When has that ever worked? Their economy is rotten to the core with fraud and corruption from top to bottom. They have blown a bubble even worse than ours and when it pops they will be knocked flat for decades - after the bloodbaths in the streets.
However, as a country we have been living on our credit cards for 40 years and that wealth, drawn forward from the future, has to be repaid (because "now" is yesterday's "future"). Wimpy will gladly pay you Tuesday for a hamburger today, but what does he do next Tuesday when he wants a hamburger? It's Tuesday for the USA.
We will not recover until the debts are dealt with, and there is more debt than anyone can get their mind around, public and private. It hasn't gone away; it's been shoved into places where you can't see it as well: gamed bank balance sheets (thanks to the FASB), Fannie/Freddie, the Fed, etc. The only place that it's out in the open is the housing industry because if you can't pay your mortgage or your rent or can't sell your house there's no hiding it.
The next few months will probably make you wet your pants. I don't know of any one strategy that will reliably work in the short term. When QE ends that will probably kick the pins out from under the stock market and commodities. Wall Street will be screaming for QE3. I don't know if we will eventually get QE3 or not. I don't think anyone can possibly know.
However, if they do QE3 they'll save stocks and commodities but cause even more inflation. I was thrilled with the performance of my stocks over the past 6 months until I realized that when priced in gold they haven't gone up at all. Needless to say, my cash priced in gold is a nightmare. Priced in silver I want to stick my head in the oven.
So QE3 or not, something will happen that you don't like. If you have no money to invest then "no QE3" will be your friend because it will decrease your cost of living, and you have no money to lose in your retirement plan. If you are rich and have a lot invested then you want QE3 because you don't care if it costs $100 to fill the limo's tank - you want your investments to rise.
The schmucks like us in the middle will take it in both ends - not rich enough to ignore inflation, not poor enough to have no retirement plan at stake.
Long term, I would stay with commodities. The pullbacks at the end of QE2 will be buying opportunities. I don't plan to sell any PM or other commodities. If you invest in PM you have to be comfortable watching your investment swing wildly up and down, especially silver.
Here's my commodity argument:
1. Real interest rates. Subtract the inflation rate from the return on a 1-year Treasury note. That's the real interest rate. If it's negative then your cash savings are being devalued. Right now real interest rates are negative and Bernanke intends to keep it that way. Too bad about people who want to save up some money or who have to live off their savings. We have bank executive bonuses that are in jeopardy.
2. Agriculture. Dust bowls are forming in China and Africa. China and India are draining their aquifers faster than they can replenish. The aquifers in the Middle East are largely fossil aquifers that don't replenish and in a year or two Saudi Arabia will have no agriculture to speak of. We are losing topsoil all over the globe. Phosphate is getting harder to find. If you don't like silver consider the "other white metal" - phosphorus - through miners or fertilizer companies. You can buy the stocks in a basket via the ETFs like MOO or PAGG, or you can try DBA which trades in agricultural commodity futures.
3. The race to Zimbabwe. In the current global economy you can't protect your economy with tariffs so you debase your currency to make your stuff cheaper than the other guy's. Everybody wants their currency to be cheapest.
4. The Middle East. 'nuff said. Own oil. My preference is the MLPs like PBT, SBR, and NRT. I bought these back in the 90s and they have paid off as well as gold for the past 10 years if you include the rich dividends.
The best hedge against debased currency is hard assets, and the most compact, fungible, and portable are the PMs. It's tough to store $1,000 worth of oil or corn. PMs also do well during uncertain times and the only times I can think of that are more uncertain than now are the ones yet to come.
It is a bad time to buy a house. It's very tempting. You can get a low rate and a low price, but when rates go up, the value of your house will drop. I'd wait, save money (in what form I can't say) and when rates go up and depress prices you walk in and plunk down a big wad of cash for the even cheaper house. Best of all worlds.
No, I'm not going to tell you where my gold is buried, except to say that it's not in my house. If you have a lick of sense you'll scatter it over several different vehicles.
Most of my PM investments are held in my retirement plan because buying and selling PM incurs some serious tax consequences. PMs are considered "collectibles" so you pay 28% tax on gains if you held more than a year as opposed to 15% for stocks held more than a year. Less than a year and it's taxed at your personal income tax bracket.
There is a lot of paranoid talk about GLD and SLV not really having the bullion they claim but George Soros has a lot of money in GLD and he is anything but stupid. The real worry would be shenanigans at the bullion vaults they use, which has been known to happen. Those kinds of games can hit any of the commonly traded funds.
Some people consider the ZKB bullion funds the safest but not all brokerages offer trades on the Swiss exchange. You can try the ZKB that trades in the American OTC market but it is very illiquid and the buy/sell spreads are painful. Some days it doesn't trade at all. I learned this the hard way. Personally I use SGOL and SIVR.
A safe deposit box is a reasonable place to park actual physical metal (although silver fills up a box very fast). If things go really bad then maybe someone will rob you as you leave the bank with your gold, or maybe the government will freeze the safe deposit boxes and confiscate the gold like they did during the First Great Depression.
There are also a few domestic private bullion vaults. These cost more and I think the government knows to look there too. If you have to bug out fast and you're using a vault in Delaware you have a problem. Unless you live in Delaware.
An off-shore vault is hard to arrange in our income bracket, but you can try goldmoney.com and bullionvault.com where you can not only store your metal offshore but trade it. BV and GM will both allow you to set up a special IRA to trade your bullion without tax consequences. And it's as safe as anything else on the Internet!
The best combo is probably some metal in a safe deposit box where you can access it easily, some in bullionvault/goldmoney to store it outside the country (either in a tax-deferred plan or outside), and some in bullion ETFs in a retirement account. That way you have the security of physical metal nearby, while you also have some assets that Uncle Sam can't reach and your trades won't incur huge tax hits. The only way they can get at those assets is if you liquidate your holdings, which defeats the whole point of confiscation.
DO NOT BUY PHYS OR PSLV - these are hideously bad vehicles that are sold to the "GLD doesn't really have any gold" crowd.
Sorry, don't mean to offend, but that's hysterical
