Get Rich Trading Gold Pdf
Mohammed Faerber
I formed gold and silver mining companies then because I believed that gold and silver were at "lows" and were set to come back up. At the time, gold was around $275 an ounce and silver was around $5 an ounce. If I'd been wrong, I would have lost the mines.
I was confident about gold and silver because I wasn't betting on them. Rather, I was betting against the dollar and oil. In 1996, oil was about $10 a barrel, and that seemed low. My suspicions were that the dollar was strong, and I believed it would drop when oil went higher. I felt the conditions were right for a massive change in the markets.
In many ways, the conditions are far worse now than they were in 1996. Today, we have a slowing demand for the dollar. At the same time, it appears that the Federal Reserve is increasing the supply of dollars .
The Great Depression was caused by governments trying to cheat on the gold standard. Heavy debts were incurred during World War I. Governments had a hard time paying off those debts because their currencies were pegged to gold. Gold made it so only so much money could be printed. If you had a million ounces of gold and you could only print three dollars for every ounce, you could only print three million dollars. Yet, governments tried their best to find a way around the gold standard.
Every day, the dollar is worth less and less. And that's why I save so many of them. This sounds like a contradiction, but let me explain. The reason I save so many dollars, even though I think they're worth less and less, is because I don't intend hang on to them. In my mind, cash is trash.
Warren Buffett often says, "The best way to get rich is to not lose money." When people purchase consumer items such as a new car, use debt to finance things that shrink in value, or save U.S. dollars, they're losing money. Some people call it inflation, I call it devaluation.
A friend just bought a new SUV. It's a beautiful vehicle. The problem is, the vehicle lost nearly 20% of its value the day he drove it off the lot. He's now in debt, paying off a vehicle that's dropping in value with a dollar dropping in value. He's a double loser.
Psychologically, the more Americans' cash -- and the things they buy with it -- decline in value, the more they worry about money. Many begin to work harder or, even worse, go deeper in debt purchasing more consumer items with sliding value. Unfortunately, many wind up with fewer and fewer dollars that continue to sink in value.
The reason I have more and more dollars is simply because I don't hold on to them. Instead, I do my best to get as many dollars as possible and to keep those dollars moving into assets that are going up in value, not down.
In the late 1990s, when people were pouring money into the tech and dot-com stocks, my dollars moved into oil, gold, silver, and real estate, when prices were low. Today, because the dollar continues to drop in value, I keep moving my money into those same asset classes, although much more cautiously.
The primary reason why I keep my dollars moving is because I'm bearish on the greenback. We have all heard the saying, "The U.S. dollar is backed by the full faith and confidence of the U.S. government." It is unfortunate that faith and confidence in the U.S. government is eroding. I don't believe Americans have the stomach to make the changes that are required to run a fiscally responsible government and save the dollar.
When President George W. Bush attempted to reform Social Security, that proposal was more unpopular with Americans than the Iraq war. People love their entitlements. When Bush pushed the Prescription Drug Benefit plan through, I decided the U.S. dollar is toast. To me, all hope of avoiding financial disaster was gone. The American people have voted.
Fiat money works the same way. Dollars have value because people have deemed them to have value. But as the writer in The Economist points out, dollars can be printed easily and at will, devaluing them quickly. Gold on the other hand has an intrinsic scarcity to it.
And throughout history, societies have always resorted back to gold as money. As the writer in The Economist points out, this has gone on for 6,000 years. The writer can call this mystical if desired, but I call it a hell of a track record.
My concern is that very soon, citizens of the world will tire of America's gross fiscal mismanagement and hesitate to take U.S. dollars. In order to keep the world interested in the greenback, interest rates must rise. When that happens, U.S. assets, especially paper assets such as U.S. stocks, bonds, mutual funds, and savings will drop in value. Some real estate prices will increase because replacement costs are high, but overvalued real estate will drop.
At the risk of sounding like a politician who flip-flops, there will still be paper assets and real estate that will rise in value. The secret to surviving in paper assets and real estate is to be very careful and very selective. People who diversify will lose. People who focus will win.
The secret to surviving the next few years is keeping your wealth in real money, not in the U.S. dollar. Buy things that hold their value and are exchangeable all over the world. Commodities such as gold and silver have a world market that transcends national borders, politics, religions, and race. A person may not like someone else's religion, but he'll accept his gold.
One of the reasons why I'm bullish on gold and silver is because the American public is still sound asleep to this asset class. Most Americans have no idea how or where to buy physical gold and silver. The outlets that sell gold and silver I have visited are already low on inventory.
If and when the American public wakes up to the reality that their dollars are not money, but a currency, the panic and stampede will begin. Should that happen, today's prices for gold and silver will look like bargains.
Rather than advising someone to sell shovels and pick axes during a gold rush, better advice from the San Francisco Gold Rush might be to import shovels from abroad. Or speculate in real estate. Or just work hard painting houses. Anything but mining for gold.
This meant that the Bay Area was as hard to reach as a far-off island. Letters from the president to his representative in California took six months to arrive by ship. In the 1840s, explorers were still searching out good overland routes across the Sierras to California, and sailing from the East Coast around the tip of South America to San Francisco or Monterey was a dangerous, months-long voyage.
In 1848, politicians and businessmen had no doubt that San Francisco had a grand future. America was in the grip of Manifest Destiny, going to war to wrest control of California and the Southwest from Mexico, and the natural port provided by the Bay made it a natural spot for development.
The three men financing and constructing the Panama Railway knew very little about railroads, which is probably the only reason the railway was built. In the unfriendly Panamanian terrain, the men exhausted their capital in a year and laid only 7 miles of track. But the frenzied gold seekers saved the project.
The hundreds of thousands of people headed to California desired nothing more than speed. In 1851, a group of migrants asked to use the seven-mile track to speed their Panamanian crossing. The railroad owners realized they could profitably run trains on their unfinished railway, and the profits from the new passengers, along with new investment from Wall Street, paid for the $8 million construction project that still awes engineers to this day.
When the engineers hammered the last spike to finish the railway in 1855, the company had already been profitable for years. Soon it became the most highly valued company on the New York Stock Exchange. It took a small cut of the value of all cargo, and people returning from California took $500 million worth of gold on the railway in just 10 years.
Yet among these adventure stories of people crossing continents, winning and losing fortunes in the course of days, many of the Californians who emerged as its richest denizens, like Thomas Larkin and Faxon Dean Atherton, were conservative businessmen.
But the Gold Rush made both of these humbugs rich. They made only modest investments in gold mining or selling mining equipment. Instead, as their biographers write, they recognized the business potential of serving tens of thousands of new settlers.
In 1849, California did not have the population to qualify for statehood, and the mining towns springing up consisted of tents and wooden shacks that burned down every few months. A few years later, San Francisco had stately streets and a soaring population.
(This photo was taken in 1906, after the San Francisco earthquake and fire. Just sixty years earlier, the population of San Francisco was a few hundred people. Photo courtesy of the Library of Congress via Wikipedia)
To varying degrees, both gold and silver may provide a hedge in a potential economic or market downturn, as well as during sustained periods of rising inflation. Understanding the difference between how the two metals are used, their economic sensitivities and technical characteristics can help you determine which metal may benefit your portfolio.
Half of all silver is used in heavy industry and high technology, including smartphones, tablets, automobile electrical systems, solar-panel cells and many other products and applications, according to the World Silver Survey. As a result, silver is more sensitive to economic changes than gold, which has limited uses beyond jewelry and investment purposes. When economies take off, demand tends to grow for silver.
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