Economic Collapse!, not really into gold

[Milly]

I think we will have a huge economic turnover in the next 5 years. I'm not really sure what the trigger is going to be. There's a decent chance the US dollar will loose it's reserve currency status, there's so much political tension that could lead to war, the government debt is growing, the stock market is going to have some baby boomer strain...

If you don't believe my conclusion, just pretend for the sake of this thread and use a big IF. Feel free to start another thread discrediting a crash.

Here's the problem:
Almost every investor I've found that believes in this oncoming crisis recommends about 10% of your portfolio in precious metals, then lists a bunch of mining and mining financing stocks as their stock exchange picks.

I think precious metals will go up in price, but so will refried beans. Maybe at first there will be a rush on metals and will be a great selling opportunity, but then what? I just don't see people using it as currency (wages/rent/etc). Evidence: if you look at the Zimbabwe dollar crisis, people used the Z$ WAY longer than I would have guessed. I guess they had to pay taxes in the local currency, so they continued to operate in it.

Am I the only one who believes in a crash, but not that precious metals are the way to go? If not, what are the other options to take advantage of the economic disrupt?

Note: I'm also very debt adverse, so real estate isn't that appealing.

[TexasHusker]

If you want to profit from a crash, by far the easiest way to do this is to buy S&P puts. As the market plunges, the puts rise commensurately.

There isn't necessarily a inverse correlation between an equities bear and a precious metals bull.

There also isn't necessarily a correlation between equities bear/bull markets and the state of the overall economy.

Common misnomers.

However, there often IS an inverse relationship between equities and natural resources. In other words, when equities are in a bull market, it is often accompanied by a natural resources bear market. Deductive reasoning requires this: as energy and materials costs rise, profits for equities are slimmer. Yer this creates a natural resources bull market because the producers are now flush with cash.

And vice versa.

Cheers.

[Kaoru]

this is why bitcoins are getting very popular right now, as an alternative to gold. since if you buy gold, a lot of times it's IOU to a mysterious bank location, or if you do have gold at home - it's a robbery/theft risk.
precious metals are really for the scenario of when the world is falling apart, zombie apocalypse style. a financial crisis, you are just looking for assets that are inversely correlated. that why people buy euros, yen, and lately, RMB.

[Milly]

Actually, I think the bitcoin is popular BECAUSE it is going up. People aren't buying it to use as money so much as to flip it for a profit.

Who needs gold in an apocalypse? An article I read said bags of cornmeal was the best store of wealth for Zimbabweans...

Maybe that's my answer. Focus on real commodities.

[TexasHusker]

Actually, I think the bitcoin is popular BECAUSE it is going up. People aren't buying it to use as money so much as to flip it for a profit.

Who needs gold in an apocalypse? An article I read said bags of cornmeal was the best store of wealth for Zimbabweans...

Maybe that's my answer. Focus on real commodities.

Long term, real commodities are the easy play. The rapid growth of the earth's population makes it so. All of these new folks will need food to eat and fuel to heat their homes and power their cars. Over the long term, the demand for natural resources will only go UP.

If you had to pick one mutual fund for the next 20 or so years and never change it, a good natural resources fund would be my choice.

[Fishindude77]

I'm not a fan of precious metals. Best protection against disaster is having everything paid off and a hefty nest egg. Yep, your saved dollars may lose significant value, but you will still be ahead of most.

The right type of (paid for) real estate will always have use and value, no matter what the economic conditions also.