Finance and Stuff

Thoughts on finance and other stuff by Johan Lindén

Tag: inflation

Survival of the Weakest

money printing press inflationIt seems that most countries want their currency weaker. At least in bad times such as the present. Both strong countries such as Switzerland, and countries with serious problems such as the USA.

In times of trouble debt is building up. In the US it seems that debt is building up no matter it is the best of times or the worst of times. When debt has reached a level in which it cannot be repaid, then there is one option left, to inflate the amount of that country’s currency and thus devalue the value of its debt.

The downside is that you lose confidence next time you need to borrow. Also note that this trick is worthless if all other countries do the same, which is what we will see happen in the future. Then the value of money just will evaporate all around the globe.

So stay tuned for a nice inflationary cycle to come within the next few years, in times when many countries will try to have the weakest currency. But then again, why not? The intrinsic value of today’s money is nil.

Platinum and Silver vs. Gold

Balancing your portfolio for stability by adding platinum and silver to your investments of precious metals.

Both platinum and silver have a lot of industrial use. Much more so than gold and thus they are more sensitive to the growth of the economy. According to Adrian Ash, head of research at BullionVault.com, industrial use accounted for 11% of total gold demand, but accounted for more than 60% of silver demand worldwide. The whole article can be read on marketwatch.com.

But even if you buy gold as an insurance (read my previous article) you might also add a part of platinum and silver, both which have been lagging gold for the last weeks.

Platinum has almost always been a much more expensive metal than gold, but today it is priced at parity with gold.

Silver had a few extremely strong years and has even been outperforming gold the last years.

gold platinum silver

80% Gold, 10% Silver, 10% Platinum, seems like a reasonable balanced mix of precious metal if are aiming at portfolio stability, rather than risk-taking. So if you want a portfolio total of 20% precious metals you buy a 16% gold, 2% silver, and 2% platinum.

Benefits of adding platinum and silver:

  • Might be better for a long-term investment since it contains metals that are more sensitive to a growing economy. So if gold is underperforming other investments, silver might do better in times of higher economic growth.
  • There is less chance that you buy at the wrong time, since these three commodities vary a lot both from other financial instruments and from each other.
  • The more expensive gold gets the more chance of other precious metals to compete to take a share of its place to store value and for its industrial use.

Drawbacks of adding platinum and silver:

  • Silver has much higher volatility than gold,
  • Silver has a higher correlation (higher beta) to the stock market, which is negative when trying to balance your portfolio to get less risk.
  • Gold has historically been the number one asset to own in the worst financial crises.

Good luck with your investments and trading!
Johan Lindén

Reasons Why The Economy Got Bad

One of the most powerful figures in finance thinks that printing money is a way to save the economy.  

Alan Greenspan, the ex chairman of the US Federal Reserve Bank and one of the most important figures in finance for the last decades, thinks that printing money can save the US economy.

Obviously he must think that the US is the only country printing their money, and that the other parts of the world still use gems and gold to do their business. No wonder we are in a bad shape.

Enjoy the video!

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