W.C. Varone on gold, guns, and food

“The thing about being a survivalist kook and stockpiling gold, guns, and food is that there’s no downside. Even if you’re wrong, you’ve still got gold, guns, and food.”
W.C. Versone

Heh. I love me some guns and we’ve been buying extra canned goods, staples, batteries, and such, just in case. As far as the yellow metal, I’m glad I bought some gold (in my 401K) when it was at $750 an ounce. Today it’s at $968.

I’m also glad I stayed almost entirely out of the stock market for the last five years*. The Dow Jones and S&P 500 look like this after being beaten down to 10 year lows

I might be interested in buying stocks when the Dow and S&P numbers start with a 6, or preferably a 5, but not when they start with a 7. Mish maintains and I agree that stocks are still too high. Even as low as they are now, they’re still too high. If you’re waiting for them to go back up you need to realize that they’re going to fall even lower than they are now.

I’m very happy right now to have Treasuries, TIPS, the Vanguard U.S. bond index, cash, and gold in my 401K, and I’m not so sure about the bonds anymore. And as always the best investment is to not go into unnecessary debt. You can do that by living below your means instead of above them. Learn to appreciate value and love the bargain.

* That’s not counting my EarthLink shares from that damned IPO a decade ago last month, back when we were in a dot-com bubble instead of a real estate bubble. The shares are only worth about a third of what I paid for them (though about half of that money was from shares I was given as an early employee of Knoxville-based U.S. Internet). Get this, though. EarthLink has been wildly profitable for the last two quarters. Their P/E ratio is 4 to 1!!!1!!one!!! You can buy the company for just four times its annual earnings for Pete’s sake, in contrast to the dot-com era when companies that had never once had a profitable quarter were trading at 50 times EBITDA or sales or some other bullshit metric. There’s no way in hairlipped hell I’m selling now. Someone is going to come to their senses and buy this stupid thing while the buying’s good.

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6 Responses to W.C. Varone on gold, guns, and food

  1. Pingback: SayUncle » ITEOTWAWKI

  2. Pingback: Instapundit » Blog Archive » FINDING THE HUMOR in survivalism. UPDATE: Heh: “The thing about being a survivalist kook and …

  3. David Govett says:

    How do we survive the survivalists? I’d better start stocking up.

  4. Pingback: GruntDoc » Blog Archive » W.C. Varone on gold, guns, and food | Les Jones

  5. Bart Hall (Kansas, USA) says:

    Don’t focus on the stock averages to determine when you buy. DJIA in particular is a price-weighted average. All its bank stocks could go to zero tomorrow and it would only trim off about 500 points.

    Much more useful is the class Dow:gold ratio. It’s now about 1:8 … that is, eight ounces of gold will ‘buy’ the Dow. Back at the dot-com peak it was over 40. At real, long-term bottoms it’s well under 5, typically 1 or 2.

    I would get out of bonds NOW. Their interest rates are at multi-generational lows, and thus there remains very little upside potential. With any serious imbalance between supply and demand — for example, a need by the US government to finance a big deficit — prices will fall rather dramatically (because interest rates must rise to attract buyers). When you already own bonds, that is not good.

    There are some very solid stocks out there, now paying sustainable dividends well into double digits. A few that come to mind are NLY, APL, and ERF. There are also stocks with great balance sheets and good single-digit dividends, for example ABB, TRN, and GSK, to choose three different industries.

    I suggest you begin buying stocks, carefully, now, and once the Dow:gold drops under about 3, start buying with both hands if you’re young enough to wait a decade or two. Gold’s very nice run will be finished once Dow:gold gets under 2 or so, though you’ll have a year or two to offload on rallies.

    Paying down debt gives a guaranteed return of 6+%, plus a lot of peace-of-mind.

  6. Les Jones says:

    Bart, you sound like you might be a fan of iTulip.com. Me, too. Yeah, I need to get out of bonds ASAP. I just need to know where to park the money. At this point I may just buy gold with it, because I don’t think gold’s run is just starting.

    I don’t think we’ve nearly hit bottom on the broader markets, but you’re right that there are individual stocks that are an absolute steal. I made a 60% profit on SWHC in a few months this fall. It’s just a little hard for me to find those good deals and time them right. I’ll check out the stocks you mentioned. Thanks!