Chile Forum

If it starts to flirt with 400 I may just pick up and head north with my dollar salary.

If you are that ambivalent about your move, keep renting.

"If it starts to flirt with 400 I may just pick up and head north with my dollar salary."

Or you can stay in Chile a bit longer and wait for the exchange rate to drop to the point that you are better off working in Chile for pesos instead of dollars in the US.

The dollar is down now, but I see it going in the other direction next year when the wheels come off of this false recovery in the U.S. and Europe. In both areas the economies are propped up by huge government stimulus spending, and that cannot go on forever. When it ends, interest rates will have to go up and that will cause money to flood back into the dollar and euro. China is the other wild card. Right now they are spending like crazy on commodities and propping up prices artificially. This too will end, and when it does watch prices for copper, oil, coal, soybeans, etc., to tank in a big way.

We are seeing the last gasp of the central bankers as they try to keep their debt-ridden house of cards from falling down. Eventually we all have to take our medicine, the bad debts will have to be recognized and written off, China will have to realize that it cannot grow at 14%/year in a world with limited resources, and in general, people around the world will learn that you cannot spend money that isn't earned.

The problem with China's growth, and other big population developing countries, is in spite them fudging the economic growth numbers they really do have the demand. When China says they grew at 8% 9%, or even 14%, that is them keeping a lid on development. They, and us (us being tied to them), are on a bullet train of development that can not be stopped. 10% of the world's population, using 90% of the World's resources, only works if the other 90% of the World has no means to use those resources. That cat and gene are so far out of the bag now, it is develop or die for everyone (literally).

admin wrote:The problem with China's growth, and other big population developing countries, is in spite them fudging the economic growth numbers they really do have the demand. When China says they grew at 8% 9%, or even 14%, that is them keeping a lid on development. They, and us (us being tied to them), are on a bullet train of development that can not be stopped. 10% of the world's population, using 90% of the World's resources, only works if the other 90% of the World has no means to use those resources. That cat and gene are so far out of the bag now, it is develop or die for everyone (literally).

True, but parabolic growth curves, like the population of germs growing in a petri dish, don't go on forever. The world has limited resources, and countries have limited finances. China, Brazil, Iran, etc., could take the resources they need by force, but that's another story altogether.

Right now, China uses twice as much coal as the U.S., and they have to import most of it. I read that they have essentially purchased the largest coal mine in Australia, but even with that supply they will face coal shortages in just a few years.

Don't think traditional monetary measures like raising interest rate will matter with all the trillions of electronic and paper dollars floating around. This is not the late 70s to early 80s when the dollar was undoubtedly the reserve currency which all important assets were priced in without serious argument from anyone else.

Of course real pandemics, meteor strikes, solar cookoffs or spurts in sunspot activity, stoppage or shifts in world climate regulating ocean currents, magnetic shifts and resulting rapid catastrophic planetary changes can make all of our projections quite worthless.

pandemic - less people - temporary stoppage in economic activity - real economic deflation with shortages - reordering of the world power base - recovery - new economies with high wages

Who knows what timeline we will be on in 5 years?

All this talk of dollars is interesting but it's sort of like discussing the Titanic as it's sinking. It's like speculating on the speed and angle of the behemoth as it slides under the waves, the water temp. (very cold), the motives and intent of the builders and Captain etc etc etc. The most important thing to understand is, it's going under. Fait accompli. Every fiat currency anywhere in history has always returned to it's "intrinsic" value. So therefore...

Do any of you hedge? As in buy physical gold and silver to hedge against govt. fiat currencies? I've been doing it for years so it's second nature to me by now. I should state that I don't INVEST in precious metals, I believe them to be a lousy INVESTMENT, if you're trying to trade them to make dollars, and I don't have a day trader mentality anyway. I buy physical to transfer wealth (such meager wealth that I can actually accumulate) across time and to protect my (future) purchasing power. Precious metals are the ne plus ultra for that use. I understand if you don't want to talk about it, but you should consider it. Au is still a bargain even at 1,100USD. If you like paper, at least think about some stock in some mining companies. Au & Ag., I would recommend you look at Bob Moriarity's 321gold.com to research some junior explorers. Base metals are worth looking into also.

" Protect yourself at all times". If you read any financial history you know why.


cheers, ymmv, imho, nia, and past results do not garuantee future results,

As I posted earlier, make sure your miner doesn't have a damaging hedge book.

Chuck said it right, only real way to go is phys. Anything else is speculation and paper. Playing with miners is still basically a paper game. Who can shutdown the exchanges in an "emergency", who can nationalize the miners for their "deep reserve" assets, is there really more transparency there than other sectors that cook the books? I mean even traditional conservative asset allocator consultants would say 10% for the unlikely TEOTWAWKI financial event. That 10% can mean the difference between totally destitute or seed money for a new start and life, depending ……

eeuunikkeiexpat wrote:As I posted earlier, make sure your miner doesn't have a damaging hedge book.... ……

Yes. It's probably the most important factor to consider?

For readers who may not be familiar: For example, you find a great mining company stock, their resources in the ground look great, the managment is good, good track record, not a lot of debt, the price is right, etc. All your due diligence looks good. But, the company managment has a "hedge book". You'll have to find an explanation for that term elsewhere, or maybe EE could explain it. I'm sure he could better than I could. Anyway, it's a danger signal regarding that company's stock.

So in other words, look for mining companies that don't forward hedge. There are plenty of good one's that don't, so there's no reason to invest in a company that does.

But having said all that. Having "physical" is where it's at.

Yea, all the biggest gold mining companies in the World seem to have got caught on the wrong side of the Gold hedge with this rally. It is the small to mid size mining companies that seem to be doing the best, as they had little to no hedging going on.

I don't think physically holding Gold is my thing. I honestly believe it is a sucker metal, just I have complete faith in their being sufficient other suckers going forward that mining companies (real ones) are a better bet. At least over the paper producers at the central banks. The whole hedge comes down to a bet on who can crank out more? Can central banks produce paper faster than the Gold mining companies can get gold out of the ground? My money (or gold) is on the central banks always being able to print paper faster than gold can be put on the market.

As for currency hedging, I try to balance U.S. dollars against pesos for the most part, and as in this situations lean heavier on holding pesos as I live in a peso economy. I don't have millions in currency to play the currency markets like the big boys, but if I get caught on the wrong side of an exchange rate for a few days or even a few weeks I can hold off moving money from one to the other if it is obvious I can get a bit better exchange by buying some time. Worse case I take my U.S. dollars and buy things that are expensive or hard to get in Chile, and import them during particularly unfavorable exchange rates. So for example, right now it is really cheap for me to buy computer hardware and other office equipment in the States, so it is worth buying it and importing it.

I also try to keep some long-term investments in both, in the event one or the other really does give out. I don't expect that anytime soon, but I also remember the wonders of having my $5 allowance in Mexico when I was a kid getting $3600 pesos to the dollar all of sudden. I use to go crazy spending sprees for a week, and still have $4 left by the next allowance day. Same reason I have a stash of several thousand Chinese RMB. Someday they are going to float those suckers, and they are already likely worth twice what they cost me (7 RMB to the dollar vs a real 2 or 3 to the dollar) if it was not for the fixed exchange rate.

History though proves the suckers are always the paper believers.

Only question is when and thus the timing aspect, for most 10% then forget about it is an easy, prudent and painless policy to follow.

Investing in currencies is like betting which elevator in a 300 meter skyscaper will reach the basement the slowest. Oh look, car number one is still on the 62nd floor while I am on the 70th. So I am winning! Oh! now car number one is on the 41st floor and I am on the 52nd, so I am really gaining!

Gold stays on the top floor. In fact, once investors in currencies realize what is going on, gold will fly, unlike the lead balloon. The gold stocks and mutual funds thereof are still very under valued. Once the gold and silver prices rise more than the increasing price of production, they will do very well. There is less and less production each year and more demand. Natural resource investments should do well for the same reason.

One of the most interesting concepts was to borrow against a mortgage in 2005. Buy the metals,bullion. Price has doubled, and will again, soon. Pay off house and live in it in the USA, or sell out and buy something much nicer for the same price in Chile.

I have in fact done this, and it has worked out well. If the rest of the strategy works as well as I think it will, I should be able to invite you all to my (future) casa in Chile.