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I don't know what color the sky is in a world where that won't happen, but I'm sure you can ask the unicorns.

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=217529&t=0...

I literally laughed out loud when I came across this quote a few minutes ago. I'm glad that I wasn't drinking anything at the time or I'm sure that I would be cleaning it off of my monitor instead of writing this right now.

The nonpartisan Congressional Budget Office, which in my opinion has actually done a reasonable job at estimating the future cost of a number of programs lately, is significantly underestimating the cost of the new climate change bill that Congress is debating right now.

The CBO recently published a study in which it concludes that if passed the new climate-change legislation would only cost the average American household $175 extra per year by the year 2020. I find that extremely hard to believe. The CBO concluded that the changes that the bill mandates could end up adding 0.7% per year to the CPI by 2020. Buy those TIPS now people. The CBO even admits in its report that "some regions and industries would experience substantially higher rates of unemployment and job turnover as the program became increasingly stringent."

The cost estimate in the report is actually much higher than $175 per household, a gross cost of $770 - $1,380 more per household per year but the CBO assumes that the government will offset this cost with the revenue that it brings in from the permits that it sells. What are the odds that the grubby politicians in Washington, Democrat or Republican, don't start drooling over that extra revenue from the pollution permits and start spending it like they have been doing with the Social Security and Medicare funds for years?

Here's what Michael Steel, a spokesperson for House Minority Leader John A. Boehner had to say about the bill:

CBO analysts "got an unrealistically low number for cost per family because they didn't factor in the millions of American jobs that will move overseas if the United States imposes this tax and our foreign competitors, like China and India, do not. I don't know what color the sky is in a world where that won't happen, but I'm sure you can ask the unicorns."

CONTINUED...

Deej
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Buy those TIPS now people.

Which do you think is a better investment, TIPS or gold (physical)?
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Good question, Wpr. I actually think that inflation, as measured by the CPI has the potential to be relatively mild for the next year or more. Capacity utilization is a historically low levels and unemployment is still painfully high. These things are usually very disinflationary.

The only source of inflation that I see as a potential problem is a significant drop in the value of the U.S. dollar. It is possible that the value of the dollar will continue to fall as foreign countries are unwilling to or unable to fund the federal government's massive budget deficit. If this does happen, and it is very likely that it will if Uncle Sam does not reign in spending at some point, interest rates are headed higher and inflation at least in terms of hard assets will be a problem. I see the decline of the dollar as likely, but being much more gradual than the hyperinflation crowd thinks.

I am not a big fan of TIPS. They are too low-yielding for me. Besides, their increase relies upon the government's calculation of inflation...which is often understated.

I am not really a gold bug either. Yeah, I know, I know there's tons of people out there who will talk your ear off about how gold is the only "real" money, blah, blah, blah. That may be true, but gold never disappears. Just about every ounce of gold that has ever been dug out of the ground that isn't sitting on the bottom of the ocean in sunken chests still exists. It has very few, real-world uses other than for jewelry, and the demand for that will likely be restrained for some time to come.

The inflation hedge in my portfolio is oil. Not the USO, but dividend-paying E&P companies. Yes, oil demand is weak right now but oil, which is priced in dollars, will go up if the value of the dollar falls. Plus, unlike gold once oil is removed from the ground and used it disappears forever. As an added bonus, the supply of light, sweet, easy to access oil is being used up at a decent pace.

To protect myself from a decline in the value of the U.S. dollar I also like to have some exposure to companies that earn a significant portion of their revenue abroad (which is Global Gains' specialty), like Philip Morris International (PM).

Deej
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"I am not really a gold bug either. Yeah, I know, I know there's tons of people out there who will talk your ear off about how gold is the only "real" money, blah, blah, blah. That may be true, but gold never disappears. Just about every ounce of gold that has ever been dug out of the ground that isn't sitting on the bottom of the ocean in sunken chests still exists. It has very few, real-world uses other than for jewelry, and the demand for that will likely be restrained for some time to come."

I am careful about thoughts upon gold because the value of Gold is not going to depend on things like logic. Gold can be a currency and like all currencies the value of Gold will somewhat depend on how much people believe in it as a currency.

Some people have all sorts of reasons for why Gold is not valuable and to that I say "What is valuable about a bunch of paper printed with all types of crazy symbols like a pyramid with a eye on it or other masonic symbols??? http://www.freemasons-freemasonry.com/masonic_dollar.html and various other stuff like dead president's or NOVUS ORDO SECLORUM which loosely translated means "A new order for the ages"."

What is the value of that paper if someone handed it to you? Is it more or less than some other paper that was printed in Brazil with the words Cruzado http://en.wikipedia.org/wiki/Brazilian_cruzado printed on it???

If you do value the dead US Presidents more then I ask why is something with Federal Reserve on it more valuable than something with Cruzado printed on it???

I figured this out long ago. It is the human brain that places the value on what different outside objects that it sees means to it. Much of the value people place on things is greatly influenced by what the collective society feels about it.

One might feel like Gold is worth less than cow dung (which can also be used as a currency) but if society as a whole feels that Gold holds the ultimate value then Gold will be very valuable indeed.

There was once long discussions about "faith" on these philosophy boards. One thing I learned long ago is the value of money is more ruled by "faith" than it is logic. It is the belief or faith in the currency where much of the value lies and not so much in what form the currency may take. As I said before Cow dung can be used as a currency.

There are some parts of the jungle of Indonesia or Brazil or Africa or in the outback in Australia that if you brought a dollar bill and tried to use it to buy something you might be killed because the "locals" might think you are trying to rip them off.

They obviously don't have the same "faith" in the dollar and it appears that neither does Moscow http://blog.foreignpolicy.com/posts/2006/07/27/introducing_t...

I would also be careful with predictions on inflation or not because inflation can happen even with high unemployment but in that case many people call it "Stagflation" http://en.wikipedia.org/wiki/Stagflation

Low growth and inflation are not mutually exclusive. The truth is no one really knows the exact time frame things will happen. Inflation can start 1 month from now or 5 years from now.......or some random event can happen and there will not be inflation at all.

There are some that believe in pre-1965 Silver dollars:

"Although many investors buy junk silver coins as bullion investments, other investors buy junk US silver coins for "survival purposes." These buyers fear the worst for the dollar, that it will be printed until it becomes worthless. If this "worst-case scenario" were to become reality, then US silver coins would be used the purpose they were originally minted: as money.

CMIGS hopes that Americans never see the day that their once proud dollar becomes worthless. Yet, we are aware that the history of paper currencies is that they are printed until they become worthless. (Actually, today the most dollars in circulation are not printed but are "electronic" or digital dollars, created by the Federal Reserve."

http://www.cmi-gold-silver.com/90circulated.html

"electronic dollars"......sounds like imaginary money to me....sort of like "Monopoly Money" which is why...

....others believe in putting their money in foreign banks of countries that have a lot of natural resources such as Brazil, Canada, Australia, etc...because their money value can be backed up with the particular natural resources that the particular country holds.

There are a lot of thoughts on these subjects. I read them all and I am not completely sure which scenario will pan out. I rather not have Gold as a currency because Gold is increasingly hoarded into a few hands. "He who has the Gold has the power" or something to that effect. Silver would be a better currency in the event of a "crash" because silver is more widely distributed and the power would be more "people power" than it would be under Gold where absolute power corrupts absolutely.



Starrob
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Although many investors buy junk silver coins as bullion investments, other investors buy junk US silver coins for "survival purposes."

The value of a dime from 1964 or before, is now worth more than a dollar these days. However, almost all pre-1964 silver currency has been pulled from circulation.

There was an interesting debate on a rare coin message board I belong to about which would be the better have (in a depression scenario), gold or silver bullion. Many people thought silver because it would be easier to many multiple smaller transactions, whereas gold could only be used to buy larger items.

Historically speaking, the "gold isn't a currency" doesn't hold that much weight to me. Gold has been used as a currency for thousands of years, whereas paper money and electronic money have only been considered legitimate in the past 100 years.
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I am not a big fan of TIPS. They are too low-yielding for me. Besides, their increase relies upon the government's calculation of inflation...which is often understated.

This is what I heard too, that the end number you get is subject to manipulation by government statistics.

Just about every ounce of gold that has ever been dug out of the ground that isn't sitting on the bottom of the ocean in sunken chests still exists. It has very few, real-world uses other than for jewelry, and the demand for that will likely be restrained for some time to come.

Pretty good point, the overall supply is always increasing, and it has no industrial use. However, if the world population is increasing, does that negate the increase in overall gold supply? Not sure.

Oil sounds like a good alternative to me. Which E&P companies do you like? I have some PBR already, but no U.S. names.
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Hey wpr. My personal favorite E&P company is a CANROY called Penn West (PWE), but there are lots of attractive dividend paying companies like it out there.

Deej
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