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The Dark Side of Student Loans
Issue #528, June 25, 2018

The Cost of Out-sourcing Convenience
Issue #527, June 18, 2018

Social Security: 66 or 70?
Issue #526, June 11, 2018

Student Loans: There’s (Unfortunately) a Lot More!
Issue #525, June 04, 2018

Co-signing a Note
Issue #524A, May 31, 2018

The Knight Frank Luxury Index and Collectables
Issue #524, May 28, 2018

The Importance of Diversification: The Myth of Diversification
Issue #523, May 21, 2018

How to Save Thousands on Your Food Bill
Issue #522, May 14, 2018

MoviePass and Other Things
Issue #521A, May 10, 2018

Degree Inflation, Long Training Periods, and “Certification”  Part III
Issue #521, May 07, 2018

Degree Inflation, Long Training Periods, and Certification” Part II of III
Issue #520, April 30, 2018

Follow-up on Several Things
Issue #519A, April 25, 2018

Degree Inflation, Long Training Periods, and “Certification”: Part I of II
Issue #519, April 23, 2018

The Kids Birthday Party Hustle
Issue #518A, April 18, 2018

A Pension Question: Part II of II
Issue #518, April 16, 2018

A Physician is an Executive
Issue #517A, April 11, 2018

A Pension Question: Part I of II
Issue #517, April 09, 2018

Is the Correction Over?
Issue #516A, April 05, 2018

Used Car Dealers, Student Loans, the Chinese, and Uncle George’s Rule
Issue #516, April 02, 2018

Starter Homes
Issue #515, March 26, 2018

Redecorating: Beware!
Issue #514, March 19, 2018

NASDAQ Closes at Record High
Issue #513, March 12, 2018

A 40% Chance
Issue #512, March 05, 2018

Several Things
Issue #511, February 27, 2018

Human Capital, Education and Wealth
Issue #510, February 19, 2018

Another Stock Market Update
Issue #509A, February 18, 2018

Some Thoughts on Savings
Issue #509, February 12, 2018

A Stock Market Upfate
Issue #508S, February 10, 2018

Who Can You Trust? Part II of II
Issue #508, February 05, 2018

The Christmas Decoration Pre-worn Jeans Hustle
Issue #Interim Bulletin #507A, February 03, 2018

2018 Outlook for Financial Markets
Issue #507, January 29, 2018

Who Can You Trust? Part I of II
Issue #506, January 22, 2018

Life Insurance Settlements
Issue #505, January 15, 2018

Commodities and Buying the Breakout
Issue #504, January 08, 2018

Buffett Wins His Bet
Issue #503A, January 04, 2018

Practice Real Estate and Free Agency
Issue #503, January 01, 2018

Outlook for 2018: Part III: Stocks and Bonds
Issue #502, December 25, 2017

My Outlook for 2018: Part Ii: Precious Metals
Issue #501A, December 21, 2017

Outlook for 2018: Hard Assets: Part I of III
Issue #501, December 18, 2017

More Thoughts on Bitcoin
Issue #500A, December 14, 2017

Fees and Good Relations with Bankers
Issue #500, December 11, 2017

Salvator Mundi
Issue #499A, December 07, 2017

Should You Rent or Own a Home?
Issue #499, December 04, 2017

A Gift Subscription
Issue #Interim Bulletin #498A, December 02, 2017

Stocks vs Real Estate: Asset Allocation: Part II of II
Issue #498, November 27, 2017

When Good Enough is Fine
Issue #497A, November 22, 2017

Stocks vs Real Estate: Asset Allocation. Part I of II
Issue #497, November 20, 2017

The Saudi Arrests and the Perils of Foreign Investing
Issue #496, November 13, 2017

Gambling and Las Vegas
Issue #495, November 06, 2017

Some Tips on Auto Insurance
Issue #494, October 31, 2017

Bitcoin and the Digital (Crypto) Currencies
Issue #493, October 23, 2017

The Coming Bear Market: Part II How to Prepare
Issue #492, October 16, 2017

Some Observations on Cemeteries
Issue #Interim Bulletin #491A, October 12, 2017

The Coming Bear Market: Part I: The Myth of Buy and Hold Forever
Issue #491, October 09, 2017

The Market makes New Highs
Issue #490, October 02, 2017

The Importance of a New High
Issue #489, September 25, 2017

A Little Insurance: Wealth, War and Wisdom
Issue #488, September 18, 2017

Some Observations
Issue #487, September 11, 2017

How to be Successful in Your Career
Issue #486A, September 07, 2017

How NOT to Buy a Home
Issue #486, September 04, 2017

This Week in the Market
Issue #485, August 28, 2017

Is the “Trump Bump” Running Out of Gas?
Issue #484, August 21, 2017

Gold is on the Move
Issue #483, August 14, 2017

The Importance of Estimation
Issue #482, August 07, 2017

Buying Art and Collecting: Part II of II
Issue #481, July 31, 2017

Buying Art and Collecting in General, Part I of II
Issue #480, July 24, 2017

Physicians need to be More Forceful: Follow-up
Issue #479, July 17, 2017

Physicians need to be More Forceful
Issue #478, July 10, 2017

Your First “Real” Investment
Issue #477, July 03, 2017

Leasing a Watch: Don’t
Issue #476, June 26, 2017

The Importance of Your Children having a Job
Issue #475, June 16, 2017

The Problem with Medical Student Debt is—the Med Schools
Issue #474, June 12, 2017

Critters and Varmints in your Home and Yard
Issue #473A, June 07, 2017

Leveraged ETFs
Issue #472, May 29, 2017

Leasing a Vehicle: Don’t!
Issue #471, May 22, 2017

Issue #470, May 15, 2017

More on Buying Jewelry
Issue #469, May 08, 2017

Buying Jewelry: Gold, Diamonds and Pearls
Issue #468, April 30, 2017

Thomas Sowell: Part III of III
Issue #467, April 24, 2017

Thomas Sowell: Pat II of III
Issue #466, April 17, 2017

Live Close to Where You Work
Issue #465, April 10, 2017

Medtronic in Hospital Management
Issue #Interim Bulletin #464A, April 07, 2017

Thomas Sowell: Part I of II
Issue #464, April 03, 2017

A Political Contribution a an Investment: Part II of II
Issue #463, March 27, 2017

A Political Contribution as an Investment: Part I of II
Issue #462, March 20, 2017

Buffett Selling Vacation Home
Issue #461, March 13, 2017

Advanced Placement (AP) ourses
Issue #460, March 06, 2017

The Importance of a Credit History
Issue #459A, March 02, 2017

A Credit Card Scam
Issue #459, February 27, 2017

The Electronic Health Reord
Issue #458, February 20, 2017

Issue #457, February 13, 2017

Platinum and Palladium
Issue #456, February 06, 2017

Economic Outlook for 2017: Part II of II
Issue #455A, February 02, 2017

Economic Outlook for 2017: Part I of II
Issue #455, January 30, 2017

A Story From Vegas
Issue #454A, January 25, 2017

Land Donation Deals and the IRS
Issue #454, January 23, 2017

The Theory of Gambler’s Ruin
Issue #453, January 16, 2017

Student Loans: But Wait, There’s More!
Issue #452, January 13, 2017

A Second Home
Issue #Interim Bulletin #451A, January 04, 2017

The Consumer Confidence Index
Issue #451, January 02, 2017


By Robert M. Doroghazi, M.D., F.A.C.C.

When the US went off the Silver Standard

Issue #430, August 08, 2016

    Inflation started to take hold in the US in the mid to late-50s. In 1958, postage on a first-class letter was raised from 3 cents to 4 cents. Just 5 years later it was increased to 5 cents. Prior to 1958, stocks had to pay a higher dividend than bonds because they were perceived as riskier. In that year, the bond market sensed the incipient inflation, which erodes the value of bonds, and the interest rate on Treasuries surpassed that on stocks.
    Through 1964, our dimes, quarters and half dollars were 90% silver with $1 of face value containing 0.72 ounces of silver. The Morgan and Peace silver dollars contained 0.78 oz. of silver. Our 1$ bills were Silver Certificates, which proudly stated “This certifies that there is on deposit in the Treasury of the United States of America one dollar in silver payable to the bearer on demand”. It provided confidence. 
    But silver also sensed the same inflation, and by 1964 the silver content exceeded the face value of the coins. The US was forced to repudiate the silver standard, just as Roosevelt reputed the gold standard in 1933. Now our previously silver coins are made with base metals with minimal intrinsic value. Look at the paper money in your pocket, from the $1 to the $100 bill: “Federal Reserve Note: United States of America”. No mention of silver or the Treasury. So we should put our faith in—Janet Yellen??
    As of the late 50s, the Treasury held about 200 million Morgan and Peace silver dollars in 60 lbs. bags containing 1,000 silver dollars each. Inflation was heating up, silver was up 30% in 1962 alone, the Treasury knows that they’ll soon have to stop making silver coins, so what to do with the silver dollars? Of course, do what any government does—the worst thing possible. In a move as poorly conceived and executed as when Gordon Brown sold half of the Bank of England’s gold hoard at the absolute bottom of the market in 1999, in 1958 the Treasury started to sell the silver dollars—for face value!! Many of the coins had significant numismatic value. It is rumored that one lucky buyer walked out the door and immediately resold the bag to a coin dealer for $75,000. After selling the vast majority of the coins, the Treasury finally wised up and stopped the mayhem in early 1964, selling the remaining coins at auction in the 70s.
    Looking back, the withdrawal of silver from circulation was one of the most no-brainer chances to make money ever. When I worked at Graham’s Book Store from 1967-1969, I’d change out a couple of dollars of silver every day from the cash register. It was easy: just look at the coins from the side: the rim of the silver coins was pure white, the clad coins had a red line (as they do now).
    A local coin dealer was paying a 10% premium over face value. Every couple of weeks, dad would take down $30-40 of silver and make 3 or 4 bucks. That doesn’t sound like much, but with gasoline at 23-25 cents a gallon, it was enough for a fill-up. It’s not often that you can make an easy and instantaneous 10% profit, but in 1980, silver peaked at 30X face value of the coins. Woulda, shoulda, coulda. I kept a little of the silver, but had I kept all that dad sold to the coin dealer, I would have had enough for the down-payment on a nice house and I could have traded my ’72 Nova for a new set of wheels, and paid off some of my student loans.
    I write this now because:
    1) it’s interesting history.
    2) Every once in a while, real opportunities do come along, you just have to recognize them. One was to go long Treasuries in the early 80s, when Volcker broke the back of inflation. Treasuries actually out-performed stocks in the 80s.
    3) Governments often make the wrong decision, especially when it comes to money.
    4) I believe the precious metals bottomed in December/January, and the final phase of the bull market that started in 2001 has begun. I will make that the topic of next week’s letter. The US Dollar has lost more than 98% of its value since the creation of the Federal Reserve in 1913. To quote Jim Grant: “paper money is confetti”. You’ll want to own some precious metals.           
    Last week I talked about why you should NOT open a restaurant. It brings up several other points worthy of discussion.
    1) In the near future I’ll review “What is Your Spare Time Worth?
    2) People often think of debt as a percent of the total value of the asset. The most familiar example is a mortgage. You buy a $500K home with $100K down and take a $400K mortgage. That’s certainly a lot of money, but even if the value of the home drops 20%, you’re still covered.
    Now say you invest in a business or Limited Partnership for $1.4M with $400K (28%) up front and borrow the rest at the bank. It goes bust, with no residual value—not an uncommon scenario in such situations. Now you owe $1,000.000. That is a lot of money. Point:
Never forget the absolute amount of a debt.
    3) When you go into business with others, beware of being “joint and severally liable”, i.e., you are potentially on the hook for the entire amount. Say 20 doctors form a general partnership and buy an office building for $5M. Each puts up $50K ($1M total) and borrow $4M. It goes bust. Half of the doctors are either A) just starting out in practice and have few assets, B) going through a divorce and are in the process of getting wiped out, or C) are punk investors, and at age 70 are still in the hole (every one of you in practice know several such physicians, who continue to work not because they love Medicine but because they must). In the end, only you and 3 other docs have any real money. Guess who the bank comes after? In general, the bank will do all they can to get as many names as possible on a note: they are doing what you would do: everything possible to protect their interests.
    4) You are about to sign a note and have some questions. The banker says “Oh, don’t worry about that, it almost never happens”. The clause is in there because it can and does happen. Don’t let anyone blow you off like that. Get another banker.
    WSJ (8/2/16). 16% of the 43 million Americans with student debt are in long-term (one year or longer) default, unable or unwilling to pay the federal government.
    RMD comment: I have probably written more on student debt than any other subject, but I think it is one of the most important issues of the 20-40 year old generation. It was the first in my 6-part series of “Negative Secular Issues in Medicine” and appeared in the January issue of The American Journal of Medicine.
    The government needs to get out of the student loan business, because this is what happens: it becomes a political issue. 
    I ended last week’s letter with an admittedly near rant about what snooty Northeasterners think of us in the Midwest. This is from a subscriber—in Boston!
    “I agree with your comments about self-centered and inaccurate views of people living in the larger cities on the East Coast about the quality of life relative to other parts of the country…I suspect there are a lot of highly desirable parts of the country between the coasts that the wine and cheese set in NY and Boston simply don’t understand”.
    The 30-year US Treasury currently yields about 2.3%. The Fed has an announced inflation target of 2%. After taxes, you have 0% real return per year for the next 30 years. When you get your $10K back after 30 years, it will have a purchasing power about one quarter or less of your initial investment. If inflation is higher, your losses are even greater. Japan is considering a 50-year bond. Switzerland already has a 50-year and 100-year bond.
    RMD comment: Think of a Treasury of 10 years or longer as a “Certificate of Confiscation”. Last week, Jamie Dimon, CEO of JP Morgan, said he wouldn’t buy a 10-year bond. When interest rates do finally turn up, it will be the short of the generation.
    The low interest rates are hammering insurance companies, and everyone who relies on fixed-income investments, like pension funds, foundations, and retirees.
    I add comments about books because 1) everything I read, the Wall Street Journal, Barron’s, Forbes and The Economist, have book reviews, 2) I hope you will find them interesting and 3) since no one can predict the future, all we have to study is the past.
    1) Jungle of Stone: The True Story of Two Men, Their Extraordinary Journey, and the Discovery of the Lost Civilization of the Maya (Carlsen, Morrow). Two principles dominate the science of numbers. The first is that the position of a number determines its value: a 1 in the one column is 1, while a 1 in the one hundred column is worth 100. But most revolutionary was the concept of zero, which had 4 independent originations. 1) Babylonia, 2) India, 3) Arabia, and 4) the Mayans. It took a LONG TIME to accept that the amazing ruins in Central America were built by an ancient indigenous population, rather than the “Lost Tribes of Israel”, or even aliens.
    2) How the Post Office Created America: A History (Gallagher, Penguin Press). The Post Office was an important equalizing force in America. A) Free rural delivery helped break the isolation of those who lived on farms. B) Flat postage rates. It cost a great deal more to send a letter from Manhattan to the Arizona Territory than to Brooklyn, but people accepted flat rates as part of living in America.
    3) The Medici: Power, Money, and Ambition in the Italian Renaissance (Strathern, Pegasus Books). Banking has always been, and still is, a business of relationships built on trust. Bankers will still loan money to an honest man on their word only. 

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