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EJ
10-26-09, 03:57 PM
http://www.itulip.com/images/spanishgold.gifGold update: Gold over $1000 and still no gold bubble

For the past ten years we could run ourselves ragged trying to counter the gold disinformation machine. For example, the lead story in the Markets section of today’s Wall Street Journal “Odd Couple: Stocks, Gold Share Same Ride Higher” begins:
As the world begins recovering from the worst financial crisis in 70 years, an odd couple of winners have emerged: stocks and gold. So far this year, the Dow Jones Industrial Average, a bet on economic recovery, is up 14%. Gold futures, a bet on calamity, are up 19%. The reason: Low interest rates and heavy government stimulus have poured cheap money into financial markets, helping both the economy and stocks. But the creation of all that money, together with the Federal Reserve's maintenance of near-zero benchmark interest rates and the prospect of heavy government borrowing to fund deficits, threatens to weaken the dollar and fuel inflation and economic volatility later.
Let’s look at the key assertions in this opening paragraph in the context of actual data, the price of gold and of the S&P over the past ten years since iTulip opened shop and we started buying gold. We also correlate the data with the political economy of the FIRE Economy that drives gold and stock prices.

Are rising gold and stock prices unusual?

http://www.itulip.com/images2/gold1998-2008.gif





Here are the facts.


The S&P finished higher in only six out of the past ten years.
In three out of the four years that the S&P finished lower, gold finished higher.
Each year for the last ten years the gold price has finished higher than the year's starting price, except for the year 2000 when gold prices fell 3%.
Even in the year 2000, the year in the past ten that gold prices fell, gold prices fell less than 1/3 as far as stocks fell.
Gold performed worse than the S&P during the stock bubble years of 1998 and 1999 when the S&P gained 14% and 23% respectively. Even so, gold prices went up 1% in each of those years.
The S&P gave it all back and more from 2001 to 2002 when stocks fell 10% then 26% while gold prices increased 20% then 17%.
In total over the ten year period, gold prices went up 260% compared to a loss of 8% for the S&P.


http://www.itulip.com/images2/goldenlieyearly199802008.gif





So far the reflation rally of 2009 is looking similar to the reflation rally of 2003 when the now famously asset inflation happy Greenspan Fed launched the housing bubble with 1% interest rates and deregulation of mortgage credit. The S&P shot up 23% that year and gold rallied 17%, the year after gold rallied 20% and the S&P fell 26%.

In the first two years of that post-bubble bust reflation, in 2003 and 2004, the S&P grew 3% net while the gold price went up 27%. The “bubbles in everything” that resulted from reflation policy produced lackluster returns on the S&P, while gold had three strong years between 2005 and 2008.

The bubbles collapsed in 2008, with the S&P down 38%. Even so, gold finished higher that year.

Turns out that the 2000s reflation did create “bubbles in everything”—everything except gold, that is.

Is the Dow Jones Industrial Average a bet on economic recovery while gold is a bet on calamity?

Gold has risen almost every year since 1998, with the exception of a 3% decline in 2000. Gold can only be considered a refuge from calamity if by “calamity” we mean a decade long process of credit financed asset bubbles and collapses of the domestic FIRE Economy that, along with an equally disastrous foreign policy, resulted in a 40% depreciation of the dollar against major currencies.

Do gold prices reflect future inflation expectations?

Gold does not rise in response to future inflation fears but in response to currency risk. As the risk to the dollar has risen every year since 1998, so has gold; the greater the risk, the greater the rise.

Some of the factors that increase dollar risk are also bullish for stocks in the short term. The WSJ writer gets this part right: near-zero interest rates and heavy government borrowing to fund deficits are reflating parts of the economy as they add more fuel on the dollar risk fire, a fire that’s been burning since 1998.

It’s human nature to think that the day we started to notice gold beating stocks is the day that gold prices started to beat stocks. The truth is that gold has been beating stocks for ten years.

The real story of gold versus stocks since iTulip.com opened for business in 1998 is that gold has produced better year over year results than stocks and with less volatility.

http://www.itulip.com/images2/goldenlie1998-2008total.gif





Over the past ten years, thousands of Ivy League university trained money mangers, schooled in the “science” of modern portfolio theory, spent in aggregate hundreds of thousands of hours analyzing the stock market, rotating holdings from one sector to another, carefully selecting entry and exit points to maximize returns, costing tens of billions in fees, all to try to beat the horrid -8% nominal return of the S&P index over that period. Still few were able to mimic the 260% return on gold they could have earned if they bought gold at the start of each year since 1998 and then did nothing at all.

Readers need no more than the one chart above to measure the scale of the disaster that FIRE Economy political and economic policies have brought us: two massive asset bubbles and a mountain of unpayable private and public sector debt. Rescue efforts after the latest crash have so far produced the grim monstrosity of nationalized GSEs, Government Motors, further concentration of money and power in America’s financial institutions, and a multi-trillion dollar gamble of the nation’s sovereign credit that housing prices can be re-inflated and credit-financed consumer spending restarted.

Don’t hold your breath waiting for a devaluation of the dollar. As I have said a dozen times before, the U.S. will never, ever explicitly devalue the dollar. Since the floating exchange rate system began in the early 1970s, no net debtor nation has ever explicitly devalued. To do so is to trigger a sovereign credit crisis. Since the 1970s, such devaluations have only ever been announced after a credit default had already occurred.

Net debtors don’t have to devalue; currency depreciation is a natural result of fiscal deficits, in combination with other factors. For a net debtor, the challenge comes in the other direction. How to maintain the exchange rate value of the currency in the face of massive fiscal deficits if the economy does not develop self-sustained, organic growth?

http://www.itulip.com/images/usadeficitNOTES.gif

The U.S. spends and spends to try to “stimulate” the economy
(read: expand public debt) until it grows on its own (read: private debt expands)




http://www.itulip.com/images2/revolvingcredit1969-Oct262009.gif

Yet consumer credit continues to decline






What if the U.S. runs out of sovereign credit before the consumer starts going back into debt?

If that happens we get currency event that we have warned since 1999 may be the eventual payback for decades of FIRE Economy policies. And if that happens not only will gold rise even more than it has nearly every year for the past decade, it will rise to the $2500 to $5000 range that we have forecast since 2001 sooner than later.

See also: What Gold Bubble? - Janszen Oct. 2006 (http://www.itulip.com/forums/showthread.php?p=3470#post3470)

http://www.itulip.com/forums/../images2/lostatsea300.jpgEconomic and market forecasting in a post-bubble world ($ubscription) (http://www.itulip.com/forums/showthread.php?p=129648#post129648)

Last night I attended a private event in Boston where Jeremy Grantham spoke to an audience of about 30 for an hour. As a fellow asset bubble watcher for more than a decade, he faces similar challenges now that the bubble era is over and a new era of uncertainty has begun. These are my comments on some of the key points that he made.

I read Grantham’s superb newsletters six months to a year after they are published. In fact, I don’t read anyone’s market and economic forecasts until they are at least half a year old. That may strike some readers as odd but there’s a method to the madness. If I stick to my own primary research and analysis then readers can be certain that if my analysis agrees with others' it’s because I have reached the same conclusions independently.

Grantham comes across in person as brilliant, honest, self-critical, and hyper-competitive. These are great qualities for a fund manager. I got the impression that he’d make a very, very demanding boss who does not suffer fools.

He contested his reputation as a perma-bear. As a point in fact he recalled his March 2009 special issue newsletter that appeared on the GMO web site on the very day that the S&P bottomed. Back when I was warning readers “beware relief rallies” he was saying “buy, buy, buy” but don’t expect the rally to reflect fundamentals. more... ($ubscription) (http://www.itulip.com/forums/showthread.php?p=129648#post129648)

iTulip Select (http://www.itulip.com/forums/showthread.php?t=1032): The Investment Thesis for the Next Cycle™
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steveaustin2006
10-26-09, 06:58 PM
Good comments.

What I don't understand is why you aren't doing more to protect yourself.

30% gold - okay great. Moot, if the Argentina-like event unfolds and we have to pay 90% on physical gold.

70% treasuries? no protection.

Staying in the U.S.? no protection from capital controls which could affect moving to any foreign asset and of course taxes are going to go through the roof, esp. in places like Mass.

Moving some to hard assets? okay, but again extreme tax risks as surely as faux blame will be put on futures 'speculators', (in addition to the Chinese yuan under-valuation to deflect criticism)

Let's assume the chances of this event are 30%. I look back in history at all these currency events and the smart guys who saw it coming always left beforehand, with their assets in tact. Affect change by staying and becoming an activist? Good luck.

icm63
10-26-09, 07:05 PM
Oh NO ! You have just put a hex on gold to show negative returns for 2009 !

hayekvindicated
10-26-09, 07:32 PM
Faber recently stated in an interview that in ten years time, the US will spend 50 percent (that's right, half) of tax revenues merely servicing the federal debt. If this figure and this projection is anywhere close to correct, Gold has a long way to run unless the currency collapses even before this happens.

Fingers crossed.

I agree with Steve Austin. I don't mind the allocation of gold at 30 percent. This is sensible. One should never overexpose oneself. HOWEVER, putting 70 percent of one's money in treasuries is something that doesn't make sense to me. There are other asset classes that one can invest in which could outperform treasuries - including real estate in emerging markets, resource stocks, commodities themselves and currencies of commodity producing nations (I like the Norwegian Kroner). There is a plethora of options that one has at one's disposal.

vinoveri
10-26-09, 07:55 PM
"So far the reflation rally of 2009 is looking similar to the reflation rally of 2003 when the now famously asset inflation happy Greenspan Fed launched the housing bubble with 1% interest rates and deregulation of mortgage credit. The S&P shot up 23% that year and gold rallied 17%, the year after gold rallied 20% and the S&P fell 26%."


Are you acknowledging that the rally we've seen over the past 7 months is likely the start of a multi-year uptrend in equities with no significant pullback as we saw from 2003- May 2006?

Jay
10-26-09, 08:07 PM
Don’t hold your breath waiting for a devaluation of the dollar. As I have said a dozen times before, the U.S. will never, ever explicitly devalue the dollar. Since the floating exchange rate system began in the early 1970s, no net debtor nation has ever explicitly devalued. To do so is to trigger a sovereign credit crisis. Since the 1970s, such devaluations have only ever been announced after a credit default had already occurred.I was thinking while reading this section, "what about Plaza!" then it hit me, no debtor nation...

Ugh, how times have changed.

Quincy K
10-26-09, 08:45 PM
If a "currency event" were to occur, you obviously want to be in any and all assets.

And if you are a US citizen, you want those assets in the US. Contrary to what many people here believe, you(physically) and your assets will probably be safer here than abroad.

It's only a matter of time until the rest of the world(common man) realizes how we(Americans) fuc_ed them over and will want nothing to do with us.

Some of them may even become violent.

LargoWinch
10-26-09, 09:03 PM
I agree with Steve Austin. I don't mind the allocation of gold at 30 percent. This is sensible. One should never overexpose oneself. HOWEVER, putting 70 percent of one's money in treasuries is something that doesn't make sense to me.

From my vintage point, iTulip was always clear on that: the UST allocation is to hedge against deleveraging.

Sure, since March 2009 cash has not been great, but what about the risks of uncontrolled economic meltdown during that time? More importantly, what about the future from here?

Regarding the immediate future, I think cash does not look too bad when we consider the state of the economy, the S&P 500 at close to 1,100, Crude at over $80/bl and gold at 1,000+. I for one would even argue that the smart money should find a way to short the most over-stimulated asset(s).

In sums, lets see once the Central Banksters stimulus money slows down (as opposed to run out) to judge that 70% cash allocation.

vinoveri
10-26-09, 09:27 PM
In sums, lets see once the Central Banksters stimulus money slows down (as opposed to run out) to judge that 70% cash allocation.


I'm not convinced it will slow down meaningfully anytime soon.

Look at the markets today, up 1% and then reversed down 1% after some senators said the home tax credit may not be extended. Then after the bell, other senators confirmed that in fact it will be extended and phased out http://www.bloomberg.com/apps/news?pid=20601070&sid=aGuiU0lB58kg
(yeah right, phased out unless the economy is not going gangbusters in which case it will be extended again; same with unemployment insurance, and all of the rest of the "stimulus" programs). Incredible is it not that are leaders are held hostage by the equity markets ...:( does give one pause I'll admit regarding the fragility of the stock market

Chief Tomahawk
10-26-09, 10:08 PM
If a "currency event" were to occur, you obviously want to be in any and all assets.

And if you are a US citizen, you want those assets in the US. Contrary to what many people here believe, you(physically) and your assets will probably be safer here than abroad.

It's only a matter of time until the rest of the world(common man) realizes how we(Americans) fuc_ed them over and will want nothing to do with us.

Some of them may even become violent.

Quincy... if anything they may be a bit upset we're apparently being "honest" now in acknowledging a problem. Think of all the economies in Asia for one who were advancing on our backs. EJ among many others have questioned the reliability of Chinese economic data, numbers probably massaged to present a favorable picture. Might they be happy if the U.S. government "massaged" the numbers and rules to return things back to the way they were before? What's the alternative-- revolution in China? High-crime in the USA? I think it's shortsighted to focus the blame only on us (USA) when we had plenty of enablers (those funneling their trade surpluses back into U.S. Treasuries.) Is it right? No, but what's the alternative??? [I'd go for Hank Paulsen making a trip to confessional and writing out a check for $250 million "for charity":)]

Chief Tomahawk
10-26-09, 10:13 PM
Aaaaarrrgggghhhh mateys, what's about's mees silvers???

Definitely lagging Au recently-- is that fear of industrial slowdown reducing physical demand? When does Ag catch up? Not until the "Friday the XIII" currency event?:eek:

Chief Tomahawk
10-26-09, 10:36 PM
Pitchfork rally tomorrow in Chicago!!!!!

Mrs. O'Leary's Cow Part Deux: It's FIRE economy time!!!

http://www.stopbankgreed.org/

Ads running on Newsradio in Chicago...... now if they go for NPR too, should be some intelligent & creative signage to be seen...;)

Chief Tomahawk
10-26-09, 11:04 PM
Just a possible explanation as to how The FIRE Economy got soooo out of hand...

http://en.wikipedia.org/wiki/Friday_the_13th_(franchise)#Box_office (http://en.wikipedia.org/wiki/Friday_the_13th_(franchise)#Box_office)

http://en.wikipedia.org/wiki/A_Nightmare_on_Elm_Street_(franchise)#Box_office (http://en.wikipedia.org/wiki/A_Nightmare_on_Elm_Street_(franchise)#Box_office)

A quick inspection of the box office for both horror stars reveals their careers began to sag after about 1994. Hungry for money, they headed off to Wall St. to begin their financial careers. This worked well until Jason lost his job in the 2001-'02 recession. Jason then went back to Hollywood, starring in one more solo film. With things sputtering still on Wall St., in 2003 Jason coaxed Freddy out of retirement and the buddy picture, "Freddy vs. Jason" was made.

Old Wall St. contacts brought the boyz back into town to work the structured financial products division at Bear Stearns and Lehman Brothers, with bonus side jobs at AIG, S&P, and Moody's soon to follow. Indeed, the boyz never knew so much slicing and dicing as could be had in lending work. Then the bubble burst. In February, 2009, Jason returned to his original stomping grounds in yet another horror flick. Freddy too, is set to star in another film coming in 2010.

hayekvindicated
10-27-09, 07:57 AM
From my vintage point, iTulip was always clear on that: the UST allocation is to hedge against deleveraging.

Sure, since March 2009 cash has not been great, but what about the risks of uncontrolled economic meltdown during that time? More importantly, what about the future from here?

Regarding the immediate future, I think cash does not look too bad when we consider the state of the economy, the S&P 500 at close to 1,100, Crude at over $80/bl and gold at 1,000+. I for one would even argue that the smart money should find a way to short the most over-stimulated asset(s).

In sums, lets see once the Central Banksters stimulus money slows down (as opposed to run out) to judge that 70% cash allocation.

There will be a second stiumulus bill long before the S&P reaches 800. And the Fed and other central banks will keep pumping money into the economy through the banks. I dont think we will see the March nominal lows again.

I agree with some allocation into cash for now (though I won't sell gold or my emerging market real estate - which is a long term bet). 2008 was a good year to be in cash and I stayed in cash (mostly Yen until Oct when I put it all into gold).

FRED
10-27-09, 10:44 AM
"So far the reflation rally of 2009 is looking similar to the reflation rally of 2003 when the now famously asset inflation happy Greenspan Fed launched the housing bubble with 1% interest rates and deregulation of mortgage credit. The S&P shot up 23% that year and gold rallied 17%, the year after gold rallied 20% and the S&P fell 26%."


Are you acknowledging that the rally we've seen over the past 7 months is likely the start of a multi-year uptrend in equities with no significant pullback as we saw from 2003- May 2006?

The phrase "looking similar to" is not the same as "is exactly like." :)

The year may start off like 2003 yet end like 2008 if the markets determine that the U.S. will run out of credit before the economy becomes self-sustaining.

Chris Coles
10-27-09, 11:10 AM
The phrase "looking similar to" is not the same as "is exactly like." :)

The year may start off like 2003 yet end like 2008 if the markets determine that the U.S. will run out of credit before the economy becomes self-sustaining.

Then the question becomes; how do we define the word "determine", and, for that matter, what do we keep a constant eye upon that will tell us when that event, (determination), is about to occur?

goadam1
10-27-09, 12:20 PM
The phrase "looking similar to" is not the same as "is exactly like." :)

The year may start off like 2003 yet end like 2008 if the markets determine that the U.S. will run out of credit before the economy becomes self-sustaining.

I don't know how I feel about that bet. Gold is the disaster hedge.

What will define self sustaining? The credit crisis and the ensuing recession was a chapter in a long story about disruptive tech, globalization, debt, declining infrastructure investment and on and on. Perma bears are as confused as those who can't figure out why jobs haven't magically returned now that the "crisis" is over.

I feel like you are answering your own sort of question. But why will it be an either or?

goadam1
10-27-09, 12:27 PM
The phrase "looking similar to" is not the same as "is exactly like." :)

The year may start off like 2003 yet end like 2008 if the markets determine that the U.S. will run out of credit before the economy becomes self-sustaining.

Why is reflation just a US concern?

FRED
10-27-09, 01:02 PM
Why is reflation just a US concern?

Because we need a continuous inflow of "excess savings" from "developing countries."


http://www.itulip.com/images2/capitalimportexport2008.gif

goadam1
10-27-09, 01:17 PM
Because we need a continuous inflow of "excess savings" from "developing countries."


http://www.itulip.com/images2/capitalimportexport2008.gif


I understand this part about capital in-flows.

Asset prices can melt up or down in dollar terms in a US credit crisis (depending of the crisis du jour). But the fed isn't the only central bank with a stake in supporting asset prices. We saw liquidity save the day in many currencies and countries during the credit crisis.

goadam1
10-27-09, 01:22 PM
Because we need a continuous inflow of "excess savings" from "developing countries."


http://www.itulip.com/images2/capitalimportexport2008.gif


Swap Australia with Japan and the bottom chart is a nice take on "wealthy" countries with too many old people and limited exportable goods. Not too surprising. How much is the problem generational dynamics?

vinoveri
10-27-09, 01:41 PM
The year may start off like 2003 yet end like 2008 if the markets determine that the U.S. will run out of credit before the economy becomes self-sustaining.

Should this happen, it will be a political event vs economic event, no, creditor nations politically deciding to cease buying US treasuries? This to me seems unlikely to happen on a mass scale, at least for a long while, and even then, it would seem to have to occur in a coordinated fashion, i.e., as long as the politcial machine can keep SOME countries buying our debt, then the game can continue, albeit with dollar devaluation (and concommitant asset inflation, e.g., equities).

What is capital anyway, not real capital, but fiat currency shell game capital?

If the Fed can buy on US treasuries, and other CBs can as well, so if China cuts back it's purchases, JP and UK can increase theirs. What are they really lending us after all? Real capital? No, just recycled dollars. Any CB can print its own currency to any extent, exchange those for $ on the Forex, and then buy treasuries. It boggles the mind .... It may end badly, but only when a coordinated global assault on the U.S. dollar commences, and this may be a long way off.

metalman
10-27-09, 06:15 PM
rereading the 2006 'what gold bubble?' article i notice the 2nd comment...


<table border="0" cellpadding="0" cellspacing="6" width="100%"><tbody><tr><td nowrap="nowrap"> akrowne (http://www.itulip.com/forums/member.php?u=213) http://www.itulip.com/forums/images/statusicon/user_offline.gif <script type="text/javascript"> vbmenu_register(&quot;postmenu_3472&quot;, true); </script>
Senior iTuliper
</td> <td width="100%"> </td> <td nowrap="nowrap" valign="top"> Join Date: Jul 2006
Posts: 172


</td> </tr> </tbody></table> http://www.itulip.com/forums/images/icons/icon1.gif Re: What Gold Bubble? - Janszen
<hr style="color: rgb(153, 255, 153);" size="1"> Great piece. The inflation-adjusted historical gold price series is pretty sobering.

i'd forgotten that krowne got his start on itulip. good on him!

tallone
10-27-09, 10:44 PM
The phrase "looking similar to" is not the same as "is exactly like." :)

The year may start off like 2003 yet end like 2008 if the markets determine that the U.S. will run out of credit before the economy becomes self-sustaining.


I'm confused. Did EJ mean the year before 2003 (not after,) gold rallied 20% and the S&P fell 26% ? Does this change what he is trying to say?

tallone
10-27-09, 11:04 PM
"So far the reflation rally of 2009 is looking similar to the reflation rally of 2003 when the now famously asset inflation happy Greenspan Fed launched the housing bubble with 1% interest rates and deregulation of mortgage credit. The S&P shot up 23% that year and gold rallied 17%, the year after gold rallied 20% and the S&P fell 26%.

In the first two years of that post-bubble bust reflation, in 2003 and 2004, the S&P grew 3% net while the gold price went up 27%. The “bubbles in everything” that resulted from reflation policy produced lackluster returns on the S&P, while gold had three strong years between 2005 and In the first two years of that post-bubble bust reflation, in 2003 and 2004, the S&P grew 3% net while the gold price went up 27%."

I'm confused with these paragraphs. In 1st paragragh, did you mean year before 2003, not after. I can't match numbers up in 2nd paragragh, either. I'm a graph newb, so can someone help?

halcyon
10-28-09, 03:58 AM
Good post. Let me play a little bit of devil's advocate here, not necessarily because I disagree as you'll see, but because, well, it's always good to throw some contra in the mix, even if it's a small one. Also, I don't claim to understand all the possibilities unravelling in the near future, so take this for what it is worth.

Gold considered by some to be a decent indicator of inflation expectations (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1002966). Regardless of this, it may or may not be a good inflation hedge (depends on circumstance, and how one defines inflation).

In fact, many current hedge fund gods are at least claiming they are buying it as an inflation (expectation) hedge recently/currently (Einhorn (http://www.valueinvestingcongress.com/downloads/n09/einhorn/Einhorn_VICNY09.pdf), Paulson (http://www.businessinsider.com/how-marc-faber-and-john-paulson-are-playing-the-inflation-trade-2009-10)).

This of course does not mean it's not a (deflationary) collapse-crisis hedge to many others - or even to the same people.

Further, it doesn't mean that gold necessarily retains wealth perfectly (even if better than many others) well over a long period of time:

http://i35.tinypic.com/1z6tfe8.png

Now, with those out of the way, let's look at bonds.

Many big hedge fund players are claiming they are shorting later date UST long bonds. This includes Pellegrini, David Einhorn & Julian Robertson, who said in his FT interview in mid October that he thinks this is a better bet than playing gold (paper or physical). Robertson does like gold mining stocks more than gold itself.

The short UST bonds can be considered also as an inflation hedge (interest rates will rise) or as a USD credibility collapse hedge. In either case, as the above hedge fund gurus argue, rates would go up, after-market selling of T-bonds would accelerate and the short would become very profitable, esp. at the level of leverage these guys are more than likely employing for their bet (5x or more).

What is of interest, although I can't find exact timing info on this, is that many of the above hedge fund guys are not buying shorts for the next 6 months, but more like in the 1-2 year horizon. This may be due to the yield curve now, but it also could be due to the fact that they think that the liquidity rally may go on for longer than many expect. Even Jeremy Grantham said two days ago, that he thinks the S&P will drop 'before the end of 2010'. That's still a long time away.

Soros also claims (http://www.ft.com/cms/s/0/79edee04-c00a-11de-aed2-00144feab49a.html?nclick_check=1) that the fear of inflation will precede inflation itself and may drive up the interest rates and then pushing forward then the inflation itself, causing a new phase in the recession.

Soros also claims that it is unlikely that USD will crash uncontrollably as long as Renminbi is pegged.

Now, above are arguments those of others, not mine. I may or may not agree with them - that is of very little importance. What is of interest that these guys think the game can be played, without an USD total collapse (hyper-inflation, UST credit downgrades) and with good results.

Their preferred tools are: short UST bonds (using many different techniques) and buy gold or even preferably gold miners.

That is, just playing high inflation expectations (like 12% p.a.) and the inevitable tightening coming in bonds. A potential uncontrolled devaluation of USD, possibility of hyper-inflation and a crash of the US is just something that their current moves hedge against (at least partially) as an added side-benefit. But that's not the main motive for their investment.

Also, many say, that as soon as tight monetary policy and sound fiscal policy is reinstated - and that will come at some point one way or the other - then it is likely for the gold to be killed fairly fast.

Take-aways for me in all this are:

- USD cash is dead for now and has been for 7 mo
- gold may work very well here, miners perhaps even better
- biggest potential may be in shorting UST bonds
- the snapback rally in USD is likely some semi-distant time in the future and can hurt gold/UST shorts, if liquidity is removed or markets start to anticipate tightening

I don't claim this is right or that I have fully understood what the guys I mention are after. So again, caveat emptor, ymmv, and all that.

LargoWinch
10-28-09, 09:41 AM
Their preferred tools are: short UST bonds (using many different techniques) ...


halcyon, I remember FRED saying that shorting UST Bonds is a very risky endeavour since the Gosvernment can always take your money and them some.



Also, many say, that as soon as tight monetary policy and sound fiscal policy is reinstated - and that will come at some point one way or the other - then it is likely for the gold to be killed fairly fast.


How can tight monetary policy be reinstated with that much debt still in the system both private and public?

I believe the name of the game is real negative rates for a long long time all over the world, which is bullish for precious metals.


Just playing the conter contra here. ;)

Jay
10-28-09, 10:03 AM
How can tight monetary policy be reinstated with that much debt still in the system both private and public?

And with the unemployment picture looking dismal and huge deflationary pressures. They can't. Rock meet hard place. Gold meet moon.

Quincy K
10-28-09, 10:20 AM
I never bought into the "gold is a hedge against inflation" theory. Gold is a hedge against a currency collapse and devaluation.

But then again, any tangible asset is a hedge against a currency collapse and devaluation including large cap stocks and housing.

CanuckinTX
10-28-09, 10:35 AM
I'm confused. Did EJ mean the year before 2003 (not after,) gold rallied 20% and the S&P fell 26% ? Does this change what he is trying to say?

I think the comma in the quote makes it read differently than what he meant. This is how I read it:

The S&P shot up 23% that year and gold rallied 17% <which occurred> the year after gold rallied 20% and the S&P fell 26%."

Verdred
10-28-09, 01:10 PM
Thanks to the itulip team (and expert participants),

Its always hard in the trenches.

Question:

It seems to me, based of the Goldman Sachs report and your own analysis that QE will have the highest impact in Q3.

Goldman Sachs just revised their estimate from 3% to 2.7%. I've also been seeing "analysts predicting 2.5%" flying around.

It seems like you've been looking at these impacts pretty closely, and I wondered if you had an opinion:

1) Can they reasonably make this estimate?

2) In your long experience, will they "manipulate" the "first read" due tomorrow in order to get a one-time pop, last hurrah, in equities?

I'm mainly asking because I think it will directly effect the "greatest impact in Q3" call (if I can call it as such).

potential examples of the effect: if the Q3 growth is on target and/or greater, can we feel more certain that the QE impact was the last gasp. Or, perhaps, ironically, if Q3 is less than expected, can we start leaning more towards a "Grantham slow dribble" theory.

I know this seems very short term, but I was wondering if anyone is banal enough here to estimate Q3 GDP. This is an open-ended question to any and all.

Disclaimer: I become more convinced by the day that eerie things are in the air. The last week has only confirmed this. The "credit runs out before self-sustaining takes hold" is gaining in probability, and as soon as the little money-spirits, computer programs, or who/whatever is running this thing realizes this, I think EJ's prescience will become more apparent.

Thanks.

halcyon
10-28-09, 03:26 PM
halcyon, I remember FRED saying that shorting UST Bonds is a very risky endeavour since the Gosvernment can always take your money and them some.


Not an expert on this. Julian Robertson (Tiger Managament) explains it like this (using his technique).

FACTS:
1) US public debt and fiscal gap is unsustainable at current levels for very long
2) Real economy is recovering very slowly, it is still in dire straits, in some areas worsening (employment)

REASONING:
1) Treasury has to sell more debt to finance fiscal gap, resulting in higher rates on the long end (remember, markets dictate this in the end)

2) Chinese *may* be force under specific circumstance to reduce UST bond buying or even stopping buying completely

3) If economic depression risks continue, additional stimulus is required, thus more bond sales

4) Markets are getting jittery about USD valuation and inflation, hence they will ask for higher rates on the BONDS

=> IF much more bond sales, bond rates will go up. If credibility collapse, bond rates will go up even more. If Chinese reduce buying considerably, well... a lottery win

TECHNIQUE
- Curve cap : basically a put on long term bonds 5 years from now
- risk is limited in this bet (doesn't explain how)
- leverage is very high (5x or more)



How can tight monetary policy be reinstated with that much debt still in the system both private and public?


You're right, they may not want to do it. However, they have to fund the stimulus. This means bond sales. Even if Fed buys them, the rates will rise, because buyers will want higher yields due to the stimulus raising inflation concerns.

And FED can't and won't monetize government money endlessly. Remember, they are private bank, they won't give money free to a dead-beat forever, if they think it'll kill them. And even if they did, they'd be killed by the rest of the world's bond market vigilantes, who outnumber the total combined ammo of UST+FED by a couple of orders of magnitude.

Also, my point was that at the very time when markets dictate how much you can stimulate/monetize is the moment of truth.

At the moment you either reinstate sound monetary/fiscal policy and start regaining the trust of the markets.

OR you go on foolishly and destroy the country, resulting in a collapse, currency replacement, writing down debt, maybe even war.

After that, the new government has to start from a clean slate - with sound fiscal and monetary policy.

So one way or the other, in the end - sound policy always wins. It just might takes us through a few rough spots :)



I believe the name of the game is real negative rates for a long long time all over the world, which is bullish for precious metals.


This is in fact, what FED is saying (although starting to get divided) and what Julian Robertson expects to happen for his bet to work on the bond shorting.

However, they are NOT buying gold, but gold miners - and they are not stupid men w/ 40+ years of experience in the market. They were making millions when most of us were still playing with stick figures on the playground. They've seen the previous gold bubble also and learned a lesson.

This is *not* to say gold can't go up, considerably. Some use it as an inflation hedge. Some as a deflationary collapse hedge. Some as a fiat currency credibility collapse hedge. Some combination of these. We've yet to see the mania phase for gold, imho.

However, I'm not sure myself that:

1) It is guaranteed to go up with 100% certainty
2) It will be a better bet than other inflation/bond-rate bets, like the curve cap Robertson is employing
3) it has the best risk adjusted return.

That's my 2cents, for free and I'm not a gold analyst, nor an expert, so I recommend everybody take it with a hefty dosage of salt.

And this doesn't mean I'm against gold myself. I've held gold, but as I operate from a non-USD currency and gold hasn't risen against it in the last 7 months, I'm not now holding gold. I'll buy it again, if it gets to what I consider oversold levels or my currency of choice starts to crumble. And it likely will, it's just a matter of time



Just playing the conter contra here. ;)


That's always a very wise thing to do. Think for yourself.

FRED
10-28-09, 04:41 PM
Thanks to the itulip team (and expert participants),

Its always hard in the trenches.

Question:

It seems to me, based of the Goldman Sachs report and your own analysis that QE will have the highest impact in Q3.

Goldman Sachs just revised their estimate from 3% to 2.7%. I've also been seeing "analysts predicting 2.5%" flying around.

It seems like you've been looking at these impacts pretty closely, and I wondered if you had an opinion:

1) Can they reasonably make this estimate?

2) In your long experience, will they "manipulate" the "first read" due tomorrow in order to get a one-time pop, last hurrah, in equities?

I'm mainly asking because I think it will directly effect the "greatest impact in Q3" call (if I can call it as such).

potential examples of the effect: if the Q3 growth is on target and/or greater, can we feel more certain that the QE impact was the last gasp. Or, perhaps, ironically, if Q3 is less than expected, can we start leaning more towards a "Grantham slow dribble" theory.

I know this seems very short term, but I was wondering if anyone is banal enough here to estimate Q3 GDP. This is an open-ended question to any and all.

Disclaimer: I become more convinced by the day that eerie things are in the air. The last week has only confirmed this. The "credit runs out before self-sustaining takes hold" is gaining in probability, and as soon as the little money-spirits, computer programs, or who/whatever is running this thing realizes this, I think EJ's prescience will become more apparent.

Thanks.


Goldman's economic forecasts are remarkably good, vampire squid issues aside.

The economic analysis that you are referring to came out in April 2009. We agreed with the forecast that the economic contraction phase of the FIRE Economy Depression was to end in Q3 2009 with the peak impact of monetary and fiscal policy.



http://www.itulip.com/images/gsrealgdp.gif


http://www.itulip.com/images/gsglobalgdp.gif


Note that Goldman forecasts that the stimulus will begin to exert a negative impact in Q3 2010.


http://www.itulip.com/images/gsstimulusimpact.gif


We presume that the 2% projected Q3 2010 growth includes the 0.4% drag caused by the side-effects of fiscal stimulus.

The jury will be in by Q2 2010 on whether growth is self-sustaining of not.

We made up our minds long ago: we think not. But we are in a minority.

Here's a chart that Richard Koo published in 2003. It shows the money supply supported entirely by government spending; private credit shrinks while the money supply grows and hot money grows rapidly. We warned our deflationist friends at the time: this is our future.


http://www.itulip.com/images/numura19koo.gif


Here's a chart we call "Richard Koo was Right."


http://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=line&graph_id=17770&category_id=0&recession_bars=On&width=800&height=480&bgcolor=%23FFFFFF&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&preserve_ratio=true&id=MZM,M2,TOTALSL,&transformation=lin,lin,lin,&scale=Left,Left,Right,&range=Custom,Custom,Custom,&cosd=2000-11-03,2000-11-03,2000-11-03,&coed=2009-10-12,2009-10-12,2009-08-31,&line_color=%23FF0000,%230000CC,%2300FF00,&link_values=,,,&mark_type=NONE,NONE,NONE,&line_style=Solid,Solid,Solid,&vintage_date=2009-10-28,2009-10-28,2009-10-28,&revision_date=2009-10-28,2009-10-28,2009-10-28,&mma=0,0,0,&nd=,,,&ost=,,,&oet=,,,


How fiscal stimulus combats a balance sheet recession:


http://www.itulip.com/images/koobalancesheetrecession.gif


Every time they tried to take away the stimulus, the economy and money supply shrank.


http://www.itulip.com/images/koojapanstimulus.gif


Can we do this for 20 years the way Japan did, while maintaining a large net capital inflow? We think not.


https://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=line&graph_id=17715&category_id=0&recession_bars=On&width=800&height=480&bgcolor=%2399FF99&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&preserve_ratio=true&id=BOPI,&transformation=lin,&scale=Left,&range=Custom,&cosd=1960-01-01,&coed=2009-04-01,&line_color=%230000FF,&link_values=,&mark_type=NONE,&line_style=Solid,&vintage_date=2009-10-28,&revision_date=2009-10-28,&mma=0,&nd=,&ost=,&oet=,

dummass
10-28-09, 06:15 PM
Gold Forecast -- Fibonacci Chart Video

http://broadcast.ino.com/education/gold1027

Verdred
10-28-09, 06:21 PM
Great response thanks.

Observation/question on the charts. Given, "1. US Real GDP growth forecasts" f/ GS says 1.0% for Q3 2009 and assuming this includes the 3.4% "2. Expected Contribution from Fiscal Stimulus" from Q3 2009.

THEN:

Isn't the 2.5 - 3% expected GDP number tomorrow even better than GS was expecting back in April?

Cash for clunkers? Housing credit (even my sister bought a house)? Either way, that is interesting news if I'm reading that correctly. Possibilities 1) The stimulus is having a QUICKER impact than prevoiusly imagined, 2) businesses are putting capital investments thinking this will be a quick turnaround (for instance there a couple of huge players in the valley of california building new houses again. Its all vertical: owners, contractors all in the same building with the financers down the block.) Maybe some businesses are banking on a recovery.), 3) stimulus is having a decent impact.

I think all three might be involved. The market is "getting more perfect" every day. It does assimilate data very quickly even if its psychological.

In conclusion: it seems that we are expecting them to be able to hit those estimates.

Which I'm assuming even with high jobless claims data ("lagging indicator" don'tchyaknow) will be seen as a definitive turn-around. The kool-aid tends to settle there at the bottom so it can pack an extra punch! Puns I guess intended.

Down Under
10-29-09, 04:52 AM
Not an expert on this. Julian Robertson (Tiger Managament) explains it like this (using his technique).

TECHNIQUE
- Curve cap : basically a put on long term bonds 5 years from now
- risk is limited in this bet (doesn't explain how)
- leverage is very high (5x or more)



Whenever one buys an option, put or call, the risk is always limited to the premium paid. So, the big plus is you precisely know the premium paid & hence, can decide how much you're prepared to risk.

Downside, of course, is that the option may well expire worthless.

I also listened to Julian Robertson and I didn't pick up that he was buying puts 5 years out. Did he explicitly state that? I thought he just said long dated puts.


And this doesn't mean I'm against gold myself. I've held gold, but as I operate from a non-USD currency and gold hasn't risen against it in the last 7 months, I'm not now holding gold. I'll buy it again, if it gets to what I consider oversold levels or my currency of choice starts to crumble. And it likely will, it's just a matter of time



That wouldn't happen to be AUD, by any chance?

goadam1
10-29-09, 11:23 AM
Looks like GS should have stuck with their original position instead of the revised one they put out. Hey, did they try to suck in some shorts?

Now you are putting out this forecast and it seems like a good one. But today you call the 6 month fire depression as spot on to your own work. When I came here a year ago you were talking about fire depression going into 2011 and 2012. I took it to heart. Seems like it was a chance blown at picking up some value. Plus, you guys seem to be betting the farm on a government credit collapse. Seems probable in some form. But even I can come up with several scenarios of how that plays out, along with some surprises. Betting that the powers that be let the US collapse is pretty extreme. I think all of us should be thinking of a spectrum of probabilities.


Goldman's economic forecasts are remarkably good, vampire squid issues aside.

The economic analysis that you are referring to came out in April 2009. We agreed with the forecast that the economic contraction phase of the FIRE Economy Depression was to end in Q3 2009 with the peak impact of monetary and fiscal policy.



http://www.itulip.com/images/gsrealgdp.gif


http://www.itulip.com/images/gsglobalgdp.gif


Note that Goldman forecasts that the stimulus will begin to exert a negative impact in Q3 2010.


http://www.itulip.com/images/gsstimulusimpact.gif


We presume that the 2% projected Q3 2010 growth includes the 0.4% drag caused by the side-effects of fiscal stimulus.

The jury will be in by Q2 2010 on whether growth is self-sustaining of not.

We made up our minds long ago: we think not. But we are in a minority.

Here's a chart that Richard Koo published in 2003. It shows the money supply supported entirely by government spending; private credit shrinks while the money supply grows and hot money grows rapidly. We warned our deflationist friends at the time: this is our future.


http://www.itulip.com/images/numura19koo.gif


Here's a chart we call "Richard Koo was Right."


http://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=line&graph_id=17770&category_id=0&recession_bars=On&width=800&height=480&bgcolor=%23FFFFFF&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&preserve_ratio=true&id=MZM,M2,TOTALSL,&transformation=lin,lin,lin,&scale=Left,Left,Right,&range=Custom,Custom,Custom,&cosd=2000-11-03,2000-11-03,2000-11-03,&coed=2009-10-12,2009-10-12,2009-08-31,&line_color=%23FF0000,%230000CC,%2300FF00,&link_values=,,,&mark_type=NONE,NONE,NONE,&line_style=Solid,Solid,Solid,&vintage_date=2009-10-28,2009-10-28,2009-10-28,&revision_date=2009-10-28,2009-10-28,2009-10-28,&mma=0,0,0,&nd=,,,&ost=,,,&oet=,,,


How fiscal stimulus combats a balance sheet recession:


http://www.itulip.com/images/koobalancesheetrecession.gif


Every time they tried to take away the stimulus, the economy and money supply shrank.


http://www.itulip.com/images/koojapanstimulus.gif


Can we do this for 20 years the way Japan did, while maintaining a large net capital inflow? We think not.


https://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=line&graph_id=17715&category_id=0&recession_bars=On&width=800&height=480&bgcolor=%2399FF99&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&preserve_ratio=true&id=BOPI,&transformation=lin,&scale=Left,&range=Custom,&cosd=1960-01-01,&coed=2009-04-01,&line_color=%230000FF,&link_values=,&mark_type=NONE,&line_style=Solid,&vintage_date=2009-10-28,&revision_date=2009-10-28,&mma=0,&nd=,&ost=,&oet=,

FRED
10-29-09, 06:23 PM
A "recession" means a negative reading of a made-up government number called GDP.

We agreed with Goldman in April that the government was able to pump enough "G" to get a positive Q3 reading. We also agree with Goldman that the very Q4 2008 to Q1 2009 "G" pump will be negative by Q3 2010, which means we'll get more "G" in 2010, probably in Q2.

See FIRE Economy Fallout -- Part I: Recession ends, depression begins - Eric Janszen (http://www.itulip.com/forums/showthread.php?p=112056#post112056)

goadam1
10-29-09, 08:04 PM
A "recession" means a negative reading of a made-up government number called GDP.

We agreed with Goldman in April that the government was able to pump enough "G" to get a positive Q3 reading. We also agree with Goldman that the very Q4 2008 to Q1 2009 "G" pump will be negative by Q3 2010, which means we'll get more "G" in 2010, probably in Q2.

See FIRE Economy Fallout -- Part I: Recession ends, depression begins - Eric Janszen (http://www.itulip.com/forums/showthread.php?p=112056#post112056)

Here we are back arguing terms. I have little doubt that the "G" is like G in Government. But the "fire depression" sure felt like a depression for those 6 months or so. So whatever the case, this part sure feels better. Plus, the perma-bears around here seem to get confused by your use of the term depression. It's a neither/nor situation. It's a bubble!

A government bubble is sure hard to short or invest in.

http://www.geopolitika.lt/data/images/moscow-kremlin-5.jpg

bill
10-29-09, 09:14 PM
, which means we'll get more "G" in 2010, probably in Q2.



Approval to extend credit should be in place and ready to go.

http://www.house.gov/apps/list/press/financialsvcs_dem/title_i_discussion_draft_final.pdf




15 SEC. 1109. EMERGENCY FINANCIAL STABILIZATION

16 (a) IN GENERAL.— Upon the written approval of the Board of Governors of the Federal
17 Reserve System (which approval shall be made upon a vote of not less than two-thirds of the
18 members of such Board then serving) and the Board of Directors of the Corporation (which
19 approval shall be made upon a vote of not less than two-thirds of the members of such Board
20 then serving), and with the written consent of the Secretary of the Treasury (after consulting with
21 the President), the Corporation may extend credit to or guarantee obligations of solvent insured
22 depository institutions or other solvent companies that are predominantly engaged in activities
23 that are financial in nature, if necessary to prevent financial instability during times of severe

DISCUSSION DRAFT – 10/27/2009

page 44
1 economic distress, provided that a credit extension or guarantee of obligations under this section
2 shall not include provision of equity in any form.
3 (b) POLICIES AND PROCEDURES.—Prior to exercising any authority under this section, the
4 Corporation shall establish policies and procedures governing the extension of credit and the
5 issuance of guarantees. The terms and conditions of any extensions of credit or guarantees
6 issued shall be established by the Corporation with the approval of the Secretary of the Treasury
7 and the Board of Governors of the Federal Reserve System.

halcyon
10-30-09, 07:09 AM
But even I can come up with several scenarios of how that plays out, along with some surprises. Betting that the powers that be let the US collapse is pretty extreme. I think all of us should be thinking of a spectrum of probabilities.

A beacon of light in the midst of dark chaos.

Yes - any sane investment (excluding gambling) is about multiple scenarios, varying degrees of probability and robustness of decisions made.

With that said, and with no intention to hanging people up to dry for their "false forecasts" what are your scenarios and probabilities?

Sharing these can sharpen the mind and broaden the horizon.

And talking about horizon, I think one should include time horizons. I claim that much of the disagreement stems from people misunderstanding each others horizons.

To me 1-6 mo is trade-worthy stuff, 3-5+ years is investing worthy. The stuff in between is the hard part.

tallone
11-01-09, 07:56 PM
Thanks for removing the comma for me. I get it, now. EJ was, in fact, saying what the graph was showing.

Slimprofits
11-09-09, 02:28 AM
We agreed with Goldman in April that the government was able to pump enough "G" to get a positive Q3 reading. We also agree with Goldman that the very Q4 2008 to Q1 2009 "G" pump will be negative by Q3 2010, which means we'll get more "G" in 2010, probably in Q2.

See FIRE Economy Fallout -- Part I: Recession ends, depression begins - Eric Janszen (http://www.itulip.com/forums/showthread.php?p=112056#post112056)

Christina Romer - Witness Statement - Joint Economic Committee Hearing - October 22, 2009 (http://jec.senate.gov/index.cfm?FuseAction=Files.View&FileStore_id=26439906-bf0d-466d-a605-6ec96daec7b5):


Table 2 reports our estimates of the impact of the ARRA on real GDP growth in the second and third quarters of 2009, along with estimates from a number of government and private forecasters.

http://www.itulip.com/forums/picture.php?albumid=11&pictureid=128

These estimates suggest that the ARRA added two to three percentage points to real GDP growth in the second quarter and three to four percentage points to growth in the third quarter. This implies that much of the moderation of the decline in GDP growth in the second quarter and the anticipated rise in the third quarter is directly attributable to the ARRA.

[..]

First, there are reasons to think that GDP growth could be either weaker or stronger than the consensus forecast. On the weaker side, one concern is the leveling out of fiscal stimulus. Fiscal stimulus has its greatest impact on growth around the quarters when it is increasing most strongly. When spending and tax cuts reach their maximum and level off, the contribution to growth returns to roughly zero. This does not mean that stimulus is no longer having an effect. Rather, it means that the effect is to keep GDP above the level it would be at in the absence of stimulus, not to raise growth further. Most analysts predict that the fiscal stimulus will have its greatest impact on growth in the second and third quarters of 2009.8 By mid-2010, fiscal stimulus will likely be contributing little to growth.

cont. (http://jec.senate.gov/index.cfm?FuseAction=Files.View&FileStore_id=26439906-bf0d-466d-a605-6ec96daec7b5)

goadam1
11-09-09, 09:06 AM
A beacon of light in the midst of dark chaos.

Yes - any sane investment (excluding gambling) is about multiple scenarios, varying degrees of probability and robustness of decisions made.

With that said, and with no intention to hanging people up to dry for their "false forecasts" what are your scenarios and probabilities?

Sharing these can sharpen the mind and broaden the horizon.

And talking about horizon, I think one should include time horizons. I claim that much of the disagreement stems from people misunderstanding each others horizons.

To me 1-6 mo is trade-worthy stuff, 3-5+ years is investing worthy. The stuff in between is the hard part.

I don't want to make predictions. I think stimulus will wear off and a whole other round will begin. Just look at extending housing credits since this posting.

Sure you can bet on cycles. Or buy at low points of cycles. But two things have become clear. One is that the strong get stronger. Number two is there is a put under assets.

LargoWinch
11-17-09, 08:44 PM
Gartman: Don't Be Naive, Gold Is A Bubble

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Mr. Gartman: you are wrong and as I said it many times; the $CAD is not a safe-haven against USD-based inflation. (http://www.itulip.com/forums/showthread.php?t=9964&highlight=mouth)

Also, any supporter of bank bailouts such as yourself is naive at best.

goadam1
11-18-09, 12:33 AM
Gartman: Don't Be Naive, Gold Is A Bubble

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Mr. Gartman: you are wrong and as I said it many times; the $CAD is not a safe-haven against USD-based inflation. (http://www.itulip.com/forums/showthread.php?t=9964&highlight=mouth)

Also, any supporter of bank bailouts such as yourself is naive at best.

I'm short the dollar by owning gold and taco bell. lot of new taco bells in India too.

goadam1
11-18-09, 12:41 AM
A beacon of light in the midst of dark chaos.

Yes - any sane investment (excluding gambling) is about multiple scenarios, varying degrees of probability and robustness of decisions made.

With that said, and with no intention to hanging people up to dry for their "false forecasts" what are your scenarios and probabilities?

Sharing these can sharpen the mind and broaden the horizon.

And talking about horizon, I think one should include time horizons. I claim that much of the disagreement stems from people misunderstanding each others horizons.

To me 1-6 mo is trade-worthy stuff, 3-5+ years is investing worthy. The stuff in between is the hard part.
I don't really have a knack for trading. Good stuff is running out. No one wants a war. People like cars, bad food, shiny things. I own land without debt and physical gold. I own short and medium term debt. I like compound interest. I like my real estate because I can enjoy it. I hate debt even though debt is an inflation hedge. I think the system is venal, corrupt and stupid. I've made more money on beer, weapons and fast food than anything else. I don't buy anything that requires too much debt or is too much owned by private equity or hedgies (retail comes to mind). Tech is bad too because it doesn't last long and is always too expensive.

I think those expecting a crash all the time or a return to sensible values are moralist or jealous of rich people. Forget it. Global fiat is a runaway train.

Does that make sense.

cjppjc
11-18-09, 06:31 AM
[quote=goadam1;133900]
I think those expecting a crash all the time or a return to sensible values are moralist or jealous of rich people.
quote]

While blanket statements are never 100% true, this resonates strongly.

Raz
11-18-09, 08:51 AM
Gartman: Don't Be Naive, Gold Is A Bubble




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Mr. Gartman: you are wrong and as I said it many times; the $CAD is not a safe-haven against USD-based inflation. (http://www.itulip.com/forums/showthread.php?t=9964&highlight=mouth)

Also, any supporter of bank bailouts such as yourself is naive at best.

Dennis the Gartman was at one time a very good trader and an excellent read. Success went to his head: he spends far too much time on the talk circuit, hobnobbing with the "Volvo, white wine & cheese set". He is also charging $400/month for his newsletter,
and it isn't worth 10% of that!

I read him occasionally and would be glad to give a heads up to anyone who really cares what he thinks.

I only use him now as a contrary indicator.:)

PS. He voted for Obama thinking he would be better for the country; now he's puking over the guy. Obama came from nowhwere to the Senate with no more experience than Sara Palin. He rose rapidly through the most corrupt political machine of any large American city. Just what did Gartman think he was going to get? :confused:

raja
11-18-09, 09:48 AM
I don't really have a knack for trading. Good stuff is running out. No one wants a war. People like cars, bad food, shiny things. I own land without debt and physical gold. I own short and medium term debt. I like compound interest. I like my real estate because I can enjoy it. I hate debt even though debt is an inflation hedge. I think the system is venal, corrupt and stupid. I've made more money on beer, weapons and fast food than anything else. I don't buy anything that requires too much debt or is too much owned by private equity or hedgies (retail comes to mind). Tech is bad too because it doesn't last long and is always too expensive.

I think those expecting a crash all the time or a return to sensible values are moralist or jealous of rich people. Forget it. Global fiat is a runaway train.

Does that make sense.
The pendulum always swings back in the opposite direction.

I think we'll have "return to sensible values" in that the pendulum of power will shift some . . . more to the People and away from the elites.

As far as a crash, that's inevitable.
Reality will rule, and US fiat fantasy will die.
Return to the mean at the extremes . . . .

Prazak
11-18-09, 10:20 AM
Dennis the Gartman was at one time a very good trader and an excellent read. Success went to his head: he spends far too much time on the talk circuit, hobnobbing with the "Volvo, white wine & cheese set". He is also charging $400/month for his newsletter,
and it isn't worth 10% of that!

I read him occasionally and would be glad to give a heads up to anyone who really cares what he thinks.

I only use him now as a contrary indicator.:)

PS. He voted for Obama thinking he would be better for the country; now he's puking over the guy. Obama came from nowhwere to the Senate with no more experience than Sara Palin. He rose rapidly through the most corrupt political machine of any large American city. Just what did Gartman think he was going to get? :confused:


Is there something wrong with a Volvo, which is the safest car on the road, a good bottle of white wine, which is the nectar of the gods, and a good cheese? Does liking all three somehow make me a liberal elitist? People like to throw phrases around like that as epithets but it only makes them sound like philistines -- which, Raz, I know from your postings, you are not!

Raz
11-18-09, 11:24 AM
Is there something wrong with a Volvo, which is the safest car on the road, a good bottle of white wine, which is the nectar of the gods, and a good cheese? Does liking all three somehow make me a liberal elitist? People like to throw phrases around like that as epithets but it only makes them sound like philistines -- which, Raz, I know from your postings, you are not!

Lighten up, Prazak. Please! :o

I meant no harm. Back in the early 1980s it was used in a perjorative sense, but down heauh in thuh South it no longer has that sting.

My wife wanted a Volvo for years but I refused due to the unbelievable, insane and totally ridiculous maintenance and repair costs. She's a red wine drinker, and although I don't imbibe much wine, when I do I prefer whites (Chenin Blanc, Reisling, Chardonnay).
I own part of a company that sells cheese pastries and cookies so I LUV cheese.:D

I'm a beer drinker by trade so I guess that removes me from the "elitest" crowd.
And by the way, they're not all Liberals: some of them are the NeoCon nitwits.:(

goadam1
11-18-09, 12:30 PM
Lighten up, Prazak. Please! :o

I meant no harm. Back in the early 1980s it was used in a perjorative sense, but down heauh in thuh South it no longer has that sting.

My wife wanted a Volvo for years but I refused due to the unbelievable, insane and totally ridiculous maintenance and repair costs. She's a red wine drinker, and although I don't imbibe much wine, when I do I prefer whites (Chenin Blanc, Reisling, Chardonnay).
I own part of a company that sells cheese pastries and cookies so I LUV cheese.:D

I'm a beer drinker by trade so I guess that removes me from the "elitest" crowd.
And by the way, they're not all Liberals: some of them are the NeoCon nitwits.:(


I'm an elitist. Although, I prefer a mercedes and I drink Malbec for it's value.

Prazak
11-18-09, 03:34 PM
Lighten up, Prazak. Please! :o

I meant no harm. Back in the early 1980s it was used in a perjorative sense, but down heauh in thuh South it no longer has that sting.

My wife wanted a Volvo for years but I refused due to the unbelievable, insane and totally ridiculous maintenance and repair costs. She's a red wine drinker, and although I don't imbibe much wine, when I do I prefer whites (Chenin Blanc, Reisling, Chardonnay).
I own part of a company that sells cheese pastries and cookies so I LUV cheese.:D

I'm a beer drinker by trade so I guess that removes me from the "elitest" crowd.
And by the way, they're not all Liberals: some of them are the NeoCon nitwits.:(


I know you didn't mean any harm, Raz, and I didn't mean to come off heavy. I just wanted to speak up in defense of some of the finer things in life, like wine and cheese, that seem lately to be abused with reference to a particular social class.

I'm also an avid beer drinker, having spent some years in the land where the Pilsener was born and where the finest Pilseners in the world are still be found. Indeed, I hoisted one last evening in honor of the 20th anniversary of the so-called Velvet Revolution.

vinoveri
11-18-09, 05:26 PM
I think those expecting a crash all the time or a return to sensible values are moralist or jealous of rich people. Forget it. Global fiat is a runaway train.

.

Perhaps there are some who are simply jealous of their own savings, and resent having to guard/preserve it by being compelled to speculate on risky assets in a casino which is obviously rigged toward the benefit of the super-elite (oh, and yes perhaps some who understand currency debasement as a form of theft may object on moral grounds, but I suppose it depends on what one's belief system is)

I for one would gladly borrow $ from the Fed at 0.15% p.a., enter the trading marketss, and continue to double down until I hit the jackpot, but most of us are not given that privileged position.

In some ways this reminds me of "trickle down economics". The gov keeps the liquidity hose open and employs/trust the talented good folks at the broker dealers, investment houses to allocate that "capital" down the chain to worthy entrepreneurs, and hey in a world where men and women were good and true, maybe that would work, but, I hate to say it my friend, but the vast majority of those with wealth, like the rest of us, are corrupt and cannot be trusted.

Great article on some of this and on Keynes here:
http://mises.org/daily/3845

halcyon
11-19-09, 11:21 AM
It pays to read the contrarians who have a good argument:

1) Paulson is starting a gold fund. He's playing a bubble (phase2 and phase3 of a bubble)

2) Louise Yamada (TA) says gold is maybe in phase 2 of a bubble

3) Willem Buiter analyzes well how gold is just fiat as anything else today. Quoting Austrians from 30s does still not make gold de jure money. TODAY counts, not 70 years ago.

4) Julian Robertson (Tiger management) correctly points out that gold does not give interest. It is a safety hedge. It only rises in times of crises due to anticipation, hence a bubble. No inherent value. BTW, he's saying to buy gold miners instead of gold, if you want to get dividends. He disagrees 100% with Jim Rogers on this (who says: don't buy the miners)

5) Even Jim Sinclair says that you gotta exit a bubble before it bursts. He did in the previous one. He's not dumb enough to think that this time will somehow not be the same.

Pretty much the only people who are saying gold is NOT in a bubble or not getting there are gold-bugs: gold pushers, gold vault leasers, gold ETF owners, gold investors, gold advice peddlers, etc. In general people who can ONLY see gold as good and everything else as bad.

Now gee, who would I listen here?

This doesn't mean you can't make stupendous money riding a bubble. But you have to exit as well. Otherwise you never make money, only paper wins.

Being right for the wrong reasons does not warm at the end of the day, unless one can also exit.

And yes, I do trade in gold myself, but I don't "invest" in it for the long run. People who are better at it than myself may well do that (ref: Jim Sinclair), but even they know when to exit.

Just food for thought.

Jay
11-19-09, 11:45 AM
It pays to read the contrarians who have a good argument:

1) Paulson is starting a gold fund. He's playing a bubble (phase2 and phase3 of a bubble)

2) Louise Yamada (TA) says gold is maybe in phase 2 of a bubble

3) Willem Buiter analyzes well how gold is just fiat as anything else today. Quoting Austrians from 30s does still not make gold de jure money. TODAY counts, not 70 years ago.

4) Julian Robertson (Tiger management) correctly points out that gold does not give interest. It is a safety hedge. It only rises in times of crises due to anticipation, hence a bubble. No inherent value. BTW, he's saying to buy gold miners instead of gold, if you want to get dividends. He disagrees 100% with Jim Rogers on this (who says: don't buy the miners)

5) Even Jim Sinclair says that you gotta exit a bubble before it bursts. He did in the previous one. He's not dumb enough to think that this time will somehow not be the same.

Pretty much the only people who are saying gold is NOT in a bubble or not getting there are gold-bugs: gold pushers, gold vault leasers, gold ETF owners, gold investors, gold advice peddlers, etc. In general people who can ONLY see gold as good and everything else as bad.

Now gee, who would I listen here?

This doesn't mean you can't make stupendous money riding a bubble. But you have to exit as well. Otherwise you never make money, only paper wins.

Being right for the wrong reasons does not warm at the end of the day, unless one can also exit.

And yes, I do trade in gold myself, but I don't "invest" in it for the long run. People who are better at it than myself may well do that (ref: Jim Sinclair), but even they know when to exit.

Just food for thought.
I have a core SHTF physical position that I hope I will never need and will give to my kids. It is insurance. I also hold GTU that I look at as an intelligent liquid investment that I will dump when the time is right.

xela
11-19-09, 02:31 PM
5) Even Jim Sinclair says that you gotta exit a bubble before it bursts. He did in the previous one. He's not dumb enough to think that this time will somehow not be the same.


Actually, he is saying that this time it will not collapse afterwards.

metalman
11-20-09, 12:14 AM
Pretty much the only people who are saying gold is NOT in a bubble or not getting there are gold-bugs: gold pushers, gold vault leasers, gold ETF owners, gold investors, gold advice peddlers, etc. In general people who can ONLY see gold as good and everything else as bad.



read the articles here then comment, else look stupid. (http://www.google.com/search?client=firefox-a&rls=org.mozilla%3Aen-US%3Aofficial&channel=s&hl=en&source=hp&q=site%3Aitulip.com+gold&btnG=Google+Search)

Digidiver
11-20-09, 12:55 AM
SocGen says $6,300 is fair value for Gold:

http://commoditytradealert.com/blog/?p=3894

The similarity between the decision of India’s central bank to buy half the IMF’s entire sale of gold, and the move by France’s central bank to start converting dollars into gold in 1965 — which was, of course, the start of the slippery slope leading to the collapse of Bretton Woods and the closure of the US gold window under Nixon.
In the gold mania that followed, the price rose to levels that matched the US dollar monetary base (it reached 140pc at the peak). If that were to occur today after Ben Bernanke’s go at the printing press, gold would have to reach $6,300 an ounce. The US owns 263m ounces of gold while the Fed’s monetary base is $1.7 trillion. Simple equation.

halcyon
11-22-09, 01:21 PM
Actually, he is saying that this time it will not collapse afterwards.

It doesn't have to, although I find the idea that it won't not only in 100% disagreement with history, but also a ludicrous idea from the point of view of economics of supply/demand.

But let's assume it will not collapse.

At some point it will stop appreciating against other assets in a REAL economy that grows. Gold doesn't give dividends. Other assets do, assuming there's still a real economy out there (i.e. some people alive and trading goods).

At that point you switch some portion (0-100%) of your wealth to that which grows in value.

My gain is to grow the assets, not just protect it.

halcyon
11-22-09, 01:26 PM
Actually, he is saying that this time it will not collapse afterwards.

If you have an argument to make, please put it forward so we can discuss it.

Assuming somebody has NOT read something is just that - an assumption and it does not do well for you.

Maybe I should assume you have not read the following:

- Gold Standard Illusion, Kenneth Mouré (Oxford University Press)
- Gold Standard in Theory and History, Eichengreen (Routledge)
- Lever of Empire, Metzler (University of California Press)
- Glitter of Gold, Flandreau (Oxford University Press)
- The Power of Gold: The History of an Obsession, Bernstein (Wiley)

But I won't, because it would go beyond my ability to know.

jk
11-22-09, 01:33 PM
It pays to read the contrarians who have a good argument:

1) Paulson is starting a gold fund. He's playing a bubble (phase2 and phase3 of a bubble)

2) Louise Yamada (TA) says gold is maybe in phase 2 of a bubble

3) Willem Buiter analyzes well how gold is just fiat as anything else today. Quoting Austrians from 30s does still not make gold de jure money. TODAY counts, not 70 years ago.

4) Julian Robertson (Tiger management) correctly points out that gold does not give interest. It is a safety hedge. It only rises in times of crises due to anticipation, hence a bubble. No inherent value. BTW, he's saying to buy gold miners instead of gold, if you want to get dividends. He disagrees 100% with Jim Rogers on this (who says: don't buy the miners)

5) Even Jim Sinclair says that you gotta exit a bubble before it bursts. He did in the previous one. He's not dumb enough to think that this time will somehow not be the same.

Pretty much the only people who are saying gold is NOT in a bubble or not getting there are gold-bugs: gold pushers, gold vault leasers, gold ETF owners, gold investors, gold advice peddlers, etc. In general people who can ONLY see gold as good and everything else as bad.

Now gee, who would I listen here?

This doesn't mean you can't make stupendous money riding a bubble. But you have to exit as well. Otherwise you never make money, only paper wins.

Being right for the wrong reasons does not warm at the end of the day, unless one can also exit.

And yes, I do trade in gold myself, but I don't "invest" in it for the long run. People who are better at it than myself may well do that (ref: Jim Sinclair), but even they know when to exit.

Just food for thought.
1. do you define every bull market as a bubble? i think that's a definitional problem here.

2. no one here has, to my knowledge, suggested that the holding period for gold is forever. imo it is likely to be at least several more years, however.

3. i started buying gold when it was 380, back in '03. so i've now owned it 6 years, and i expect to continue owning it another 3-6 years, as a rough guess. you want to call that trading or investing?

aaron
11-22-09, 02:02 PM
read the articles here then comment, else look stupid. (http://www.google.com/search?client=firefox-a&rls=org.mozilla%3Aen-US%3Aofficial&channel=s&hl=en&source=hp&q=site%3Aitulip.com+gold&btnG=Google+Search)

uncool

.
.
.
.

xela
11-22-09, 04:19 PM
It doesn't have to, although I find the idea that it won't not only in 100% disagreement with history, but also a ludicrous idea from the point of view of economics of supply/demand.

When you say history, which period are you refering to?

I'm of the opinion that we are very early in the cycle, so what to do best next is, even if you could form your strategy today, still years off.

Alot depends on whether gold will be remonetized. It looks that way, this implies no collapse afterwards and also keeping part of your wealth in it.
If it's not going to be remonetized then knowing when to exit from the bubble will be very difficult, worth its weight in gold :)

PS: I guess your response to metalman erroneously quotes my first response.

metalman
11-22-09, 06:29 PM
If you have an argument to make, please put it forward so we can discuss it.

Assuming somebody has NOT read something is just that - an assumption and it does not do well for you.

Maybe I should assume you have not read the following:

- Gold Standard Illusion, Kenneth Mouré (Oxford University Press)
- Gold Standard in Theory and History, Eichengreen (Routledge)
- Lever of Empire, Metzler (University of California Press)
- Glitter of Gold, Flandreau (Oxford University Press)
- The Power of Gold: The History of an Obsession, Bernstein (Wiley)

But I won't, because it would go beyond my ability to know.

i'm frustrated. i've had it. enough of this shit.

you do realize that every argument that you make was either made here 10 yrs ago or demolished since then. why rehash it?

neophytes have called gold a 'bubble' at $400, $500, $600... etc. they don't understand. all they have to do is read the articles here.

if you had, you'd never ask these questions. but since you'e too lazy to read them...


1) Paulson is starting a gold fund. He's playing a bubble (phase2 and phase3 of a bubble)

he's a ******* idiot. it's not a 'phase 1' or 'phase 2' of a bubble.

read the articles here (http://www.google.com/search?client=firefox-a&rls=org.mozilla%3Aen-US%3Aofficial&channel=s&hl=en&source=hp&q=site%3Aitulip.com+gold&btnG=Google+Search) to learn why.


2) Louise Yamada (TA) says gold is maybe in phase 2 of a bubble

another ******* idiot. where was louis in 2001 when janszen explained why gold was gonna go up? why are analysits who've been wrong, wrong, wrong on gold or absent over the last 8 years now suddenly a pack of experts?

read the articles here (http://www.google.com/search?client=firefox-a&rls=org.mozilla%3Aen-US%3Aofficial&channel=s&hl=en&source=hp&q=site%3Aitulip.com+gold&btnG=Google+Search) if you want to know what's gonna happen.


3) Willem Buiter analyzes well how gold is just fiat as anything else today. Quoting Austrians from 30s does still not make gold de jure money. TODAY counts, not 70 years ago.

just like the itulip view... but you'd know that if you bothered to read anything here. gold is money because gov't said it was... to collect taxes. period. all this 'gold is natural money' crap is crap.

read the articles here (http://www.google.com/search?client=firefox-a&rls=org.mozilla%3Aen-US%3Aofficial&channel=s&hl=en&source=hp&q=site%3Aitulip.com+gold&btnG=Google+Search) to learn about it.


4) Julian Robertson (Tiger management) correctly points out that gold does not give interest. It is a safety hedge. It only rises in times of crises due to anticipation, hence a bubble. No inherent value. BTW, he's saying to buy gold miners instead of gold, if you want to get dividends. He disagrees 100% with Jim Rogers on this (who says: don't buy the miners)

duh. gold up 260% vs s&p off 8% since 1998. 'oh, what about dividends'? whined the lying sack of shit stock shills. fine. add 30% to the -8%. now you got 22% vs 260%. big ******* deal. jim rogers is 100% correct. buy the stuff not the miners. you'll never, ever, ever, ever pick the right miners to beat a 10 yr buy and gold of gold in a bull market. never. impossible. no one has done it. only liars claim otherwise and only cretins believe them.


5) Even Jim Sinclair says that you gotta exit a bubble before it bursts. He did in the previous one. He's not dumb enough to think that this time will somehow not be the same.

duh. duh. duh. of course gold doesn't go up forever. janszen will tell us when to exit. jim's too emotional. how many 'THIS IS IT!' end of the world warnings does he plan to issue, anyhow?

who do you trust? the guy who got into gold in 2001 & stayed in through every ******* stupid 'deflation' call for the past 8 yrs or some assclown who got in a year or two ago... or got in early but ran back and forth between bull and bear positions like a squirrel crossing a highway ever since?

you are here... so avail yourself of the info here.

really, read the articles. else, why are you here? to 'teach' us?

you are but one of a long, long line of newbees that come here to try to uneducate us... if we want to get uneducated, we'll watch tv not hang out here. thanks for your 'input'.

grapejelly
11-22-09, 07:14 PM
People have no idea what a bubble is like.

I lived through the gold bubble of 1979-1980.

Gold was what people talked about at parties.

Gold was quoted everywhere.

Ordinary people knew about gold and silver prices.

People who had gold or silver to sell would wait weeks for an assay because the smelters were backed up unbelievably. BTW, if you wanted to sell a bar, you were out of luck because it took too long to get the assay done and nobody wanted to bother.

Rare coins, jewelry, all was melted down at the smelters, without discrimination. This was a mad panic to buy gold and silver.

This is NOTHING like a bubble. Sure there is more interest in gold because it has gone up.

Sentiment FOLLOWS price.

But so what?

There is no widespread public participation in gold. The total market cap of GLD is a fraction of the S&P500 market cap.

The "man in the street" is selling gold today because he needs the money.

Those buying gold are the smart money including central banks, wealthy people. And they have not BEGUN to buy gold.

Gold will go up hundreds of times what it is today when this is truly a bubble. And this time, the bubble will correspond with the complete collapse of the USD IMHO.

That's why I tell people I know to buy gold and silver. Today's prices are nothing compared to what we will see.

jk
11-22-09, 07:49 PM
there are 2 all news a.m. stations in nyc. during the late '70s each one announced the price of gold every 30 minutes [wcbs at 25 and 55 after the hour, wins at 26 and 56 after the hour] as part of their regular business segments. i'll worry it's a bubble when that starts happening again.

metalman
11-22-09, 07:50 PM
People have no idea what a bubble is like.

I lived through the gold bubble of 1979-1980.

Gold was what people talked about at parties.

Gold was quoted everywhere.

Ordinary people knew about gold and silver prices.

People who had gold or silver to sell would wait weeks for an assay because the smelters were backed up unbelievably. BTW, if you wanted to sell a bar, you were out of luck because it took too long to get the assay done and nobody wanted to bother.

Rare coins, jewelry, all was melted down at the smelters, without discrimination. This was a mad panic to buy gold and silver.

This is NOTHING like a bubble. Sure there is more interest in gold because it has gone up.

Sentiment FOLLOWS price.

But so what?

There is no widespread public participation in gold. The total market cap of GLD is a fraction of the S&P500 market cap.

The "man in the street" is selling gold today because he needs the money.

Those buying gold are the smart money including central banks, wealthy people. And they have not BEGUN to buy gold.

Gold will go up hundreds of times what it is today when this is truly a bubble. And this time, the bubble will correspond with the complete collapse of the USD IMHO.

That's why I tell people I know to buy gold and silver. Today's prices are nothing compared to what we will see.

thank you. a voice of reason. thank you.

people have no historical perspective.

history to them is what they saw on tv last night and have already forgotten.

jiimbergin
11-22-09, 08:41 PM
People have no idea what a bubble is like.

I lived through the gold bubble of 1979-1980.

Gold was what people talked about at parties.

Gold was quoted everywhere.

Ordinary people knew about gold and silver prices.

People who had gold or silver to sell would wait weeks for an assay because the smelters were backed up unbelievably. BTW, if you wanted to sell a bar, you were out of luck because it took too long to get the assay done and nobody wanted to bother.

Rare coins, jewelry, all was melted down at the smelters, without discrimination. This was a mad panic to buy gold and silver.

This is NOTHING like a bubble. Sure there is more interest in gold because it has gone up.

Sentiment FOLLOWS price.

But so what?

There is no widespread public participation in gold. The total market cap of GLD is a fraction of the S&P500 market cap.

The "man in the street" is selling gold today because he needs the money.

Those buying gold are the smart money including central banks, wealthy people. And they have not BEGUN to buy gold.

Gold will go up hundreds of times what it is today when this is truly a bubble. And this time, the bubble will correspond with the complete collapse of the USD IMHO.

That's why I tell people I know to buy gold and silver. Today's prices are nothing compared to what we will see.

I too lived through that true gold bubble. Even my 2 young children, 9 and 13 bought junk silver, although I probably have already mentioned somewhere that my very frugal 9 year old daughter made me sign a contract that said over the next 10 years she would make on the silver no less than she would have earned on her CD. Guess what in 1990 I bought back her silver at a price much higher than the then spot price! But I still have it now:D PM is not in a bubble today!

jim

LargoWinch
11-23-09, 10:20 AM
...

Gold will go up hundreds of times what it is today when this is truly a bubble.

...



GJ, that was a great post.

I only lived through the dot com mania (yep, I was buying Nasdaq 4,000) and the ongoing RE mania here in Toronto (houses still sell in less than 24h with 20+ bids with the median detached selling for around 750 tr. oz of Gold).

But I disgress.

I think (and hope :)) that Gold will go up, but I doubt it will be "hundred of times" the current price...that would mean $X00,000 / tr. oz!

Surely that is the worst/(best for some) case scenario! But I cannot imagine the Fed sitting idle and not raising rates however.

Jay
11-23-09, 11:10 AM
GJ, that was a great post.

I only lived through the dot com mania (yep, I was buying Nasdaq 4,000) and the ongoing RE mania here in Toronto (houses still sell in less than 24h with 20+ bids with the median detached selling for around 750 tr. oz of Gold).

But I disgress.

I think (and hope :)) that Gold will go up, but I doubt it will be "hundred of times" the current price...that would mean $X00,000 / tr. oz!

Surely that is the worst/(best for some) case scenario! But I cannot imagine the Fed sitting idle and not raising rates however.
You can make a very good case for it if the Fed raises rates, the economy tanks, the politicians and public scream for inflation (which they will), the real economy crumbles more, rinse and repeat a bunch of times, Shazaam Zimbabwe!

jk
11-23-09, 11:19 AM
You can make a very good case for it if the Fed raises rates, the economy tanks, the politicians and public scream for inflation (which they will), the real economy crumbles more, rinse and repeat a bunch of times, Shazaam Zimbabwe!

zimbabwe is not the proud issuer of the world's reserve currency, and specifically the currency in which the saudi's et al price their oil. those facts put a lid on our potential inflation rate.

Jay
11-23-09, 11:46 AM
zimbabwe is not the proud issuer of the world's reserve currency, and specifically the currency in which the saudi's et al price their oil. those facts put a lid on our potential inflation rate.
OK, so I took some liberties. You got me. ;) It was fun to write though and the thought process is correct, at least in my mind. :D Even if the reserve status keeps us out of Zimbabwe territory, inflation is going to continue for a while until it really hurts. What we have now isn't pain.

WDCRob
11-23-09, 11:52 AM
I wasn't paying attention to finance/markets/etc in 1980 on account of baseball and the discovery of strange new creatures known as "girls" - but I still remember hearing about gold.

To follow on Grape's point... compare what you hear about gold to what you heard about real estate four years ago. Not even close.

But people who know I bought some a few years ago have started contacting me about it out of the blue in the last few weeks and quoting the price to me. You can tell they're curious, and if it keeps going up I'd expect they'll jump in. That'll be the tip of the iceberg for the next big move IMO.

BiscayneSunrise
11-23-09, 12:00 PM
Another feature of a real bubble is one we haven't seen yet: That is the con men and ponzi schemes.

Thus far, investment in gold has been the trade of legitimate dealers and brokers. At some point (probably soon) the criminals will see this as an other lucrative way to swindle money from the gullible. Some things to look for in the upcoming gold con that are always universal in a con:

-The too good to be true factor.

-Beware of gleaming offices in Class A space and other displays of ostentatious wealth.

-If the receptionists are young and stunningly beautiful, beware.

Here is a link to a pair of our more notorious con men down here in S Florida, The Alderdice Brothers and their infamous "International Gold Bullion Exchange" circa 1980:

http://www.time.com/time/magazine/article/0,9171,923619,00.html

metalman
11-23-09, 12:27 PM
Another feature of a real bubble is one we haven't seen yet: That is the con men and ponzi schemes.

Thus far, investment in gold has been the trade of legitimate dealers and brokers. At some point (probably soon) the criminals will see this as an other lucrative way to swindle money from the gullible. Some things to look for in the upcoming gold con that are always universal in a con:

-The too good to be true factor.

-Beware of gleaming offices in Class A space and other displays of ostentatious wealth.

-If the receptionists are young and stunningly beautiful, beware.

Here is a link to a pair of our more notorious con men down here in S Florida, The Alderdice Brothers and their infamous "International Gold Bullion Exchange" circa 1980:

http://www.time.com/time/magazine/article/0,9171,923619,00.html

this time the gold scams are on the buy side...


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Slimprofits
11-23-09, 03:34 PM
there are 2 all news a.m. stations in nyc. during the late '70s each one announced the price of gold every 30 minutes [wcbs at 25 and 55 after the hour, wins at 26 and 56 after the hour] as part of their regular business segments. i'll worry it's a bubble when that starts happening again.

Gold is up what, $20 today?

I was listening off and on to Bloomberg TV all morning and think I heard gold mentioned once. It's still almost all about the stock markets.

halcyon
11-27-09, 04:35 AM
i'm frustrated. i've had it. enough of this shit.


No need to get emotional.

Also, calling another person a newbie and trying to play down arguments by calling other people stupid doesn't again put your arguments in a very good light.

You stand with your opinion, I stand with mine. Let's hope we both make money and enter/exit at the right time for our calls.

That's what it's about.

BTW, for future reference perhaps it's good to make a distinction between reading something and believing it. There is a difference for me at least. Most of the crap I read on the Internet I don't believe. Especially the gold-bug propaganda from gold-pushers. That doesn't mean I can't ride their game though. I just don't buy the ideas. Keeps me less emotional about my investments too.

Personally I believe the day I start calling people stupid, just because they disagree with me, I'm risking making a really bad trade (or even investment) decisions.

Always think both sides, look at the arguments, use what's useful and discard the rest. That's my credo.

I'm playing gold as a bubble. You're apparently playing something else (?). And make no mistake, it is a 'play', as nobody has a crystal ball on the future.

I'm here to discuss, not to argue or to try and win fights.