How to make $301% in six years with low volatility

[rabot10]

Re: How to make $315% in six years with low volatility

Funny the best returns I've gotten on Gold and Silver have been with GoldMoney becouse I didn't trade any of it. Now my Man futures account where I would trade the tops and bottoms in Gold and Silver have about wiped out my gains from GoldMoney lol.

[EJ]

Re: How to make $315% in six years with low volatility

More good questions.

I'm confused. If the inflation adjusted high for gold (previously reached during somewhat similar times) is something like $2,000 and it's currently less than half that, given the current economic problems listed in your book and others like Peter Schiff's, why do you consider it nerve wracking to own gold above $850? Other than the short term blips down on some sort of "good news" that never lasts long, what could force gold down significantly below its current price?

Higher volatility. I suspect that the nearly continuous price climb is over. As I mentioned in the original 2001 article on gold, a 50% retracement is not out of the question. However, this fact threw off gold bulls in 1980s who did not understand that the FIRE Economy was being birthed and that gold was down for the count, for another 20 years. A successful execution of the Next Bubble will allow inflationary money creation to be curtained and cause gold prices to decline. Failure to maintain inflation above zero, ala Japan in the early 1990s, will also do it, but we believe that unlikely.

As a complete amateur in all this, I can tell you that the dumb masses have no clue what is going on and eventually all this will come out in the media (I have watched a relative flood of information that mirror what's being said here and in the books in the last 6 months that I never saw before). When that happens, wouldn't they just pile into gold, much as they did tech stocks and real estate before it? I had been searching w/o success for something to invest in with some degree of confidence from about 2001 to last spring and only finally found it after reading your chapter on gold in the book.

A true asset bubble requires government support via legislation (regulatory and tax), as well as monetary policy. Gold prices may rise, but the government will never engineer an asset bubble in which gold, or commodities in general, are the chief beneficiaries. When you can borrow money from a bank to buy gold and write off the interest from your income taxes as you can with a mortgage on a home, and be taxed at 0% for $500K in capital gains from sales of gold as you and your significant other can for a primary property owned at least two years, maybe we'll have a gold asset bubble. For starters, we need to see gold ETFs re-classified to be taxed like other funds rather than at the higher "collectibles" tax rate. Add it all up, and it's obvious that governments are not enthusiastic about gold ownership. Seems to me the mining lobbies are not in a position to change that, so I'm not going to hold my breath waiting for a gold asset bubble. That does not mean that the price will not rise as it did in the late 1970s, but it will do so in spite of government policy desires, not because of them.

Being personally connected through employment and/or stock ownership to companies like Tyco and Krispy Kreme, where they cook not only donuts but books, I can attest to the quote on the website here about investing as a non-insider. Knowing what I know about how business decisions are made at financial institutions, I have zero confidence in financial stocks. Trust me, they're run by mental 11 y/o's who haven't bothered to read the definition of "fiduciary duty".

Noted.

I was always nervous holding stocks and index funds. It seemed that periodically the market would tank 20% or so and was so vulnerable to "bad news" in the world that you never knew what was going to happen, even if you made all the right calls technically. But with gold I just do not have that feeling. The very prescience of your book and others gives me confidence that I properly understand what is going to happen (a continuing spiral of govn't debt ultimately resulting in currency worth less and less).

The task is to regularly go back and test your assumptions. If the assumptions have not changed, do nothing. If they have, then sell. The difficulty is to be unsentimental and unemotional. That is not human nature. Investors tend to excited about tech stocks or houses or gold. But these are neutral things, objects of speculation and inflation that need to always be seen that way.

I suppose if they find massive new gold deposits or a cheap and easy substitute for oil in the next year, it could go down a lot. But that's highly unlikely.

Very low probability. Gold is unlike oil. Gold only exists as small deposits. Gold comes from stars, from space. Tell that to your goldbug friends when they lecture you about fiat money getting printed out of thin air.

I guess my point is, where else are people going to go besides things like Gold? With real estate in oversupply, debt harder to get which further depresses it, an end to the debt fueled "boom", etc I don't see economies continuing to grow worldwide, but a realignment (recession) back to normal. So money put into stocks seems scarier to me at this point than gold.

Foreign utility stocks, maybe. But I don't see a bidding war for a German electric company consuming us like the real estate or tech booms.
What other risks are there to look out for?

This is a superb point and the other reason I have not yet diversified. Into what? Stocks? Real estate? Bonds? I will diversify into Next Bubble assets in the future. We have spent that past several years laying the foundations of understanding that will be a crucial this year in making those calls.

Starting this year, my advisers and business partners have told me that as much as I enjoy conversing with our community on the public forums, I need to restrict myself to the Select area so we can focus in on nailing down these areas of investment.

[bill]

Re: How to make $315% in six years with low volatility

Bill -

You wrote:

<<

Originally Posted by bill The feds objective will be to keep the water level in the tea pot just right, not to hot, not to cold, a nice moderate rate of inflation steam until the next bubble is formulated. The fed’s rapid response policy of not allowing deflation at the same time keeping inflation intact is not by accident. If deflation in a certain asset class becomes a concern, implement policy for a more gradual prolong deflation cycle as in real estate. The focus for the next bubble will be energy technology, energy usage and infrastructure to deliver, $100.00 oil demands it and will be used in part as a political launching platform. The reports, analysis, justifications for such projects and politically positioning must be in place prior to launching such cycles. Keep an eye on companies like http://www.wgint.com/about_us/ as one example for detail bubble formulating policy.

>>

This is what I remain unable to clearly understand. The equities bubble of the 1990's was a US domestically engineered stock bubble, which spilled over into foreign stock markets but was originally in US assets, due to US credit policies which were then emulated by a few foreign credit markets.

The housing bubble was also a domestically engineered bubble which similarly spilled over into foreign assets.

But any prospective "energy and energy infrastructure" bubble it seems would have to start from domestic US assets - i.e. alt-energy companies, and US based actual energy resources? If it did not start from US domestic assets, then the notion it was emerging as a US FIRE economy bubble becomes open to question. The FIRE economy is a US phenomenon and nowhere is referenced as occurring in direct relation to US FIRE economic impulses in other parts of the world.

If you look around at the bidders globally on energy assets and energy infrastructure, the US effectively is relegated to a secondary (soon to be tertiary!) "owner" of these assets in terms of it's share of the global pie. We "own" a fraction of the overal global energy or it's infrastructure.

How then does a domestically inspired nascent bubble in these asset classes in the US spark a global bubble in them? If it indeed sparks a US bubble in "infrastructure", that's only a US bubble, not a bubble that's echoing throughout the world in these asset classes - unless and until these asset classes undergo a serious demand bid throughout the world which results in their being bid up by countries globally due to increasingly critical global NEED.

Plus America's position as "prime mover" of new global asset bubbles has just undergone some serious degradation in the past seven years. It is not a static percentage of the global pie by any means. Our currency is being repudiated, our market share in many asset categories is shrinking. Therefore for the US to cause another "global" asset bubble it would have to exert it's inflationary effort upon an asset class with some notably tight or solid fundamentals in order to bring the rest of the world along for the new bubble ride as we approach 2010 and move beyond it.

I am unclear how the "US infrastructure bubble" is going to be a bubble on a global scale at all, unless and until the fundamentals of alt-energy, or conventional energy, in fact gain all the attributes of a fundamentally underpinned global bull market - underpinned by their increasingly critical role - and in that case this new asset class bubble would be a hybrid, not a pure "bubble" class at all.

I guess what I'm trying to point out here is that my understanding of the prior "bubble" paradigm as it applied to A) stocks and B) real property, was based on asset classes with no inherent reason to surge to bubble heights other than monetary / loose credit phenomena. Notably, these asset bubbles were borne in America, by means of American domestic assets, and then spread to other parts of the world.

But it appears to me that fitting alt-energy into the next bubble class is introducing an "asset class" with some notably different attributes to stocks and real property in America.

1) Alt energy and energy infrastructure are today rapidly globalising assets or sectors. While US housing and US stocks were wholy owned subsets of the domestic US economy.

2) Stocks and housing in America were by no means "vital" or "essential" assets to the world". US housing if anything was the antithesis of "vital to the world".

3) Alt energy and energy infrastructure are rapidly moving to the forefront as "vital" or "essential" assets to the world. These in effect are not wholly owned subsets of the US economy, but rather are global assets, which will increase in value more closely in proportion to global bids than merely US bids.

Therefore is there not at least a valid argument to be made that if we see soaring prices of alt-energy which seem to validate the notion of an emerging "alt-energy bubble" this bubble is fundamentally unlike the prior two fiat US caused bubbles because it's emerging bid is global, and cannot therefore be reasonably imputed primarily to US FIRE economics?

That's my other perpetual puzzlement. How can US FIRE economics in an era of declining US global economic leadership continue for long to be capable of causing any new global bubbles? I've never understood how US FIRE economics exerts any direct motive force on asset classes which have a fundamental, critical global bid underpinning them. To me the connection seems tenuous. I get increasingly skeptical of the idea that America will have the clout to affect the trajectory of asset classes which emerge as critical to the world, simply because the bid inflating such global essential assets is rapidly outstripping America's share of the whole - and because America is broke and others are holding all the cash to act as prime movers.

With all the cash piles in the BRIC nations and OPEC, and the fact that America's comparative cash pile is rapidly dwindling to "comparatively much smaller" (due to evaporating USD purchasing power and repudiated USD) it seems to me we must defer to all those other countries collective wish or consensus, as to which asset classes will be the next "bubble" - and as the vast majority of those nations dont even have a FIRE economy, those asset classes won't be bubbles at all.

Lets follow the link I posted above.
http://www.wgint.com/about_us/
http://www.wgint.com/projects/power/
click on:National Enrichment Facility
copy:Client/Owner
Louisiana Energy Services
google:http://www.google.com/search?hl=en&q...=Google+Search

http://www.nefnm.com/v2b/index.asp

click on:URENCO
http://www.urenco.com/default.aspx

Urenco concludes two new funding transactions
In the first two weeks of December 2007, Urenco has concluded two new “private placement” debt transactions: the first, an index-linked debt issue for €100 million maturing in 2017 with ABP Pension Funds of the Netherlands; and a further transaction with a group of ten US investors – a fixed-rate $200 million debt issue with maturities ranging from 2015 to 2018. Both deals were completed on a “no financial covenants” basis. For more information, click here

Urenco secures EIB debt facility
Urenco has successfully secured a new EUR 200 million debt facility from the European Investment Bank. This is the first loan to a nuclear organisation to be approved by EIB since the recent publication of the 'Clean Energy for Europe' document. The loan will fund the company's continued capacity expansion planned for the UK and the Netherlands. For more information, click here


My question is who are the group of 10 US investors?

Re: How to make $315% in six years with low volatility

Bill -

You wrote:

<<

Originally Posted by bill The feds objective will be to keep the water level in the tea pot just right, not to hot, not to cold, a nice moderate rate of inflation steam until the next bubble is formulated. The fed’s rapid response policy of not allowing deflation at the same time keeping inflation intact is not by accident. If deflation in a certain asset class becomes a concern, implement policy for a more gradual prolong deflation cycle as in real estate. The focus for the next bubble will be energy technology, energy usage and infrastructure to deliver, $100.00 oil demands it and will be used in part as a political launching platform. The reports, analysis, justifications for such projects and politically positioning must be in place prior to launching such cycles. Keep an eye on companies like http://www.wgint.com/about_us/ as one example for detail bubble formulating policy.

>>

This is what I remain unable to clearly understand. The equities bubble of the 1990's was a US domestically engineered stock bubble, which spilled over into foreign stock markets but was originally in US assets, due to US credit policies which were then emulated by a few foreign credit markets.

The housing bubble was also a domestically engineered bubble which similarly spilled over into foreign assets.

But any prospective "energy and energy infrastructure" bubble it seems would have to start from domestic US assets - i.e. alt-energy companies, and US based actual energy resources? If it did not start from US domestic assets, then the notion it was emerging as a US FIRE economy bubble becomes open to question. The FIRE economy is a US phenomenon and nowhere is referenced as occurring in direct relation to US FIRE economic impulses in other parts of the world.

If you look around at the bidders globally on energy assets and energy infrastructure, the US effectively is relegated to a secondary (soon to be tertiary!) "owner" of these assets in terms of it's share of the global pie. We "own" a fraction of the overal global energy or it's infrastructure.

How then does a domestically inspired nascent bubble in these asset classes in the US spark a global bubble in them? If it indeed sparks a US bubble in "infrastructure", that's only a US bubble, not a bubble that's echoing throughout the world in these asset classes - unless and until these asset classes undergo a serious demand bid throughout the world which results in their being bid up by countries globally due to increasingly critical global NEED.

Plus America's position as "prime mover" of new global asset bubbles has just undergone some serious degradation in the past seven years. It is not a static percentage of the global pie by any means. Our currency is being repudiated, our market share in many asset categories is shrinking. Therefore for the US to cause another "global" asset bubble it would have to exert it's inflationary effort upon an asset class with some notably tight or solid fundamentals in order to bring the rest of the world along for the new bubble ride as we approach 2010 and move beyond it.

I am unclear how the "US infrastructure bubble" is going to be a bubble on a global scale at all, unless and until the fundamentals of alt-energy, or conventional energy, in fact gain all the attributes of a fundamentally underpinned global bull market - underpinned by their increasingly critical role - and in that case this new asset class bubble would be a hybrid, not a pure "bubble" class at all.

I guess what I'm trying to point out here is that my understanding of the prior "bubble" paradigm as it applied to A) stocks and B) real property, was based on asset classes with no inherent reason to surge to bubble heights other than monetary / loose credit phenomena. Notably, these asset bubbles were borne in America, by means of American domestic assets, and then spread to other parts of the world.

But it appears to me that fitting alt-energy into the next bubble class is introducing an "asset class" with some notably different attributes to stocks and real property in America.

1) Alt energy and energy infrastructure are today rapidly globalising assets or sectors. While US housing and US stocks were wholy owned subsets of the domestic US economy.

2) Stocks and housing in America were by no means "vital" or "essential" assets to the world". US housing if anything was the antithesis of "vital to the world".

3) Alt energy and energy infrastructure are rapidly moving to the forefront as "vital" or "essential" assets to the world. These in effect are not wholly owned subsets of the US economy, but rather are global assets, which will increase in value more closely in proportion to global bids than merely US bids.

Therefore is there not at least a valid argument to be made that if we see soaring prices of alt-energy which seem to validate the notion of an emerging "alt-energy bubble" this bubble is fundamentally unlike the prior two fiat US caused bubbles because it's emerging bid is global, and cannot therefore be reasonably imputed primarily to US FIRE economics?

That's my other perpetual puzzlement. How can US FIRE economics in an era of declining US global economic leadership continue for long to be capable of causing any new global bubbles? I've never understood how US FIRE economics exerts any direct motive force on asset classes which have a fundamental, critical global bid underpinning them. To me the connection seems tenuous. I get increasingly skeptical of the idea that America will have the clout to affect the trajectory of asset classes which emerge as critical to the world, simply because the bid inflating such global essential assets is rapidly outstripping America's share of the whole - and because America is broke and others are holding all the cash to act as prime movers.

With all the cash piles in the BRIC nations and OPEC, and the fact that America's comparative cash pile is rapidly dwindling to "comparatively much smaller" (due to evaporating USD purchasing power and repudiated USD) it seems to me we must defer to all those other countries collective wish or consensus, as to which asset classes will be the next "bubble" - and as the vast majority of those nations dont even have a FIRE economy, those asset classes won't be bubbles at all.

[c1ue]

Re: How to make $315% in six years with low volatility

I was always nervous holding stocks and index funds.

Stocks and index funds are a play on nominal growth plus monetary inflation.

Index funds are the low cost play, stocks are the "skill" sales pitch.

If there is a depression, though, this conventional wisdom will be exposed for the scam that it is.

However, if EJ/iTulip is right and there is a successful reflation, then index funds in the right sector will be successful.

Thus as with any choice, you must scrutinize both the macro- and the micro- strategy to arrive at something you can stand by.

[donalds]

Reflation beats down deflation?

If I understand things correctly, those who see inflation emphasize money creation, while those who see deflation emphasize credit destruction.

So, while we are experiencing credit/debt deflation, we are also experiencing money inflation. The former reflects the melting of shadow (fictitious capital) credit/debt creation (which has, at least up till now, been substituting for, and exceeding Fed money creation -- just as debt has long now been a substitute for decreasing or at least flat incomes): the deflating of assets as collateral; the later reflects the . . . inflating our way out of debt deflation by reflating deflating assets.

Doesn't the Fed reflating machine (buying Treasuries hand over fist) run the risk of fast eroding the value of the dollar, thus discouraging foreign CBs and private investors from buying Treasuries, leading to higher long term rates . . . canceling out any benefit from reduced Fed interest rate target levels. And doesn't Fed aggressively expanding monetary base risk leading to unneeded reserves piling up in the banking system, causing the Fed fund rate to dive?

Lost in the picture here, as far as I can tell, is the real economy of work and consumption. If a recession, as iTulip predicts, is just around the corner, then are we to expect that with declining consumer demand the Fed is expected to reflate deflating assets? If so, then I guess we'd have to expect renewed debt creation, that is, households falling further into debt as a result of inflating our way out of debt deflation. A paradox, indeed.

[FRED]

Re: How to make $315% in six years with low volatility

The feds objective will be to keep the water level in the tea pot just right, not to hot, not to cold, a nice moderate rate of inflation steam until the next bubble is formulated. The fed’s rapid response policy of not allowing deflation at the same time keeping inflation intact is not by accident. If deflation in a certain asset class becomes a concern, implement policy for a more gradual prolong deflation cycle as in real estate.
The focus for the next bubble will be energy technology, energy usage and infrastructure to deliver, $100.00 oil demands it and will be used in part as a political launching platform. The reports, analysis, justifications for such projects and politically positioning must be in place prior to launching such cycles. Keep an eye on companies like http://www.wgint.com/about_us/ as one example for detail bubble formulating policy.

A most concise summation of iTulip Select investment thesis! Thanks for the all the heavy lifting, identifying legislation and companies as potential targets for Next Bubble investment.

[c1ue]

Re: How to make $315% in six years with low volatility

Now we have a quite different problem to address, the hedge funds are still there doing their thing, leveraging away as fast as the central banks are trying to stem the depreciation by inflating the system.

Chris,

Do you have evidence that the hedge funds are still able to access the credit they previously had?

Who would be lending them this money?

If banks are facing solvency crises, I would think loans for leverage would be scrutinized much more than in the past - when the loans were probably not vetted at all.

[bart]

Re: How to make $315% in six years with low volatility

Put away your calculators, money supply counters. It's all about politics. Always has been, and always will be. Don't bother looking at the money supply and inflation statistics; they are not going to be valid when you need them to be because governments cannot play the inflation game in full view.

Although your point about politics (from the root words poli meaning all, and tics meaning blood sucking pests of course) is very well taken, I respectfully disagree about money supply and inflation stats being invalid either now or in the future except under extraordinary conditions (like making it illegal to publish economic or monetary stats).


There are more than a few folk like John Williams who have much experience with divining the real facts about the CPI, money supply etc. through the curtain of BS from the BLS and others... and are publishing them broadly.


Then we have the whole concept of time lags that must be taken into account. If the Fed discontinued all the monetary aggregate reporting tomorrow, today's data would still be valid for 12-18 months since that's roughly the amount of time it takes for monetary changes to be reflected in most prices.

[jk]

Re: How to make $315% in six years with low volatility

I'm confused. If the inflation adjusted high for gold (previously reached during somewhat similar times) is something like $2,000 and it's currently less than half that, given the current economic problems listed in your book and others like Peter Schiff's, why do you consider it nerve wracking to own gold above $850? Other than the short term blips down on some sort of "good news" that never lasts long, what could force gold down significantly below its current price?

As a complete amateur in all this, I can tell you that the dumb masses have no clue what is going on and eventually all this will come out in the media (I have watched a relative flood of information that mirror what's being said here and in the books in the last 6 months that I never saw before). When that happens, wouldn't they just pile into gold, much as they did tech stocks and real estate before it? I had been searching w/o success for something to invest in with some degree of confidence from about 2001 to last spring and only finally found it after reading your chapter on gold in the book.

Being personally connected through employment and/or stock ownership to companies like Tyco and Krispy Kreme, where they cook not only donuts but books, I can attest to the quote on the website here about investing as a non-insider. Knowing what I know about how business decisions are made at financial institutions, I have zero confidence in financial stocks. Trust me, they're run by mental 11 y/o's who haven't bothered to read the definition of "fiduciary duty".

I was always nervous holding stocks and index funds. It seemed that periodically the market would tank 20% or so and was so vulnerable to "bad news" in the world that you never knew what was going to happen, even if you made all the right calls technically. But with gold I just do not have that feeling. The very prescience of your book and others gives me confidence that I properly understand what is going to happen (a continuing spiral of govn't debt ultimately resulting in currency worth less and less).

I suppose if they find massive new gold deposits or a cheap and easy substitute for oil in the next year, it could go down a lot. But that's highly unlikely.

I guess my point is, where else are people going to go besides things like Gold? With real estate in oversupply, debt harder to get which further depresses it, an end to the debt fueled "boom", etc I don't see economies continuing to grow worldwide, but a realignment (recession) back to normal. So money put into stocks seems scarier to me at this point than gold.

Foreign utility stocks, maybe. But I don't see a bidding war for a German electric company consuming us like the real estate or tech booms.
What other risks are there to look out for?

the issue is for having the stomach to ride out the volatility. it's easy to be confidant when gold has been moving up steadily for the last several years [as pointed out by ej in the post starting this thread].

but if you look at the 1970's chart, for example, you'll see that at one point gold was cut in half. let's halve THAT- suppose gold drops to the low $600's? are you ready for that? is your confidance strong enough that you won't sell some or all of your position? this is the basis of the comment i made earlier in this thread, about the importance of position sizing.

richard russell likes to say that a bull market likes to shake off as many riders as possible on its way up. that's the effect of downside volatility forcing nervous selling, and also of people mistiming things when trying to outsmart the trend by trading - taking profits in the hope of re-purchasing positions after a sell off.

the next leg of the gold bull market, the second leg, will have more volatility. buy what you can live with during the downswings, and then hold on for dear life.

[bart]

Re: How to make $315% in six years with low volatility

3) Again, can we back this up by facts? It seems implied by gold, oil, agricultural commodities rising but e.g. the much touted $500bn ECB injection was mostly replacing expiring 'old' money, wasn't it? Some of it seems to be illusory; isn't the recent M3 increase due to replacing CP with bank debt for example?

No. Neither CP nor bank debt is in M3.

The recent spike is due to large increases in Institutional Money Market inflows, Jumbo CD inflows and H.8 deposits (line 17 on the H.8 report).

Re: How to make $315% in six years with low volatility

I'm confused. If the inflation adjusted high for gold (previously reached during somewhat similar times) is something like $2,000 and it's currently less than half that, given the current economic problems listed in your book and others like Peter Schiff's, why do you consider it nerve wracking to own gold above $850? Other than the short term blips down on some sort of "good news" that never lasts long, what could force gold down significantly below its current price?

As a complete amateur in all this, I can tell you that the dumb masses have no clue what is going on and eventually all this will come out in the media (I have watched a relative flood of information that mirror what's being said here and in the books in the last 6 months that I never saw before). When that happens, wouldn't they just pile into gold, much as they did tech stocks and real estate before it? I had been searching w/o success for something to invest in with some degree of confidence from about 2001 to last spring and only finally found it after reading your chapter on gold in the book.

Being personally connected through employment and/or stock ownership to companies like Tyco and Krispy Kreme, where they cook not only donuts but books, I can attest to the quote on the website here about investing as a non-insider. Knowing what I know about how business decisions are made at financial institutions, I have zero confidence in financial stocks. Trust me, they're run by mental 11 y/o's who haven't bothered to read the definition of "fiduciary duty".

I was always nervous holding stocks and index funds. It seemed that periodically the market would tank 20% or so and was so vulnerable to "bad news" in the world that you never knew what was going to happen, even if you made all the right calls technically. But with gold I just do not have that feeling. The very prescience of your book and others gives me confidence that I properly understand what is going to happen (a continuing spiral of govn't debt ultimately resulting in currency worth less and less).

I suppose if they find massive new gold deposits or a cheap and easy substitute for oil in the next year, it could go down a lot. But that's highly unlikely.

I guess my point is, where else are people going to go besides things like Gold? With real estate in oversupply, debt harder to get which further depresses it, an end to the debt fueled "boom", etc I don't see economies continuing to grow worldwide, but a realignment (recession) back to normal. So money put into stocks seems scarier to me at this point than gold.

Foreign utility stocks, maybe. But I don't see a bidding war for a German electric company consuming us like the real estate or tech booms.
What other risks are there to look out for?

[Jeff]

Re: How to make $315% in six years with low volatility

Wow. It just hit $865. How can I be so happy I bought a lot at $350, and pissed I didn't buy more at $600?

[bill]

Re: How to make $315% in six years with low volatility

The feds objective will be to keep the water level in the tea pot just right, not to hot, not to cold, a nice moderate rate of inflation steam until the next bubble is formulated. The fed’s rapid response policy of not allowing deflation at the same time keeping inflation intact is not by accident. If deflation in a certain asset class becomes a concern, implement policy for a more gradual prolong deflation cycle as in real estate.
The focus for the next bubble will be energy technology, energy usage and infrastructure to deliver, $100.00 oil demands it and will be used in part as a political launching platform. The reports, analysis, justifications for such projects and politically positioning must be in place prior to launching such cycles. Keep an eye on companies like http://www.wgint.com/about_us/ as one example for detail bubble formulating policy.

[EJ]

Re: How to make $315% in six years with low volatility

In response to a question on a previous post, you indicated that you were going to sell some of your gold holdings when it reached $850. Did you do so yesterday?

Good question. Two issues: 1) unless evidence presents itself that central banks can reverse course during this debt deflation, I still plan to diversify when gold nears its real $2,000 versus nominal $850 peak, and 2) into assets that I have not yet identified. We have developed a fair number of candidates, but nothing specific as yet; the Next Bubble needs to develop further.

I will add that as the price of gold (not to mention silver and platinum, which I also own) rise to the levels we see today, it's increasingly nerve wracking. These prices and rates of increase present major challenges to the financial system and exert political stresses on governments and central banks. Rising inflation from China to Russia is causing domestic political problems that cannot be tolerated forever.

The most important lesson we learned in 2001 was that governments should not be underestimated; the motive to cooperate to solve systemic problems is much greater than the motive to fight each other. No one who benefits from the system desires systemic failure and the regime change that follows. They may get it anyway, but taking long bets against the house has as many hazards as long bets with the house as the system goes through transition. I maintain that the only way "out" that I can see is for governments to create something new rather than try to fix what is broken directly, that is, rather than try to re-inflate deflating assets, move the game to a new asset arena that is both politically expedient and practicable.

A great wisdom in economics was offered by John Kenneth Galbraith in his later years, reflecting back on his own errors. In A Journey Through Economic Time (1994) he said, "It is my guiding confession that I believe the greatest error in economics is in seeing the economy as a stable, immutable structure." (We're fans of John Kenneth Galbraith here; I had a chance to meet him at my sister's commencement at Harvard. We interviewed his son James K Galbraith in 2006.)

The economy is always changing. It's not a building but an amoeba; estimating how it's shape will change is more art than science. So far we've done okay, but the coming years will be especially challenging as crisis intensifies. Change can happen very quickly, as it did in 1980.