What “fundamentals” mean to me.
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My thoughts exactly, Reverend.
If currencies are expanding world-wide to paper over sovereign debt problems then inflation is rampant (inflation is NOT prices rising; prices rise because there is depreciation in money) so abundant currency will depreciate relative to its exchange value relative to gold over a LONG time-frame relentlessly. Of course, the gold price can discount future currency debasement so prices do not rise in a linear fashion.
See the free book: The Dollar Crisis:
http://mises.org/books/dollarcrisis.pdf
What edge does a technician have? My coin flipping is better than yours? My cycle work says gold will drop to $1,000 plus my horoscope says I have a bad moon rising. Watch out! Gold to plummet based on my five second oscillator cross over death cross. Absurd!
Kitco too used some astrologer guru John who spoke total bilge last year re gold’s great ascendancy.
Thanks John!
My take on Gold is this: After the financial collapse in 2008 the large investment firms looked around after the dust settled and had to ask themselves “where can we make money with everything in disrepair?” It wasn’t going to be in housing, real estate or financials. Then a brilliant idea!! Let’s pump up the commodity markets. It was the pump and dump game. Bank of America , JP Morgan, GSachs, etc., said let’s do it. It was off to the races for oil, metals, cotton, etc.. Then comes the mania. After that it was a matter of who would be closest to the exit doors when the fire alarm went off. Most importantly now is where do most manias end. Normally below where they started. You have to look at a long term chart to see that silver was around $9. and Gold was around $723. This game has been kept alive even as metal prices have headed lower, because these firms still look to make money shorting it all the way back down to where this all started. These guys are masters at making things look like they are going up when in reality they are just getting ready to short it again. If you do your homework you can find their futures contract documents from 2009 when they began this run up into 2011. So you have to ask yourself what is the real value of silver and gold. Look at the charts and determine where this game started in 2008.
Very interesting point Duke!
I have not thought of the markets in that way.
We already have runaway inflation. It’s just that it is being stored in the stock market, bond market, and real estate market at the moment. As long as it stays there it’s not considered bad inflation, it’s viewed as beneficial asset inflation.
The problems come when the liquidity starts to leak out of these markets and into the commodity markets.
We got a front row seat to this process in 2007 and 2008 as the stock market topped and the inflation that was being stored in stocks and real estate leaked into the commodity markets. It resulted in a spike in the CRB and a parabolic move in oil to $147.
That collapsed consumer spending and rolled the economy over into the second worst recession since the Great Depression.
Beneficial asset inflation in real estate? Geez Gary….you do realize we are coming off an historical inflation adjusted low in prices dating back to the early days of the republic. This little bounce seen so far is peanuts compared to what is still possible. Anyway, inflation is not found in housing under the current system except where rents are concerned but these can track differently than home prices themselves for a wide variety of reasons. Your idea of “stored inflation” is actually quite interesting but I am not sure it has much validity as what we have seen these past years was severe asset deflation seeking a recovery versus pent-up inflation awaiting a breakout in other classes of goods and services. Where indeed would that inflation materialize during a time of surplus labour, flat demand and an economy that needs a decade just to burn off the excess acquisitions of the past. See that is where the gold camp is confused. All they ever talk about is so-called money printing as they mix up the ideas of central bank interventions with what the consumer is actually doing. We will need higher rates of employment and growth before the forces of inflation can kick in. Even then, this will probably be reigned in by CB interventions in withdrawing liquidity as pressures arise. Remember that we have 2% inflation targetting and so anything above that level risks opening the interest rate spiggots. Nobody wants that situation. It is easy to imagine that growth will actually be contained within a desired spectrum being neither hot nor cold for an extended period of time. Slow growth meanwhile is more supportive of real estate acquisitions and rents than it is of precious metals and commodities.
Big Al made a great point. A hand full of gold coins and a few hundred oz of silver could very well save your life literally under the right circumstances. Even if if you are a trader or you love the stock markets you should take Big Al’s advice and have a stack of phyzz hiding in a dark place somewhere never to be traded away frivolously.
Thanks Glen!
Heeding the fundamentals does not of course exclude being savvy to all the spin and propaganda in the media. David McAlvaney cites the old illustration of how the Rothchilds were privy to the outcome of the battle of Waterloo half a day before Wellington won. By driving the stock market down they then made a killing as London share prices raced up.
DM says that Goldman is doing the precise same thing: Adding to their GLD position while telling the public to sell. Roughly from Minute 26 on we’re told ‘don’t be a Goldman patsy’….the trend remains our friend.
Steven Leeb is back on KWN with his crystal ball. He claims that China plans to buy 5000 more tons of gold and that higher gold prices is not in their interest. Therefore, don’t expect run away prices to come anytime soon. Where in the hell is China going to find 5000 tons of real Good Delivery Bars? If this is true we gotta wait a few more years to see higher gold prices. Leeb is all over the place with his crystal ball now and has no clear idea of where the price of gold is headed. We need to change of hobby’s.
Not really, Glen.
I mean where else are we going to find such an interesting and all encompassing hobby!
Hey ALL: (Glen)
That dovetails into EXACTLY what I am about to say. Would you want to be on a ‘sinking ship” – the US dollar, which has been ‘king” for a very short amount of time historically speaking or ‘real money” that has a track record of 5,000 years with a myriad of civilizations and circumstances? We live and will continue to live in times that NOBODY has EVER seen – because it is financial, social and economic infrastructure CHAOS on a GLOBAL scale – uh, the choice is clear – very clear. As far as the gold price not running away – you can bet that it will go up – and up and up, etc. Can you say that for the US dollar! HELL NO….save in gold and you will be fine. Shun gold at YOUR OWN RISK…and any ‘purchasing power’ you lose will be your own fault. Good luck.
Hey SD Marc. Are you the Silver Doctor Marc? You gotta understand that in the US investing in something that may or may not go up tommorrow is not going to interest that group of people. Study your own culture. I think culture is important to understand when you look at gold. US citizens are looking for immediate gratification. In fact, they prefer to use credit to buy things because they want it now. Buying gold coins and staying out of debt is not a US thing. In fact, being in debt is considered normal and planning for future is considered stupid. I lived there for the bulk of my life and know plenty about the mind set. In the East they think differently than we do. I made the mistake of marrying a Thai lady and although her habits of stealing all the salt and hotsauce and checking all the pay phones for change was not the reason for my divorce, I did learn something about the way they think. They put off immediate gratification and they are more than happy to buy gold and just keep it in a dark place for 30 years. That is just the way they think. They use credit at a much lower rate than we do and do without with no fan fare. Its just a different mindset and culture. Should we be like them? I don’t think so. We should be a little more open minded though. Gold is not a lost cause. History proves this. Cheers.
I am very familiar with the Eastern mindset.
Is it better than our? Sometimes I really think so!
Glen,
No. I am simply stating that global economic circumstances are reverting back to gold and silver. The US is only 5% of the global population. Believe you me, there will come a time real soon when billions of people with your ex-wife mindset will demand a hard asset based currency. Centuries of history say so and so it shall be again….. look all around you and study the primary trend. That’s all.
“Centuries of history say so and so it shall be again…..”
Ha Ha……goood one. But totally wrong. Please stop repeating mythology SD Marc.
Marc, if we deflate you can count your bottom dollar that the buck will rise and stay strong for a long period of time. It is my contention you are better off storing dollars than gold for the foreseeable future. At least until this current period of declines in metals has truncated and come to an end. Even then…..the wait could be a long one before gold gets all crazy again. Have you not noticed it got beaten to ratshit these past two years and virtually everyone with sense has already fled seeking greener pastures? Like housing for example where folks are making a lot of money again.
But you can still dream man. It’s your money.
Not making any money in my neck of the woods, Bird!
P.S. END of STORY! 🙂 With all due respect to anyone and everyone on this site.
Ok, Al. Is the Eastern mindset better than ours? Especially if you live in the Eastern world it works out better. I am not as old as you. You are much wizer than I. But I am not stupid either. I am not being sarcastic. I respect my elders. Living a conservative livestyle is wize. Paying cash for items is wize. Postponing purchases until it can be afforded is wize. But, it is not good for a nations economy. I personally could care less about a nations economy. I do things that are good for my family. I have failed and have had many marriages and have fought over this idea that if you do not have the money you should not buy. I have given in. Then got divorced and then paid dearly. It is not in the interest of the PTB to go along with any of my conservative ideas. I live in Panama now, and am completely out of debt. I do not own a credit card. I do not own a car. I wear those plastic sandals that they sell in Benign to the spooge. I live simply. I don’t care how you live or anyone else lives. I live simply. My house hold budget is 1000 dollars per month. I own my house and do not pay taxes on the house. Life if not fancy. Most of you could not live this way. I actually live fairly well on the income I recieve as I
live walking distance from almost everything I need. It isn’t easy to live like a local but it works for me. I cannot relate to US persons any longer. The lifestyle is just too different. You cannot understand nor could you adapt to my life. I have made decisions and have some control over my situation which is better than having the whole mess imposed on me like will eventually happen in the US. It will be 5 years or so and the typical US family will not be living much better than I do now.
Cheers glen
Re: “Postponing purchases until it can be afforded is wize. But, it is not good for a nations economy.”
For the last 80 years, everyone has been taught that spending is what drives a healthy economy. This is false. Keynesian economics is extremely flawed. Postponing purchases in favor of building capital is both wise and best for the economy. A healthy and sustainable economy is driven by savings and production, not spending and consumption. The latter are the healthy result of the former. Like individuals, societies produce their way to wealth; they don’t spend their way to wealth. Debt-driven economies are unsustainable and only weaken society. The West is in big trouble precisely because spending/consumption, both private and public, has exceeded savings, and, therefore, production.
Very interesting post, Glen. Like you I also dumped credit cards, debt and the trappings of consumption slavery in the West. Got myself sandals and a nice hat too which goes well with the horse. I live simply now and yet it is far more satisfying and enriching than my old life. Here in Africa I have the full time efforts of my house staff as support, enjoy a lush garden, a generous spacious home in the African style of a compound and the people are warm, friendly and relaxed. I live well for a very tiny fraction of what I paid back home without having to face a mountain of bills coming in my mailbox month after month. Nor do I tolerate bill collectors and harassment anymore. It is about finding peace of mind I suppose and kicking the demons out of our minds and our lives.
Pretty interesting life style change for you, Bird!
You have no idea Al. We have a full time housekeeper/coook, gardener and driver on staff for the house. The only thing I am responsible for these days is my desk and laptop which nobody is allowed to touch. I have no idea where anything is in the house anymore. They just cook and clean and tend flowers around me like a buzzing hive of bees and if I did not actually make myself get out of my chair to go for a walk I would probably be a risk of a coronary from lack of exercise. I cannot even recall the last time I cooked my own meal or opened the fridge. How damned crazy is that?
So how did you end up over there?
Nothing dramatic sorry to say. My wifes father was quite ill and she needed to spend time with him as he is fairly elderly. Guess you could say it was just family reasons for being here but it has been an eye opener. I thought it would just be a short stay but it has stretched on. Everything I thought I knew about the developing world turns out to be totally wrong. Boy, the media sure does a hatchet job on Africa. The image of the place delivered to us is a combination of lunatics running around with machettes, raging street riots, child soldiers and starving babies. Good grief. I have never seen even one starved person. The imagery must be stock or something because it gets recycled a lot especially by the chariities trying to raise money and pull at heart strings. Actually it is pretty much normal as anywhere else here except of course there is a lot of people asking for money. There is poverty too but it is not anywhere near as bad as I had been led to believe. People are pretty religious too. Makes it a nice place to live.
Sounds pretty interesting.
Not saying the eastern mindset is any better or worse than that of westerners. It is simply different.
You have adopted an interesting lifestyle down there, Glen. It sounds like you are very happy.
Best
Many of you will not get this message since it is late in the evening. But, when the US finally settles into its third world status things will get tougher for the young. They will be forced to live with parents longer. House down payments get larger and can be as large as 30 percent in third world country’s. In Panama we have subsidized loans but the houses are very small for the amount than can be built. We have very few foreclosures here but the average house here is extremely small, like 600 sq ft. Houses have value here that is very stable but the living conditions are very sparce. Very few McMansions. Things must scale down in the US as the lifestyle is not sustainable with the high taxes and low wages. Not possible. A person is better off with a 600 sq ft house that is paid off and does not pay property taxes even though the lifestyle is crowded. It is actually sustainable in the long run. You have to experience third world living to understand what I am talking about.
Is Panama really Third World, Glen?
In my opinion. Housing should be the hail mary of all investments. This will not be true in the US until the economy collapses. You save money, put thirty percent down on the house, pay a reasonable price for the house, buy a small house, take care of it like it is gold and then live your life. This same theory goes along with gold saving. Save this money, buy your house. Then, once this is done buy gold. Phyzz. Hide the gold in a dark place and do not talk about it. Raise the kids to save money and to marry likeminded individuals. We are not talking about getting rich here folks. We are talking about staying out of debt, living simply(which is another subject altogether) and surviving the crisis. What is wrong with having a garden? What is wrong with saving up money to buy something? Well, it is the issue and the problem with the system that we currently live in. Only revolution will make any difference at this point. Save gold if the money can be put away for 3 to 5 years. Change your attitude now. Be Conservative. I am not as old as Big All and I cannot pretend to know nearly as much as he knows nor do I talk as if I am his mouth piece but I bet that he would at least partially agree with me. Cheers.
Ok, I live in Panama. We have rich people here and the houses they build are insane as far as the majority. But the rest of us live in small houses. Panama is a very insignificant country. Do you believe that since you live in the US that you live in a significant country? Well, you do for only for the moment. Don’t expect this to last. Anyone who plans will decide that living in affordable housing is a good plan in advance of a melt down. Anything could happen. Taxes could go go up or loss of a job could happen. Both incidences happen all the time in the US and the house goes into foreclosure. In fact, if you look at divorces this pushes houses into foreclosure very quickly as well. The housing market in the US is not stable. Not equal to Panama which is a very insignificant country on the world stage. First of all we live in shitty very small houses. We don’t hang our head out there to be cut off by the whims of everyday living. Now, the story is very different in the big City of Panama. Don’t even consider buying into that bubble. Cheers.
Thanks Glen, your three posts are very timely. Here in the UK we’re still mulling buying a house after decades spent in tied houses (vicarages). At first I thought yes, we’re on a roll here with PMs. Now with the prolonged correction better my wife and I both feel that we buy a modest place, and to live fully within our means. That way our shares in PMs stay intact.
Here we sense that before long pensions in the future will be means tested. Our State pension which is one giant Ponzi scheme could, in our case, be the first to go given that we both have employment related pensions and are thus (ha ha) better off.
This a.m. on BBC radio 4 there were two topics which following one after the other have a sad inter-connect. The first spoke of the National Lottery wishing to crank up its revenues, while the second focused on the scandal of pay-day loans. The Government to its DIScredit has not agreed to impose ‘caps’ on the rates imposed by these loan sharks, even as people grow increasingly desperate for meeting essential food, heating bills, etc may well use part of what they borrow to fund lottery tickets.
A carousel of insanity that stands only to accelerate ever faster.
Thanks again. As I say what you write feels especially timely in our case!
Best, Andrew
Reverend,
I think it is timely for a lot of people!
Thanks Al – Very helpful to hear you outline your ‘philosophy of choice’ and why you believe in fundamentals, as do I. The technical guys are very well informed, but simple guy that I am (in no way do I suggest that you’re the same!), it’s a bit like appreciating a work of art for its own sake without going into all the sophisticated rigmarole as to why I should like it!
At a modest level I enjoy collecting paintings. But its only the fundamentals I look for: Does the painting appeal to the eye? Does it reflect integrity in the artist? Maybe it tells a story, fictional or real. I guess I’m looking for honesty first and foremost.
So yes, of course gold should react well where there’s political turmoil. Ditto the same when so many currencies are chasing each other into the basement. Every day there are new reasons for supporting the fundamentalist approach. For example, KWN reminds us that this week is the longest holiday of the year for the Chinese: an ideal time for the Fed, BIS and major banks to push the paper price of gold lower. But that’s only paper gold and as Andrew Maguire reminds us Chinese agents and the People’s Bank of China are treating this week as anything but a holiday, with investors still buying gold like crazy.
Even if the art-world spurns my paintings (who knows one day it might not) I’m happy because what I own holds intrinsic value for me!
How much more so for gold.