Where Is Gold Going In This Market

[lannarebirth]

Roubini: Supporters of a Gold Standard Are 'Lunatics and Hacks'

http://finance.yahoo...-181958239.html

One of my favorite examples of the subject matter and it's association with the fringe:

http://www.gold-eagl...span041998.html

I got a kick out of Greenspan's cigarette backed monetary system comments. It reminded me of this:

http://www.theonion.com/video/prison-economy-spirals-as-price-of-pack-of-cigaret,14327/

[fletchsmile]

Roubini: Supporters of a Gold Standard Are 'Lunatics and Hacks'

http://finance.yahoo...-181958239.html

One of my favorite examples of the subject matter and it's association with the fringe:

http://www.gold-eagle.com/greenspan041998.html

Underscores the mess that can be created by leaving someone with such views in his position far too long...

[OriginalPoster]

Roubini: Supporters of a Gold Standard Are 'Lunatics and Hacks'

http://finance.yahoo...-181958239.html

One of my favorite examples of the subject matter and it's association with the fringe:

http://www.gold-eagl...span041998.html

Underscores the mess that can be created by leaving someone with such views in his position far too long...

Up until the Nixon administration, support of the gold standard was a pretty mainstream thing amongst American conservatives.

[fletchsmile]

Underscores the mess that can be created by leaving someone with such views in his position far too long...

Up until the Nixon administration, support of the gold standard was a pretty mainstream thing amongst American conservatives.

Unfortunately today's problems won't necessarily be solved by looking backwards. That's the problem with fossils like Greenspan. Can't help feeling the mess wouldn't be quite so bad if they'd had someone more forward looking and Greenspan had gone years earlier

[OriginalPoster]

Underscores the mess that can be created by leaving someone with such views in his position far too long...

Up until the Nixon administration, support of the gold standard was a pretty mainstream thing amongst American conservatives.

Unfortunately today's problems won't necessarily be solved by looking backwards. That's the problem with fossils like Greenspan. Can't help feeling the mess wouldn't be quite so bad if they'd had someone more forward looking and Greenspan had gone years earlier

Greenspan wrote that piece back in the 60's, and at the time it must not have sounded a lot different than what quite a number of other "party line" Republicans were saying. I'm not sure that I ever heard him address the gold standard during his reign over the Fed but a quick google search suggests that he might be favoring it again now.

I think that it's safe to call Greenspan mainstream (as opposed to fringe), but the analogy does occur to me though that at one time mainstream physicians believed in bleeding patients to cure fevers.

[fletchsmile]

Underscores the mess that can be created by leaving someone with such views in his position far too long...

Up until the Nixon administration, support of the gold standard was a pretty mainstream thing amongst American conservatives.

Unfortunately today's problems won't necessarily be solved by looking backwards. That's the problem with fossils like Greenspan. Can't help feeling the mess wouldn't be quite so bad if they'd had someone more forward looking and Greenspan had gone years earlier

Greenspan wrote that piece back in the 60's, ...

Now you've got it - the point being he had been around 50 years, and was somewhat of a fossil - too slow to see what was coming and the repercussions of his actions until it was too late. Sure he may have scored highly on history and experience, but unfortunately he was lacking in vision and didn't see the massive train crash he was setting up. Without doubt he was a major contributor to the crises we've been going thru in the last few years.

Should have been put out to pasture well before 2006

Edited November 25, 2011 by fletchsmile

[fletchsmile]

One example of Greenspan's failures towards the end of the reign:

Asked why he didn't speak out, if he knew these practices were going on or even suspected that there was something illegal or shady, Greenspan admits, "While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late. I didn't really get it until very late in 2005 and 2006."

----------------

Gold pulling back nicely now... Could be approaching time to re-enter soon.

[fritter1970]

Greenspan, Bernanke, Trichet, Draghi..... what have they got in common? They are academics. So what is the problem with academics? They are great at theory but, unfortunately, the economic theory of most academic institutions is completely different to what actually goes on in the real world of economics. In fact, when it comes to the real world of investing these guys are virgins. They have lived in universities their whole life and I wouldn't be surprised if they have never even traded shares in their life.

The irony of the whole economic disaster that has ensued is that the few individuals who actually understand what is going on and who could literally "save the world" are amongst the most hated people on Earth. Who are they? Those "terrible" speculators who, for instance, made a fortune on credit default swaps in the sub-prime mortgage market. Those "terrible" speculators who will make a fortune on the credit default swaps they hold for Greece and Japan. These "speculators" aren't bad guys. They are just like you and me. They see an opportunity to make a buck and go for it.

In fact, these "speculators" have been screaming for years "you're making a huge mistake guys, you have to reverse your position ASAP". But who listens to them? No one.

Just as an aside, what is the one investment every one of these guys has got in common? Physical gold. They all own physical gold. Don't listen to the jerks on here who talk down gold. Listen to John Paulson, Kyle Bass, Jim Rogers etc.

P.S. There has been some talk on here that John Paulson has sold down his gold holdings and therefore he must have turned bearish on gold. Those who have stated this are as useless as Central Bankers. Paulson runs a hedge fund. Hedge funds have to meet redemptions. So what is Paulson doing? Selling some gold to meet redemptions on his hedge fund. Only an ignorant fool would conclude that this equates to him having turned bearish on gold.

[OriginalPoster]

P.S. There has been some talk on here that John Paulson has sold down his gold holdings and therefore he must have turned bearish on gold. Those who have stated this are as useless as Central Bankers. Paulson runs a hedge fund. Hedge funds have to meet redemptions. So what is Paulson doing? Selling some gold to meet redemptions on his hedge fund. Only an ignorant fool would conclude that this equates to him having turned bearish on gold.

I'm looking forward to the day when Jim Sinclair says that it's time to get out of gold. According to him (or at least according to what he was saying when gold was in the $500 or $600 range) such a day will come but when he says it's time to get out no one will believe him.

[fletchsmile]

I think you'll find the words "may" and "might" being used a lot with regard to Paulson's transactions. It was interesting he sold the ETF shares. That was the key point.

Why is not easy to ascertain. He has also been selling various equities. Who's to say these were not used to pay redemptions instead? I haven't seen a net redemption figure quoted for his funds either, only a gross figure so far. Of course he also uses options, maybe saw an opportunity to arbitrage. Some hedge funds use gold to hedge other exposures, so he may have removed the underlying and hence no longer needs the hedge. Bottom line - all sorts of reasons possible. I've yet to see a reliable source that shows a definitive reason, and I think the copy of the 13-HR filing he sent me seems to have got lost in the Thai post

He doesn't know though, that I know his 13-HR shows his long positions. I feign ignorance in case he slips up in conversation, and lets on what he's shorting too so I can see the net.

[fritter1970]

I think you'll find the words "may" and "might" being used a lot with regard to Paulson's transactions. It was interesting he sold the ETF shares. That was the key point.

Why is not easy to ascertain. He has also been selling various equities. Who's to say these were not used to pay redemptions instead? I haven't seen a net redemption figure quoted for his funds either, only a gross figure so far. Of course he also uses options, maybe saw an opportunity to arbitrage. Some hedge funds use gold to hedge other exposures, so he may have removed the underlying and hence no longer needs the hedge. Bottom line - all sorts of reasons possible. I've yet to see a reliable source that shows a definitive reason, and I think the copy of the 13-HR filing he sent me seems to have got lost in the Thai post

He doesn't know though, that I know his 13-HR shows his long positions. I feign ignorance in case he slips up in conversation, and lets on what he's shorting too so I can see the net.

I think you will find that nearly everything he is selling is for redemptions and the purchase of USD.

Unfortunately even someone with the enormous wealth of Paulson is subject to the flow of capital. And the flow of capital in times of panic is to be out of everything, including hedge funds, and into the reserve currency - which at this time in history is the USD....

[fletchsmile]

One thing that is clear, is that there are far more factors driving the gold price these days than probably any time throughout history. This is one reason why on listening to historic arguments I'm not convinced they will hold and repeat in the same way. The hundreds of years argument is becoming superceded by ever shorter cycle changes in many walks of life, technology in particular

A recent example. The stock markets have had a turbulent couple of weeks going down. Gold has generally shown a positive correlation heading down too. i.e behaving as a risk asset (or at least positively correlated as a risk asset) rather than a safe haven.

Now many people, gold bugs in particular, like to explain this as people, hedge funds, investors etc having to liquidate their gold to cover redemptions in the case of funds,or other such liquidity requirements for other entities.

Now assume for a minute we follow thru the gold bug argument that fiat currencies will collapse. With this many other assets classes will collapse too. This suggests to me, that there could be an even bigger sell off in gold for people to cover their positions, meet redemptions, funding needs, margin calls on the crash down.

Also imagine the US govt, German govt, Italian govt etc unloading all their gold at the same time if their fiat currencies collapse. No-one is going to want another currency or even some form of guarantee backed by gold, they will want first hand payment in hard currency (gold). That would be one hell of a fire sale for the gold market too. When the creditors and liquidators come calling fair values go out of the window and the few remaining assets that do experience stress in their pricing. So if anything the demise of fiat currencies could well come with a drop in gold price too - for a while at least. Not disimilar to the last couple of weeks, but on a larger scale.

Another assumption gold bugs seem to assume an orderly transition in passing gold from one hand to another, as though it was a gentleman's agreement. When countries collapse, violence among many other breakdowns in law also kicks in, and legal possession or title gives way to rule of force. So I hope all those gold bugs have also bought a gun or two and fortified their homes

Just a thought

Edited November 25, 2011 by fletchsmile

[muchogra]

"One thing that is clear, is that there are far more factors driving the gold price these days than probably any time throughout history."

This is so true particularly for people who didn't ride the wave to its crest f to around 1900 from USD800 in a relatively short period of time. Now, all kinds of reasoning and conjectures fueled by experts are meaningless to me! To me, you are gambling at this jucture after you missed the boat. Luckily most are not on leverage is all I can say!

[muchogra]

Let me add further that if some of these people play on leverage they would have been long broke based on their theory and readings!

[khaan]

Also imagine the US govt, German govt, Italian govt etc unloading all their gold at the same time if their fiat currencies collapse. No-one is going to want another currency or even some form of guarantee backed by gold, they will want first hand payment in hard currency (gold). That would be one hell of a fire sale for the gold market too. When the creditors and liquidators come calling fair values go out of the window and the few remaining assets that do experience stress in their pricing. So if anything the demise of fiat currencies could well come with a drop in gold price too - for a while at least. Not disimilar to the last couple of weeks, but on a larger scale.

Another assumption gold bugs seem to assume an orderly transition in passing gold from one hand to another, as though it was a gentleman's agreement. When countries collapse, violence among many other breakdowns in law also kicks in, and legal possession or title gives way to rule of force. So I hope all those gold bugs have also bought a gun or two and fortified their homes

Just a thought

if you are correct about gold still doesn't give me any more faith in paper currency so what you're saying really at the end of the day it's better to invest in these

[fritter1970]

I have a lot of respect for your opinion fletchsmile but I have to disagree with you on this occasion. Most western investors have the same viewpoint as yourself - a linear view of the world. However, from all my research, the best investors view the world more like asians do - they have a cyclical view of the world. They see investing as no different to the cycle of winter, spring, summer, and autumn. As no different to the rise and fall of daily tides. As an example, and I know I have mentioned this before, there was a commodities bull market and stock bear market between 1966 and 1982, then a stock bull market and commodities bear market between 1982 and 1998, and now we have been in a commodities bull market and a stock bear market since 1998. Capital moves back and forth between the two just as the seasons change and the tides rise and fall.

What we are going through now with the collapse of economies has actually happened repeatedly and cyclically throughout history. And there are a few brilliant (non-academic) individuals that have worked out exactly when they will occur based on analytical and mathematical equations. Economic calamity is first followed by hatred of bankers and as things get worse politicians drive a hatred of other minorities in order to obtain power (ie. the wealthy, chinese currency manipulators, the media, "gold speculators", mexican job takers etc etc) - and from there we end up voting in extremist figures to head-up our government.

As for gold, history will repeat as well. Once the point arrives, and it will, where people realise that the emperor has no clothes (ie. that their paper currency is actually worthless) the surge to gold will be far greater. The initial signs will mark an increase in the price of gold at a noticeably faster rate. And just as people wonder what the hell is going on in these Global Financial Crises that we are experiencing, they will also wonder what is going on with gold. And the flock will start to move into it en masse. I agree with you that governments will sell their gold but its impact will only be temporary due to the increase in demand for gold in the face of absolute loss of confidence in paper currency massively outweighing gold supply.

[fletchsmile]

I have a lot of respect for your opinion fletchsmile but I have to disagree with you on this occasion. Most western investors have the same viewpoint as yourself - a linear view of the world. However, from all my research, the best investors view the world more like asians do - they have a cyclical view of the world. They see investing as no different to the cycle of winter, spring, summer, and autumn. As no different to the rise and fall of daily tides. As an example, and I know I have mentioned this before, there was a commodities bull market and stock bear market between 1966 and 1982, then a stock bull market and commodities bear market between 1982 and 1998, and now we have been in a commodities bull market and a stock bear market since 1998. Capital moves back and forth between the two just as the seasons change and the tides rise and fall.

What we are going through now with the collapse of economies has actually happened repeatedly and cyclically throughout history. And there are a few brilliant (non-academic) individuals that have worked out exactly when they will occur based on analytical and mathematical equations. Economic calamity is first followed by hatred of bankers and as things get worse politicians drive a hatred of other minorities in order to obtain power (ie. the wealthy, chinese currency manipulators, the media, "gold speculators", mexican job takers etc etc) - and from there we end up voting in extremist figures to head-up our government.

As for gold, history will repeat as well. Once the point arrives, and it will, where people realise that the emperor has no clothes (ie. that their paper currency is actually worthless) the surge to gold will be far greater. The initial signs will mark an increase in the price of gold at a noticeably faster rate. And just as people wonder what the hell is going on in these Global Financial Crises that we are experiencing, they will also wonder what is going on with gold. And the flock will start to move into it en masse. I agree with you that governments will sell their gold but its impact will only be temporary due to the increase in demand for gold in the face of absolute loss of confidence in paper currency massively outweighing gold supply.

I'd agree markets are generally cyclical. I'd disagree westerners view money and investments as linerar. I'd actually say most westerners I know in investment and banking view markets as cyclical, myself included. In other areas of life, eg life and death, re-incarnation, etc Asians have more cyclical views, whereas for many westerners life is more linear. However, when it comes to investing and economics, cyclicality is the mainstream norm. An example that would back up my view that westerners believe in cyclicality for money is Basel III. A pro-cyclical buffer for capital is likely to be introduced. Spain already use one. Most investors talk of cycles

One key point in my view is that cycles change. They are not exactly the same. The speed of today's world will accelerate shorter durations in cycles. An example - The Asian Financial Crisis (Tom Yam Kung). There is unlikely to be a repeat of that given conditions have changed. However, the will be similar crises, eg many Thais call 2008 the Hamburger Crisis

To me cycles in investment are not unlike viruses in nature. eg Flu viruses come around, some annually, some after decades, but each time they have mutated.

There are of course many cycles, and they are not 2 dimensional either, which is where in my view charts fall down, including gold and equity charts. In reality these many cycles are interelated. What also happens is that while the majority of cycles come around again, from time to time, one particular product or cycle becomes obsolete, and from time to time new cycles and new elements are intoduced, and new commodities come along. eg How many years has uranium been on the scene? What happens when oil runs out? RAM is a new commodity for computer memories, and there are now IT commodities etc?

At some point I believe every one of those cycles will end, as nothing is infinite and nothing lasts forever. It may take months for some and milleniums for others but it will happen. Economic theory is another example. It is incorrect to say that cycles always repeat. They will all stop for example when the earth is destroyed. When not if. Where we are at the moment has potential to change these cycles for ever. Peak Oil leading to war over oil or new energies, nuclear war, collapse of western empires won't be taken lying down, etc

At some point, gold will go the way of tulips. Tulips had its own (agricultural) cycle for many years, and then its infamous investment bubble and bust. The main diff is time frames. Looking forward, water is likely to become a valuable commodity one day.

I agree with you that governments will sell their gold but its impact will only be temporary due to the increase in demand for gold in the face of absolute loss of confidence in paper currency massively outweighing gold supply.

Two questions

1) Wouldn't that drop be a better time to buy then? or

2) Isn't it possible that the carnage that ensues creates a totally different way of life and creates new cycles, with totally different values

In summary. Yes I see the goldbug arguments on cyclicality. What they fail to see is history does often repeat itself, but not always, and there are from time to time game changers. In addition cycles are not 2 dimensional shifts round a single point of origin.

Another way to look at it, is many people assume certain distributional norms, and use mathematics, probabilities, value at risk, confidence levels. It's also an irony that this modelling becomes self-fulfilling. What these always omit though are "tail events". We're at a point in time where I think some form of tail event will happen. While the historians and theorists and mathematicians model these cycles, and are geniuses 99.9% of the time, back test them, validate them, they are useless for tail events. There's also a tendency for mathematic modelling to "over fit" past data, and not take enough account of new factors and changes.

Edited November 26, 2011 by fletchsmile

[fritter1970]

I have a lot of respect for your opinion fletchsmile but I have to disagree with you on this occasion. Most western investors have the same viewpoint as yourself - a linear view of the world. However, from all my research, the best investors view the world more like asians do - they have a cyclical view of the world. They see investing as no different to the cycle of winter, spring, summer, and autumn. As no different to the rise and fall of daily tides. As an example, and I know I have mentioned this before, there was a commodities bull market and stock bear market between 1966 and 1982, then a stock bull market and commodities bear market between 1982 and 1998, and now we have been in a commodities bull market and a stock bear market since 1998. Capital moves back and forth between the two just as the seasons change and the tides rise and fall.

What we are going through now with the collapse of economies has actually happened repeatedly and cyclically throughout history. And there are a few brilliant (non-academic) individuals that have worked out exactly when they will occur based on analytical and mathematical equations. Economic calamity is first followed by hatred of bankers and as things get worse politicians drive a hatred of other minorities in order to obtain power (ie. the wealthy, chinese currency manipulators, the media, "gold speculators", mexican job takers etc etc) - and from there we end up voting in extremist figures to head-up our government.

As for gold, history will repeat as well. Once the point arrives, and it will, where people realise that the emperor has no clothes (ie. that their paper currency is actually worthless) the surge to gold will be far greater. The initial signs will mark an increase in the price of gold at a noticeably faster rate. And just as people wonder what the hell is going on in these Global Financial Crises that we are experiencing, they will also wonder what is going on with gold. And the flock will start to move into it en masse. I agree with you that governments will sell their gold but its impact will only be temporary due to the increase in demand for gold in the face of absolute loss of confidence in paper currency massively outweighing gold supply.

I'd agree markets are generally cyclical. I'd disagree westerners view money and investments as linerar. I'd actually say most westerners I know in investment and banking view markets as cyclical, myself included. In other areas of life, eg life and death, re-incarnation, etc Asians have more cyclical views, whereas for many westerners life is more linear. However, when it comes to investing and economics, cyclicality is the mainstream norm. An example that would back up my view that westerners believe in cyclicality for money is Basel III. A pro-cyclical buffer for capital is likely to be introduced. Spain already use one. Most investors talk of cycles

One key point in my view is that cycles change. They are not exactly the same. The speed of today's world will accelerate shorter durations in cycles. An example - The Asian Financial Crisis (Tom Yam Kung). There is unlikely to be a repeat of that given conditions have changed. However, the will be similar crises, eg many Thais call 2008 the Hamburger Crisis

To me cycles in investment are not unlike viruses in nature. eg Flu viruses come around, some annually, some after decades, but each time they have mutated.

There are of course many cycles, and they are not 2 dimensional either, which is where in my view charts fall down, including gold and equity charts. In reality these many cycles are interelated. What also happens is that while the majority of cycles come around again, from time to time, one particular product or cycle becomes obsolete, and from time to time new cycles and new elements are intoduced, and new commodities come along. eg How many years has uranium been on the scene? What happens when oil runs out? RAM is a new commodity for computer memories, and there are now IT commodities etc?

At some point I believe every one of those cycles will end, as nothing is infinite and nothing lasts forever. It may take months for some and milleniums for others but it will happen. Economic theory is another example. It is incorrect to say that cycles always repeat. They will all stop for example when the earth is destroyed. When not if. Where we are at the moment has potential to change these cycles for ever. Peak Oil leading to war over oil or new energies, nuclear war, collapse of western empires won't be taken lying down, etc

At some point, gold will go the way of tulips. Tulips had its own (agricultural) cycle for many years, and then its infamous investment bubble and bust. The main diff is time frames. Looking forward, water is likely to become a valuable commodity one day.

I agree with you that governments will sell their gold but its impact will only be temporary due to the increase in demand for gold in the face of absolute loss of confidence in paper currency massively outweighing gold supply.

Two questions

1) Wouldn't that drop be a better time to buy then? or

2) Isn't it possible that the carnage that ensues creates a totally different way of life and creates new cycles, with totally different values

In summary. Yes I see the goldbug arguments on cyclicality. What they fail to see is history does often repeat itself, but not always, and there are from time to time game changers. In addition cycles are not 2 dimensional shifts round a single point of origin.

Ok. This can get a little confusing. I think what is happening in your analysis is that you are lumping macro-economics and micro-economics into the same space. For example commodity cycles (macro-economics) have always had bull and bear markets. However the components of those commodity cycles (micro-economics) have varied (e.g. salt was highly valuable during the roman empire, whereas crude oil is valuable today).

As to your question "wouldn't it be better to buy gold when there is a temporary price drop due to governments selling off their gold?" ....... not likely. Why? Because it is likely that gold will increase in price quite a lot more prior to governments going into "sell mode". So, in comparison to today's gold price, those future post-sell off prices are likely to be higher.

I really have to suggest something to you....

If you do the things that successful people do, you get the results that successful people get.

If you do the things unsuccessful people do, you get the results unsuccessful people get.

What I am saying in quoting this logic is that it is better to avoid conducting your own in depth analysis and ending up with the mediocre investment outcomes that 99.9 per cent of other investors end up with. Instead I want to propose that you identify the .1 per cent of investors with a long history of phenomenal investment success and submit to the notion that to follow them is to end up with phenomenal success yourself!

There is one caveat to this proposal however, and that is to avoid following Warren Buffett. His model is suitable for the individual with enormous amounts of capital to invest, but for you and I will lead to mediocrity in comparison to allowing your investment horizons to alter between commodity bull markets and stock bull markets. One advantage we have over Buffett is flexibility. He essentially has no option but to invest in the stock market due to the amount of capital he has under management. You and I can recognise when stock markets are bearish and commodities markets are bullish and alternate our investments accordingly with ease. To follow him with comparatively miniscule amounts of capital is to surrender the one advantage that you have over him..... enormous investment flexibility.

[fletchsmile]

...

Ok. This can get a little confusing. I think what is happening in your analysis is that you are lumping macro-economics and micro-economics into the same space. For example commodity cycles (macro-economics) have always had bull and bear markets. However the components of those commodity cycles (micro-economics) have varied (e.g. salt was highly valuable during the roman empire, whereas crude oil is valuable today).

As to your question "wouldn't it be better to buy gold when there is a temporary price drop due to governments selling off their gold?" ....... not likely. Why? Because it is likely that gold will increase in price quite a lot more prior to governments going into "sell mode". So, in comparison to today's gold price, those future post-sell off prices are likely to be higher.

Your first sentence to me is key. Yes I do lump the two together. Probably because my mode of thinking is holistic or strategic in nature, seeing the whole of life in one go, and definitely not linear or even just cyclical. Not always easy to express either to other people who think in more focused ways.

You highlight well one of my views. Macro and micro economics are not the separate entities that people like to use in their analysis. They have impacts on each other. In the same way politics, sociology and many more items impact pure economics. None of them exist in vacuums, yet economic theory makes assumptions they do.

Macro-economics and micro-economics are interrelated. To use your examples salt during Roman times as a "micro-economic" variable would influence the Roman's thinking who in turn were key influencers of macro-economic policy globally because of their power.

Small micro events can have massive impacts on macro events. eg Chaos theory, a single flap of a butterfly's wings changing the weather system.

One problem with much of economics is it compartmentalises these things, and oversimplifies. This 2 dimensional way of thinking, 2 dimensional charts etc are limited in thought.

Until recently many banks looked at liquidity risk, separate from credit risk, separate from market risk. For many years that worked. What they are finding now is that life and risks are much more inter-related. In the same way credit risk can influence liquidity, macro and micro economics impact each other, so considering one without the other in my view is flawed.

Nothing exists in isolation. Linearity, cyclicality and so on are just simplications to help people digest the bigger picture in their own way in more sizeable pieces. Same for macro and micro economics. Just tools to help people simplify think and digest in more manageable ways.

BTW Philosophically there is no you or me or world or universe as individual entities either, it's all part of the same whole Even if someone doesn't believe that, think for a minute that the actions of every single person in the world has an impact on you. We are not much more than 6 links away from anyone in the world. Their actions affect many people actions, who in turn affect many more. To underestimate this linkage, underestimates the power of unforseen tail events.

Something big will happen in the next couple of years, times are changing and there's a good chance of paradigm shifts. The markets we are in are pivotal times

Edited November 26, 2011 by fletchsmile

[fletchsmile]

One example of micro-economic policy tools that could have changed the whole mess we are in now.

Imagine the US powers to be had introduced a policy limiting by regulation the loan to value (LTV) of mortgages in the housing sector a few years back. Let's say something as simple as limiting LTV to say 80%.

That would mean the housing market wouldn't have bubbled. Defaults would have been much lower. Derivative and leverage products such as MBS, CDOs would not have been impacted. Banks wouldn't have had so much debt, leveraged debt, credit derivative lossses, counterparty risk would be lower, liquidity risk lower, banks would lend to people and themselves. Lehmans wouldn't have failed. The packaged debt securities would have been safer as the underlyings are safer, the packages on the packages in turn safer - as we know banks have took loans packaged, repackaged, repackaged again and multiplied by 40 - if the underlyings were safer the packages would be too, no matter how leveraged and how intransparent.

In turn todays macro-economic policy would look very different. Gold would probably be much lower too. We'd be in very much different business and economic cycles globally

Interestingly Thailand uses micro-economic policy tools on the housing sector. Bank of Thailand sets maximum LTV by value. In this way Thailand has been far ahead of the US in foreseeing problems.

Unfortunately most economist running the world favour one method or the other or a variation on them. Milton v Kenes and all the other neo variations. Macro vs micro. Gold or USD. Equity or debt...

Life doesn't work simply by single factor analysis of models, it's multi-factor as a minimum. Same applies for gold prices.

[flying]

One thing that is clear, is that there are far more factors driving the gold price these days than probably any time throughout history.

A recent example. The stock markets have had a turbulent couple of weeks going down. Gold has generally shown a positive correlation heading down too. i.e behaving as a risk asset (or at least positively correlated as a risk asset) rather than a safe haven.

Now many people, gold bugs in particular, like to explain this as people, hedge funds, investors etc having to liquidate their gold to cover redemptions in the case of funds,or other such liquidity requirements for other entities.

Another assumption gold bugs seem to assume an orderly transition in passing gold from one hand to another, as though it was a gentleman's agreement. When countries collapse, violence among many other breakdowns in law also kicks in, and legal possession or title gives way to rule of force. So I hope all those gold bugs have also bought a gun or two and fortified their homes

Don't know if folks consider me a gold bug but some of those assumptions I have stated from years now....

1) turbulence ahead & the markets will reflect the gambling/speed trading/leveraged paper that has no counterpart in reality.

Swings will get more & more volatile & a separation between paper & physical will get wider & wider via premiums for physical.

COMEX is under no obligation to deliver physical & it states such in their contracts that they have the option to settle in cash.

As for prepping whether it be arable farmlands, guns etc etc etc

I have also said for years that these past 2-3 years I saw as a gift.

Maybe others have taken the opportunity it provided ? If I am wrong no problem...If I am right & did nothing

thinking what I am then I would feel very foolish later. I am not talking Mad Max I am talking about distressed times

which may be a bit easier for those that prepared a bit in advance.

[fletchsmile]

Some food for thought, and some ways to look at some of the stats.

http://www.commodityonline.com/news/fallacy-of-gold-and-primacy-of-silver-44049-3-1.html

One thing the article does is successfully debunk the idea of gold being used as a domestic retail currency for individuals. With 7bio people on the planet there simply isn't enough of the stuff. Possible use between govts, banks etc, but not really practical for individuals.

[mccw]

For anyone in uk- check out the guernsey mint ;-)

[12DrinkMore]

For anyone in uk- check out the guernsey mint ;-)

I have blacklisted Guernsey ever since those tossers hung all the Landsbanki-Guernsey customers out to dry. They were keen enough to allow the bank to open up but did absolutely nothing to help the depositors, as far as I know the only depositors who have lost money in this mess.

Here's Lyndon Trott, the Chief Minister.

http://landsbankigue...yndonTrott.html

I wouldn't trust him to support you.

Edited December 2, 2011 by 12DrinkMore

[Naam]

I have blacklisted Guernsey ever since those tossers hung all the Landsbanki-Guernsey customers out to dry. They were keen enough to allow the bank to open up but did absolutely nothing to help the depositors, as far as I know the only depositors who have lost money in this mess.

correct!

by the way, i wouldn't trust any of the Channel Islands in case of a major financial meltdown. no substance in relation to what is stored there. if "island" then islands with substance, i.e. Hong Kong and Singapore.

[Naam]

JPM

abstract:

Over the last decade, as the precious metals have appreciated, production growth

has been the best driver of outperformance. Yet now investors have been asking

for more dividends. Many expect gold prices to move still higher in these

uncertain times; however, it's worth remembering that gold and silver are near

30-year (inflation adjusted) highs. So we decided to poll investors on what they

expect and what they are expecting from their gold investments.

There is a split opinion on gold price. A minority see the long-term price

around the $1200/$1300 level that seems to be indicated by current gold equity

trading levels while the majority are looking for a long-term gold price of

$1500/oz or higher.

Support for dividends has grown. Most investors voted for more dividends to be

paid from free cashflow after sustaining capital had been allocated. Newmont is

paying the biggest dividend at present offering about a 2% yield, though, we

believe, investors are asking for a 3% yield. Perhaps investors are asking to be

paid to wait for higher gold prices.

The majority expect inflation, though about 25% of resource and gold sector

investors are fearful of deflation. Most investors dislike hedging though

perversely (a small sample of) gold investors were less negative on gold hedging

than the resource and generalist groups.

While gold equities have lagged gold, they have outperformed the S&P 500 for a

decade and are still trending higher. We include a chart on page 4 showing how

the S&P gold index (HUI) remains in a strong uptrend relative to the S&P 500.

Our Overweight major gold stocks are: Barrick Gold (ABX), Goldcorp (GG), Gold

Fields (GFI), Harmony (HMY), Kinross (KGC), Newcrest (NCM), and Newmont (NEM).

Link: https://mm.jpmorgan.com/PubServlet?action=email&doc=GPS-736726-0.pdf

Date: Fri Dec 02 00:15:49 EST 2011

[johnnybgood]

Thanks gentlemen for your endless opinions, please here is a graph which kinda sums it all up.

[Naam]

Thanks gentlemen for your endless opinions, please here is a graph which kinda sums it all up.

finally a contribution with relevant content

[midas]

in this very recent interview Gerald Celente says at 6 min 20 seconds

" they don't have the money and they don't have the gold "

http://www.informationclearinghouse.info/article29858.htm

Edited December 3, 2011 by midas

[flying]

" they don't have the money and they don't have the gold "

I know there is only the slimmest of chances of RP being elected

But....if he were elected I would so look forward to a audit of Fort Knox.....

Then again in many ways I like RP too much for him to be elected as he would surely be

a target for removal.