What is th edeal with GOLD???

[switters]

Re: What is th edeal with GOLD???

While I can certainly empathize with the pain of watching your net worth take a dive on paper, I'd like to point out for the record that I don't hold EJ or anyone else here responsible for the investment choices I make. I'm grateful for the wealth of information and perspective provided here, but in the end I bear full responsibility for the choices that I make. EJ has made it very clear that he's not an investment—he's an analyst. We're free to follow his advice, or not. I'm no expert, but I've been studying this stuff for several years and read widely, and while EJ isn't perfect he's been right far more often than he's been wrong and has a better track record than anyone I can think of.

I bought gold at $900, but I also bought quite a bit at $1,650, so I'm way down as well. However, I'm playing the long game and I still believe that we'll see at least a $2,000 gold price again. So my solution is simply not to pay much attention to the gold price, and to remember that I bought it primarily as insurance.

[shiny!]

Re: What is th edeal with GOLD???

Originally Posted by goadam1

Fair enough. But you sit on the perch of a well done trade. From where I sit... Meh.

Not a trade. Insurance.

I sit on a perch of a SMALL well done trade...but I do sympathize. Losing what you thought you had always hurts bad..but you do have the gold, right? Those are PAPER losses you are moaning over...and the trade is not finished.

You're right- the trade's not finished. But it still helps to view gold not as a trade as much as an insurance policy. Buying it at a high is not unlike paying more for life insurance if you have health problems. The only time it's wrong to buy gold is at if it goes into a bubble and you buy near the top. Was it in a bubble? Are our long-term economic problems over now? Are we entering a stable period of economic growth and prosperity? If you think so, then yes, gold was in a bubble and will not rise again for a long time. Personally, I don't think happy days are here again.

Insurance is something you buy, not to make a profit, but because it can save your fanny if disaster strikes. People who buy life insurance when they're young and healthy can get it cheap. But if an overweight 50 year-old gets married, should he not buy life insurance for his new family just because his premium is higher than if he had bought it 20 years earlier?

My late husband had a small life insurance policy for which we paid too much every month because he was overweight. Every month as I wrote out the check, I grumbled a little inside and wished he wasn't so heavy. But then he died, and that insurance has allowed me to keep my modest lifestyle. I don't think about the premiums we paid, I'm only grateful we paid them. But I would be far happier if I could pay that high premium this month and have my husband here.

Investments are trades for making money. Insurance is for keeping what we have. When I imagine what life will be like in a scenario whereby gold soars, I get depressed and hope it never happens.

[BadJuju]

Re: What is th edeal with GOLD???

Investments are trades for making money. Insurance is for keeping what we have. When I imagine what life will be like in a scenario whereby gold soars, I get depressed and hope it never happens.

Better invest in some Prozac! The stocks, too! You are gonna have a bad time.

[coolhand]

Re: What is th edeal with GOLD???

+1

Read FOFOA. The price of "gold" you see quoted on your screen is going to $0, & it will drag the miners into bankruptcy with it.

The price of "gold" you see is a derivative, not gold.

The price of "gold" set at COMEX is the equivalent of a AAA-rating on subprime mortgage bonds in 2005. Worth par or more in 2005, worth zero by 2008. The fact that "gold" prices are cratering while physical supplies are drying up are the early signs of a USD/UST crisis that EJ hinted as possible earlier this year.

[rogermexico]

Re: What is th edeal with GOLD???

Read FOFOA. The price of "gold" you see quoted on your screen is going to $0, & it will drag the miners into bankruptcy with it.

The price of "gold" you see is a derivative, not gold.

The price of "gold" set at COMEX is the equivalent of a AAA-rating on subprime mortgage bonds in 2005. Worth par or more in 2005, worth zero by 2008. The fact that "gold" prices are cratering while physical supplies are drying up are the early signs of a USD/UST crisis that EJ hinted as possible earlier this year.

Most of this "Paper vs Physical" stuff is pure goldbuggery. Call up APMEX or Monex and see how hard it is to buy physical today.

Answer: Not hard and the premiums are much lower than in 2008-9.

This is just whistling past the graveyard for people who want to think their physical is worth more than the market is saying it is right now.

Note I am not saying gold will not go up again, just that the idea that physical has some secret value not reflected in the paper derivatives is nonsense.

I'll bet a buffalo or eagle with anyone that COMEX cold will never ever be zero or anything approaching it. Could futures trade at a discount to spot in a crisis? Of course they could. Just like the ETFs can be bought at a discount right now.

But not by much and not for long and no COMEX gold will ever be "zero".

[coolhand]

Re: What is th edeal with GOLD???

Most of this "Paper vs Physical" stuff is pure goldbuggery. Call up APMEX or Monex and see how hard it is to buy physical today.

Answer: Not hard and the premiums are much lower than in 2008-9.

This is just whistling past the graveyard for people who want to think their physical is worth more than the market is saying it is right now.

Note I am not saying gold will not go up again, just that the idea that physical has some secret value not reflected in the paper derivatives is nonsense.

I'll bet a buffalo or eagle with anyone that COMEX cold will never ever be zero or anything approaching it. Could futures trade at a discount to spot in a crisis? Of course they could. Just like the ETFs can be bought at a discount right now.

But not by much and not for long and no COMEX gold will ever be "zero".

Roger-

You're misunderstanding me. Here's FOFOA's point re: paper v. physical, & why paper will stop falling at whatever price the authorities settle the COMEX contracts in cash at:

You're Rogermexico, so let's just call you "Mexico." You're an oil exporter. You need your oil revenues to among other things, pay the military to avoid a drug cartel takeover of your country & gov't.

Prior to 2008 & US ZIRP, you would sell oil, get dollars & put the money in UST's that yielded close to or above the rate of inflation. That stored your oil wealth for future generations such that you knew those dollars would maintain the purchasing power of your oil wealth to combat the rapidly inflating costs of running your gov't & fighting drug gangs.

Post-2008 ZIRP, you are still getting dollars, but now when you put those dollars into Treasuries, you earn basically 0%. And in the meantime, the cost of food, bullets & weapons for your military has tripled since 2008...you are falling behind, more & more w/each passing year.

So with every passing year that the reserve asset issuing nation of the world runs "ZIRP", you steal more from your future oil wealth simply to keep big western banks solvent...in the mean time, the bill to run your gov't & unsuccessfully fight drug gangs continues to rise...

So - when I talk of paper or physical, here's what FOFOA & by extension me, mean: How long will you allow pay the Americans to take your oil from you? That is what you are doing when you sell oil for dollars & UST's that are negative-yielding on a real basis. So far, your answer has been "I have been doing this for almost 5 years."

The $64,000 question is "How much longer will you continue to do it?" If you assume that Mexico, & Saudi Arabia, & Russia, & Brazil & China & India & Germany (all the net exporting nations with whom the US has been running massive trade deficits financed by those countries with negative real rates) are not stupid, then we know for sure that the answer to the $64,000 question is not "Forever."

So then if we know the answer isn't forever, if you are a BRICS nation, or Germany or KSA, how long will you allow the Americans to give you 0% paper promises that the Americans are then debasing at $1T per year?

And THOSE are the gold buyers FOFOA, & by extension, I am talking about. I couldn't care less what the price, spreads or availability on APMEX or Tulving or anywhere else are.

Tell me what the premium & availability of gold bullion is if the world's exporter nations settle just 50% of this year's trade surplus with the US in physical bullion - call that trade surplus $250B for easy, round math. 100% of global annual gold mine production is 2500 tons, or $96B. Uh oh. Do you see the problem here?

If the exporter nations say "We will not allow the Americans to steal from us anymore (that's what financing at negative rates does), then to settle 50% of trade surplus w/just the US would require nearly 3x more gold value than current mine production...and that's just for THIS year...now what if they decide they don't want to keep their other accumulated trade surplus in UST's that are losing real value...China has what, $2T?

Did you notice that in April & May, Chinese physical gold settlements in Shanghai equaled 100% of global mine production for those months?

Virtually no one understands this game yet..."the big savers" in the world increasingly do NOT want negative real rate paper from the Americans...they simply cannot afford to take it for much longer from a political standpoint.

THOSE people are the people that cannot get the gold they want..that is why global gold ETFs have lost 700 tons YTD...those are the only places left to get the tonnage...unless you are a really big spender, my guess is that you did not call APMEX & take down those 700 tons that were sold out of the ETFs globally YTD...

Now, I am sure you, Mexico, would be happy to keep buying UST's if the US would give you a positive real return on those UST's...so let's say you need at least 3-4% with no duration risk...that means ZIRP has to go up 300-400bps...but the BIS just said last weekend that a 3% hike in short rates would cost the US $1T in losses, which is 5X the initial estimate of subprime losses that nearly collapsed the entire world financial system...

So when you hear that, and then look at how growing US GDP $1.2T or so in the past 4 years required a $9-10T increase in US Federal debt & a $2.5T increase in the Fed's books, you realize "Holy shit. The Americans are fucked. The only way they can get out of this is by stealing from me and all the other net exporting nations FOREVER!"

So, now that you & all your net exporting friends realize that a) The Americans need you to pay them to buy your stuff (vendor finance them) FOREVER; and that b) if you vendor finance them FOREVER, your country will eventually collapse & you will hang by your neck from a light post, you begin to hedge yourself.

What do you hedge yourself with? Very simple. You buy physical gold...B/c COMEX futures are simply an obligation of the bullion banks who as we saw in 2008 are simply an obligation of the same US gov't you are trying to get AWAY from!!!

Then you also buy oilfields (China); oil refineries (China); real estate all over the US (China, Japan, India); pork companies in the US (China); tire companies in the US (India)...

Do you see what's happening? THIS is the physical shortage I am referring to, in gold & elsewhere. There is $700T-$1Q in global derivatives perched on $70T in global debt perched on real assets whose value has been artificially depressed in USD terms by the very existence of those derivatives. The big net exporters of the world are beginning to call bullshit because they must for their own domestic political considerations...

...unless you are OK running out of money to fight the drug gangs in your home country, Mexico...we know what those guys do to you when they catch you, right?

...

[FRED]

Re: What is th edeal with GOLD???

I don't have subscription anymore, just checking to see what is the current thinking on Gold? It's getting hammered to death. Not sure what to make of it. Any enlightenment is much appreciated.

Just posted:

Free part: The Post-Market Economy – Part I: Chaos on Planet ZIRP - Eric Janszen
Subscription part: The Post-Market Economy - Part II: The Crash of 2014 - Eric Janszen

Summary of the research on gold:

1) The stall-out since 2001 due to flat oil price and falling U.S. oil imports, oil trade deficit, and resulting foreign USD reserves accumulation
2) Crash in 2013 due to China's credit and liquidity crisis

#1 will take years to play out, but U.S. oil imports will rise again and gold prices, too.
#2 will play out along a similar time trajectory as the U.S. credit and liquidity crisis of 2008.

Expect typos and other errors. Final copyedit not yet complete.

[verdo]

Re: What is th edeal with GOLD???

Most of this "Paper vs Physical" stuff is pure goldbuggery. Call up APMEX or Monex and see how hard it is to buy physical today.

Answer: Not hard and the premiums are much lower than in 2008-9.

This is just whistling past the graveyard for people who want to think their physical is worth more than the market is saying it is right now.

Note I am not saying gold will not go up again, just that the idea that physical has some secret value not reflected in the paper derivatives is nonsense.

I'll bet a buffalo or eagle with anyone that COMEX cold will never ever be zero or anything approaching it. Could futures trade at a discount to spot in a crisis? Of course they could. Just like the ETFs can be bought at a discount right now.

But not by much and not for long and no COMEX gold will ever be "zero".

Agreed 100%

While I can certainly empathize with the pain of watching your net worth take a dive on paper, I'd like to point out for the record that I don't hold EJ or anyone else here responsible for the investment choices I make. I'm grateful for the wealth of information and perspective provided here, but in the end I bear full responsibility for the choices that I make. EJ has made it very clear that he's not an investment—he's an analyst. We're free to follow his advice, or not. I'm no expert, but I've been studying this stuff for several years and read widely, and while EJ isn't perfect he's been right far more often than he's been wrong and has a better track record than anyone I can think of.

I bought gold at $900, but I also bought quite a bit at $1,650, so I'm way down as well. However, I'm playing the long game and I still believe that we'll see at least a $2,000 gold price again. So my solution is simply not to pay much attention to the gold price, and to remember that I bought it primarily as insurance.

that's the spirit

Just posted:

Free part: The Post-Market Economy – Part I: Chaos on Planet ZIRP - Eric Janszen
Subscription part: The Post-Market Economy - Part II: The Crash of 2014 - Eric Janszen

Summary of the research on gold:

1) The stall-out since 2001 due to flat oil price and falling U.S. oil imports, oil trade deficit, and resulting foreign USD reserves accumulation
2) Crash in 2013 due to China's credit and liquidity crisis

#1 will take years to play out, but U.S. oil imports will rise again and gold prices, too.
#2 will play out along a similar time trajectory as the U.S. credit and liquidity crisis of 2008.

Expect typos and other errors. Final copyedit not yet complete.

yes!!

[Guest]

Re: What is th edeal with GOLD???

But in our unique and odd little world where we got out of stocks at the real peak in 2000 and into gold at the real bottom in 2001 a 50% decline in stocks or gold is irrelevant. It's happened over and over and will happen over and over. What matters is how it all turns out. That's the long game. The long game is in bonds and currencies. We play the long game. We have to put emotion aside. Watch events with fascination and wonder not fear. Relax. You are in control of events if you can control your emotions.

The long game? I would like to point out that a seven times return on your money over 3 years is a bit different from the same return over 20 years. In the long run, we are all dead, etc, etc.

[ProdigyofZen]

Re: What is th edeal with GOLD???

Speaking as one who valued gold as insurance but also treated it as an asset to invest in and trade in, I'll offer my two cents.

Missing the equities rally is a criticism I somewhat agree with. Marc Faber called that one right, and did so emphatically.

I think the itulip stance was that staying long UST and not shorting them was the primary call we could have confidence in. It only became really clear from the itulip perspective that equities were the explicit target of QE, and they were being targeted effectively, well after the 2008-9 low in stocks. So a case could be made that if one is willing to buy into one artificial market (bonds), why not be willing to buy into another one (equities) ? I wish I had bought some futures at the 2008 low but I did not. I got out of stocks in 2000 but made the exact same mistake at the bottom in 2002, believing equities were still "too high" at the 850 mark on the S and P.

That said, no one is right about everything all the time, nor is it necessary to be. EJ has correctly made calls to short equities two times and held tight with treasuries through the longest lived and most persistent (and artificial) rally in world history. Would perfection have been to also call the market bottoms in 2002 and 2008 and tell us to pile in? I suppose so, but the same rigorous analysis and coherent framework that lent surety to buying and holding UST for so long and made the initial gold call with confidence probably made it hard, if not inconsistent, to make a call to go long stocks.

It would have taken a mentality more fitting to the pits in Chicago than the hard core long play zen master in EJ's brain to make those calls confidently.

As far as gold, EJ has been consistent in identifying gold as insurance, even in the face of arguments from some quarters at times (C130 pilots : )) that the recommended allocation was too low, and in the face of his own observations that gold was going up at a regular pace year after year with little statistical volatility. The 74-76 drawdown on the chart should be known to anyone who bought gold. Just as well known as what happened afterwards culminating in 1980.

Those of us who treated gold as something other than insurance, as I did, should be happy if we did well by choosing to take the risk of treating gold as a speculative investment.

I bought what according to the itulip position was way too much, and sold most of it at much higher prices. I also bought quite a lot of silver and (100% consistent with itulip) sold every bit of it at the top. The result is that I am well ahead of a buy-and-hold strategy over the same time period.

But does this mean that I think I got bad advice about gold? Absolutely not. I took on an additional risk, one that EJ and itulip never advocated, and I got away with. Or I got lucky. Or I was talented, or whatever post-hoc characterization you want to use.

Your observations about gold's collapse might be apt if EJ were some Turd Ferguson style cheerleader telling you to go all in on gold, but he is not.

Gold is an investment vehicle you can trade your dollars for and take your chances on like any other speculative investment.

Gold is a unique asset class that we hold to protect us from something that has not happened yet. Something we would prefer not to happen even if it were to "pay off" in gold appreciation.

Let's not confuse the two.

EJ writes for the long game not short term trading. He wrote about his portfolio in 2001 as a long term buy and hold because he didn't want, what most likely are investors who are novices almost everyone on iTulip, to try and trade around events like this because very few of us are in hedge funds etc aka insiders.

With that said, I do trade and buy stocks. I bought some equities in April of 2009. I bought equities in 2010, 2011, 2012 and even now 2013.

During the coming months (6 months) I will most likely be moving into short equity index positions and long vol positions depending on how the market looks.

Two months ago vol hit just about historic lows, that is when I like to buy.

One future problem to be cognizant of and that I see in a Janszen Scenario event is that investors will pile in to equities near the bottom like some did in March 2009 but there will be no reflation as before.

The last 3 major crashes in the US equity markets have now conditioned investors to believe that the equity market will quickly rebound (87, 2001, 2008).

But what if the next equity crash turns into Japan's equity crash and no reflation of the early 1990's?

IMO the equity non-reflation event I speak if is conditional on the US FIRE Economy finally being put to death and the world psychologically not seeing the UST and USD as reserve asset and currency even if it still is.

[Redwoods]

Re: What is th edeal with GOLD???

on this threads rec i went to read Martin Armstrong. have been flipping thru his postings,
trying to figure out his overall viewpt of where the economy's going. it's not hyper inflation.
but what is his overall pt of view. he says somethings coming...but what is it?

[verdo]

Re: What is th edeal with GOLD???

The long game? I would like to point out that a seven times return on your money over 3 years is a bit different from the same return over 20 years. In the long run, we are all dead, etc, etc.

the long game as in, by the end of this decade or sooner

[Forrest]

Re: What is th edeal with GOLD???

the long game as in, by the end of this decade or sooner

The long game? I would like to point out that a seven times return on your money over 3 years is a bit different from the same return over 20 years. In the long run, we are all dead, etc, etc.

Gold as viewed on this site is primarily as insurance, not as a speculative asset. The value of an ounce of gold is what it will buy when the prices go screwy based on natural disaster, famine, war, insurgency, financial or governmental breakdown, and people dissolve temporarily into detached communities, or there are temporary shortages in a localized area.

None of here actually expect or want natural disaster, famine, war, insurgency, financial or governmental breakdown., as could happen, but are much more worried about disorder in the financial markets, when no one actually knows how much some things costs, like energy, thus disturbing the remainder of our portfolio, and the income or profit expectations there.

10% is minimum insurance for anyone, ever and for always...it's the grub stake you pass on down to your children if you don't ever need it.

11-30% are heavy balancing options due to the riskiness of your portfolio based on difficulties in the world financial markets, due to Federal Reserve stupidity, and the Oligarchy's blind belief that the Federal Reserve knows what it doing. It is not so much as a bet against the stability of our country, as against the instability of the Banking System combined with the instability of world events, energy and food prices that could get very difficult to calculate into a retirement portfolio, as the world is a very jumpy place right now, and will be for a very long time. Inflation under these conditions are perhaps 20 to 50% per year, which is nasty enough, particularly when combined with an economy that cannot improve until the debts are cleared...jobs stagnating where we are with high interest rates to discourage any more debt for any reason.

When you are above 30%, you are making a bet that society will collapse, or speculating on a short term rise in the price of gold. In the US, one of the more stable societies and markets, hyperinflation of the Weimer Republic's, Rwandan, Mexican, or Argentinian types is not very likely. Hyperinflation is prices doubling daily at the market.

As for timing the gold market...it's very hard to to even accidentally sell at the high after buying at the low, much less doing it more than once. EJ advises against it regularly.

[ProdigyofZen]

Re: What is th edeal with GOLD???

The long game? I would like to point out that a seven times return on your money over 3 years is a bit different from the same return over 20 years. In the long run, we are all dead, etc, etc.

Osmose, you continue to be obtuse. So you expect these equity investors to be perfect, selling before the 2008 collapse and buying back in March 2009?

Most of the investment world is passive investments, probably more than 85% of investors and that includes mutual funds, RIA's, investment banks and even some hedge funds. As a friend of mine said they are closet index investors.

If you were a passive index investor and bought in 2005, you were down 40% plus in the equity market. (a lot of people sold due to fear) If they had stayed in perhaps they would have recuperated their losses by the beginning of 2013 (5 years later) uh oh there goes your return on money in 8 years to zero (unless you bought dividend paying stocks).

Stop playing around and be a productive member of the community by being respectful instead of antagonizing and trolling.

[doom&gloom]

Re: What is th edeal with GOLD???

I just saw this very nice gold report at zero-hedge. The size limits of itulip do not allow me to upload it. It is available as a pdf. Here is the link.
This report was produced by Incrementum AG June 27th 2013.

http://www.zerohedge.com/news/2013-0...obia-valuation


This report agrees with a lot of this site's core beliefs.
Has a 12 month target for gold at $1400.
Has long term target at $2300.
Current production costs of around $1200.
View miner's as underpriced due to more transparency in miner financials, and plateauing cost structure
Discusses some reasons for gold's recent tumble. CB smaller balance sheet, rising rates, calmness in euro-area.

$2300 is dervided from a probabalistic calculation using various scenarios. The dollar will require some variable degree of gold backing
and different projected sizes of the fed's balance sheet.

I agree it has not been fun to see gold monkey-hammered into a $700 drop from the high, but overall I guess my whole metals portfolio is pretty much even. So while I have made nothing, I have lost nothing. I may still lose something, but I cannot believe the central banksters of the world can keep pulling the levers forever. they have always f'd things up, and they will do so again. Only now that will have not just a stock bubble, and not just a housing bubble, but a stock, housing and bond bubble to crash. If the rest of the world is getting tired of our shenanigans, crashing all three and the ripples that spread afterwards will certainly have worldwide repercussions.

I am not smart enough to prognosticate on where gold will go, but I do believe that the producers will not sell gold for a loss for a very long time. I would expect them to shut in production and put a floor under the price at cost or above. Frankly, I cannot even begin to understand why they do not have a cartel of their own going, and simply shut off the spigot when the price gets too low, just like DeBeers in diamonds. then again the miners have never been too smart a crowd.

My own best guess is we have pretty much seen the worst of it. Gold held technically over $1200 at the end of the week, and silver had quite a snapback. It seems that most who have been 'blown out' of the trade are gone, and the rebuilding might continue, or we may trend aorund for some time to come based upon EJ's most recent work. Either way, as I too am not a trader but a long term holder, I will just grin and bear it.

Meanwhile, farming has been very very good to me, and farm prices are up quite a bit since I entered the arena. I can only see them moving up more in Uruguay, though they may settle donw here in the US, as land there is still relatively cheap when comparing yields to acreage costs. When all my land hits roughly $15k/ac I will have to rethink if I will keep it for the long haul, but for now, it "pays a dividend" both externally (crops) and internally (rising prices). I only wish I had bought more when I started out.