Gold getting K I L L E D !!!!!

[Guest]

Re: Gold getting K I L L E D !!!!!

No it was a "wherever you're from" chicken (jes kidden).

Yes I gathered that is your thesis. ;)I respectfully disagree if by awesome you mean real returns over the next five years, as you have likewise probably gathered from my posts. Well, that is why it's called bird hunting and not bird shooting! PS. Appreciated the hat idea - San Diego chicken?

[santafe2]

Re: Gold getting K I L L E D !!!!!

Unless you are omniscent, buying any asset whatsoever is indeed a bet in the sense you are speculating (or you should be, unless you don't care if the asset performs poorly) on the future value of the asset relative to other assets.

If you put everything into one asset class, that is never a hedge, that is a bet. If you allocate to both treasuries and gold or cash and gold, or to any pair of assets that you think are negatively correlated, you have made two offsetting bets, and then one is hedging the other. A hedge cannot exist in isolation. Here you are saying that gold is hedge, presumably against a fiat currency. I could not agree more, but a hedge is just a bet that offsets the risk of another asset. Think of selling a futures contract on the S&P (a bet that the market will go down) that offsets a portfolio of large cap stocks (a bet that stocks will go up) futures, options, long, short, currencies, metals commodities are all bets. hedging is function of what else you own.

I think you are confusing my use of the word "bet" in the trivial sense with vegas gambling or lottery tickets, which are bets with terrible odds and which I would call gambling. "Long shot" just means a bet with very low odds of success and a high payoff. A bet could be just the opposite, like when you speculate(bet) on the future solvency of a firm by buying a bond yielding 6% - high probability of payoff, low payoff as percentage of your risked capital.

Of course it will. Make you whole means restore you to your previous state. If gold is a 10 bagger in fiat money and the fiat money declines 90% and you held everything in gold, you are made whole. Even insurance is a bet in an opposite outcome. Here I and EJ both use fire insurance, not life insurance as the appropriate metaphor.(Life insurance is a bet on a non-financial outcome.) Your house can be replaced when it burns to the ground because you have bought an option that expires worthless with very high probability, but pays off big with low probability against the insured event. Options are bets.

I personally believe gold has a potential downside of of $5-600 and a potential upside of $3-5000 absent hyperinflation. If I felt these probabilities were equal (I don't - I think the upside is more likely), that is an asymmetric bet.

I enjoy your posts, always very thoughtful. I make no bets so to me the word bet is akin to a table in Vegas. The word is, in itself, trivial. Thoughtless chance, luck. Gold is none of these.

For me gold is a hedge against my traditional investments. My business, the value of property I own, US hegemony and other factors. You make the spreadsheet point that gold will ipso facto make you whole, but it won't. If gold moves up to a point where it offsets your other losses, the world will be a place much different than today. This is not a zero sum game. If gold moves to $5,000 as you suggest, none of us will be made whole by virtue of our gold investment.

It's very important for all of us metals buyers to understand - if we win - we lose. Not as much as everyone else but it's a horrible outcome.

[ax]

Re: Gold getting K I L L E D !!!!!

I bought more gold (a LOT of it) at $920 an ounce and Im not missing a moment's sleep. If anything, Im feeling rather relaxed by the whole episode. The way I see it Ive got BULLION in a vault which I can always get my hands on (some exceptional circumstances notwithsatinding). what Im not holding is paper currency which will lose value faster than anything we've seen in recent memory. I am NOT holding stocks of any companies in a brokerage account in the UK or the US which could experience a currency crisis - and slap asset controls.

My investment thesis is extreme - I am preparing for a currency crisis (and not a piddly one like Iceland) but a major one. When THAT crisis hits, you'll see physical bullion disappear so fast, you won't be able to get your hands on it. Can I predict when it will happen? no. But what I can do now is buy it when its possible to buy in exchange for paper currency that still has some value.

15-20 percent price moves don't bother me. Thats not my forte - picking intermediate tops and bottoms. All I can say is that the final gold top in THIS bull market is some way off yet.

Interesting comments from Fleckentstein on gold today:

"What lies beyond the Fed's meddling is gold. A recent article in the Financial Times summed up the bull case (though it wasn't the intent) as follows: "UBS, for example, calculates that the U.S. reserves of gold are so small, relative to the monetary base, that a price above $6,000 an ounce would be needed to reintroduce a gold standard. To implement that standard in Japan, China and the U.S., the price would be more than $9,000. Moreover, right now few Western governments have any motive to even entertain the debate, given that inflation may soon seem the least bad way to tackle the current overhang of debt."

http://articles.moneycentral.msn.com...inflation.aspx

[Starving Steve]

Re: Gold getting K I L L E D !!!!!

Why invest in gold when oil is dirt cheap, and you absolutely have to have the oil, not the gold?

The "cult of gold" is what I don't like about gold right now. Gold has become a religion again, and I hate ALL world religions.

[hayekvindicated]

Re: Gold getting K I L L E D !!!!!

Why invest in gold when oil is dirt cheap, and you absolutely have to have the oil, not the gold?

The "cult of gold" is what I don't like about gold right now. Gold has become a religion again, and I hate ALL world religions.

Various problems:

Storing it is much more difficult than gold. So you don't get the benefit of storing something of value in a far off jurisdiction with no hassles. Storage costs are also a hell of a lot higher.

Secondly, because oil is a necessity, you are much more likely to get price controls. Price controls would drive physical supplies to the black market. So if you are invested through ETFs, you are screwed.

Third problem, contango. Contango screws up oil ETFs big time. For example, some oil ETFs are down this year even though oil is up.

Fourth problem, asset and exchange controls. What do you do with your futures contracts when the US government imposes asset and exchange controls? (And price controls?)

Fifth problem, if you invest in oil stocks and the government slaps "windfall taxes" (this is not as unlikely as people think - if oil had kept rising last year and hit $200 a barrel, you would have seen legislation in Congress. And with Democrats in power now (and the Dems HATE the oil industry), this is even more likely when oil prices recover)?

The best way to play oil would be through Canada. But Im not Canadian and as a retail investor have no access. Some hedge funds will make a killing in the oil sector. I don't think retail investors will succeed as much.

Im sticking with my gold bullion for the time being.

[Raz]

Re: Gold getting K I L L E D !!!!!

Nothing profound in this research article, but I do notice from the COT data that Silver and Natural Gas appear to be pretty well sold out.

This is research from "across the pond" - sometimes I actually DO want to know how Europeans see things - especially about crude oil, gold, and China.

[tragoudistis]

Re: Gold getting K I L L E D !!!!!

http://www.telegraph.co.uk/finance/n...-hit-1500.html

[leegs]

Re: Gold getting K I L L E D !!!!!

Various problems:

Storing it is much more difficult than gold. So you don't get the benefit of storing something of value in a far off jurisdiction with no hassles. Storage costs are also a hell of a lot higher.

Secondly, because oil is a necessity, you are much more likely to get price controls. Price controls would drive physical supplies to the black market. So if you are invested through ETFs, you are screwed.

Third problem, contango. Contango screws up oil ETFs big time. For example, some oil ETFs are down this year even though oil is up.

Fourth problem, asset and exchange controls. What do you do with your futures contracts when the US government imposes asset and exchange controls? (And price controls?)

Fifth problem, if you invest in oil stocks and the government slaps "windfall taxes" (this is not as unlikely as people think - if oil had kept rising last year and hit $200 a barrel, you would have seen legislation in Congress. And with Democrats in power now (and the Dems HATE the oil industry), this is even more likely when oil prices recover)?

The best way to play oil would be through Canada. But Im not Canadian and as a retail investor have no access. Some hedge funds will make a killing in the oil sector. I don't think retail investors will succeed as much.

Im sticking with my gold bullion for the time being.

For probably the only time, I agree with Steve. I fear that gold (especially paper gold) is much more susceptible to the kind of problems that you identify.

[hayekvindicated]

Re: Gold getting K I L L E D !!!!!

For probably the only time, I agree with Steve. I fear that gold (especially paper gold) is much more susceptible to the kind of problems that you identify.

The comparison was not with paper gold and paper oil but with physical gold stored offshore (for disclosure I have physical in India and Switzerland) and oil (physical and paper). Physical oil is hard to play unless you're very rich or an institutional player like a hedge fund (for reasons I mentioned above).

Paper oil is a bad way to play the oil market because of contango and various other problems.

Conclusion: if you are a retail investor with a balance sheet smaller than a large hedge fund, physical gold is a better way to hedge against currency debasement than oil (physical or paper).

[LargoWinch]

Re: Gold getting K I L L E D !!!!!

Hi, LargoWinch,

No, and it really doesn't matter. The only thing that matters is how the market responds to money printing, how it responds to what it thinks China will do, and how it responds (or doesn't) to any of these things and more - including natural disasters.

Fundamentals which alter supply and demand will change, but - after it becomes obvious to the oblivious - the price of Gold (or corn, sugar, copper and most anything else) will have already made most of its move.
The one thing which NEVER changes is: Human Nature. The basis for technical analysis is quantifying those responses of humans through price charts, then observing the repetitive nature of those responses. Patterns are observed and are then classified as to their reliability. The best source material I've found is The Encyclopedia of Price Charts by Tom Bulkowski. He also has a web site: http://thepatternsite.com/Blog.html

The problem so many seem to have with Technical Analysis is (1) it requires genuine study (hard-ass work) to understand it well enough to put it to a sensible use, (2) it must be filtered through at least some real knowledge of the fundamental backdrop of the market in question, (3) many people tend to overtrade when in fact only three to five really good trades (commensurate with the risk involved) occur each year, (4) people are looking for a crystal ball when Technical Analysis is really just a windsock, and last - but most important of them all (5) emotions tend to ruin most traders.

I'm right about 60% of the time I take trading positions in a stock or future (I trade futures rarely). But I never take profits on all of those 60% correct calls because my emotions cause me to abandon a large portion of the trades. In other words, my TA is just fine, it's my 'friggin nerves that do me in ! :eek:

Raz, thanks for your thoughtful reply. You are making some interesting points.

As you indicated, I do think TA is a tool among many, no more no less.

I consider that using only TA to establish an investment strategy is dangerous to your financial health.

[jtabeb]

Re: Gold getting K I L L E D !!!!!

I Hate You guys
Mike

This just in -DOW TANKS GOLD RALLIES, Film at eleven!

[rogermexico]

Re: Gold getting K I L L E D !!!!!

I enjoy your posts, always very thoughtful. I make no bets so to me the word bet is akin to a table in Vegas. The word is, in itself, trivial. Thoughtless chance, luck. Gold is none of these.

For me gold is a hedge against my traditional investments. My business, the value of property I own, US hegemony and other factors. You make the spreadsheet point that gold will ipso facto make you whole, but it won't. If gold moves up to a point where it offsets your other losses, the world will be a place much different than today. This is not a zero sum game. If gold moves to $5,000 as you suggest, none of us will be made whole by virtue of our gold investment.

It's very important for all of us metals buyers to understand - if we win - we lose. Not as much as everyone else but it's a horrible outcome.

Sante Fe - thanks for your thoughtful response

I do not disagree. I also never gamble in the vegas, lottery ticket, sense

Your points are well taken. I may have a somewhat stochastic view of life - nothing is certain and certainly nothing is permanent. Hence, we are all making choices or bets every day, and the best we can do is make well-reasoned, if not scientifically informed bets about future outcomes. I was using the word "bet" in its literal, probabalistic sense. I understand "bet" has a trivializing connotation and I just wanted to make clear that was not what I meant.

My day job is as a diagnostic radiologist, where I routinely make "bets" by forming differential diagnoses based on incomplete information and images which are "not the thing in-themselves" but are at best just representations of the human body mediated through physics and technology. These are often "bets" of what the correct diagnosis is based on equal parts science, experience and intuition, but that does not diminish their gravity.

You are absolutely correct that I was making a "Spreadsheet point" about gold making you whole financially. You have now stated what I left unsaid, which is that investment alternatives can only hedge certain kinds of risk - mostly financial in nature. I still maintain that gold is simply hedging being wiped out financially, extremely worthwhile as far as it goes, but there are certainly outcomes under which gold would rise vis a vis the dollar that we would need food, travel plans, or weapons to hedge against more completely. Of course, some events cannot be hedged at all.

That said, I do think there is misconception that for gold to do well requires some sort of mad max scenario or armageddon. I do not think that is the case at all. I believe that gold could easily go to $3-5000 per ounce in scenarios far short of a hyperinflation that implies massive social dislocation. That is why the "bet" is so asymmetric. I am in no sense rooting for any of these outcomes, but there are more benign scenarios that result in eventual partial remonetization of gold that would be very good for gold.

Remember EJ's admonition to not be one of the victim's in "the line".

I have stated elsewhere that I view gold ownership as a political and moral act of self defense against governments. The spreadsheet approach is a necessary but not sufficient part of this. I assure you I take gold very seriously and I laugh at the daily twitches in price!

PS How do you feel about SF as place to live during the current uncertainty?

[hayekvindicated]

Re: Gold getting K I L L E D !!!!!

This just in -DOW TANKS GOLD RALLIES, Film at eleven!

There will be massive volatility before POOM. And then all of a sudden, gold and commodities will take off. That will leave the usual suspects gasping and wondering what's causing it. Before long Congress will institute price controls. Then havoc.

[cobben]

Re: Gold getting K I L L E D !!!!!

"Before long Congress will institute price controls."

"A depression cannot happen and even if one does it will never be called by that name." (title of '70s financial cartoon)

I'm thinking that the guvm'nts cannot institute traditional price controls as "everyone" knows they did not work in all previous instances.

Societal controls (the only true love of all bureaucrats) imho will be instituted in some new convoluted roundabout fashion and will not be called "price controls" or "rationing".

[Raz]

Re: Gold getting K I L L E D !!!!!

Raz, thanks for your thoughtful reply. You are making some interesting points.

As you indicated, I do think TA is a tool among many, no more no less.

I consider that using only TA to establish an investment strategy is dangerous to your financial health.

I agree. And possibly ruinous to ones financial health.

Investing without Technical Analysis is like driving with one eye closed.
Investing without Fundamental Analysis is like driving with both eyes closed.:eek: