Posted by
OffThePeak
12 yrs ago
Maybe we need this here.
We can discuss things like:
+ The price of property measured in Gold
+ What happens to each of them in a Recession, a depression, or in hyperinflation
+ How to hold Gold as an investment
== ==
The idea that we need such a thread was inspired by this posting from Ed:
--QUOTE---
Lloyd... picture this...
It's WW2 and my name is Ed Goldman... I'm in Poland... I get wind of the Nazi's ovens... but it's too late to catch the bus out of dodge... they've closed the borders...
So I have to think on my feet - how can I escape... so I remember ah - I have those gold certs I bought from that the guy on AsiaXPAT said were the same as physical gold...
So I scoop them into my backpack and make a run for it... I get to a border crossing and there's a soldier there ... he says 'nein ver izzz yo hoss and feffer?' i say 'hos and feffer, what's hos and feffer'
Then I reach into my pack and i say i have to hos and feffer but I have gold certificates - he looks at the thoughtfully... he wonders what they are...
---UNQUOTE---
Ed,
If you are holding a Gold etf in an account offshore, where the gold is stored somewhere other than the country-in-chaos, I don't see the problem
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CHARTS
=====
The Parabolic Gold price:
https://img.skitch.com/20120914-tjb7pgqt6efggit7rf4k6sutis.jpg
Gold-related charts: http://www.Goldstock.co.uk
UK Property measured in Gold ozs:
http://imageshack.us/a/img823/729/ukhomesingold.png
Here's a podcast about Gold, seasonality, & the 4-year cycle:
http://commoditywatch.podbean.com/2012/10/15/michael-hampton-bullish-on-gold/
Related charts : http://www.greenenergyinvestors.com/index.php?showtopic=16841&st=40#entry258739
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Remmy
12 yrs ago
Yes funny, Ed thinks gold should rise as we get QE from the US, yet not HK property, which is measured in HKD (which in turn is pegged to the USD). I have tried before to explain it...
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Ed
12 yrs ago
Funny thing Remmy - how I've said perhaps a thousand times... that QE and ZIRP are what are driving the HK and other property markets - as well as the stock markets...
And I have said many times... QE will drive them higher...
But what I have also said... is eventually QE will result in a liquidity trap - or the unintended consequences of QE will overwhelm the system ... and when either of those happens everything unravels...
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Remmy
12 yrs ago
OK, noted Ed. So I think we both agree on the former point, re the effect on QE (subject to my one additional comment regarding gold being that yes it should also rise with QE, but I don't like it as its true value cannot be quantified as it produces no yield).
That leaves us with the discussion on whether QE will work. I personally think QE may work, if its handled correctly. I know what Ben is trying to achieve, and if its handled right, it will work. (If not, then the problems you have referred to might well arise).
I believe that the unprecedented actions global central banks have taken to stimulate growth were right and necessary to prevent a massive depression. To me it was definately the right thing to do. And you can see the results and benefits of this in global markets. Can you imagine where we would be now without such steps?
The BIG QUESTION is whether they can exit the stimulus programs when the economy rebounds without spurring inflation. Its a bit like, for example, rapidly turning the wheel of a car to avoid a head on crash, but now having avoided that, correcting the car to avoid overstearing - very possible, but also very difficult to accomplish.
Central banks are engaged in a very delicate maneuver. First they increased the quantity of money available and then eventually, as I have said, they need to wean us off this, and they have to reduce it when the economy resumes a faster rate of growth. Ed, I doubt they will "suddenly cut off money" as you have suggested as a scenario. Rather it will be done carefully and gradually, based on economic data.
I have read some of Bernanke's thesies and I do think he's the guy to be able to pull this off. Again, its by no means 100% certain, but so far everything looks very much on track to me.
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Ed
12 yrs ago
That's the 64 trillion dollar question Remmy... gold medal to you!
While I agree Ben had to do something, otherwise, instead of debating this here we'd be battling out back of the ParkNshop for food scraps from the dumpster...
But what I disagree with was forcing the tax payer to take the hit for the banks INSTEAD of the bond and shareholders.
There would be pain either way but the message needed to be sent - you were stupid - YOU lose. Instead they were made whole and rewarded for their basically criminal activities with 1. big bonuses 2. unlimited 0 interest money and 3. a guarantee that if they engage in risky behaviour again and it goes wrong... they are too big to fail and will be bailed.
Remember who Ben's boss is - it is NOT Obama... he takes his marching orders from the heads of the mega banks that own the Fed ... so Dimon, Blankfein etc... are Ben's bosses...
If you were losing sleep over why the owners of the banks were made whole on the backs of the taxpayer... well now you can sleep like a baby http://www.globalresearch.ca/who-owns-the-federal-reserve/10489
As for will the printing work? I can't see it:
1. Money printing on a large scale has not generally worked in the past - it has collapsed currencies and countries - this is by far the biggest print in history
2. They have been printing since 08 - and things are getting worse or at best are stagnant... GDP is barely above 1% in spite of the printing... job creation is hovering around 100k...
3. The longer you print the higher risk of toxic side effects including a liquidity trap - we are seeing signs of that already
4. And last but not least... many assume Bernanke is a wizard... that he is some master who can make everything right ... have a look at this clip of Bernanke pre-Lehman... and tell me that you think he knows what he is doing http://www.youtube.com/watch?v=9QpD64GUoXw
I actually think he could see the bubble - many others did ... jeez... they were giving 750k mortgages to gardeners!!! with no cash down - and calling them LIAR LOANS!!! Of course he knew - everybody in the biz had to have known.
But his masters were of course making many billions off of this subprime fiasco... they of course wanted it to go on and on... so the last thing they were going to do is say 'hey Ben please go out there and pop the bubble'
Of course the masters also knew that the US govt would bail them out because they knew about the first too big to fail bailout of Long Term Capital and the Savings and Loans disaster...
And they knew full well that none of them would go to jail for the very obvious fraud that was going on because they had donated millions to politicians turning them into fawning sycophants...
So no... I don't think the QE will work. Do I get the 64 trillion? I'll settle for a gold medal...
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But....but....Ed, don't you know that "this time it's different"?
On a more serious note, there's two separate issues here:
1. moral hazard - banks as well as individuals should be forced to live with the consequences of their actions. No arguement from me that letting people off the hook from the consequences of their risk taking is generally a bad idea and it doesn't matter whether you are a shareholder in a bank or an individual who has managed to avoid paying the full value of what they borrowed during the boom
2. what happens when QE/ZIRP ends - no one knows for sure but given the size of the US debt and the unsustainability of the massive enititlement programmes, it's fair bet that manageble inflation to reduce the real size of those burdens will be the goal and continued low interest rates will help to keep the debt servicing cost down. Will Ben or his succesors succeed? No idea, but it is possible.
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@ OffThePeak
To address your original qeustions, in terms of holding gold:
1. physical has it's advantages (you hold it, it's real, no credit risk and it looks pretty) but also its disadvantages (fraud, theft, confiscation, less liquid)
2. notional (including unallocated storage and unbacked ETFs etc): more liquid and lower margins which is good for trading but you are taking credit risk on your counterparty. Notional accounts are the lowest cost option I have come accross
3. ETFs (backed by physical) and allocated storage: more expensive than notional accounts but without the credit risk (in theory)
4. Gold miners: I would be interested in what people think of the PRC gold mining companies listed on HKEX?
There is also silver - sometimes called "high beta gold" or "the restless metal" - it's another alternative.
FWIW, I hld my gold in a mix of coins and notional accout. For silver, it's mostly notional with a few small bars (the spreads on the silver coins were too wide for my liking).
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Ed
12 yrs ago
TI: I am not sure how ZIRP and QE can end - imagine the interest payments on a debt that is over 16 trillion (and increasing at the rate of over 1 trillion a year) if interest rates were in a more historically normal range...
I think this is what Ben and his QE monster have done: http://www.youtube.com/watch?v=wixLlPFJgyQ
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So logically, one would expect ZIRP for a long time + inflation. If so, then self protection would be to have most of your money in risk assets (subject to valuations) and less in cash/bonds (not none - I sleep easier knowing I have at least some protection against being wrong).
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My question is, by inflating away the 'real size' of the burdens, doesn't that still destroy all of the investors in the t-bill market? Basically, anyone the US government owes money to or has any cash savings at all, you murder them. Pensioners, Pension funds, things like PIMCO, teacher's union..
The beneficiaries are the guys who are debt heavy.. People who have high exposure/risk, or large debts.. Hrm... Maybe we're onto something here..
The megarich will stay megarich and get richer, because they're pulling the strings.. I wonder where their money is sitting right now? We should just follow the smart money.
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Elsdon - yes and that is the whole idea. They cannot repay all they money that they have borrowed or honour all the entitlement programmes and other future payments that they have been promised (no matter how much taxes are raised).
The choices are:
1. outright default (recent example: Greece)
2. keep borrowing until the world refuses to lend you any more money
3. inflate away the obligations - reduce the real value of what you owe/have promised to pay (i.e. keep on with QEternity and negative real interest rates)
# 3 is the least painful option but none of them are assured of a happy ending.
The smart money is in risk assets. US retail investors have been reducing equity holdings and buying bonds/CDs. The markets have been rising and inflation has been nibbling gently at the real value of their savings. The smart money has been loading up on equities when the markets have been down and real estate (if I had better knowledge of some of the US markets I would have been buying there). Some have been buying precious metals and collectables.
Oh yes....and using debt. Like many I am paying less than the rate of inflation on my mortgages. So long as that continues, the real size of my obligations is falling. If it works for Uncle Sam, it can work for me (I hope).
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Ed
12 yrs ago
Slight problem with trying to inflate the debt away... in many major economies the debt is increasing much faster than the rate of inflation....
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My only concern with mortgages and debts is that they're somewhat localized so betting on a foreign market with your domestic debt although correlated, doesn't have a hard linkage.
I still think HK will decouple from the USD at some point in the near future. HK has a healthy economy, low unemployment (lowest in the world?), and is so cash rich. By inflating along with the US (right now down to about 3-4%? source: http://www.tradingeconomics.com/hong-kong/inflation-cpi) we're eroding much of the population here of 'savers' (most in the world?)
Hrm.. Inflating away the obligations.. I wonder what means they have left that they haven't tried yet? The biggest problem is that they really don't seem to be able to restart the US economy, the money isn't reaching the middle class.. They literally may have to drop cash out of helicopters..
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@ elsdon - I prefer to match obligations with the cash flows that will service them. When I had a mortgage on a property outside Hong Kong, I borrowed in the local currency to avoid FX risk. With the benefit of hindsight, if I had borrowed in HKD or USD not only would I have paid a lower rate of interest but I would have made a good chunk of money from the FX movements.
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Ed said:
"Remember who Ben's boss is - it is NOT Obama... he takes his marching orders from the heads of the mega banks that own the Fed ... so Dimon, Blankfein etc... are Ben's bosses... "
Sure.
I have seen evidence that 51% of the Federal Reserve Bank's shares are now held by two big banks: JP Morgan Chase, and Citicorp
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TI, I hold my gold positions in many forms, like these:
==
+ Gold etfs: like MNT.t, HK-3081
+ Options on: GLD, UGL, AGQ, SLV
+ Shares in Gold stocks, like GDX etc., and Silver stocks, like SLW
+ Shares in Junior explorers
+ Gold held at GoldMoney
+ Some physical gold
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An interesting comment received by email from a Research analyst:
==
I spent yesterday going through the recent World Gold Council data on central bank purchases over last 12 months. The numbers are staggering and it’s the new buyers that are the surprise. Take Turkey - in the last 12 months (July ’11 – July ’12) they have bought up exactly 100 tonnes of gold. To put that in perspective that is about the same as what the gold industry will add each year for the next 4 years from the 56 greenfield gold projects and 70 brownfield expansions that are currently under construction around the world. Even Mozambique is joining the action and is now the 3rd Central bank in Africa out of their 56 to own gold. If you annualize the first half purchases of these 10 countries they could account for 370 tonnes of demand this year. So far China has net imports of 302 tonnes up to August. In this chart we take out China to show you what the next 10 big buyers look like. Who would have thought the Philippines would buy 35.3 tonnes in the 1st half of 2012 (Philippines now has 92 times more gold than Hong Kong).
It really makes you wonder, where is all this physical gold coming from when the industry can only deliver around 100 tonnes of extra gold a year while Central bank buying is now running at around 600-800 tonnes this year. You have probably seen Eric Sprott’s recent article called Do Western Central Banks Have Any Gold Left. Of course he is biased running one of the largest gold funds in the world but it’s an interesting read.
Ten Biggest buyers of Gold in last 12 Months (ex China)
http://imageshack.us/a/img688/6190/goldbuyers.jpg
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Man that chart is pretty scary. It feels more and more like I'm on the wrong team.. There's no way the G11(20?) wouldn't know where the market is heading yet all these third world countries are moving into gold..
None of the 'top 10', besides China are developed countries. Am I betting on the wrong horse?
You have to believe that ultimately, this world is corrupt and that most rich people or powerful people are corrupt.. There's no way they would let this happen, right? 100tonnes @ 1700oz = $5,996,580,000USD? 6 bil?
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" Am I betting on the wrong horse?"
The power structure, including BOTH candidates (Romney and Obama) are stealing our freedoms, and concentrating power in a tiny minority, who are already filthy rich.
By voting for either of these two, we are voting for continued enslavement
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Not specifically on gold, but this kind of news is a bit worrying:
http://www.foxbusiness.com/news/2012/10/15/lme-week-hkex-awaits-results-warehousing-review-before-releasing-bazooka/
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Get out of gold and get out if treasuries.
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Ed
12 yrs ago
China's been buying record amounts of gold... and encouraging it's citizens to do same...
Something is surely up... not sure what though.
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They want the Gold, not Dollars
There are loads of rumors about a "new financial system" on the internet.
China is supposedly one of the insiders, helping to drive the creation of a new currency regime.
Why dump Gold, LGMV?
The technical situation looks very good, better than for HK property IMHO
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JS MIneset on Gold Cycles
With respect to intermediate-term cycle analysis, prices have moved lower following the formation of the second half cycle high (HCH) of the cycle from May.
http://www.jsmineset.com/wp-content/uploads/2012/10/clip_image003_thumb4.gif
The next intermediate-term cycle low (ITCL) will likely develop sometime during the next three weeks. If the forthcoming ITCL forms well above the previous low in May and it is followed by a strong move above congestion resistance in the 1,795 area, a breakout to new all-time highs would become highly likely in late 2012 or early 2013. Therefore, although the short-term outlook is currently bearish, the secular uptrend may be preparing to resume, so it will be important to monitor price behavior closely during the next several weeks for the next signals with respect to long-term direction.
CIGA Erik McCurdy
Senior Market Technician
/more: http://www.jsmineset.com/
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A CRAZY RUMOR ??
Wow !
Ben Fulford is now talking about a possible Coup in the US before the election.
What would THAT do to the Dollar and Gold !?:
http://www.greenenergyinvestors.com/index.php?showtopic=16180&st=200
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I would not rearrange my finances on the possibility of a coup in the US. The odds are too long to bet on.
If it did happen - USD would take a hit, US government debt obligations would also decline. I would expect gold and silver to rise. In general, it would be destabilising for markets around the world.
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As some who know Ben well say:
"Ben's all over the place.
Sometimes his writings are right over home plate, in the strike zone.
And sometimes they are out in left field."
He's been right and early on enough, that I think it is worthwhile to follow his writings, even the bizarre ones.
There is way too much truth, that the Mainstream News hides from us, and I am tired of being spoon-fed lies.
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When I was doing my morning reading, this piece caught my attention: http://www.bloomberg.com/news/2012-10-17/lumber-mills-trail-rebound-in-u-s-as-beetles-bite-commodities.html
Leaving aside the confirmation of a recovery in US housing, does anyone have any thoughts on whether timber would make a good investment and, if so, the best way to get exposure?
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Ed
12 yrs ago
TI: you'd have plenty of good company ... Michael Burry (of Big Short fame) took his money and bought farmland and gold... Jim Rodgers recommends farmland...
Uber fund manger Jeremy Granthem is the poster child for investing in ever more scarce resources:
http://thinkprogress.org/climate/2012/08/16/681571/jeremy-grantham-on-welcome-to-dystopia-we-are-entering-a-long-term-and-politically-dangerous-food-crisis/?mobile=nc
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Ed
12 yrs ago
Doing a news search of grantham http://seekingalpha.com/article/929811-timber-set-to-soar-says-jeremy-grantham
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Low rates => More new home construction => Higher timber prices
They will last no longer than the low interest rates do
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They call them Mining Billionaires, big red. I know a few.
It looks like we may have just seen a major low in Gold, but I will be more confident of that when Gold is over $1650.
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