Don't Miss the Coming Gold Bull 51 comments
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With the massive monetary expansion experienced in recent months and the promise for unprecedented levels of money and credit supply increase in coming months, the United States Federal Reserve looks on paper to be sending America straight into hyperinflation. Germany's post-World War I Weimar Republic, post-World War II Hungary, 2001 Argentina, and present day Zimbabwe are all analogous examples of massive debt monetization, which all led to hyperinflationary disaster. Never before has the entire world's economy been linked to one nation's, however, as is the case today with the United States.
In a case of economic mutually assured destruction, foreign creditor nations and their central banks can't afford to spark a run on the US Dollar, because it would kill their own export-based economies, as well as devalue their debt repayments and foreign exchange reserves. But the United States has been financing consumption through debt for decades and has resorted to monetary expansion to finance its debt and deficit spending, which is only going to increase with Barack Obama's infrastructure and social programs. The Troubled Assets Relief Program (TARP) itself amounts to $700B, all of which will essentially be "printed." Foreign demand for US debt is all but gone, as creditor nations are now attempting to unwind their USD positions. Huge creditor nations like China and Iran were net sellers of US Treasuries in recent months, attesting to the weakening of the American debt bubble. So where's all this excess liquidity go?
The answer is gold, and it is the only way to prevent the hyperinflationary scenarios referenced above from materializing in the United States.
The Fed has been on a money printing binge of unprecedented proportions, but has been able to thus far "trap" the excess liquidity from reaching the consumer level, which is what causes price inflation. It started a massive foreign currency sale this summer through the Exchange Stabilization Fund (ESF) that led to a supply increase of Euros and suppression of dollar usage. It has been liquifying troubled banks by issuing them T-bills financed through monetization in exchange for toxic assets by utilizing reverse repurchase agreements. And it has used the recent deleveraging and commodity collapse (partially caused by credit defaults in many of the overleveraged institutions that were supporting the commodity bull) to supply the temporary demand for US Dollars and feeding its own foreign exchange reserves.
But the excess liquidity thus far is trapped in time-sensitive and manipulated instruments now, and without a demand for American debt, it has to go somewhere. As T-bills expire and the stock market descends further, actual currency is going to be released out of sequestration into the economy. The Fed cannot allow the market to breach below its November lows, unless it wants widespread insolvency in insurers and banks, which are legally required to halt operations in the event of insolvency. I've heard estimates of 7500 and 8000 in the Dow as being minimum support levels that, if broken for an extended time, would lead to economic collapse in America as financials would all go under. To prevent this and to finance Obama's deficit spending, actual dollars will have to be injected into the system and they will be.
Weakness in the dollar causes strength in gold, which is something the Fed (through America's banks) has been suppressing for years. COMEX shorts dominate this suppression of gold prices, but this act will be discontinued to prevent economic collapse. Allowing gold's price to rise to current fair levels (and then rise further to represent gold's rising fundamentals) will soak up much of the excess liquidity, preventing hyperinflationary price increases in consumer goods. Gold reached backwardation this month, signifying the big gold market manipulators are abandoning their short positions.
Ben Bernanke is a proponent of dollar devaluation against gold and is a staunch advocate of Frank D. Roosevelt's decision to do so in 1934 during the Great Depression. Dollar devaluation is one of the government's most prized tools, as it allows debts to be paid back in devalued nominal terms, transferring risk and purchasing power destruction to American taxpayers, who have no clue what is going on. Inflation is a tax on the people and with a fiat currency, a power-limitless Fed can (and has) tax the hell out of the American people.
The dollar, and fiat currency as a whole, faces collapse now, however, as the artificial wealth created and used in the past few decades is now showing its nature as being just that-- artificial. The global monetary system will have to return to some sort of precious metal backing, directly or indirectly, and surging gold prices is essential for this to occur.
Rising gold prices represents the excess liquidity being soaked up and also causes nominal equity values to rise without dramatic rises in consumer goods. Gold has little utility outside of store of value, which is why its price hasn't collapsed at nearly the same rate other commodities, like oil and natural gas, have. As crude and steel suffered demand destruction from consumers losing wealth quickly, gold was barely touched at all and in fact probably would have shown even more strength hadn't it been for the aforementioned manipulations of the Fed and the global deleveraging of financial institutions.
Creditor nations like China and Iran are buying as much gold as is possible without dramatically disturbing prices, and Iran has said it wants to convert the majority of its foreign exchange reserves into bullion. Gold-buying sentiment is getting stronger as the massive seigniorage of the Fed, and with gold shorts being abandoned by the Fed, the huge demand is finally going to surface into price expansion.
Technically, gold appears poised to break out of its countertrend down move in its primary bull, leading to much higher prices soon. It broke out of its 50DMA on strong volume recently and is approaching a 200DMA breakout. With backwardation occuring this month, all indicators point to gold surging in the coming months.
Gold and gold miner stocks are also looking quite bullish. I recommend Royal Gold (RGLD), which recently broke out of a great long-term base, as well as El Dorado Gold (EGO), Goldcorp (GG), Iamgold Corp (IAG), Barrick Gold (ABX), Randgold Resources (GOLD), Jaguar Mining (JAG), Anglogold Ashanti (AU), Agnico-Eagle Mines (AEM), and Newpont Mining (NEM) for the coming year. Also, look into buying the Ultrashort 30-year Treasury Bond ETF (TBT) as the US debt bubble collapses and debt monetization starts to show up in the Fed's balance sheets. I do suggest buying lots of bullion, however, as stock market returns are in nominal dollar-denominated terms.
The American total credit market debt to GDP ratio is at unprecedented highs, well above 350%, and this with ridiculously manipulated inflation numbers artificially deflated through hedonics. The government deficit could top $2 trillion next year. And the Fed is going to print money to pay for it all. The only way to prevent hyperinflation is to return to some sold of hard asset-backed monetary system and to allow gold's price to rise dramatically.
My prediction: gold breaks $2000/oz in 2009 and $10,000/oz by 2012.
Disclosure: Long gold bullion; no positions in stocks.
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This article has 51 comments:
My prediction: Gold will drop like a rock before a sustained rally occurs. BUY DZZ NOW.
No reasons or explanations needed, ala Pinelli.
I'm short gold for the short term (one or two months) until I see a few people saying that gold will not double.
It is also hampered by a confused analysis of periods in history when it has happened.
Hyperinflation as in Germany between the wars, and Zimbabwe today, should not be considered alongside the inflation crisis that rocked Argentina a few years back.
Inflation in three figures cannot be compared to German and Zimbabwean inflation that has figures ending in figures to the power of 10.
I make this point in order to emphasise the one common factor between Germany and Zimbabwe. No gold in their treasuries, all fiat paper must have gold backing of some amount.
Argentina was bailed out by the IMF, that did have gold to back it's paper loans.
Your opening paragraph makes a very common error by lumping stagflation and hyperinflation together.
I agree that "helicopter Ben" is busy at the printing press. But with fractional reserve banking, $1 of printed money becomes $5 of "money supply".
Due to loan defaults and the bank's reluctance to loan, doesn't that reduce the money supply?
Are the differences offsetting or is it just a matter of time until they catch up and the inflation begins?
Your prediction is an interesting one , i would be keen to see how you came to the conclusion that gold will drop like a rock....
Do you understand what gold is? or are you playing the USD carry trade game in an attempt to believe that it will act like the Yen?
Are you aware of the fundamentals of Gold?
Your thoughts are interesting and it would be nice for you to elaborate further on this prediction.
Thanks
Comet1
On Dec 31 09:43 AM aitvaras wrote:
> Good for you. Stick to your guns.
>
> My prediction: Gold will drop like a rock before a sustained rally
> occurs. BUY DZZ NOW.
>
> No reasons or explanations needed, ala Pinelli.
Every stock or ETF he picks is a long position. Meanwhile, since I believe we are still in a Bear Market and the Recession will get worse, I picked something he loves and UltraShorted it.
Another reason, however miniscule, is that the Central Banks will dump more Gold than usual because of its current value and Gold is now up 8 years in a row.
Are you willing to bet the Bank on 9, I am not.
IMHO
Central Banks dumping gold? Are you kidding me? They are "prevented" from "selling" (really lending..they NEVER sell their gold) more than 500 tonnes annually. This year TOGETHER the central banks have not "sold" that much gold. They have even gone so far as to state they will be refraining from any further gold activity! SO, what gives you any indication they are doing so, when China, Russia, France, Italy and others are buying as much as they can get their hands on? Even if they DO "lend", what does that do to the almighty dollar? Give it up, please! If you want to chide the Pinelli's of the world, go ahead, but make sense, huh?
If a country decides to sell gold, it will be sold over the counter (read; without market interference) to China, India and the Middle East. Those are countries with low percentiles of gold diversifications in there reserves.
IMF and/or Central bank selling (apart from the gold agreement II) will not alter the price of gold, unless a JP Morgan is involved with a concentration of shorts backed by US Fort Knox (FED) gold reserves. For more information read GATA.com.
brgds,
It would be impossible for anyone to find a bigger potential loser than DZZ..but then..why would anyone be surprised?
Gold and silver ave been..and will continue to make..anti-T bill moves..
On Dec 31 09:43 AM aitvaras wrote:
> Good for you. Stick to your guns.
>
> My prediction: Gold will drop like a rock before a sustained rally
> occurs. BUY DZZ NOW.
>
> No reasons or explanations needed, ala Pinelli.
Look in your rearview miron and all you'll see is the vindictiveness and shortsightedness of a certain poster...lokk forward! And make a profit..Best to you all....
On Dec 31 06:40 PM aitvaras wrote:
> Comet1, I don't really believe it will drop like a rock but it has
> the potential to do so if additional forced selling comes into play.
> I'm pretending to be Greg Pinelli who has been tauting stocks of
> all stripes without rhyme or reason during a Bear Market in the middle
> of a severe recession.
>
> Every stock or ETF he picks is a long position. Meanwhile, since
> I believe we are still in a Bear Market and the Recession will get
> worse, I picked something he loves and UltraShorted it.
>
> Another reason, however miniscule, is that the Central Banks will
> dump more Gold than usual because of its current value and Gold is
> now up 8 years in a row.
>
> Are you willing to bet the Bank on 9, I am not.
>
> IMHO
Please..REFER US TO THE ALPHA ARTICLES YOU'VE WRITTEN..WE'RE ALL DYING TO SEE THEM.....
On Dec 31 09:43 AM aitvaras wrote:
> Good for you. Stick to your guns.
>
> My prediction: Gold will drop like a rock before a sustained rally
> occurs. BUY DZZ NOW.
>
> No reasons or explanations needed, ala Pinelli.
With continued foreclosures, defaults, unemployment and whatnot in the works for the next year at least don't count on banks doing anything but sucking up the output of the printing presses for a good while.
Obama can spend a trillion on stimulus and it won't matter. Another trillion on the national debt won't change anything and won't lead to hyperinflation. The federal debt problem is a problem measured in the 10's of trillions.
Zero interest rates, quantitative easing and so on - we have seen it before in Japan. It led to a stagnant economy, but nothing like hyperinflation at all.
Yes you can invest in gold if you want, but don't count on big returns. Or even keeping up with inflation. Gold is pretty well priced compared with other hard assets right now. Buying now is not buying low.
Hedge Funds have been forced to sell because of redemptions. Some have stopped allowing redemptions, Paulson chided them publically regarding this practice saying it is detrimental to Investors and that they are not ingratiating themselves with Congress.
If the Forced Selling continues into the New Year, those relatively strong ETFs like GLD could be sold enmass. This in turn could force GLD to liquidate its horde on the open market because many of the Counterparties no longer exist, like Bear and Lehman and others no longer have the liquidity or the ability to buy the gold baskets.
This is what has been ongoing for the past 4 months to other ETFs. Bear Markets tend to savage everything.
But this time its Different! Right.
I've seen your posts to the writers of other Articles. I see no reason to subject myself to the same kind of abuse, like Mr. Anthony and Mr. Bui.
I am not vindictive, I just respond but unlike yourself, I do not use vulgarities to express myself.
And Silver is not required for drinking water.
Neither post exists any longer.
I hope my added response clarifies my stance at this point in time.
Besides, Mr Pinelli had high praises for a Mr. Schiff. Mr Schiff did a 180 recently. Mr. Pinelli now praises Mr. Faber instead.
If you really want to hold bullion, consider holding it at bullionvault (click link above if you'd like me to share in their commission :>) It's, by far, the best price and safe from greedy government paws in a professional bullion vault in Zurich. Buy now while the price is low and supply is plentiful. You can buy 1 gram or 100 kg for .4% or less above spot and instantly take title to your gold (not like the Perth Mint unallocated scam you see all over the Internet). Storage fees are 0.12%, again far lower than any known competitors, is often cited as the major drawback to allocated gold.
Do yourself a favor and check out their FAQ. I'm still looking for the 'catch' but there doesn't seem to be one.
So for the short term, I look for Gold to drop as the economy gets worse and the Iranian Food and Med. Supply ship is allowed access to Gaza. This will occur within the next few days. It will also have a negative impact on oil. IMO
Is the US Government the only govt, to print money?
Is the US the only country in economic crisis now?
Did any other countries offer bailout packages?
My answers:
All govts. cut rates, all govts. are printing money.
Most countries are in crisis, it is the US which is quick to take actions.
China, India, European countries all offered bailout packages. so, what's the big deal, eh?
I agree with aitvaras. Gold is building itself a bubble. C'mon, nothing goes up straight forever. Gold has been going up and up and up.
Countries build enormous gold reserves and do what next? At some point of time, they have to sell in order to liquidate. They can't go on building reserves of something materialistic. That selling time is now, when their economies are in recession or crisis. You will see selling now! Do you know why strategists keep pumping Gold? Because they amassed too much of Gold till now and want to sell it to naive people at a higher rate. They don't pump because it really is the forecast.
But the rub is that when the velocity actually picks up (banks start lending, treasuries expire, consumers spend) the inflation will hit HARD and QUICK. All of the sudden the billions and even trillions that have been pumped into the economy and have sat dormant become alive at once. The Fed could find out that it is much more difficult to REMOVE stimulus than it is to implement it.
So at that point, inflation will be very dangerous and gold will become valuable nearly overnight. I think we need to be careful about being lulled to sleep by discussions of deflation or the new sophistication of monetary and fiscal policy. We should see a sharp increase in inflation in 2009 and investors should prepare accordingly.
Thanks for the good article!
Zach
zachstocks.com
Dividend Reinvestment and the returns over time with it, sound great when comparing the return on stocks vs Treasuries. You do not assume risk on Treasuries if you hold to maturity.
With any given Stock, you assume the risks of dividend reduction, dividend elimination or Bankruptcy of the company itself.
Over time Stocks are considered to offer a much higher return. The comparisons always use an Index like the S&P. Individual Stocks within the S&P are changed annually, Mergers, Acquistions, Bankruptcies, Price levels too low to remain in the S&P etc.
Like I said, you chose wisely.
Dr. Weiss's opinions have been widely followed for decades. I didn't know he was still in the Biz.
If this statement were correct, Treasury yields would be a lot higher than they are today.
Monetary policy from Fed Reserve is veered around keeping low interest rates and this is intended to keep the value of the US currency lower. But I would think this would fail since demand is much lesser for any asset compared to 2007 and prior years.
The Fed Reserve has run its course over interest rates. ZIRP does not help. What helps now is direct currency market intervention (ala Chinese Central Bank) to keep the USD low. This was what brought US out of the 'Great Depression of 1933'.
Only then will energy (oil, ng) start to inflate assuming demand from USA, EU, South Asia and East Asia holds up and assuming that production from OPEC and non-OPEC like Russia, Norway, Nigeria, Venezuala remains flat to low. No amount of production cuts from OPEC will help now though.
As for gold price, assuming Gold-to-Oil ratio should reach 30, then gold ounce price cannot exceed $1200 assuming mean $40 per crude oil barrel. And assuming a currency devaluation of 17 to 20% for fighting the deflation and with appropriate cuts in oil production to keep mean $45 per oil barrel, gold per ounce price has a maximum of $1350.
No more upside to gold price exists. And all gold bugs are wrong if their price is higher.
Kalahasti
From An Enquiry into the Paper Credit of Great Britain, an 1802 book written by Henry Thornton who was an economist and governor of the Bank of England: ”We assume that the currency which is in all our hands is fixed, and that the price of bullion moves; whereas in truth, it is the currency of each nation that moves, and it is bullion which is the more fixed.”
Each day is more of the same, the groundhog comes out, sees his shadow and runs back in. This is my scenario for 2009 until something unforeseen arises.
In 3 weeks, THIS administration will be the Obama administration with all three Houses of Congress under one roof. I can hope that this change will be the "unforeseen event".
Gold is us 8 years in a row, but it's just about where it was at its peak in early 1980. After that, it went into a long period of trading between 250-450 before starting to rise again in late 2005, when it was 430 at the beginning of the year.
Perhaps you could surmise that gold has already peaked again and will fall on hard times if the economy bounces back. If it does, look for the price of gold to drop like a lead balloon.
Otherwise, listen to the gold bugs who scream of huge gains to be made by buying at the top of the market.
From the information we are getting within the mining sector itself, gold could well reach $1,500 US this year and silver back to last years high. Maybe even $25.00 US.
Base metals will continue to lag although copper could very well see an upswing along with uranium.
Deleveraging is not over.
Paul Volker once said his biggest mistake was "letting the price of Gold get too high".
What does that tell you?
On Dec 31 06:40 PM aitvaras wrote:
> Comet1, I don't really believe it will drop like a rock but it has
> the potential to do so if additional forced selling comes into play.
> I'm pretending to be Greg Pinelli who has been tauting stocks of
> all stripes without rhyme or reason during a Bear Market in the middle
> of a severe recession.
>
> Every stock or ETF he picks is a long position. Meanwhile, since
> I believe we are still in a Bear Market and the Recession will get
> worse, I picked something he loves and UltraShorted it.
>
> Another reason, however miniscule, is that the Central Banks will
> dump more Gold than usual because of its current value and Gold is
> now up 8 years in a row.
>
> Are you willing to bet the Bank on 9, I am not.
>
> IMHO
But, history says Fed measures being taken now to inflate the money supply will eventually show up as price inflation and be reflected in the precious metals. That being said, gold could easily dive before rising. If you want into the precious metals markets, never say the price cannot drop when you least expect it.
Right now, commoditities and most precious metals have taken a dive, even silver, platinum, and palladium. Comparatively, gold hasn't taken a significant dive. If you think it has, you haven't been investing in gold for very long or you are only thinking of gold in terms of the USD.
Why hasn't gold dived? Because enough people, including bankers, still think of gold as money, much more so than the other precious metals. And, they study history, they watch the Fed, and they sense monetary inflation coming after the current price deflation abates.
You can believe that people will lose faith in gold and it will drop like all the other commodities. You can believe that the banks will take down gold again if it approaches $1,000 again (many believe the banks, most notably JPMorgan, take gold down periodically by shorting futures and via mysterious unspecified "derivatives"). You can believe that "de-leveraging" is not over and will knock gold down again as hedge funds take profits. Or, you can believe that Fed reflation of the money supply will fail and it is Great Depression II, and everything but cash is a bad idea. Or, the market can just decide to stab you in the eye for no particular reason.
I'm going with the idea that history will repeat itself again and gold and gold stocks will provide outsized gains as they have since 2000. Myself, I'm wary of those sharp unexpected drops, and I think the gold price ratio to the other precious metals is significantly out of whack at the moment. Gold could drop to a price more in line with the other precious metals before it rises again. That's why I'm heavily into silver at the moment, not gold, slightly into palladium, and I'm eying platinum and palladium. The gold/oil ratio is out of whack too, so I'm also now into oil.
But, I'm ready to sell everything and short or double short the S&P500 if the overall market turns ugly again. This is not a buy and hold market.
But, history says Fed measures being taken now to inflate the money supply will eventually show up as price inflation and be reflected in the precious metals. That being said, gold could easily dive before rising. If you want into the precious metals markets, never say the price cannot drop when you least expect it.
Right now, commoditities and most precious metals have taken a dive, even silver, platinum, and palladium. Comparatively, gold hasn't taken a significant dive. If you think it has, you haven't been investing in gold for very long or you are only thinking of gold in terms of the USD.
Why hasn't gold dived? Because enough people, including bankers, still think of gold as money, much more so than the other precious metals. And, they study history, they watch the Fed, and they sense monetary inflation coming after the current price deflation abates.
You can believe that people will lose faith in gold and it will drop like all the other commodities. You can believe that the banks will take down gold again if it approaches $1,000 again (many believe the banks, most notably JPMorgan, take gold down periodically by shorting futures and via mysterious unspecified "derivatives"). You can believe that "de-leveraging" is not over and will knock gold down again as hedge funds take profits. Or, you can believe that Fed reflation of the money supply will fail and it is Great Depression II, and everything but cash is a bad idea. Or, the market can just decide to stab you in the eye for no particular reason.
I'm going with the idea that history will repeat itself again and gold and gold stocks will provide outsized gains as they have since 2000. Myself, I'm wary of those sharp unexpected drops, and I think the gold price ratio to the other precious metals is significantly out of whack at the moment. Gold could drop to a price more in line with the other precious metals before it rises again. That's why I'm heavily into silver at the moment, not gold, slightly into palladium, and I'm eying platinum and palladium. The gold/oil ratio is out of whack too, so I'm also now into oil. When the ratios normalize somewhat, I’ll be ready to get back into gold or gold stocks.
But, I'm ready to sell everything and short or double short the S&P500 if the overall market turns ugly again. This is not a buy and hold market.
www.goldreview.com/new...
9.6 Million Gold Equivalent Ounces correspond to a market capitalisation of less than $ 1 per ounce of gold. Recent takeover values have been in excess of $ 50 per ounce of gold.
Coeur d’Alene Mines (NYSE:CDE) has recently completed the purchase of Palmarejo for US$1.1 billion and paid more than $ 200 per Ounce of Gold (Au-Eq oz)
*Sustained* hyperinflation, the sort of condition which utterly destroys a nation's economy, has _never_ occurred within a (modern) country that maintains a credible and project-able military force. In fact, historical sustained hyperinflations have been halted by either (a) establishment of a credible military power as in the post Weimar Germany; or (b) foreign intervention inevitably by a country or countries which maintain such a power, as in the case of Israel.
Other countries such as Russia, when facing a long-run hyperinflation scenario, simply change the rules -- ie. default in one way or another. The world simply must accept that outcome and endeavor to restructure global financial positions accordingly.
The goldbug theories are all predicated upon terribly flawed thinking. The sort which Nassim Taleb eloquently describes in his books. They are assuming a linear-style projection of macroeconomic factors in arriving at their outcomes which, of course, inevitably favor gold becoming worth a zillion dollars per ounce.
I am not smart enough to tell you how this current situation will play out. But I am smart enough to tell you that I don't, and that I simply cannot. And neither can you. What you can do is think outside the box and broaden your consideration of possibilities. You can prepare for the unknowable unknowns by maximizing your exposure to positive things you can know, and minimizing your exposure to things you can't. Or more concretely, minimize your exposure to gold (note I didn't say eliminate it, just make it minimal).
Its all about making selections and taking Insurance against worst case scenarios.
With Gold at these levels, if you are not going to buy the bullion, then gold and silver stocks are the route to take.
I've owned CDE since the mid 70's, seen it as high as $30 +, and owned its convertible Bonds. I dumped the stock after conversion. Bought Bema Gold instead, which was swallowed by Kinross.
CDE, earlier this year, forecast the eventual production of 17 million oz. of silver annually. This would make it the worlds biggest producer by far.
Why is it where it is? It has nothing to do with short selling, insiders have been buying recently, the biggest problem is the location of some of its assets and the number of shares outstanding. With over 1/2 Billion shares and silver at say $10/oz., 17 million oz. is a $170 million dollars, this does not bring a lot to the table when there are 551 million shares outstanding.
CDE has great potential, I would like them to do a 1 for 10 reverse stock split.
IMHO
On Dec 31 09:43 AM NOWHEREMAN wrote:
> Good for you. Stick to your guns.
>
> My prediction: Gold will drop like a rock before a sustained rally
> occurs. BUY DZZ NOW.
>
> No reasons or explanations needed, ala Pinelli.
The name is the one you gave me.
You have a Profile. That Profile appears to be entirely fictitious. I have asked numerous times for an explanation.
I have provided a scenario as to how I believe things will unfold in 2009 and Challenged you to provided a counter scenario. Apparently something like that is beyond your scope since " That takes some commitment and more than 2 sentences."
"Silver is virtually the only way to create Potable water."
This is your quote, did you even know the definition of Potable?
You do not provide a single piece of useful information that is not linked to some sort of Rah, Rah for Pinelli.
You did not recognize and understand the Catch-22 comment I left. All that meant to me was that the "investing for 40 years" was another piece of fiction.
A popular 1960s stock was the Colt Firearms Company, they no longer exist. What did they make, other than Colt firearms?
didn't they take 57 trillion out of the market economy by removing credit default swaps?
shouldn't the value of the dollar actually go up?
can I ask a dumb question, are real estate and Gold just ways of storing value like the dollar bill?
The credit default swaps, CDS, are alive and still toxic.
Every now and then a little more gets priced.
Perhaps, you are thinking in terms of the Auction Rate toxics which are supposedly being covered by various underwritering companies as part of State Legal settlements. It wouldn't surprise me if institutions were using TARP funds for these settlements.
The next dollar leg up has started.
The gold chart itself is quite bullish, although I'd like to see it holding above the 860 level for several weeks. As for GLD, I don't think you can trust it too much since no independent audit has ever been performed on it. What happens if it turns out to be another scam?
As far as something going up in value perpetually, it's not so much that gold has gone up perpetually for the last 96 years as it is that the amount of dollars has increased perpetually for the last 96 years and so the prices of commodities have had to increase due to dilution of the money supply. Look at the latest chart from the Federal Reserve of St. Louis Adjusted Monetary Base. Notice the unprecendented spike in the adjusted monetary base in recent history and get a freaking clue.
On Jan 01 09:12 AM Anon2009 wrote:
> I would like the guys [who say USD is devalued because of printing]
> to answer these questions:
>
> Is the US Government the only govt, to print money?
> Is the US the only country in economic crisis now?
> Did any other countries offer bailout packages?
>
> My answers:
> All govts. cut rates, all govts. are printing money.
> Most countries are in crisis, it is the US which is quick to take
> actions.
> China, India, European countries all offered bailout packages. so,
> what's the big deal, eh?
>
> I agree with aitvaras. Gold is building itself a bubble. C'mon, nothing
> goes up straight forever. Gold has been going up and up and up.
>
>
> Countries build enormous gold reserves and do what next? At some
> point of time, they have to sell in order to liquidate. They can't
> go on building reserves of something materialistic. That selling
> time is now, when their economies are in recession or crisis. You
> will see selling now! Do you know why strategists keep pumping Gold?
> Because they amassed too much of Gold till now and want to sell it
> to naive people at a higher rate. They don't pump because it really
> is the forecast.