Bruce Pile

America's Overheated Printing Presses and Huge Debts Helping Drive Gold Higher

I agree with Einhorn. Gold pricing tends to be a function of fiscal policy stupidity. And it doesn't matter if that stupidity causes deflation, inflation, or some gyration back and forth between the two. That is why Gold has a high correlation with debt. Debt threatens instability, no matter what form that may take. I have a post up at my blog goodstockinvesting.blo... showing two charts - a debt chart and a gold chart. They are twins and have a much tighter correlation than the inflation rate vs gold or about anything you could plot vs gold.

Gold Juniors Poised for Historic Bull Run

A lot of fascinating stats in this article. One that really is something to think about is that less than 1% of all invested money is in gold and its shares. We are going through the paper asset/hard asset cycle which has us in the middle of a big up cycle (see my chart in goodstockinvesting.blo...). If there is just a little investment capital redirected from stocks and such to unprintable money (gold and other commodities) there will be an tsunami crowding into a thimble.

Gold Stocks: The Ultimate Options Strategy

It's true that there was the inflationary event in 1934, during the pre-1968 era of the gold price being set by the government, when Roosevelt jumped the price from $20.67 to $35. This devalued the dollar as we are doing now. The gold standard was a major drag back then. Every major currency left the gold standard at some point during the Great Depression.

But the gold mining stocks did 400%+ climbs before 1934, with gold flat during a period of severe general price deflation. For a nice article on this, google "Gold Stocks in a Depression" by Jeff Clark


On Nov 02 11:58 AM chap08 wrote:

> "look at what gold stocks have done over a large variety of strong
> market disturbances - from deflation to inflation"
>
> Where is your deflation period? I hope you are not referring to Homestake
> in the 29 to 35 period. The boom in gold stocks in this period was
> due to an inflationary event, not a deflationary one. It was caused
> by the devaluation of the dollar from $20.67 to $35 on the gold standard.
> Suddenly, due to a deliberately inflationary government edict, gold
> production and reserves were worth about 70% more in dollar terms.
> This kicked off a gold mining boom that doubled production by the
> end of the 30s.
>
> None of your examples demonstrate the performance of gold stocks
> in deflation, or when gold is "steady" (for the reason I give above,
> you are totally wrong to say that gold was steady in the 30s). The
> reality is that, if we were to return to a deflationary trend, gold
> stocks would fall hard. During the deflation scare of 2008, gold
> fell by 30%. If the Fed starts raising rates and the dollar rallies,
> gold and gold stocks will fall again.

Gold on Sale?

I am new to options and I've just started reading books, including Cramer's two chapters on options in his new book, which are great. I've been running numbers and going through the option chains, but the more I look at it, the more I get the feeling that selling options is the easy way to make money with them. You are the casino as the seller; the more gamblers the better.

Selling puts to accumulate positions of interest sounds interesting. You buy the positions you want with filled limit orders at discount prices if your buyer cooperates or you take in a steady stream of risk-free sales if they don't. I have a dumb question for you experienced options people out there. If you are assigned the stock when the put is exercised, do you get to keep it until you want to sell it?

Redux: Future S&P Returns Could Be Extraordinary

The point you are making is exactly the one John Bogle makes with the chart he shows in one of his books (Common Sense On Mutual Funds I think it was) where the price of the stock market is plotted vs the total of the constituent companies' earnings/share and their dividend payout. This was graphed over some 100+ years. The two lines stray only slightly from each other over the years and form a pretty tightly intertwined pair and wind up at the same destination after 100 years! The charts you show are just a small section of this 100 year view.

It would be nice if this would continue as it has for decades and our stocks would follow the money higher. But so much of "the money" lately is being created out of thin air with government printing presses and an out-of-control parabolic debt curve. This will become more unstable and breakdown at some point unless it is fixed soon.

Is VIX 20 Important?

I accidentally referred to the savings and loan crisis above as late 90s (it was just the dot-com excesses over that period). The S&L mess was early 90s and helped to aggravate the recession then. It was actually the warm up for what we are going through now. These lenders had extended credit to people who should not have received it and there was a mini-mortgage meltdown and a miniature government tax-payer bailout. This amounted to $124 billion. That's billion with a "b", not the "T" we are tossing around now. But it created the legal precedent and the moral hazard for the idiocy we see now. Bill Seidman, head of the Resolution Trust Corportation that cleaned up the mess back then and forerunner of TARP, said this

"The banking problems of the '80s and '90s came primarily, but not exclusively, from unsound real estate lending"

Is VIX 20 Important?

I accidentally referred to the savings and loan crisis above as late 90s (it was just the dot-com excesses over that period). The S&L mess was early 90s and helped to aggravate the recession then. It was actually the warm up for what we are going through now. These lenders had extended credit to people who should not have received it and there was a mini-mortgage meltdown and a miniature government tax-payer bailout. This amounted to $124 billion. That's billion with a "b", not the "T" we are tossing around now. But it created the legal precedent and the moral hazard for the idiocy we see now. Bill Seidman, head of the Resolution Trust Corportation that cleaned up the mess back then and forerunner of TARP, said this

"The banking problems of the '80s and '90s came primarily, but not exclusively, from unsound real estate lending"

Crude Oil and Gold: Not Worth Worrying Over

Many of the commodity ratios like gold/oil and oil/nat gas have entered a much different world the last two years or so. I don't think their decades old correlation is going to be the same anymore. Oil/gas has forever been changed by peak oil. If you look at the oil vs gas production curves at goodstockinvesting.blo... you can see why this is so. This chart also shows why nat gas, along with coal, has to be the bridge to our non-fossil future.

As for gold/oil, we have entered into a new monetary situation that has forever changed gold's role.

Julian Robertson: Bearish on Gold and Bonds, Bullish on Credit Cards and Galleon Arrests

The supply and demand "fundamentals" for gold are like those for teen retailers - subject to immediate change for no sound reason. The jewelry part lends itself somewhat to supply/demand analysis, but both jewelry and investor angst are about as inscrutable as teen fads.

This means fundamental analysis is the LAST method you want to think about when analyzing gold. That leaves technical and fractal - and they both seem to agree that gold is in a strong primary move up.

Bullish Sentiment Survey Signaling Market's Turn?

More telling, perhaps, than investor sentiment right now is consumer sentiment. That has shot to a 6 month explosion seen only 3 times in the last 20 years - all sharp turn points back to the downside. I put up some charts on this at my blog pointing out how it jives with some other things.

Doug Casey: Why Gold Miner Stocks Are 'Burning Matches'

Gold is better than shorting the government. A short can only gain 100%. Over the last 10 years, gold stocks have done roughly a 7 bagger. Government stupidy has been the greatest of all investments for the last 10 years. Viva La stupidity.

Max Keiser: Oil Trade's U.S. Dollar Dump Rumors Are True

Maybe Clif High's web bot prediction of a major collapse of the USD running from November '09 to November '10 isn't so crazy after all.

Clif Droke: Producer Expectations for Gold, Base Metals Prices

Could you explain what 10 year cycle you refer to? Commodity bull and bear phases historically run in about a 15 year cycle, with the fast part of the bull markets in the last few years. That would put the most intense portion of gold's bull phase just ahead.

AWACS Prep In Iran Theater?

Taxi (one of my favorite TV shows of all time), funny you should mention seeing signs of the attack in the technical condition of certain related stocks. I have been researching just that very thing. I am not seeing any market reaction to the Iran situation. There's the obvious oil/gold market, no linkage evident there - yet. But if you consider how desensitized we've become to the whole WMD thing since the U.S. went into Iraq nearly 10 years ago and found nothing, another area of interest in the market is the bioweapon and chemical weapon defense stocks. If you remember, 9/11 produced a tanking stock market, but the terrorism defense stocks typically surged dramatically. There may be another dramatic focusing of the market's attention to these same stocks, many of which are in much better shape now than then. Iran has chemical weapons. An Iranian weapons stockpile was recently disrupted in Lebanon releasing some of this material killing several people. If Israel does a strike on Iran, the retaliation may involve threats and/or some use of their WMD fare.

I am going to post a piece on some of the gold, oil, and military stock reactions to past flare ups in the Middle-East at my blog and discuss some related stocks. If Jim Cramer is right about the aerospace/defense sector being in for a bull market, some of these stocks look good with or without trouble in Iran (as does gold).

The Next Major Crisis Brewing

The next major crisis brewing tends to be whatever the markets are not preoccupied with at the time. Right now that isn't auctions, interest rates, or commercial real estate. It could be Israel vs Iran. There are some serious early warnings about the military option being resorted to over the next 3 months or so. Yet, when I survey newsstands, and count the number of cover stories about Iran, I repeatedly come up with a total of zero! Only since the Geneva talks started yesterday have I noticed mention of it on CNBC.

I've posted on some of the signs of a strike coming soon at my blog. We've heard this wolf-crying drumbeat about Iran's nukes for many years now. And it's hard to believe two modern day countries could actually come to blows with nuclear fists. But consider these facts.

Nuclear weapons have actually been used in a war, not once but twice. There were no negotiations or even a warning. Just a quick destruction of two major cities. And the offender in this case is considered the most level-headed, responsible owner of nukes in history - the U.S.A.

Now fast forward to the mullahs of Iran. About half the people surveyed feel they wouldn't actually use their atom bombs - it would be suicide for them. But for Pete's sake, suicide bombing is their religion. So just how level-headed and responsible would these suicide bombers be with nuclear bombs? I doubt if Israel is going to wait around to find out.