Golden Economizer

Golden Economizer
Contributor since: 2009
Company: none listed

designshoe -
"there were many US stocks and a few global stock indexes that did as well or better than gold from 2001-2011"
Talk is cheap.
Name 3 stocks and 3 indices that beat gold's peformance over the decade 2001 to 2011, not denominated in hyperinflating currencies.
Using the US Currency in Circulation (rather than a flawed metric like CPI) to inflate the price of Silver is the strongest point of Mr Brom's analysis.
However, I see two serious flaws in this analysis:
1) the INDIRECT METHOD used by extrapolating the fair value of silver from gold, using the SGR and the amount of gold CLAIMED to be held by the US Treasury/Federal Reserve.
2) the ASSUMPTION that the amount of gold in Fort Knox/Fed vaults is UNCHANGED since 1973, and that it has no foreign claims on it. The US gold reserves have not been audited since 1953, contrary to federal law which requires an audit every ten years. There is no transparency in the matter of the true gold holdings of the US, and Mr Brom is staking the accuracy of his analysis on something completely opaque until there is an audit.
In my recent Seeking Alpha article, "Jim Cramer and London Financial Times Now Touting Physical Silver",
the fourth chart uses a DIRECT METHOD, showing the Silver price in constant 1920 dollars, which was $0.16 an ounce as of March 11th, 2011, and would be about $0.21 an ounce today.
Using the US Currency in Circulation (rather than CPI) to inflate the price of Silver, it would need to reach $296 an ounce today just to equal the price of $1.32 an ounce in 1920, and there is far greater demand for silver today, and far less supply (above ground inventory). The above ground supply is being rapidly consumed by industry, and very little is being recycled at current prices.
Good point, Franny
I have no personal experience with self directed IRA's, but I am aware that they are an option for holding the physical.
But they DO add unnecessary layers of counterparty risk, and if there is a silver or gold confiscation like in the 1930's, they will not be safe from government intrusion. Most people do not realize that silver was effectively confiscated in 1934 through the Silver Purchase Act of 1934.
If you look at the last line of the following article by Jeff Nielson, there is a link to a historical text written in 1939 describing the 1934 silver confiscation.

I still advise to keep the majority of any money that you won't need to spend within five years in physical bullion in your own possession.
You might also want to keep some percentage in a retirement account for the tax benefits, but bullion might be confiscated whereas shares in a Canadian or Swiss physical bullion ETF probably won't.
Here is a link to another excellent article by Jeff Nielson on potential confiscation. I agree with him that silver is much more likely to be confiscated now than gold.
Reply to JustSayin3363 -
Dave -
I am certainly not a "survivalist-bunker guy", and I certainly do respect preparedness and self sufficiency. It's a shame that America has strayed so far from these principles.
I also think that a self sufficient country lifestyle is laudable although not practical for many.
I do strongly advocate silver as an investment, but even more as a store of wealth to protect your hard earned savings from evaporation at the hands of the money printers. In this respect, only physical silver will accomplish that goal. My portfolios designed around physical silver funds are a second best alternative for those who are married to their IRA's and 401K's, and won't consider investing in physical metal and taking possession.
I understand that, come crisis time, you may not want to sell your pig for silver coins, but that is not the point. The point is that come crisis time, there will be a widespread need for barter, and nothing will serve that purpose better than silver coins. Even the most well prepared, self sufficient person, such as yourself, might need a new transmission for your vehicle, so you might want trade your surplus corn, for instance. It will be a lot easier to sell your corn for silver, then trade silver to the mechanic than to find a mechanic who needs 100 bushels of corn.
You will certainly need your shotguns and homestead and canning equipment and seeds to survive the expected chaos and social disorder, which you got a glimpse of in Katrina. With a nationwide/global depression, currency collapse, food/fuel shortage there will be gangs of urban thugs and starving but honest families roaming the countryside for anything they can beg, borrow or steal. Stockpiling silver is no substitute for preparedness, and even a single homesteader family is vulnerable compared to a tight knit rural community who has each other's backs.
But the real value of silver will be after the initial year or two of disorder passes and civilization is starting to return. After the expected hyperinflationary currency collapse, silver may be $1 million an ounce, $1000 an ounce in NEW dollars, after they are devalued 1000 to one. In January 1993, the NEW Mexican peso was issued with a value equal to 1000 old pesos. Think it can't happen here? If you had your money in physical silver, then you could have used it to exchange for new pesos, and you'd have lost nothing. Holders of old pesos were out of luck.

And here's what you should be concerned most about now: when the property taxes on your homestead go up by a factor of 1000, will you lose the place as your savings become worthless? Will you be able to support the new property taxes selling your crops and livestock?
I do agree with you that one should stockpile some food, water, and other necessities before beginning to stockpile silver, and self sufficiency country style will be a much better survival strategy than urban living.
<<<<My only tools are a decent education and 30 years entrepreneur business experience, and COMMON SENSE.>>>>
BRAVO funkyronster -
Congratulations on thinking for yourself, and having the balls to put your money where your mouth is.
Nearly all financial advisors are not paid based on your portfolio's performance, or we would see a huge difference in their recommended allocations. Some are paid a flat fee in advance, and others are paid a commission on each trade which motivates them to churn your account and diversify to the point of absurdity.
They get paid no matter how poorly your portfolio performs.
What most people never even consider is that TOTAL RETURN is the only thing that is important. If you are fortunate enough to average a 50% annual return on investment, you don't really care if it is 5% income and 45% capital gains, or 5% capital gains and 45% income. With bond yields depressed to absurdly low levels by the federal reserve open market operations, and the risks of corporates and munis greatly undercompensated by currently yields, the risks in bond investing have been greatly distorted, and camouflaged by the corrupted ratings agencies. Any fool who can't see how obvious this is should not call himself an "investment adviser."
Bill Gross, the Pimco bond king, just announced that his flagship fund which manages over a quarter trillion has just SOLD OFF ALL OF ITS US TREASURY BONDS.
Even an establishment tool like him doesn't want to get shafted and ruin his reputation by holding treasuries as the bond bubble bursts.
Most retirees have their advisers allocate them into the same percentage of bonds as their age. My friend's adviser had him 80% in bonds, which is clearly a losing strategy at this point in time with the bond bubble about to burst, and many different factors combining to pressure interest rates upward.
Clearly, past performance is no guarantee of future gains. The only thing relevant at this point in time are the current fundamentals of silver supply and demand, and the larger macroeconomic trends over the next three to five years. Silver inventories are way down, production is flat with very small increases, and the both industrial and investment demand are growing for a variety of reasons. Another unique property of silver (over gold and every other commodity) is the inelasticity of demand and the inelasticity of supply.
Certainly no investment is a "sure thing", but having identified an investment trend as 98% certain, would you still ignore that and invest in a widely diversified portfolio of standardized allocations?
Why only 98% certain? Well, a giant silver meteor could hit the earth, changing the supply fundamentals in the short to medium term. If it was the size of Mt Everest, it might disrupt supply fundamentals in the long term, if it didn't destroy the earth.
“Wide diversification is only required when investors do not understand what they are doing.” Warren Buffett
Thanks Doug6, I liked this quote.
So there are two different arguments possible here: you could stipulate that silver has a 98% certainty of great gains over the next few years, and debate what is the best portfolio allocation knowing this will happen, or:
you could argue that silver does NOT have a 98% certainty of exceptional gains over the next few years.
This article was based on the first stipulation. If you want to argue over silver's future prospects, I would GLADLY do that with anyone who has done the thousands of hours of homework that I have done on the subject, or even someone who had read and digested just the seven silver articles by Jeff Nielson listed in my followup article today:
Note: the man described in the article was 82 years old three years ago, currently 85. Nowhere in the article does it say he was 88. Also, the portfolio proposed three years ago was never intended for his asset allocation, just to illustrate how easy it would be to beat the returns of his investment adviser using the obvious precious metals primary trend and underlying precious metals fundamentals. It was intended to show that simply doing your own research and thinking outside the box would greatly improve on the returns of a so called "professional" investment adviser (hack). If he had put his funds in my hands, the portfolio would have been more conservative, but still heavily weighted in precious metals with no bonds. The biggest development in the past three years has been the significant improvement in silver's fundamentals over gold's. Three years ago I allocated equal parts silver and gold. Now I would advocate about three to one conservatively, four to one to be more aggressive. Had I done this three years ago, the returns would have been much better than the 40% three year gain.
Had I actively managed the portfolio rather than let it sit unattended for three years, the returns also would have been greater than 40%
But the point was to illustrate that for money that isn't needed for expenditures in a three to five year period, just identifying and riding a primary macroeconomic trend in an underpriced asset could exceed the returns of standard allocations as a LONG TERM HOLD.
<<<<<The big flaw is all the GOLD BUGS seem to think it has to go in precious metals.>>>>...
<<<<<This is one of the classic signs of a MANIA-emotions over logic.>>>>...
This is classic BASHER language. JS knows how to manipulate a few figures, but intentionally misleads by failing to mention the incredibly strong silver supply/demand fundamentals.
<<<<<Ditto for the real estate bubble.
How many people do you know got rich in the tech bubble?>>>>...
James, you need to learn the definition of a bubble. You are an unabashed basher. Can you point to any evidence of silver investors using borrowed money? Did you know that less than 1% of Americans own any actual bullion? Ask the next ten people you meet what is today's silver price. Do you find even one who can answer correctly?
<<<<<Greed always gets them in the end. Everytime.>>>...
Thank you, James THE FEARMONGER Stock for this pearl of wisdom. Silver is not a speculative investment for capital gains. It is for asset preservation.
And since we know already your position on PM's, what do you find worth investing in instead in today's market?
Yes, Schiff and Maloney will never call a top in gold, because we will have a catastrophic dollar collapse and the dollar will cease to exist before gold reaches a top.
<<<<<What we really had was a huge increase in investment demand over the last 5 months more than any supply cruch. There is no problem with supply. Supply will go up in 2011. Supply went up for 7 years in a row.>>>>>
No supply problem? In 2010, the US mint alone consumed 88% of the total amount of silver produced by all US mines in 2009, leaving just 12% for industrial, jewelry, photographic, and all other uses. And since the US govt has zero stockpiled silver remaining, all 35 million ounces had to be purchased (from US mined silver, by law). Peak world silver will eventually be reached.
<<<<<Si... is overvalued and will go down.>>>>>
Go down compared to what? Housing? The dollar? The inflation adjusted dollar?
It is generally agreed that silver was at its most overpriced in Jan 1980, when it set a closing high of $48.45
Using that number and the median housing price from Jan 1980 of $62,900 we get 1298 ounces of silver to buy a median priced US home. Since silver was only priced above $20 for less than three months in early 1980, I find it more useful to use the peak yearly average of the decade which was $21.79 in 1979. This gives a value of 2887 ounces of silver to buy a median priced US home.
Today, in Nov 2010 a median priced US home was $213,000 and silver reached $30.40 on Nov 9th, so 7006 ounces would be required to buy a median priced home. So by your own "logic", silver was five times more overpriced than today in 1980 when measured in terms of housing.
Your specious attempts to use long term charts to bash silver have been exposed for what they are. You want to mislead people by comparing today to irrelevant time periods that include major silver strikes, far lower populations, and world's governments demonetizing silver.
In addition, you don't take in account major differences in today's world, chiefly the money supply, which has more than doubled in the past two years. If you want to graph something relevant, graph silver price vs real interest rates, and see what you can learn from that.
<<<<<There is no evidence of manipulation whatsoever. I am still waiting for an article which explains exactly what JPM did wrong. Outside of having a big short position.>>>&...
As far as the JP Morgan silver manipulation, you clearly haven't done your homework. The sheer size and duration of their silver short position over the time period of steadily increasing silver prices is prima facia evidence of suppression. This week's COT report shows that the commercials' net short position in silver futures and options is 2.5 times the size of the total net short position, showing that private holders (speculators) are overwhelmingly long silver. Of course the commercial banks know that they will be bailed out for their eventual losses, so they just continue to short, following orders. Banks are supposedly in business to make money. Does it sound logical to you continue massively shorting a commodity in an obvious ten year bull market, with ten straight years of price increases? Buying and holding would have given them a 536% gain over the past ten years. How much do you think they've made by continuously shorting silver over this period? Are you saying that the big commercial banks are stupid then, in their silver shorting policy of the past decade?
The organized price suppression of silver should be apparent to any blind and deaf investor. I never used the word conspiracy, and said nothing about JP Morgan being solely responsible. If you ever want to have an informed discussion on the subject, first read the works of Ted Butler, and, and get back to me.
<<<<The eight largest commercials also had a significant drop in the net short position, illustrating that they didn’t take control of the short positions covered by JP Morgan and the other three largest commercial traders. >>>>
You are going to have to start looking more at total open interest and the international picture, than at the commercial net short position in the COT report. The bullion banks are now offshoring their short positions to foreign banks to escape regulation and reporting requirements, and dodge public opinion and lawsuits.
See this article by Adrian Douglas:
Of course JPM and HSBC are the two largest commercial shorts, but the question is are they using all their own money (proprietary trading desk) or holding short positions for their clients?
And are their clients the Chinese?
Since these positions far exceed the COMEX position limits, then they must be largely held by legitimate hedging clients, or be in violation of exchange rules.
Remember, these are long time positions, (nearly a decade) and comprise a larger percentage of inventories and annual production than any other commodity, far exceeding gold.
Actually, I don't think that they need to short less than they are buying long contracts.
They could be shorting the exact same amount, (or even more). My point was that they settle all the shorts in cash, and only deliver physical metal to those shorts that demand physical delivery to settle. This is traditionally about 2%
So they could continually roll over the same short contracts each month (sell the short contract before expiration and buy a new longer dated short with the money), while allowing all their long contracts to expire and take physical delivery. And then open new long contracts, about equal to the shorts they just rolled over.
Using this strategy, assuming equal number of contracts short and long, they would be accumulating 100% of the long contracts in metal, and paying out about 98% of the short contracts in cash and 2% in metal each month, plus service fees, commissions, and any losses or gains from fluctuations in the silver price.
There are many layers of counterparty risk involved in buying COMEX futures, the most obvious being what happens to the value of your contracts when there is a delivery failure, a very real possibility. Inventories are dangerously low right now, and we haven't seen real panic buying of physical yet.
What if the COMEX declared bankruptcy? No FDIC to bail you out.
Conan -
I don't know Jake Towne, and certainly didn't bring him in.
As I told you before, there is no proof without transparency, just circumstantial evidence.
Are you ready for some more?
Andrew McGuire, Jeffrey Christian, class action suit again JP Morgan, Morgan Stanley fined over storage scandal, etc.
Have you been doing your homework?
And of course, no exit strategy needed at $30 an oz. It will be $300 in five years, so why exit?
AlexR -
There are other things to consider. First of all, how much gold is left in Fort Knox? If you google search "No gold left in fort knox", you get 275,000 responses.
Second, of the gold left there, how much if any is actual gold. Tungsten filled counterfeit bars have been appearing over the past few years.
Third, of any actual gold left there, how much is unencumbered? How much belongs to other countries?
You can read at how the world's central banks have been systematically selling gold over the years to suppress the market price to perpetuate the Ponzi scheme that is the federal reserve note. This is why the treasury and fed refuse to allow an audit of the gold at Fort Knox.
And finally, and most significantly, the national debt is just the tip of the iceberg. There are the multi trillion dollar liabilities of Fannie Mae and Freddie Mac that the US govt now is responsible for, and the multi trillion dollar unfunded liabilities of Medicare, Medicaid and Social Security that dwarf the national debt.
The US govt is not just flat broke, they are in hock up to their eyeballs. It's only a matter of time until the next generation gets wise and overthrows them.
Gold has maintained its purchasing power for millennia. The dollar is being continually diluted. If you had a grasp of economics and current events, you would be aware of that. When they print enough dollars, one ounce of gold will certainly buy a Hyundai.

On Apr 07 12:51 PM Conan the Barbarian wrote:
<<< Speedspirit felt that the Article gave Trading Info. Somehow he was mislead. >>>
Paul -
Isn't this trading info?
<<<Now that SLV is again trading 3% below the 26 day EMA, it looks like a great buy for both the short term trader and long term investor in the $12.00 to $12.60 range.>>>
I'm not here to provide entry and exit points for you to make trades.
You can always get a pay service for that. If you want to dispute this trading info and provide alternate trades, I would be interested to hear your opinion, with supporting facts, of course.
Please read my articles more carefully and try to stay on point.
As for proof of market manipulation, did I ever state that I could prove it? Or that anyone could?
Obviously the PPT and hedge funds are completely non-transparent, so I just submit suspicious trading patterns to the readers as circumstantial evidence to make their own determination whether it is manipulation or not.
As for reporting my knowledge to the SEC of manipulation in one particular stock, many others with more specific knowledge than I had already reported it. Why should I waste my time reporting to an organization that has proved itself worthless since inception in 1934?
If you think that you can disprove ANY of the facts I present, or want to dispute ANY of my analysis with valid, factual analysis of your own, I would be MORE than glad to respond.
By the way, the past tense of "mislead" is "misled".
I stand by everything I wrote. SLV below 12 is just a better entry point, a better value. No need for exit strategy, it is a hold for many years. Short term exit is determined by your own greed.
You doubt that silver is being manipulated? Read Ted Butler and refute any of his arguments here on SA. I will be waiting.
<<<Harold keeps trying to fit everything into
> a Manipulation/Conspiracy slot. He does provide some interesting
> perspectives, Unfortunately, everything is one sided. There are no
> exits.>>>
<<<Consumer confidence is up four points from a week ago, up twelve points from a month ago and up nine points from the beginning of the year.>>>
<<<retail growth is indeed leading to US economic recovery.>>>
Please explain why these isolated data points are any indication of a recovery?
Jobs are vanishing, stocks and real estate are still over valued by conventional criteria, the money supply has been greatly inflated which will inevitably result in higher prices to come which will reduce consumption, corporate profitability and consumer confidence.
We need economic analysis of the big picture and macroeconomic trends, not another cheerleader.
Two questions:
Why don't you include PGH on your list of recommended energy trusts?
Why aren't you concerned that all the Canroys will get slaughtered by the upcoming change in tax regulations in 2011, and when do you believe that investors will start dumping them in advance of this?
The average bear market cycle is 17 years long and this one started in 2000. I see Dow/Gold at 1:1 within 8 yrs, but you never know since they keep changing the components of the Dow 30 Industrials.
On Mar 26 09:51 AM clam75 wrote:
> What led you to pick 2017 as the end of the bear market? Do you
> see the Dow/gold ratio hitting 2:1 or 1:1 in 8 years?
> You are correct that the bear market has trashed the idea of buy
> &amp; hold. While such a strategy may be appropriate for a secular
> bull market, we are not in such a market now.
I don't really know how to answer this.
Mark to market should be a good thing for the economy in the long run, but in the short run, many more banks could be exposed as insolvent if the true nature and value of their speculative holdings became public.
That would be good for SKF, and good for the economy to weed out the insolvent banks. Unfortunately, the vast majority of the largest banks would have to go into bankruptcy proceedings, but we would come out of it a lot stronger and more productive.
Market perceptions could end up affecting SKF more than the long term benefits of mark to market.
On Mar 26 01:36 PM goodfigs wrote:
> You recommend SKF and I want to agree, but the meeting on April 8
> to discuss mark to market and reinstating the uptick rule scares
> me. Even though any changes likely wouldn't go into effect immediately
> both of these issues could significantly hurt SKF. Do you agree?
# abcde_98 -
The surge of buying at the close today sure felt like PPT was painting the tape, although I have not really analyzed it. If you look at the first chart in the article that I submitted for tomorrow, entitled "The Future of US Markets", it shows that the S&P 500 is above its 50 day EMA for only the second time since the panic in Oct/Nov, and it seems logical that the manipulators want to bring buyers into the market by attempting to hold at these levels.
My guess is that their use of stock index futures and such can only fight the market forces for short periods of time before it becomes too expensive to maintain. Every technical indicator is screaming overbought, and I am short the financial and real estate sector for the next few weeks, expecting some nice gains.
On Mar 25 05:02 PM abcde_98 wrote:
> Harold,
> 1. Any thoughts on what just happened in the final 30 minutes, particularly
> the final 10 minutes of today?
> Was the PPT in full force trying to paint the tape to show a positive
> (+ve) day and/or demonstrate support? Last time we were above 7,800
> it was a channel trading range between approx 7800 and 8200. Are
> they trying to pump fake us to be in that zone?
> 2. Any comments to my questions posted above:
> (a) So, should we look for strong support the next time the 50day
> MA nears the 200day MA ?
> (b) What other nearer-term events (say in the next month) do you
> think would lead to "manipulation" forces to make an appearance?
> Appreciate your viewpoint/input.
> 3. My market quote system data feed tends to "freeze" (for a minute
> or so) at rather significant point moves whether +/- moves and of
> course it happened in the last part of today. In the mid-late 1990's,
> our trading team conceived that the retail investor was "frozen
> out" of trading by automated trading and/or software in the electronic
> order placement systems. Any thoughts on this?
Brilliant analysis. It shows that charts can and do lie, especially to the uniformed.
If you read a little more carefully, you will see that I was referring to the Japanese government tried lowering their fed funds rate to zero, not buying back their own debt.
Buying treasuries on the open market is actually one of the "accepted" practices of the federal reserve when necessary to increase the money supply, but not at a time when record amounts of new treasuries are being issued.
This is selling with the right hand, and buying back with the left hand. It is a pathetic attempt to make the treasury bond auctions look like they are not failing.
On Mar 22 03:46 PM lbsterling wrote:
> You say the Fed buying long bonds "has only ever been done in third
> world countries before the US did it this week, and the UK did it
> last week."
> Of course the U.S. did it in the 1940s and you yourself say one paragraph
> later :
> "Japan tried this in 1991, and their economy has never recovered."
> Why should we listen to anything else you say when you are ignorant
> of history and self-contradictory?