J. S. Kim

Will the Fed's Overkill Succeed?

paultaut,
A month ago, I said a gold correction would happen and it did. So that people would not misinterpret that particular article of mine, I stated: "But don’t misinterpret my message. Physical gold is one of the most conservative investments you could own right now." I couldn't have been more explicit in that statement that I was not advocating selling gold.

As well, advocating a new investor to wait for a better entry point to buy gold, which indeed materialized as I predicted, is a vastly different thing than advocating selling physical gold, which I have not never advocated a single time since I started publicly writing about the virtues of gold in 2006 on my blog.

During a monetary crisis, there are always much better means of not only maintaining the purchasing power of your dollars but far exceeding in gains, the equivalent decline that occurs as a result of rapid and significant monetary expansion.

Thus, I would still never invest in traditional stocks in the hopes of maintaining the purchasing power of my dollars, especially when there is no fundamental backing to this brief rise we have experienced so far. Investing in assets that will benefit from this monetary crisis, assets that have produced significant profits for the past several years, is a much better approach.

In Today's Environment, Neither Technical Nor Fundamental Analysis Alone Will Work

To Kelm, you are correct, I haven't publicly printed all of my correspondences with Mr. Bart Chilton, Commissioner, CFTC, but you can find much of my correspondence with the Commissioner that I broached as of October 1, 2008 at this link:

www.theundergroundinve.../

For those interested in writing Mr. Chilton their own messages regarding the concentrated short positions in gold/silver futures markets that indicate collusion, you can personally write to him here.


Bart Chilton, Commissioner
Commodity Futures Trading Commission
Three Lafayette Center 1155 21st Street, NW
Washington DC 20581
Telephone: [phone]
Fax: [phone]

[e-mail]

Have Gold and Silver Stocks Peaked? Challenging the Analysts

Hello paultaut
thanks so much for your comments. in fact, thank you everyone for your comments, whether you agree or disagree, as long as you keep the comments constructive. However, if you visit my blog, theUndergroundInvestor... which I have been maintaining since August, 2006, I started publicly blogging about the merits of owning physical gold in September, 2006 and have owned physical gold prior to posting my blog on the internet.

Yet, I guess since I did not first buy in 2001, I admittedly have been a little late to the party, but for those that had the foresight to start building physical gold positions back in 2001, I tip my hat to you. However, it is my strong belief that this monetary crisis is just getting started and that even now, people that prepare now will have the opportunity for massive profits over the next several years. Better yet, the US Federal Reserve and US Treasury engineered sell off in gold and silver futures market last year (at least this is my strong belief as to what happened) provided another great entry point for those that have been "late to the party". All the best, JS

Law of Supply & Demand Is Dead for Gold & Silver

Hello iyamwutiam,

Regarding your comment above about European central banks, in particular, of Spain selling off gold. I've been aware for a long time now that the economy of Spain is in serious trouble. In fact, I shorted the Spain ETF (EWP) over this past year and this turned out very well for me. In any event, Spain has been suffering for a while now from an imploding housing market and soaring inflation. I think that their Central Bank sold gold a while back not to flood the market with supply but because gold was one of the few things left that they possessed that had any value. Thus, I believe their selling was an act of desperation on behalf of their government to raise some immediate cash to address the problems that were facing their country. The actions of the U.S. government this past week (and the subsequent announcements to come this Monday) near guarantee massive amounts of massive future inflation. So buy physical gold and physical silver. It will serve you well.

In response to Wefwef, why would I be mad that the gold coins I bought a couple of years ago have appreciated now in the range of 45% to 100% (with the bump up in gold prices over the past couple of days)? If you read the article carefully, you will discover that the prices I quoted of gold coins when the spot price of gold had been driven down to $750 were the BUY BACK prices that dealers were quoting to me were I to sell my coins that I purchased two years ago back to them. I did not sell these coins and am still holding on, probably at least for a couple more years if not longer. Please re-read that portion of my article and you will discover that I did not fall victim to coin dealers as you claimed. Somehow you seem to be confusing the meaning of "buy" and "sell".

Law of Supply & Demand Is Dead for Gold & Silver

Quicks,

Just as you have stated, I have told my clients when they ask me if the dollar is really doomed that one way the Feds could potentially save it would be to raise the Fed Funds rate to 12% or higher like the Paul Volcker/Jimmy Carter days. However, where I respectively differ somewhat from you is in the possibility that they actually do this.

I actually think that extremely high interest rates is a possibility. Since the Feds have never taken into consideration the welfare of Americans, including mine and yours, I think that they would consider raising interest rates strongly, but just how high is the question. Paulson will be gone as he has already stated that he is fleeing this sinking ship and won't stay on board after the elections.

How can banks continue to earn negative rates of return on mortgages and other loans at these current interest rates? With a 30-year mortgage at 5.78% (or is it 5.87%) and inflation at 10%-13% in the U.S., a bank is currently losing 4% to 7% on all mortgage interest payments as the interest rate does not even match current inflation rates.

With all this massive intervention taking place now, if the Feds really were concerned with the welfare of Americans, they could have taken 1/100 of the intervention measures that they are taking now starting 15-20 years ago and prevented this entire mess today. It truly would have been that easy. But if they were responsible for the past 20 years, the richest 0.1% in this world would not have built the enormous amounts of wealth that they just did over the past 2 decades.

But if that doesn't happen Quicks, and you are right, then all the arguments about deflation and inflation punching each other into a draw and resulting in stagflation should now be over given the latest bailout decisions. The gov't and the PPT declared inflation the winner last week and the true rates of inflation are going to get downright nasty next year (actually they should get downright nasty whether or not the gov't raises interest rates significantly because at this point, it seems impossible that the Feds could ever raise interest rates high enough to combat inflation).

Here's an experiment you can do just so you'll know the official rates of inflation the gov't will report next year will be 100% bogus.

Take an inventory this week of all your costs. What you spend on fuel, what you spend on food (prices and sizes, because food companies have become clever and instead of jacking up prices, they have shrunk packages and are charging you the same price for less), clothes you may buy this week, office supplies, tuition for your children business hotel stays, whatever. Then six to nine months from now, take out that list, buy the same stuff, and come back here and let me know what the price of those same items are. I'd be shocked if that list hasn't gone up by at least another 15%-20% in total price just 6-9 months out from today.

Law of Supply & Demand Is Dead for Gold & Silver

Oh btw, just to clarify my comments above, that was for the coin prices last week, not this week as obviously gold prices are considerably higher now. - J.S.

Law of Supply & Demand Is Dead for Gold & Silver

Chris B,

I have to respectfully say that you have 100% missed the point of my article. Those of us, including me, that bought gold coins 2 or more years ago, are still sitting on 37% to 90% gains on all of our coins when the spot prices established in the futures markets tells us that we should only have 8% to 12% gains on these coins. We are not upset at all and in fact are ecstatic that our gold investments from years ago have held their value so well (this is based on calls to gold dealers and asking their buyback prices for the coins i own). I'm sure that any gold coin owner on this site that bought gold coins (not bullion, but rare coins) 2 or more years ago will confirm this statement. This is an indisputable fact Chris B. No emotional attachments to an investment that we believe is sacred - just a cold hard fact.

This discussion should remind you nothing about tech stocks that were selling at impossible P/E valuations because they were $130 a share while the underlying company had zero profits. You are comparing apples to oranges in trying to compare hard tangible assets such as gold that has also been viewed as a form of money throughout history with paper tech stocks for companies that never declared a single penny of earnings. Hope that clarifies the point I made in my article for you.

Law of Supply & Demand Is Dead for Gold & Silver

By the way, and this is not a plug at all for my services but just an observation, I told my subscribers just a few weeks ago that I was convinced that gold and silver markets had been manipulated (nothing new here given my article above). Again this is very different than a conspiracy. When the Working Group on Financial Markets had intervened numerous times in the U.S. stock markets to prop it up over the past six months, this is free market intervention, not a conspiracy. People that don't believe in manipulation, even when provided with overwhelming supportive circumstantial evidence, tend to try to discredit talk of manipulation by automatically yelling "conspiracy!" rather than just criticizing the logical arguments we present.

In any event, I said to my subscribers, if I am right about this manipulation, we will know because we will see some explosive days to the upside during the rebound, days where gold explodes by $100 an ounce higher in a single day. Well within the past 24 hours, gold has risen more than $97.50 an ounce (including action in Asia this morning). While of course this is not proof I am right about the manipulation schemes, I base my short-term and long-term predictions based upon common sense and logic from things I uncover that are not reported in the mainstream media. The price of gold and silver set in the paper futures market that were so OUT OF SYNC with not only behavior in the physical market but also the fundamentals of the gold and silver market is what led me to state in my above article "make NO mistake that we have just experienced a steep correction and not an end to the gold and silver bull".

Now today, I see the same analysts that said there is still integrity in our gold and silver futures markets, that no manipulation exists, and that stated as recently as just a few weeks ago that gold was going to head to $560 to $600 very shortly are now incredulously stating that gold's meteoric one day rise yesterday was long overdue. What happened to the proclamations of $560 gold and get out from the gold and silver markets while you can?

If you really want to compare those of us that point out such anomalies with those that ridicule the anomalies I've pointed out, you will find for the most part that those of us that find such anomalies have always remained firm in our opinion that the gold and silver bull were not dead, while those that ridicule these anomalies flip flop their views on gold and silver given the slightest change in trend. From being familiar with the views of those analysts, I can almost guarantee you that even though they just stated that gold was headed to $600 or $560 a mere few weeks ago, that most will now not only jump back on the bandwagon but fabricate claims that they previously called for a large leap higher in gold and silver prices.

As professionals, we should always have such discussions regarding the material I presented above in a respectful and courteous manner. There is never any need for those with a brain to resort to insults as a matter of reply. However, my warning here, is not to listen to those analysts that claimed this was a "natural" correction in a bull run and that gold was primed to sink to the $560 to $600 range because they were numerous. The majority of these same analysts are now reversing their positions overnight based one ONE DAY of positive gold and silver activity and now claiming that gold is a "safe haven" when four days ago they were claiming that gold was a barbarous relic and a terrible investments. Such explosive movements such as yesterdays one day leap in gold and silver prices in the futures market is impossible to understand if you don't understand the manipulation game and continue to downplay the significance of manipulation in the futures markets. It is very easy to understand, and even predictable (as I predicted single day $100 an ounce movements higher which people thought was crazy at the time) when one understands the manipulation game.

Going heavy into physical gold and silver will still serve an investor extremely well. Good investing.

J.S.

Law of Supply & Demand Is Dead for Gold & Silver

Bron,

Sure of course I understand that you can buy silver and gold bars at spot prices. I only used the coin example to illustrate the discrepancies between the paper and physical markets. But yes buy gold/silver bars and coins, avoid the ETFs and paper representations of gold bars such as Perth mint certificates. Yes, I am 100% in agreement with you there.

JK

The Inconvenient Truth of the Slowing U.S. Economy

Hi John, This is J.S.

In response to your question, inflation is a problem all over the world now. Inflation is raging in the UK, Spain and other EU countries as well. This means the BOE and the ECB are massively inflating the Euro and Pound as well. In some ways, although the Euro is stronger that the dollar, the Euro in theory is even worse than the dollar because the EU is still a conglomeration of sovereign states all with separate agendas to protect their own sovereign economies. So I really do not like any paper currencies at this point until I see central banks take appropriate action to address the problem, not just "talk" about hawkish policies.

Furthermore, this a serious disconnect between the prices of gold and silver established in the futures markets where it is extremely rare for any physical gold or silver to ever change hands versus the physical silver and gold market where real coins and bars change hands. This points to the fact that the prices established in early August in the futures markets for silver and gold were fantasyland prices not reflective of macroeconomic conditions (too much to go into here, but there was a reason Wall Street wanted to push down prices in the futures markets so much and why an unprecedented severe disconnect formed between futures markets that trade "paper" gold and silver and physical markets that trade REAL gold and silver. Nonetheless, it has given rise to great opportunity. By the way I posted that article on August 12th on my blog though it didn't make it to the Seeking Alpha site until yesterday. All the best JW and hope that helps.