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Nick Abe, CFA

 
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  • Why QE Was Never Bullish For GLD And Why The Taper Will Hurt It Further [View article]
    I was trying to illustrate a point by using a known piece of data, previous prices. We don't know what the "true" value of anything is at any given point in time, other than what we can buy and sell it for. The point here is that since the start of the recession virtually everything (oil, commodities, stocks, CPI, etc) is up in the range of 5-15%. Gold was up about 60% at the time this article was published (slightly less so now).

    So if your thinking was that inflation was going to be rampant as a result of things like TARP and QE, you were wrong. Now QE may or may not end, but if it does I don't see how your expectations of future inflation will be materially higher than now... and as such it doesn't make sense that gold would go up IF QE ends or tapers. On the other hand if it doesn't end or taper and we "end up like Japan" we will also have virtually no inflation... so again I don't see how it goes up.

    All the things you mention (credit bubbles, de-leveraging, and monetary experiments - QE I'm guessing) have been proven to be neutral to bad for gold. So I'm not sure if you're agreeing or disagreeing with me or just making the point that maybe certain things were overpriced to begin with.
    Jun 27, 2013. 04:17 PM | Likes Like |Link to Comment
  • Why QE Was Never Bullish For GLD And Why The Taper Will Hurt It Further [View article]
    In response to whether gold beats CPI the answer is "depends". If you picked a time where gold was high (like 1982) then the answer is no. If you pick a time where it's low (say 2000) then the answer is yes.
    In theory it should work for very very long run inflation, but then again so should stocks.

    As for the devaluation of the currency to zero and whether or not that occurs, I guess I have a different view. Technology is constantly increasing our ability to make things, so all else equal (i.e. no printing) the dollar is getting more valuable relative to goods. If you believe, as I do, that gains in technology will exponentially increase our ability to produce (per unit of labour) then you would realize that you will have to do a lot of printing just get a low amount of inflation (i.e. decrease in the value of the dollar).
    Jun 27, 2013. 04:08 PM | 1 Like Like |Link to Comment
  • Why QE Was Never Bullish For GLD And Why The Taper Will Hurt It Further [View article]
    Thanks for the comment. However, if your read the entire paragraph you will see that is what exactly what I said. The reason the first loan is only $90 (in the economic text book) is that the bank does not have $900 to lend at that point. They only have a $100 asset. They lend $90 of that $100, and then the $90 gets redeposited somewhere else and then $81 of that gets loaned out. Total is $900.
    Jun 27, 2013. 04:03 PM | Likes Like |Link to Comment
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