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Tao Jaxx

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  • Deflation + Volatility = Bull Market In Gold [View article]
    In deflation, cash is king as it is default free and as yields on alternative investments are zero or negative.
    But in deflation gold is better than cash as it cannot be debased (should currency debasement be the last resort option to escape deflation) and as it is in particular immune to negative nominal interest rates, other last resort option (see ECB).
    So when Mr.Market fears deflation, buy gold, you'll be glad you did.
    Get there now: fast money will get there soon, then smart money and finally the rest of the pack.
    As gold is a tiny market in proportion of all financial assets, there could be a nice crowding in with a wall of cash chasing a finite number of ounces.
    If I'm wrong and that doesn't happen, most of the air has escaped the gold bubble since 2011 already, so the downside is limited.
    Free advice, coming from a traditional gold bear.
    Oct 16 09:59 PM | 5 Likes Like |Link to Comment
  • What The Plunge In U.S. Treasury Yields Means For The Next 10 Years [View article]
    Had heard of name dropping, this is downright roll call dropping:
    Ho and Lee, Heath, Jarrow, and Morton, John Cochrane and Monika Piazzesi, Jarrow and Li (again), Chadha, Turner and Zampolli, Adams and van Deventer (self reference), Svensson, Nelson-Siegel, not to forget Merrill Lynch.
    And finally that ultimate source of authoritative advice, the January 2010 version of the Basel II market risk framework (which brought you the greatest financial crisis since 1929, and is now mostly used as a doorstop).
    Only name that stands out is Kamakura. Spent some time there and enjoyed the lovely place.
    Oct 16 09:27 PM | 3 Likes Like |Link to Comment
  • No Relief For GLD Longs On The Horizon [View article]
    Hi Fish, long time no see!
    See, I end up on the same side of the trade as you, after all these years lol. Took me time, but I got there…
    In a nutshell, deflation means no lending and balance sheets contracting as debt implodes through early repayment or default.
    Banks excess reserves are just the mirror image of Fed buying Treasuries/MBS from banks (or from others, through banks). Banks will NEVER lend those reserves, these will always stay on the Fed balance sheet until either
    -the Fed sells the securities it purchased (ain't happening, not now, not in a million years) or
    -said securities mature (about 7 years from now, top of my head, as this I believe is the Fed's portfolio average maturity).
    To fight deflation is difficult, as you can lead the horse to the pond but you can't make him drink if he doesn't want to (see Japan, who was slow pump priming their economy, 20 years with same nominal GDP!).
    Best thing is not falling into deflation in the first place, hence the Fed's policy in the past years, pumping out base money (aka "banks reserves") and keeping rates at 0.
    Raising the rate would FIGHT lending and SLOW velocity if inflation reared its ugly head, so the opposite of what we need right now, but will be needed as we (finally) exit deflation risk. That's what I'm describing in my previous post: the Fed is technically ready to choke inflation if and when it shows up.
    We ain't quite there yet, and my gold bullishness relates to the current deflationary risk. For two reasons: gold should do as well as cash in deflation, and may do better if the only way out of deflation is some inflationary policy.
    Finally, I still think gold is trading higher than its long term value ($600 to $800, if you ask me). I just think it is bound to trade further away from that long term value for some time to come, so up.
    Oct 15 04:22 PM | Likes Like |Link to Comment
  • Is It Time To Just Give Up On Gold? [View article]
    You got 14 likes for this comment lol? "Wait for the bottoming and then buy" Wow, I'm impressed by the analytical capabilities this requires…
    Plus, wasn't time to wait, it was time to buy!
    Oct 15 04:01 PM | 1 Like Like |Link to Comment
  • No Relief For GLD Longs On The Horizon [View article]
    As a (almost) perennial gold bear who covered his gold shorts yesterday (and even went long, I have a hard time getting used to it after almost 4 years of running a short gold position…), I would take the exact opposite view from the author's, at least on a 1 to 3 months horizon.
    Yields move down, this will support gold for a while.
    As to "it's unclear to any what exactly the Fed's tightening measures will look like", it is crystal clear: the Fed will raise the interest rate it pays on banks reserves as well as mop up excess liquidity if needed through reverse repo auctions.
    It's all described precisely in plain English in the FOMC minutes, for all who bother to read them.
    Oct 15 03:46 PM | Likes Like |Link to Comment
  • Why Low Interest Rates Are Giving Gold The Buy Signal [View article]
    Finally a reasoned article on gold. Been continuously short gold since November 2011 and nicely rewarded for it. Covered my shorts yesterday and went long, first time in almost 4 years! Feels kind of odd lol.
    My timing looks perfect (at least so far, and that can change) but I think I just got lucky on that one.
    Anyway, fully agree with the author's analysis: go long gold guys, you'll be rewarded.Coming from a 4 year long gold bear, no less. You'll be glad you did.
    You read it here first.
    And yes, gold is useless except as shiny doorstops and paperweights. Only reason i'm long is to get fiat money I can invest productively (or buy stuff with).
    Fun fun
    Oct 15 03:23 PM | Likes Like |Link to Comment
  • Monthly Versus Quarterly Dividends: The 30-Year Case Of A Popular mREIT [View article]
    Compounding calculations are based on the assumption that dividends received are reinvested at the current yield (This applies to all fixed income Present Value/ Future Value calculations).
    Therefore this compounding effect does not apply to this stock in two cases: when dividends are cut (applies to all longs) and when this stock is owned by income seeking investors who use the dividend to put food on the table, not to buy more shares.
    Not to mention that the computation is contingent on a stable share price. On a 30 year horizon. No less.
    The whole mREIT business is a leverage play on the slope of the curve funded by repos at 0% overnight rates. Surprised this would be marketed to mom and pop investors.
    Plus, isn't it funny that there would be articles building on a 30 year horizon based on a 0% overnight rate assumption?
    Talk about a case of investor myopia. I can see the pathetic headlines when the thing hits the fan: "How could this happen? Small investors lose it all!"
    Winners are mREITS management teams: they are the ones striking it rich. Nice illustration of the Wall Street food chain.
    Oct 12 09:10 AM | 1 Like Like |Link to Comment
  • Going Gray [View article]
    To LJK: Nicely put. But the only one pushing this is Larry Summers and they voted him down because he said ladies were not good at maths.
    Unintended consequences of small time politics...
    Oct 7 04:43 AM | 1 Like Like |Link to Comment
  • Going Gray [View article]
    There's 170,000 tons of gold above ground, of which a conservative 60 to 70% is held as investment ready to be sold as soon as expectations of price appreciation vanish.
    That's over 100,000 tons up for sale when prices sag as interest rates turn positive.
    Yearly production is 2000 tons, a trifle compared to existing stocks, which inflate year after year after year as gold extracted is never, I repeat NEVER consumed. So production costs are a side show, with no impact.
    That narrative was used at $1500, $1400, $1300 and crumbled each time, as did the India, China, Central Bank of Nowherestan narratives before.
    Chinese buyers are the bag holders, as were the Japanese in the 80's for US real estate (Rockefeller Center, Pebble Beach Golf course etc..).
    From a not so fat (22BMI), not too dumb, and indeed happy speculator (shorted gold @$1550), as a response to Mr. Lean, Smart and definitely Unhappy gold pumper.
    Enjoy the beach,
    Oct 7 04:37 AM | Likes Like |Link to Comment
  • Going Gray [View article]
    Oops, got that last one wrong: 2007 average fixing was $696. Even I fall prey to recency bias...
    Oct 5 03:26 PM | Likes Like |Link to Comment
  • Going Gray [View article]
    So? Gold up?
    Yup, that's what the average reader can infer from this geopolitical tirade grounded on the Chinese gerontocrats' love of toupee-looking hairstyle.
    But the esteemed (but cautious) author hedges his bets by stopping short of spelling it in writing and switches to a disclaimer the size of the article.
    I would point at the opposite: divergent monetary policies mean a strong dollar indeed and lower commodities. It means Armageddon chances recede and the inflated gold bubble leaks air further with prices returning to their pre-Lehman SHTF levels:
    Average gold fix in 2007:$796.
    Oct 5 02:59 PM | 1 Like Like |Link to Comment
  • Gold - Resting On Support At $1290 [View article]
    How about a sequel to this today?
    Gold - Resting On Support At $1190
    You have your work cut out for you: An article a month, same enlightening content, just one digit difference.
    Oct 4 10:28 PM | Likes Like |Link to Comment
  • The Trade That Led To The Demise Of PIMCO Total Return [View article]
    Good article. I was always amazed at Gross's rock star status, even more so now. I agree with the author as to the lack of basic understanding of economics BG displayed. True, he beat the index for so many years, but by adding risk to his portfolio. Simple as that.
    Sep 30 08:35 AM | 1 Like Like |Link to Comment
  • Gold - Support Level At $1215 Remains Firm [View article]
    Gold "enjoyed support" @ $1315, $1415, $1515, $1615, $1715, $1815 and even $1915 as well.
    Sep 30 08:20 AM | 2 Likes Like |Link to Comment
  • Gold - Resting On Support At $1290 [View article]
    So much for the title of the article….
    Aug 21 04:29 PM | Likes Like |Link to Comment