Seeking Alpha

htmortimer

htmortimer
Send Message
View as an RSS Feed
View htmortimer's Comments BY TICKER:
Latest  |  Highest rated
  • Do We Need A Catalyst For The Next Big Drop In Gold? [View article]
    I think that the correct question is what catalyst will make gold go up; two come to mind: inflation and deflation.

    Events, like Crimea, the Ukraine etc. are not likely to have long term interest. If you look over history, you will see that the real drivers behind gold prices are significant economic events. If the economies of the free world are functioning well even significant political events don't have much of an impact.

    To the extent that you are not concerned about the levels of debt in the free world, I can see no reason to hold gold; to the extent that you are then gold should be in your portfolio as insurance.
    May 18, 2014. 10:30 AM | Likes Like |Link to Comment
  • GLD: A Very Dangerous Set Up [View article]
    A study of history will show that there are periods of substantial appreciation against currency and long periods when it does not appreciate (and may fall) against currencies. Typically, the appreciation comes when a currency is no longer a store of value (e.g. during an inflation). The trick is to understanding the macroeconomics of the period. I would say that it is the only liquid asset that is not someone else's liability.
    May 5, 2014. 05:29 PM | 1 Like Like |Link to Comment
  • GLD: A Very Dangerous Set Up [View article]
    Gold is an asset that strikes me as unsuitable for trading. That's because, as many pundits have pointed out, it does not have earnings, pay a dividend, or have an industrial or commercial value that would drive its price.
    The price of gold does, however, respond to unsettling political and economic events, serving as an asset that represents a safe haven in such times. As a result, instability in the Ukraine, the Middle East and elsewhere will tend to cause gold to rise and fall in response to events that are, to some extent, unpredictable and random.
    The real reason to buy gold is as insurance against potentially catastrophic events in the financial markets. Presently, the developed world has an unsustainable debt burden that continues to increase and bubbles in the financial and real estate markets - driven largely by cheap debt.
    History tells us that when debt becomes unsustainable it is forcibly reduced by either inflation or deflation and, so far, no other alternatives have been found.
    Those who understand gold know that it serves as a safe haven in both cases. In an inflation, the value of currency and debt fall; in a deflation, currency will be strong, but debt will fall because it becomes increasingly costly to repay and much of it will default.
    To the extent that one fears neither inflation or deflation, holding gold probably doesn't make much sense.
    May 4, 2014. 11:16 AM | 6 Likes Like |Link to Comment
  • Another Curious (And Pretty Bullish) Inflow For The Gold ETF [View article]
    You are so right. For some reason, there seems to be a large number of people who seem unaware that both US securities, as well as Gold (and other commodities), are priced in a world wide market.
    Mar 25, 2014. 11:52 AM | Likes Like |Link to Comment
  • A Brief History Of Gold And Why It's Overvalued By A Factor Of 2 [View article]
    Short-term predictions are the hardest to make, but that is less the case with the longer term. Imbalances tend to get corrected over time and being able to to identify such imbalances significantly improves one's overall success, even though the timing may be wrong. I would also argue that avoiding large losses is more important than making small gains.
    I would also note that no investment or investment strategy works all the time. There are times to own particular investments and times not to. That is the case with gold.
    Feb 18, 2014. 11:19 AM | 1 Like Like |Link to Comment
  • A Brief History Of Gold And Why It's Overvalued By A Factor Of 2 [View article]
    That's my point. You need to think of gold as a currency. That's how it is priced.
    So far, you are only thinking about inflation and I think you now agree that its "value" is relative to the currency that it is priced in. Step two is to recognize that if say, the Argentinians are buying gold, then there will be lees of it available for others to buy and that will raise its value in other currencies. Step three is to recognize that it will also have value in a deflation.
    Feb 17, 2014. 09:14 AM | 1 Like Like |Link to Comment
  • A Brief History Of Gold And Why It's Overvalued By A Factor Of 2 [View article]
    No. We are talking about gold in various currencies. You will want to note that gold's performance is different in every currency.
    Feb 16, 2014. 06:06 PM | 1 Like Like |Link to Comment
  • A Brief History Of Gold And Why It's Overvalued By A Factor Of 2 [View article]
    You might want to have a look at Argentina, Brazil, Venezuela, and Turkey for starters. In Argentina in the late '80s a $100 million investment in Argentina Government bonds in local currency was worth approx. $16,000 a little less than three years later. I will let you do the math with respect to gold.
    Feb 15, 2014. 09:34 AM | 2 Likes Like |Link to Comment
  • A Brief History Of Gold And Why It's Overvalued By A Factor Of 2 [View article]
    Not to be picky, but we went off the Gold Standard on August 15, 1971 - a decision taken by Nixon.
    Less picky is the fact that lots of currencies adhered to a gold standard (or a gold exchange standard) and what interests you is not the currencies per se, but rather the price of gold in those currencies. That will help you develop and understanding of the factors that influences the price of gold. You might also consider the value of gold in the case of currencies that were not on a gold standard. I can assure you that gold always comes out on top.That may or may not change your mind about the present, but it will educate you on the factors that make gold valuable (relative to currencies) from time to time. In this regard, I would note that there are times to own gold and times no to - but not for any of the reasons you suggest in your article.
    Feb 13, 2014. 05:44 PM | 1 Like Like |Link to Comment
  • A Brief History Of Gold And Why It's Overvalued By A Factor Of 2 [View article]
    My, my, one hardly knows where to begin. First and perhaps most important your analysis assumes that the US is the only country in the world and that the dollar is the only currency in the world. I hate to say so, but that is not the case. Were you in Germany in the 1920's you sure would have been happy if you held a bit of gold. That was a time when the stamp on the envelope with your life insurance check exceeded the value of the check itself.
    Second, when you compare the price of gold to say. the CPI, you fail to note that from 1900 until 1975 the price of gold was fixed by the Treasury, first at $20.67 an ounce and then at $35 an ounce. Those were the prices at which the Treasury was prepared to either buy or sell gold in any amount. It was, therefore, not surprising that the price of gold did not change. Were you in any other country that was on a gold standard (e.g., the UK), you would have found that the price of gold varied a bit more as devaluations occurred. You might also have noted that were you around for the deflationary depression in the US in the '30s you would have seen the value of your gold holdings rise by almost 70% when FDR devalued the dollar.
    Lastly, as you point out, gold is not like a bond or a stock (or a commodity) and that is why it cannot be analyzed like a bond or a stock (or a commodity). It has also been around a lot longer than the dollar and indeed any currency that exists today. In addition, the data extends back into periods BC, but you need not go back that far for your analysis; a couple of centuries and less than a dozen currencies will tell you the story and if you do that you may both gain a better understanding of what influences the market value of gold and want to amend your analysis.
    Feb 13, 2014. 03:37 PM | 5 Likes Like |Link to Comment
  • Gold- Buffett And Morgan Stanley Agree [View article]
    If indeed the world economy picks up steam gold will do poorly; all we know right now is that the market sentiment favors that analysis. The other things that we also know now is that we and the rest of the world have accumulated mountains of debt that cannot be paid off and that when debt rises faster than income it eventually becomes bankrupt. Where we are in that process is hard to discern - principally because the process of debt creation depends on liquidity - something that disappears very rapidly when confidence wanes. And that, to paraphrase Warren Buffet, is when we see who is not wearing bathing suits. Then, those who own some gold will be seen to be wearing scuba gear.
    Jan 31, 2014. 11:07 AM | 1 Like Like |Link to Comment
  • Harry Dent: How To Prosper In The Coming Downturn [View article]
    History shows that gold is always strong in a deflation. That is because deflation makes debt more expensive to repay, causing large numbers of defaults. Because gold is not someone else's liability is what makes it attractive. Additionally, most depressions occur because of an excess of debt and deflation is one way to get rid of debt - by bankrupting it away. In fact, often the policy response to deflation is to devalue the currency against gold (as was done in the last US depression) as this too (under a gold standard) is another way to reduce debt. It is my view that the best (and least costly) way out of the current predicament would be to return to a gold standard. For the US, that would be a big win as we have the most gold.
    Jan 21, 2014. 10:06 AM | 1 Like Like |Link to Comment
  • The SPDR Gold Trust Vs. The Sprott Physical Gold Trust [View article]
    The point on taxation tells everything: with GLD you have a direct interest in gold and are taxed on that basis; with Sprott you have an indirect interest in the underlying gold because you own shares in a corporate entity. In return you get a better tax deal when you sell.
    Nov 26, 2013. 09:30 AM | 1 Like Like |Link to Comment
  • Gold Trust ETF Falling As Expected [View article]
    I agree, but the issue is at what rate. It doesn't take a (historically) very high rate to absorb virtually all of the government's tax revenues.
    Nov 6, 2013. 09:34 AM | Likes Like |Link to Comment
  • Gold Trust ETF Falling As Expected [View article]
    I am not a trader and do not buy and sell on the basis of short term moves. The only reason to hold gold today is because there is a high probability that the developed world is not able to repay the debt that it has incurred in the last decade. Not only is it unable to repay existing debt, but must incur additional debt to function. We are thus hostage to the market and the interest rates it charges for the refinancing of existing debt and the funding of new debt.
    If you believe in the tooth fairy, then you will believe that the developed world's central banks will be able to fund both the new debt and the refinancing of the existing debt at low interest rates. In that case you must also believe that taxation is no longer needed as the governments only need to fund themselves through their central banks at low interest rates. I would like to think that you would find the latter statement to be absurd.
    Plan A, of course is to approach the debt problem by trying to inflate it away. Unfortunately, this is not working anywhere in spite of Herculean efforts to do so; in fact the growth of debt has outpaced the rate of inflation since the last crisis, so we are actually going backward in out attempt to inflate debt away.
    Plan B, unfortunately, is not discussed (other than behind closed doors among the central banks because that plan used deflation to extinguish debt and does so with bankruptcy (both corporate and sovereign).
    Unless you have a Plan C, those are the only two choices and both cases are deleterious to your financial health. In a deflation, not all debt will default, but all debt (corporate and sovereign) will become suspect and fall in value. In an inflation, debt will lose value in real terms and in nominal terms with rising interest rates; and in both cases equity values will suffer because neither environment is friendly. In a deflation, prices will fall and in inflation costs will rise, potting profits at risk in both cases.
    Both cases, however, are beneficial to gold. Gold has always been a good hedge in inflationary times and in deflationary times it will offer a safe haven because it is not someone else's liability.
    Nov 5, 2013. 02:00 PM | 6 Likes Like |Link to Comment
COMMENTS STATS
107 Comments
215 Likes