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htmortimer

htmortimer
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  • 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 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 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 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 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 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 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 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 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 02:00 PM | 6 Likes Like |Link to Comment
  • Gold Is A Slam Dunk Sell [View article]
    This is a copy of my comment on another recent comment.

    There are umpteen approaches to analyze gold as an investment and none of them make sense. There are only two conditions under which gold will be a good investment and that is runaway inflation (such as we had in the early 1980's and in deflation in which falling prices cause massive debt defaults. Neither of these phenomena are subject to traditional analysis, value or otherwise. Those who think we are in the midst of a temporary hiccup and that things will return to normal should not invest in gold. Those are circumstances under which gold will fall in value and that is well demonstrated in the history of money. Those who think that all is not well and that deflation or runaway inflation is a risk should invest in gold in amounts that reflect how concerned they are about that risk.
    It's as simple as that.
    Oct 10 08:26 PM | Likes Like |Link to Comment
  • Which Side Of Goldman Sachs Is Right About Gold? [View article]
    There may be too many comments already for another to have any impact. That being said, there are umpteen approaches to analyze gold as an investment and none of them make sense. There are only two conditions under which gold will be a good investment and that is runaway inflation (such as we had in the early 1980's and in deflation in which falling prices cause massive debt defaults. Neither of these phenomena are subject to traditional analysis, value or otherwise. Those who think we are in the midst of a temporary hiccup and that things will return to normal should not invest in gold. Those are circumstances under which gold will fall in value and that is well demonstrated in the history of money. Those who think that all is not well and that deflation or runaway inflation is a risk should invest in gold in amounts that reflect how concerned they are about that risk.
    Oct 10 08:23 PM | Likes Like |Link to Comment
  • Ron Paul Has It Totally Backwards, Gold Isn't Going To Explode Higher [View article]
    It would be nice if we could do away with gold, but until politicians are no longer able to debase their currencies for political and other policy ends, we will need to find something that introduces discipline into the system if currency is to be a store of value, one of the important attributes of money.
    If you look at the history of money from the beginning of time you will see endless schemes to debase it and all have failed. One of the most interesting occurred just prior to the French Revolution, when the perennially broke French State decided to confiscate all church lands and use them to back a new currency, the Assignat. Since the church lands were finite, this, it was thought, would restore confidence in the currency, and indeed it did - until it was discovered that even this new wealth was insufficient to satisfy the state's needs and untold new Assignats (also backed by the same confiscated lands) were printed. It wasn't long before this was discovered and the Assignats soon became worthless. The next chapter was the Revolution.
    During all of these periods of currency debasement, ownership of gold served to protect one's wealth.
    One can argue as to whether another such economic crisis is at hand or not, but you cannot argue that if it, is one should not buy gold.
    Aug 26 10:21 AM | 1 Like Like |Link to Comment
  • Ron Paul Has It Totally Backwards, Gold Isn't Going To Explode Higher [View article]
    All these comments demonstrate why we have vigorous and healthy markets; sellers can't sell without buyers and buyers can't buy without sellers. I think that sometimes people for get that there are two sides to every transaction.
    That being said, there have been times when it has been profitable to hold gold and times when it has not. Unlike equities which depend on earnings (and sentiment) and bonds which depend on interest rates, gold depends on the perceived soundness of money (and debt - which is what money is).
    Those who think that we have sound money now should eschew gold and those who think otherwise should embrace it.
    Aug 24 09:06 AM | Likes Like |Link to Comment
  • Ron Paul Has It Totally Backwards, Gold Isn't Going To Explode Higher [View article]
    You can't talk about quantity and ignore price; there is always a price at which a commodity can be obtained. If we wished to return to the 1980's (when gold made up approximately 50% of central bank reserves) you could do so by raising the price of gold to approximately $11,000 per ounce. In fact, that is roughly the price that would be needed to return to a gold standard.
    Aug 22 09:49 AM | Likes Like |Link to Comment
  • Ron Paul Has It Totally Backwards, Gold Isn't Going To Explode Higher [View article]
    The point is that the Great Depression was all about excessive debt levels. The Gold Standard was not responsible for the high debt levels and the best way to reduce them was to devalue the dollar against gold. Usually, excessive debt levels are reduced through inflation, but sometimes that doesn't work and you get deflation instead. The results are the same, but deflation is far more painful and harder to reverse.
    As a separate point, there is no such thing as a balance of payments deficit (that's why it is called a balance). I think that you are referring to a trade deficit which is offset by money flows to achieve a balance. So long as the money flows remain available, the trade deficit doesn't have an impact.
    Aug 19 09:35 AM | Likes Like |Link to Comment
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