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htmortimer

htmortimer
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  • Gold falls 1.3% to $1,588, the entirety of the decline coming in the minutes following the jobs report. In a little more than a day since a gold bull's dream - 3 major central banks loosening monetary policy and weak U.S. data giving at least a bit more impetus towards further Fed ease - the metal is off 2.1%. Silver is down 4.6% during the same time frame.  [View news story]
    You bought at the peak and I bought at $750-800. That makes me more comfortable as I have a profit and you have a loss, but those facts have no bearing on the prospects for gold going forward. Making decisions on a personal loss or gain is how you can lose money fast.
    Jul 7 10:00 AM | 2 Likes Like |Link to Comment
  • Gold falls 1.3% to $1,588, the entirety of the decline coming in the minutes following the jobs report. In a little more than a day since a gold bull's dream - 3 major central banks loosening monetary policy and weak U.S. data giving at least a bit more impetus towards further Fed ease - the metal is off 2.1%. Silver is down 4.6% during the same time frame.  [View news story]
    The economic news is deflationary; most gold investors buy gold when the news is inflationary and have yet to think about how gold acts in a deflationary environment. A hint of QE III would be all that would be needed to send gold up as would a couple of big debt defaults.
    Jul 6 12:05 PM | 1 Like Like |Link to Comment
  • Gold And Hyperinflation [View article]
    It should be obvious that our money (and that of others as well) is not performing its function as a store of value. Gold is and that is what it does in periods of monetary upheaval, which include both inflation and deflation. As you surely know, fiat paper money is a debt and in both periods debt performs poorly. In an inflation it loses its value and in a deflation it defaults. This has always been true throughout history and this time will not be different.
    Jul 3 10:37 AM | 1 Like Like |Link to Comment
  • Why The Spanish Bailout Is A Game Changer [View article]
    The bailout is unlikely to be sufficient as its purpose is to recapitalize the Spanish banks. It should be remembered that banks do not fail because of lack of capital, they fail because of a lack of funding. In this regard, their funding requirements are more than three times Spain's GDP and if they lose their funding it's game over.
    Jun 11 05:44 PM | 2 Likes Like |Link to Comment
  • Don't Bet On Gold [View article]
    There are no asset classes that truly stand the test of time (assuming you look at real returns); the reality is that different asset classes do well at different times. In times of relative monetary stability - such as in the mid eighties to the late nineties for instance, gold performed poorly and stocks performed well.
    If you believe that a period of monetary stability lies directly ahead, then you are right to eschew gold and invest in assets that do well in such a period. For my part, I do not believe that we are on the cusp of such a period; on the contrary, all of the signs are pointing towards continued monetary instability as the developed countries search for strategies to deal with excessive indebtedness. In this respect, I would argue that there are no good strategies and that only significant inflation (or deflation) can produce the meaningful reductions of debt that are needed. If that is true, then history will tell you that in those periods gold not only served as a good store of value, but also provided significant real gains. In this regard, I would note that in a deflation, gold prices only need to be stable to provide positive real returns.
    May 12 10:56 AM | 6 Likes Like |Link to Comment
  • "Market forces are driving a de facto return to the gold standard," argues Lew Spellman. In a world where good collateral is scarce, and what does exist yields close to zero, "gold is stepping up to the plate." All that's left is for regulatory recognition, which may be coming in the form of a Basel proposal to make gold a bank capital Tier 1 asset.  [View news story]
    You imply that something that pays zero interest has no value. If you think about it that is plain silly. The Zimbabwe dollar used to pay interest; would that have been a better investment than gold? In the '20s the interest rate in Germany approached 50% a day; would that have been a good investment?
    I think that you should start with the premise that the value of anything is never more or less than what someone will pay for it and proceed from there.
    Apr 24 10:32 AM | Likes Like |Link to Comment
  • "Market forces are driving a de facto return to the gold standard," argues Lew Spellman. In a world where good collateral is scarce, and what does exist yields close to zero, "gold is stepping up to the plate." All that's left is for regulatory recognition, which may be coming in the form of a Basel proposal to make gold a bank capital Tier 1 asset.  [View news story]
    I don't know who Lew Spellman is, but his comment is fair. The fact is that fiat money hasn't worked that well because it does not impose the monetary discipline that a gold standard does - and that is why politicians hate it.
    Contrary to what seems to be the popular view, inflation has not been dormant. As a result, if you look at the world in real (inflation adjusted) terms, the picture that you will see is quite different from the one generally put forth. As an example, in real terms the stock market (S&P 500) peaked in the first quarter of 2000 and would have to increase a further 30% from where it is now to have the same purchasing power as it did in 2000. Not much of an investment for the past 12 years. Gold, on the other hand, has increased just under 300% over the same period.
    That is because money (the dollar) is no longer a good store of value and as cash money starts losing value (inflation) people will turn to gold (and other assets that can be expected to retain their value in real terms).
    Apr 23 10:40 AM | 3 Likes Like |Link to Comment
  • Is Gold Ever An Investment? [View article]
    This article is right up there with the discussion of when art is art and when it's not. I would note that when one cashes in on an investment it generally done by selling the investment to someone else. In fact, that's the only way to dispose of an investment, successful or otherwise.
    For reasons that escape me, investment has a good connotation and speculation a bad connotation; yet they are both purchases of an asset in the expectation of making a gain.
    The demand for the many possible investments (or speculations) vary over time; when the demand is high, prices rise and when demand is low, prices fall. It is as simple as that. The trick is to understand not only why demand is high or low, but also how to assess likely demand (or the lack thereof) in the future. In this regard not only does one need to consider the merits of the proposed investment, but the financial environment. In a poor financial environment, it may be that apparently attractive investments are being sold solely because the sellers simply need the money for some urgent need or needs. There are countless examples of this and it is at such times that those with cash get unexpectedly good bargains.
    Apr 10 03:36 PM | 4 Likes Like |Link to Comment
  • A majority of analysts polled by Bloomberg turn negative on gold, the first bearish read this year. Topping the list of concerns are slumping demand in India - where jewelers have been closed for 3 weeks in protest of higher taxes - and the Fed being a little less eager to paper the planet with greenbacks. Gold +0.8% to $1,627.  [View news story]
    Not at all, the prices of lots of things rise during inflation. I was just focused on gold because it was the subject of the survey. However, as a financial asset, it is a much more liquid investment than many of the other things that rise in an inflation.
    Apr 5 04:47 PM | 1 Like Like |Link to Comment
  • A majority of analysts polled by Bloomberg turn negative on gold, the first bearish read this year. Topping the list of concerns are slumping demand in India - where jewelers have been closed for 3 weeks in protest of higher taxes - and the Fed being a little less eager to paper the planet with greenbacks. Gold +0.8% to $1,627.  [View news story]
    For the few who value gold on the basis of industrial demand and for the many who see it as a hedge against inflation, the view that gold is overvalued is understandable, even though the risk of inflation cannot yet be taken off the table.
    For those who fear the consequences of the pyramid of debt in the developed world, gold looks cheap. That's because of the very real threat of deflation. Indeed, were it not for the massive printing of money we would be there already.
    It is interesting that few have questioned how it has been possible to print so much money without creating a massive inflation; had this been done at virtually any time in the past the result would have made the inflation of the late '70s and early '80s look mild.
    I think the answer lies in the power of the massive deleveraging that is taking place and which is highly deflationary.
    If indeed deflation emerges as the real threat, then all debt will become suspect as the falling prices that deflation brings will make existing debt harder and harder to pay off until bankruptcy is the only option.
    In such an event, gold will be the only safe haven.
    Apr 5 09:44 AM | 2 Likes Like |Link to Comment
  • Does GLD Really Hold Gold, Or Is It A Scam? [View article]
    GLD's safekeeping is as good as it gets on this planet. There is no way the level of risk can be reduced to zero and that's pretty much true with any risk. I would be interested to hear what would a better way for GLD to protect its assets.
    Mar 27 03:45 PM | 1 Like Like |Link to Comment
  • 3 Reasons Why Gold Could Drop Another 30% [View article]
    If you believe that nations can solve their debt problems by printing money to buy their own debt, then you should definitely not own gold. If you believe that five years of zero interest rates are costless, then you should look at the unfunded pension liabilities (both public and private) in the US and Europe. This represents hidden debt that will have to be paid off from earnings (for private debt) and taxes (for public debt).
    Bottom line the US and Europe have accumulated more debt than they can possibly repay and will need to get rid of some of it. Unfortunately, there are (so far) only two known ways of doing this: inflation (which is good for gold) and default, which brings deflation (which is also good for gold).
    Mar 8 10:23 AM | 4 Likes Like |Link to Comment
  • The Fed considers a new "sterilized" bond purchase program, still aimed at boosting the economy, but also designed to calm inflation fears. With this plan, the Fed would still conjure up dollars to buy long-term bonds, but would then engage in a "reverse repo," borrowing back the money for short periods. And all it took was one serious down day in stocks.  [View news story]
    I think that's what you do when nobody wants to buy your debt.
    Mar 7 01:11 PM | 2 Likes Like |Link to Comment
  • A Return To The Gold Standard Could Destroy The Modern Economy [View article]
    As you surely know gold is part of the central banks' international monetary reserves along with foreign currency and some SDRs.(Special Drawing rights). We can pretty much ignore the SDRs because there are so few of them. During the 80's and into the early 90's we have a period of monetary stability and at that time foreign currency and gold were held in approximately equal amounts. Since then, the world has been printing money at an alarming rate and the foreign currency component of central banks international reserves has been increasing at an annual rate of 15.4% since 2000 and at 17.7% over the last three years.
    To restore the "equilibrium" of the 80's it would be necessary to increase the price of gold to approximately $10,000 per ounce.
    That assumes of course that you believe that gold (which cannot be created at will) is a better store of value and thus a more appropriate form of international reserves than fiat currency.
    As for building an economic system based on periodic devaluations as a manner in which to create durable wealth strikes me as a very dubious proposition and begs the question of why anyone would lend money to an entity that would devalue its obligations.
    Feb 23 05:23 PM | 1 Like Like |Link to Comment
  • A Return To The Gold Standard Could Destroy The Modern Economy [View article]
    I think that before you trash the gold standard, you should first understand how they work. I would note that until 1971 gold standards were the prevailing means of reining in the excesses of currency creators.
    Then saying that there is not enough gold to go around is ludicrous; you are forgetting price. At a higher (some would say much higher) price there is plenty of gold to go around.
    Equally ludicrous is saying that the problem with Greece is that they do not have a currency that they can devalue. If the ability to devalue, debase and cheat your creditors is a good economic model, it is hard to see what a bad one might be.
    Feb 23 11:29 AM | 4 Likes Like |Link to Comment
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