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  • Gold Is Heading Lower [View article]
    It is pretty clear to me that we are going to have either inflation or deflation in the near future. That's what happens when you have debt service requirements that cannot be met, as is the case now. I believe that the outcome will be deflationary, but either way the outcome will be good for gold. Until one of those two scenarios actually occurs, it is likely that the recent ups and downs will continue. The move that i am expecting will take gold to at least $5,000 per ounce and perhaps as high as $12,000 per ounce. Let's keep in mind that at $12,000 per ounce would restore central bank gold reserves (as a % of total reserves) to where they were in the late '50s and early '60s.
    Jun 8, 2015. 10:02 AM | 1 Like Like |Link to Comment
  • The FOMC And U.S. GDP Could Bring Up GLD [View article]
    I think that we are entering the end game. The problem is simple - the world has too much debt, which is impeding economic progress. The Greek case may be extreme, but it showcases the issue.
    When you have too much debt you can devalue your currency through inflation to get rid if debt; if you can't create inflation you must devalue your currency against gold to get rid of debt. History history tells us that those are the only two possible courses of action to address too much debt.
    Tinkering by the world's central banks will continue to be ineffective. I predict a return to the gold standard when the deflationary collapse occurs.
    Apr 28, 2015. 05:26 PM | 1 Like Like |Link to Comment
  • Case For GLD Bullishness: FOMC Induced Inflation Uncertainty [View article]
    It should be pretty clear by now that inflation is not in the cards any time soon. The vast money printing exercises undertaken in the US, Japan and now the EU are pretty dispositive. The winds of deflation are simply too strong.
    That, of course, is good for gold. Why? Because the problem is and continues to be too much debt and if we cannot inflate our way out of it then the forces of deflation will do the job for us.
    Unfortunately, history tells us what that means for our financial system and why gold will become valuable relative to paper IOUs.
    Mar 21, 2015. 04:42 PM | Likes Like |Link to Comment
  • Gold - The Oversold Commodity That Is Worth Picking Up [View article]
    We, along with the rest of the world, are tipping into deflation as the result of an excess of debt and a major financial crisis looms ahead. I suspect that its onset will only be determined in retrospect and that it could have already begun.
    However, until it becomes more apparent or until we have a "Lehman" moment, the price of gold is likely to fluctuate. Once the crisis becomes apparent, both gold and the dollar will soar. Why? Because in a deflation cash becomes more valuable relative to the goods and services that it can buy and in the case of the US dollar, there is presently a roughly $9 trillion short in the dollar (consisting of the dollars borrowed by or invested in non-dollar economies). In the case of gold, it will soar as a result of bankruptcies (which will make all debt suspect).
    That is the real reason for owning gold.
    Mar 9, 2015. 11:04 AM | 1 Like Like |Link to Comment
  • GLD Bearish As Greece Kowtows To The European Commission [View article]
    For Germany, that's a big number: 16% of their GDP. I am not sure how they survive that hit other than by the extend and pretend game.

    On the other hand, I agree that the US stock market is overvalued - as are the rest of the world's markets. That is the unsurprising consequence of low interest rates and their application to discounted cash flows. At current levels even small interest rate increases have a huge impact on present values.
    Mar 1, 2015. 09:31 AM | 1 Like Like |Link to Comment
  • GLD Bearish As Greece Kowtows To The European Commission [View article]
    Greece actually matters a lot. Look up something called Target 2 balances (which do not show up as debt). You will find that Greece owes the Bundesbank (Germany's central bank) another 600 billion euros in balance of payments deficits.
    Feb 28, 2015. 10:36 AM | 1 Like Like |Link to Comment
  • GLD Bearish As Greece Kowtows To The European Commission [View article]
    Extend and pretend is all that we have so far and it is hard to see how that can be bullish for either Greece or Europe. Anybody who thinks that Greece will ever be able to repay its indebtedness is smoking stuff that is not generally available legally. And that indebtedness does not include the T2 balances held by Germany.
    Some time has been bought, but it is not clear to what end. In four months Greece cannot show much progress. So far, since the beginning of the crisis all Greece has been able to do is to increase its debt (as has the entire EU).

    As a separate matter, I would note that deflation would be good for gold. Why? Because deflation bankrupts debtors and bankrupt debtors will bring down the financial system as we know it.
    Feb 27, 2015. 05:42 PM | 4 Likes Like |Link to Comment
  • FOMC Deflation Interpretation Drives GLD Down [View article]
    You say that "Gold... serves as a hedge against inflation and instability" and I agree. When the worldwide debt bubble bursts, I can assure you that you will have a severe dose of instability. One of the things that could burst the bubble is rising interest rates. The problem is that most of the developed world - not to mention the less developed world - is struggling to service their debts at current interest rates.
    Defaulting debt will bring down the banks and as debt becomes suspect, gold will be the only remaining (liquid) safe haven.
    Feb 25, 2015. 04:48 PM | Likes Like |Link to Comment
  • Gold Slides As The Greenback Climbs [View article]
    I usually stop reading when I read that gold has no intrinsic value because that is simply not true. What is true is that it does not provide a stream of income, but you do not need to have a stream of income to have value, intrinsic or otherwise.
    Furthermore, gold is traded in a world market and simply looking at its value in dollars doesn't tell you much. If you look around the world there are a great many currencies in which it has been a most profitable investment. In addition, the Central Banks are increasing their gold holdings, suggesting that they see some intrinsic value in gold. Bottom line, Gold shines brightest when the value of paper obligations become suspect.
    Feb 15, 2015. 01:30 PM | 5 Likes Like |Link to Comment
  • Fed's Insistence On Transitory Disinflation Puts A Pause On The GLD Trade [View article]
    Gold has been rising and will continue to rise as a result of the appearance of deflation. This is the bit that most people don't understand because we haven't seen deflation for several generations. The key part of a deflation is defaulting debt which causes people to look for a safe haven that is not someone else's debt.
    It has also been a long time since there was a gold standard, but if you check, every deflation has ended with a devaluation of the currency against gold.
    Jan 30, 2015. 05:57 PM | 4 Likes Like |Link to Comment
  • What Is Keeping GLD Up? [View article]
    The simple answer is demand. A more complex answer is because of deflation fears.
    Jan 12, 2015. 03:28 PM | Likes Like |Link to Comment
  • Manufacturing PMI Deflation Shock For SPDR Gold Trust ETF [View article]
    If you are right about deflation, then you are wrong about gold. It is my view that deflation remains as a significant risk and with deflation comes bankruptcies - which are the market's way of getting rid of excess debt. That will push people to hold cash (to take advantage of declining prices) and gold (because it is liquid and not someone else's debt). In addition, history shows that deflations are generally followed by a return to sound money, which is achieved by devaluing the currency against gold.
    Dec 3, 2014. 12:50 PM | 1 Like Like |Link to Comment
  • GLD - On Inflation And Econo-Watch [View article]
    While I agree with Fishfryer (above), I do not see inflation as an issue. The real issue is deflation and if (and as) we tip int it (as Europe appears to be doing) both gold and the dollar will soar. That's because deflation is the bane of creditors as it makes debt more expensive to repay, causing large amounts of debt to default.
    What we are waiting for is a trigger event and I believe that it will come from either Europe of Japan and in either case will involve illiquidity of the banking system.
    Nov 22, 2014. 05:09 PM | 3 Likes Like |Link to Comment
  • What Is Next For GLD? [View article]
    The only important issue is whether or not the developed world is tipping into deflation. I would argue that it is, but we are not there yet and when we are it will be too late to act.
    The problem is the mountains of debt - public and private - that cannot be repaid, only rolled over. The central banks have outdone themselves in trying to create some inflation to reduce this burden and have been unsuccessful despite the trillions of dollars (and Euros and Yen) that have been injected into the monetary system. That leaves only deflation to get rid of the excess debt.
    That, of course, is an environment in which both cash and gold will see significant increases in value. Cash will become valuable because of declining prices and gold will become valuable because it is not someone else's debt - and in a
    deflation, all debt becomes suspect.
    Nov 21, 2014. 10:59 AM | 4 Likes Like |Link to Comment
  • The FOMC Pushes Down GLD [View article]
    I agree that there is little inflation but the danger is not inflation it is deflation. Europe is already showing signs of deflation and Japan can't shake the deflation that has plagued them for a decade.
    The problem strikes me as both simple and straight forward. The developed world in as well the emerging markets have incurred an excessive amount of debt that not only cannot be repaid, but cannot be serviced at "normal" interest rate levels.
    There's nothing new here; societies have become over-indebted throughout history. So far, there are only two known ways of solving this problem: creating a level of inflation that reduces its value and experiencing a deflation that removes the excess debt through bankruptcy.
    Currently, the inflation route has not been too promising given the trillions of dollars of "printed" money that has been created and when that plan fails deflation takes hold.
    The good news is that gold (along with cash) always performs well in a deflation (particularly as it is a liquid asset that is not someone's debt) and is often the solution to restarting and restoring the economy. Indeed, that's what FDR did (revalue gold) to combat deflation in the '30s as have many leaders in similar circumstances throughout history.
    Nov 1, 2014. 06:29 PM | 2 Likes Like |Link to Comment
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