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htmortimer

htmortimer
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  • Are There Any 'New' Catalysts To Cause Gold To Rally? [View article]
    The problem, as I see it is one of excess debt and excess debt is debt that can never be repaid. When there is excess debt, the usual reaction is to reduce its value through inflation. If that doesn't work, Mr. Market steps in and causes debt to default by refusing to refinance it. That process reduces the excess debt just as surely as inflation, but also causes a depression. The correct response to that is to devalue (depreciate is the correct word) the currency, but that is often difficult to do when everyone is trying to do the same thing. If you have a lot of gold as we do, then you can devalue against gold and those without gold cannot follow.
    My view is that the forces at work now will force us to return to a gold standard.
    Jun 7 12:54 PM | Likes Like |Link to Comment
  • Are There Any 'New' Catalysts To Cause Gold To Rally? [View article]
    As you no doubt know, "money" is created by both the Fed and the banking system. Recently, the Fed has been creating like crazy and the banks have been destroying like crazy. As you also probably know, most of the "money" in the system is the result of bank lending and not Fed "printing". I would add that you can't look at the money supply without looking at velocity (which is near all time lows). Bottom line, there is no inflation now because there is little net money creation. That's why i believe deflation is more likely than inflation.
    Jun 3 08:56 AM | Likes Like |Link to Comment
  • Are There Any 'New' Catalysts To Cause Gold To Rally? [View article]
    I beg to disagree. Two things happen in a deflation: the currency strengthens and gold rises - indeed in every deflation that I am aware of devaluation of the currency against gold was used as the way out of deflation. Indeed, devaluation used to refer to changing the gold value of the currency. Changing the value against other currencies was called depreciation.
    The reasons are simple: As prices fall currency buys more goods and services; debt becomes suspect as it is defaulting and gold is not someone else's debt.
    Jun 2 11:53 AM | 1 Like Like |Link to Comment
  • Are There Any 'New' Catalysts To Cause Gold To Rally? [View article]
    The only reason for a sustained rise in gold will come from the financial markets and it will come in the form of an economic crisis. Stuff like what is going on in the Ukraine is not going to do it. Either we will have massive inflation or, in my opinion, more likely deflation. Either will send gold skyrocketing. The rest is just noise. The underlying issue is excessive levels of debt and the only way to reduce them is through inflation or deflation. Right now, we are waiting for "the straw that breaks the camel's back".
    Jun 1 12:35 PM | 1 Like Like |Link to Comment
  • 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 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 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 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 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 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 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 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
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