Seeking Alpha


Send Message
View htmortimer's Comments BY TICKER:
  • Gold's Artificial Lows From Extreme Shorting Attack Won't Last [View article]
    There are many ways to guess at the value of gold after the debt bubble bursts. I would opine that around $12,000 per ounce is probable because that would restore gold as a percentage of international (central bank) reserves to roughly the amount (50% of total reserves) that existed from 1950 to 1971 on average during that period. Bottom line, the increases in the price of gold following a bursting of the bubble are going to be very significant even if they are much less than your and my guesses.

    As an aside, I would note that the "total" amount of derivatives outstanding grossly overstates the values at risk. A single derivatives transaction generates multiple transactions of the same risk amount as counterparties hedge their book. In addition, derivatives transactions have no principal risk as (unlike bond transactions) no principal amounts are exchanged. Instead, they involve exchanges of cash flows on "notional" amounts.
    Aug 10, 2015. 09:35 AM | Likes Like |Link to Comment
  • Gold's Artificial Lows From Extreme Shorting Attack Won't Last [View article]
    I wouldn't expect a meaningful move in the price of gold until the debt bubble bursts - as it surely will. At that point, I would expect to see prices to rise by more than $1,000 per ounce.
    The big question is when will that happen and that is very hard to determine because it will almost certainly will result from a seemingly random event. In the mean time, the world's central banks will continue their extreme policies to counter the forces of deflation, much as did Sisyphus with his rock. Ultimately, they, like Sisyphus, will be unsuccessful.
    Aug 9, 2015. 10:39 AM | 2 Likes Like |Link to Comment
  • Greece Bailout Agreement Adds To GLD Selling Pressure [View article]
    Not really; the US has the ability to print dollars to pay off its debt, while Greece cannot print Euros.
    With respect to the currency, I expect that the dollar will be rising vs. other currencies because of the $9 trillion or so that has been borrowed and converted into other currencies (e.g., dollar mortgages in Hungary). This represents a gigantic short position against the dollar that will need to be covered.
    Jul 17, 2015. 08:52 AM | Likes Like |Link to Comment
  • Greece Bailout Agreement Adds To GLD Selling Pressure [View article]
    I would note that US debt is well over 100% of GDP. Your numbers do not include the US Treasury debt owned by the Social Security Trust. It is often excluded on the theory that it is "owed to ourselves". The fact is that it is a debt of the Government owed to all of the payers into the trust and really reflects the borrowing of money that has been spent. Eventually, it will need to be repaid when outflows from the Trust exceed inflows.
    Jul 15, 2015. 10:50 AM | Likes Like |Link to Comment
  • Greece Bailout Agreement Adds To GLD Selling Pressure [View article]
    If you think that Greece will be able to pay any of their debts or meet the conditions imposed on them, I think that you have either gone through the looking glass or are somewhere in la la land. Just meeting a primary surplus in 2015 will prove to be impossible.
    But that is not really the issue and anybody whose gold investment turns on whether or not Greece blows up is misguided. Greece only illustrates the problem that the world economy faces: excessive quantities of debt that can neither be repaid nor serviced at "normal" interest rates. Even in the US, growing your debt faster than you grow GDP eventually takes you to a very bad place.
    Right now storm clouds are forming everywhere:China, Japan, Russia, etc. Puerto Rico and Greece are indeed minor in the scheme of things. Remember Penn Square Bank? That was a small unheard of bank that took down Continental Illinois (the 7th largest US bank at the time). Why? Because their involvement with Continental Illinois caused them to lose a significant part of their short term funding.
    That's how these things start; never with something obvious. For my part, I find it hard to see how we will avoid the storm that invariably follows the creation of excess debt and that is the reason to own gold, not to try to make a few bucks off of a $100 move.
    Jul 14, 2015. 06:10 PM | 10 Likes Like |Link to Comment
  • 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
More on GLD by htmortimer