ozzy43

Are GLD and SLV Legitimate Investment Vehicles?

In response to the comment immediately above (if it does not, as the author insists, vanish quickly):

Anyone who believes that the Wall Street Journal and NY Times are disinterested, unbiased bystanders who would be willing to expose fraud by financial elites is really living in Wonderland. Many of the people benefiting from the fraud are among the same people who control those Establishment media. It's not surprising that someone who is so blind to the fraud that is the mainstream media would insist on blinding himself to other possible frauds. I notice that his post here was not even in response to the article above - did not address the significant points at all but preferred to post a diatribe on an article cited in the article above. Perhaps THAT is why the post will vanish, if it does. Sounds like obsession to me...

Now, in regard to the article in question, the issue some of us have is: self-directed 401k accounts do not permit acquisition of physical metals, but *do* permit investment in ETFs. In such a case, what would the author suggest as an alternate? Would CEF be the best bet? I don't like miners at this point because I expect this bear market rally to fail at some point, and that would likely drag down miners as well, though perhaps not to the same degree.

Why I'm Keeping an Eye on Corporate Defaults

I think the author is overly optimistic. The 'problem' didn't take 25-30 years - it's taken almost 100. Fiat currency and fractional reserve banking began a lot longer than a couple of decades ago. Since 1913 (and central banking as we know it didn't really come together as a consolidated whole in this country until FDR in the 30s), the dollar has lost 95% of its purchasing power. We grew up in this era, and take it for 'normal' - it's not. Current policies cannot but accelerate that ongoing loss. The difference between 'nominal' and 'real' will inevitably become apparent, and sooner rather than latter, it seems likely.

This is not a recession, cooked government figures notwithstanding. It's a depression. A fundamental restructuring of the economy is underway, masked by government bailouts of zombie companies and cooked up figures for economic indicators on all fronts. But the toxicity remains. The 'real' unemployment rate is north of 15% already - what's the 'real' GDP? The 'real' inflation rate? Who knows? I do know it is far, far worse than these metrics reveal - and that this is not an accident.

So does it really tell us anything to look at corporate defaults when you have so many sectors being artificially propped up by so many market-distorting forces? I don't know, but I think, like so many other metrics that would yield useful information in a free market, the answers from reading such tea leaves are likely to mislead.

Hyperinflation Not on the Horizon

Yes, there can be no doubt that the Fed will act in an intelligent, responsible and far sighted manner. After all, there's a first time for everything.

Look at Oil, Not Inflation, as Gold Price Indicator

Open the taps? Close the taps? So oil supply is now effectively infinite and opening and closing taps is all that's required? This ignores the very real geological fact of peak oil AND the fact that oil is consumed whereupon it disappears, whereas gold isn't and doesn't.

Inflation Expectations and the Price of Gold

Straw man argument. Analysts like Mish Shedlock make a compelling case for deflation - and it has nothing to do with looking at the CPI. If the author is willing to thoroughly address the arguments Shedlock makes, I'll be interested in reading it, but this post adds little to the debate.

Buy Gold on Weakness

This analysis seems to completely ignore the other component of the money supply: bank credit. Doesn't matter how much monetization the Fed does if the total money supply shrinks, which is deflationary. The Fed has been fighting deflation now for some months and guess what? They seem to be losing. Seems obvious there will be no inflation in the near or mid term horizon, regardless of Fed efforts. Mish Shedlock and others build a compelling case in this regard.

That said, it certainly seems like inflation is in the cards in the future - but that's probably years away because the Fed has been so spectacularly unsuccessful so far in achieving its anti-deflationary aims and banks are just sitting on their funds, since this is the smart money thing to do in this environment.

What I'd like to see is a serious analysis which looks at the prospects for gold in an extended deflationary period. I am currently long gold, and plan to add cautiously, especially if we retest lows, but not because inflation is imminent.

De-Leveraging Is Not Deflation

I think this is pretty simple. I agree with von Mises/Rothbard/Hayek/e... that an increase in money supply = inflation. Austrian economics are sound. However, bank loans are one component of the money supply. Using a simplifies but accurate model, if A + B = C, where A is printed (OK, electronically created) dollars and B is bank loans (including mortgages, credit card debt, multiplier effect, etc) and C is money supply. A is way up, but B is even further down, and future defaults will continue to drive B further down, even as A continues to increase.

So C is going down, on net. For now. That means deflation. The net money supply is shrinking, despite the Fed and fed actions. Until that trend slows, then stops, inflation will not be a worry. And trying to time that occurrence - a virtual impossibility IMHO - will probably be suicidal. Might be next quarter - or next year, or the next. Throughout, governmental manipulation will continue to make things difficult to understand and extrapolate.

A Depression and Recovery in Internet Time

I think this statement says it all:

"Indeed, the eye of the storm has passed and 2009 will be a much better year than everyone expects."

Anyone who has lived in Florida can tell you: it is after the eye passes and the 'back' side of the storm then hits that most of the serious damage is done. The author does not seem to realize just how apt his metaphor is, because he does not understand hurricanes any better than he understands economics, which is born out by making ludicrous assertions like 'over the top deficit spending' is the 'only known fix'. I suggest some reading on Austrian economics.

High Cash Stockpile Available for Buying Stocks to Fuel a Rally

"...Gross domestic product will contract in the first half of the year before growth resumes in the third quarter, according to a Bloomberg survey of economists."

These are, presumably, the same economists who insisted up until 3 months ago that the US would avoid a recession?

Given how wrong mainstream economists have been about EVERYTHING recently, it makes about as much sense to trust their predictions going forward as it does to listen to the Intel community's prattle about geopolitics. At least the latter don't constrain themselves via wholly artificial and proven-wrong econometric models.

The only economists worth listening to are those who correctly predicted what has happened - that would be one school and one school only: the Austrian economists.

As Good as Gold?

Anyone who relies upon the fraudulent CPI as an accurate indicator of inflation, and uses this metric as a basis for virtually any calculations which directly involve inlfation, can safely be ignored.

The Problem with GLD and SLV ETFs

The author raises valid concerns; however, GLD and SLV are within the scope of a 401(k) plan. Purchasing and storing physical metals are not.

The latter would be vastly preferrable, but today, government legislated vehicles like IRAs and 401(k)'s represent the only available investment dollars for most.

In a non-ideal world, the GLD and SLV ETF's have their place, and their risks.

Fiat Money and a Profligate Congress: A Bad Combination

An astonishingly naive view, politically speaking. If this government of ours has proved nothing else, it is that it is utterly incapable of abiding fiscal restraint of any form.

Also worth noting: every episode of fiat currencies deployment, historically speaking, has ended in massive economic dislocation. In France, in the late 18th century, it ended in the guillotine being put to good use. Perhaps they were on to something...

Another Brick in the Wall: the GDP, Gold and Silver

I do not understand why intelligent people insist on citing fraudulent government statistics like the GDP. Garbage in, garbage out. Any analysis that relies on such bogus numbers must per force generate flawed conclusions. Using shadowstats.com numbers or some similar more reliable less biased measure would yield conclusions in line with reality rather than government sponsored fantasy.

Ignore the Hype - Gold as Currency is Dead

All one can say to such a short-sighted, ahistorical, down right willfully ignorant argument is: rofl.

Inflation Could Cure Our Economic Ills

The fundamental problem is one of malinvestment, thanks to both the feds and the Fed along with the giant financials (or do I repeat myself?). Until this vast misallocation of capital is corrected - flushed out of the system - the system will remain ill. Increased government spending - more debt, more deficits, less purchasing power - will do nothing but to exacerbate the problem, and destroy the dollar in the process. More people need to learn Austrian economics, which predicted exactly this scenario, and which explains how to correct it. Too bad Keynesianism is apparently alive and well, and leading to policies which will destroy the USD as the world's reserve currency, and the US along with it. We cannot inflate our way out of this mess, this will only increase the pain of the eventual collapse when it finally occurs. Of course, that's not about to stop Helicopter Ben - the man who learned all of the wrong lessons about Great Depression 1 - from trying.