Blair

'Dr. Doom' Bearish on Gold

The reason to have gold is very simple: you don't know what will happen in the future.

Given the people in Washington, you know that they are unable to run our economy, even though they think that they can.

So, you hold gold as an asset hold -- long term and you do not!! trade it.

Watching a Germany investment broadcast last week (after the sell-off), there was one analyst saying that he expected gold to hit $2,500. It is always interesting to get an insight from someone out side of the US.

I don't know where gold is going -- no one does, so don't try to rationalize inflation/deflation or whatever in the future -- but I am repeating myself.

Dollar Rally: Follow the Contrarians

If you look at the dollar index, there is a massive double top generated from fall 2008 to summer 2009. A projection indicates a down move to the low 60s. I.E. a 20% drop from here ≈ 76.

The Next Crisis: Spiraling Inflation (Part 2)

My put on having a significant position in precious metals is, basically, not knowing what will happen next with regard to economic and financial matters.

Some worry about inflation, some worry about deflation. One will know with hindsight which worry point will be the most significant.

All one has to do is to watch what is going on, world-wide, to be aware that all of the powers have gone to the same school. From my perspective what one sees right now is a world-wide collapse of fiat money system. One can rant and rave about the root causes of the problem, of which I can discuss, but it is not relevant.

The baseline where I come from is to hold precious metals and precious metal mining securities. Don't trade them because you may find that come a situation that you may not be able to get back into them, i.e., the price has run-up too much in terms of fiat money. Don't try to do 'top price of the gold market' either.

When to get out? Without question, not now. One bench mark is to see fine gold chains and stores with sensitive scales to cut off an appropriate length to purchase an item. (Hint -- look for companies that will sell such scales in the future and mints that will take up the gold scraps to make new chains.) Even then, you may find that long term, 100s of years?? where gold will be the principal medium of exchange.

Can Gold Supplant Commodities in Your Portfolio?

I look upon holding gold and its derivatives, as a hedge against fiscal and monetary uncertainty.

I don't try to decipher whether we are going to had inflation or deflation. What I do know is that I have no trust in what ever the western governments will do to get our economy going again.

Consequently, my opinion is to buy and hold gold over the long term. I think that the time to get out of gold will be fairly obvious when everyone is going out and buying gold. Just like the 2002, 2007 and 1929 tops.

Nouriel Roubini, One on One: More Doom and Gloom

The basic question is: where did we come from and how does the history prejudice oneself.

I have gold investments. Why do I have gold investments? Answer is quite simple. I don't know what the future brings -- deflation or inflation? Anyone who says that they know is deluding both themselves and anyone who listens to them.

I do know that I don't have any faith in the central banks and/or legislative bodies to do rational actions to control the turmoil. I do have faith in gold simply because it has limited supply. I don't know where it will go in the short term, but in the long term I am convinced that its price will be significantly higher. There will be a time to reduce gold holdings, however, it is not now.


Now, let us talk about the price of oil. Dr. Roubini says that $30 is a good price. I disagree. There is no doubt that overall consumption can be controlled by different methods. But, one thing that is not stated is whether the so called baseline has oil *underpriced* over the longterm. I am of the opinion that energy resources have been underpriced for all too long. Similar situation to have clean water. We can have clean water, at the expense of cleaning up 'dirty' water. Just think about the cost of drilling for oil 10,000 feet below the ocean surface.

Thus for the energy issue, I see energy as a long term buy and hold investment. You don't trade the stuff. The value of the energy resources will mitigate the impact of any kind of financial instabilities. In a modern society, you will always need source of high density energy. A bunch of wind mills and/or bio fuels will never provide it in sufficient amounts. As far as I can see, nuclear power is the only long term energy resource that will meet the requirements.

Three Asset Classes that Can Actually Outpace Coming Inflationary Price Increases

One poster repeats a statistic that I have seen elsewhere, viz, personal income is up. Where is the money going to?

With a 10% unemployment rate, what that statistic implies is that all of the gainfully employed got a 10% pay raise. Now, if you want to include all of the government handouts, then I can partially understand the statistic, but not to the extent that personal incoming being up.

Don't believe everything the government tells (or doesn't) tell you.

The Final Market Bubble

On Feb 10 11:03 PM derryl wrote:

> Hyperinflation can be stunted by a value added tax (seekingalpha.com/symbo...)
> on everything. A 100% VAT would instantly double the price of everything
> so 1/2 of any money that is spent (rampant spending contributes to
> or causes price inflation, as our recent bubbles experience shows)
> would flow to Treasury, and Treasury could remove that money from
> the economy by using it to buy back its bonds from the Fed. Or Treasury
> could just lock it in a vault.
>
> There is no limit how high the VAT could be set. If it was 500%
> then a $1000 item would cost $6000 and pretty soon even a hyperinflationary
> spending mood would be cooled down because the government would suck
> so much money out of the economy every time anybody spent some money.
>
>
> In hyperinflation the velocity of money reaches warp speed as everyone
> tries to trade their cash for something they think will hold its
> value. So we bid up the prices of everything to get rid of all our
> money before it is worth less.
>
> But if Treasury takes a large slice of that money out of every transaction
> then after purchase #1 for $1000 (with a 100% VAT) the seller only
> has $500 to get rid of, and after purchase #2 for $500 the seller
> only has $250, etc. Pretty soon there is no longer 'too much money'
> in the system. It's a fast way to suck money out of a system where
> too much money is chasing too few goods.
>
> There ARE solutions to these monetary problems. We don't have to
> just sit back and allow arithmetic problems involving money to cause
> the world to end. The solutions would be politically difficult (a
> 500% VAT!!! Raise the guillotines!). Maybe Paul Volcker will be
> the guy who kills hyperinflation.

There is only one problem with this concept: There are such things as black markets. With such a large spread introduced by the VAT, there will be enough 'fat' to enable profitable VAT avoidance transactions. Mankind has always been inventive to avoid taxes and there is no reason to think this situation will be an exception.

Gold's Divergence Between the Paper and Physical Markets

If you look at the long term charts, a 50% retrenchment calculates to (roughly) $625. Examine the charts, this dollar value lies within what should be a support area.

A 33% retrenchment calculates to roughly $780, which again should be a support area.

One will know where gold bases out with hindsight. By the way, these estimates are based on London gold prices.

Some of the discussions are interesting. My surmise is that many leveraged gold buyers are being faced with margin calls, and consequently are dumping or being required to raise cash through selling assets that have held up in this recent bear market.

The Current Market Atmosphere: Easy Money Hard to Come by

I don't know whether anyone will read this late posting, but my put is the market is going back to the 2001-2003 bear market low.

What happens next is another story.