I think everyone by now knows what I think. Sure there's inflation. Anybody who actually has to live in the real world can tell you there is inflation. All commodities are rising. Most importantly IMO gold is rising. There is no shortage of gold. All the gold ever mined is still around. So we can't blame rising gold prices on a shortage of gold. Inflation is simply too much money. When governments try to get something for nothing by printing paper currency it eventually flows into hard assets. Populations will eventually figure out that their money is decreasing in value either consciously or unconsciously and they will fore go saving because they realize prices will be higher if they wait. Now the government will quote some crazy statistics about how computers are cheaper because they are faster or rent is cheaper so housing hasn't gone up or how hamburger is no longer as expensive as prime rib used to be as evidence that there is no inflation. Does anyone really believe this stuff?
With the big rate cut a couple of days ago and more apparently on the way it appears the Fed has put the Kibosh on the dollars attempt to climb out of the cellar. There's a blizzard coming. A blizzard of money. Got Gold?
Thursday, January 24, 2008
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42 comments:
Gary,
Whats yor favorite gold miner? Also do you think AEM and AUY are the best ones?
Also, good posts lately. Keep it up.
Is DBA could also benefit as much as GLD from rising inflation? Can the govts manipulate their value as they have done with gold?
My favorite gold miner? GDX :)
DBA should definitely benefit from rising inflation. Doubtful that governments can manipute the price of all soft commodities. They aren't going to ultimately control the price of gold either. Heck they've let it rise from 250 to over 900. Not ver good manipulation if you ask me.
That was the shortest recession ever. On to new highs we go.
;p
Gary,
I'm seeing more of the inflation vs. deflation discussions. A popular opinion seems to be that with RE values going down we may experience deflation across the board, similar to what happened during Depression.
Do you think there's a danger of deflation?
There is a danger of deflation, which is why the Fed will do everything in their power to stop it. In the process of stopping deflation, they will cause inflation.
With Big Ben at the helm. Not a chance.
gary
I am afraid you are confusing money with credit. What we are heading into
is a collapse of leveraged speculative credit expansion reflected in broad money supply.US is
a credit based economy with relatively low cash base.It is very hard under such a structure to have inflation while real economy is contracting. Gold may disappont.
stockshah-
Those are my go-to's. And institutional favorites as well. When they start to struggle, it is often a signal.
Good luck.
MarkM
Yeah gold disappointed me to the tune of $28 dollars yesterday. Heck it's been disappointing me for the last 5 years. Gold is a thin market and as such it's going to have scary shakouts. These will keep the majority of investors from being able to ride the bull. I can tell you right now I'm absolutely not going to be one of the also rans that gets bucked off.
BTW so far this morning it's disappointing to the tune of another $15. Thanks Ben. Sure am glad I didn't listen to Beanie when he told us commodities where going to collapse $300 dollars ago :)
yen up overnight. ditto for base metals and PM. even our stock futures look good. pinch me, but i just might make more money today than yesterday, and yesterday was a pretty good day :-)
Mr. T.
forgot to mention Asian markets up 4 - 7% overnight on stimulas drunkeness. wow....the recession really *is* over.... (lol)
Mr. T.
Hmmmm....the consensus (except for Kudlow and a few other media cheerleaders, who don't count in my book) is we bounced off a tradeable bottom two days ago. Not a single "agendaless" individual thinks we have formed a bottom.
From a contrarian perspective, maybe we go much higher than the +/-1400 that Gary expects us to top out at - up to a point where everyone is feeling comfortable that we are out of the woods. Then, we crash.
Wouldn't it be ironic if someone took their 'tax rebate' and bought gold with it?
Crush,
That's what I'll be doing with my check :)
JJ,
I think you probably hit the nail on the head. I will be watching the Yen to approach the up trend line before I'm willing to enter shorts again. Whether that puts the S&P at 1400 or 1500 I don't know.
Anyone else take note that the Fed rate cut did not result in a positive close for the market. The market didn't turn until the Yen topped the next day. Rate cuts are not going to save this market. The only thing IMO that is going to make a difference is if Japan and Europe decide to go down the stagflation path along with the US. So far they seem determined to stay out of that quagmire.
Remember me saying Platinum leads the precious metals market? Take a look at what happened yesterday and what's happening today.
What's most interesting about the inflation/deflation debate is that both sides are buying gold and other precious metals. Based on history, gold is desired in periods of economic distress. In inflationary periods, paper money becomes worth less (and sometimes worthless), thus hard assets retain their value. In deflationary periods, people hoard money, and gold is money. Anyone who thinks there would be a sale on gold were we to enter a deflationary depression needs to think about it a little more. If you had a pile of gold at your house and the economy was crumbling around you, would you be yelling, "Take it! Take my gold! Just make me an offer and it's yours!" No way in hell. Though this is precisely what people do with stocks and bonds during such times.
The Fed is going to try to avert the contraction of money and credit by continuing to lower interest rates. It will work just as well as it did in Japan, i.e. not at all. While consumption (consumer spending) is still holding out, it's on its last legs. When the number of peak spenders drops, which it soon will, AND people increase their savings rate (currently zero), it's lights out for the economy. It's going to then take a long time to recover from the massive extension of credit that's occurred over the past 25 years. So hang on to your gold until the market is offering a ridiculous price for it.
My advise: pay attention to B and continue to ignore Beanie :)
gary i know you wont answer me but :) i may close out part of my twm and roll it into more dba , or possible dbo , gld, slv . just not sure yet .
the unknown loser
I've sold all my GLD and SLV and most of my gold stocks. I will buy back later this year at much lower levels. Been holdin' GLD for over 2 years. Sure it may go higher but, pigs get slaughtered and I want to take some time off. Metals will be lower later this year.
f
Could this possibly be JAKE THE WINNER?
It's just good money and risk management.
f
Ok folks...please go back to economics 101...lokk up inflation, deflation and STAGFLATION.
Deflation in a fiat currency enviornment means contraction of the money supply. Deflation in a commodity currency means a decrease in overall prices. We are experiencing none of these. We have increasing prices and increasing money supply.
Sorry Kaan..increase in credit is increase in actual money supply. Go look at the FEDs own numbers. How is this so? look at housing....Joe buys a house with no money down. He borrows 200K fully financed...credit...he buys mary's house...mary just received 200K..this MONEY did not just go away. Even if Joe can't pay his mortgage, or the value of Joes house decreases, the original 200K still was PRINTED. The debt did not go away, even if it is worth less. The loser is the last user of the created money..which is usually the consummer. Its the same with government debt...when the government borrows money...credit...you don't think dollars are printed???..trillions printed to finance a war...you don't think any real money was printed??it doesn't matter if it electronically transferred from a government account to haliburton, to dubai the MONEY is created. Oh and YOU owe the principal and interest. Gold will not disappoint.
F...HOGS get slaughtered, PIGs get fat...lets all be pigs...imho..gold will bottom for the year in March..if you call around 800.00 a bottom..(give or take 30.00)..before it explodes higher
N
Taking profits now and not paying taxes for 15 months and using the money to generate small returns until PM correct makes perfect CENTZ to me. 750-800 will be a good level as it looks now...might not be then. N, take some profits...fat pigs always get slaughtered first..haha
f
F..I have been taking profits...I am waiting to reload for april/may
nat,
What makes you say March is the month gold will find a bottom around 800? Thanks.
Gary:
major problems in South Africa with platinum and gold...one Platinum mine flooded, energy issues with other mines, deficit in supply again, of course 50% of all platinum ends up in catylic converters...that 2k car the Indians are producing is going to do wonders for demand..wait till they export it to China..or the chinese come with their own version...and now their is a company in California adding gold as well as platinum to converters..wonder what that will do to gold now that it will incorporate an industrial component as well as store of value..
John..I think because oil will bottom around then..end of winter season..and refiners will begin switching products from heating oil. I also think europe will cut rates by then, giving a boost to the dollar...temporarily..this is just my opinion, don't think I can predict any better than the next guy. But I do see gold pulling back about 15-20% from whatever top it makes in the next 2 weeks or so..I am more focused on price level than actual time frame. In that, whether it is this month, next month, month after, is not a big concern. Just look for a level you are comfortable with if you are holding for long term.
For those who say that we cannot have inflation under our current fiscal structure, and that money and credit are being confused: you need to look up a guy called Hyman Minsky. He laid it out pretty clearly, that since the Great Depression, the size of the federal budget has expanded to become a significant part of the economy, and the federal government will always increase spending and give tax rebates to stimulate the economy, at the expense of inflation.
Happy I sold my PM position this AM.....!!!!!!
f
Trying to time the ups and downs of the gold/silver markets is -- for lack of a better word -- stupid.
These markets are volatile. Volatility works both ways. Why worry about a 15% pullback when you're going to pay 28% taxes on your GLD?
Secular bull markets last years and years. And, they extend further in the upside direction long past what anyone can forecast. So, if you're moving in and out, you will under-perform.
Find a secular trend, bet big, don't let the pullbacks deter you, and ride it out.
Re: oil, Russia just announced they're cutting exports in February by 9% (that's 500k barrels per day) plus Nigeria just announced that exports in March will be down 400k barrels per day. Plus Saudi Arabia just announced that a 1 million per day project due online in 2008 has been postponed.
We have an annual decline rate of 5-6 million barrels per day, projected demand going up 2% (that's trimmed down for a recession), exports dropping even where production is steady, and new projects that were supposed to come online in 2008 being put on hold. Plus the Fed's about to cut another 1/2 percent.
John D...I never move "out" of gold or silver..I have been accumulating for years. I add to the position every year. I do however use leverage during up trends. I don't try to catch tops or bottoms..I don't need to....my returns have been quite good, my position of gold and silver is increasing and I don't worry about tax rate relative to the profit I have achieved. Plus I have lots of deductions.
COT not looking great.
Words of wisdom John!
Today's action was very important IMO. The weekend update is going to be a long one this week. (sigh)
Gary, once again, thanks for a great week of comments and keeping calm during a crazy time in the markets. I just want to remind you that there are many people here who appreciate your work everyday and know it takes a good deal of effort (and patience sometimes!) to put this together and keep up with the comments.
Thank you!
By the way, you were not seen hanging around the Monte Carlo Casino earlier today were you! :) I guess that is one way to keep people from gambling. Seriously, luckily no one was hurt.
Have a great weekend!
rb
Hi Natanarchist,
I wasn't referring to you specifically about moving in and out of gold.
I read this blog every day and noticed that a lot of people seem to ask "is gold going to go down?" "should I sell my commodities?", etc, etc.
In my opinion, these people will end up under-performing, and could even likely lose money in a huge bull market.
There will be a bubble in gold at some point, but that's going to be when doctors and lawyers stop practicing medicine and law and instead trade gold futures because there's a fortune to be made. Or, worse yet, put on a hard hat and actually try and mine gold.
How many people were venture capitalists in 1999? Lots of people that had no business doing so.
So, we haven't reached the end of the secular bull, regardless of what charts say.
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