The “Golden Age” of Recession

As many posters may have followed My Gold comments on Nouriel’s blog, I decided to keep this discussion going, but move it to a stationary location, so we can better debate the macro views of gold.  In addition I’d like to point out that while the Professor states that gold is a “safety valve” for countries… I believe this DIRECTLY CONTRADICTS his theory of the fact that there is: “NO SAFE HAVEN”. (if gold was truly a “safety valve” then it WOULD BE a “safe haven”!)

As a preamble, I would just like to remind people that my views and opinions are based on my unique style of research and intuition.  I do not have any vested interest for or against gold. At the same time, I stress that you should diversify your reading sources on this topic there are very good/valid contrarian views to mine.  (but be aware that talking heads like Schiff and Rogers do not necessarily offer very unbiased/impartial opinion.  I can’t say this enough… CONSIDER YOUR SOURCE!!! Gold players want the value of their asset to be high. I do not trust anyone’s opinion on gold if they own it. Ownership poisons the well of balanced opinion.) Bubbles? Gold is sitting on a 200% increase in 10 year span!  Its value is 100% above its peak value in 2005  Did the market or any foreign governments experience any disturbances during this time??? In the past year where we’ve witnessed bubbles bursting what happened to gold?  Likewise, in a year that was filled with apocalyptic financial news that brought fear to all time highs…  what did the volume of gold trading look like?  In particular…

When Bear went under… What did Gold Volume do? When Lehman went under… What did Gold Volume do? When FNMA/FRE went under… What did Gold Volume do? When AIG went under … What did Gold Volume do? When Obama was elected… What did Gold Volume do?

Yet January 09 brought on some changes?  Why now? Was our situation better in September? Was our situation better in October?   …November???  I ask again…   Why now?

“Past performance is not indicative of future gains”

If a popping of the real estate bubble has taught us anything…  it should be that many of our historic pricing views are no long practical in the modern day real world.  How long ago were people still saying:  House always go up?  For that same reason I have a warning for all the Goldbugs out there… (and all of those others whom are heavily invested/ing in gold)  For your sake, I hope I am wrong! …but I can’t help but think there is a major “adjustment” just around the corner for gold.

Yes! I am aware of it’s hedge value… Yes! I am aware of its upside and downside, and its currency weight etc… I think I’ve done “my homework” here? (…and yes, I’ve tried very hard to open myself to its dogmatic value, even though I dislike this commodity due to it “technically” being a “useless commodity” because it is nothing more than a poor conductor of electricity.)

>From the perspective of where I believe “FLOW” will go, (and not my opinion of dislike) this is what I have to say:

I can’t help but think that the power players of the gold market are selling industry fear to increase the value of the asset. (as goldbugs will buy on fear) Done in coordination with the strength of the dollar versus the depressed level of equities, distressed debt, Corp Bds, Munis, etc… I believe the big players (manipulators – market makers/movers) are doing this before stimulus devalues the dollar more. One would think this should inflate the dollar denominated Gold… but net selling, coupled with the fact that gold can’t be used as a backstop/collateral, and the fact that in a limited credit environment, credit  will not flow to commodity in a true downturn. Instead, the dollar devaluation (which is a positive for gold) will be pushed against a net sell (which is a negative for gold) for the players in this market to get out at a price that doesn’t leave them catching a falling knife.

So the net sellers devalue gold and inflation of increased stimulus adds to it. Then fear helps get the sales through to buyers at elevated/stable prices. That added credit, of still strong dollars, then buys assets that are at depressed values and are insured through backstopping from the government.

If I was a power player in this market… It would be my move! (this is my OODA loop theorizing) So I believe this to be a potential flow. (until we see gold opened up as a common collateralized security, I doubt it will have any ability to avoid manipulations) If you believe in tightening credit, (or less corporate discretionary credit = money to hedgies that might be more willing to play this market at an impact level) or you believe the upcoming stimulus packages will devalue the dollar, or that the issuance of massive amounts of new USD denominated debt (T’s Corp Bds, Munis, etc…) …then you do not want to own a USD asset that is still trading at 100-200% above its 5 year moving average.

If you look back on volume in the oil market, May08 broke the trend of “light” trading to millions in volume. This lasted for 3 months, and went alongside a doubling of the price of oil. (which I don’t perceive to be “useless”) Then, the floor fell out on oil dropping over 70% from its peak value and at the same time… volume skyrocketed.

Well, In very similar fashion, I believe gold broke its volume trend. (there have been realized fears in the market for almost a year now, since the collapse of BS, LEH, and financial difficulties of ML, FNMA, Freddie, AIG, etc (as well as similar situations overseas) there has been a generalized SYSTEMIC FEAR for quite some time now… yet… none of it led to the same volume that we currently see in the past month.

Now, some may “try to argue” that this is fear turning to reality… …but that is debunked in proof that every time the ACTUAL MARKET STARTS CRASHING DOWN… gold fell hard. (Which flies in the face of its purpose as a hedge?!?!?) This is why in a true meltdown (or credit freeze) its value could potentially be worthless. There’s something else going on here and holders of gold should be on alert! Either they will see a large manipulated upswing, or a 50% drop from current levels! …and if it’s the latter, there will not be any bailout packages for holders of gold.

If I were a betting man… I would take $500 gold over $1,000 gold at high odds! (with a potentially scary $400 floor.)

Inflations effect on Gold:

 A thought to take into consideration is this…  The US Government is a major holder of gold.  It is well “hedged” here amongst the international financial community.  …but in a catastrophic downturn…  The Government would not want a flight to safety to be gold.  It is in the interest of our government to keep Treasuries and US Dollars as the “flight to quality”…  and for this reason you will never see an insurable backstop of gold, and continually see a powerful government keep the commodity in check as a “flight to quality”.

So regardless of the potential impact of inflation, I see vested interests in check.

In a recent article I wrote:  I delve into inflation possibilities and other various market calls.  For example:

“My predictions on the “unwind” leads us down a road of eventual inflation, as currency intervention on massive scales is required. If debt is not reduced, and cash injection approaches are increased, the inflation will increase at a rate comparable to the socialized costs expectancies that have been added through default. (Somewhere between 3% and hyper, but closer to 3%) I see Asian banks (preferably Japanese, since I don’t believe in Ch-Enron as long as free speech (whistle blowing) does not exist) being rewarded for tighter reserve requirements, and expect a higher safety level for wealth retention there. I expect Japanese cash to start buying (or possibly leasing) valuable real estate, and loaning to growth oriented corporations, etc… in an attempt to put cash inflow/appreciation to better investment use. (this will level out when commodity/resources prices “level up” so that once again puts the low resource country at an equilibrium.) I believe transparency issues may arise in the EU, where Fractional Reserve Banking may have expanded (to irresponsible levels) or been controlled (prudently) by different country banks at such various levels, that it may put a level of stress on the EURO that it has not yet experienced. I have confidence in their ability to work through this, but it will come at a cost to the currency. …and finally, I see oil in and around the $40-$45 range as the new expected price. Deflation will press on and drive prices lower short term, (I “guess” $29 is absolute low) but ultimately, inflation and alternative prices will settle on the $40 mark. I believe the oil nation cash will eventually make the necessary move of marrying their commodity and their cash to the green revolution.” (On the upside of an inflationary run… I have $70 pegged as a likely oil price. )

All the best, Miss America

p.s.  For any investors that have followed my calls, I hope I continue to provide beneficial views.  If you are lucky enough to profit from my calls… all I ask is that you pass some good along to others. PAY IT FORWARD! (there are a lot of people hurting out there that need help. In addition… I hope you do not have blind faith in my calls? I’d suggest reading other views and draw conclusions that leave you comfortable with your moves.)

41 Responses to "The “Golden Age” of Recession"

  1. PeterJB   January 28, 2009 at 2:05 pm

    “I can’t help but think that the power players of the gold market are selling industry fear to increase the value of the asset. “You are undoubtedly correct but then, there is indeed a sound basis for fear despite these types of typical tricks of the trade of “investment” cum speculation.If all collapses that is to say the Stock Markets cum Ponzi, cum modern Government System (evolved and manipulated) I have no doubt at all that Gold will be in great demand, not to continue the Ponzi, but for survival.(please refer to my previous posts)Ho hum

    • MA   January 28, 2009 at 2:25 pm

      In that enviornment… I think food will be exchanged for hard currency. Something the masses actually own. Pennies, would be a new medium.I don’t see it going there. the book will be thrown at this crisis to prevent collapse.Something will eventually give. debt forgiveness? Currency splits on equal levels (while debt holds.)… Something.I don’t see an age where I will hand over a nugget for a hot dog.We have evolved. Worst case, a new medium would be born.Thanks for stopping in… and Ho hum. (I’ve always liked that tag of yours)MA

      • Guest   January 28, 2009 at 7:18 pm

        Timely Bloomberg article.From: Founder Takes Grandfather’s Advice on GoldBy Stewart Bailey and Saijel KishanJan. 28, 2009 (Bloomberg) — Greenlight Capital Inc. founder David Einhorn is finally taking his grandfather’s advice. The $5.1 billion hedge fund is buying gold for the first time amid the threat of inflation from increased government spending.Since Einhorn was 10 years old, his grandfather has warned him that investing in bullion and gold-mining stocks was the only “sensible” thing to do given the threat of inflation and the risks of so-called fiat currencies, New York-based Greenlight said in a Jan. 20 letter to clients. The firm had never before considered buying bullion or mining-company shares.“To everyone’s dismay, we believe some of Grandpa Ben’s predictions are playing out,” Greenlight said in the letter, a copy of which was obtained by Bloomberg News. “The size of the Fed’s balance sheet is exploding, and the currency is being debased.”Greenlight is turning to the centuries-old currency to mitigate the effects of the economic collapse and government efforts to end it. Bullion gained for the eighth straight year in 2008 as governments in Europe and the U.S. rescued banks from collapse.Greenlight said in the letter that in addition to buying gold, it has added call options on gold and the Market Vectors Gold Miners exchange-traded fund to its other investments. Call options are the right to buy a security or commodity at a set price, within a set period of time. The owner of the call profits when the security rises above the set price.Gold & Silver IndexThe 16-company Philadelphia Stock Exchange Gold & Silver Index gained 90 percent in the three months through yesterday while the Standard & Poor’s 500 Index fell 0.4 percent. Gold rose 21 percent in that period. Gold futures for April delivery fell $11.30, or 1.3 percent, to $888.20 an ounce today on the New York Mercantile Exchange’s Comex division.Steven Lehman, who manages Federated Investors Inc.’s $1.3 billion Federated Market Opportunity Fund, beat the S&P 500 by 30 percentage points last year. The fund, which outperformed 99 percent of its competitors in that period, also has bet on the precious metal and counts Toronto-based Yamana Gold Inc. and Goldcorp Inc. among its top holdings.‘Too Many Mistakes’Greenlight, which Einhorn, 40, started in 1996, has returned an annual average of 20.8 percent from its Greenlight Capital LP fund. The firm said it made “too many mistakes” last year, when it lost 23 percent from its main fund, its first annual loss. Mary Beth Grover, a Greenlight spokeswoman, declined to comment.The Federal Reserve’s policy of taking unorthodox steps to boost the supply of credit is essentially “printing money,” Greenlight said. The government’s “aggressive” fiscal policy also signals all efforts will be made to stem the effects of the current economic problems, the fund said.Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising asset prices and participate substantially in profits from money invested.

  2. ptm   January 28, 2009 at 2:15 pm

    MA, what do you mean by “OODA loop theorizing”

    • MA   January 28, 2009 at 2:31 pm

      John Boyd’s OODA loop. (the basis of thought for fighter pilots)Much like the Art of War, OODA loop is knowingly practiced in the world of finance.Quite simple… it is:ObserveOrientDecideActThen repeat over and over. In theory, it’s simple. In practice, it trains your mind for staying competitively ahead of the curve. (or ahead or out of your oponents OODA loop.)If you have some spare time, read a little on it. It’s quite simple and IMO a valuable “out of the box” & “Inside the box” logic puzzle.(I like to refer to it quite often)Miss America

      • C.A.   January 28, 2009 at 3:00 pm

        “the basis of thought for fighter pilots”Excellent point. Anyone every refer to you as the “ace of aces?” In view of financial calls that have been astonishingly accurate, it would probably be foolhardy to bet against this logic without a tightly reasoned counterargument. Your posts are consistently on target, yet enigmatic. What causes a wee bit of cognitive dissonance to some of us readers is the fact that you decided (and acted!) to go back into equities looking for a DOW around 8,000, while Dr. Roubini speaks of a further potential 20% drop. Where does your OODA loop diverge from that of the professor, if this is not asking too much? Cheers.

        • MA   January 28, 2009 at 3:58 pm

          TIMING!He is damn near spot on about everything… but his blog is not a timing mechanism. (which too many readers don’t realize)Miss America

          • ptm   January 28, 2009 at 5:26 pm

            Ed Zackly! Goldbugs have it figured out too, but they have no sense of timing.MA, thank you for putting up this discussion. If others are like me, I think there will be a lot of questions.

  3. Guest   January 28, 2009 at 2:45 pm

    MA, you passed on mentioning the GATA documented government, Fed, and IMF interventions in the price of gold

  4. JS   January 28, 2009 at 2:58 pm

    MA – in response to what you said here specifically:”Now, some may “try to argue” that this is fear turning to reality… …but that is debunked in proof that every time the ACTUAL MARKET STARTS CRASHING DOWN… gold fell hard. (Which flies in the face of its purpose as a hedge?!?!?) This is why in a true meltdown (or credit freeze) its value could potentially be worthless.”One thought I have is that all the recent turmoil we had from the Bear collapse to the November lows clearly resulted in widespread asset destruction which in turn lead to a USD rally / treasury rally since they were viewed as the only safe havens. Note that gold dropped as well during this time (due to deflation fears?) but not as much as most assets (about 20%).Since then, there has been two solid up moves in Gold. The first, I believe, was simply part of the year end rally that all assets partook in. However, this most recent push up to 900 and slightly above (and now down below again today), I think is due to the fact that people are starting to focus on the risk that China will clearly not purchase as many treasuries as they have in the past.China’s reduced purchasing of treasuries, coupled with the flood of dollars the Fed has made available, the upcoming record issuance of treasuries, and Geithner’s protectionist comments the other day are what I now believe people are focusing on.Should the scenario play out whereby China does indeed purchase a significant amount less (either due to concerns about the actual credit risk of the US government or due to the fact that they just simply have less money to put to work), then I believe that situation could easily snowball into a severe treasury/USD sell off. The tipping point could be that there is no confidence in any other currency…..not the EUR, JPY, or GBP.So, should this scenario play out, which I think there’s a decent chance it will (maybe 50% chance?), then all that leaves left is gold.All that said, I think you make an excellent point and certainly not one that I have thought of. I’m currently long 6% gold in my port, was planning on going longer (and still am), but you are making me second regardsJS

    • MA   January 28, 2009 at 3:48 pm

      Thanks JS.I hate making calls like this because I damn near get anxiety attacks over their outcome. I hate being wrong, and am very conscious of my accuracy rate. (which has been pretty spotless so far)What I’m finding very interesting is the volume.Some serious DIGGING needs to be done to see what’s going on in volume! (pardon the pun) Fear has been around for a long time. Why now? …and stimulus cash will not flow here, so it’s not that either.People were betting on $200 oil this summer with extremely valid arguments. I said $145 peak with a rapid decline back in May.I don’t trust others analysis.MA

      • JS   January 28, 2009 at 4:46 pm

        MA,I agree that looking into the volume is important so please let us know what you find (I’m sure you will).One thing I think you’re missing though is that even though fear has been around, it is the type of fear that is important to look at. It is only now that people are fearing that the actually solvency of the treasury/fed could potentially be in trouble (in the future). 6 months ago and 3 months ago, people were clearly not fearing this (or they were ignoring their fear) as they were scooping up treasuries and USD’s all day long.JS

        • Guest   January 28, 2009 at 9:04 pm

          Interesting views all. Gold could certainly pull back in the short term, I would still see it as a buying opportunity. I have a small personal position in Gold/Silver equities and will top up if the price pulls back. I’m not very positive on buying gold at current levels. Its a good inflation hedgeJust thought through one scenario that I thought I would share. Its plausible…if unlikely- UST market collapses due to lack of buyers, dollar falls, gold soars, equities tank- Big holders of Gold (TPTB) sell at $2-3000 per ounce??!!, cash up and buy cheap equities, etc.- After the big players have sold out of gold, the fed raises interest rates, restoring the USD’s value, capping inflation. Gold tanks, equities roar, bonds, paying 10%+ interest are finally back in fashion and bought by the big players again.Gold at $900 is not a sell for any big holder, but they would sell if a black swan in the Treasury market (or anywhere else) caused a spike.You then have to ask – would it be possible for TPTB to “manufacture” a crises in the US Treasuries market. My view is its possible….but I wouldn’t bet the farm.

    • Guest   January 29, 2009 at 12:03 pm

      What keeps gold from rising is that Indian women stop buying gold jewelry when the spot price of gold rises above about $750 an ounce. Most of the demand for gold is for trinkets, not as a storage of value.For more about John Boyd and the OODA Loop, see the book reviews at skies! — Dan Ford

  5. The Unholy Scrollio   January 28, 2009 at 4:57 pm


    • Guest   January 28, 2009 at 4:57 pm

      • Guest   January 28, 2009 at 4:58 pm


        • Guest   January 28, 2009 at 4:58 pm


  6. RED   January 28, 2009 at 5:12 pm

    Interesting views all. Gold could certainly pull back in the short term, I would still see it as a buying opportunity. I have a small personal position in Gold/Silver equities and will top up if the price pulls back. I’m not very positive on buying gold at current levels. Its a good inflation hedgeJust thought through one scenario that I thought I would share. Its plausible…if unlikely- UST market collapses due to lack of buyers, dollar falls, gold soars, equities tank- Big holders of Gold (TPTB) sell at $2-3000 per ounce??!!, cash up and buy cheap equities, etc.- After the big players have sold out of gold, the fed raises interest rates, restoring the USD’s value, capping inflation. Gold tanks, equities roar, bonds, paying 10%+ interest are finally back in fashion and bought by the big players again.Gold at $900 is not a sell for any big holder, but they would sell if a black swan in the Treasury market (or anywhere else) caused a spike.You then have to ask – would it be possible for TPTB to “manufacture” a crises in the US Treasuries market. My view is its possible….but I wouldn’t bet the farm.

    • MA   February 3, 2009 at 3:18 pm

      Hello RED,Your theory is pretty much spot on with my theory of what happens if this game goes the other way.It’s Treasuries and USD versus Gold.If gold wins, then your scenario is what I see happening. (which may play out oddly, since I see that coupling with a complete meltdown)the problem is… the people that control the horizontal and the vertical… don’t want that to happen. There will be a huge fight to save T’s and USD. …and foreign governments will join that fight to stablize their interrelated economies. In theory… it’s trickle down governomics.Miss America

  7. Anonymous   January 28, 2009 at 9:07 pm

    The fact that so many people are actively talking about gold makes me think there must be some kind of financial / economic crisis going on somewhere?

  8. PeterJB   January 28, 2009 at 10:31 pm

    I had a friend from Shanghai (I have told this story here before) who was incarcerated in a POW camp (Nathan Road) by the Japanese, in Hong Kong during WWII. His Father kept them all alive by bribing the guards for food and medicine – with Gold – carefully rationed from one solid gold Rolex. He, as well as others I know, always wear a solid gold Rolex; it is called risk mitigation.Ho hum

  9. blindman   January 29, 2009 at 3:02 am

    rh, ma,midevil? i don’t think those were midevil references.they were more ancient than that.!i agree with your position that gold as a currency is unlikely if not impossible. as a intermediary though it could have great value providing the alliances and reliable associations are in place. this is speculation of the downfall of the world order. something sane people refrain from for the sake of is a hedge against the destruction of law. that is what my pre midevil mind tells me. and maybe that is why it is so expensive today, because law is so , well, the other way, my pre midevil mind tells me that the trade imbalance, money in china, will buy a major interest in new york banking to forestall the lights going out in the high rises and then we will see working hungry “citizens” of the u.s. lining up to borrow banker money at high interest. why? to eat.and pay their taxes. or.. we see a big black birdthat appears to resemble a swan.j.p. china.

    • MA   February 3, 2009 at 3:21 pm

      Blindman… don’t get all literary on me.I just used medieval as a “past” type reference. Not a literary one.

  10. PeterJB   January 29, 2009 at 5:14 am

    FYI,I understand that Keynes referred to Gold as that “Barbarous Relic” – no wonder all these so called “economists” are manipulating Gold downwardsand why the real players are secretly hoarding GoldIts a game of the big boys.Ho hum

  11. Capone   January 29, 2009 at 12:06 pm

    reasons i like gold (ZERO vested interest by the way):#1) 25+ year resistance of 500 hit in 82ish and 87ish was taken out a while back which should indicate some strength above that level for a while#2) many regular folks who own it lived through the 800 to 300 crash and have not forgotten – therefore we are at a price level where people are afraid to get long – this is a buy signal to me#3) the chart is much, much different this time wider base leading to here than in late 70s early 80s…#4) in bubble speak, i do not believe we have had the blow off phase to the upside yet. a while back i looked at silver and thought 50 or 60reasons i do not like gold (and oil for that matter):#1) they are the poster boy inflation hedges that everybody talks about#2) gold was confiscated in the past by the government#3) relatively speaking, there are better options that fly well under the headlines and magazines covers that provide inflation hedges – POT or MOS for example, silver perhaps and perhaps other commodities… if you own a commodity stock and there is any success whatsoever in the reflation effort, you will be happyno matter what, physical gold and silver as a small percentage preferably that no one knows about seem to be a sensible ideathis trip ino financial wonderland has taken us so far outside what is known, who knows how it will end

    • MA   January 29, 2009 at 1:16 pm

      Well said JMa….and perfectly objective. Not many people play devil’s advocate enough. It’s killing me right now going against GOLD and for equities…As much as I hate GOLD… I can make extrodinary arguments in favor of it too. But these positives fly in the face of what my gut tells me.When I simplify it, I look at it like this:If there were $100 dollars worthof credit in the entire system. Now A% has evaporated, B% has to recapitalize, C% Treasuries, D-Zetc… Of that… How much speculative $ is left to play GOLD at an impact level???Sure… I’d love to buy $30,000,000 in gold, and there are hedgies out there that would love to buy $100,000,000… but in today’s risk averse enviornment, a commodity like Gold might not be proper risk taking. In fact, playing Gold (adding to fear), likely depresses the value of your other assets.Discretionary spending is better played on an impact level on something that will likely be insured through backstopping… or will add to the value of your current assets.For example… You’ve taken a bath on GE… It might pay to buy GE bonds (with higher rates) in an effort to recap GE to inflate the stock you own??? If it all goes under… The Bonds/GE receive bailouts.It’s just a logic I see prevailing in what are horrific financial times!Miss America

  12. Capone   January 29, 2009 at 12:19 pm

    one more thing, if you think the us dollar is going down – short the us dollar – take the bull by the horns. from a gambling, i mean speculation, i mean wise investment perspective – it has cost me in the past to add something to a bet i mean trade because i was uncertain of the main call. in this case, people want inflation hedges because they are afraid of the dollar declining or crashing yet they are not confident enough to short dollars. if the dollar crashes and they are still playing games with some commodity prices you may not be well covered. buy puts on the us dollar index if you are afraid of unlimited losses shorting.better yet – sell calls above and buy puts below to help pay for it… if the us dollar index is 85 sell the 90 call take that cash and buy the 75 put to help pay for it. if you like these ideas and would like to discuss more, hire me :)that is my $.01 worth anyways…

  13. amacfly   January 29, 2009 at 9:53 pm

    I’m very inclined to accept a gold slide, because historically gold always seems to sink in declines, and rises with inflation. When there is less cash about to buy anything the price of everything declines, including gold, giving cash an edge. When the money taps are turned on there is cash to buy and stash everything, and thats when gold usually rises.MA, I’m still intrigued by your call that the DOW will to stay above 8,000. So far you have been right, but it still seems like we should have one more flush out taking us below the Oct/Nov lows to put in a real base. Would you mind recapping and updating your reasoning please.

  14. belevo   January 30, 2009 at 1:15 am

    In the last six weeks, TLT, representing 20+ long term bonds, has plunged over 15% and no end to the downward spiral in sight. at the mean time, gold has gone up from 750 low to over 900, a 20% up swing. Is this just a coincidence or people finally realize gold has some real value versus US bonds? is money flowing out of dangerous dollar and into gold?check out the charts in this one even if you don’t read Chinese text:

  15. statsdoc   January 30, 2009 at 7:04 am

    Rich,I greatly appreciate your comments. I do take umbrage at your comment “I do not trust anyone’s opinion on gold if they own it.” My feeling is that I would not take someone’s advice if they SOLD gold. If they are arguing that I should own gold, AND THEY DO NOT OWN ANY, I would be seriously concerned. It would analagous to a broker advising you to purchase an equity, when they are selling their position.In that respect you are internally consistent. You are arguing not to own gold, and you do not own any. For a compelling argument, Einhorn would be a good counter position. He is clearly purchasing gold as an investment and does not greatly benefit from an individual’s purchase. Schiff’s opinion would need to be discounted based on the questionable investment advice that his investors have received.Thank you for your insights. You are making me think, which is always a good thing.

  16. ptm   January 30, 2009 at 9:01 am

    With gold jumping up to a six-month high of $920, are you having any second thoughts MA?You know the real trouble with gold? It attracts the fearful, so if you make a call and it looks like it’s going the other way, you have to put with a lot of wining!

    • ptm   January 30, 2009 at 9:22 am

      The trading pattern established over the last several months have changed. Damn, with the price of gold jumping up and down $25 a day, there is so much money to make in this market. Just wish I could see the future.

  17. Todd   January 31, 2009 at 8:52 am

    People are interesting. One guy who posted said he was about to go longer in gold in his portfolio until someone he doesn’t know (Miss America) gave him second thoughts. If you are so easily swayed by one post from one guy, then you definitely shouldn’t buy said investment.You have to be sure (or at least convinced). Do your homework. I ‘got in’ with a group of people who are smarter and more versed than I am in finances. These guys starting buying gold in the 200-300s in the early 2000s. They foresaw the housing bubble and low interest rates. They saw people living off of credit (loans, credit cards, HELOCs, etc.) and negative savings rates as unsustainable. In short, they saw disaster ahead. They bought gold.The gold price has now more than tripled from this initial buying point. I was slower in recognizing this inevitability, and sadly, wasn’t convinced as quickly. I bought gold in 2007. While the financial world has collapsed around us, gold has held up and even appreciated. For eight straight years. Of course, the author is right in saying the gold bull market will not last forever. No bull market does. However, this gold bull is far from exhausted. The amount of money being printed- ‘quantitative easing’, bail-out nation, record deficits- it is all just getting started. As funny money is printed out of the clear blue sky from nothing, the value of each dollar will dive. Eventually, it ha to. Thus, the gold bull will rage into 2010, 2011, and perhaps even longer.Gold will go up and down during this time, but primarily up. I warned friends starting in 2007. Most didn’t listen. Their portfolios have been halved and mine has risen. I’m all in now- DGP- a double long gold fund. Up nearly 20% in the last 5 weeks or so. What have stocks done for you lately?Please don’t take my advice and please don’t take Miss America’s. He/she is due for a major mistake, and I believe this is it. But again, don’t take my word for it. Look around you. Read article after article and book after book until you know what’s right for you. I think you’ll find gold is reaching a tipping point. People who have traditionally been anti-gold are investing in it. Hedge fund managers and private retail investors alike are beginning to swarm. Herd behavior will win in the end and gold will explode. Then, sell (gold $1400 to $2000)and buy equities on a huge discount.Just my two cents (which are worth less and less every day).

    • Guest   January 31, 2009 at 1:06 pm

      The one factor MA did not account for was a flight-to-safety from the British Pound. My guess is that what is pushing up the price of gold at the moment.But one cannot deny that gold is manipulated and if you can spot the coming dips why not speculate?

    • JS   February 2, 2009 at 3:06 pm

      Todd,”People are interesting. One guy who posted said he was about to go longer in gold in his portfolio until someone he doesn’t know (Miss America) gave him second thoughts. If you are so easily swayed by one post from one guy, then you definitely shouldn’t buy said investment.”If you are referring to me…which I’m pretty sure that you are…then first of all you should re-read what I wrote as I clearly stated that I was sticking with my decision to go longer. Second, as a lurker on this site for quite some time, I’m very familiar with MA’s comments/viewpoint as well as all the other regulars.However, even if I wasn’t and I changed my decision based on stranger MA’s comments….who gives a sh*t? I know a thing or two about trading and any time I feel pretty strongly about a trade, I always try and seek out the contrarian viewpoint. It’s all about educating yourself the best that you can and then making your decision. If you are so confident in your trading that no article or commentary has ever made you rethink/question/second guess your strategy than clearly you’re a better trader than I….

      • MA   February 3, 2009 at 10:36 am

        JS…That’s a SMART INVESTMENT MOVE!Trust your gut. Not mine. You will feel better in the long run win or lose if it is your own choice. You will not feel as good if you lose based on my call.As far as contrarian reading… I emplore my readers to do just that.I’m glad you stuck with your gut and hope it works out for you.There are a lot of signals that are on your side. (I am bound to be wrong sometime)As for equities… My big move has been for 401k’ers to go long. (as that money is locked in the market… and upside is higher for these investments. I see 401k risks in equities being on par with 401k bonds/t’s safehavens.)My spare cash is sidelined. I advised family members to go 9 month CDs, under 100,000 spread around “reputable” banks. (since they were compelled to invest)If you have “gravy” cash… That’s when I’d bargain hunt the equity market. There are serious values out there.Good luck and thanks for stopping in.Miss Americap.s. KEEP READING other views then your own… and remember the writer’s influence.

  18. London Banker   February 7, 2009 at 11:50 pm

    Rich,I’m in a place with many shops filled with gold watches, jewellery and trinkets of all sizes, shapes and tastes – and no customers. I can definitely see the crash coming, with sales folk gazing blankly at empty doorways for the length and breadth of boom-time climate-controlled malls that were once crowded with gold-loving and gold-card-carrying elites.I’d never bet against you my friend, and the stillness of the glittering shops around here backs up your gut feeling.There’s always a good “story” for every boom engineered by TPTB. It was new paradigm for the equities boom of 2006, China industrialisation for the commodity boom in 2007, and peak oil for the oil boom in 2008, followed by “flight to safety” for the Treasury boom, and it will be “quantitative easing” this year for the gold ramp. (How often had you heard that phrase even mentioned outside a graduate level monetary economics seminar before 2009? Now it is part of the common parlance at Starbucks.)I am reminded of what someone wrote in describing the Great Depression on Roubini’s blog a few years back. She recalled that in the 1930s the problem wasn’t that there weren’t things in the shops people wanted, but that no one had any money to buy. I think of that every time I walk through the empty shopping malls. They are full of things – pretty things, useful things – but suddenly no one has the money to buy.Gold may relatively outperform for a time (because it can’t be magically created from hot air like Treasuries and equities) but outperformance in a deflationary crisis doesn’t mean gold doesn’t lose value, it just means gold falls by less than other stuff. On the other hand, these are scary times and unpredictable things are happening every day.Stay well my friend.

    • Guest   February 8, 2009 at 1:35 pm

      Hi LB,Funny to see you checking this backwater topic. Your comments are all fine, but I’m sitting in cash, waiting to jump back into gold after it crashes, and nervous as a cat!I am beginning to think that the gold market is too big to explain with just a USA perspective. If it is a gold bubble, then why is MA’s timing off? Gold continues to bounce above $900 for the last 10 days and looking like it will slowly climb towards $1,000/oz. East Europe currency crisis seems to be pushing investors into gold? And there could be some heretofore unknown tipping point that is being crossed?Is there anyway to tell if the central banks are selling gold? If they have stopped, that would support MA’s bubble theory; if they are still selling gold, then it the increased price of gold reflects real demand?On the other hand, maybe I’m so nervous because these are scary times and unpredictable things happen every day.So do you speculate or just leave your savings in gold and forget about it?

  19. ptm   February 9, 2009 at 11:15 pm

    MA,Here is another gold price pump from Merrill Lynch: Gold hysteria continues, with prices possibly hitting US$1,500, says Merrill Lynch. there is nothing else to pump, so lets bait the gold bugs?