marceau

John Doe, I've read what you've written over the last few pages (and few years), and all you seem to offer is misdirection, misrepresentation and confirmation bias - a superficial parroting dogmatist. You're not the only one who's been around a while, but if you can't or won't take the time to understand why this situation is different to the 70s then I see no point in engaging with you further - and I'd recommend that no-one else here attempt it either. A lost cause in every regard. I think you're a panglossian fool of the most dangerous type. Look away if you must - but don't encourage others to do so.

I've said it before and no doubt I'll say it again before this is over. ALL possible outcomes from this situation result in rapid and dramatic rate rises. It still amazes me that so few understand how fragile, artificial and temporary the current rate environment is. It could last a few more years, but in terms of a 25 year+ mortgage commitment that's the blink of an eye. Taking on hefty debt at the moment is pure folly.

They were not lucky, they followed the advice of those who managed the bailouts. They won a rigged game without any comprehension of the deeper risk of playing in a crooked system. When those who manage the bailouts fail, so will your 'lucky' friends. They have lashed themselves to the mast of rotten ship. Normalcy bias. I don't recall anyone on this board killing themselves or living in nuclear shelters, most here appear to run businesses. Despite increasingly an increasingly hostile and barren environment, 2011 was the most profitable year of my life so far, I'm not giving up, I intend to prosper. Do not confuse pragmatism with nihilism.

If they think that then they quite clearly still don't understand anything. The slow grind is the least likely outcome. Even in the most flexible indebted economies this option is the equivalent of walking a tightrope over a 1000ft drop with a faulty balancing pole, where the weight at each end of the pole keeps changing randomly and dramatically without warning. Oh, and the tightrope will take 25 years to cross. A generation of low growth is the BEST we can hope for and credit availability still has a long way to fall IMO. How far? Look at the South American credit systems and weep. We're going exactly the same way for almost exactly the same reasons.

Terrible news everyone - it looks like Bubb was right: The plentiful hidden gold starts to emerge.

There are stories on the web that say giant space lizards run the world, that doesn't mean the subject is credible. Oh, and consipracy loons and death threats go together like coffee and cream, there's a word used to describe these people - unhinged.

Haha, ditto. I've maintained a disciplined silence on my financial beliefs (like it's some kind of weird religion lol) since 2007, when it was clear the level of delusion was so absolute that I just couldn't win by trying to warn people. Ever since then I've just paitiently watched and chuckled at the complete surprise of those around me as it all played out. This year has seen a noticable increase in the number of people coming to me for 'my take on the situation' - this month, however, the numbers have gone through the roof. All are talking about inflation, gold, house prices, debt (although, critically, not deficits) and what they should do next. This may sound harsh, but with most I stay silent - their continued ignorance is necessary for my 'Personality Indicator' to keep working. Back in 2007 I selected the opinion and behaviour of certain individuals as a measure of how far along we've come on the bubble lifecycle for various assets. It nailed the recent gold selloff, much to my delight - and I just need two more people to 'turn' and we'll be into the enthusiasm phase!

Yup. Buys time, fixes nothing. That 50% haircut in itself will probably eat the whole bailout fund. All I can say is LOL.

All of your points are rebutted elsewhere in my post. Please re-read. My final comment is that stockpiling will not work. Make of that what you will.

Yes, BUT. Take a look at Keen and (I hate to say it) Denninger. They explain the basic figures in simple and understandable terms. Personally I don't think the R&R 90% can be applied to this crisis. It may work in isolation, but not for the multiple concurrent debt burdens we have at the moment, the critical level of debt to GDP could be much, much higher in these circumstances. Admittedly, though, the historical comparisons using the R&R figures are devastating. For more depth take in viewpoints not usually seen here, including the accounting offered by the chartalists. Their appraisal of the process which got us here and continues to this day is impeccable IMO. Their conclusions, however, seem to be totally disconnected from reality - for them deficits really don't matter and it's a real eye opener. Once you can understand the differences between their appraisal, the neo-classical and austrian approaches I think you have enough to form your own basic view. Compounding debt is only part of the problem, albeit a very big one. The real issue is structural and cultural. Unwinding promises and changing embedded practices can be extremely challenging, even on a small scale. In the case of western societies the scale is unprecedented and I doubt the ship can be turned around while maintaining any semblance of order. It's the order that is important, without it events spiral out of control. My take is the maths drives the viability of good order, then order (of lack thereof) drives the sentiment, speeding the process. For what it's worth I think we get a long emergency with a short catastrophe at the end. Then we see what those zeros really mean.

Unless you live in the wilderness, those zeros are part of the fabric of your existence. Discount their importance at your peril. The key words here are at present. The supply chains that enable this bounty are fragile, complex and operate on the thinnest of margins. I don't personally expect food shortages, but it is a distinct possibility in a systemic financial collapse, or even just in a severe recession. The world will still turn, people will still work. A whole lot of other things can change and that would still be true. I take it you never buy insurance? Or plan ahead? Or read any of the hundreds of posts on this subject in this very forum? Maybe, but for many those times were indeed catastrophic, and IMO we'll be very lucky to get off as lightly. Either way, you're right, we will get through it. That doesn't mean everyone should just look away and whistle happy tunes. Systemic failure. Your bank no longer exists. Your pension and savings are gone. Your salary is meaningless. Traditional units of exchange are no longer recognized. Governments can't pay their employees. There is no social safety net. International trade ceases along with the flow of goods. Businesses cannot function. Supply chains cannot function. Food and other essentials become hard to obtain. Rioting. Bloodshed. War. Fire and brimstone. Dogs and cats living together. All of these have happened to a developed country somewhere in the world in just the last 20 years (apart from the last few maybe). Then look back 50 years, then 100, then 200. Systemic financial and associated social crises are so common that historically they're almost the norm. And yes, we'll still get through it. Some better than others - that's the point. You have correctly identified current worldwide economic policy. Same result, different route. Possibly different time line (unknown, in case you ask). Google the maths, google historical comparisons. Weep. Catastrophe is always relative. A flood or earthquake wouldn't appear catastrophic next to a giant meteor strike - ask any dinosaur, preferably a happy one. In the context of a thread about housing and the financial system it shouldn't be too hard to figure out the meaning. Maybe I should have used the word Panglossian. Fairies or not, positivity will not trump mathematics. Although I've heard that what you can't see can't hurt you, apparently.

Sorry matey, don't agree. The figures involved ARE catastrophic. And even if they weren't, it appears you think that paying down debt is just an issue of time. Even at a supra-national level, let alone household, that's simply not the case. Leaving aside the (killer) issue of interest, that debt burden will rob Western economies of fresh capital for decades. That's less money for business, innovation, welfare and a million other things we take for granted that the rest of the world doesn't have. That capital was our edge, it was that capital that kept us ahead, gave us time, allowed for innovation, broadened our horizons - and now we've not merely consumed it, we've also consumed the next generation's worth of it. So, even assuming the level of debt isn't high enough to cause systemic failure (which it is), every year we spend paying it down sends us closer to the worldwide average - and that's a hell of a long way down from where we are at the moment. You're correct when you say the media are dead wrong - but it's because they're UNDERSTATING the problem, having failed to understand it. Positive thinking, fairies and rainbows will make no difference. The best case is that we write it off and start from scratch. The worst case doesn't bear thinking about. We've eaten the larder clean and we've already started to eat ourselves.

Strange to feel relief at a fall like this, but that's exactly my sensation at the moment. Maybe, just maybe, I'll be able to buy under £1000 just one last time.

'It's the deal of a lifetime!' The knife catchers mantra.....

Your certainty worries me John. They are choosing slow strangulation over a quick hanging, and will continue to do so as long as the market permits them. The result will still be the same. In both real and nominal terms house prices will eventually return to an affordability level based on earnings. The only question is how long it takes, and there are far too many variables to allow sensible prediction. Those wishing for debt jubilee and/or government helicopters could end up very, very disappointed and substantially poorer, as could those wishing for the return of sound money policies and the real/nominal convergance that would entail. Governments can become powerless overnight, likewise they can somtimes influence markets to a ridiculous degree. The current dynamic could turn on a dime and head to either extreme before we reach the end. There is no way to predict either the path we take to the collapse or its length, but we will get there.

Steady on there - we haven't even completed the 'first sell off' bear trap yet.

This will kill Ireland's credit market stone dead for decades. TBH that's probably a good thing.

These bullets will directly compromise the currency involved. Their impact is too obvious and direct for them to be considered fantasy material. Still, I'm sure they will happen nonetheless. Primarily because desperation will make those in charge turn a blind eye to the consequences. This is the road to those extreme dow/housing/anything else:gold ratios becoming reality.

Yep, and the government has no fantasy bullets left. All that has happened to over leveraged mortgage holders in the last 3 years is a squeeze from the opposite direction, as living costs rose while real wages fell. The bottom line is they still can't afford the house!

I reckon it won't be too long before the curve makes gold actually start to move backwards in time.

Please can someone post this on HPC right now.

Gold totally parabolic now. Realistically only the big round number at $2000 will be significant enough to stop an advance like this. Then a correction to $1650 (please)?

That will not be healthy for the South American mining firms. I know Venezuela is an extreme example, but that's it for me, I'm going to start scaling out of any mining stock with geographical/political risk tomorrow - it's simply not worth it. For those that are interested in another good warning example look at what happened to Bear Creek in supposedly stable Peru. I'm really not a fan of 'rolling the dice' at times like these.

The bulk of my portfolio is in Royal Gold and Silver Wheaton, with another small royalty co, Sandstorm as a (so far successful) speculative play. They seem to offer constant appreciation in line with the metals. Other than that I have minor exposure to over 20 juniors and explorers. Unfortunately, outside the royalty streamers the risk is phenomenal regardless of the gold price or market cap (the mid caps and large caps are the worst offenders in my book, as they have absolutely no excuse for their consistently shambolic performances). Good management is one thing, but it can't mitigate the level of fear, both real and imagined, attached to the sector. Look at what happened to Bear Creek, they had a great deposit and a superb management and they were fast tracking towards profitable production. Then national politics kicked in and they dropped 50% overnight. Taking that level of risk is at a time of global crisis isn't that smart an idea IMO. I've picked my miners well since I started investing here, and to be fair some of my explorers have been multibaggers. There are good firms out there, but they make up a laughably small percentage of the sector and, crucially, even the winners haven't leveraged the upside of the metals. Considering the risks I've taken my overall portfolio should be several times higher given the rise in underlying PM prices. The fact that it isn't, even with good entry timing, risk management and stock selection, warrants careful consideration for anyone wanting to invest in this area.

The bottom line is that they are so badly run that they aren't making money. They can have untold riches in the ground, but if their management isn't up to scratch then the only thing they suceed in doing is burning truckloads of cash, hence the endless dilution. It's the mark of incredible incompetence that most of these firms haven't made a single dime during a decade long bull market. Why would anyone invest in them when 10 years of evidence points to them being money pits? Miners are the riskiest of risk assets, so the mainstream market won't touch them regardless of the gold price. In most cases the leverage has only worked on the downside and you'd have been much better off just owning bullion. It's sad, but true. I'm glad I put most of my money into the royalty companies, at last they've shown a consistent profit.