malvern hills

I have no data on anything that has performed relatively better. I have ideas, but not data to find out if they are true or not.

 

However, IF the mentioned gold graphs are true within the error margin assumed, then the whole notion of "gold as inherent store of value" is silly. It's a fiat, just like anything else. Better fiat than many other, but susceptible to value erosion and fiat nevertheless.

 

Can still be a great interim term investment and good trade, which is the whole point in this thread.

 

 

 

Agreed.

 

Good graphs, very thought provoking. All gold-bugs should study them hard. Especially investors.

 

Thanks again!

I'm sorry I don't understand or agree.Fiat is 'by decree',however no -one or government has decreed gold to be valuable .Every person on this planet knows gold to be valuable (even if hey don't know why) ,by reason of its nature , the effort required to win it from the earth and is multi millennial use as money which I'm sure has left a great psychological impact on our brains.

You might disagree with the notion that it is valuable but most of the planet does not and that is unlikely to change ,although its worth in terms of fiat may ebb and flow.

I don't think you can describe it as fiat ,a 'barbarous relic' maybe.

You might also consider that true fiat has no limit to its quantity and a present we cannot produce gold.

Karl Denninger is not going to be a happy bunny!

 

Caution On Quantitative Easing (QE)

 

Be warned Ben....

 

The BOE executed their first "QE" operation today.

 

The "bid to cover" was an astonishing 7.35.

 

This means that for every bond purchased 7.35 were tendered, or made available by willing sellers.

 

Back in January I posted a Ticker in which I made clear what was likely to happen if Bernanke actually attempted to do (as opposed to threatening) QE:

 

Bernanke bluffed and the bond market called it. He cannot monetize several trillion in new issue plus the entirety of the 10 and 30 year bonds out there to stop a bond market sell-off. In addition, the market no longer believes him, as evidenced by today's price action. A serious bond-market sell-off will ramp the cost of all credit, including mortgages and commercial loans. If he tries to monetize the result will be current bondholders tendering into his buying, forcing him to essentially "consume" the entire float. That stunt will cause the dollar to implode and we wind up exactly like Iceland. Overnight. Ben knows this; ergo, he is screaming like a petulant child while the market laughs at him just like the market forced Paulson to do what he said he wouldn't with Fannie and Freddie. Bernanke had better shut the hell up before he precipitates a bond market dislocation; traders can and will try to force him to make good on the threat.

 

Ding. The BOE now has seen exactly what happens when you promise as a government to overpay for something - everyone hits your bid immediately!

 

This is a form of crack that the government cannot afford to loose into the market - as soon as the buying pressure is removed rates will start to rise again, forcing yet another purchase.

 

Ultimately The Fed winds up owning all of its own government's bonds, having destroyed the private capital market for sovereign debt (just as it has done for other securitized debt by threatening to overpay for those issues!)

 

The difference is that if this happens for sovereign debt then deficit spending becomes impossible on an instant basis; this would in turn force a nearly 75% contraction of government spending.

 

The outcome of this event would be the immediate destruction of Social Security, Medicare, half the military budget and half of all other government programs.

 

PS: Bernanke knows this, which is why it hasn't happened yet. Let's hope he continues to remember it, because the destruction of our government is very, very un-funny, and this would likely precipiate exactly that in a "vast and fast" form.

Please for the dumb among us ie. me ,could you explain this?

Bernanke 'threatens' to monetize the bonds and announced to do so today-why is this threatening to anyone? Is it because doing so will signal the end game of bond price collapse?

QUOTE (malvern hills @ Mar 5 2009, 05:56 PM) *

... I suppose what i'm asking is why do you believe that the idiots in charge will definitely fail? ...

oxymorons

Thank you-RH ,Az and Cg

RH -50% of long term savings are in pm and I would like to increase to 80% and keep the rest in mining stocks

Az-when you put it that way there is only one way to go.

Cg- I'm not trying to do ta ,I'm just trying to get and hold with the most bang for my buck.I hold your comments with high regard ,as you have been the most consistent poster ever since my HPC lurking days of 2006 however I just wish I could see where your strongly held conviction comes from.I suppose what i'm asking is why do you believe that the idiots in charge will definitely fail?

It's hard keeping your kids inheritance safe in these times and anything which helps makes the decisions is gladly received.

To the more learned among us- I need advise/views

What's the consensus with regards to this leg down?

Am already holding pm's but would like to load up.

From what I can gather au should correct down to $850 ,some say to low $800's by mid year.However with qe beginning now might the low be restricted to just above the rising ma's ie. between here and $870's?

Any views appreciated

Many think that in a global depression cash would be good. Due to fears of [global] recession, many investors seem to be going into cash now. The problem is that last time round, in the 30's, cash was backed by gold... by real solid stuff with a sound history of value. This time round, no such luck. It is best to go straight to the source and hold a portion of your worth in gold and silver.

 

If there is a global depression all paper assets, including the dollar, would deflate.

 

Edit to add: Dollar deflation would have an inflationary effect in prices.

I think you are right to say that putting 10% of net into physical gold would be a good way to go-If nothing else you can give it to the kids-however talk of 'going all in' just doesn't sound right with respect to investment decisions.I am going to average in over the next 6 months-lets see what happens after the election.

Not sure about the link. Quark previously posted this from Faber's latest article:

 

We shouldn’t dismiss entirely the possibility that all the bailouts fail to revive credit growth and that a deflationary secondary depression is now under way," writes Dr.Marc Faber in the latest edition of his highly respected Gloom, Boom & Doom Report.

 

"The sharp deceleration in credit growth, with rising default rates across the board, could suggest that debt liquidation is now occurring...[but] Ben [bernanke of the US Fed] and Hank [Paulson of the Treasury] may replace private debt with government debt in order to bail out the system.

 

"That such a bailout will diminish the purchasing power of the Dollar even more (it should be highly inflationary) is clear...

 

"Under this scenario, renewed US Dollar weakness and strength in commodities – in particular, in Gold – should reappear."w

 

 

Personally, I agree with Faber's view here. The market is in the midst of a deflation scare [prime cause being the credit crisis]. It is only a matter of time before investors realise the dollar is also devaluing... for all the inflationary reasons we all know so well.

 

Edit to add: Over and above money supply issues, now that F&F are on the Treasury books, it certainly makes the dollar a less attractive investment for the players abroad. Could F&F be the trojan horse?

Roman -I am relatively new to all these issues,but it seems to me that while I can intellectually agree with the reasons Faber gives for an ensuing inflationary period it does not follow that it will come to pass-for example I believe (but I may be wrong)that none of the commentators we look to, called this deflation scare (except Shedlock) and the subsequent gold decline.

In particular I am coming to the following conclusion.The question I think to ask is what would make the market devalue the dollar, if all that has happened so far(B Stearns,indymac,credit ratings lowered for bond insurers ,F+F etc,etc) has not done so(although its still early days)

Leaving manipulation and black swans aside,which we obviously cannot anticipate and position for, I think that the only reasonable answer is that ,for the dollar to devalue the markets must judge that all other currencies or assets are relatively overvalued or lower risk.

In a global depression where do you park money such that these conditions are met?

I'm not sure, and these are just my thoughts.Any one with more brain power/economic savvy please tear to shreds/comment as appropriate.

Where do you think they are going to go when the inflationary scare [dollar deflation/devaluation] hits?

What are the reasons given by Faber for the inflation-or link to what he said?

High Closing Gold was $1,022 (??)

 

x SQRT (Fibo.6812): 0.8257

 

= Adj.Number .......:

I think exact intra-day high was 1032

sorry but could you spell out the above?

I am not sure what flag you are referring to, however the Capital Gains Tax limit is about £9.2k.. after which your profits from any rises in Gold, Silver etc are liable for tax.. Some of the UK coins are legel tender and therefore exempt.. however they do attract a premium over bullion prices

I think springer is talking about buyers of gold above £2000 at one time or more than £10000 from the same supplier in one fin year-hope this helps to clarify-don't know answer to question though sorry