romans holiday

"Bohm believes the reason subatomic particles are able to remain in contact with one another regardless of the distance separating them is not because they are sending some sort of mysterious signal back and forth, but because their separateness is an illusion. He argues that at some deeper level of reality such particles are not individual entities, but are actually extensions of the same fundamental something."

Historically, a lot of metaphysics grew out of ideas of transcendence. Realist science is itself a branch of that endeavour, where reason [still assumed to be "outside" the physical world] turns to physical experience, and represents to itself the nature of an objective reality. So much for rationalism. Modernism increasingly drags reason, kicking and screaming from its transcendent stool, into the world of experience. Folding in on itself, reason looks for the contingent conditions of its own thought.... Marx, Freud and Nietzsche were the masters of this thorough-going naturalism, or 'hermenuetics of suspicion", where the faith in objectivity was lost.

If transcendent knowledge is exhausted, then maybe that other school of thought should be re-opened, that of immanence. they should never have moved away from the mystic early neo-Platonists. i blame Aristotle.

U.S. money velocity is at a historic low (for data since 1959). So, all the naysayers and fiat money bugs that think gold can only do well under inflation: at least from a velocity point of view inflationary pressure is at historic lows. Now, the problem is of course that MZM money supply itself is meanwhile going ballistic. So, when money velocity will get back to normal, and then beyond, you will see inflation that will scare the **** out of you. And I think this is when we will get to know the real nature of this gold bull market.

Errrr, no... there have been a few predicting that gold would perform well in a "non-inflationary, low money velocity" setting.

Gold May Rebound as Swiss Franc Ceiling Reduces Haven Investment Options

http://www.bloomberg.com/news/2011-09-06/gold-may-decline-for-a-second-day-after-rally-to-record-encourages-sales.html

Gold may rebound after falling the most in a week yesterday as investors sought to protect their wealth against declining currencies and economic turmoil.

 

Gold for immediate delivery traded little changed at $1,875.02 an ounce at 11:08 a.m. in Singapore, swinging between gains and losses as equities rebounded. Bullion dropped from a record $1,921.15 yesterday as the dollar advanced for a sixth day against a six-currency basket including the franc after the Swiss central bank set a ceiling on the exchange rate.

 

“We’re going to have pullbacks but there’s a lot of opportunity in gold today and it’s a bull market that will last many more years,” Robert Lutts, president of Cabot Money Management, said in a Bloomberg Television interview.

.......

Safe Haven

“A stronger dollar does usually mean a lower gold price,” Julian Jessop, chief global economist at Capital Economics Ltd., wrote in an e-mail. “However, we see no reason why both the dollar and gold cannot benefit from increased safe haven demand in the event of a further escalation of the financial crisis in the euro-zone.”

.....

“The upside for the franc is now limited, some of the demand for safe havens should be diverted to gold, supporting its price,” Jessop wrote. “We continue to expect gold to rise to $2,000 this year.”

....

“Gold and Treasuries, particularly longer duration bonds, exhibited a significant jump in correlation, as the two started moving in lockstep with each other” after Standard & Poor’s cut the U.S. credit rating on Aug. 5, according to Michael A. Gayed, chief investment strategist at Pension Partners LLC in New York.

 

“It appears that gold is now serving as a viable alternative to treasuries during market turmoil,” Gayed wrote in an e-mail. Treasury 10-year note yields dropped to an all- time low yesterday as bullion rallied to its highest ever.

 

“Even during the dark days of the Lehman Crash in 2008 this was not the case,” Gayed said, referring to the collapse of Lehman Brothers Holdings Inc. which triggered the worst recession since World War II. “It may be gold is behaving like this because investors are concerned about further debt downgrades, and you can’t downgrade a metal.”

http://www.reuters.com/article/2011/09/07/us-markets-precious-idUSTRE78401J20110907

A surprise move by the Swiss National Bank to curb its currency's strength shocked the markets on Tuesday, drove the dollar up and encouraged profit-taking by bullion investors after gold prices hit record highs.

 

Spot gold tumbled as much as $60 from Tuesday's record of $1,920.30, but rebounded half a percent to trade at $1,873.99 an ounce by 0329 GMT.

 

U.S. gold gained 0.2 percent to $1,876.70, off the all-time high of $1,923.7 struck in the previous session.

 

The resilience of gold was widely expected, as mounting worries about the euro zone's fiscal health continued to drive nervous investors to seek protection in the precious metal.

 

....

 

There are signs that investors have become more cautious in joining the gold rush.

 

The Relative Strength Index of spot gold has hovered in the lower 60s so far this month. In August, when gold surged 12 percent on a record-setting rally, the RSI exceeded 70 for 14 out of 23 trading days. A reading above 70 suggests the underlying asset is overbought.

So did Errol and a few others, I imagine . But there are some of us who are still earning fiat to convert into money. Others are sipping pina coladas. Or reading.

Well, when economies turn vicious, it doesn't hurt to sit it out on the side-lines for a bit. I still work when it suits me, but work [in a vicious economy] tends to only cover living costs, and not decent savings.

Of course, the old Protestant work ethic still dominates, and family uncomprehendingly think I live the most decadent of lives..... even though I'm a frugal teetotaller.

Is "$200-300, possibly more" a Crash?

Surely it would depend on the time scale. $200-300 in percentage terms is roughly 10%. If it corrected that much in a few days... yes, it would be bordering on a crash. But if it corrected that much over a few months it would feel more like a consolidation.... considering that it did spike recently above the long term trend line. Crash proper territory would perhaps involve gold going below 1500 odd. It could also just bump along sideways for a few months.

That's basically true - though much of my Gold exposure is hedged already - not all.

So if it slides, I will lose very little, and if it rises further I make a bit.

If it drops sharply, my hedges will really "kick in", and I will have cash to load up.

So small gains or loses if there are no large moves. It would be interesting to know what percentage of your worth is long gold [disclosure of the monetary amount is unnecessary]. If it's not a largish percentage, could your gold strategy be bordering on a zero sum game? If you completely hedge to both sides of the present price then you're protecting yourself from [conventional] currency losses. But what if gold itself is a strengthening currency? The risk is one of going backwards, in real and relative terms, against gold. I labor the point because I don't think you've entertained this scenario seriously. That gold is a currency doesn't entail the view that gold is the only true, or natrural, form of money. Rather, I reckon it's a mediate position between the often polarized extremes on gold.

Of course, as a successful trade, or one who gets it right slightly more often than wrong, then you might be able to accumulate profits, in conventional currency terms, that keeps up pace with the long term appreciation of gold. But there are "costs" involved here, in terms of time, that others aren't prepared to make. You'd have to living it near 24/7... screens, digits, charts, analysis, interpretations etc. The difference perhaps between those who choose to work hard on a running machine, and those who sit sipping pina coladas while on a cruise. Right, back to my book.

Would love to see a $500 correction here. Doubt it will happen but would love to see it. Buying of physical (if you can get it) will be manic if it drops that much.

Good to see someone has cash reserves left. I piled most of mine in a few years back.

Still have some US dollars earmarked in case we get that big correction, but that would go to work in silver, and then back into US dollars on the silver recovery. Always good to keep some diversity [and hedge] in currencies.

The sophistication shows through in this remark... Not!

 

I suggest you look at the Beating B&H thread to see how I am taking money

off the table, with very little risk

 

This thread is a bit funny.

The real action is in the US Dollar today

 

Which is hardly mentioned while Gold tries to put in a possible

Classic Double top, which some purists want to ridicule

Yes, the dollar is well due a bounce, and yes that might see gold consolidate a bit. But that hardly entails that gold will crash. The dollar index is mostly a reflection of Euro/ dollar. If the Euro is in dire straits then it's likely that both gold and the dollar will benefit. Gold would replace the Euro as the alternative to the dollar. And this is leaving all concerns of dollar hyper-inflation to the side.

What's the point in "polarizing" on gold, or the dollar for that matter. Because markets are bipolar, does that mean this site must be also?

http://www.bloomberg.com/news/2011-09-05/gold-rises-above-1-900-an-ounce-as-growth-debt-concerns-enhance-demand.html

Gold surged to a record above $1,920 an ounce on speculation that Europe’s debt crisis will worsen, damping economic growth and driving investors to protect their wealth. Futures in India and China, the world’s two largest consumers, touched all-time highs.

 

Gold for immediate delivery gained as much as 1.1 percent to $1,921.15 an ounce, surpassing the previous peak of $1,913.50 reached Aug. 23. It was at $1,919.85 by 2:12 p.m. Singapore time. December delivery futures in New York also touched a record $1,923.10, up 2.5 percent from their close on Sept. 2. Floor trading in the U.S. was shut yesterday for Labor Day.

 

“Europe has the capacity to drive gold higher as it looks unlikely to have its problems resolved very soon,” said Darren Heathcote, head of trading at Investec Bank (Australia) Ltd. “I don’t think investors are really convinced that European governments have got what it takes, got the political will to sort out the crisis and also do it sooner rather than later.”

 

Gold is in the 11th year of a bull run, the longest rally since at least 1920 in London, as investors seek to diversify away from equities and some currencies. It climbed to records priced in euros, British pounds and Canadian dollars today

Money is a useful social fiction. When the going gets tough for the monetary value of assets [even more fictional] then the toughest symbol of money gets going.

Why should gold be expected to correct back to where commodities and assets have been left behind when the divergence is due to its re-monetization as a currency. Commodities and assets are not currencies.... but have a monetary value as priced in currencies. Apples and oranges.

Failure to recognize this [gold as a currency], by the bubble callers, is a failure of imagination.... where one is habituated to the norm of one's own currency [money illusion]. Prices may look high, but it's all a matter of perspective. Doesn't preclude gold consolidating a bit from these levels though.

I posted this at HPC soliciting comment in regard to a statement made by _w_ that most newsletter writers and providers of subscription research were playing their clients for "suckers". HPC link

 

Hi Erewhon, I just clicked on the HPC link and noticed you've posted my comments there. I don't mind you cutting and pasting those comments, but if you do a link should be provided, or the source acknowledged.

Cheers,

Romans.

The developments in China will also need to be accommodated in any theory with better explanatory and predictive power.

Keep in mind also that unbalanced trade between the US and China was/is a primary cause for the financial mess. This enabled excess Chinese reserves to be recycled into US assets, massively inflating their prices.

Bringing it back to gold, the old gold standard [in the previous era of globalization] operated practically as a balancing mechanism for international trade.

Here's David Hume's theory on it:

The price-specie-flow mechanism is a logical argument by David Hume against the Mercantilist (1700-1776) idea that a nation should strive for a positive balance of trade, or net exports. The argument considers the effects of international transactions in a gold standard, a system in which gold is the official means of international payments and each nation’s currency is in the form of gold itself or of paper currency fully convertible into gold.

 

Hume argued that when a country with a gold standard had a positive balance of trade, gold would flow into the country in the amount that the value of exports exceeds the value of imports. Conversely, when such a country had a negative balance of trade, gold would flow out of the country in the amount that the value of imports exceeds the value of exports. Consequently, in the absence of any offsetting actions by the central bank on the quantity of money in circulation (called sterilization), the money supply would rise in a country with a positive balance of trade and fall in a country with a negative balance of trade. Using a theory called the quantity theory of money, Hume argued that in countries where the quantity of money increases, inflation would set in and the prices of goods and services would tend to rise while in countries where the money supply decreases, deflation would occur as the prices of goods and services fell.

 

The higher prices would, in the countries with a positive balance of trade, cause exports to decrease and imports to increase, which will alter the balance of trade downwards towards a neutral balance. Inversely, in countries with a negative balance of trade, the lower prices would cause exports to increase and imports to decrease, which will heighten the balance of trade towards a neutral balance. These adjustments in the balance of trade will continue until the balance of trade equals zero in all countries involved in the exchange.

 

The price-specie-flow mechanism can also be applied to a state's entire balance of payments, which accounts not only for the value of net exports and similar transactions (the current account), but also the financial account, which accounts for flows of financial assets across countries, and the capital account, which accounts for non-market and other special international transactions. But under a gold standard, transactions in the financial account would be conducted in gold or currency convertible into gold, which would also affect the quantity of money in circulation in each country.

That gold is continuing to appreciate against currencies could reflect the unconscious and informal [within the free-market] "re-booting" of this system [remember gold is the most powerful symbol of money]... a system where gold reserves act to ballast international trade. The more unstable the world economy becomes, the more likely the old system will be re-instituted [of necessity] in order to stabilize both currencies and economies.

If this were the way it was to go, there'd be no need to worry about a "blow-off top".... or an exit plan.

The developments in China will also need to be accommodated in any theory with better explanatory and predictive power.

 

http://www.youtube.com/watch?v=6d9WbjEmfQY

The theory views China in terms of a bubble [along the lines of Jim Chanos, Hugh Henry]... a crack-up boom running on a hyper-inflation of credit. The theory is universal/ global and allows for differing economies/ currencies to move contrary to the dominanting principle of a macro-deflation at times. This contrary "upwards" move in liquidity is caused by stimulus.... but it can only be a temporary holding measure, a rear-guard action, in the face of overwhelming deflationary forces.

That China's decoupled from the west smacks of a comforting myth... it's still tied at the hip to the US, for the immediate/ short term anyway. When China slows down and reverses, commodities could be very volatile.

I posted this at HPC soliciting comment in regard to a statement made by _w_ that most newsletter writers and providers of subscription research were playing their clients for "suckers". HPC link

 

http://www.youtube.com/watch?v=RnZGgrXicQU

 

The reply from "_w_"

 

 

 

Can anyone provide pointers to further discussion of "these two theories"?

Strictly speaking, they are not theories but facts that need to be explained by a theory. That central banks are diversifying reserves into gold, and then that treasuries and gold are moving together as an "asset" class suggest gold needs to be thought of as a form of liquidity [a currency] and not merely an asset [or inflation hedge].

A theory interprets phenomena, but will break down in the face of "anomalies" that problematize of falsify it. The crucial fact today is that gold is performing well in a deflationary environment [low interest rates/ performing treasuries]. A new theory is needed to "save all the phenomena", one which puts forms of liquidity at the centre... not assets, or inflation hedges. Consider Exter's reverse liquidity triangle: assets are predicted to deflate in value against currencies, and then currencies* in turn deflate against gold. A theory, with explanatory and predictive power, can be formulated with it in mind. I've termed it hyper-deflation. Theory should be as universal as possible... and the beauty of this theory is its ability to escape from a focus on particular prices [say of consumables] within particular economies.

*Currencies can be distinguished between minor/ major/ commodity currencies, and then placed in mid-tiers on the triangl in order to "globalize" it. So far example, the pound would be situated above the dollar. Of course certain periods of volatility [the "risk on" trade] may see liquidity flow upwards, but the big picture trend is clear.

This theory also predicts that the US dollar will not collapse and the gold price will not explode overnight. Rather gold is predicted to appreciate at a relatively steady rate against the dollar.... as if it was being re-monetized as a currency.

Gold is not going up because of inflation. It's going up (among other reasons) because of the monstrous debt crisis and the deflationary black hole that governments around the world are trying to escape from.

Some sense at last. Once gold is shifted from the asset side of the ledger to the cash side.... no problemo.

Looks like business as usual:

Interesting juncture here.... though we've seen them before. Renewed volatility in gold within the context of its long term appreciation. Breakout of the long term trend, or consolidation?

Very true Dr. B, and a fair bit of powder is being kept dry.

 

 

 

I knew you'd know and as I was a touch sozzled last night, I thought I should mention my favourite Churchill quotation, when, on being told by Bessie Braddock MP: "Winston, You're drunk!" he replied "Bessie, You're ugly. But in the morning I shall be sober."

 

Classic

Yeah, he was quick on his feet with that one... can't have been too sozzled.......

Now who was it that first said "As the facts change, so too does my opinion". Churchill?

 

Keynes.

Are you sure about that?

 

We used to have for example, MIRAS and boom bust policies (Lawson boom etc etc).

 

There has always been political interference of some form.

 

 

 

Agree regarding the US, although I would guess they are practically there now.

 

Regarding affordability in the UK, IR's aren’t moving for years, and that's going to mean affordability remains OK for the majority. Look around, UK gilts are their highest value (lowest rates) for 50 years!

 

You can now fix for 5 years at less than 3.7%!

 

If (when) there is an IR shock, then, as I have always said, all bets are off. But, until then, the nominal low could well be in soon.

My 2 pennies worth. "HPC" is still possible even in nominal terms. More probable is a grinding Japanese-style deflation in house prices over a decade or two. That said, the crash has occured, and is proceeding, in terms of gold.

Note to Goldfinger: how about changing the title of the thread to HVC [House Value Crash].... there always seemed something incongruent about hyper-inflation mixed in with HPC.

I think my sig has been taken the wrong way by several people since I started using.

 

It was a saying from my youth, whilst living on a s**thole estate in the midlands, when, whatever you tried to do, you always seemed to get shafted, while the better off always seemed to succeed. (Of course in reality, we didn't really help ourselves much at that time). I think BaB has a similar background, maybe that’s why we sometimes see things a certain way.

 

The sig was really meant to convey my anger and frustration that things are not as they should be now.

 

If you read my posts pre 2009, you will see I was a true deflationist (I even STR'd in 2007 (for the second time)).

 

It was only when I saw the lengths TPTB went to, to maintain themselves and their friends, I realised just how much the odds are stacked against us, and how much they are stacked in their favour.

 

Others seem to think that it means we shouldn't complain or something along those lines. It doesn't and was never meant to convey that.

 

It was meant to be taken as, you can’t beat the system, but if you know what they are doing, perhaps you can use that to your advantage in your trading etc.

 

Anyway, I think I will remove it.

 

 

 

No offence Jake, but my “version of reality” stated this time last year that we would probably only see 5% falls for house prices in 2011, when practically everyone else here was predicting a big crash.

 

I think that particular prediction is closer to the money than any of the others.

 

Again with the sig, it doesn't matter what "should" be, it just is what it is.

Nice post, which i think gets to the crux of it. What is primarily an investment forum "should" discuss what actually is in the economic world, and what might then realistically come from that..... not what should be. I think some of the storms in teacups often arise from various posters arguing at cross-purposes.... where one will be taking a descriptive approach, of what is, and another more of a normative, "purist", or moral approach, of what ought to be. Of course they are all valid discussions but need to be separated out if posters are interested in constructive dialogue. Having separate threads for distinct topics should facilitate this.

I'm trying to make the point that if you think of house prices in terms of gold - a young person should buy NOW! But they can't because all they have is money (not gold) and they haven't got enough of it to buy a house. So, the house/gold thing is completely irrelevant.

 

They might not be able to buy a house now, but they can still "buy".... by putting that near deposit into gold. With 5% down payments here in NZ, and wobbly inflated house prices, why would you buy a house... and why wouldn't you buy gold instead... or at least put half your savings into gold. Nice staedy 20% odd annual gains, and even better in real terms if the housing market deteriorates.

Gold/ houses wouldn't be irrelevant if you thought gold presently was in a bull market.

Oh rh back to your myopic moderating,its fine for that prat to make personal insults to the very way I conduct my lifestyle but oh dare not say anything about his silly investment strategy because you agree with it and that is bad form.My advice was valid and reasonable and well intended,where as his was just pure slander and piss taking.Open your eyes and read the posts properly RH,or perhaps I should put it on a log chart.

Posting privileges are suspended for a few days. Cool off a bit and come back posting in a more civil manner.

:lol:

The TRUTH is to much to bare heh.

GOOD LUCK with your hhhmmnn profits.

PRAT

This is poor form fitkid. The general rule on an investment forum is not to ridicule the decisions others make.... let alone others.