romans holiday

Groundhog Day?

Fundamentals are also central to my view on things. But I am not much interested in looking for some certainty in the markets. There are no certainties and those that think they have them will most probably be certainly wrong. Far from replacing one certainty for another, my position it is more about exercising a healthy skepticism towards dogmas and then hedging. As far as fundamentals go, I have a theory, that of hyper-deflation, which I do not take dogmatically. I take it to be only provisionally true until falsified by the real world [so far, I believe, it is being verified]. The basic idea is that real value will slowly erode from all assets including certain currencies. I include currencies in the asset class due to the fact they are traded freely as commodities on the fx market and capital could flee easily from one to another [this also incorporates the idea of future currency crises]. Based on this theory, one should take large positions in the strongest of currencies. These currencies would include gold, silver, Yen, the dollar [the reserve currency could also be the wildcard] and perhaps a commodity currency [though I think silver covers this better]. These currencies also hedge each-other This is the long term "back-drop" that the buy and hold investor type should be interested in. Against this back-drop, in the short/medium term, things get more interesting due to the fact that investors are largely divided between inflationary and deflationary macro-economic views.... not to mention the average highly leveraged consumer's view/behaviour which is deflationary. This should set up "cross currents" in the market where at times inflation concern is in the ascendency, and then at others deflationary concern. This should lead to massive volatility in the market, and confusion in the minds of investors as they struggle to put a value on assets. Those with a view of how the short term volatility is likely to play out in the long term have a huge advantage in my opinion. They will be in a position to not only expect market behaviour which seems to negate their long term position, but also be in a short term position to take advantage of it. For example, I expect silver to at some time tank on the back of a renewed risk aversion trade [gold I expect to remain relatively stable with a floor at 900]. Expecting this event, I will be in a "contrary" currency, such as Yen, which should strengthen when commodity currencies, and silver, weaken. Rather than being rattled, I would then buy silver on weakness knowing that it will bounce back again and remain a beneficiary of latter inflation concerns [on the peak of a latter inflation trade in the market, I would swap to gold]. Psychology should also be a central part of the investors strategy here as if you are free of anxiety and emotion, when the market, isn't it will enable you to cooly make the correct decisions. I hope this provides a little substance to my views. In main, my views are based on my own macro-economic view [which I think is essential to an investor/trader today]. If the investor doesn't have such a view, he would be like being all out at sea without a compass, being tossed this way and that. This is the way I expect the market to behave in the near future. Regards.

I remember a colleague mentioning some such thing.... having recently seem a movie, he associated "blood diamonds" with gold.

What's this? A gold bear... here?

I was buying silver on the last dip... though I was a bit eager at the time and missed the bottom, but then you are never going to get the exact bottom. Post dip [once most of your cash has been used], the idea is to accumulate another cash reservoir from income and other sources you may have, making sure it is kept in a currency that should show strength when silver shows weakness. I think the Yen is good for this... dollars might be another option. On a peak, I will not be so concerned with prices as I will with the gold/silver ratio. I will look to swap nearly all my silver when the ratio of 50 is neared... most of it to gold and then a portion back to cash... that way you can once again have a large cash position, next to your increased gold position. Buy on the next big dip, which has to come thanks to a very confused market. I do not really see this trading so much as a currency swap. And then I imagine such an opportunity to swap would come about only every six months or so. If you are overly attached to certain ideas about "fiat", or emotional towards monetary metals, this strategy would be very....difficult.

Not wrong at all..... and I have always said investors are wasting their time sitting in pounds. It would be just silly not to have some serious powder dry on looking at the chart below. Personally, I suspect the metals might go higher with the market before the next slump in prices. But who knows, we could see a slump here, where I for one would be a serious buyer. Perhaps this should be discussed on the silver thread. In this environment, gold and silver are very different investment vehicles imo.

Not at all. If you are looking for a store of wealth... come what may... spend half on gold. With the other half keep in "fiat" and then only buy silver on the dip. Fiat is not quite toilet paper yet, amazingly, it looks likely to have the ability to buy more silver tomorrow than it can today.

Not me. Silver is the one to hold out for.

Gotcha!

But these programs are telling people to sell something, not buy something.

Large dollar spike the cause for the slip in prices.

Yes, something to keep an eye on. Also, of interest for me, is what the market does. Thinking of chickens, it might react like one with its head cut off, running all over the place sending prices flying everywhere. I like to think I could remain calm in any panic, whether inflationary or deflationary, and take advantage of it. Must practice Zen.

I have most of my cash with GM where it can easily converted to add to the bullion I hold there. I am not too concerned about the state of the banks..... at the moment.

Not being proud at all... just stating certain facts that do not fit in well with what seems to be the current orthodoxy for many, that of hyper-inflation. This hyped up approach no doubt causes some to rush into metals 100%. For some not so seasoned veterans, this could well prove traumatic if prices are to [momentarily] crash.

Yes, I doubt gold will go down much. Silver on the other hand could, and it would then be a much cheaper way to buy gold; buy silver when it slumps then swap to gold at a later date.

No chickens... no counting... no anxiety. If it goes up, I am happy and will swap silver to gold. If it goes down, I am happy also and will buy silver with cash.

Ahem.....hyper-deflationary tendencies thankyou very much. [see signature] This theory expects further chaos in the price of gold [more so in silver actually] before it eventually doubles in price. Lets face it, the hyper-inflationary scenario hasn't even got off the ground...even after all this QE and stimulus. A new theory, neither simply inflation nor deflation yet incorporating both, is required imo.

How so? Are you hedging pounds with gold?

993. This should be a wake up call for those who think it will be a one way shoot to the moon. Who's trading here? Keeping powder dry for a dip certainly isn't that. Mind you, I think it makes more sense to buy silver on the big dip then trade swap to gold when it recovers.

Which goes without saying...especially given the context of the post.

I assume you already have a good position in bullion. The Yen is good but expensive now.... so is the Euro.... hmmm that only leaves one and that looking cheap at the moment. The other thing you could always do is diversify your extra-metal funds between these currencies.

I have often hammered away on this point. If you are looking to take advantage of a possible dip in gold, you have to be in a currency which will strengthen not weaken on the risk aversion/ deflation trade.... currencies that weaken are likely to weaken more than gold and hence a futile exercise. Currencies you do not want to be waiting in would include besides the pound, the Aussie and kiwi dollars. The currencies to have would be the US dollar [hold your nose] and Yen.

Yes, I have always viewed gold as a currency which is central to my speculations on "hyper-deflation".... where all financial assets, including cash, deflates. In this scenario, prices would become increasingly confusing because that used to price, namely currencies, are themselves deflating [devaluing]. In a macro environment where prices - which have conventionally been the measure of value - become increasingly deceptive, the investor has to step back and focus on [real] value. This is where gold has to once again become central in the financial sphere [not only for the investor] in so far as it has the ability to re-set and rebalance, at the international level, the value we place on goods and assets. Given the above logic, CPI kind of becomes irrelevant.... due to the currency being in flux and losing its function of being a reliable measure of value.

Yes, and then it makes sense to buy gold simply as a currency and not as an investment, a commodity, insurance, or an Armageddon hedge... though it may be all those things as well. Hmmm... not really "buying" gold so much as exchanging currencies.

They are sly cunning foxes, behavioural economists playing mind games. They desperately want to see a dollar devaluation, and inflation, in order to rebalance the banks and reduce the national debt burden. Yet, as the adage goes, be careful what you wish for; the dollar may drop too low, and too fast, that they will panic and crash the markets in order to salvage the dollar and the treasury market. This would see a dollar spike the likes of which were seen last year.