mSparks

So did the Harvard prof have the foresight to make the killer trade?

 

I agree with you that there are better trades out there [i like silver]... Personally, I think trading gold is a waste of time.... but I will accumulate it, that is, take profits from other trades in the accumulation of gold ounces....which makes sense with the liquidity pyramid in mind.

While I was there in 05, the medium term strategy we came up with was short builders, banks and interest rates, long copper, he undoubtably made even more than I did, because he was also managing other peoples money and had a BBerg terminal.

I dunno. But it would make sense from their perspective to forward buy on the dips in anticipation of orders if the trend is upwards, wouldn't it? However, such a tactic would not be so clever if the POG reversed to a down trend. An enforced 3 month max for holding cash would limit any losses and also generally encourage full investment for fear of running out of time.

 

You tell me!

I think it would make more sense for GM to buy as little gold as they can get away with and take a little more risk than the holders of GM accounts would wish (aka moral hazard) especially when the Jersey version of the FSA really don't care whether what they stick in their annual report bares any semblance of truth (which, imho is one of the reasons they are so reluctant to give it out).

Once its held "as gold" they can trade the noise as much as they want, just like any other money changer, slightly more risky doing that with highly liquid funds, there is nothing, afaict, stopping the likes of GM or BV offering out of spot price, I'd be more worried if their bid/offer gap was expanding.

My actual guess is they are actually an arm of Baird & Co. Limited, so basically all they are doing is selling the gold they refine themselves, just like the bankers of old.

If they are short they can always buy and refine off j6P for well below spot via junk cos like "Cash4Gold" or "GoldBuyerMan"

Hmm, so you don't think it's a ploy on the part of GM to share any losses that might occur if they forward buy physical to meet potential orders and then get caught in a big down move?

 

So long as they can keep people fully invested in gold, then POG corrections are shared. If everyone can move freely in and out without any restrictions, GM is left holding the baby in the event of a long term correction.

does GM forward buy?

How can we be sure given how lax Jersey financial reporting laws are?

But not against gold right? The liquidity pyramid suggests everything erodes in value against gold.... some things more than others depending on the tier. It is all relative; in this pyramid, currencies can appreciate against assets while also depreciating at the same time against gold [for the sake of argument, assume gold isn't in a bubble here].

If I thought the gold price was rational right now, I would absolutely agree with you.

But right now the gold price appears to be skewed towards raping the buyers (aka holders of US treasuries), which is just another one of those "whos uncertainties" to add to the list.

A Harvard prof explained it beautifully to me.

Consider the graph you posted:

Someone who has held onto gold since the start of the graph, may well feel quite happy with themselves.

However the person that bought at the start of the graph @ 610, sold at 777, bought again @660 and sold @777 is laughing all the way to the bank.

this is where "short termism" comes from.

Yet another one of those "Don't do it because you'll make far more money than we want you to have"

But there are much better assets to play this game with than gold.

(Also, do not forget, shares pay dividends, a share paying 5% grows your assets by 5% per year even if the price remains the same.

One of my key examples of this was RBS, if you had bought RBS shares 11 years ago, just before RBS blew up you would have been getting 50% per year back on your original investment.

And my favourite, you can buy shares on margin

Housing markets, equity markets, peripheral currencies. Also, if we continue to see chronic instability between currencies from the centre to the periphery this does not bode well for a stable global economy. It is also interesting to see how gold has appreciated against currencies during this period of instability. If, for the sake of argument, you decided to price assets and currencies in gold, then this tends to show a hyper-deflation. Exter's inverse liquidity triangle is intersting in this regard:

The "hyper deflation" you talk of is absolutely real, it doesn't even need a "for the sake of argument"

Its called depreciation, and it happens as much because of technological advancements as from wear and tear (neither of which affect gold much).

It seems very easy here to go off topic, but I really cannot see how these markets are examples of eroding value. If anything my GBPs EURs and USDs are more valuable than they were two years ago.

The problem is value, a very contingent thing, is eroding from both assets and currencies [i've referred to this as hyper-deflation] today jeopardizing the global economy. If the process is not arrested [and I think gold/ a new Bretton Woods can play a role here] then, as you suggest, we may be loking at tanks and bombs. Personally, I think governments are a bit more inventive than that.

examples?

Yes, but we are looking at systemic uncertainty here. How certain can you be of collecting on your insurance if there is systemic failure in institutions; that the capital is simply not there to cover liabilities.... hmmm the CDS debacle comes to mind.... and Katrina.

 

I think globalization will need to be rebooted, recapitalized on gold and a new Bretton Woods. No certainties but.

"that the capital is simply not there to cover liabilities"

That's not resolved by "recapitalizing on gold" (if the gold was there, there would be capital to cover liabilities)

That's resolved by sending in the bailiffs.

Big Bailiffs with tanks and bombs if necessary, higher taxes either way.

Insurance? I don't think gold is insurance. I think it is in the process of monetization... capital will got to gold as the strongest currency. If the global economy became unstable enough, there is a very good chance that this would be formalized in a new world currency, to which increasingly unstable currencies are pegged... but I am going over old ground here.

Insurance is the process of removing uncertainty, you may not be able to remove the risk, but you can remove the uncertainty.

-> Given the dominance of uncertainty, investors will not be sure how to value assets... and currencies for that matter... this is the prime reason capital will continue to flow, in the aggregate, into gold and out of other currencies and assets.

I 'almost' agree with.

But I would put it as:

Given the dominance of uncertainty, investors will not be sure how to value assets ... and currencies for that matter... this is the prime reason capital will continue to flow into goods and products that remove that uncertainty.

Sorry are you trying to tell me there is a fundamental ideological difference between Alan Printsalot Greenspan and Helicopter Ben?

maybe, maybe not.

That is entirely irrelevant when compared to the difference between peoples expectations of their behaviour.

Its expectations that define what people plan for.

People were not planning for helicopter Ben in the Greenspan era, inflation was all but forgotten by the masses and deemed under control by TPTB.

It was this caricature that kicked off the hyperinflation debate.

Which, among many other things triggered a seismic shift into gold buying.

The US crash started in 2005.

So there is two very good reasons to look at it from these dates.

What could possibly be affecting the price of gold that started and continues from 2000 that can compare to these two issues?

There are so many factors, complexities... not too mention swans.. that it remains irreducibly uncertain. Given the dominance of uncertainty, investors will not be sure how to value assets... and currencies for that matter... this is the prime reason capital will continue to flow, in the aggregate, into gold and out of other currencies and assets.

 

As a skeptic myself, I am quite comfortable with uncertainty. Bye bye rationalism.... with all its silly certainties

In that case, there are many, many better forms of insurance than holding gold receipts, why will the money prefer gold and not these?

Bernanke Greenspan same difference same Fed same philosophy same problems no difference.

 

2000 onwards is what it is all about gotta put things in context.

 

What and why are you going to throw something at me? and whateever it is I don't think I want it - ta very much tho'

absolutely not.

Ben Bernake was the one spun as the money printer (helicopter ben) Greenspan and Greenspeak was well understood and largely approved of by everyone outside of the tin hat brigade.

I meant with regards to the corrections, e.g. the kind of alterations that need to be made to a graph for a long term trend analysis.

You didn't answer my question and obviously RH is incapable of answering it!!

 

Why not 2000 and why not a log chart?

 

And sit there for a couple of years - that is funny!! nothing is going to sit at a steady price for a couple of years.

Well, if you start a trend analysis from 2000, a log chart is a really bad idea, log charts are only really useful when comparing different assets over a fairly short time period.

If you use a log chart over a long period the kind of corrections you need to make become insane, and you will always adopt a "bubble" mentality since that log chart will hide what has happened recently and place to much emphasis on what happened early on.

If you can give me a reason why it should start from 2000 (e.g. What Ben Bernake was up to in 2000 ) I can throw some of the corrections that need to be made your way.

I just see gold as a hedge against uncertainty. As long as investors/ CBs remain uncertain about the economy, trade and currencies, gold will continue to perform well. Also, I see even Sarkozy has been talking about a new Bretton Woods lately.

But its much more than that.

Whos uncertainty?

Your governments?

The IMF?

The third world?

China?

TPTB?

trade?

savings and loans?

reserve requirements?

thermonuclear war?

border hostilities?

The dollar?

All currencies?

The list is endless, all of which play significant roles in its movement, but all of which are so inter-related, that its [currently] impossible to see what the effect of one will have on the other.

e.g. say people decide to save a higher percentage of their income.

That should increase the price of gold.

But if that saving results in lower national income, the actual amount saved could decrease, reducing the price of gold.

Exactly the same applies to oil, sometimes there are massive forces, which drive it one way or the other, and you can get some sort of hold they are about to happen (e.g. last November), but even these are usually buried in gigs and gigs of misinformation.

I think the tendency is for people to be either far too bullish or far too bearish on gold. I like the idea of a middle way, a golden mean of sorts, where gold slowly stengthens on the fundamentals while reversing/ consolidating at times on market dynamics.

My problem with gold (and oil) is the component parts of its fundamentals are so very very complicated, its not like say, Northumbrian water shares, where you can spot insider trading a couple of months in advance of a taker over bid, or NRK/LEH shares, where you can pull up their balance sheet and get a good idea of the impact of the credit crunch on their bottom line.

Its all flaky ifs, maybes and 1st/2nd/3rd order derivatives of the entire global economy.

Why did you select that start date for your chart? why not from the start of the bull market?

 

I am not expecting an answer as you have failed to answer my previous question.

 

Chart looks highly selective to me.

If he'd selected october 08 it would look even further away, He's actually being quite generous, a big blow out is always (in my experience) preceded by a high level of chaotic price movement, I think he's probably being a bit too generous even continuing the trend, Its probably going to end up something like oil, drop some high double digit percentage through its lower support, rebound back to it (oil support, via Russia, was and still is $70 last time I checked) and sit there for a couple of years.

just to clarify, you are expecting gold to fall significantly below its current $US 1161.40 next week?

I am.

Down and Down she goes

Where she stops nobody knows.

They seem to have missed us off......

How long have you lived in the IMF?

Gold sparkles in 'perfect storm

Which way round does the clock tick again?

Spooky.

Where have you been over the last ten years that is exactly what they have been doing. Gordon Brown topped them all with selling half of the UK supply at the very bottom on behalf of the cartel.

And you believe UK govt figures?

He was probably very busy playing Quake 2 or something...

 

How's the economic modeling coming along msparks? Or are you not allowed to say? Secret squirel and all that!

Good stuff, slight memory leak issue at the moment with some of the more advanced stuff which is my job for today, but most of the critical bugs are now fixed, hopefully fully delivered on the pharma requirements now, so its back to the grindstone on things I had planned for the start of the year.

Should this be impossible, then we could resort to inviting paid government shills who take this role instead. But it's not the same thing, especially not if they're gold-bugs in private (secretively).

When western governments hold such a large portion of their forex reserves as gold (both in the ground, and in the vaults), I suspect you may struggle to convince them to talk its price down.....

Nothing is impossible - but you are painting a very dramatic picture of the next several years. Developments on that scale would probably also bring global wars (economic and military, perhaps even nuclear). In that scenario, having or not having X kg of gold won't matter. I'd still rather have a safe home with a fair chunk of agricultural land [...plus a 2-year foddstock, windmill, livestock, water purifyer, and big set of guns!!!].

Have you seen China/Russia/India/Pakistan state TV recently?

They're like full colour HD re-runs of 1938.

1938 Rome:

http://www.youtube.com/watch?v=4hiBLceU12I

2009 China:

RBS case highlights repossession threat even when mortgage repayments have been paid

http://www.timesonline.co.uk/tol/money/pro...icle5385975.ece

 

 

 

:blink:

A serious case of "really should've read the small print on those mortgage agreements"

It doesn't even have to be housing, every overdraft/loan agreement ever to cross my desk has had a "demand full and final settlement within x days" clause in it.

housing speculators bend over and prepare to take your medicine.

More worrying is this suggests RBS is getting margin calls its not in a position to meet.

Very plausible

And fits nicely with a road to economic recovery starting halfway through this year.

although The bottom is likely to be closer to 80k than 130k

EDIT:nothing to see here, move along.