GOLD

[marmite]

More gold bashing of at HPC but they seem to have got themselves very confused

 

http://www.housepricecrash.co.uk/forum/ind...showtopic=84567

 

Pound Taking A Shoeing., Not a good start for the day ....

 

Imagine the sterling value of gold is taking a bit of a pounding too.

 

Perhaps its going the same way as..... nah, I can't say it.

-------------------------------------

If gold maintains it's USD value, and the GBP weakens. The sterling value of gold goes up.

-------------------------------------

*Hides head in shame*

 

Yes, you are right.

-------------------------------------

 

The thing that is annoying me about the GBP/USD fall is that gold is still costing me more than it did in December

 

But if anything I am provoked to buy more. If GBP stays this weak and we go back to $1000 gold which really seems likely a bought ounce is going to cost us £570 +

 

 

 

[Steve Netwriter]

John always sounds very measured and reasonable. And the message is a good one.

 

John Rubino

Dollar-Gold Drama *AUDIO*

http://www.howestreet.com/audio/johnrubino_2008_0813.mp3

 

 

[marmite]

More gold bashing of at HPC but they seem to have got themselves very confused

 

http://www.housepricecrash.co.uk/forum/ind...showtopic=84567

 

Pound Taking A Shoeing., Not a good start for the day ....

 

Imagine the sterling value of gold is taking a bit of a pounding too.

 

Perhaps its going the same way as..... nah, I can't say it.

-------------------------------------

If gold maintains it's USD value, and the GBP weakens. The sterling value of gold goes up.

-------------------------------------

*Hides head in shame*

 

Yes, you are right.

-------------------------------------

 

The thing that is annoying me about the GBP/USD fall is that gold is still costing me more than it did in December

 

But if anything I am provoked to buy more. If GBP stays this weak and we go back to $1000 gold which really seems likely a bought ounce is going to cost us £570 +

 

I suppose this is what im still trying to work out.

 

1. Is the GBP fall directly related to the USD rise and Gold fall. In which case as the USD falls back, GBP will rise and the actual cost of gold in GBP wont really change

 

or

 

2. The GBP fall is a independent issue, related to recession fears etc and when USD drops back and Gold rises the GBP/USD excahnge rate will still be a lot weaker ( say 1.80 ) and gold is going to cost a fortune in GBP.

In which case we should be buying gold now.

 

[bitbigt]

Seconded. I have to let it sink in slowly, then return later & see if my head is around it

 

May I turn this around into a simple, self-centred question?

 

If you had 150,000 lying in a Euro account, (& it is unlikely you would ever need it), would you not be tempted to stuff the lot in PMs right now?

.... because I am so tempted. All else (apart from Dr Bubb's, too much for my brain, investing) looks a disaster zone.

 

If I ask myself the question will Gold fall in relation to the Euro over 3-5 yrs, then it seems madness not to proceed?

 

If I go any deeper than this the clarity vanishes

 

All comments welcome please............ even 'shut up woman!'

Not trying to give advice, but perhaps you might llike to reflect on my strategy...

 

I try to look for the lowest risk investment options (which I define as 'prices won't fall permanently lower in the time frame I am willing to invest) balanced against the best likelihood of profit (which I define as 'near certainty that price will go up at some time within the time frame I am willing to invest)

 

The targets on my hit list are then:

- Asian stock markets

- Oil

- Alternative energy companies

- PMs

- global infrastructure

- water resource companies

- property in Switzerland

 

...I feel certain that ALL of these options will have a major bull run some time in the next 2-10 years, but NONE of these are yet at what I think is their bottom before they start those bull runs. PMs may be the only exception to that last statement (but until last week I thought that was true at 850 for gold, now I'm open to the remote possibility of 750)

 

So, with about 600k to play with, I've started into PMs now (100% in with gold at 600, 25-50% in with silver at 16.5), and will add more silver if it goes sub 14. I'm very close to starting to average in to oil (will start at 110 if we get there, and double up every 10 dollars lower). I've also made my first foray into Swiss property, and currently looking for more (they never suffered the bubble that most other countries did). And have one big toe in the alternative energy domain.

 

But that still leaves more than half my money sitting in bonds and high-interest cash and money-market accounts. I don't expect the bottoms will arrive in Asian markets, global infrastructure, and water resource companies until late 2009 with current trends, and so am holding fire for now.

 

Total fraction (of my investment money, not total wealth) in PM when all said and done: probably about 20%

 

EDIT:

- My list would also include small biotechs working on biotherapeutics if I could find time to create and investigate a good list

- might also add military hardware companies (given my expectations for world peace) but would feel rather guilty about this

 

[bitbigt]

If you are never likely to need the 150k, then you also don't need it to make you a profit.

 

So have some fun!

 

If big, risky bets are your type of fun, then why not? Me - I'd rather see a bit more of the world, or maybe buy an exotic getaway, or a seaworthy boat, but each to their own.

...actually, and as usual, wrongmove probably speaks the most sense of all :-)

[Steve Netwriter]

The thing that is annoying me about the GBP/USD fall is that gold is still costing me more than it did in December

 

But if anything I am provoked to buy more. If GBP stays this weak and we go back to $1000 gold which really seems likely a bought ounce is going to cost us £570 +

 

OK, I've got to say it. What ARE you doing with GBPs !!!

 

Unless you're looking for a hedge, just in case everything turns out OK

 

[bitbigt]

What about when a bank repossess a property and then gets less than the value at auction. Is this not the equivalent of letting the borrower off the mortgage debt?

Yes indeed. And I believe I covered that in post # 786

I would judge the amounts to be small compared to new mortgae new money creation (and run the numbers in that post).

[bitbigt]

Only if they write off any outstanding debt, which they don't do for years. Instead they hold it against the mortgage holder and often return to pursue it years later. Meanwhile it sits on their books as an asset, albeit a rather distressed one.

...aha. Thanks, I've just learned something else that's pro-inflationary

[marmite]

OK, I've got to say it. What ARE you doing with GBPs !!!

 

Unless you're looking for a hedge, just in case everything turns out OK

 

Unfortunately GBPs is what I have comming in month to month

 

Also my " primmed gold dry powder " has been kept in GBP's for the past 8 months. On reflection I should have converted it all to gold back then, hindsight is a wonderfull thing

 

But then I could have deceided to convert it all to gold @ $1030 an ounce, so you never really know what to do without the crystal ball

 

 

[bitbigt]

Writing off debt means that money in circulation that would have been paid back will never be paid back. Ultimately, write-offs mean therefore more monetary inflation (money that got created can not be destroyed anymore).

With respect, I think about this a little differently:

- I agree that there in this scenario money is left in circulation, which is proinflationary

- but the actual M3 (= 'total money in existance') number goes down. Imagine a 30k write off due to negative equity debt being written off by the bank. There was the 30k in the economy (part of the initial mortgage loan) plus the 30k part of the mortgage contract face value (that contract is 'money' as it can be exchanged for cash, packed into MBSs etc). Thus 60k in total. If the bank writes off that 30k there is now only 30k in the total system.

- But Magpie says they don't usually write it off, they just stop chasing you for a while. So no actual decrease in M3.

[bitbigt]

my bones are telling me we might today be due a smackdown in oil, and therefore gold also

...hope I'm wrong

[G0ldfinger]

... If the bank writes off that 30k there is now only 30k in the total system. ...

Can you explain to me in what way a balance alteration of a bank (the 'write-off') directly influences M3? How does this destroy 'money'? I agree that 'value' gets destroyed. But money? How?

 

write off

To cancel a debt, or to acknowledge the loss or worthlessness of an asset. Also to remove an asset or holding entirely from a balance sheet. The reduction in value, or loss, is said to be "written off"

Found on http://www.aviva.com/index.asp?pageid=69

So, yes, write-off means 'sorry, our asset is worthless'. I can't see how this destroys money. It destroys value, e.g. for shareholders, but no money.

 

EDIT: OK, I guess the question is, is the actual mortgage part of M3? I wouldn't think so. The money that got created through the mortgage (e.g. paid to the previous house owner) is M3, but not the mortgage itself. Or do I get this totally @$$-backwards?

... plus the 30k part of the mortgage contract face value (that contract is 'money' as it can be exchanged for cash, packed into MBSs etc) ...

[bitbigt]

Can you explain to me in what way a balance alteration of a bank (the 'write-off') directly influences M3? How does this destroy 'money'? I agree that 'value' gets destroyed. But money? How?

 

So, yes, write-off means 'sorry, our asset is worthless'. I can't see how this destroys money. It destroys value, e.g. for shareholders, but no money.

I'm no expert, but my understanding is that the definition of M3 includes such things as the value of mortgage contracts, mortgage backed securities etc. I presume this is becuase they are a paper asset with an agreed value (just like a pound note), and they can be used to pay for things. Hence, if you write one off, its like burning a pound note.

 

So I think it all comes down to what's included in the definition of 'M3: money supply'. The narrower definitions (M1, M2) do not include thing like this

 

...very happy to be corrected if I'm wrong

[G0ldfinger]

OK, here an example with numbers.

 

Say, M3 is X. Now a bank with a market capitalization of Y makes a loan of 100,000 to someone who buys a house.

 

Now M3 is X+100,000, because this someone takes the money and gives it to someone else. The bank doesn't win or lose anything (we disregard interest), so the market cap possibly stays at Y.

 

Now the mortgage defaults. M3 is still X+100,000, with no chance of the additional 100,000 ever being destroyed. The bank says, "CRAP, we have a write-off!" The stock market says "CRAP, they have a write-off!" The bank then does funny things on its balance sheet (reducing it by 100,000, I suppose), and if the stock market is rational, the banks new market cap is Y-100,000.

 

END RESULT:

M3 has increased, the stock holders of the banks have made a loss.

 

--> money supply INFLATION (and stock market DEFLATION)

[G0ldfinger]

I'm no expert, but my understanding is that the definition of M3 includes such things as the value of mortgage contracts, mortgage backed securities etc. I presume this is becuase they are a paper asset with an agreed value (just like a pound note), and they can be used to pay for things. Hence, if you write one off, its like burning a pound note.

 

So I think it all comes down to what's included in the definition of 'M3: money supply'. The narrower definitions (M1, M2) do not include thing like this

 

...very happy to be corrected if I'm wrong

I don't think so. I think it's only very short-term debt that can be included in M3. But maybe I am wrong here. Happy to be corrected as well.

[G0ldfinger]

...

END RESULT:

M3 has increased, the stock holders of the banks have made a loss.

 

--> money supply INFLATION (and stock market DEFLATION)

The story won't end here, by the way. BECAUSE the bank will run to the central bank crying. Mommy central bank will then say, here, little bank, give me your defaulted or crappy mortgage, I give you freshly printed cash, because I don't want stock market DEFLATION. Hence, we get even more money supply INFLATION.

 

This loan also will never be paid back, because it will be rolled over to infinity.

 

This is how gold finally goes to $10,000, and oil to $400.

[G0ldfinger]

http://www.bloomberg.com/apps/news?pid=206...&refer=home

Consumer Prices in U.S. Rise at Fastest Pace in 17 Years on Energy, Food

Inflation two times higher than forecasted.

 

Gold drops. Of course.

 

:lol:

[lifechooser]

I don't get it.

 

 

War breaks out, team america try to pick a fight with russia - Gold plummets.

Eurozone economy shrinks for the first time since the eurozone exists - All european indicies rise.

US inflation data is scary bad - Gold plummets again.

 

Could someone explain this economics thing to me please?

[drminky]

I don't get it.

 

 

War breaks out, team america try to pick a fight with russia - Gold plummets.

Eurozone economy shrinks for the first time since the eurozone exists - All european indicies rise.

US inflation data is scary bad - Gold plummets again.

 

Could someone explain this economics thing to me please?

 

 

Welcome to the "new" world. 40 is the new 20. White is the new black. Up is the new down. Bad is the new good. Losses are the new profits. Bear is the new bull. Socialism is the new Capitalism. Insanity is the new Common Sense."

 

make sense now?

[bitbigt]

http://www.bloomberg.com/apps/news?pid=206...&refer=home

Consumer Prices in U.S. Rise at Fastest Pace in 17 Years on Energy, Food

Inflation two times higher than forecasted.

 

Gold drops. Of course.

...yes, of course!!!

 

PPT are now shi77ing bricks about inflation, so they smack down oil and gold today

 

What else did you expect, a rational market - just now its all being 'fixed'

 

[bitbigt]

removed duplicate post

[marmite]

I don't get it.

 

 

War breaks out, team america try to pick a fight with russia - Gold plummets.

Eurozone economy shrinks for the first time since the eurozone exists - All european indicies rise.

US inflation data is scary bad - Gold plummets again.

 

Could someone explain this economics thing to me please?

 

The more I read and learn about economics the less I understand

 

[drbubb]

my bones are telling me we might today be due a smackdown in oil, and therefore gold also

...hope I'm wrong

 

Alot of people are worried about such a possibility.

When it doesn't happen, and the prices just sheds a bit, and stays above the recent lows,

that will be a good sign that Oil and Gold now want to go higher (that's my expectation anyway)

 

I do think that we have only seen the A-wave of an A-B-C correction in Oil.

And I believe that we may have seen the end of the C-wave in Gold. so in then next little while.

they can both up together.

 

I don't get it.

 

War breaks out, team america try to pick a fight with russia - Gold plummets.

Eurozone economy shrinks for the first time since the eurozone exists - All european indicies rise.

US inflation data is scary bad - Gold plummets again.

 

Could someone explain this economics thing to me please?

 

Sure. Prices move when something unanticipated, or undiscounted happens.

Or, in thin markets, when a manipulator has taken charge. Markets are thin in the summer, and its

easy to push them around. The big traders like that because they can stay out of the market (on holiday)

and then react after they have been moved to an extreme. I think you will find people love seeing gold

go to a low level, and stocks too high, because they are setting up some good trading opportunities for

later, after the summer moves peter out.

 

You need to study charts and psychology alongside economics. if you want to understand this

[wrongmove]

Could someone explain this economics thing to me please?

 

Certainly not me!

 

One point though. Markets look to the future, while indices measure the past. It's all about expectations, not "here and now" and certainly not "several months old data".

 

 

 

[bitbigt]

OK, here an example with numbers.

 

Say, M3 is X. Now a bank with a market capitalization of Y makes a loan of 100,000 to someone who buys a house.

 

Now M3 is X+100,000, because this someone takes the money and gives it to someone else. The bank doesn't win or lose anything (we disregard interest), so the market cap possibly stays at Y.

 

Now the mortgage defaults. M3 is still X+100,000, with no chance of the additional 100,000 ever being destroyed. The bank says, "CRAP, we have a write-off!" The stock market says "CRAP, they have a write-off!" The bank then does funny things on its balance sheet (reducing it by 100,000, I suppose), and if the stock market is rational, the banks new market cap is Y-100,000.

 

END RESULT:

M3 has increased, the stock holders of the banks have made a loss.

 

--> money supply INFLATION (and stock market DEFLATION)

As this site shows, its all quite complicated.. http://www.answers.com/topic/money-supply

 

My reading of it is that I've basically got it right, but may have been refering to 'M3' when I should have been referring to 'L'

 

Of all the money supply metrics, the main questions are 'which one is best predictive of inflation vs deflation' and 'how does all this interplay between the global and local contexts'

 

Since I should get some 'real' work done today, I'm going to leave it for now - other than to say I still judge we have been, and we are still, putting more new money into the global system than it can handle, and this will cause uncontrolled inflation over the next few years. The CBs will then play their 'natural' part in manipulating markets, but eventually the fundamentals wil exert themselves. Fiat currencies will continue to be devalued, and at an ever increasing pace. Its been that way for the past 100 years (1 dollar then worth 2c now) and I don't see why things should suddenly change now when bale outs are everywhere, M3 is growing at 15%, and Asia is roaring ahead