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Balestra Capital: "We View Gold As Potentially The Best Currency"

Tyler Durden's picture




 

By James Melcher of Balestra Capital:

April was a month of diverging markets in Europe, China and the United States. European policymakers have been under pressure to resolve the deteriorating sovereign debt problems, exemplified by Greece, which spun out of control in recent weeks. The May 9th announcement of a rescue of Greece by the EU, IMF, and ECB has been taken by investors as a resolution of Europe’s problems – probably another triumph of hope over experience. China is addressing its inflation by tightening bank reserve requirement and lending standards, thus slowing growth. Its trade balance turned negative in March and was marginally positive in April. While facing the problems in its major export markets, China also risks deflating its speculative bubble in real estate, commodities, and equities.

The United States, while continuing to show strains from weakened consumer spending and a relatively slow employment recovery, looks more resilient. We question the strength and durability of the U.S. recovery, and are monitoring it closely. But the most important question is whether the global economy can return to growth levels that will enable fiscally challenged countries to service their debts while restraining spending. It appears that every country plans to solve its problems by increasing exports and decreasing imports; something that is obviously not possible.

We view gold as potentially the best currency; an ongoing portfolio theme based on the probability that central bankers in the U.S., Europe and Japan will continue their efforts to stimulate their economies with excessive monetary easing (printing money), while ignoring for the time being the dangerous fiscal ramifications. While deflation is the current problem, these policies increase the risk of a sudden turn to inflation. Without the return of significant global growth it is possible that we get the worst outcome in the form of stagflation. For example, oil and other commodity producers may start to demand higher prices in debasing currencies even though unemployment remains high and wages are stagnant or falling. Our analysis of commodities markets indicates that this effect has already begun. In any event the ongoing debasement of paper currency in the major economies will continue to create distortions in financial markets and asset prices. These factors have already created a topsy?turvy world in  which the rich developed countries of the post?war era have become the slow or no growth, problem?ridden debtors, while the smaller developing economies are the ones creating growth and wealth.

 

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Thu, 05/13/2010 - 19:45 | 350515 dumpster
dumpster's picture

those calling for 700 gold  now,, own none

 

are floating around in purple airhead bubbles .

gold has become a currency breaking out to the up side in all national fiats ..

 

suddenly the paper will become valuable ..lol

gold the real will be selling for a premium the paper gold can fool even mother nature

Thu, 05/13/2010 - 19:45 | 350513 Celsius
Celsius's picture

I would like to see someone try and take my gold by force. I will leave bodies on the ground. A pile of gold can buy you allot of protection when everything is in the crapper. 

Thu, 05/13/2010 - 19:47 | 350520 dumpster
dumpster's picture

celsius

 

yes  gold can buy you protection ,,, and food and shelter .. fools are degrading gold , as they puff around in little lap top pools of spit . and fancy manure chat

 

 

Thu, 05/13/2010 - 22:42 | 350849 Gully Foyle
Gully Foyle's picture

New Speedway Boogie
-------------------

Please don't dominate the rap, Jack,
if you've got nothing new to say.
If you please, don't back up the track
this train's got to run today.

I spent a little time on the mountain,
I spent a little time on the hill,
I heard some say "Better run away",
others say "Better stand still".

Now I don't know, but I been told
it's hard to run with the weight of gold,
other hand I have heard it said,
it's just as hard with the weight of lead.

Who can deny, who can deny,
it's not just a change in style?
One step done and another begun
and I wonder how many miles.

I spent a little time on the mountain,
I spent a little time on the hill,
Things went down we don't understand,
but I think in time we will.

Now, I don't know, but I was told
in the heat of the sun a man died of cold.
Keep on coming or stand and wait,
with the sun so dark and the hour so late.

You can't overlook the lack, Jack,
of any other highway to ride.
It's got no signs or dividing lines
and very few rules to guide.

I spent a little time on the mountain,
I spent a little time on the hill,
I saw things getting out of hand,
I guess they always will.

Now I don't know, but I been told
if the horse don't pull you got to carry the load.
I don't know whose back's that strong,
maybe find out before too long.

One way or another, one way or another,
one way or another, this darkness got to give.
One way or another, one way or another,
one way or another, this darkness got to give.
One way or another, one way or another,
one way or another, this darkness got to give.

Thu, 05/13/2010 - 20:13 | 350579 mogul rider
mogul rider's picture

atta boy/girl celsius

anyone comes into my yard gets a 30/30 enema

Thu, 05/13/2010 - 19:58 | 350544 ambrosiac
ambrosiac's picture

 

Yea, is not even Apollo

   with hair and harpstrings of gold

a bitter god to follow

   a beautiful god to behold?

Thu, 05/13/2010 - 20:01 | 350555 dumpster
dumpster's picture

apollo

 

fools gold

Thu, 05/13/2010 - 20:04 | 350560 Atomizer
Atomizer's picture

More bread and circus. My inbox email tonight. Long story short, I'm an American and signed up to receive lovely warning signs from the last four years. Here it goes.

Dear ***,

Welcome to the May Edition of the Migration Expert Newsletter.

During the election, immigration was a hot topic, with all major parties presenting their own solutions to the problems, and ideas on how to improve the immigration system. With the election outcome still undecided, it is difficult to predict how UK immigration will change in coming months. Migration Expert will keep you up-to-date with policy changes as they occur.

In UK Immigration News, UK Border Agency (UKBA) plans to survey thousands of new UK temporary and permanent immigrants, and asylum seekers with regards to their positive and negative experiences of the UK. The survey is designed to provide the Government with feedback on how to improve services, facilities and processes for immigrants.

If you have taken our free Visa Eligibility Assessment and passed, we recommend that you start your application now while you still meet the criteria. If you took our assessment previously and did not meet the criteria, we recommend you retake the assessment, as many things have changed and you may now qualify. Please contact Migration Expert to find out more.

Kind Regards,

The Team at Migration Expert

http://www.migrationexpert.com/

What is the difference in America & the Global immigration issues? Answer, none. The cartel is diligently working to make a few bucks off a new serf victim. All under the rule of democracy. The dumb ass and lazy american's can see thru the old playbook. I will follow up with a video next.

Thu, 05/13/2010 - 22:39 | 350846 Gully Foyle
Gully Foyle's picture

http://www.un.org/special-rep/ohrlls/News_flash2005/08%20July%20rising%20population.htm

 

"Fornos also cited the U.S. National Intelligence Council, a panel that advises the Central Intelligence Agency (CIA), as saying that large youth populations potentially threaten U.S. interests in Afghanistan, Colombia, Iraq, Mexico, Pakistan, Saudi Arabia and the West Bank and Gaza. "

Thu, 05/13/2010 - 20:11 | 350573 mogul rider
mogul rider's picture

gold bitches gold bitches rah rah rah.

gold bitches gold bitchrd rah rah rah

Thu, 05/13/2010 - 20:27 | 350604 spinone
spinone's picture

Three things can happen when it is time for central banks to pay back all the debt they have taken out.  They can either roll it over ad infinitum, default on it or pay it off.

I dont think they can roll it forever.

If they default then it will be deflationary, and gold will go down. 700?  maybe, who knows.

If they pay it back, it will be inflationary, and gold will go up.

 

Thu, 05/13/2010 - 21:29 | 350729 tmosley
tmosley's picture

If they default, people will lose trust in them, and thus avoid their paper (including currencies) in the future.  Gold is an alternative, so it will go up in this scenario, but not as much as in hyperinflation (where EVERYONE piles into gold).

Thu, 05/13/2010 - 20:29 | 350614 glenlloyd
glenlloyd's picture

gee, the nay sayers have really stepped up the pace tonight. Personally they can comment all they want but it makes little difference.

why waste time trying to combat ignorance.

Thu, 05/13/2010 - 20:41 | 350647 Celsius
Celsius's picture

It's proper risk management. Protect against tail risk events - hyperinflation or default. In either case you will have an economically accepted medium of exchange.

Thu, 05/13/2010 - 20:50 | 350665 CheapKUNGFU
CheapKUNGFU's picture

Hey guys, novel idea coming...

Why not IGNORE JayJayBaker's posts (pretend they are not there)...And before you know it, JayJayBaker finds somewhere else to post his/hers useless, and antagonistic thoughts?

Just sayin...

Thu, 05/13/2010 - 21:05 | 350692 spinone
spinone's picture

I think he is trying to put forward a point of view.  He isn't just being purely antagonistic.

I happen to disagree with his point of view.  I think CBs (ECB and FED) will inflate to pay off their debt when they can't roll it.  The only investment I hold now are physical PM's - I put my money where my mouth is since 2007.  Maybe I'm wrong, I can't predict the future.  If I'm wrong, and gold goes to $700, and silver to $10, I'll be wiped out.

But I sleep well at night.

Thu, 05/13/2010 - 21:19 | 350714 ColonelCooper
ColonelCooper's picture

I would maybe agree with you, but the SOB comes out of the chute with the name calling.  Fuck him.  You want to debate a concept?  Cool.  Do arguments get heated sometimes and we MF each other?  Yes.   Not this shitbucket.  Right off the rattle.  Douche. 

Thu, 05/13/2010 - 21:28 | 350728 uraniuman
uraniuman's picture

Sleeping well: priceless - every time I buy  gold I sleep a little better. Hope my schedule is fast enough. Paper IRA conversion= 36 months

Thu, 05/13/2010 - 21:55 | 350770 ColonelCooper
ColonelCooper's picture

You may have enough time, you may not.  I don't know what your situation is, but you sound like you're insuring.  Don't get caught into the trap that the only thing worth spending money on is gold.  All tangibles that are everyday items are an investment.  If a case of Ivory soap is going to go up in price by 35% in the next two years, seems like a good investment.  If you can't get Ivory soap anywhere, now your bar of soap takes on a value approaching PM status.  Not only can you not eat gold, it doesn't scour smegma out of those hard to reach places either.  I am also long on physical toilet paper, kotex, and dental hygiene products. 

Thu, 05/13/2010 - 22:10 | 350795 dumpster
dumpster's picture

you cant eat gold, toilet paper, or soap

they have a function for their use .

so dont mix dental hygene with kotex

Thu, 05/13/2010 - 23:48 | 350932 akak
akak's picture

And toilet paper!

My God, do NOT forget about toilet paper!

Thu, 05/13/2010 - 21:45 | 350754 dumpster
dumpster's picture

his point of view is, his only his shit does not stink

 

while all the time standing in yards of manure

Thu, 05/13/2010 - 22:11 | 350796 living on the edge
living on the edge's picture

I think you will not only sleep well, but be pleasantly surprised where the price of gold goes in the next few years. 

Two thoughts: 1. amount of gold mined each year is decreasing. 2. Soros, Sprott and other billionaires are increasing their gold positions even as we speak. They must know something.   

Thu, 05/13/2010 - 22:34 | 350840 Gully Foyle
Gully Foyle's picture

Will they be holding that gold unto death? They will be selling eventually correct?

Or maybe it is a Father Coughlin scenario.

Thu, 05/13/2010 - 21:43 | 350752 dumpster
dumpster's picture

quess its human nature to smash a knat on your arm.

or step on a large ant  

Fri, 05/14/2010 - 04:12 | 351134 Maddeafandblind
Maddeafandblind's picture

a knat?

 

Knat King Cole?

 

 

Thu, 05/13/2010 - 22:46 | 350853 sterlinger
sterlinger's picture

Seems like IMF begs to differ: 

Finally, in principle, a new global currency issued by a global central bank, with robust governance and institutional features, could provide a nominal anchor and risk-free asset for the system independent of national currencies. This global central bank could also serve as a lender of last resort.

http://www.imf.org/external/np/speeches/2010/051110.htm

Thu, 05/13/2010 - 23:11 | 350893 silvertrain
silvertrain's picture

 The Imf can think whatever they want..they know what the deal is, thats why they turned down selling Eric Sprott that gold a month ago.Why not sell I have to ask? number one, they dont have it..they have already sold it all off..So now they trying to pull an okie dokie..I can tell you now, they can come up with whatever they want to come up with, if it dont come with some gold backing, that can be fully audited, its not going to fly, period...This is a new group they dealing with now and it is called the internet..

Fri, 05/14/2010 - 00:42 | 350978 Apocalypse Now
Apocalypse Now's picture

Just like space cash from South Park.  Truth is, they have no reserves either.  Do we really want people that are not accountable to constituents, this would be the equivalent of taxation without representation when they try to institute their global tax.  They'll call it something cute and through their controlled media mouthpieces will tell you that it will save the world - something like a carbon tax to eliminate global warming so we can save the world - yeahh! wave your UN flag yeah!

No, but the international banker parasites do.

Thu, 05/13/2010 - 23:08 | 350888 Fraud-Esq
Fraud-Esq's picture

A little gold and silver helps me sleep better at night.

like xanax but more healthy. 

I'm not sweating the capital gain issue. 

but, I think as more people feel this way, out of 6.8 billion people and 200,000 net births today....

It could end up being quite an actual gain. 

if not, I will have slept better for several years. 

That's priceless for me

Thu, 05/13/2010 - 23:50 | 350933 repo 105
repo 105's picture

Speculators are involved now, we know how that ends.

Internet stocks -  I don't care if the company hasn't made a dime and the market cap is $4 billion.

Oil - we are running out.

Real Estate -  they aren't making any more of it.

Gold - Read comments on this post.

Fri, 05/14/2010 - 06:18 | 351202 JJ McApe
JJ McApe's picture

New ATH: Gold 1000+ Euro

Fri, 05/14/2010 - 06:49 | 351229 Mentaliusanything
Mentaliusanything's picture

New Currency TD - Don't you you know its a 'Barbaric relic' of the past. Wake up the World has moved on. We have HFT and paper Tigers that will eat your 'shorts'. Gold--------------------- That's just so early 19th - 18th - 17th - 16th - 15th - 14th - 13th - 12th- 11th - 10th- 9th- 8th - 7th - 6th - 5th - 4th - 3rd - 2nd - 1st -----  negative here (follow me guys)  where was I --- I know 30 coins of silver and all that ---- BC 1st - 2nd - 3rd -4th - 5th ---- Break just here ---- My fingers are getting so frigging worn out ---- read the Bible for the run down. Gold is Totally not anything through the ages. BUY USD .... Rah rah Frigging Rah

Fri, 05/14/2010 - 07:50 | 351289 doggings
doggings's picture

I'm still laughing at "parabolic blow off" :) ..how absurd, and from a supposed financial professional too. says it all.

July 09 - $900 Oz

02 Dec 09 - 1225 Oz

22 Dec 09 - $1075 Oz

09 Jan 10 - $1055 Oz

04 Feb 10 - $1045 Oz

11 May 10 - $1245 Oz

yep, the last 6 months has really wiped me out, how I wish I'd listened to the $700 numpties and gone short instead. 

chuckle chuckle chuckle

 

 

Fri, 05/14/2010 - 08:32 | 351352 peripatetic86
peripatetic86's picture

Does this whole thread not have the imperious overtones not unlike those in "The Road"?  I may have to re-read that tome in order to prepare for the coming days.

Fri, 05/14/2010 - 10:37 | 351657 WaterWings
WaterWings's picture

The Road describes the depravity pretty well - but not much else in terms of survival. That's as bleak as it gets.

For a total Mad Max scenario that is based closer to reality try, One Second After.

http://www.onesecondafter.com/

Fri, 05/14/2010 - 15:20 | 352447 Maddeafandblind
Maddeafandblind's picture

Know your customer is a golden rule.

Know your markets is another one.

Although the more hysterical members here (presumably hysterical because they bought within the last $200 or so *LOL*) will probably not appreciate it. Maybe they could sell half an ounce and find someone to read and explain this article to them.

http://www.miningmx.com/news/gold_and_silver/Gold-too-hot-for-Indian-buy...

So far so good - no problem yet.

But if you ever see pictures in the newspaper of people queuing to sell the family silver and/or gold:

beware!

or not - you're all free agents and "masters of your destiny"

for want of a better word :)))

 

 

 

 

 

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