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Guest Post: Primer #3: The Dangers Of Mass Psychology (Or Why Overwhelming Majorities Are Always Wrong)
Submitted by Ben Rabidoux of Financial Insights
Primer #3: The dangers of mass psychology (or why overwhelming majorities are always wrong)
Hello again
In our first primer we discussed the notion of deflation and
why a period of deflationary pressure is inevitable. We explained how
inflation is created in our fractional reserve banking system via
credit-based money creation by our banks. We also saw that when people
stop taking out mortgages or home equity lines of credit and instead
begin saving and paying off those debts, it shrinks the money supply and
slows the velocity of money. This is what awaits us and this will
exert tremendous pressures on asset prices, particularly leveraged
assets like real estate and some stocks.
We then looked at whether or not there is a Canadian housing bubble
in our second primer. I hope you now see that when you remove the
anecdotes and clichés from the discussion and instead look at
fundamentals, it is awfully hard NOT to see that house prices are
significantly overvalued.
So today we turn our attention to a subject that is very dear to my
heart: mass psychology. I want you to notice that in a normal,
functioning economy, debt-based money should be created and destroyed
at close to the same rate. Provided the population grows and GDP grows,
there should be a slight upwards bias in money creation. So why have
things gone so crazy in the past 10 years?
Let’s look at some interesting data points. Many thanks to Jonathan Tongue for compiling these graphs.
Graph 1: Mortgage outstanding
Note the parabolic increase in mortgage debt outstanding since 1999.
Graph 2: Growth in personal lines of credit
Note that this is massively parabolic, approaching a near vertical
move. This right here is the ‘wealth effect’ visualized. People have
been more than happy to borrow against their home equity for many years
now, as perpetually rising home prices have made them feel wealthier.
Think about the implications for the broader economy. This consumer
spending has fueled much of the growth we have experienced over the past
10 years. David Rosenberg recently calculated that every dollar of
home price appreciation creates 9 cents in spin-off spending. It’s not
too hard to see that phenomenon in this graph. My position is that as
house prices normalize, there will be a slowing and then a reversal in
personal line of credit growth. This will choke off consumer spending.
Hence, I see a recession in Canada by Q3 2011.
Graph 3: Credit card balance growth
Wow!
Remember that debt constitutes a claim on future earnings, and
therefore future consumption as it eventually must be repaid. This is
why debt is inflationary in the short-term, but deflationary in the
longer term, paradoxically. So back to the initial question. If
debt-based money creation should roughly equally money destruction, why
the massive boom in debt-based money creation over the past 10 years?
This is the result of group-think. When everyone decides on mass that
it makes sense to take on huge amounts of debt, while very few people
save, a credit bubble is born.
To understand how this happened, let’s rewind the clock back to
the turn of the millennium where two significant events occurred. First
was the crash of the dot-com bubble. Technology stocks reached
massive overvaluation levels in late 1999. The tech-heavy NASDAQ index
in the US was crushed in the following couple years, losing well over 80% of its value in one of the great bubbles of the past couple centuries.
People were burned by this massive bubble bursting. Consumer, who
now felt poorer, began to retrench and the US was back in recession.
Then came 9/11. This further damaged consumer psyche. In response to
all this, the Federal Reserve in the US and the Bank of Canada both
crashed interest rates to encourage consumer spending.
In response, consumers realized that their savings were earning them a
pittance in their GICs and savings accounts. So the savings rate
crumbled in both countries crumbled, with the US actually seeing
negative savings rates for a short period of time.
Remember that as people save, the velocity of money decreases.
Likewise, as they stop saving, leaving more money in the system to
change hands, the velocity increases.
Now central banks can encourage spending, but they can’t channel that
spending. So, consumers who had been scarred by the stock market
decided that real estate was the new safe bet, and the real estate boom
began. It was the events of the early millennium set the stage for this
new prevailing view of real estate to be born. As home prices began
their ascent, more and more people piled in. Home ownership rates
soared. Lax lending standards in both Canada and the US (the ‘prudent
Canadian banking system’ fallacy will be addressed in a later post) led
to a deluge of new buyers. Rising home prices then became the
justification for rising home prices. Eventually everyone became
convinced that real estate rises forever, it is a great investment
(which it can be when the fundamentals are normalized), and everyone
should own. That’s where we find ourselves today.
Here is the connection to mass psychology: Any time people
overwhelmingly believe that an asset is a ‘sure thing’ it inevitably has
to be otherwise. It was John Kenneth Galbraith who astutely noted
that, “In economics, the majority is always wrong”. This is the great
paradox in the world of finance and it is exactly why the contrarians
always prosper.
To wit, consider the following article.
The title is “Majority of Ontarians believe that real estate is a good
investment”. It goes on to indicate that 90% of Ontarians believe that
real estate is a great buy and a solid investment. From other sources I
have seen, this number is fairly consistent across all of Canada.
Faced with such an overwhelming majority who would disagree with me, I
suppose I should probably recant the predictions made in my last
primer and join the party. Well, I’m not quite there yet. In fact,
this only strengthens my convictions that we are at the tail end of a
bull market in real estate. Allow me to explain using a couple of
wonderful graphs and a brief lesson in market psychology. One of the
most amazing things about markets is that when a large majority of
people believe that an investment is a sure thing, it invariably turns
out to be otherwise. Cue the first graph. This one shows mutual fund
manager cash positions in equity (stock market) mutual funds over time.
It sounds intimidating, but it isn’t. The bottom squiggly line
indicates the portion of the fund that is in cash at a given time. The
top line shows the stock market, in this case, the SP500 out of the US.
Why is this significant?
Well, a mutual fund manager will strategically move into cash (sell
stocks) when they believe that the market will go down and there will be
better buying opportunities in the future. Obviously. And when they
believe that stocks will go higher, they reduce their cash position (buy
stocks). What is absolutely astounding is that when taken on
aggregate, mutual fund managers (who are supposed to be the smartest at
picking stocks) are always holding their highest cash positions at times
when the markets are about to take off, and always have the lowest cash
positions at times when the market is about to tank. In other words,
they have it dead wrong virtually 100% of the time. Seriously! The
vertical dashed lines make the connections for you. You see that the
bottom line (cash position) is always spiked higher at times that
correspond with an uptick in the top line (stock market) and vice versa.
This is a very well-studied phenomenon. For a great perspective on
this as it relates to stock markets, I would suggest you read the
following two books: A Random Walk Down Wall Street by Burton Malkiel,
and The Little Book of Common Sense Investing by John Bogle. Both are
fantastic. The two points that must be gleaned from this are as
follows:
1) Mutual fund managers aren’t worth the money you pay them. You get
much better value and much better long-term performance by buying an
index fund.
2) As it relates to all markets, including real estate, anytime that
the majority is convinced that the market is a sure thing, it will
invariably do the opposite, as the majority of the money has already
positioned itself accordingly. In this case, if everyone has sold to
build up their cash position, no one is left to sell. That means that
buying will dominate, and prices will move higher by necessity. The
opposite is also true, and now is the time to make the connection with
real estate. If everyone has bought expecting a higher price, then the
majority of the money is already in play on the buy side, leaving the
sell side to dominate the foreseeable future, with lower prices being
the result of the immutable law of supply and demand.
One more graph will further illustrate the amazing effect of market
psychology. This one is kind of like the inverse of the last graph.
Essentially what it shows is the stock market on the bottom (SP500 out
of the US) and at the top is the percentage of the population who are
‘bullish’ on stocks. Bullish is just a term that means that you believe
stocks will go up. The opposite is called being bearish.
Once again, the blue line at the top indicates what percentage of the
population believes that the stock market will go up. What you will
notice is that, as with the last graph, points of maximum pessimism are
inevitably linked to points at which the stock market is about to break
out to the upside, while points of maximum optimism are always
associated with periods of heightened volatility and times of downward
pressure on stock prices. Amazing isn’t it?
In any market, overwhelming majorities always indicate that the
opposite is about to happen, as the overwhelming majority has positioned
itself (themselves?) to prosper from the ‘obvious’ coming increase in
asset prices. With real estate, 90% of the population currently
believes that it is a good investment (the highest in 12 years). This
has translated into higher ownership rates (the highest in several
generations). So the question must be asked, ‘if so many people have
positioned themselves to prosper, to whom will they sell to to realize
their gains’? And that, my friends is why I am soooooooo unimpressed
when I hear the talk about the massive abundance of real estate bulls
out there.
You should not be swayed either. The contrarians always prosper, as
evidenced by the above two graphs, as well as countless academic studies
on market psychology. Public opinion will inevitably shift back to a
dislike of real estate as an asset class. It will be then that I, and
the other smart money, will make a move. I would advise you who may be
considering a purchase to do likewise.
I have long believed that the government interventions back in the
Fall of 2008 did nothing to alter fundamentals. Rather, they dragged
demand forward and exhausted the pool of potential buyers. There is now
a void in potential buyers at the same time that people try to cash in
on their real estate equity en mass. Hopefully you heeded the
advice not to follow the herd!
As a final thought, consider that bubbles tend to follow a particular progression.
This chart was put together by Dr. Jean-Paul Rodrigue of Hofstra University in New York. Now let’s consider the progression of home prices in Canada as indicated by the Teranet Home Price Index.
I’ll leave it for you to decide where we are on the bubble progression.
Cheers and blessings,
Ben
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Bernanke to his master(s): "I'm blowing as fast as I can boss, but those dam banks won't lend out the frigging money and nobody believes the markets are real anymore. Time to helicopter drop checks directly to the people."
Funny thing is when i read the first few words 'The Dangers Of Mass Psychology' i knew at that very instant that Cognitive Dissonance would be the first to reply.Call it very basic instinct.
BTW, i am no phycho clairvoyant.
Did you mean FICO clairvoyant?
http://www.amazon.com/s/ref=nb_sb_ss_i_1_6?url=search-alias%3Dstripbooks&field-keywords=mackay+delusions&sprefix=Mackay
I hope they helicopter drop me a check.
It's better than some fat cat hedge fund manager getting it.
Fat cat already got his during the run up.
In response to your first wish, let me just say: checks monkeys might when see you falling ass sky Ben's fly out the ass from.
??????????????????????? - WTF?
Are you a foreigner?
I think he's a boston. But he may be a Cheap Trick.
If he isn't watch out for supertramps.
http://www.youtube.com/watch?v=kwNvm263b6c
Yes, we're definitely not in Kansas anymore, Toto. We're out in the Styx.
Screw that noise, here's what we need:
http://www.youtube.com/watch?v=BQifd7O_N5k
And I'm not even a big Boston fan...
You might see checks falling from the sky when monkeys fly out Ben's ass.
I thought you wanted to use cut up technique? Either way, I'm easy.
Thanks Ripped... I'm new here... Is this an inside joke?
william s. burroughs
da da. . . is that really you??
All your phrases aren't belong to us..
Beige book (down); Consumer credit (down) and stock market? (UP). This is quite a bizarro market...
Can't have the market go down on the same day the Fed and the Teleprompter speaks.
See how good that Portuguese auction was? Europe's in the clear! The Irish banking problem is solved by splitting a crappy nationalized bank into two crappy nationalized banks! /sarcasm
I have been a contrarian all year; where's my money?
Nihilarian,
Loved it!
Ditto!
DavidC
I second that. Nothing here except a suggestion that Leo refrain from purchasing a home.
It's not a nursing house...it's a nursing HOME now...
group hug after the carrot mash?
Never been a big fan of the so called "Wisdom of Crowds"
A fun nug
Where are the Canadain REITS ?
Lost at sea...twas a sad day in St John's that day when the SS Nicklepumper went down at sea, taking with it 23 good men to old davy along with the REIT's and Mutual fund returns...
Been three years now...yarrrr.
mass psychology that applies here is the one that somehow gets people believing a pack of lies from the authorities...the power of denial, and the reluctance to shatter leadership even when that leadership is flagrantly lying and engaging in criminal behavior.
Bubble alright...A couple of weeks ago, people were lining up over night to have the right to purchase a condominium in a new project in downtown Montreal (maybe Leo was one of them). This was unheard of in this town when in the late nineties there was not even a single condo project in the city. In 1995, just before the referendum, houses were being given away for peanuts
The referendum.. Haven't thought about that for years... What a messed up time that was.
Je me souviens.
(In response to Johnny's gold bubble comment directly below.)
I must admit Johnny may have a point. All everyone is talking about where I work these days is gold. Maybe a bubble is nigh.
Sorry, gotta get back to work. There's a crapload of core samples I have to analyze for our head geologist.
My favorite part was when they lost and Parizeau was hammered on stage and blamed jews, women and blacks (immigrants??) for the fact they weren't going to run Quebec into a ditch all by themselves.
Good times...good times...
There's a post about the "dangers of mass psychology" here?
Does GOLD BITCHEZ ring a bell? LOL
Johnny,
I believe you take the comments from this blog as being a part of the masses. If this fundamental flaw is a part of our assumption you may want to take a survey of your coworkers and neighbors. Ask them what their portfolio is comprised of. Most will say they are well diversified with some "risky" stock exposure and less "risky" stocks. Then ask if they have any gold, in physical form, and the deer in the headlights is what you will get.
The point of the matter is that the ZH community does NOT constitute "the masses", at this point at least.
On gold?
Can you name one mainstream source that is bearish on gold? One at all?
I bet you can't. (I'm watching a bullish piece on gold on CNBC right now as I type this!)
If the people here agree with CNBC and Bloomberg, Fox, and everybody else, how is that an opposing view to the masses?
Oh, and marketwatch!
How many comments are bullish here, versus how many are bearish?
Is it 10:1? 20:1?
http://www.marketwatch.com/story/gold-timers-showing-a-lot-of-excitement-2010-09-07?dist=afterbell
The majority of people don't even know what they're invested in - be it gold, stocks, bonds, or otherwise.
If you ask them what they're invested in, you'll hear:
"Ummm... I have a 401k?"
They couldn't tell you what's in it if their lives depended on it.
They're not "invested". It's a savings account, with an extra uncertainty factor thrown in for funsies.
The last few decades, that fun factor has meant +10% or whatever per year. If we're in a long term debt deflation cycle, ouch.
Ignorance is not an excuse. The fact is that very few people have any exposure to gold, no matter how much your "contrarian" liehole wants them to.
Exposure to precious metals is about 1/50th of what it was in 1980. Suck on that and like it.
Instead of trying to gauge whether Gold is contrarian or not you would be better served by looking at the fundamentals. i.e. Long term chart of the total value of Gold as a percentage of the money supply. It is my opinion Gold is definitely not a crowded trade, but that should be a secondary consideration. For example, stocks are not going to go down simply because most people are long term bullish. Stocks will go down because p/e's are above their historical median, the leading indicators are rolling over, and the consensus is still anticipating a recovery. As a side note, I work in a wirehouse and only one of the 20 brokers is bullish on gold. They all think it is a bubble and have thought that ever since I started working there three years ago.
Seriously? You think the masses are the gold, bitches crowd? Maybe here, but the masses aren't well represented here. Read Greenspan's '66 paper on gold yet? No, of course not - you don't need to - you've made your mind up and are going to stay the course.
Yes, I should read the opinion of the man who did more than anybody else to ruin the economy (and thus caused gold to increase the most).
As far as the belief that gold isn't mainstream...
Show me one financial news site that is bearish on it, or doesn't say that it's going to make new highs.
You can't.
CNBC is bullish on gold, bloomberg is. Faux News is. I could go on and on about all the people toting gold as a sound investment.
Like I said, can you name one mainstream source that isn't bullish?
The masses are a lot more represented here than you think.
Not buying the guy's arguments, nor yours. Time will tell.
The (longer term) rising wedge in gold is still intact! Also note that it is making its wave 5.
http://4.bp.blogspot.com/_TwUS3GyHKsQ/TIaretgxpjI/AAAAAAAAHdI/daThKA-Mvi...
What's the ratio of bullish to bearish comments in this article?
http://www.marketwatch.com/story/gold-timers-showing-a-lot-of-excitement-2010-09-07?dist=afterbell
10:1, maybe 20:1.
Marketwatch isn't the masses?
How about CNBC?
Gold to hit new highs??
http://www.cnbc.com/id/39040235?__source=aol|headline|quote|text|&par=aol
Bloomberg?
Gold may hit new highs in a couple of weeks.
http://www.bloomberg.com/news/2010-09-01/weinberg-says-gold-may-hit-new-high-in-couple-of-weeks-video.html
How is the opinion of ZH gold bugs different than the masses again?
They're really going out on a limb there... you ever hear of Ramadan? Indian wedding season?
"Looking at more than four decades of seasonality, September has been the best month of the year for gold and gold stocks."
Are any of the articles bearish?
What is the ratio of bullish comments to bearish ones on the articles?
I'd say that those news sites represent a pretty full spectrum of mainstream.
It's seasonal! Being contrarian doesn't mean you take the opposite side of the weatherman when he forecasts snow in December!
Indeed! Nor is it being "wisely contrarian" for an impala to refuse to flee from the attacking lion just because the rest of the herd is doing so at the same time.
But with that said, "the herd" overall still does not see the lion, nor even yet has a clue that there IS a lion out there.
You're right. The herd doesn't see the lion (the rising wedge).
The herd is bullish on gold.
you have shown one good rising wedge there in the Chart. I will wait and watch since I have a lot of buffer. Somehow this is not aligning with the QE2 to be unleashed soon. But as "ANOTHER" says, you have to throw all TA out the window when Gold transitions from Commodity to Currency.
Johnny's rising wedgie means squat in the face of all the fundamentals, such as continued and accelerating deficit spending, and the Federal Reserve's monetization of the latter, that guarantee a rising gold price.
He can attempt to bamboozle us with short-term distractions and irrelevancies, but in the longer run, his precious fiat dollar is toast, as has been EVERY fiat currency throughout history. To state or even infer that fiat currencies do not continually and inevitably decline in value (if not actually and often collapse into worthlessness) is to deny reality itself.
Yes, I should read the opinion of the man who did more than anybody else to ruin the economy (and thus caused gold to increase the most).
He wrote it almost 50 years ago and if you ever read it you would realize that he later did exectly what he warned about.
Like I said, can you name one mainstream source that isn't bullish?
I generally don't pay attention to mainstream propaganda anymore. But, I do pay attention to the average citizen - and NO, they don't own gold, and if you mention it to them they will say "gold is at an all time high! You should sell!" and they don't have a clue why it when up either.... sound familiar, Johhny Average?
Okay, so the people who read Bloomberg, CNBC, marketwatch, etc. aren't mainstream investors?
How can you say that people tell you to sell gold when you were just saying that people looked at you like they are confused when you ask them about it?
Read the articles I posted already. Read the comments.
Tell me how many people are bearish on gold. (like two maybe?)
Fuck-it. I give up. You're not in a rut. you're reinforcing a trench.
There Must Be Something In The Water
Restaurant | Houston, TX, USA
(I’ve just asked a customer if they would like a new carafe of water.)
Customer: “What’s a ‘carafe’?”
Me: “In layman’s terms, its basically a water pitcher.”
Customer: “What’s ‘layman’s terms’?”
Me: “It’s like…dumbing down.”
Customer: “What’s ‘dumbing down’?”
http://notalwaysright.com/date/2010/04
Fractional reserve banking necessarily transmutes to ficitional reserve banking. They are all bearish on gold because fiction only works if there is no non-fiction.
But who's bearish?
I can't find anybody...
Then you clearly have not been looking hard enough --- or at all.
Just go read Jon Nadler (your gold-hating, central bank-loving soulmate) over on Kitco.com on any given day, for one.
He's not in the mainstream at all.
He doesn't represent the masses. Gold bugs ARE the masses.
You are insane.
Go ask any random collection of people on the street, or in your office (presuming that the latter is not equivalent to your mom's basement), or in your Keynesian, pro-statist university economics classes (presuming you have told the truth about your situation), and let us know what percentage are even aware of gold as an investment. It is going to be a low, low figure, I guarantee you ---- under 10% absolutely, probably under 5% would be my guess. Then come back here and go through the mental and semantic gymnastics of trying to explain how an asset of which less than 10% are even aware, and probably less than 2% are holding, is somehow "mainstream". Really --- it should be quite entertaining.
Buy gold if you like playing a market dominated by every central bank on the planet.
.
You are incorrect; central banks do NOT dominate the gold market!
Even according to their officially stated levels of reserves, central banks collectively only hold around 20% of the world's stock of gold. And if GATA and others who accuse them of having meddled behind the scenes in the gold market are correct, then central banks only hold 10% or even less. Hardly a dominant position.
Sorry, central banks as purchasers for their respective captives (sorry I meant governments)
Junked by Timmay I guess
Were like photons. Massless. Only we're really not massless. We are just spread out over such a large area nobody can find a scale big enough to weigh us.
Massless movements are a bitch aren't they.
.
Goldbugs are a massless movement.
JohnnyBravo is just a bowel movement.
There are plenty of people bearish on gold. I see a fair number of talking heads on the MSM bearish on gold.
I would say though that CNBC et all are lagging indicators in the sense that if the price trend is up then they will have more bullish guests (always bullish on stocks though) to demonstrate they are "right" and a valuable advisor to viewers.
If gold went down $200-300, you would see that tide turn quickly, and more guests that said "told you so - I've been bearish all along".
I too think gold is fashionable among many of the investor-class. They think holding GLD is fashionable. I don't think a lot of those investors "get it" and are simply trying to make a buck on a rising trend.
My guess is that most ZH'ers have physical, and don't consider their gold as an "investment" in the traditional sense of the word. It's a hedge, a safety deposit box, a store of value.
Will it have value on the other side? Dunno. My guess is that it will, but it is not my only escape hatch. I have lots of items I could barter. I am constantly moving excess FRN's into tangible, storable, usable items.
In that sense, I think gold is very UNDER-owned. The bubble is in the fiat. That is over-owned. How many people have all of their assets in the USD? And 10101010's at some bank computer?
I think there is a massive bid under gold and silver for physical delivery. If it ever dropped $100 to $200, I think there would be lots of people backing up the truck to buy. I know I would. And I don't ever intend to sell unless I absolutely need to. It's a diversification tactic that may help to protect my family in certain SHTF scenarios. I have assets to cover the others. And Mad Max - who cares?
It's looking like it's about to poop out again. There may be a new chance to buy. The top trendline of the rising wedge is around 1280, but this is wave 5, so I don't know that it will get that high. MACD and RSI are setting divergences. Over the short to intermediate term, I think we head lower, and people get the chance to "back up the truck."
I mean, I just posted articles from all the major mainstream sources, from today or yesterday, and all of them are bullish.
If ZH doesn't represent the "masses" then why do they share consistent views on this topic?
Who's bearish? I haven't seen any articles. I was watching a bullish thing on CNBC as I was typing though.
I mean really. I haven't seen a single bearish article on it on any of the ten sites I read daily.
.
Oh, and by the way, whatever happened to your "perfect prediction accuracy" regarding your "gold is going to top at $1220" thesis?
You apparently have a rather flexible definition of "perfect" (which is much in line with your infinitely flexible definition of "truth").
Hey, I goofed. My prediction was off by 2.5%. Oh no.
Believe it or not, the fact that it didn't correct at 1220 is more bearish for it than if it did. It's called a "blow off top."
My prediction of gold to the triple digits is still in the cards.
That's one hell of a nasty rising wedge. I mean look at EVERY SINGLE technical indicator on this chart... is one of them bullish? Nope. Is the entire mainstream bullish (which is a contrarian indicator) Yep.
Nasty, nasty things will happen to gold. I've been saying the triple digits by October. It might be a little bit longer than that, but it's coming. :) Read the chart, if you know how...
http://4.bp.blogspot.com/_TwUS3GyHKsQ/TIaretgxpjI/AAAAAAAAHdI/daThKA-Mvi...
Also, I don't agree with the particular wave count on this chart. I do agree with that it is making a fifth wave though...
You are clearly learning a lot at the ITT Technical Analysis Institute. I can't wait to see you in a TV commercial.
Every agent that has stood thier ground against gold has died. But where they have failed you will succeed. No matter how strong and how fast gold and silver are they are based on a system of rules. When you're ready neo you will be the one. You will be beyond these rules and limitations becuase you will be insane. No tile covered styrofoam was harmed during the making of this scene.
http://www.youtube.com/watch?v=XX8Y5-BZLaM
"But who's bearish?
I can't find anybody... "
Bear Sterns tilll they exploded. Llehman till they exploded. Morgan stanley who's just about a month away from exploding. JP Morgan Chase who will explode as well. Deutshe bank. Boom. Societe Generale. Boom. I hope I have the players right but it doesn't really matter. If they have a part in comex they are going to explode.
So it's really not a question of who is bearish on gold and silver. It's merely a question of how long they have left to live.
HSBC
Oh ya. BOOOM.
http://soundbible.com/576-Barrel-Exploding.html
I have seen FAR more articles in any media form that smacks of being "mainstream" being dismissive of gold, and calling its market "a bubble", and mindlessly repeating the same old tired and utterly pointless lies and disinformation (much as you do) that "you can't eat it", it earns no interest, its unsafe, its risky, its hard to buy and sell, blah blah blah, than I have seen mainstream articles actively promoting gold or speaking favorably of it.
Tally up the minutes of talk devoted to gold on CNBC and Bloomberg on any given day, and then compare that figure to the number of minutes (which can be measured in HOURS) devoted to stocks and bonds, and give me that ratio if you will. I would be shocked if it exceeded 0.01. QED.
It earns no interest is the only selling point that bad money has to drive out good. Unfortunately bad money never continues to earn interest it just simply keeps you distracted while everyone carts away the good money. It's like porn.
Interested interested interested. Suddenly lost interest.
Can you post one of these articles?
Do your owned damned research --- I'm not here for your convenience. If you really expect anyone here to comb the internet and make such a compilation for you, you are even more arrogant and naive than I already believe you to be. Anyone who does any significant amount of reading, on or off line, knows that what I say is correct: gold is still generally hated and dismissed by most mainstream pundits and pro-establishment analysts.
That's funny. I just posted four different articles from all the major mainstream sources, and all of them were bullish. I guess you don't do a significant amount of reading afterall.
You can't post one. Not one.
I guess your argument must be false, since you can't back it up.
http://www.dailymarkets.com/forex/2010/08/21/gold-bearish-indicators-in-...
http://www.cnbc.com/id/15840232?video=1549854308&play=1
http://www.reuters.com/article/idUSTRE65652L20100607
That's just in a little bit of Googling...
Two of those articles are from June. One of them is from August.
All my articles were mainstream sources from either today or yesterday.
Timing matters in the markets. All mainstream sources are currently bullish.
Sure, they change their minds, as the markets change (where gold bugs do not), but they are all currently bullish.
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You are insane.
"You are insane."
You should have typed:
"I lost the debate."
:)
Get some money together to back up the truck for gold in the triple digits! It will be an early Christmas present for you.
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The only thing that has been lost is your last shred of sanity.
You are insane.
You are insane.
You are insane.
You lost the debate.
You lost the debate.
You lost the debate.
What's the matter? Your Colonel Cooper account broken now?
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You are insane.
Poor irrational, gold-hating troll, now a completely crazy, gold-hating troll.
That doesn't mean that you still can't be a Keynesian "economist", however --- in fact, your qualifications just improved!
Damn son even the seldom posters are getting tired of your $hit
http://www.businessweek.com/news/2010-09-03/roubini-says-dollar-franc-ma...
Fvck there it is.... Dr. Doom BULLISH as usual.... all over the MSM pimping the dollar.
For the record not all of us here are gold bugs. Do us all a favor and stop wasting space on bullshit.
Dude has been pimping this for years....
http://www.thestreet.com/s/roubini-dollar-will-crumple-gold-will-fall/vi...
He has been wrong. Just like you. Check the dates son.
P.S. I JUNKED your ass.
No one wants to take the time on a blog to counter the argument of another. And to continue to press for someone to do so is counter-productive.
Best just to state your case, present your evidence, and then to move on.
Do your owned damned research
I think that's asking too much. He hasn't even figured out why most of the comments on gold articles are bullish.
I posted four fucking articles.
Is that not research? ALL the research supports what I said.
Yet, there is no research to the contrary that you can post.
I guess we all know who's really researching here.
If you think that the bullishness is just seasonal, you can google articles from April if you want to. Those are all bullish too.
But that's only because it's your job to do so.
JohnnyBravo is a paid disinformation agent whose job it is to harass and swarm this forum desperately trying to discredit gold, and to defend the abomination of fiat currency, central banking and wholesale statist intervention in the economy to the detriment of the many for the benefit of the few. But unlike his vile, vehement and vicious anti-gold disinformation campaign here, nobody is subsidizing my posting.
LOL. You still believe that?
If you have time to post paragraph long conspiracy theories about who pays me, surely you have time to back up your position.
It took me about two minutes to go to all of those sites, pick the FRONT PAGE bullish articles on gold, and paste the URL.
I mean really... where do you even come up with your conspiracy theories? Can I have some of those drugs?
You just make assertions that have no basis in reality and make ad hominem attacks against people to support your position. It's really pathetic.
I give you the chance over and over again to prove your point. I don't call you names. I don't make up conspiracy theories about you. And you still can't prove your point.
You can surely put your two cents in though...
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JohnnyBravo is insane.
"JohnnyBravo is insane."
akak translation:
"I lost the debate."
We're all entitled to our own opinions, but the facts are not on your side, friend.
The entire media is bullish. The charts are bearish.
Gold bugs on this site are in the mainstream opinion. Didn't you just read the article about what being in the mainstream is?
It's dangerous.
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LOST: JohnnyBravo's sanity.
Can be recognized by being quite small, rather rotten, and by its irrational hatred and fear of gold.
If found, please return to JPMorgan and ACORN.
I proved my point. Yet you can't prove yours.
Yet you still keep making it.
You lost the debate.
LOL at ACORN. Dude, you must have some damn good drugs out there...
I want some!
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You are insane.
You can't read a stock chart.
You are also on drugs, apparently.
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.We must pity the insane.
I was hoping we'd lose insane Johnny when gold went higher. I guess we're stuck with him no matter what gold does. No amount of increase in "price" will drive him away. Of course, like the blind hog and the stopped clock, he will be correct in predictions. He will, however, forget that he ever said what he said when the time is well past that he said it.
Four recent articles, and an absolute ignorance of history does not equal research. I'm done with you Johnny, I'm going to concentrate on teaching my dog to speak French, it will be far easier.
Gold has went up 40% in thirty years.
Stocks are up 1000% in thirty years.
Who is ignorant of history?
And now, I post four articles that PROVE that the mainstream consensus is bullish on gold, and you make up some bullshit about "reading history" or whatever.
You aren't a Republican by chance are you?
The main arguments of Republicans are "stop drinking kool aid" and "read a history book."
And yet, they can't cite the history that they speak of.
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I am convinced that you are simply insane.
There is no value in trying to debate the insane.
Numbers don't lie.
1000% > 40%
Charts don't lie either. Read it if you know how.
http://4.bp.blogspot.com/_TwUS3GyHKsQ/TIaretgxpjI/AAAAAAAAHdI/daThKA-Mvi...
You will not find one bullish indicator on this chart.
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You are insane.
I didn't junk you, btw.
"You are insane."
=
"I lost the debate"
I speak Akak too.
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The only thing you have lost, aside from the debate, is your sanity.
Poor gold-hating troll.
AHAHAHA!!!!
"do your OWN research."
Yeah, I lost the debate dude. Just keep telling yourself that.
Everything objective agrees with me. You just show up where you're not wanted when I post, with nothing relevant to add, and no basis to form your opinions on.
Gold to triple digits by Christmas!
I hope you have enough money to "back up the truck."
I hope you haven't been buying it for 1300 like that tmosley fellow.
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Keep spewing your irrational and nonsensical lies and hate, troll.
It only keeps demonstrating that you are, in fact, insane.
You are in college? Try taking a course in grammar. Gone is the past participle of to go. Went is the past tense of to go. Went does not take an auxiliary verb.
Johnny,
Zero Hedge is not a typical site because it highlights things -- like the Federal Reserve buying treasuries -- that no mainstream source discusses. It highlights how the whole financial system is based on fraud, manilulation of markets and corruption at the highest levels. Again, the mainstream media might state the obvious every now and then -- gold is going up and people are recognizing its value -- but a little truth is more dangerous sometimes than outright lies. The mainstream press keeps stating the economy is recovering. Who you gonna trust?
So the fact that many here are bullish on gold reflects the attitude by many here that when fiat money loses its credibility completely, people will rush to something else that is perceived to have value. Sure, guns, food and seeds could be argued to have more value, but the gold market is small enough that if even .5% of the planet moves into precious metals, the "prices" will rise dramatically, if you can find a seller at all. And history shows when these moves happen, more than .5% of the population will start acquiring metals, or for that matter any assets that are tangible.
Here is something for your pipe to augment what you are currently smoking: all real wealth, and I mean all REAL wealth, comes from the earth. Period. We have been conditioned to think that paper is wealth, when in fact it is ephemeral and history shows repeatedly that all, and I mean ALL fiat currencies collapse. They are structured Ponzi schemes that benefit elites until they collapse of their own weight. When they do, people learn very quickly to put their faith in tangible assets and not paper money. I am very confident gold and silver will become highly prized in the very near future as the US dollar and all other central bank created currencies are seen as the illusions they are. I couldn't give a shit what you think on the topic because most if not all your other predictions have turned out to be completely and totally wrong.
Methinks you just like to argue and be noticed. This is the first time I have ever submitted a comment here, and I had to do so because you seem to be more interested in knocking anyone interested in owning gold than really exploring the issue. If you use the mainstream media for anything other than cross referencing data points you are an idiot.
Look, do what you want, and you are now on record as saying that gold might slip back into the triple digits in the near future, and you may be right. If there is a serious crash, which I fully anticipate will happen, gold could slip as major positions are liquidated to raise cash to pay for bad stock calls, etc. But even if it does fall in price it may still have more buying power because prices for everything else -- including and especially stocks -- will be crashing as well. And even in the event of a market crash, I don't see it falling that much. Precious metals and Precious Metal moning stock only constitute 2% of global financial assets at present, while in the last PM boom the numbers were more like 25%. This bull has lots of pasture to move in yet.
Anyway, your berating everyone won't shake my faith in gold in the near term. In fact, even if the market does crash and PM prices drop, it will verify that the crisis we are in is very real and I was wise to build my PM position. At that time I will gladly buy more metals at reduced prices, because if history is a guide, shortly afterward people will leap into precious metals because they will realize money will have little value anymore. Think Weimar Germany. There was a story of a bellhop in that period who received a gold coin as a tip who later bought the whole hotel he was working in for that same coin.
Think Greece, where people THIS SPRING were paying $1700/oz to own the real thing.
You do what you want. I'm comfortable that all signs point to major financial trauma in the future, and fools like you who put their money into what -- bonds? -- will be licking their wounds soon enough. Of course at that point you and every other braggart will be declaring you saw this coming, right? Guys like you are a dime a dozen.
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Excellent post, DB!
But as you have probably already observed, this JohnnyBravo (aka "The Troll Formerly Known as MasterBater" before he was banned) is manifestly NOT interested in honest or open debate in any manner whatsoever, but merely infests this forum to spew his hysterical and shrill gold-hating vitriol and pro-establishment propaganda.
It is telling that I have not seen ONE poster here who even mildly agrees with him in most circumstances, or who will defend his disingenuous and dishonest, close-minded rantings. Trying to debate him logically is like trying to plow the sea.
Whether he, or anyone else is interested in reasoned debate is immaterial.
In some ways he is doing us all a favor. He represents in a very real way all the other noise thrown at us to keep us off balance in these dangerous times, and in fact we should always be examining and refining our arguments and positions to ensure they still have weight and merit.
There may well be a time when gold loses its momentum and other forces come into play, such as the establishment of a new world currency, and no I am not talking IMF notes. Bull markets always eventually end, and even if you can ride this one to the top, at some point it will start coming down and at that point you want to get off or you could lose your shirt. In addition, we are heading into uncharted times, so it is important to question everything. As Mark Twain said so eloquently: "It ain't what you don't know that gets you into trouble; it's what you know for sure that just ain't so." With change literally overwhelming us on every level, it is very important to have a flexible viewpoint even about things you are sure about to avoid traps that have been set.
I'm very grateful for this site, though. It is a fantastic sounding board for ideas that otherwise would not get any hearing. If a Jackass like Johnny Bravo wants to play, let him. Either he'll raise some issue or question that causes me to rethink my position -- which I would be grateful for -- or like the fool he is will confirm that all who think like him -- the majority sadly -- are about to be shipwreaked on the shoals of history.
Johnny will not join in at this juncture.
He moves on to greener arguing pastures.
Thanks for your very lucid and cogent comments!
Yeah, sorry, I was in classes.
I don't post here all day.
So, what do you think is average person investment in gold, even counting in GLD?
Johnny, have you abandoned the "cut up" method?
I'm not sure what you mean.
He means you have completely lost your mind.
Poor irrational, gold-hating troll.
Really... who's the troll?
You just show up whenever I post, make arguments with no basis, and refuse to see the other side of an issue.
It'll be sweet when I'm proven right.
I can't wait to log in the day gold hits the triple digits. It'll be a ghost town, just like it was the last time I was right at the 1265 high.
Don't you mean your prediction that "gold is going to top at $1220"?
You are insane.
Not insane. He is a liar. He is a little boy living with his parents, going to college. He might have played some in the stock market, and might have made a bit of money by sheer dumb luck. It made him think he is a super genius. He claims that he is always right, even as gold is NOT at $900.
Rather than sticking to his guns, he's studying to get his CPA so he can do his grandma's taxes. He's nothing but a bitter little loser. A crybaby. He didn't see the bull market in gold, and he apparently never will. He'll pretend he's a big shot, even as he continues to post from his mama's basement.
Well, he'll be out one way or another on August 11th, 2011. He swore that he would never post on this website again if an American Gold Eagle for delivery from APMEX was more than $1297. Guess what Johnny, it's sitting at $1335. You're gonna lose, you dumb bitch. Better get another account going, so you can pretend like it isn't you, so you can keep trolling your dumbshit ideas. Shit, at this rate, physical delivery will be just shy of $1700 by the time your "rising wedge" hits the back of your teeth.
You can say whatever you want. You'll be gone when the wedge breaks down.
Just keep investing in an asset that has no other characteristics for going up except "I bought it at 1335, and i say it'll be at 1700!"
I don't live in my mama's basement. Hell, my mom doesn't even have a basement.
You're just bitter because your 401k is down 50%, and I'm the one taking your money.
I can't help it if you don't know fundamental analysis, or technical analysis, or anything about investing, really.
Actually what I mean is
My voices are saying please shut the fuck up before I vomit
saying before are the up voices my fuck please I vomit shut
I must admit Johnny may have a point. All everyone is talking about where I work these days is gold. Maybe a bubble is nigh.
Sorry, gotta get back to work. There's a crapload of core samples I have to analyze for our head geologist.
Hilarious!
Any thoughts on the fact that M3 has stopped declining, and has reversed course over the past few months? The Debt-Deflationists (of which I am one) have been touting this chart, until it reversed course. Then suddenly, they become quiet about it.
It is the quiet before the storm. M3 will continue to decrease when the stimulus is finally wasted on SEC porn and the squid.
We're still at the very top of the credit bubble. Private is deleveraging, Govt is leveraging, so credit is still oscilating on a flat trend line.
All we've seen so far is credit disinflation : instead of growing at near +10% per annum, credit is oscilating around +/-0% per annum.
But in the year to come, Govt is going to be forced to slow down its leveraging contest and Bernanke won't dare accelerate QE. Meanwhile private is going to accelerate its deleveraging and we'll finally enter in full deflationary mode.
M3 is a useless instrument, a small irrelevant fraction of credit money (not even a quarter of credit money is fiat money). And more importantly it lags credit money changes. Credit is essentially composed of valueless tokens which create fiat money (and not the other way round).
We live in a credit money system, not a fractional reserve money system :
In a credit money system, banks create credit money (valueless tokens : electronic data in various accounts) and adjust the deposits accordingly, creating fiat money. Then they look for the reserves later. Here credit > broad fiat money
In a fractional reserve system, reserves get "multiplied" by (up to) the inverse of the reserve ratio which create broad fiat money and credit, so that broad fiat money = reserves + credit. Obviously in a fractional reserve money system credit < broad fiat money
reality is credit ($52trillion) >> broad fiat money M3 ($13 trillion)
It's more informative to look at the data on credit from the Fed's Z1 flow of funds, than M3.
I have to respectfully disagree on a number of points, though I will agree on the broader picture.
E.g. I don't think M3 is useless, but I agree that it's a smaller measure. In fact, I think this latest bump, as well as the previous decline is indeed telling us something. Not that recovery is in store. More tactical, rather than strategic, if you will. And certainly not the harbinger of inflation, as the inflationistas are looking for.
In any case, thanks for the thoughts and the perspective. You two are the only ones I've seen to actually address the issue (other than shadowstats),
I live in Ontario. In the last 2 weeks I have asked about 15 different people if they think now is a good time to buy a house. Only one said no - He was about 24 and when we were out for lunch after a training meeting said "I don't think so... everybody told me I have to get into the market or I'm going to be screwed, so i bought. Now my mortgage/hydro/gas/cable/internet/taxes eat up almost all my income and I'm looking at paying three times what I had to borrow over 30 years and I was out of work for 3 months and blew most of my savings. I hate it... there are 2 bedrooms i don't even use. I feel like I have everything to lose and nothing to really gain, but all my family keeps telling me prices will keep going up."
exactly where the SATANIC F**KING BANKERS want him
I'm pretty sure he's selling - he was overjoyed to meet someone who wasn't pushing him to stay at the table. It's hard when you're a kid to go the opposite way of all the people who love you, even when your gut tells you they're all wrong.
I think homeownership as being a part of the pumped up American Dream is propaganda offered by the local government bureaucrats, realtors, homebuilders, etc. It worked in the '50's when you toiled at one company for 25-30 years and then retired.
Now it's a chain around your neck to move around to follow jobs. A house in Detroit can be had for $5-10k.
Not sure how these developments will impact the idea of "community" but that's what the corporate kleptocrats get for wrecking the middle class.
I'd believe in home ownership if it wasn't for the extortion of property taxes. If I am going to support my community, it should be through regular channels - not some "move the valuation goalpost" ripoff scheme local governments use.
Dump it, and move in with room-mates. You'll find weird things like parties, women and booze to fill the gaping hole left by the lack of home ownership.
"When everyone decides on mass that it makes sense to take on huge amounts of debt, while very few people save, a credit bubble is born"
Quite a bit of fluff based on the premise above. Not saying I disagree, "animal spirits" & all of that, but Rabidoux's theory is conjecture only.
+1
I find this series of articles kind of funny. As an American, all of this was readily apparent a year and half ago, if not earlier. But apparently it's still revelatory to Canadians.
If you're in Canada, sell your real estate now. If you're in Vancouver, sell your real estate yesterday.
I visited Vancouver last fall with a colleague, and we literally rolled with laughter a number of times while perusing the wildly, absurdly, surrealistically, Alice-in-Central-Bank-Wonderland inflated prices in the Vancouver real estate listings. They did not just shout "BUBBLE!", they screamed it with a megaphone!
Vancouver is a very specific RE market with many of the traits of an international resort.
So consider that while you are screaming and laughing through a megaphone.
Yes, there are always rationalizations and "reasons" why every bubble is "different this time" --- until they inevitably pop.
Never have I seen *UNSUSTAINABLE* written as large as it is in Vancouver real estate prices.
Vancouver and Victoria both benefited from the Olympics this year, but without that particular stimulus, with unemployment continuing to rise in both cities (I left Victoria this year because there were NO prospects for a job in my field in either of the cities) and with both the American and Chinese markets in the doldrums, there frankly is little that is keeping the housing market up other than hopium - I would certainly not be in the market for a house there at the moment.
English investment banker explains why it's different this time (humor)
http://dailybail.com/home/british-tv-silly-money-bird-and-fortune-satirizing-the-finan.html
My point is that international resort real estate markets are supported by wealthy people from around the globe. So it is a different analysis.
I have to agree with akak. When I was there on business recently, I think the rationalizations reminded me even more of the US bubble than the prices did.
In Canada, "Real" Estate is a misnomer.
Mass psychology...just ask vegas how sport bettors do when they all line up one side.
With your criticism, all you idiots are literally missing this rally! Bunch of bozos...
Yeah! Green shoots! Recovery is here!
Jake, better get out by Friday or you will be punch drunk like a sneak left hit you from Floyd.