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Guest Post: The Shoeshine Boy
From FOFOA
The Shoeshine Boy
To set up this post I will share with you two brief predictions I
recently received by email. These were both in email blind copied to
large groups of recipients that included me. The two senders do not know
each other. In fact, their only connection is that they are both
supporters of my blog on the highest order, I know what they each do for
a living (very respectable), and I therefore hold them both in high
regard:
Email 1:
This is a very
orderly secular bull market. The bubble, that WILL come, is still about 2
or 3 inches to the right of the margin on the right side of this
chart...
Email 2:
Perhaps we
are talking about the first general realization among the investing
public that the Fed cannot/will not rescue us with their magic wands and
QEs… This may be it, the beginning of Stage 2 of gold's rally, where
the smart money starts moving in. Stage 3 is next when the shoeshine boy
tells you: Buy gold!
For those of you that don't know the
meaning of the shoeshine boy reference, JFK's father, Joe Kennedy
claimed that he knew it was time to get out of stocks in 1929 when he
received investing tips from a shoeshine boy. Ever since, the shoeshine
boy has been the metaphor for "time to get out"; for the end of the
mania phase in which everyone, even the shoeshine boy, wants in.
Joe Kennedy
Joe
Kennedy's credibility on this "bubble top calling" issue is bolstered
by the fact that from 1929 to 1935 his fortune went from $50 million to
$2.85 Billion in today's purchasing power. And the take-home lesson in
this story is that it is time to sell ANYTHING once the shoeshine boy is
recommending it. Because the next phase is the blow off phase where the
item in question comes crashing back down.
Bubble Phases
And
the fact that two of my favorite readers are now calling for an
eventual bubble in gold reminded me that it has been 9 ½ months since I
wrote Gold: The Ultimate Un-Bubble. Perhaps it is time for an update.
Now
I'll grant that the point in both of the quotes above was that we are
nowhere near the bubble top. And they were addressed to people that are
very jumpy when it comes to bubbles because they have been burned by a
couple bubbles in recent history. But even so, I think they expose a
fundamental misunderstanding of what is actually happening today.
How Gold will handle even the Shoeshine Boy
Before
I get into what is actually happening with gold today, I want to show
you WHY it is happening to gold. And WHY gold is different. There's a
unique thing that happens with gold. ANOTHER said it pretty clearly
(even if still a bit cryptic) in his very first post:
"Gold has always been funny in that way. So many people worldwide think of it as money, it tends to dry up as the price rises."
In
a future post I'll explain the context in which ANOTHER made this
statement because it portends vast changes in the international monetary
system directly in front of us. (Remind me of this. I was going to
include it here but the post grew too long even without it. :) But for
now, we need to look at why this statement is true. For this I turn to
John Law. Well, not the real John Law, but another pseudonymous blogger
like me using his name back in 2006:
An illustration
Let's start by comparing two hypothetical cases.
In case A, a million Americans decide right now to move all their savings into Dell stock, buying at the current market price no matter how high.
In case B, a million Americans decide right now to move all their savings into gold, buying at the current market price no matter how high.
In both cases, let's say each of these test investors has an average of $10,000 in savings. So we are moving $10 billion.
Neither gold nor Dell can instantly absorb $10 billion without considerable short-term increases in price. Because it would require us to predict precisely how other investors would react, we have no way to precisely compute the effects. But we can describe them in general terms.
In case A, the conventional wisdom is right. Our test investors should expect to lose a lot of money.
This is because Dell has a stable equilibrium price which is set by the market's estimate of the future earning power (price-to-earnings ratio) of this fine corporation. Because it is not the result of any new information about Dell's business, the short-term surge should not affect this long-term equilibrium.
Since there will almost certainly be a short-term price spike, many of the test investors will be buying at prices well above the stable equilibrium. In fact, the more investors we add to the test, the more each one should expect to lose. Doh!
But there is no way to apply this analysis to case B.
Precious metals have no price-to-earnings ratio. With gold formally demonetized (that is, with no formal link between gold prices and currencies such as the dollar, as there was until 1971), there is no stable way to price it. There is no obvious equilibrium to which the gold price must converge.
It is true that gold has industrial uses. It can be priced on the basis of industrial supply and demand. The conventional wisdom is that it is.
Thus we can say that gold, for example, is overvalued if gold miners are selling more gold than jewelry makers and other industrial users want to buy. At present (with gold near $700), they probably are. So if you follow this reasoning, the right investing decision is not to buy gold, but to sell it short.
But this just assumes that there is no investment demand for gold. On the basis of this assumption, it shows that gold is a bad investment. Therefore there should be no demand for it.
Therefore, when our case B investors put $10 billion into gold, that money has to be used to bid gold away from its current owners, many of whom already believe that the price of gold in dollars should be much higher than it is now.
So the result of case B is that the gold price will, as in case A, rise immediately. But it has no reason to fall back.
In fact, quite the opposite. Because the gold price is largely determined by investment demand, any increase in price is evidence of increasing investment demand. Mining production, noninvestment jewelry demand, and industrial use are relatively stable. Investment demand is a consequence of investors' opinion about the future price of gold - which is, as we've just noted, largely determined by investment demand.
This is not a circularity. It is a feedback loop. Austrian economists might call it a Misesian regression spiral.
Suppose you believe this. It's all well and good. But what does it really prove? Couldn't gold still be just another bubble?
And why should gold be a better investment because it has no earnings to price it by? This makes zero sense.
To answer these sensible objections, we need a few more tools.
Nash equilibrium analysis
The Nash equilibrium is one of the simplest and oldest concepts in game theory. (Nash is John Nash of A Beautiful Mind fame.)
In game theory jargon, a "game" is any activity in which players can win or lose - such as, of course, financial markets. And a "strategy" is just the player's process for making decisions.
A strategy for any game is a "Nash equilibrium" if, when every player in the game follows the same strategy, no player can get better results by switching to a different strategy.
If you think about it for a moment, it should be fairly obvious that any market will tend to stabilize at a Nash equilibrium.
For example, pricing stocks and bonds by their expected future return (the standard Wall Street strategy of value investing) is a Nash equilibrium. No market is infallible, and it's possible that one can make money by intentionally mispricing securities. But this is only possible because other players make mistakes.
(Nash equilibrium analysis of financial markets is not some great new idea. It is standard economics. The only reason you are reading a Nash equilibrium analysis of the interaction between precious metals and official currency now on the Web, not 30 years ago in the New York Times, is that the Times gets its economics from real economists, not random bloggers, and the profession of economics today is deeply tied to the institutions that manage the global economy. Real economists do not, as a rule, spend time thinking up clever new reasons why the global financial system will inevitably collapse. They're too busy trying to prevent it from doing so.)
What Nash equilibrium analysis tells us is that the "case B" approach is interesting, but inadequate. To look for Nash equilibria in the precious metals markets, we need to look at strategies which everyone in the economy can follow.
Let's focus for a moment on everyone's favorite, gold. One obvious strategy - let's call it strategy G - is to treat only gold as savings, and to value any other good either in terms of its direct personal value to you, or how much gold it is worth.
For example, if you followed strategy G, you would not think of the dollar as worthless. You would think of it as worth 45 milligrams, because that's how much gold you can trade one for.
What would happen if everyone in the world woke up tomorrow morning, got a cup of coffee, and decided to follow strategy G?
They would probably notice that at 45mg per dollar, the broad US money supply M3, at about $10 trillion, is worth about 450,000 metric tons of gold; that all the gold mined in human history is about 150,000 tons; and that official US gold reserves are 8136 tons.
They would therefore conclude that, if everyone else is following strategy G, it will be difficult for everyone to obtain 45mg of gold in exchange for each dollar they own.
Fortunately, there is no need to follow the experiment further. Of course it's not realistic that everyone in the world would switch to strategy G on the same day.
The important question is just whether strategy G is stable. In other words, is it a realistic possibility that everyone in the world could price all their savings in gold? Is strategy G in fact a Nash equilibrium?
There are no market forces that would tend to destabilize it. Or are there? Actually, it turns out that we've skipped a step in our little analysis.
Levitating collectibles
The problem is that the exact same analysis works just as well for any standardized and widely available asset.
For example, let's try it with condoms. Our benchmark of all value will be the standard white latex condom. We can have a "strategy C" in which everyone measures the worth of all their assets in terms of the number of condoms they exchange for. Cash payments will be made in secure electronic claims to allocated boxes of condoms, held in high-security condom vaults in the condom district of Zurich. And so on.
This is obviously ridiculous. But why? Why does the same analysis seem to make sense for gold, but no sense for condoms?
It's because we've ignored one factor: new production.
Let's step back for a moment and look at why people "invest" in gold in the first place. Obviously they expect its price to go up - in other words, they are speculating. But as we've seen, in the absence of investment the gold price would be determined only by industrial supply and demand, a fairly stable market. So why does the investment get started in the first place? Does it just somehow generate itself?
What's happening is that the word "investment" is concealing two separate motivations for buying gold.
One is speculation - a word that has negative associations in English, but is really just the normal entrepreneurial process that stabilizes any market by pushing it toward equilibrium.
The other is saving. We can define saving as the intertemporal transfer of wealth. A person saves when she owns valuable goods now, but wishes to enjoy their value later.
The saver has to decide what good to hold for whatever time she is saving across. Of course, the duration of saving may be, and generally is, unknown.
And of course, every saver has no choice but to be a speculator. The saver always wants to maximize her savings' value, as defined by the goods she actually intends to consume when she uses the savings. For example, if our saver is an American retiree living in Argentina, and intends to spend her savings on local products, her strategy will be to maximize the number of Argentine pesos she can trade her savings for.
Here are five points to understand about saving.
One is that since people will always want to shift value across time, there will always be saving. The level of pure entrepreneurial speculation in the world can vary arbitrarily. But saving is a human absolute.
Two is that savers need not be concerned at all with the direct personal utility of a medium of saving. Our example saver has little use for a big hunk of gold. Her plan is to exchange it for tango lessons and huge, delicious steaks.
Three is that from the saver's perspective, there is no artificial line between "money" and "non-money." Anything she can buy now and sell later can be used as a medium of saving. She may have to make two trades to spend her savings - for example, if our saver's medium of saving is a house, she has to trade the house for pesos, then the pesos for goods. If she saves directly in pesos, she only has to make one trade. And clearly trading costs, as in the case of a house, may be nontrivial. But she just factors this into her model of investment performance. There is no categorical distinction.
Four is that if any asset happens to work well as a medium of saving, it may attract a flow of savings that will distort the "natural" market valuation of that asset.
Five is that since there will always be saving, there will always be at least one asset whose price it distorts.
Let's see what happens when that asset is condoms. Suppose everyone in the world does adopt strategy C, just as in our earlier example they adopted strategy G. What will happen?
Just as we predicted with gold, there will be massive condom buying. Since condom manufacturers were not expecting their product to be used as a store of wealth, demand will vastly exceed supply. The price of condoms will skyrocket.
Strategy C looks like a self-fulfilling prophecy. Condoms will indeed become a costly and prized asset. And the first savers whose condom trades executed will see the purchasing power of their condom portfolios soar. This is a true condom boom.
Let's call this effect - the increase in price of a good because of its use as a medium of saving - "levitation."
Sadly, condom levitation is unsustainable. The price surge will stimulate manufacturers to action. Since there is no condom cartel - anyone can open a factory and start making condoms - the manufacturers have no hope of maintaining the levitated condom price. They will produce as many condoms as they can, as fast as possible, to cash in on the levitation premium.
Levitation, in other words, triggers inventory growth. Let's call the inventory growth of a levitated good "debasement." In a free condom market, debasement will counteract levitation completely. It will return the price of a condom to its cost of production (including risk-adjusted capital cost, aka profit). In the long run, there is no reason why anyone who wants condoms cannot have as many as he or she wants at production cost.
Of course, condom holders will realize quickly that their condoms are being debased. They will pull their savings out, probably well before debasement returns the price of a condom to the cost of producing one.
We can call the decrease in price of an asset due to the flow of savings out of it "delevitation." In our example, debasement causes delevitation, but it is not the only possible cause - savings can move between assets for any number of reasons. If savers sell their condoms to buy Google stock, the effect on the condom price is exactly the same.
Because condom debasement is inevitable, and will inevitably trigger delevitation, savers have a strong incentive to abandon strategy C. This means it is not a Nash equilibrium.
The whole sad story will end in a condom glut and a condom bust. The episode will be remembered as a condom bubble. In fact, if we replace condoms with tulips, this exact sequence of events happened in Holland in 1637.
So why won't it happen with gold?
The obvious difference is that gold is an element. Absent significant transmutation or extraterrestrial trade, the number of gold atoms on Earth is fixed. All humans can do is move them around for our own convenience - in other words, collect them. So we can call gold a "collectible."
Because it cannot be produced, the price of a collectible is arbitrary. It is just a consequence of the prices that people who want to own it assign to it. Obviously, the collectible will end up in the hands of those who value it highest.
Since the global bullion inventory is 150,000 tons, and 2500 tons are mined every year, it is easy to do a little division and calculate a current "debasement rate" of 1.66% for gold.
But this is wrong. Gold mining is not debasement in the same sense as condom production, which does not deplete any fixed supply of potential condoms. In fact, it only takes a mild idealization of reality to eliminate gold mining entirely.
Gold is mined from specific deposits, whose extent and extraction cost geologists can estimate in advance. In financial terms, gold "in the ground" can be modeled as a call option. Ownership of X ounces of unmined gold which will cost $Y per ounce to extract is equivalent to a right to buy X ounces of bullion at $Y per ounce.
Since this ownership right can be bought and sold, just as the ownership of bullion can, why bother to actually dig the gold up? In theory, it is just as valuable sitting where it is.
In the form of stock in mining companies which own the extraction rights, unmined gold competes with bullion for savings. Because a rising gold price makes previously uneconomic deposits profitable to mine - like options becoming "in the money" - the total value of all gold on earth does increase at a faster rate than the gold price. But the effect is not extreme. 2006 USGS figures show 30,000 tons of global gold reserves. This number would certainly increase with a much higher gold price - USGS reports 90,000 tons of currently uneconomic "reserve base" - but the gold inventory increase would be nowhere near proportional to the increase in price.
In practice, modeling unmined gold as options is too simple. Gold discovery and mining is a complex and political business. The important point is that rises in the gold price, even dramatic rises, propagate freely into the price of unmined gold and do not generate substantial surges of new gold. For example, the price of gold has more than doubled since 2001, but world gold production peaked in that year.
The result is that gold can still levitate stably. Even if new savings flow into gold stops entirely, debasement will be mild. The cyclic response typical of noncollectible commodities such as sugar (or condoms), or theoretical collectibles whose sources are not in practice scarce (such as aluminum) is unlikely.
Of course, if savings flow out of gold for their own reasons, it can trigger a self-reinforcing panic. Delevitation is not to be confused with debasement. Again, it is important to remember that debasement is not the only cause of delevitation.
What we have still not explained is why gold, which is clearly already levitated, should spontaneously tend to levitate more, rather than either staying in the same place or delevitating. Just because gold can levitate doesn't mean it will.
Money in the real world
In case it's not obvious, what we've just done is to put together a logical explanation of money, using gold as an example, and using only made-up terms like "collectible" and "levitation" to avoid the trap of defining money in terms of itself.
Now let's apply this theory to the money we use today - dollars, euros, and so on.
Today's official money is an "artificial collectible." Money production is limited by legal violence, not natural rarity. If in our condom example, the condom market was patrolled by a global condom mafia which got medieval with any unauthorized condom producers, it would resemble the market for official currency. No one can print Icelandic kronor in the Ukraine, Australian dollars in Pakistan, or Mexican pesos in Algeria.
It may be distasteful to hardcore libertarians, but this method of controlling the money supply is effective. There is minimal unlicensed production of new money - also known as counterfeiting.
It should also be clear from our discussion of gold that there is nothing, in principle, wrong with artificial paper money. The whole point of money is that its "real value" is irrelevant. In principle, an artificial money supply can be much more stable than a naturally restricted resource such as gold.
In practice, unfortunately, it has not worked out that way.
Artificial money is a political product. Its problems are political problems. It does no one any good to separate economic theory from political reality.
Governments have always had a bad habit of debasing their own monetary systems. Historically, every monetary system in which money creation was a state prerogative has seen debasement. Of course, no one in government is unaware that debasement causes problems, or that it does not create any real value. But it often trades off short-term solutions for long-term problems. The result is an addictive cycle that's hard to escape.
Most governments have figured out that it's a bad idea to just print new money and spend it. Adding new money directly to the government budget spreads it widely across the economy and drives rapid increases in consumer prices. Since government always rests on popular consent, all governments (democratic or not) are concerned with their own popularity. High consumer prices are rarely popular.
There is an English word that used to mean "debasement," whose meaning somehow changed, during a generally unpleasant period in history, to mean "increase in consumer prices," and has since come to mean "increase in consumer prices as measured, through a process whose opacity makes chocolate look transparent, by a nonpartisan agency whose objectivity is above any conceivable question, so of course we won't waste our time questioning it." The word begins with "i" and ends with "n." Because of its interesting political history, I prefer to avoid it.
It should be clear that what determines the value of money, for a completely artificial collectible with no industrial utility, is the levitation rate: the ratio of savings demand to monetary inventory. Increasing the monetary inventory has a predictable effect on this calculation. Consumer price increases are a symptom; debasement is the problem.
Debasement is always objectively equivalent to taxation. There is no objective difference between confiscating 10% of existing dollar inventory and giving it to X, and printing 11% of existing dollar inventory and giving it to X. The only subjective difference is the inertial psychological attachment to today's dollar prices, and this can easily be reset by renaming and redenominating the currency. Redenomination is generally used to remove embarrassing zeroes - for example, Turkey recently replaced each million old lira with one new lira - but there is no obstacle in principle to a 10% redenomination.
The advantage of debasement over confiscation is entirely in the public relations department. Debasement is the closest thing to the philosopher's stone of government, an invisible tax. In the 20th century, governments made impressive progress toward this old dream. It is no accident that their size and power grew so dramatically as well. If we imagine John F. Kennedy having to raise taxes to fund the space program, or George W. Bush doing the same to occupy Iraq, we imagine a different world.
The immediate political problem with debasement is that it shows up in rising consumer prices, as whoever has received the new money spends it. If we think of all markets as auction markets, like EBay, it should be clear how this happens.
Debasement and investment
We haven't even seen the most pernicious effect of debasement.
Debasement violates the whole point of money: storage of value. As such, it gives savers an incentive to find other assets to store their savings in.
In other words, debasement drives real investment. In a debasing monetary system, savers recognize that holding money is a loser. They look for other assets to buy.
The consensus among Americans today is that monetary savings instruments like passbook accounts, money market funds, or CDs are lame. The real returns are in stocks and housing. [Written in 2006]
When we debasement-adjust for M3, we see the reasons for this. Real non-monetary assets like stocks and housing are the only investments that have a chance of preserving wealth. Purely monetary savings are just losing value.
The financial and real estate industries, of course, love this. But that doesn't mean it's good for the rest of us.
The problem is that stocks and housing are more like condoms than they are like gold. When official currency is not a good store of store value, savings look for another outlet. Stocks and housing become slightly monetized. But the free market, though it cannot create new official currency or new gold, can create new stocks and new housing.
The result is a wave of bubbles with an unfortunate resemblance to our condom example. When stocks are extremely overvalued, as they were in 2000, one sign is a wave of dubious IPOs. When housing is overvalued, we see a rash of new condos. All this is just our old friend, debasement.
This debasement pressure answers one question we asked earlier: why should gold tend to levitate, rather than delevitate? Why is the feedback loop biased in the upward direction?
The answer is just that the same force is acting on gold as on stocks and housing. The market is searching for a new money. It will tend to increase the price of any asset that can store savings.
The difference between precious metals and stocks or housing is just our original thesis. Stocks and housing do not succeed as money. Holding all savings as stocks or housing is not a Nash equilibrium strategy. Holding savings as precious metals, as we've seen, is.
Presumably the market will eventually discover this. In fact, it brings us to our most interesting question: why hasn't it already? Why are precious metals still considered an unusual, fringe investment?
The politics of money
What I'm essentially claiming is that there's no such thing as a gold bubble.
This assertion may surprise people who remember 1980. But markets do not, in general, think. Most investors, even pros who control large pools of money, have a very weak understanding of economics. The version of economics taught in universities has been heavily influenced by political developments over the last century. And your average financial journalist understands finance about the way a cat understands astrophysics.
The result is that historically, the market has had no particular way to distinguish a managed delevitation from an inevitable bubble. Because of Volcker's victory, and the defeat of millions of investors who bet on a dollar collapse, the financial world spent the next twenty years assuming that there was some kind of fundamental cap on the gold price, despite the lack of any logical chain of reasoning that would predict any such thing.
Even now, there is no shortage of pro-gold writers who predict gold at $1000, $2000 or $3000 an ounce, as though they had some formula, like the P/E ratio for stocks, that computed a stable equilibrium at this level. Of course, they do not. They are only expressing their intuitive feeling that gold is very, very cheap right now, and tempering it with the desire to be taken seriously.
Gold's main weapon is one we alluded to already: a sudden, self-reinforcing, and complete collapse of the dollar. In a nutshell, the problem with the dollar is that it's brittle. When Volcker did his thing, the US was a net creditor nation with a balance-of-payments surplus. Its financial system was relatively small and stable. And it had much more control over the economic policies of its trading partners - the political relationship between the US and China is very different from the old US/Japanese tension.
For the Fed, what is really frightening is not a high gold price, but a rapid increase in the gold price. Momentum in gold is the logical precursor to a self-sustaining gold panic. If the US federal government was a perfectly executed and utterly malevolent conspiracy to dominate the world, let's face it. The world wouldn't stand a chance. In reality, it's neither. So a lot of things happen in the world that Washington doesn't want to see happen, and that it could easily prevent. Anticipating surprises is not its strength. [1]
Holy
Cannoli, Batman! I think this is the longest "snip" I've ever used in a
post. Nine pages in Word, just for that quote. And I even edited several
pages out of it, "to tighten it up!" I hope you enjoyed it.
To
recap, a rising gold price is evidence of increasing investment demand,
which confirms the belief of those that already invested in gold that it
was a good investment. And because investment demand is over and above
the relatively stable industrial supply and demand dynamic, any new
investment dollars must bid gold away from its current owners. And
because saving in gold is a Nash Equilibrium, the price will rise very
high. And because gold is THE monetary metal with the highest monetary
to industrial use ratio, it will have no reason to fall back when it
reaches its top.
And, as ANOTHER said, "So many people worldwide think of it as money, it tends to dry up as the price rises."
Stock, Flow, Supply and Demand
Let's
try a little thought experiment and see where it leads us. This might
be a bit of a mind bender and a challenge for me to articulate, but what
the heck, we're already 11 pages into this thing. Why stop now?
Let's
think of all the physical gold in the world in the same terms as our
price discovery markets classify the gold they hold secure for private
parties. (You do know that the gold for sale does not belong to the
exchanges, don't you?) There is that gold which is "eligible" for
delivery. And in our experiment this would be all the physical gold in
the world. It is ALL "eligible" to be handed to someone else in exchange
for something else. (The only requirement for eligibility in our
thought experiment being that it is a physical object made of gold.) And
then there is the gold that is actually "registered" for delivery. In
our case this would be the gold that is up for sale or expected to go up
soon.
So "eligible" is the "stock" and "registered" (for
delivery) is the "flow," sort of. (Yes, I know that flow would mean the
gold coming out of the ground and then being used up in jewelry and
electronics if gold was like other commodities, but it's not, so get
over it.)
Now what I just wrote is not entirely correct. You
cannot simply compare stock to flow like that because they have
different measuring units. Flow is measured in units/time and stock is
just units. They do not and cannot compare. The only meaningful
relationship they have is a ratio. Stock:Flow, or units/(units/time),
which = time. This yields us a time value in which the flow will deplete
the stock. So "our flow" is the amount of "registered" gold that
actually gets delivered in exchange for something over a given time
unit.
In the world as a whole, gold has the largest stock to flow
ratio of any commodity, which is why it is unique. This means a very
high time value for the depletion of gold stocks. In fact, it is an
infinite time value since gold is not consumed, it is merely shuffled
around until it ends up with those who value it most. So in our case
we'll think of flow as delivery demands actually being met with
"registered" stock over a period of time. And in this view, "stock to
flow" is a dynamic system that is complicated by many factors.
One
complication is that, today, physical and paper gold exist as "stock"
at par with each other inside the system. And the flow of paper happens
prior to the flow of physical stock (on the price discovery exchanges).
In other words, price is discovered in paper and then delivery comes
later. Price is not discovered at the physical delivery window. In fact,
whether there is any physical at that window when you finally show up
with your paper depends on dynamic changes that happened earlier.
As
the paper flow precedes the physical flow, the supply and demand
dynamics can change very fast, perhaps even so fast as to give the
impression that they traveled faster than the speed of light like a tachyon,
went back in time, and originated in the past! (Making them impossible
to get out in front of!) As demand increases while registered gold is
depleted and/or deregistered one of two things must happen. Either the
price must skyrocket or the supply of paper must explode to take up the
slack.
And as either of these things happen – or they both happen
together – we end up with John Law's self-sustaining Misesian
regression spiral. Where today's demand is determined by yesterday's
performance. (We can call it "the tachyon effect" if you'd like.) This
applies to both physical gold and paper gold, and the feedback loop will
have separate effects on these separate elements of the market. It will
be the cause of the separation and the result will be a flood of paper
and no registered gold to service the delivery demand portion of it.
Ultimately
the stock to flow ratio of physical gold will go inverse to that of
paper gold. Infinite flow demand against zero registered stock. Zero
time until physical depletion, concurrent with infinite time until paper
depletion. At this point the price will have to go infinite and paper
supply will separate because parity will no longer exist.
And in
case you haven't noticed, we are now, apparently, at a novel stage in
the game. The stage when it is becoming obvious to almost everyone that
the Fed can do nothing but print more money (QE), and that it plans to
do just that. I draw your attention to gold trading at $1,301 today as
evidence! And regarding the Fed, what does a monkey with a hammer do?
That's right. It hurts itself.
Being at this stage in the game
right now, when clarity is spreading like wildfire, we can expect a
further run up in the price of paper gold. Of course the price discovery
market buys and sells paper gold so a move in either direction is
possible in the short run, but the general trend in gold should now be
obvious, even to monkeys. And don't forget that delivery of physical in
this market is secondary, and only comes after price discovery occurs in
paper.
So with this dynamic situation we find ourselves in, we
should expect conflicting signals and responses in the gold market. The
flow of gold should increase as demand from dollars pulls on the market.
And the supply of gold bullion should be withdrawn or "deregistered" as
the people holding it realize their investment belief has been
confirmed.
From a demand perspective, flow should increase per
the economic law of demand. And from a supply perspective, it should
decrease. But how is this possible? Well, this is where price factors
into the dynamics of the situation. In most commodities (and all other
markets for that matter) flow would be measured in the weight of the
good. "How many ounces are flowing?" But gold is a little different.
Because
gold is behaving in this case primarily as a savings instrument, flow
can be measured in the amount of savings being exchanged. Just like
exchanging dollars for euros. In other words, to properly judge the flow
we should look at the aggregate amount of wealth flowing "into" gold
rather than the weight of gold changing hands. And in this view, the
flow can increase with demand even as the stock is withdrawn. Price
takes up the slack. It can even accommodate the shoeshine boy without
threatening a top.
But there's another element in this dynamic
situation that must be considered. And that is paper gold. As I said,
price discovery occurs in paper only, and delivery comes after the fact.
So paper supply creation can easily absorb the pressure of increasing
demand while relieving price of its "taking up the slack" burden.
However,
unless the ratio of physical stock "registered" to become flow rises
along with the creation of new paper gold, well, "Houston, we've got a
problem." And I'm talking about registered physical stock measured in
weight, not value! Which is QUITE a problem!
Fortunately, to
quote John Law (not the real one), there is no need to follow this
challenging scenario further. Instead, we can just repeat ANOTHER's line
once again:
"Gold has always been funny in that way. So many people worldwide think of it as money, it tends to dry up as the price rises."
In
economic terms, ANOTHER was referring to gold's price inelasticity of
supply here. In other words, gold seems to violate the economic law of
supply. As the price rises, the supply dries up.
But another
funny thing also happens when gold "tends to dry up as the price rises."
Even more people join the "many people worldwide that think of it as
money." And this means that gold violates the economic law of demand as
well, delivering a positive price elasticity of demand. In other words,
gold is a Veblen good.
But unlike a Rolls or the Mona Lisa, gold is divisible and fungible
making it the Veblen good that puts the common man on equal footing with
the Giants!
This is what FOA meant:
In
this world we all need much; blessings from above,,,,, family,,,,
home,,, friends and good health. But after all that, one must have
currency and an enduring, tradable wealth asset that places our footing
in life on equal ground with the giants around us,,,,,, gold!
And this is how and why gold WILL accommodate even the shoeshine boy without collapsing!
There is no such thing as a physical gold bubble.
So,
to wrap this beleaguered post up, let's just say that we have the
distinct makings of a parity break between paper and physical gold in
the works. The supply of paper gold must rise while the supply of
physical is withdrawing (deregistering). The flow must also rise, at
least in nominal terms, so the price will skyrocket to take up the
slack. And as expanding paper competes with a rising price for the
"slack taking-up" role, who do you think will win?
Could they
each have their way? Could the price rise to take up the extra demand
while supply contracts at the same time as easy paper dilution wins
itself a lower price? Confused yet?
Well, this situation leaves
us with an uncomfortable question. If the only price of gold we know
today is the price of paper gold, what is going to happen to "the price
of gold?" Will it skyrocket? Or will it plummet?
And if we apply
the principles learned in John Law's amazingly long piece in a logical
way to this uncomfortable predicament, we'll find ourselves at the
conclusion that the true Nash Equilibrium is to take possession of
physical gold. And, if you already have some, not to sell it while the
price is rising OR falling (this time).
And with the supply of
paper gold rising to meet demand while physical is being withdrawn, the
only conclusion we can come to is that the gold buyers **IN SIZE** will
have to stop buying from the price discovery marketplace because, if
they do their due diligence, they'll clearly see that subsequent
physical delivery has become impossible at the present price.
So, in conclusion, the price of gold will plummet!
That's
right. At some point in the future, after the price of gold rockets
upward, it will fall like a box of rocks! And right about that time
you'll see more of Robert Prechter on CNBC than you ever thought was
possible.
But here's the challenge. When the price of gold falls
to $200 per ounce, try and get some physical. I'm sure that Kitco will
sell you some from their pooled account. And GLD will be standing ready
to sell you a share at $20. But just try to take delivery. I think
you'll find it will be impossible at that point.
And that's why
you've got to take delivery NOW, at the current "high" price of $1,300.
Don't wait for the dip. Oh, yeah, the big dip is definitely coming. A
**BIG** "correction." But will there be any physical available? Perhaps
at $1,200 if you're really lucky. At $200? No way.
When I look into MY crystal ball, here is how I see a future gold price chart developing (roughly, of course):
And with that, I'll leave you with my replies to the email at the top:
My reply to email 1:
Is this an orderly bull market in paper gold or physical gold?
The bubble that "WILL come"... will it be in paper gold or physical gold?
Is there a difference between paper gold and physical gold?
Is your chart showing paper gold or physical gold?
My reply to email 2:
You
may be right on stage 2. But my gut says that stage 3 is when it's
obvious everyone's flooding into gold and the real physical **IN SIZE**
decides its best move is to withdraw from delivery registration. At that
point the paper market won't be able to handle the flood.
My bet, when the shoeshine boy tells you to buy gold he'll be talking about small gold coins only.
GLD probably won't even exist anymore. And in this unique historical
case, the shoeshine boy will not be the bad omen of a bubble top mania
phase, but he will instead be the amazing bell-ringer of a new era. One
in which even shoeshine boys can save their surplus wealth in gold. One I
like to call Freegold. Because a physical-only gold market can actually
handle everyone PLUS the shoeshine boy, unlike any other market.
Sincerely,
FOFOA
[1] From Why the Global Financial System is About to Collapse
by John Law
Edited by me for length and content.
»
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You have not refuted anything in the article. Did you read it? If you did, why not refute his interpretation of the bubble issue. He has a comparison he made. Why is he wrong?
The only point you have managed to make is that you failed to read the article. I guess the words over 2 syllables were a deterrent.
Poster is weak as water, weak as water. He won't come back cause he can't do it. Lame. Kinda sad really.
So why am I wrong in saying that a bubble is a bubble is a bubble, and gold most certainly is displaying classic characteristics of an asset bubble?
Can't you refute it?
Did you even read my post?
Why the personal attacks?
You goldies are hilarious. You actually think only a very small % of the population own gold. And, of course, you ZH'ers are in that "elite" minority, and will be rewarded with a lifetime of riches as gold continues to appreciate 30% annually for the next 30 years.
By all means, keep buying and buying.
Gold is the ultimate bubble, meaning that it will be the LAST BUBBLE! Come back and chortle AFTER Bonds and T-bills pop (first!)
You sound exaclty like ole Johnny Bravo. No kidding.
Are you reincarnated?
Trimmed HedgeIt's the circle of life. One gold troll is ultimately and completely humiliated, and another pops up.
Same "arguments", same "you can't refute my arguments" to the one post in 20 that doesn't specifically address everything he said.
Same damn thing happened on another website I used to go to. Eventually the regulars gave in or gave up. Even as gold is at new highs with no end anywhere on the horizon, radar screen, navigational chart, globe, solar system model, or space map, they are still there, with ratcheted up "plunge" targets.
If these fucking gold trolls ever paid up on my offered bets, I'd be a millionaire in short order. I've offered these trolls bets anywhere from 1 oz of silver of 100 oz of gold, a year later for the price on the day the bet was made--none have taken me up on it. Bloody cowards every last one of them.
And don't worry, I'll start off the junking first by junking myself.
I like the fact that he junked HIMSELF ...pretty much says it all.
I didn't know you could do that. Gotta try it ...
Its the zerohedge wack a mole gold troll show....
I insulted you hoping you would come back and post. I see I succeeded. I can be manipulative like that.
I notice you did not answer my specific question in my post above you. You are manipulative too. If you did read the article then you would know how naked silly you seem, talking about this post. You are unarmed at a gun fight. He has arguments about why gold does not go into bubbles. He compares it to several things, among them condoms. He has some good linguistic fun which I have not seen folks play with much. What is the difference between condoms and gold? Is he wrong? You couldn't do it because you have not read/comprehended.
We'll see who's hedge gets trimmed. Look, I do not KNOW too much, but I do like to protect myself. A decent chunk of my assets are in gold, the world's best wealth preserver.
I believe only 2% - 3% of Americans own (non-jewelry) gold. Bubble? Could be, but I doubt it.
DoC,
We are SO far from a Bubble, it's laughable.Hell,it's not even at it's '80 price adjusted for jnflation.
When you can't GET it, or have to order it,and wait for an Extended time.......then, maybe.
The entire industrialized world is readying their ships for the coming tsunami, Americans are doing 360's on there thumbs by and large.
China,Russia,India, etc, all are loading up, as are the CB's(not selling), and China's encouragement to their people to BUY, is a wake up call to the world.
We are in a worldwide currency crisis, and most everyone knows it, except Americans.
Your score: 0. You are even wrong about shoeshine boys; there are plenty of them, though they tend to be adults these days. You just aren't in the economic strata that allows for purchasing fine leather shoes.
great article, l o n g . thanks for posting TD.
FOFOA said:
... As gold’s true value is revealed.
Well put.
You are preaching to the choir, whereas Trimmed Hedge is sitting with the congregation in the back row next to the exit doors.
He/she is in the woman's restroom shaving the "hedge" ...
FOFOA welcome to the CLUB, I mean FIGHT CLUB.
You are good, one of the best. I follow you for months, now.
The only thing, we disagree, is silver role. I am 100% physical silver, and silver outperforms gold since I bought it.
Gold at $200 will deflate economy to the level that nobody will:
-plow the fields
-mine the resources
-foundry the metal
-produce anything at profit.
The economy will completely collapse to the barter level. (I been through that in Russia). Deflation vortex will evaporate any business activity. Let's pray that will not happen.
On the other hand, Big Ben will deliver wheelbarrows of cash to staff of deflation.
Keep up good work!
Joker
'... and I thoght my jokes are bad"
http://www.youtube.com/watch?v=R1X6RQLZtoA&NR=1
i junked you w e l l,
........because i can†
"...why so serious?"
http://www.youtube.com/watch?v=Spkb5810JQU&feature=related
well thank G O D you showed up for some giggles and fun. this place has gone to
Ø - minus the h e d g e†
if you know what i mean. don't need drama, but some naughty or nasty faces, or at least some provocative tunes .
provocative |pr??väk?tiv|
• arousing sexual desire or interest, esp. deliberately.
Wow!
Agent Provocateur?!
Would that's still be arousing if you have had found me @
http://sugardaddie.com/
"got to love internet. isn't it"
ok, you be Agent Provocateur!
and i will be your patient.
don't do sugar daddies, but try something else.
i like looking at your picture, sorta does it for me.
at least you replied. ya want me to email you some naked picture of me doing YOGA poses?
"i like looking at your picture, sorta does it for me"
http://www.youtube.com/watch?v=uYMnAUGFuG0
oh, i get something back in return for sure. especially when it is a reply.
The economy will completely collapse to the barter level. (I been through that in Russia). Deflation vortex will evaporate any business activity. Let's pray that will not happen.
And you had a pocketfull of Gold, and it did not help you?.WOW.
Silver /Gold ratios held should be around 60/40,if you want to head for the hills 90/10.
IMHO
Yep.
http://ampedstatus.com/the-road-to-world-war-iii-the-global-banking-cartel-has-one-card-left-to-play
DZ- If you have the inclination I suspect many would be interested in your impressions of how the "run-up" in Russia compares to how things seem and feel to you today ? Any similarities or distinct differences that you have observed? Are there any "tells" we should be on the lookout for?
Having never been through that type of experience I have nothing to compare our situation to, and am very curious...
Yeah, that's an experience nobody would want to get. My skin still shivers. Rubble was like 129 to $1, for like a year. I sold 5 containers at $60 000 profit, even without opening them. At that time, Russians would buy anything you throw, at them. Then you wake up and Rubble is 240, then 280, then 300. 800% inflation a year. Banks refused to sell dollars(think gold). My loss was that I could not even cover my invoices. My friend had 10 000 rubles saved on his savings book; that was like an apartment value, then. Few months later, he could buy like $2 for that money. Go buy physical gold and silver, ASAP.
If metals price will crash, just wait it over. Do not worry about $200 gold; that's Ben's biggest headache, not ours. FOFOA is right
Zerohedgefan,
I'm certain that a lot of readers would be fascinated by your experiences. Can you elaborate further?
I promise few pages entry. The timing is right. Definitively, I went through that reset hell, few times. Poland, Russia, Europe, now. Seems to have it in my blood. Give me some time, and you will be rewarded.
Joker
".........I am a guy of simple taste"
http://www.youtube.com/watch?v=HqcbgSpHMFs
Thanks for the info ZHfan. I, too, would like to hear more if you are willing. Any parallels you see with our situation today?
I read an essay once from a Soviet ex-pat who said reading Pravda was a daily exercise in humiliation, because you knew it was all lies, but the government also knew that you understood it was all lies. It was their way of saying, "Screw you, peasant. We make the truth". I often think of this when I read the latest economic numbers from the US government...
+1
http://www.miningweekly.com/article/gold-not-cheap-but-no-bubble-either-2010-09-25
All say no BUBBLE, but.........you guessed it.
NADLER.
This is a good article. And yet, I found some areas that FOFOA did not think through:
1) You can't discuss gold without discussing *WHY* it was selected by markets everywhere over thousands of years to be the monetary commodity. This is because its marginal utility declines the least. It is the most marketable in the large (the bid goes down the least for large sell orders, and the offer goes up the least for large buy orders), in times of crisis it's the one good for which the *offer* is withdrawn--for all others, it's the *bid* that disappears. FOFOA did mention that the stocks to flows ratio is higher for gold than for anything else--this is the flip side of the same coin. It is important to distinguish between the bid and offer, particularly with gold. Usually, the bid and offer are close to eachother, but if they widen, watch out. For any normal good, one should think of "the price" as the bid. For example, houses today. The bid is what matters. For gold, it's the offer. So if the spread widens (it's narrower than for any other good extant) that means gold owners are unwilling to part with their metal, and if bidders don't want to pay up that's just fine too.
2) FOFOA did not distinguish between saving and hoarding (and in a few cases called gold buyers "investors"). Savings is when you lend money to the system by depositing it in the bank. Hoarding is when you don't trust the banks or the system and/or don't like zero interest rates. Why take the risk when you can take your gold coin home?
3) It was amusing to see the comparison between $10B of gold buying vs. $10B of Dell stock purchases. I don't think the gold price would spike all that much (unless the purchaser was responding to a fresh crisis that everyone else can see also). Gold is the most marketable, and there is all that stock out there. Gold's stock *IS* its supply--at the right price. By the way, there are many market mechanisms to handle the case if a large buyer wants a lot of gold today. Lots of gold holders can sell their gold now and simultaneously buy a forward or a future (so long as they don't fear default--which they don't today). Yes, we will reach a point where gold goes into permanent backwardation, where the price of a future or forward is lower (perhaps a LOT lower) than the price of gold-in-hand-right-now-for-cash-on-the-barrelhead. But that is not today.
4) The whole "levitation" thing is backwards. It is looking at the price of gold in terms of dollars. The correct view is that gold has a non-declining marginal utility. People want today, and have always wanted, the stuff--without regard to how much of it they already have. This is not true for water or food or clothing or shelter, much less condoms or Dell stock!
5) Non-declining marginal utility, not "rarity" is what gives gold its value. Gold isn't actually all that rare--there is an estimated several hundred thousand tons of it! And yet people have been accumulating it for thousands of years.
6) Inflation vs debasement vs. price increases. Inflation refers (properly used) to an expansion of the money supply. Since we have a credit-based monetary system, this is an expansion of credit. Debasement refers to reducing the quality of the money, for example it used to be backed (I know, this is a check-kiting scheme...) with Treasury bonds and many of those were swapped for sub-prime mortgages. Price rises have a whole nother dynamic, including what people want, can afford, etc. The prices of Miami condos are collapsing. The prices of food, not so much. I responded to several comments about the price of wheat or the price of a suit measured in gold 100 years ago vs. today. If these things cost the same in gold today as back then, then gold today hasn't recovered the value it lost during the "great moderation". Bread and suits (and everything else) require far less labor today to produce, than they did back then. The price should therefore be *lower*.
7) I can't say that I am familiar with Nash. But any theory that purports to look at economics in terms of equilibrium begins on false ground and can go nowhere. Professor Antal E. Fekete has done groundbreaking work on a disequilibrium model. Disequilibrium looks at buyers, sellers, market makers, entrepreneurs, capitalists, wage earners, retirees, investment bankers, etc. Each acts as a force to push up or down certain bids and offers. At any given transaction, the market clears as a "price". But there is a disequilibrium dynamic that is constantly moving every bid and every offer. To show one (over)simplified part, the marginal consumer pushes the offer up, and the marginal producer pushes the bid down. To see why, think of yourself as the marginal consumer. You come to market to buy, say, coal. You need coal to keep your apartment building warm, which you owe your tenants by contract. Coal has bids at 30, 40, 50, and 55. Coal has offers at 65, 70, 80, and 90. To keep things simple, assume each bid and offer is for 100 pounds, and that's what you need to buy. What price do you pay? 65. But further, the guy with the offer at 65 is done, and he goes home. The new offer is 70. Instead, assume you are the marginal producer who show up with a day worth of coal mine production. What price do oy get? 55, and worse the next bidder is 50. If you don't like 55, you can just bloody well come back tomorrow with 200 lbs and see if you like the price!
FOFOA rocks. Go watch a f*ing football game and make love to your wife. (get a life)
Gold is the end game. The only reason we price gold in US dollars is because we don't currently trade in coconuts. Thus the nature of the ponzi... hello?
after the end is a beginning...if you are willing & able to look that far into your past.
I would have expected more from Dagny Taggart than: inability to comprehend, boolean view of things (either I am "for" FOFOA or "against").
Really sorry, Bearster. I do know better than to blog when I'm that stressed. Right or wrong, you contributed, I didn't. I value the variety of opinions and debates here on ZH, yours included.
these are interesting questions bearster. unfortunately, it seems the peanut gallery round here no longer is willing to tolerate the contrarian view. which is even more reason to believe it's worthwhile to dig deeper into your questions.
You can't discuss gold without discussing *WHY* it was selected by markets everywhere over thousands of years to be the monetary commodity.
for me, this is the essential question and methinks it's goes much deeper than your hypothesis. why GOLD? why does every single 'civilization' across earth time & space (or rather our current conceptions of such) value it above every other material/element on the planet? i've heard all the 'rational' arguments and frankly i don't buy it.
until this question is actually considered & discussed amongst 'friends' (and friends of friends of friends of...), i choose to believe that this whole mania is one giant trap and that even 'freegold' will do nothing but create an new subset of masters & the same old subset of slaves...same as it ever was...
(junk me if you wish, i don't really give a fuck as i just ate a tomato that i grew myself in soil that i made myself at a cost of about one Benpenny...and my time which i gave freely and with joy. and i happen to enjoy FOFOA's blog more than anyone elses on the interWEB, not for what he says, but the way he says it. see, value & wealth is all in the eye of the beholder...bitches.)
excuse me but this piece of writing appears to be
nonsense disguised as thoughtful analysis, along the lines
of how many angels can occupy the space implied by the
words "head of a pin". in the first few paragraphs the author
tortures logic and sends you the bill. i will read on but have a
bucket handy. comments made in a sour mood.............
" The real returns are in stocks and housing. [Written in 2006]"
did they say "real returns". yes, i think they did.
gold.
you can't eat it, you can't live in it, it wont keep you warm,
it won't protect you from stds, and you can't wrap your mind around
it's symbolic and unique physical properties (other than it is shinny) and
the meaning of that symbolism (redundancy) as it relates to the idea
we know as inertia. (integrity). yet, we love it anyway like we love
ourselves. good for us! (like words and ideas)
ps. there is not a paragraph in this piece that does not inspire argumentation.
imo. that must be just me. i call total bullshit, not on the trajectory of the
"price" of gold but on the presentation and wording of the arguments.
all physical anything has a price but it may be entirely political as pricing
seems to be anyway. so is economics just a bastard offshoot of power / politics?
hmm? who needs math anyway when in the end it comes down to the words
and ideas held by the majority ,or self proclaimed omnipotent minority, as "truth"?
but then again one does suffer the effects of scarcity of resources, the cold , hunger
and social disgrace.
note: i have limited interest in this subject of physical possession and offer no advice re same.
get rhythm.
http://www.youtube.com/watch?v=Roug4qG7qCY
.
pps. joe kennedy. three sons butchered. one daughter butchered. so what did he gain?
what did he know?
apologies and useless sympathies offered but he was a criminal and a crook. the point being
when even the slave class knows something concerning systemic function it is time
for the elite to burn the system to the ground and create a new game with new
nash equilibrium, ?
equilibrium? what could that possibly mean in a dynamic living and infinite universe?
in short, i don't understand this post one bit and it is too long winded and confused
to further investigate for me.
.
tip e,
gold is the unique element in the universe that is inert in it's milieu. it does not
react with the typical environment, oxygen rich. it does not tarnish. it is malleable
and has been used historically ornamentally and artistically and has properties that
appeal to the human eye. etc.. it can be pounded into "leaf" that is as thin as an atom
or two. ornamental, reflecting light and implying depth (illusion)
but so what? well, these properties and it's "nature" communicate the principles
of the universe itself and correlate them to the human experience as the human
mind recognises the significance of these ideas or principles and their relevance to
humanity and it's supposed and speculated continuance into the future, perennity,
by way of light which is experienced in the moment, eternity.
so gold is that element that directs man's mind and attention to the nature and
glory of the physical universe and it's wondrous mysteries. it just is. and is.
and continues to be what it is. stable and soft and beautiful and as the sun and moon
all in one.
i, personally, have no use for it.
it implies meaning, like language, but is inert. it implies power and value but is inert.
it implies beauty and life but is lifeless. it is social and personal and dead and inspiring
and the physical manifestation of art and life and uselessness and potential all in
one element and the earth decants it from the mantel where tectonic plates collide.
it is an element that can only exist in a solar system that has evolved from prior systems
that have existed for life spans of stars and then exploded in super nova type
destruction to seed further physical and biological evolution. it speaks to all this
without changing it's tune. it is redundant and inert. royal.
but we don't need it anymore. ?
we will "see".
see pjb.
it is the historic universal physical manifestation of metaphor, irony and oxymoron.
again, we have little or no use for it in the land of cheeseburgers, soft drinks and
i phones (whatever that is).
Hey Freddie,
All those things you said!?
It's the perfect yardstick.
The Numeraire of millennia.
hi blindman. i think i only see you on weekends. but haven't been so active on ZH cause
b o r i n g
johnny cash sang about the shoeshine man in that youtube song, rhythm.
well, you kind of scare me with your talk of not being interested in gold. really liked what you said and i don't feel guilty. i truly enjoy my gold jewelry. it means a lot that the artist is true to his own integrity and only using recycled gold that people sell to him. bought some coins. see with my own eyes if they do anything for me or i just put them away for a rainy day.
no-i's-2c :: thank u for extending the hand to bridge the chasm thoughtfully. it is much more worthwhile to wonder why gold and these observations are fruitful to the search. perhaps we are heading back into the womb and we need something solid, comfortable, royal to guide us there. especially since we all seem to have lost trust in each other as guideposts. but then what? and what if the solid & immutable is discovered to be not so (or the virus is implanted into us before the lights go completely dark?) ladies & gentlemen, i welcome you to the abyss.
(pjb? more clues please? i struggle to decipher as is...)
re: FOFOA :: your points are shared, nonetheless, i like his style. i wish more teachers would emulate such a path of education, no matter the subject. and yes, i do see (and am wary of) the elements of machiavellian seduction, but then again, is it not the time to be responsible for our own personal integrity? where we can discriminate & assimilate as our eyes see it (always questioning our own assumptions of course)?
p.s. JoeK :: always seen the man as a 20th century daniel webster, where his progeny paid his debts (w/ compounded interest due to his arrogant attempts to think he could escape the collection notices). a myth for that century. time to write something new methinks. a myth of mutual trust & respect, where gold shines not from fear but from the recognition of our cosmic folly...
i love U
likewise darlin...but we both are strange like that oui?...goddess bless america
apologies, here is a better link/s.
.
http://verbewarp.blogspot.com/search?updated-max=2010-05-09T10%3A42%3A00%2B08%3A00&max-results=1
.
http://verbewarp.blogspot.com/2005/08/ad-infinitum-science-is-of-esoteric.html
.
http://verbewarp.blogspot.com/2005/10/evolving-man_28.html
.
or pjb / the warp / or the verbe.
.
but it is not about the gold, it is about the man. man / women. civilization.
the mind that our grandchildren will receive we manufacture here. alchemy .?
this too.
http://verbewarp.blogspot.com/2006/07/global-economic-collapse-new-global.html
tip.e:
The funny thing is I am not of the contrary (to ZH readers) view. I think gold is money and nothing else. The problem with most people is that their reactions are binary and their comprehension is binary. Since I dared criticize FOFOA then that means I am "against" him.
Bullshit.
I think his overall point is a good one, though I think we have "freegold" now. Anyone can go out and buy as much gold as he wants, and willing sellers will part with gold for US dollars. One day this will not be true, but today it is.
But the more I study Austrian economics, and particularly Karl Menger and Antal Fekete, the more I think that most people are missing the essential.
One of Menger's axioms is: the utility of the next unit of a commodity is less than the previous unit. Example, the first sack of grain means survival. The second means feeding chickens for some meat. The third means insurance against loss. The fourth is, perhaps amusement, if you use it feed songbirds.
Gold is the commodity whose marginal utility does not decline (or if it does, it declines so slowly that it is negligible). Why? It is rate, but not that rare. It is extraordinarily expensive and risky to extract. It doesn't rot or rust. It is divisible to tiny nuggets. Each piece is identical to any other piece. It can carry value across distance and across time. It is the most marketable in the large (its bid-offer spread does not expand as fast as that for any other good). It is not consumed, and yet people have accumulated massive amounts of it. It's shiny and pretty, etc.
Anyways, I don't think one can look at gold like any other commodity or good. In every respect, it behaves differently. I mentioned earlier that for other goods, the bid is withdrawn in crisis. For gold, it is the offer. Another difference is that gold is the commodity that people trade all other goods for (because they are less marketable). A software developer has little expectation that those who need a computer program will have food and shoes for his children. So he accepts gold because he can trade it to those who sell food and shoes.
While the dollar seemed to be "working", the above analysis was background material. But now that it's obvious that the fiat paper system is in a slow-motion train wreck: not happening quickly but not avoidable, the gold question matters.
Then people who want to flee the dollar are faced with the same question, in a different guise, that all people throughout history had to deal with:
What can I use to store my wealth across distance and time? I might need to buy something far away from home. I might need to buy something 20 years from now.
Real estate? Too many homes and offices and stores built for too little demand. Still in collapse, will be dead for a generation.
Stocks? With the threat of rising taxes, unemployed consumers, rising regulation, unionism, protectionism, expensive new healthcare and carbon regimes... there is a high risk that businesses will go out of business. I think the only reason why anyone buys stocks today is the expectation (hope?) that (a) the Fed will print, and (b) Fed printing will cause stocks to go up further.
Commodities? Ahah. Right idea. An asset that is no one's liability, and does not have counterparty risk. OK, great. Corn. Wait, corn spoils, gets eaten by bugs, etc. OK, lumber or copper. Wait. These have giant bid-ask spreads, and I hate to even think if I want to move a few million dollars into or out of lumber! And they are bulky, hard to transport, and a pain to store... and if I need food or ammo or whatever, will the guy selling them to me want wood or copper? Wood and copper are not as marketable as ... other commodities. How about platinum? Closer in some ways, certainly much more value-dense. But the spreads suck. And since aboveground supplies are so tiny compared to annual consumption, the price can bang all over the map like a pinball. Their calendar spreads too, sometimes sharp contango and sometimes sharp backwardation, based on small changes in mine production or automobile manufacturing.
What's left?? Other than gold (and a similar but maybe slightly lesser case for silver)? Silver has one advantage, actually. It is more marketable in the small. It is more hoardable for people who want to put away 10% of their weekly paycheck. Gold bid-ask spreads are larger for amounts of $100.
That's the bottom line. What else, *other* than gold or silver would people turn to? And why??
bearster, you make very rational points and an excellent argument. i agree, 'freegold' is here and so is hyperinflation for that matter. we are dancing around the event horizon, playfully dipping our toes into the void, inviting it to suck us in but thinking we have the force to defy its gravity. i happen to accept and agree with all of the points you make (and will add M.Armstrong's latest joint from the joint as an adjunct to your argument).
nonetheless, for some reason, the story of McTeague keeps replaying in my head (i encourage you to rent the film Greed if you are not aware, if only to view the final scene). and i wonder if gold is not, like fire, a dangerous plaything, something that will burn (or rather enslave) us if we get too close without remaining fluid. and upon the reading of history, it's not too crazy to consider that gold has been a crutch that enchains us from realizing our potential possibilities. this is maybe not a very popular opinion at this juncture, and i accept that, yet i feel the urge to express the caution not to limit our horizons and keep our eyes open for any gray swans in the distance, beyond our current conceptions of how humanity should and would and could be constructed.
"I have to say that I participate in what Saint Paul called “a hope against all hope.” It means that in a way, I see hope behind the threat of the apocalypse. It doesn’t put an end to humanity. It’s possible, but not certain. And at the bottom of the pit, there is only hope. We are approaching the pit of ignorance." - Paul VirilioAdd garden lettuce,mayo,a nice thick slice of Deli Garlic Baloney and it don't get any better than that!
only gets better if you have brothers & sisters in arms to share with Hulk. baloney & homegrown veggies (& gold for that matter) is a delicacy best shared amongst friends, yes?
funny you should comment, cuz it was the website you shared last week that really snapped the synapses for me. to wit,
Anyone is welcome to visit the farm anytime. No trade secrets, no locked doors
Respecting and honoring the pigness of the pig is a foundation for societal health.
Soil health creates healthy food.
also, i think it was someone around these parts who said recently that gold is not a solution, but a symptom of the problem. these principles above for me are essential elements of a solution and it is solutions that happen to get my gold on. to each his own...
Looking at the price of gold as quoted in exchange for USD or any other currency misses the point. What matters is the purchase/exchange power of an ounce of gold versus a basket of other basics like wheat, oil, aluminum, .223 ammo (if you're so inclined), tillable acreage, etc.
We need a Gold relative value index to know what an ounce translates to in the real world. Is it possible to build a model of this w/a Bloomberg?
Looking at the price of gold as quoted in exchange for USD or any other currency misses the point. What matters is the purchase/exchange power of an ounce of gold versus a basket of other basics like wheat, oil, aluminum, .223 ammo (if you're so inclined), tillable acreage, etc.
We need a Gold relative value index to know what an ounce translates to in the real world. Is it possible to build a model of this w/a Bloomberg?
$55'000 / oz = $1.768 Billion / ton
150'000 tons (all mined gold over human history) @ $55'000 / oz = $265.273 Trillion
Global nominal 2009 GDP = $58.07 Trillion
Total world wealth in 2007 in 2010 US$ = $156.56 Trillion
Just saying....
Don't bother Repran, I tried above too and got "junked" several times.
Don't know why you were junked for stating the obvious.
What is the aggregate USD value of the OTC derivative market?
London, UK - 23rd March 2010, 15:31 GMT
http://www.mi2g.com/cgi/mi2g/frameset.php?pageid=http%3A//www.mi2g.com/c...
The latest figures for March 2010 have fallen significantly to USD 1.048 Quadrillion, and tell a rather different story:
1. Over-The-Counter (OTC) derivatives stand in notional or face value at USD 604 trillion (DOWN -39%) for the most recent period ending June 2009 and include:
a. Interest Rate Derivatives at about USD 437+ trillion (DOWN -5%);
b. Credit Default Swaps at about USD 36+ trillion (DOWN -37%);
c. Foreign Exchange Derivatives at about USD 48+ trillion (DOWN -21%);
d. Commodity Derivatives at about USD 3.7+ trillion (DOWN -72%);
e. Equity Linked Derivatives at about USD 6.6+ trillion (DOWN -34%); and
f. Unallocated Derivatives at about USD 72+ trillion (DOWN -11%).
2. Exchange traded or listed credit derivatives volume stands at USD 444 trillion (DOWN -18%) including USD 307 trillion of futures (USD 21.7 trillion outstanding) and USD 137 trillion of options (USD 51.3 trillion outstanding) for the most recent quarter, ie, Q4 2009.
$50K per ton is asking a bit much.
FOFOAs main point is easy; don't get confused by papergold.
Gold is the ultimate settlement of debt. If you hold gold to and through the end of ouer debt based money system you will see the true value of gold.
Though you're taught that prices are set by supply in demand in school...
That statement is SOOOOOOOOOOOOOOOO FAR FROM THE ACTUAL TRUTH IT'S SCARY IN THE FINANCIAL MARKETS!!!!!!!
PRICES ARE SET by Fixing, Manipulation, Naked Shorting Fraud, Media Lies, SEC looking the other way and not enforcing rules/laws, HFT COMPUTERS/SOFTWARE,,,, and other CROOKED variables.
SUPPLY AND DEMAND LOLLLLLLLLLLLLLLLLLL LOLLLLLLLLLLLLLLLLLLLL
Now I've heard it all. Thanks for the Belly Laugh!!!!!!!!!! LOLLLLLLLLLLLLLLLLLLLLLLL
LOLLLLLLLLLLLLLLLLLLLLLLLLLL
I wonder what the correlation between Sonny Corleone and Tim Geithner are?
One robbed from the Government & the other is robbing from the peasants.
http://www.youtube.com/watch?v=yrv1roq_gBw
Not one fucking reference to the Goodfellas.
Goodfellas "Get your shine box" http://www.youtube.com/watch?v=d7LERhz-s8kThat shoe shine boy looks kind of seductive. Is that gay?
Forget gay. That's a child and you are sick!
Boy we just jumped from kidding joke domain straight to prison sex didn't we. Kind of a froggy judge of character aren't we?
The paper price collapse to gold @$200 is irrelevant. Just like in 2008 silver dropped to $9 ozt. After about a week, you couldn't buy physical without a huge premium. If that condition occurs again, likely we will be buying it at some ratio in coconuts. No problem - I got my Ag dimes and I like nuts - otherwise I wouldn't hang out here. And I can make change for gold in either commodity.
Great insights for the most part.
I've been a devoted reader for quite some time, but have lurked heretofore. And when I post now, it's to say this: Tyler, another user some time ago suggested that you create a $50 or greater password-protected site so that those of us in the business, or with assets sufficient that we're not making posts about running up credit cards and defaulting on mortgages, don't have to wade through this morass. Zerohedge IMO is better in some ways than quite a few of the (highly) paid services I use, but Jesus, does it get old reading 100 pieces of junk for every 1 comment of, well, gold.
So make a donation and get an invite to the real site.
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It is so good to see the usual ZH avatars out tonight. I still can't quite get over Kat.chamber's new avatar -I keep staring at those small breast protrusions, and thinking fondly of a teen Marcia Brady-which is,incidentally,okay - since I AM Marcia Brady. but it is clear to me that, as soon as I am lulled into that innocent chest wall- the pinochio lady, mixed with acid scenes of Jim Morrison in the Mojave- will instantly threaten me, and that junior training bra will snap horribly back on my hand. once burnt. I want to say that I am growing weary of gold discussions - and I don't mean this to be condescending- I guess that- as a huge goldbug myself- having put everything I have into physical gOld and silver- well, I am just thinking to myself, okay move on- keep buying the metal, but STOP obsessively poring over blogs defending it. We were right - Gold was the smart place to be- is still it- but can we make some progress? I feel the way I also began to feel about 911 - how much time can you invest trying to convince people that we did it? When do you start getting beyond it? For me, it is now- what is the future? I have a five year old daughter- what is her world for the next fifty? I am trying to see the megatrends- trying to see the next "singularity". How do you mix a republican resurgence, gold returning as sound money, peak oil, a rapidly expanding Chinese and Indian population, coupled with a probable Chinese depression; but roll in the fact that technology and The net will reach everybody within five years? I need to see some way tO make the fact that CHATROULette is somehow going to be the most important paradigm shift of tHis century. I am confused. The only thing I am certain of is, I would lay down my life for Mscreant. Someone take a cheap shot at her, so I. Can die like a man, in. a blaze of glory.
BTW, I don't think those tits need a bra. I think they stand on their own merits if you know what I mean.
you seem to be the shit around here. what can you teach me, babe.
Hi,
I had not seen that post, had to go find it so that I could get context. Heph said a whole lot in that post. The part you have focused on is not his point. I admit to being flattered, but there is so much I could say I am not sure where to start, and fear that starting will not give you what you want.
I'll say this, I know better, I am NOT the shit around here. Lizzy is (with the Lucy avatar), in terms of the women who post here, just true. Subtle, she does not throw sex out there, and she gets lots of love. She knows her stuff, she is competent as hell, and the guys love her. She does not say much but when she choses to weigh in, it is worth while.
No one knows who anyone is so we are all projection screens for each other with our avatars and attitudes, our hopes, dreams, and our nightmares too. So with that caveat in mind, knowing you are looking into my mind as I write this (this is my projection) here is what Lizzy, who I think is the shit on this site, teaches me. She is liked because she is smart, competent, and can take care of herself. She is not needy. If I am a dude thinking about the whole thing, Lizzy does not need me for anything. If she decided to spend some time with me, it would really be because she liked me. If I'm a trader dude that would boost my self esteem like crazy that someone so smart, competent, and market wise, chose me for a partner.
The folks on this site are passionately interested in the topics presented here. Many of the folks feel alone and responsible for themselves and others. They come here to let their hair down, or test their logics about what is happening, to see if it holds up or not. Many folks are scared and trying to figure it all out. I resemble these remarks. I don't look to fuck anyone here, I am really fortunate my hubby takes care of me this way. :-) But he does not share my interest in what is happening to the economy. He knows about it, but seems to have moved on. I on the other hand am obsessed. Want to learn all I can. Based on my own feelings, I can guess that some of the folks posting here enjoy each other a great deal because they are getting needs met that they cannot get met anywhere else. The fantasy is a straight up equal partner, who can be there when you stumble for a second and not judge you, and who you can be there for and get to feel strong when they stumble for a second. And together, you get through it, different, but equal, and better off for having known and loved each other.
These are not sexy fun thoughts, I like those too. But it is where my head goes if I think about why men might like particular women on this site.
well not to be blunt, but your a bit of a turn off. just sayin. i think you people must be city folk. i am not interested in anything that you just wrote. guess what, i could care less about lizzy and her rampant admiration on ZH.
I thought that would be the case. Apologies.
It is so good to see the usual ZH avatars out tonight. I still can't quite get over Kat.chamber's new avatar -I keep staring at those small breast protrusions, and thinking fondly of a teen Marcia Brady-which is,incidentally,okay - since I AM Marcia Brady. but it is clear to me that, as soon as I am lulled into that innocent chest wall- the pinochio lady, mixed with acid scenes of Jim Morrison in the Mojave- will instantly threaten me, and that junior training bra will snap horribly back on my hand. once burnt. I want to say that I am growing weary of gold discussions - and I don't mean this to be condescending- I guess that- as a huge goldbug myself- having put everything I have into physical gOld and silver- well, I am just thinking to myself, okay move on- keep buying the metal, but STOP obsessively poring over blogs defending it. We were right - Gold was the smart place to be- is still it- but can we make some progress? I feel the way I also began to feel about 911 - how much time can you invest trying to convince people that we did it? When do you start getting beyond it? For me, it is now- what is the future? I have a five year old daughter- what is her world for the next fifty? I am trying to see the megatrends- trying to see the next "singularity". How do you mix a republican resurgence, gold returning as sound money, peak oil, a rapidly expanding Chinese and Indian population, coupled with a probable Chinese depression; but roll in the fact that technology and The net will reach everybody within five years? I need to see some way tO make the fact that CHATROULette is somehow going to be the most important paradigm shift of tHis century. I am confused. The only thing I am certain of is, I would lay down my life for Mscreant. Someone take a cheap shot at her, so I. Can die like a man, in. a blaze of glory.
Mscreant is an idiot.
There ya go.
Thanks saulysw -MsCreant can rest easy now, knowing you "Swim with the fishes"
Thanks saulysw -MsCreant can rest easy now, knowing you "Swim with the fishes"
He does, doesn't he? Proof is right there in the avatar. It was funny, because I read his post first!!! It stuck out, alone down there and my eye went to it. I had to know what my crime had been. saulysw is pretty nice usually! What a laugh when the drama resolved!!
I think a lot about my son too. Unfortunately, he is college material. He is very bright, but I don't know if he will be able to DO anything. I tell him he does not have to get caught up in the college ponzi, but honestly, he was built to read and think and maybe design something. Post peak oil world, wow, don't know. But I love him.
Peak oil, hell, peak everything, sounds like we are on the same page there. I think we are rapidly approaching peak bullshit. Even the bullshit ain't real bullshit (at least you can plow some real bullshit into a garden and grow something good).
So many things come out on the electronic front that look like they are going to "change everything" and they sort of do. And then the next thing comes along so fast. I wonder if we will become a hive mind, if the thing goes unchecked. Say the tech comes along that would allow us to merge consciousnesses, and commercial interests got ahold of that? Well, they have done that already (mass media) but we still have some freedom from it and non commercial interests are circulating content too.
My avatar is flattered that Marcia Brady would lay down her life for her so that she could die like a man (??). Innocent sweet Marcia, who knew? Because my avatar is armed with the pistol (and a cigarette), she feels fairly ready for all comers. She would hate to see such a lovely young icon throw it all away when she didn't need to. Instead of a Bonnie and Clyde, maybe they could go be Bonnie and Bride. Don't know. I wouldn't want to get in the way of it if they chose to up and animate and leave us both behind.
Glad you got the joke, because, I don't think you are an idiot - quite the opposite.
"Say the tech comes along that would allow us to merge consciousnesses, and commercial interests got ahold of that?" Isn't this a perfect description of the internet, as it now stands? After all, the thought I am having now is entering your brain from right across the world. Look at the sidebar - commercial interests creeping in.
I really like FOFOA - his/her words are very lucid and the logic is virtually flawless.
But there is one thing I am still having trouble reconciling (at least in this blog post); I don't see the spot, or paper, price of gold plummeting, and physical detaching in price to the other extreme.
Sure, the COMEX may go belly up, but when (or if) it does, price discovery will still need to be determined internationally.
A spot price of 200 is ridiculous, it makes no sense. Do you think the Shanghai exchange, or the Hong Kong exchange, or the Sydney exchange, will let 200 (or the equivalent thereof) be the spot market price if physical is going for 10-15k? Gold will still need to be traded. Comex goes bust, then focus will shift to two of the world's biggest gold producers for price discovery, Australia and China.
Comex spot may become irrelevant as the physical price marches on, but there will still have to be exchanges somewhere in the gold-producing world that reflect and discover that real physical price.
Just a thought, and would welcome rebuttal if I'm thinking down the wrong track.
I like to consider all angles, so I like your ideas of the other physical marketplaces taking over the price discovery role. Interesting....
Joe Kennedy's credibility on this "bubble top calling" issue is bolstered by the fact that from 1929 to 1935 his fortune went from $50 million to $2.85 Billion in today's purchasing power.
Wha.... gimme a break . Can you say rum running during prohibition . Thats where the fortune came from .
Get thee some gold.......btw.....where is.......ANOTHER?
Cannot imagine the Perth Mint selling me gold at 200USD if the paper market crashed.You certainly wont be getting any holders selling their gold for that.
If paper gold crashes it wont' be an issue of the spot price but of the real supply available for paper. If they reveal they have only one hundredth of the volume required then the value of a share would drop by that 100th.
The thing people would want to know pretty quick is how much gold there is and you can bet the major holders would be collecting theirs before the peasants which may get one thousandth.
You would imagine the paper gold market would come to a sudden halt with no buyers. Sprott would need to be out there with attested current video of a gold audit for his stuff.
Would fear keep people out of gold, getting rid of buyers? I gather if we have gotten to the stage of the paper market crashing then the economy/USD has entered a terminal phase and everything turning to shit daily.
The biggest worry for people will still be how to preserve their wealth.
Thinking of Zimbawe gold is what people accepted for produce.
Great to see your post here FOFOA!! I always figured that ZH and others were reading your posts. You won't remain in the dark for much longer
The During and The Afterwards:
DoChenRB said "I will sell some either there or along the way"
It might be impossible to guess the multiples of outcomes, but in trying to plan, should we hold physical until another currency comes along? Until gold or silver IS the new currency? Should we trade out 1/2 way to the end (if that can be figured out or timed) and buy real estate north east of Wasila Alaska?
I completely agree with FOFOA but I have few clues about the During and Afterwards.
Because most ZHers are very forward thinking, I value any insights/plans that might help the rest of us.
Navigator! I am so glad that I read all the way through to the end.
Because I do not KNOW what will happen (although I suspect something like what FOFOA predicts), that (not KNOWING) is why I will sell some at, say $12,000 (if gold prices maintain a continuity), and then some more at, say, $30,000. And use those funds to strengthen our bearing company in Peru.
If gold has the paper vs. physical price divergence AND the quantum gap (Robert Prechter's 15 minutes of fame, love that!) where the physical disappears as FOFOA predicts, then I will wait until After to sell any.
EDIT:
I am a strong believer in diversification (gold is an important part of that). I own lots of different types of assets, including in other countries.
Diversification, flexibility and alertness will get you through this.
DoChenRB
Thanks... you brought up a very good point - having different assets in different places, and being able to get to them.
For some of us, having our PMs in our home safe, our Bug Out Bags ready, plenty of ammo etc, and reading ZH daily is where our planning stops. Perhaps having a small cheap 20-40 acres in Montana or NE of Wasila AK and having some of our assets there is better - or having some PMs in a Canadian Safe Deposit Box or if possible in Peru or Bermuda. Because having AG, Au, Pb and 1 years food stores is just the start - when the panic starts is not the time to start planning.
You are right.... Flexibility, Diversification and Alertness (hopefully) will see us all thru this. I'm not sure how much more time is available and the need for alternative plans is extreme. For example, I'd hate to be turned back at the Alaska border and told 'only residents and landowners can enter' or you can't even get there 'cus the line of cars trying to get in stretches down to Oregon (then plane or boat is the only way in?).
Damn the chess games going on in my head - 'if they do this, I'll do that' or 'the crowds will go here, then I'll go there' or 'why sell at $12k/oz, isn't it going to go to $15k?, but why sell at all at $15k in exchange for meaningless paper money losing 200% value daily if we have hyperinflation'
Man, there's SO much I don't know! And this time could be very different from anything we've seen or read about in the past.
Thanks DoChenRB for your comments and advice ... opened up some new trains of thinking for me.
So I'm just trying to get my head around the future value of gold when the USD and the entire world of fiat currencies comes crashing down. Am I off the mark in thinking that one day all of the worlds wealth (arable land, commodities, commercial and residential real estate, container ships, mines, yachts, fine art, trucking fleets, factories, etc., etc.) - all things that humans hold as valuable - will have a piece of gold with its name on it? Is this the key to understanding where gold is going? If this is so, than I think that the purchasing power of 1oz of gold will be much, much higher than 50g USDs in todays terms. 350 loaves of bread or the finest hand-made saville row suit for an oz. of gold??? Not a chance.
I have had this same thought but did not give voice to it in print or out loud. It seems too "out there" like a frothing, greedy, riled up gold bug. Also seemed too simplistic.
Thanks.
Hope you get a response.
The value will go up and eventually reset to something more reasonable as it becomes common trade and as fewer people sell out of their assets from dire need. What good is arable land in the winter? People who aren't prepared with some gold will sell anything they don't need at the time just to survive. So to me the value is infinite in some ways. People will sell anything for food and water and if gold will get them that they will sell anything for gold including land, buildings, fuel, machinery, tools, stocks, luxury items etc.
Technically, gold might pullback here a little. The chart looks a little heavy to me.
But that should provide a nice buying opportunity to add to longs or for those look to get in to buy.
Longer trend is pretty clear and unlikely to reverse, unless of course, you actually get someone to decide to default (ie greece or someone) which would indicate a willingness to destroy money, but that seems unlikely in this krugman-believing world that you can have your cake and eat it. We all know you can't.
C'mon....an apocryphal exchange used as an excuse for his convenient exit from a burning house?
Has anyone already pointed out that Irish prick was a market-manipulating wise-guy?
Europe's Central Banks Halt Gold Sales
http://tiny.cc/fl1tx