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Guest Post: Welcome to the Mania!
Submitted by Jeff Clark of Casey Research
Welcome to the Mania!
With gold punching the $1,300 mark, thoughts of what a gold mania will be like crossed my mind. If we're right about the future of precious metals, a gold rush of historic proportions lies ahead of us. Have you thought about how a mania might affect you? Not like this, you haven't…
You log on to your brokerage account for the third time that day and see your precious metal portfolio has doubled from last week. Gold and silver stocks have been screaming upward for weeks. Everyone around you is panicking from runaway inflation and desperate to get their hands on any form of gold or silver. It's exhilarating and frightening in the same breath. Welcome to the mania.
Daily gains of 20% in gold and silver producers become common, even expected. Valuations have been thrown out the window – this is no time for models and charts and analysis. It's not greed; it's survival. Get what you can, while you can. Investors clamor to buy any stock with the word “gold” in its title. Fear of being left behind is palpable.
The shares of junior exploration companies have gone ballistic. They double and triple in days, then double and triple again. Many have already risen ten-fold. You have several up 10,000%. No end is in sight. Your portfolio swells bigger every day. Your life is changing right in front of you at warp speed.
Every business program touts the latest hot gold or silver stock. It's all they can talk about. Headlines blare anything about precious metals, no matter how trivial. Weekly news magazines and talk-radio hosts dispense free stock picks. CNBC and Bloomberg battle to be first with the latest news. Each tick in the price of gold and silver flashes on screen, and interruptions offering the latest prediction seem to happen every fifteen minutes. Breathy reporters yell above the noise on the trade floor about insane volume, and computers that can't keep up. Entire programs are devoted to predicting the next winner. You watch to see if some of your stocks are named. You can't help it.
The only thing growing faster than your portfolio is the number of new “gold experts.” It’s a bull market in bull.
You can feel the crazed mass psychology all around you. Your co-workers know you bought gold some time ago and pepper you with questions seemingly every hour, interrupting your work. They ask if you heard about the latest pick from Fox Business. They want to know where you buy gold, who has the best price, and, by the way, how do I know if my gold is real? They all look at you differently now. Women smile at you in the hallway. You worry someone may follow you home.
Your relatives once teased you but now hound you with questions at family get-togethers – what stocks do you own? What's that gold newsletter telling you? Where can I keep my bullion? You don't want to be the life of the party, but they force it – it's all anyone wants to talk about. Your brother tells you he dumped his broker and is trading full-time. Another relative shoves his account statement in front of you and wants advice. You sense someone will ask for a loan. You don't know what to tell people. The attention is discomforting, and you feel the urge to escape.
At first it was exciting, then breathtaking. Now it's scary. You're drowning in obscene profits but are becoming increasingly anxious about how long it can last. Worry replaces excitement. You don't know if you should sell or hold on. Nobody knows what to do. But the next day, your portfolio screams higher and you feel overwhelmed once again.
You grab the local paper and read the town's bullion shop had a break-in last night. They hired a security company and have posted several guards outside and inside the store. Premiums have skyrocketed, but lines still form every day. The proprietor hands out tickets when locals arrive: your number will be called when it's your turn… the wait will be long… please have your order ready… yesterday we ran out of stock at 11am.
You begin to worry about the security of your own stash of bullion – those clever hiding spots don't feel quite as secure as you first thought they'd be. Is the bank safe deposit box really secure? Shouldn't they hire a security guard? Should I move some of it elsewhere? Is there anywhere truly safe? You find yourself checking gun prices online.
And it's all happening because the dollar is crashing and inflation has scourged every part of life. You curse at those who said this couldn't happen and mock past assurances from government. Cash is a hot potato, and spending it before it loses more purchasing power is a daily priority. Everyone is clamoring to get something that can't lose value, but mostly gold and silver.
Your wife calls and says the $100 you gave her that morning isn't enough to buy groceries for dinner. Prices change often on everything. She urges you to get some bread and milk before the stores raises the price again. You suddenly remember you're low on gas and make plans to leave work early to beat others to the filling station. Restaurants and small businesses post prices on a chalkboard and update them throughout the day. Employers scramble to work out an "inflation adjustment" for salaries.
On your way home, the radio broadcaster reports the government has convened an emergency summit of all heads of state. They're working urgently on the problem, and all other agendas have been tabled. Outside experts have been called in. We're going to solve this rampant flood of inflation for the American people, they say. In your gut you know there's nothing they can do.
You change the channel and hear about the spike in arrests of U.S. citizens at the Canadian border. Scads of people are caught trying to sneak bullion and stock certificates out of the country – from airports to rail stations. Violence at borders has escalated, and stories of bloodshed are getting common. The White House ordered heightened security at all U.S. borders, with the media reporting it can take days to cross. Foreign governments offer meaningless help, others mock U.S. leaders for their shortsightedness. Their countries are suffering, too.
You think about the gains in your portfolio and wince at the taxes you'll pay when you sell. Nothing has been indexed to inflation, so everyone has been pushed into higher tax brackets. Citizens are furious with government. Agencies have been swarmed with bitter taxpayers and revolting benefit recipients. One government office was set on fire. A riot erupted in Washington, D.C. last week and martial law was temporarily declared. It's too dangerous to travel anywhere.
As crazy as things are, it's hard not to smile. You're in the middle of a mania. Your life has changed permanently. You're part of the new rich. You can quit work, live off your investments. Your wife is ecstatic, and you both feel as if it’s your second honeymoon. Your kids are amazed and gaze at you with the same awe they did when they were children.
You're thankful you bought gold and silver before the mania, along with precious metal stocks. You daydream of where you might go, what you might buy. New options open up daily. You realize you'll need to meet with your accountant, maybe hire a second one to protect your sudden wealth. You wonder what you'll invest in next. You ponder what charities are worthwhile. Better meet with the attorney to redraft the will.
As night settles and your house quiets, you log on to your brokerage account one last time. Even though you're ready for it, your mouth drops when you see your account balance. It is truly overwhelming. You think of others who own gold and silver stocks and wonder if any have sold yet. Has Doug Casey exited?
You stare at the blinking screen, hand on the mouse, the cursor hovering on the sell button…
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Alarmist
Before (now): get some assets out of the USA, can be perfectly private AND legal if you do it right.
After FINCEN: black markets and renting a yacht and captain for a "fishing trip" to Canada, Mexico or the Bahamas.
Where there is a will there is a way. Saw it in (Communist) Poland in 1984. Have seen it in Peru the last 20 years.
DCRB - Years ago, I was on an island in the Caribbean with friends. The friends knew the island doctor. The doc was an avid sailor and asked us to go out with him. The boat was a beautiful 40' sailing yacht. I asked the doctor where he got the boat.
He answered that - during the 70's, France had currency controls in place. Some french guy was buying boats in France, sailing them away and selling them. People can be so creative when the need arises.
Old joke; frustrated customs agent who's been inspecting a kid on a bicycle crossing with a daily work permit every day from Tijuana into the USA; I give up kid, really I don't care anymore; but what are you really doing? "Smuggling bicycles, Senor"
Too depressing.
Missed adding to AUY by one stinking penny.
Party like its 1999. Doubt it though.
The Administration is destroying the economy. Nothing the Fed can do about that.
This administration has simply put the destruction into overdrive mode. the policies of something for nothing have been building for a crash of some sort since the 1930s. OBamaNomics is the same thing on steroids with some cocain added.
Aug,
Anyone with half a brain HAS got to see this, to not is denial.
This is intentional, it is socialist/marxist to the Nth degree.
Manduca said it, watch the clip( Machlatte posted).......he'd dead on, he's a Brit, he's asking US WTF are you doing?( you IDIOTS!!!!)under his polished U.K. style breath.
THEY see it, some here see it..yet we do nothing!.
Dos,
Well fingers crossed for the results of the first Tuesday after the first Monday in November. It will be a start on doing something.
- Ned
"The Fed is destroying the economy; nothing the Administration can do about that." Both statements are true !!
If you own gold you will maintain purchasing power, if you find a way to transfer gold for the items you need to survive. If the government doesn't change the rules somehow. If you can defend your cache.
Gold is not a way to get rich, it is an intermediate step to preserving your savings. Hopefully.
Yes, those are 2 very important pieces of the puzzle left out of the narrative which presumes that society today will be the same during hyperinflation. Will your accountant still be sitting at his desk and the phone still work and the downtown babes still be wearing those tight dresses and all that jazz? Maybe not.
The downtown babes will be wearing even tighter, smaller dresses in the new ass for gold exchange - the oldest economy.
"Your wife, your Daughter, the little girl -- how much?" -- Jake Blues
How much gold will some parent need to buy insulin for their dying daughter, if no insulin is available? How much silver will it take to buy a five gallon bucket of oatmeal, if no food is being distributed? Remember the gas lines of the seventies? No amount of money could buy gas from a station that was out of gas.
Manduca
http://www.cnbc.com/id/15840232/?video=1603108809&play=1
http://jessescrossroadscafe.blogspot...ecious_30.html
Spalding,
Yes we were discussing this a day or so ago,funny part is the PHYS is the only anomaly in the bunch (that has caught me eye).
Somehow, I do not see Sprott buying more(and he has), if he thought it was hitting the fan.
As I said, THIS time it is different, in any way you cut it.
The most frustrating issue I have, is WHAT are my alternatives?What are yours?.
When it's just one soverign, ok,but globally?.The (for the largest part) whole planet has the same disease.
Just differing stages of it.
To really nutshell it, is watching it, knowing it's being done knowingly is the part that is killer.
and not being able to do much about it...
(requote: "i bailed out *my* part of the Titanic...")
it's the only way America , can be saved, turned around anyway... bring it on. You should write novels, I'll bet most of that story comes true. nice.
Replace 'Gold' with 'Real Estate' and add a bit of civil unrest and you have 2006 all over again.
It will be an ugly world.
PAIN is mandatory in life. Learning is optional.
Simple, fair, boring markets were so beautiful, weren't they? I miss them dearly already!
I think Dr. Paul Craig Roberts' article was much more realistic. (http://www.infowars.com/the-year-america-dissolved/ ) There will be riots, martial law, food rationing, worldwide chaos as the resources to support our troops comes under question. I just hope my PMs are enough to sustain a decent life style. I don't think I'll be getting rich. While PMs may rise 500-1000% adjusted by the cpi, I suspect they will rise -100 to +100% measured against the rise in cost of food and energy. And if it the system doesn't break down at that point, the soon to follow peak oil energy crisis will bring it down.
CPI flat. PMs up 500-1000%. Food and energy up 300-1000%. Everything else down.
please!!!
...and then one day you finally decide to sell all your gold stocks and then...what? You're rich? in what?
if gold ever reached these levels we would not 'sell' for anything, as it would be simply a physical asset with which to barter. you may trade your gold bar for some gold and silver coins, then you may trade one of those coins for a loaf of bread. or you may trade your labor for a silver coin. or you may trade your labor for a loaf of bread.
same as the past 5,000 years, i suppose.
I'm down with the concept of barter and exchange. My point was - how do you turn your mining stock portfolio into something you can buy bread with after the dollar has collapsed?
You can't. If you have gold mining stock, you probably don't even hold the certificates. And you're not betting on total collapse.
Collapse comes and goes - we won't live in "utter chaos" mode for the next ten thousand years... eventually people come to accept the "new normal". And at that time it is safe to buy up towns, cities, and empires and start teaching the humbled population the ways of free-market capitalism (which they have already learned, the hard way); but somebody has to provide the initial wealth, and it's better that YOU provide it than the vault owners of Ft. Knox and NY.
He said "gold stocks", not physical. I'll answer for me in that case.
If I had gold stocks (which I won't because all my wealth will be in physical gold and silver balanced), I'd have fiat money! And that would not be a bad thing since the amount of fiat dollars needed to live in a hyperinflated world would be provided to me by my prescient investment in gold miners. So there you have it. A near valueless dollar would either be needed or not. If so, then I have dollars. If not then the stocks will just have to sit until revalued as needed. The mining company does not lose its in-ground stock, just as my physical gold is not impeded by counter party risk. If one cannot sell or trade his miners he cannot sell or trade his MSFT either.
All true but I would think you'd want to be out of that whole system of brokerage accounts and electronic money well before that point. If we get the kind of hyperinflation illustrated in this post I don't think you can really hope to rely on the mechanisms of financial transactions (or anything else) working very well. We're talking major social unrest among other things.
I'll not be in any sort of stock (have not been in the market since 2001). Provisions will be made at all turning points for methods of getting what one needs. The opportunities for investing will be perilous seas but manageable by those who have wealth to trade for investment vehicles. We will not go from financial boom to Mad Max overnight. Areas of the country will vary according to their resources and the stamina of the people living there. There will not be homogeneity throughout the country, so the smart people will have to prevail either by stealth or knowledge. Having friends with both knowledge (e.g.: gardening) and strength (e.g.: armed) will be the winning strategy.
Hmmmm..... are you talking about the phuture or today.
can you still request stock certificates anymore?? store a few of those of the miners under the gold/silver stash
Your broker can do that, but you'll be charged a fee -- both ways.
The mining stocks may not lose their in-ground stock, the cost to recover that gold will be priced in devalued fiat. Miners may not be an adequate hedge.
Debt slaves work for free, and believe me, there will be lots of slaves digging for gold.
Now it's an investment. When it goes vertical, it's a trade. Do both sides and flip out at the top and ride the 2x down for a nice retirement.
No way it plays out as written but it makes for a good movie.
as long as its a called a mania it's nowhere a mania. when it's called *SAFE AND A GOD-GIVEN RIGHT AND PROMISE* the it's a mania.
http://www.youtube.com/watch?v=tTlSMMhlYdU
.
http://www.youtube.com/watch?v=ghz4_kikLkE
.
America the Beautiful
Words by Katharine Lee Bates,
Melody by Samuel Ward
O beautiful for spacious skies,
For amber waves of grain,
For purple mountain majesties
Above the fruited plain!
America! America!
God shed his grace on thee
And crown thy good with brotherhood
From sea to shining sea!
O beautiful for pilgrim feet
Whose stern impassioned stress
A thoroughfare of freedom beat
Across the wilderness!
America! America!
God mend thine every flaw,
Confirm thy soul in self-control,
Thy liberty in law!
O beautiful for heroes proved
In liberating strife.
Who more than self their country loved
And mercy more than life!
America! America!
May God thy gold refine
Till all success be nobleness
And every gain divine!
O beautiful for patriot dream
That sees beyond the years
Thine alabaster cities gleam
Undimmed by human tears!
America! America!
God shed his grace on thee
And crown thy good with brotherhood
From sea to shining sea!
O beautiful for halcyon skies,
For amber waves of grain,
For purple mountain majesties
Above the enameled plain!
America! America!
God shed his grace on thee
Till souls wax fair as earth and air
And music-hearted sea!
O beautiful for pilgrims feet,
Whose stem impassioned stress
A thoroughfare for freedom beat
Across the wilderness!
America! America!
God shed his grace on thee
Till paths be wrought through
wilds of thought
By pilgrim foot and knee!
O beautiful for glory-tale
Of liberating strife
When once and twice,
for man's avail
Men lavished precious life!
America! America!
God shed his grace on thee
Till selfish gain no longer stain
The banner of the free!
O beautiful for patriot dream
That sees beyond the years
Thine alabaster cities gleam
Undimmed by human tears!
America! America!
God shed his grace on thee
Till nobler men keep once again
Thy whiter jubilee!
.
i guess we will just never know exactly what to make of this?
.
peas
I kinda like the JUBILEE part.
Once I was blind, but now I see. You are not blind my friend...
C'mon Tyler, ZeroHedge is better than this! A more apropos title would be "A Gold Bug's Wet Dream".
The author, in his masturbatory frenzy, misses the obvious point. If we ever reach this point, grocery stores and gas stations will empty overnight. If that happens, you can forget about gold and silver. I don't think a lot of people realize just how precarious the supply line is for food and petrol.
Oh wow! - Will women in the hallway really smile at me?
They didn't in the late 90's and I had loads of tech stocks..... (and I still had hair)
Seriously, the guy in this fantasy will likely be happy because he is one of the few families EATING, not shopping for a yacht.
Trashy gold porn. Didn't teach me jackshit about anything--atypical for ZH.
And I'm saying this as a guy who cashed in his IRA to go 80% in gold coins.
I think some are not getting this article. It is a description of what mania might look like and how it may affect some people.
Not a bad idea to think about this before the whirlpool of confusion and fear starts.
It would appear most readers have completely missed the point of this article. What was that office space game.... Jump.... To conclusions?
Fuckin' ay!
it was a great post, Tyler. the message board lit up. 'nuff said.
No, it's not a great post, and there are plenty of comments on all ZH posts.
If there's a point to this article, it was indeed lost on me, as well as many others. Most ZHers will find this article distasteful as it's devoid of facts, or anything useful for that matter.
Perhaps ZH is targeting a different demographic these days. Terms like "'nuff said" will fit right in.
Think of it as the Dilbert cartoon on the financial page. A bit o' diversion in the plodding mundane landscape. I rather enjoyed it.
exactly, if this write-up was burdened with any facts, then i may have dimissed it as terrible 'research'. however, it is so absurd and full of holes that it is a welcome break from our daily reality. i enjoyed it, too, and am fascinated by the 'hate mail' that ensued as a result of the posting. halarious.
...anyone pouting about this post is taking themselves entirely too seriously, in my opinion.
Spare us the impact of your monicker/affliction.
IOW - Chill out dude...
It's a comic relief thing.
So supply some facts! Most of us do our own research.
wow. that was harsh, but i'll take it. however, i will say that anything that gets this kind of an emotional reaction is good for the gold debate. for that matter, i believe there is still plenty to debate at these prices. are they high? are they low? we'll see.
i respect that you wish to guard the integrity of the incredible ZH resource.
I still think it is a great post, particularly because of your vitriolic comments. 'nuff said. :P
Yes Sir, a wake up call!
Nothing like a gazillion comments on gold posts to amplify it's importance and the fact it's in our DNA...
It seems the point of the article, through hyperbole, is to suggest that gold is not yet in a bubble.
With all due respect, if the class doesn't get it, is it the teachers fault?
TREADING WATER......
Treading water .........
treading water ............
Gulp!
The belief system herein is that the world as we know it is about to change significantly. Depending on the time line...... you understand.
So this is not necessarily about making money anymore. It's about survival. What kind of a shit hole are we in? Who has the flashlight? Can we last long enough to get out? How much was that Rolls Royce yesterday?
"It would appear most readers have completely missed the point of this article."
Does this not tell you something already!? You appear to be concerned about jumping. How many gold coins do you get when you jump the shark?
Give us access to your statcounter.com account so we ca see the net net of all this goldbug-dom.
soon??????
http://www.youtube.com/watch?v=GPYLJoq_40Y&feature=related
"..... we are dumping everything,
bullion, grab what you can!
changin' your tune?
see, you still like me.
;)
Listen Katja,
Money, capital has a life of it's own.
It's a force of nature; like gravity. Like the ocean, which flows where it wants to flow.
We are just going with the tide. The only question is, whether you want it go like an unguided missile and raise hell, or whether you want to keep it in the hands of responsible people.
What the future will hold is such a dramatic sharp burst to astonishing new price levels of several thousands of dollars. This does not even require hyperinflation. It is not likely that the United States would enter a hyperinflation mode. The system would collapse long before that takes place. The much more likely result will be a complete currency default with a replacement of a new currency. This is one way government defaults by using a shell game so that the average person does not understand he was just taken to the cleaners.
- Martin A. Armstrong on Gold
The FED Cannot Keep Stocks Up
What a difference a month makes. As I prepared to begin my Labor Day weekend in late August the financial media was abuzz with predictions of stock market doom. You could barely read anything without being confronted with several references to the dreaded Hindenberg Omen and how the appearance of several of these had all but guaranteed an imminent stock market collapse. There were plenty of reasons to be bearish. The market performed horribly in August and the economy was clearly still in the dumps despite a continued endless propaganda to the contrary. Nevertheless, the constant predictions of doom was indeed a great contrary indicator and barring some monster reversal today we are about to finished the month of September +10% in what is typically the worst month for stocks. It is set to be the best September in 70 years.
The truth of the matter is while the relentlessness and strength of the rally did surprise me a bit the fact that we bounced hard did not. Ironically, the reason I thought this could happen is because I am SO bearish. At the end of the day, if you are coming from the angle that I am you need to assume the stock market is a political tool for those in charge. I have said this time and time again. The manipulators cannot stop the cycles of markets any more than they can the cycles of nature in the end, but in the interim they can create a lot of problems and seriously damage your P&L if you do not know who you are up against. When it is the system itself that is fighting for survival as it is today, the system will fight back with everything it has. People in positions of power in the United States today are much more Machiavellian than most good natured citizens could ever fathom. If you do not wake up to who your leaders really are you will be led to the slaughter with the rest of the sheeple. I want this to happen to as few people as possible. This is the main reason I write.
Ok, so all of this action in the market is ancient history and the bigger question is what happens next? What I find so interesting about sentiment right now is that it has done an complete 180 from just a month ago. Those that have bought significant out of the money protection on stocks are suffering big losses on their insurance due to the rally and the action in the VIX. From a sentiment and positioning standpoint, this was where the pain trade was into September and therefore it has happened. Bears are terrified to short and this notion that the soon to be extinguished Federal Reserve can prop up stocks forever has entered the psychology of investors and traders everywhere. This is DEAD wrong.
What I find so hilarious about the last week or so is the amount of complete garbage that has come out of people’s mouths, which then gets spun by the media and others to justify higher stock prices and keep this ridiculous rally going. I don’t care if someone is worth $100 trillion dollars and made $5 trillion last year, if what comes out of that person’s mouth is Orwellian 1984 style 2+2=5 drivel I don’t simply accept it like some mindless drone. I don’t check my common sense at the door because of someone’s paycheck and neither should you. I also don’t mindlessly worship a billionaire who acts like some dopey/humble grandfather figure in front of the television cameras all the while lecturing us serfs that it was necessary for the government to bail out the elites at the taxpayer expense. The good news for us is that when I watch many of the elites and power players I see fear behind their veneer of arrogant self-righteousness. Their statements while seemingly brimming with confidence are becoming more desperate. They are losing and they know it. The stock market and money printing is all they have left as a tool to keep people asleep and it’s not working. What I find so hilarious is that no one seems to ask themselves why a big money manager might come on CNBC and tell everyone stocks can’t go down. Perhaps in a market with little to no liquidity someone needs liquidity to dump their garbage on some unsuspecting sucker. Based on the volumes in the market I shudder to think what happens if someone actually tries to sell positions in size.
Are We Near a Major Top in Stocks?
I typically do not talk about the broad market in aggregate unless I feel we are at some sort of major turning point. I think we may be at one currently. When you have a stock market up this much on vapors and the belief that the Fed can keep it up you have nothing short of a disaster waiting to happen. Let’s just think about some of the nonsensical logic out there. So people think the Fed can just launch QE2 and push stocks higher. Really? First of all the market just surged 10% this month and is trading at the highest level since May. Food prices are soaring, gold is above $1,300/oz and silver is above $22/oz (gold is at a nominal record and silver is at the highest price in 30 years). Does anyone realize how ridiculous an announcement of QE2 would look in that context? It would probably freak people out and stocks could collapse. Ok, so if I am right and they can’t do QE2 with asset prices at these levels what do you think is going to happen to stocks once people realize QE2 is not about to be launched. Whereas in late August the pain trade was the rally we just had, the pain trade may be an equally powerful although much quicker plunge down to the 1,000 level in the S&P500.
Oil Closing in on $80/b
This is almost a perfect setup for a big selloff in stocks. As I have pointed out for several years now, the broad stock market has never sustainably rallied as oil breaks the $80/b level. We are trading just under that now in WTI, Brent is nearing $82/b and Asia Tapis is above $85/b. What’s worse is that other commodities are way higher today that than they were the last several times oil approached the $80/b mark.
Mortgage Gate
If you are not up to speed on “Mortgage Gate” I recommend you get there and fast. While the whole issue of put-backs to the banks has been in the news for a long time I don’t think too many people appreciate the implications of all of this. What is so interesting to me is that many people seem to think the fraud that happened earlier this decade is behind us and we can just brush it all under the rug like a bad dream. Wrong. This is only NOW starting to really hit a head and for once in my life I am happy that we have an excess supply of lawyers in this country because we need an army to go through all these documents and put people away. If they had succeeded in reflating housing perhaps a lot of this stuff would have just gone away but they didn’t and it hasn’t. Once people find out how much trouble they will be in they will sing to the authorities and rat out those above them. This is going to get really ugly really fast. The best quick summary I have heard on this issue is by Chris Whalen. The interview is here and is a MUST listen.
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/9/24_Chris_Whalen.html
GDX/SPX Trade Should Take Off Shortly
One thing that almost nobody thinks can happen is surging gold share prices amidst a falling equity market. In fact, I see no more attractive trade currently although I do acknowledge that in the initial sell-off (look at today) the gold shares could take it on the chin. Nevertheless, I wouldn’t try to be too cute about timing it since I do not think we will see the 2008 trade again. Like I said, I think gold shares will surge as the stock market languishes. This is because big money will buy physical gold on dips while paper longs panic. I expect this spread to be one of the most powerful trades we may ever see later this year and into 2011.
All the best,
Mike
gold is a physical asset that you may trade for another physical asset, so the only way you would trade if for fiat money is if it (paper money) became more scarce than it is currently. Demand and scarcity would then be reflected in interest rates for those who wish to borrow increasingly scarce fiat. for example, if interest rates become 20%, even if inflation is also at 20%, then I may be tempted to part with my gold in order to get paper money so that i could loan to others for profit. Why? At a practical level, if I am making 20% on my fiat $1,000,000, but only have living expenses of $100,000, then 1 year from now I will have even more fiat money to lend out in order to stay ahead of my increasing living expenses. Even as my living expenses rose to $120,000 next year (with 20% inflation of food and energy costs, for example), then I would still have an additional $80,000 (= $200,000 in interest income - $120,000 in living expenses), so I still have even more fiat to lend out in order to further stay ahead of inflation (and perhaps buy more gold!). This works great until rates drop so low that there is no longer an incentive to lend, then I convert my fiat back to gold.
right now fiat money is not remotely scarce, and food and energy expenses will be going up as a result. so, towards which (more scarce) physical asset should we convert our fiat money?
I don't know, throughout history, gold seems easier to carry around then 50 bags of sugar (although I did just buy a big bag as Costco for $25), especially if i need to move countries.
in fact, my 1-year-old daughter was playing with a gold coin of mine last night. she would not let go of it. I'm pretty sure she was really liking how shiny it is. I thought is was quite telling. I think people will always like shiny stuff, but i cannot be so sure about the green linens.
The paradigm shift will be complete when you realize that it is meaningless to "sell" gold or silver. What can you sell money for?
If you have it in usefully-sized pieces, then when your wife says she can't get the groceries for tonight's dinner for the $100 you gave her -- you will give her fifty cents in silver -- five dimes, preferably -- and you will tell her, quietly, "Use this. Talk to a manager."
mick,
You nailed it, I have thought the same thing a dozen times.
When you have the material things of greatest numerical value ,intrinsic value, what next?.
All I can say is have a plan,be prepared for the long haul,.........have close friends of like mind CLOSE,keep your $$$ to yourself, and have a strategy,and if you cannot get out of CONUS.
If the Nov election is not a major blowout,( Senate & House) at least have a plan,place to be 2-4hrs away from Urban areas.
IMHO,(it's the very least you can do if things do not get somewhat better).
(PS: While on this post, I have been hit 3x's by Anti-Phishing warnings, on the article.When I followed the ISP it was out of Brisbane Australia.)........Just an FYI.
its funny, Mick. gold and silver is not even 'money'. its just a physical asset whose value is determined by the recipient in exchange for their labor or physical asset. If they store manager will not take 5 silver dimes for a bag of groceries, then I offer 6 silver dimes or i go to another store, or more likely a farmers market. eventually, we work out the value of a bag of groceries as it relates to a handful of silver. probably depends on whether or not it is winter or summer, as this could potentially affect the scarcity of what is in the bag.
chopper,
I agree with everything you wrote, except Gld & Slvr is not money.
It is the only real money there is, or ever was.
For 6000yrs it has served as money.
i get you, DosZap, but what is 'money'? gold and silver are non-perishable and easy to transport. each is shiny and, in the case of silver, can be used for industrial purposes. thats good enough for me, i do not care what we call it. you get me?
Back in the day in the Dneiper and Volga valleys when purchasing something you took out your knife and cut an appropriately sized sliver from a bar of silver. The hunk of silver was called a rouble. I wonder if the French word 'argent' had a similar development ?
tyler says----"It would appear most readers have completely missed the point of this article. What was that office space game.... Jump.... To conclusions?"------
Seems to me, Tyler told a story about gold going up and everbody being really excited about being rich and richer the next day. The story ends with great wealth in hand and a finger on the sell button. The only thing Tyler left out is that it was A DARK AND STORMY NIGHT. Which by the way it is, we are in a dark storm and we can not see.
Anyhow, if you could continue Tyler's story, you get to the chapter that tells you that nothing goes up forever on a continual basis. As in, things go up and then go down.
I think he left you in the lurch of what happens after the mega/super run up. You got wealth and then what. What do you got? Reduced wealth as the gold goes down. Maybe like stocks, hold on and they will rebound. Or, dont sell the house until the prices come back. There may be a hint at the reality that thing do not go up forever. However, we may see a primo gold run up for the gold holders.
The point is----- then what? I dont know, I guess I will be up nights watching for any indicators world wide along with some of you. I assume I will sell too soon like I did my stocks. I hope so. The gold down draft will be much faster than the updraft. That is the way markets work. What you gonna do-------- Tyler asks (kinda obliquely).
i disagree. When the government trades you the already printed Red dollars 1 to 100 of the green dollars, the gold will keep its value and very few of us will sell our metal for another paper till the fools and thieves are in jail or hung.
I have two questions / problems with the scenario in this article:
When the guy goes to sell his gold who will buy it and what will he do with the worthless money?
Shouldn't the guy have sold his gold before civil unrest began not after and, if so, what should he have done with the money?
the article clearly is taking place in the usa but what about the rest of the world? in this scenario what would be happening with gold abroad?
Thise are the missing pieces of the puzzle for me
Exactly right. It made no sense in the article that our dear gold investor was going to fuel his car on the way home from work. Firstly there would probably be no gas to buy and more importantly, by the time fiat money implodes to the extend described very few will have jobs at all. Most businesses will stop trading because they will have no customers. This is when everything is for sale because the next purchase of food is a continuous concern. The idea of business being able to continualy adjust wages for inflation is unrealistic. Unless you provide something vital (food, water etc) you will not have a business.
I do think it prudent to have some shiny metal and have been accumulating little by little for two years. But in a hyperinfationary bust I do not expect it to make me `rich`. It might be useful to trade for a tractor or a bore hole though.
I actualy thought the article was going to end with the investor logging on to his account to find, a) that the internet had been shut down, or b) that the governament had appropriated his assets in the name of national security.
Double Post.
Its hard not to wonder how many of these pieces ZH is tossing out there in order to count the naysayers, and how much nay they are saying.
For reference, people out here in flyover land will look at you like you have a paper head if you mumble any nonsense about buying gold. (Gold whats?)
I'm long, but non-plussed about it. Its a Bull Market -- the one time you Really Can buy and hold until (at least until conditions change -- which is nothing odd, really).
Anybody who didn't at least experience the 1996 gold/gold stock mania (let alone the earlier one in 1979/80), really has no benchmark as to how these things go when they get out of hand, and should think twice before they comment about this article. At a minimum, think .com stocks in 1999 and early 2000. If this article seems extreme to you, I really suggest you do some research on past gold manias. And, we're no where near there yet. When everybody in my office is telling me what gold stock I should own, and my previously unemployed friends are hawking stock for fly-by-night brokers, then we're there - thats what 1996 was like.
I STILL get class-action stuff from positions I had during that era. So yeah, I've seen a mania, and I don't doubt that they can occur.
After all, WD and YHOO bought half my house.
I think gold is great. I moved my ass when it was clear that Bear was dead. But I quit dreaming of riches. Bad Karma. That's all. Didn't mean to harsh anyone's mellow.
I didnt think the article was in anyway too extreme. I found it odd though, that in the middle of a story the guy would write something as gay as "Has Doug Casey exited yet?" LOL cmon dude, thats gay. That made me hesitate a bit, and kind of rethink the article a bit, or at least rethink the writer for a second. Id like a writer to be worth my time when I read him. Id like him to be very knowledgeable, and to sort of write in blood, write from life and having thought through something deeply. When he throws a plug in for his company (which I hadnt taken notice of before i.e. who he works for) and he does it in a corny-gay 3rd person/indirect way like that, it allows me to form a border around the reaches of his intelligence, intellectual integrity and seriousness for me--- i.e. it allows me to pigeonhole him ( as a thinking person, I look to categorize ("pigeonhole", if you will) wherever i think its appropriate). He should have just said "Doug Casey has helped me gain a better understanding of the gold market etc etc" I mean that wouldve reflected better on both him and Mr. Casey. The article was cool enough up until then though. And yeah, in no way too extreme really.
From Apmex 09/30
The U.S. Mint announced today that it is significantly raising the premium on all Silver American Eagle coins. Obviously, every dealer will have to increase their premiums on Silver American Eagle coins.
1 oz. 2011 Silver Timber Wolf Coins
Only $1.99 over spot per coin! Any quantity.
This limited mintage coin is the first in the Royal Canadian Mint’s new “Canadian Wildlife Series." Don't miss your chance to own one of these stunning coins at an attractive premium.
Or Purchase 1 oz. 2010 Silver American Eagle Coins
As Low as Only $2.39 over spot per coin!
Correct... and I snapped-up 100 t-wolves. Very nice coin .9999 and un-circulated. I've decided that instead of flying into Philly twice a season for an Eagles home game, this season I'll be padding the kitty.
inflation at the US Mint!!!
If that is not a sign...
that was fun.
<sarcasm> but it'll never happen... </sarcasm>
torn between more of that upward chase, and the mouse on the 'sell' button. hard life, mine.
Just Jules!
http://www.youtube.com/watch?v=Yh-QWKGbm2Q
Well, this reply ended up right where I wanted it...not!
One problem with the article: in the presented scenario not a single person would dream of "selling" or "trading" their bullion. It will be exchanged for only a few necessities, otherwise held to be passed on to children.
May be exchanged for food, healthcare, land/property. Thats about all i can think would make the exchange worthwhile.
Anyone know where Steak is? I want another playlist.
until then I have a song for the fiat currency markets from DJ Gold.
http://www.youtube.com/watch?v=pg0BLZszvHM
ONE MO TIME!
http://williambanzai7.blogspot.com/2010/09/end-one-mo-time.html
What a piece of crap.
This is the best goldbug wet dream ever.
next fib number 1597
Ahhh the Banksters .....
The Banksters get what they deserve. They have their business model and we have ours. Check out this guy who has a business model that (finally) worked for the little guy.
http://patrick.net/forum/?p=25968
Rent vs. Buy??? Patrick.net Good site and a good guy.
banksters giving 0% on money and charging 29%?
if this is not a clear sign of how desperate banks are for cash, then i do not know what is.
when the 29% comes down to 13% for late payments, then i'll stop exchanging my fiat for gold. until then...
I think this post would give a eunuch wood.
In case you forgot, back in 08 - 09 we were all shorting the markets as we knew the jig was up. Then TPTB pulled a rabbit out of their hat and against all common sense pushed markets higher causing us to cover our shorts at a pretty hearty loss.
What makes you think they can't do the same with gold or anything else? I haven't seen anything that would indicate that the corpo-gangsters have lost control, nothing. With a commodity such as gold that cannot be easily audited by any of us, we can only take someone else's word of how much (non-tungsten filled) gold there is above ground. The odds are better in Vegas...
http://www.stungunstopepperspray.com/