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Meet The Latest Gold Bull: David Rosenberg?
We have recently stated that it is our belief that at this point any excess liquidity pumped into the system (see the prior report from Goldman on the debt ceiling, in which the investment bank presents some ideas on how the Treasury (never mind the Fed) can increase liquidity in the market by reducing obligations until such time as (if) the Congress votes to raise the debt cap) will likely go to chase not so much returns in credit or equity markets, but directly to appreciate the price of gold. Reading through Rosie's Breakfast with Dave piece from earlier, leads us to believe that the strategist may have jumped on the dollar bull bandwagon.
Without sharing many thoughts on the topic of Au, Rosenberg throws the cryptic statement "Buy Gold" at the end of page two. The preamble is a discussion on the ongoing deterioration of the dollar:
And portfolios have to be protected against the prospect of a much more pronounced depreciation of the U.S. dollar (and correspondingly, a stronger Canadian dollar) — see the editorial on page 6 of the weekend FT (A Strong U.S. Needs a Weakened Dollar). Also see the commentary on page 9 of Monday’s FT (The Case for a Weaker Dollar).
We do not disagree at all with the assessment that any additional deterioration in the DXY, while beneficial to the stock market on the margin (although several days now a weaker dollar has provided no immediate nitrous boost to the S&P) will see a much more pronounced skew toward gold appreciation than other asset class returns. We hope David will provide more perspectives on his short/mid/long-term view on gold: a topic he has so far not chimed in on extensively.
Other notable points from Rosie's daily recap include the ongoing observations on the market-economy dislocation:
There are some very serious headwinds facing the U.S. economy, and one of them is access to credit for people who are at the lower end of the income spectrum (and who also represent the greatest default risk). A great article on this can be found on the front page of the weekend WSJ (The ‘Democratization of Credit’ Is Over – Now It’s Payback Time). Families at the lower end of the income spectrum spend nearly all of their income, so this is a vital part of the economy and it is going to be very difficult for lower-income families to secure credit going forward. The ratio of credit card debt outstanding to income is 50% higher for the bottom 40% of the income strata than is the case for the upper 40%. The highest default rates are the folks at the bottom of the pay scale. In 2007, fully 35% of poor families had a balance owing on their credit card compared with 21% in 1989. This is the byproduct of government policy inducing lenders to make credit cards available to high-risk, low-income individuals — a reckless policy drive that started in the late 1970s (the policy did help drive homeownership rates up and crime rates down).
Now that lenders have started to respond to their record-high delinquency rates by rationing credit, a mad scramble for cash is occurring to replace the loans — food stamp usage is up 22% year-over-year, pawn shop business is up nearly 40%, and there is a tidal wave of applications for Social Security disability benefits that are not explained alone by workplace mishaps.
In any event, so much effort is being expended by the government to keep the credit cycle going that it isn’t even funny, nor is it useful, anymore. Allowing households to still finance almost 100% of a new house purchase has meant that the FHA default rate for loans made in the last year has surged to 20%; and to 24% for loans made since 2007. Private lenders are now requiring a 20% downpayment, and the credit officers at the FHA only need a 3.5% downpayment. The U.S. taxpayer could be facing up to another $50 billion bailout here. Moreover, the White House plans to induce the banks to modify enough loans to keep 2 million delinquent mortgage borrowers in their homes is proving to be a total flop (see Panel Says Obama Plan Won’t Slow Foreclosures on page B1 of the Saturday NYT) — to the point where Congress is now starting to push the ‘mortgage cramdown’ legislation through — torts, contracts, property rights, we hardly knew ya. Have a look at the article on page 38 of the of the Economist (A New Culture War is Brewing Over Capitalism). Also have a look at Return of the Mortgage Cramdown on page 52 of BusinessWeek.
While the subprime market, first-time home buyers and low-income earners have been and will likely remain the primary targets of government relief efforts, the strains in the housing arena are now most intense at the higher end. According to Zillow, 30% of foreclosures are now concentrated in the top one-third of U.S. home values, nearly double the 16% share when the problems in residential real estate were first coming to the fore three years ago. Prime loans now represent 58% of foreclosure starts, up from 44% a year ago.
Meanwhile, the wave of failed banks continues unabated – we are now up to 98 banks that have failed so far this year. The Sunday NYT ran with an article that half of the $1.8 billion [TD: trillion?]in outstanding commercial real estate loans are sitting on the balance sheets of the small and mid-sized banks. The article cited research by Foresight Analytics who concluded that 581 banks are likely to fail by 2011. As the chart below illustrates, large chunks of the credit market are vanishing. Last week, outstanding bank lending contracted $33 billion, which brings the total decline to nearly $400 billion since the end of May (a 17% plunge at an annual rate). It’s hard to imagine that the economy can gain much traction without recurring government support with the banks calling in their loans at this unprecedented rate. The banks continue to deploy their cash assets into Treasuries/Agencies, having been a net buyer of $30 billion last week and over $50 billion for September as a whole.
Yet this it a topic that has been beaten to death. Going back to our original question, we are curious whether this is i) a fade the gold move, ii) all excess liquidity going to gold, or iii) a precursor ot a currency crisis as the dollar is all but set to plummet to all time lows.
h/t Jullian
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Boo Yah!
Just posted this... largest gold reserves by country. Paulson if he was his own country would now be somewhere just below the top 15 countries in the world with his 9% stake in SPRD GLD etf.
http://www.fundmymutualfund.com/2009/10/largest-gold-reserves-by-country...
What I also listed was what % of foreign reserves each country has in gold; huge weightings in Europe, not so much in Asia.
What's your opinion on whether or not these etf's actually have the gold they claim?
They don't. It's mathematically impossible. Those who think they hold physical bullion because they invested their fiat into GLD or SLV are going to be pretty sore assholes when they get paid back out in the same worthless fiat they paid in. Douches. Serves you right for not listening to those much smarter than you.
I am Chumbawamba.
nothing to add....
the uk treasury is completely broke of all gold
except for perhaps a few coin gold bricks which
the usa sent to them in the 1960s via the london
gold pool....even that is now gone as of september
when lbma failed to deliver on some huge gold
deliveries....
i guarantee you that the usa treasury does not
have nearly as much gold as it claims....it is
quite doubtful that any gold remains in the in
the treasury...
i will state that we are in severe and permanent
gold backwardation....comex is going directly to
the mines to find gold.....it is not available....
abandon hope all ye who have no gold....
If gold becomes totally scarce, do you think that silver and other PM will take on more of the "inherent value" that gold enjoys?
I don't mean that they will become as valuable as gold, just that they'll take on more respect as "real money" like gold has. I ask because silver bullion seems like less of a sure thing to me than gold right now.
as antal fekete says gold is money in the large
while silver is money in the small....
the gold silver ratio fluctuates quite a bit but
silver actually has more upside potential....
but once the full effects of gold and silver
backwardation are felt all valuation will be
in terms of gold and silver....silver will hold
its own...
Chet, yes.
In my opinion (take it for what it's worth) silver will outperform gold, as it has much more headroom and is currently way undervalued (in my aforementioned opinion). That's not to say gold will not soar itself--it most certainly will. But silver will do 10X what gold does.
Silver is an investment, as well as money.
Gold is money, and a long term store of wealth.
If you want any, get it now. Order online if you must, or find a local dealer that can hand you physical for your phiat.
Do not delay.
I am Chumbawamba.
Thanks dudes. I'm finally at that point.
I can still find gold and silver at a local dealer here. As of last week anyway. Maybe the gold's gone now.
Yeah, that billionaire Paulson guy who cashed in shorting MBS is REALLY STOOPID!
DO NOT buy GLD as their gold reserves ARE NOT insured and, furthermore, the counterparties they entrust with their gold holdings ARE NOT regularly independently audited. In addition, these counterparties have risk plusthey could be loaning the gold they hold and thus adding more 'paper gold' into the marketplace. READ THE GLD disclaimers and decide if this is the counterparty risk you choose to invest in. Physical gold holding has zero counterparty risk.
Disclaimer: i am not a precious metals dealer nor hold any GLD stock. Recently GLD's largest holder sold their shares and purchased physical gold.
Do you think Greenspan, an on-again/off-again/back-on-again gold bug, had something to do with that?
http://nymag.com/daily/intel/2008/01/john_paulson_aquires_an_alan_g.html
totally off topic but Richard Belzer (law and order guy?) on Maher claims JFK was shot because he was working against Federal Reserve.
1 minute video
http://www.youtube.com/watch?v=wcgCqpRaoiw&feature=player_embedded
Does Ron Paul have a security detail? Would some of the Chiefs at ZH please suggest he get one.
Those in the "tinfoil" aka "paranoid ZH-reading conspiracy nutjob" aka "precious metal devotee" group have never quite dismissed the link between Presidents who have signed acts abolishing the Fed, and their untimely demises shortly thereafter.
FWIW, Soros has been buying gold mining companies (and obviously giving a requiem for the dollar and this 'recovery' - certainly not talking his book now...). As much as I despise the man, I wouldn't invest on the opposite side of his trades.
At this point the only nutjobs are the "dollar-bugs"/"dollar devotees".
BTW, who in their right minds would want to take the opposite side of BOTH Soros AND John Paulson's trade?
GG, most likely the same nut jobs who line up outside of W.L. Ross's office to do some transfer of risk off of Ross's book business.
Yeah, I forgot Robert Prechter is taking the opposite side of those two gentlemen's trades...ROTFLMFAO! Jesus man...how stupid do you have to be? No wonder the guy is selling subscriptions to a "letter"...
HA! Never ceases to amaze me how many folks never heard the "listen to the facts of life" conversation.
Who the fuck holds dollars? Only an idiot, I say. A stupid idiot. A moronically stupid idiot. A moronically stupid idiot who is dumb.
I am Chumbawamba.
there is no reason to insult stupid people by
equating them to gold bashers...
Me! Because my mortgage is in dollars, and my taxes are paid in dollars. My store of FRNs and mortgage together are "hedged." If the dollar craters, my FRNs become less valuable but my mortgage will (hopefully) become proportionately affordable. If the deflation theory is right, I'll still be able to make my mortgage payment while your gold becomes less valuable. So--while you are likely correct that the dollar will melt down, I'll hold onto a year's worth of FRNs anyway. It's about survival, not making money, at this point. However, I do plan on putting future savings half into FRNs and half into silver.
I won't even typographically laugh at you as I don't have the time or patience to write as many "HAs" as it will take to adequately express my increduility of your statement.
Suffice it to say that you have not thought this out very thoroughly.
Good luck with your paper. You'll still be able to use it as kindling and, if things get really desperate, an asshole cleaner.
I am Chumbawamba.
Since you brought up the Maher fellow...my favorite New Rules segment:
http://www.hbo.com/billmaher/new_rules/20090529.html
In the upcoming sequel to "Wall Street," "Wall Street 2: In Search of Curly's Gold Card," Gordon Gekko must say, "On second thought, greed isn't good." In fact, it's the common thread that runs through all of the problems this country faces, from financial meltdown, to health care, to climate change. Americans will do anything to each other for money.
Now, last week, we found out that American personnel in Iraq are being electrocuted in the shower because shoddy electrical work is cheaper. How can one American kill another American to save a little money on wire? Oh, I forgot, I'm sorry. We're the greatest people in the world. Politicians always tell us we are, and that's how you know it's a lie.
Now, here in L.A., we've been having a little problem lately with hospitals dumping patients who don't have coverage on the street, on Skid Row. Who acts like this?
Because we're not a good people. We mustn't be if prison population is any indication. We put more of our fellow citizens in prison than anywhere else in the world. Five times the rate of tolerant, benevolent China. Because jailing people, like people's health, also turned out to be, really, when you think about it, a for-profit industry.
We do it all to each other, the killing and the keeping people sick and poor and in jail, and destroying their habitat.
Humans have always been greedy, but they never convinced themselves it was good.
To add to that, 24% of FHA loans originated since 2007 are delinquent (this despite growing issuance which raises the denominator).
Anyone who originates loans where 24% of the borrowers are delinquent is immoral.
The government is encouraging this program.
Thus, our government is immoral.
Steak, wherever there is a crossroads of commerce we will likely find an American squid there somewhere.
"...here in L.A., we've been having a little problem lately with hospitals dumping patients who don't have coverage on the street, on Skid Row. Who acts like this?"
Well, in China, if you're hurt on a Sunday you can get dumped on the street if you don't have cash. Proof of company medical insurance (on Monday) or credit card are NOT sufficient.
You sound like a pretty provincial person?
Have you considered getting a clearer picture of the world before deciding what the Big Problems are?
What else is new?
would love for ZH to dig into this rumor some more.
http://www.libertygrotto.com/blog/?p=1560
Project Mayhem has hinted at that sort of thing happening.
It is totally plausible it happened - it would be a good way to get your hands on some physical gold.
Interesting, but if it were true wouldn't we be hearing that JPM has suddenly ceased selling gold futures? Why would they just set themselves up again? Why would the CBs allow them to?
Simply because there is paper in them thar hills.
I'll take dollar plummet to hell for $1000 Alex.
Ding! It is the Daily Double.
FINALLY, someone gets it.
http://www.marketwatch.com/story/dollar-ticks-higher-vs-yen-but-slips-vs...
"The U.S. dollar slumped to a new 14-month low versus major counterparts on Tuesday as investors favored gold, often viewed as the most stable currency..."
That is CORRECT, gold is a currency. In fact, it is the only true money.
(ahem) and Silver.
And corn. And pussy. And cock (to desperate ladies). And anything else that can be traded for something else.
I am Chumbawamba.
(ahem) and Silver.
And then some. Looks like people are finally catching on. Perhaps David needs to take a look at this:
http://www.zerohedge.com/article/gold-whats-next-0
Will Paulson start printing his own currency? er, probably not.
Can't wait til Obama confiscates the US gold.
Gold, bitches.
I am Chumbawamba.
Keep those anal beads out of your mouth. The cerebral bacterial infection from fecal ingestion can cause illusions that gold has value beyond $250/oz.
gold's value is steady....the fiat has severe
difficulty holding its value just as a 90 year
old man may have difficulty remaining continent
and thus have a severe and on-going need for depends....
that dear bubba is where the fecal matter rests...
look in your own shorts to find odor....
let's see, 1050 +/- vs 250...hmmmm....not only
incontinence but alzheimers as well....
anyone care to see a dollar depreciation vs gold
chart since 2001?
keep a roll of frn handy to wipe your ass....
I will have to assume you speak only from experience as evidence of cerebral bacterial infection is endemic in your silly writings.
I am Chumbawamba.
Oh don't even get me started. ZH is turning into Goldbug central.
"i) a fade the gold move,
ii) all excess liquidity going to gold, or
iii) a precursor to a currency crisis as the dollar is all but set to plummet to all time lows."
Fade the gold move. Where was DXY during the boom of 2006-2007? .70 Who cares if DXY falls back to that level or even .65.
Why buy gold, why not short DXY like the rest of the smart people? Seems like the most desperate gold bugs really chat up these gold stories. Hey Gekko(smile, wave).
"Why buy gold, why not short DXY like the rest of the smart people?"
Yup, that's really smart...trading one toilet paper fiat for another. It's funny how people like you have been saying "fade Gold" since it was $800 at the beginning of the year AND HAVE STILL NOT SHUT UP.
These are douchebags that just don't get it. When they have to go out and pan a tenth of a gram of gold for their daily bread then it'll finally make sense.
I am Chumbawamba.
With non-GMO corn yields averaging 200 bu/acre Mr T says "I pitty the fool who does not to buy up foreclosed acreage."
Inflation will make it all very attractive.
sure shorting dollars will provide a profit but
then that profit won't be worth too much...especially
now that gold is in permanent backwardation....
gold had been the life support of the fiat...
and it's gone...
wave buhbye as your punctured hot air balloon
races all over the sky to crash in some deep
canyon to meet wylie e. coyote...
oh boy, prepare to catch holy Hell, anon.
<ducking>
How come gold bashers almost always turn up as "anonymous"?
Because they are punk-ass bitch cowards. Or people who work for the banksters. But I repeat myself.
I WILL NOT OBEY, BITCHES.
I am Chumbawamba.
Said it before, say it again, long term gold bull, short term (next six months) very bearish. Too crowded of a trade and absent an near term complete dollar collapse, which I highly doubt, personally don't see much upside.
I won't be surprised when you say the same thing again at $1500.
let him prattle on....there is no need for another
competitor for gold when it is already in severe
backwardation....
the deceit of the comex market gives an illusion
of contango but that illusion has now been totally
shattered with a failed lbma delivery....
Yeah, what's the time frame? Even Marc Faber is expecting a 20% or so correction.
Latest by Spring next year. Just 20%? Why not make it 50% while you're at it.
I have not had the pleasure of using gold as currency- apparently many of you have used it for currency.
I have always used physical gold as collateral for bank loans. I have spent many years looking for jobs because I could not keep my mouth shut at work. Each time I needed money, I took gold to the banker. It was easy and they liked it. The gold was doing me no good sitting in the safe deposit box.
I cannot for my life understand how gold can be thought of as money. If the dollar is worth nothing, then why would someone accept dollars for gold? I can see diamonds or art being traded for gold but, currency?
Think this through: what do bullion dealers do with the paper money they get in exchange for their gold? There must be a reason. Come on, rub two of them brain cells together and get a spark!
I am Chumbawamba.
In exchange for what gold?
The thought of the US government converting to a gold standard or allowing gold to be used in commerce is laughable.
If they ever ditch the US Dollar the replacement currency will not be tangible. There will be an underlying currency index for exchange, but the physical dollar bills and coins will be replaced with a credit card similar the modern day foods stamp redemption. Your credit card is tied directly to your bank account.
this is correct and the mark of the beast...
buy gold to evade the anti-christ....
Pretty neat how gold moves right back up to it's intra-day highs after the NY bullion banks have finished their naked short selling.
Another small bear raid on Gold a few minutes ago.
Can't have gold up when equities are down now can we?
I think I will sell my Gold and foriegn stock holdings and put them in massively over-valued US stocks denominated in a soon to implode currency..... NOT!
Agreed. US stock market is probably THE worst place to put your money in the entire universe right now. Might as well withdraw all your cash from the bank and set fire to it.
+10
+100 .Couldn't agree more.
Someone is battling for the dollar's life at .76 on the DXY. Pure comedy.
If not today, surely by tomorrow, or the end of the week at the latest, the dollar will close below .76, then it's off to .72 and gold is off to $1,200/Toz.
I am Chumbawamba.
Sell stocks and US$, buy gold.
74 usd for a barrel of oil with so much oil alleged to be sitting in tankers and other storage....sounds like the usd might be having trouble holding its value....
Nothwitstanding gold's bright long term future, I'm guessing that gold might be due for a short term reprieve. Now I know that is blasphemy around these parts, but oil creeping up has me a bit cautious on gold short term. Yeah I know, gold isn't directly correlated with oil, blah blah blah, but the O Team can't have oil go much higher or Joe Six pack might start robbing gas stations more frequently. It stands to reason in my mind that if DXY went down to 72 in the next few months, oil would likely be at $100, which the O Team just wouldn't allow in our "free" markets. Just a thought.
Yeah, now is the perfect time to go long gold. It's not a crowded trade at all. You freaks are gonna get crushed.
If anyone is interested in some positive new about the USD. I've heard they are going to start printing it on two-ply paper!