The Next Bubble: Gold
Who would have thought that central bankers who have been offloading gold the last 10 years would suddenly reverse course and become buyers? Hey, can't blame these guys. They are into self preservation just like any other Fidelity, Putnam, or Vanguard "Money Mangler" on Wall Street attempting to save his career and avoid becoming an unemployment statistic or worse, pushed off the social register.
Let's look at what happened last week: New highs on Royal Gold:
Remember this up and coming hooker I mentioned a few weeks ago?
Now look...
Next up: Rangold Resources, Newmont Mining, Anglo Gold
Anyway, I just found it interesting that gold refused to pull back despite:
- The the onset of a correction in the CRB Index
- The recent massive volume accumulation in UUP with a rise in the dollar
- A record number of jawboning and pie-holing by Fed Heads and Treasury Department officials threatening an end to QE programs
And the rise in gold in some other currencies:
Hey, there's always a bubble out there somewhere... Might as well get it while the getting is good...
(6 votes)
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on Sat, 11/07/2009 - 14:45
#123542
And the latest from Rasputin, with some annotation...
........................................
Sober, rational analysis of the economic situation and the "Gold Bubble".
Rasputin - Sat, Nov 7, 2009 - 07:08 AM
All hysteria regarding the supposed "Gold Bubble" aside, please allow me to take this opportunity to present a sober, rational (and lengthy) case for why central bankers and other prudent people are piling into PMs.
Firstly, it has been approximately two full years since the "Ponzi Pyramid of Debt and Derivatives Death" began to implode. It started with the the marginal homedebtor defaults in the fall of 2007, and has subsequently cascaded through the entire financial system, collapsing the following gigantic entities:
1. Countrywide Financial
2. Bear Stearns
3. Fannie, Freddie, FHLBs
4. Merrill Lynch
5. Goldman, Morgan Stanley (who had to be converted to "commercial banks" in a rush 24-hour period)
6. Citi and BofA
7. AIG
8. GM, Chrysler
9. Other banks, pension funds, the entire money market space and additional financial gamblers too numerous to list here.
10. Actual states, with California being the poster child.
In the interim time since the collapse of Bear Stearns in March of 2008, the Fed and Uncle Sugar have jumped in with both feet and have gone on the most massive fiatsco-flinging campaign in the history of mankind. Monetizations, nationalizations, backstops, loans, direct buy-ins, "stress tests", stimulus packages, extensions of unemployment benefits, "Cash for Clunkers", $8,000 fiatsco-bribes-for-homedebtors...you name it, they've done it.
And Europe and Asia have gone on similar campaigns to fight the worldwide economic collapse, with the central banks and governments of the world flinging a total of:
TWENTY TRILLION FIATSCOS
...at the failed financial gamblers.
And an extremely important issue of the Fed's efforts has been their gargantuan implementation of the "Alphabet Soup" programs, which include:
1. AMLF
2. CPFF
3. Interest on Reserves
4. MMIFF
5. PDCF
6. TAF
7. TALF
8. TARP
9. TSLF
...and of course the creation of various "Maiden Lanes" to literally take over Bear Stearns and AIG, paying off counterparties to these failed financial gamblers at 100%.
As part of the myriad programs outlined above, the Fed is now the "proud owner" of the following "collateral" now "backing" the U.S. Nightcrawler:
Cabela’s Credit Card Master Note Trust
CarMax Auto Owner Trust 2009-1
Chase Issuance Trust
Citibank Credit Card Issuance Trust
CNH Equipment Trust 2009-B
Ford Credit Auto Owner Trust
GE Capital Credit Card Master Note Trust
Harley-Davidson Motorcycle Trust 2009-1
Honda Auto Receivables 2009-2 Owner Trust
Huntington Auto Trust 2009-1
MMCA Auto Owner Trust 2009-A
Nissan Auto Receivables 2009-A Owner Trust
SLM Private Education Loan Trust 2009-B
Small Business Administration Participation Certificates
Volkswagen Auto Lease Trust 2009-A
World Financial Network Credit Card Master Note Trust
World Omni Auto Receivables Trust 2009-A
In addition to the above list of trash, the Fed has also taken in unknown quantities of EVEN MORE useless gunk in the from of Wall Street-supplied MBS, CDOs/Squareds/Cubeds.
RobotTrader addition: Don't forget the next round of trash to be heaped upon the Fed Balance Sheet in the coming months:
Allergan Botox Injections Receivables Trust
Lap-Band Financing Master Note Trust
Beverly Hills Plastic Surgery 2009 Owner Trust (Series C and D)
Invisalign Grille Straightener Receivables Master Trust
Best Buy Plasma Entertainment Certificates Trust
Medicare Scooter Receivables Trust
And let us not forget that the Fed is also sopping up Agencies like there is no tomorrow, having purchased approximately $700 billion fiatscos worth so far, of a promised $1.5 trillion or so.
Then there is the $300 billion fiatscos of Uncle Sugar's debt outright that the Fed has swallowed.
Finally, there is the dropping of "Free Market Fed Funds Overnight Rates" to near-zero and keeping them there.
Whew! That's a lot of action in such a short time.
And the result of all of this flinging on the part of Uncle Sugar and the Fed?
Well, the banking system is STILL crippled. The banks are lending very little to the lambs, instead preferring to simply sit on their reserves and collect the .25% annual interest from the Fed.
The residential McMansion market is still in collapse mode, with Fannie and Freddie still showing losses one year after Uncle Sugar took them over and seven months after the Fed started sucking up their MBS and debt. In fact, the McMortgage market is so horrid that BOTH Fannie and Freddie have resorted to converting McLoans to McRental agreements in a desperate attempt to keep the deadbeat, dirtball homedebtors in the rotting McBoxes.
Commercial real estate is no better, with thousands of unfinished strip malls and "see-through" office buildings dragging down the regional banks that piled into these speculative endeavors because the developers are failing and defaulting left and right.
Referring back to the above-listed toxic, horrid trash that the Fed has taken on its balance sheet, the deadbeats that owe these credit card, Harley Hog, student loans and other debts are defaulting in record numbers, as unemployment has now reached:
Sixteen million people
...and rising.
Which means they won't be making the payments on the "assets" that back the U.S. nightcrawler. It's as simple as that.
But that's not even the worst part. The junk that the Fed took on its balance sheet from the failed financial gamblers is in even MORE pathetic shape and there is NO CHANCE that a good portion of the ABS/MBS/CDO/CDO-Squareds/Cubeds that the now owns (and won't disclose, even to Congress nor under FOIA suits) will ever cash flow.
(Ras Conclusion): Despite two full years of unprecedented action by The Fed, Uncle Sugar, and other central banks and governments, the financial system is still crippled. This is why we have witnessed the CONTINUED monetizations and ZIRP action on the part of the major CBs, worldwide.
And with world trade having collapsed approximately thirty-percent in the last year, the situation isn't getting better, but rather worse.
Finally, the single most important stastic--U.S. Consumer Debt--is actually FALLING, not rising, which means that our economy, which is seventy-percent consumer-based, is actually shrinking.
Which means that the "Ponzi Pyramid of Debt and Derivatives Death" continues to implode.
So, it is little wonder that China, India, and now Sri Lanka--as well as other central banks and prudent people looking to preserve their wealth--are scrambling into buggy whips.
Because these central banks and governments aren't going to stop their fiatsco-flinging campaigns, despite the fact that, so far, their efforts have only mitigated the "Great Disintegration I" that has been ongoing for over two years now.
And the Fed will NEVER be able to unwind the majority of the trash they have taken on their balance sheet--unless they can somehow pass it on to either Uncle Sugar (translation: the taxpayer) or foist it off on the money market funds (as they have been floating trial balloons to that effect lately).
So, at this point I have concluded that useless, barbarous, relics are not in a "bubble", but rather the fiat prices are merely reflecting the growing loss of faith in the fiat system.
And this trend looks to continue for some time, until either "Great Disintegration I" finishes playing out, or the governments and central banks manage to pull off "Weimar Meets Zimbabwe", which is what they are now undertaking.
on Sat, 11/07/2009 - 15:55
#123572
Robot-
I was going to give you a "thank you" and nice call nod on IAG. What do think from here? Pretty nice gain already. Anyway, thanks.
on Sat, 11/07/2009 - 16:35
#123596
Yo Rasputin, the Fed is going to cut their slosh to the US Treasury to 0 from 30+ Billion a year the moment they start realizing losses. Might take a few years to take care of those MBS losses.
on Sat, 11/07/2009 - 15:19
#123559
Shouldn't "deadbeat, dirtball homedebtors" really be "McDebtors"?
Any particular miners you would recommend, or perhaps an index fund?
on Sun, 11/08/2009 - 19:14
#124132
http://www.perthmint.com.au/investment.aspx
on Sat, 11/07/2009 - 15:24
#123565
great post robo and golf clap to rasputin.
question: rasp quotes 700 billion of agency purchases, I thought it was closer to 950-975 billion. anybody know for sure? thanks.
on Sat, 11/07/2009 - 16:41
#123601
deadhead, Nov 5, 2009, FRB MBS 774 Billion, agencies, 146 Billion,
http://www.federalreserve.gov/releases/h41/Current/
on Sun, 11/08/2009 - 09:45
#123847
thanks very much unemployed! i had that 900+billion number in my head, guess it's the total of the 2. I appreciate it.
on Sat, 11/07/2009 - 15:54
#123571
Excellent robo, as always.
on Sat, 11/07/2009 - 15:59
#123576
What is going on with UUP? Is the Fed going to try something to shore up the dollar?
on Sat, 11/07/2009 - 16:14
#123584
Here is the last that I read on UUP. Make of it what you will.
on Sat, 11/07/2009 - 17:41
#123625
The purchase of a large call option position suggests this is a correlation trade - an option on a currency basket has a large currency correlation risk, especially if there isn't the liquidity in the underlying UUP to manage the delta. I don't read it as being bullish USD, but I could be wrong...
on Sat, 11/07/2009 - 16:14
#123582
What is going on with UUP?Is the Fed plotting some sort of maneuver to prop up the prop prop up the dollar?
on Sat, 11/07/2009 - 16:14
#123583
You can leave your hat on.....
Baby, take off your coat...(real slow)
Baby, take off your shoes...(here, I'll take your shoes)
Baby, take off your dress
Yes, yes, yes
You can leave your hat on
You can leave your hat on
You can leave your hat on
Go on over there and turn on the light...no, all the lights
Now come back here and stand on this chair...that's right
Raise your arms up in to the air...shake 'em
You give me a reason to live
You give me a reason to live
You give me a reason to live
Suspicious minds are talking
They're tryin to tear us apart
They don't believe in this love of mine
They don't know what love is
They don't know what love is
They don't know what love is
They don't know what love is
I know what love is
Courtesy: Randy Newman
on Sat, 11/07/2009 - 18:07
#123633
OK, I like Randy Newman as much as the next guy, but I just can't be mellow with my blood boiling like it is. (excitement, rage, anticipation...)
Newman mellow is for when I'm at hearth & home after the apocalyp$e is about through.
For now this sister is all twisted up:
we've got the right to choose it
there ain't no way we'll lose it
this is our life, this is our song
we'll fight the powers that be just
don't pick our destiny 'cause
you don't know us, you don't belong
oh we're not gonna take it
no, we ain't gonna take it
we're not gonna take it anymore
oh you're so condescending
your gall is never ending
we don't want nothin', not a thing from you
your life is trite and jaded
boring and confiscated
if that's your best, your best won't do
we're right/yeah
we're free/yeah
we'll fight/yeah
you'll see/yeah
we're not gonna take it
no, we ain't gonna take it
we're not gonna take it anymore
on Sat, 11/07/2009 - 16:25
#123589
Follow the money; anyone with half a brain knows the FED plans are failing & continue to fail. Once the general public realizes these plans are not working, recriminations will begin as "elected" officials are forced to take action against their enablers. The one thing the FED can't control is inflation expectations which are rising with the liquidity bubble. The FED is shit outta luck. Charts show nice uptrends or breakouts from consolidation patterns. Bullish.
on Sat, 11/07/2009 - 16:34
#123595
i still say that the bb reappointment is not a done deal.
the obamas are feeling intense heat on unemployment/banks/wall street.
on Sat, 11/07/2009 - 17:46
#123627
I agree DH; bernanke is expendable. If required, they just make him the scapegoat as the politicos save their own skins in the "clean up" crusade. The choice is an easy one for any elected official. bernanke's Achilles heal is inflation expectations and there anchoring. All his models and jawboning can't shift human perceptions about an impending Zimbabwe scenario. The emphasis on inflation in the latest FOMC minutes show their fears on this subject. Solution, target their fears and start increasing expectations by a rising investor gold demand & price. The squeezing vice the FED can't escape. The harder they pump liquidity, the harder the vice squeezes against them. Action/reaction.
on Sun, 11/08/2009 - 09:49
#123849
well said lion....
i would add that i still think we'll see the play where in order to contact yields, they will have to prop the dollar for a time being and scare money back in to treasuries. at least is a potentiality.
or, geopolitical events could do it for them.
on Sat, 11/07/2009 - 16:36
#123599
The fed is destroying the dollar every day. IAG has been so strong. Of course the physical gold is much better than shares in a company, but for those that can't get the gold, shares in IAG seems pretty good.
This gold comes with benefits:
http://www.youtube.com/watch?v=_DC00rqya-4
on Sat, 11/07/2009 - 16:47
#123603
RT, that's the good news, on with the bad stuff. Where to hide, ....
on Sat, 11/07/2009 - 22:52
#123726
"Where to hide..."
Due to the new refrigeration reclamtion laws to take effect at the end of the year, this might be a safe hideout....
HDSN
http://www.google.com/finance?q=hdsn
on Sat, 11/07/2009 - 17:44
#123626
This is the honeymoon period for buying gold (silver, plat, pall...)
I usually read Robo for the news on what the pirranhas are up to. Sounds to me from this report like the flesh in the water is getting a bit thin, now that the 'second/third world' central banks are beginning to exit.
When the OECD governments and Wallsters stop ignoring/denying and start participating, the fan will really hit the shit...they'll be thinking of ways to derivativise gold, securitise it, store it 'for you', trying to get it out of the hands of the peasantry and into their own underground vaults. The 'we'll buy your gold' ads are small potatoes to the scams that are to come when the stampede out of fiat gets to the 'momentum' stage. We'll hear no end of MSM chatter about the sudden turnaround by the pirranhas and all the ways they'll be 'helping' us the peasants, with whatever gold we've managed to accumulate now during these 'under-the-radar' days.
Gonna buy two exotic angel fish for my big home fishtank (when I get one, a year or so from now) and will name one 'Robotrade' and the other one 'Rasputin'.
on Sat, 11/07/2009 - 18:31
#123644
"they'll be thinking of ways to derivativise gold, securitise it, store it 'for you', trying to get it out of the hands of the peasantry and into their own underground vaults."???
A gold future is a derivative. It is a paper contract that bets on price movement. Read up on the ongoing fraud at the COMEX, the ETFs (managed by JP and GS), and pool accounts. Read articles by Rob Kirby regarding tungsten filled gold bars, and strangeness in the published list of GLD bars held in storage by JP Morgan. Or how about the class action law suit filed against Morgan Stanley for charging its clients insurance and storage fees on gold bars that didn't exist...but that the clients paid for!!! http://news.silverseek.com/TedButler/1193161018.php
The time for those shenanigans were the Clinton/Rubin "strong dollar policy" gimmicks, its what kept the price of gold low all these years. Buy physical.
on Sat, 11/07/2009 - 17:47
#123628
Good job. My worry with the gold was that the other metals are kinda lagging, but that does not seem to matter here...
on Sat, 11/07/2009 - 21:35
#123701
I have felt and read that also as the sun comes up every day. More firms are stabilized and waiting for the hocus pocus from the potus to appear IMO. I think the Consumer may have another idea as they awake to a resolve yet to be seen IMO. Long time to spring to fester some attitude but really no matter what we say or them in the spectrum more are penting up a long term change in habits as we know...
anom at work...
on Sun, 11/08/2009 - 18:14
#124097
Andy,
that either gold or silver lack a bit has happened before.
Look at http://www.stockcharts.com/charts/performance/perf.html?$gold,$silver and play with the slider.
But something in the market action feels different then before, hard to tell why exactly. Silver has an unusually wide trend-channel. The trend seems to be up for now but I am not sure what to make out of it.
on Sat, 11/07/2009 - 18:34
#123645
'Abandon hope all ye who enter here'.
You're at the gates of hell. What do you do? Do you abandon hope, or buy gold? Will gold help you in hell?
Buy some arable land on it's own aquifer in the southern hemisphere. Live long, and prosper.
on Sat, 11/07/2009 - 20:32
#123682
hmm... no thanks. i'll buy some jesus christ first, thank you.
on Sat, 11/07/2009 - 18:36
#123646
How can all the Banksters buy gold at the same time? Not enough of it to go round.
RE
on Sat, 11/07/2009 - 19:20
#123661
Just think, if gold went to about $6 or $7K the feds books would be about balanced!!
on Sat, 11/07/2009 - 19:44
#123669
Don't think Gold is going down in a big splash given the backdrop of fears of CBs money printing which will go on until the bond market starts to rebel, which is not apparent for the next 3 months. So Gold will at worst go sideways or slowly deflate for the coming months as the CBs start to "talk" (not "act") responsible.
After that period, it will be a toss between which happens first - a) the next major banks fail first, or b) the bond market collapses first.
My bet is bond market kaput first as Treasuries issuance schedule is relentless as US tax receipts plunge deeper in 2010. Bond market collapse will quickly be followed by a series of second tier banks fail, followed by a hyper-Lehmanesque failure (those trillions of interest rates swaps in the off-balance sheets of your favorite TBTF banks would receive due respect finally). So gold would deflate downwards as CBs are forced to raise rates and Roubini claims victory, then major bank failures in late 2010 or 2011 and Jim Rogers gets his $2000/oz gold. Both gold bulls and bears will have their day in the sun. QED.
on Sat, 11/07/2009 - 20:30
#123680
Very plausible, folks should have been worried about the central bank printing when the money was feeding into the economy at 10X. At this point, money is being destroyed faster than it is being printed. The bond market will probably be the key. Higher rates will not be favorable for gold so gold will need a financial crises to propel it higher.
on Sat, 11/07/2009 - 21:27
#123695
HOWEVER WHEN ALL THE FINANCIAL DUST SETTLES AND THE SIZE OF THE MOUNTAIN IS REDUCED 90%, GOLD AND SILVER WILL HAVE REMAINED ON TOP, THUS TRUMPING ALL OF MANKIND'S VAIN IMAGINATIONS.
"MONEY IS THE GOD OF THIS WORLD AND ROTHSCHILD IS HIS PROPHET"
BENJAMIN DISRAELI
on Sat, 11/07/2009 - 20:35
#123679
Here is some gnus on what the approaching run to gold might look like.
http://www.youtube.com/watch?v=fjDqSyDHcJo
on Sat, 11/07/2009 - 20:43
#123686
In the 1980's and '90's ABX, and other major gold corps, applied Black Scholes model to leverage their gold production (a little like oil drilling double reverse options), ... least ten - twenty years into the future.
Sam & Ella Potato-Salad will be too weak to rise up against the system. They dare not accept the hard-money loan, there are few sub-prime loans, and those with commercial loans are paying the debt off, entirely, and not taking new loans.
Someday you gotta find another way,
you better right your mind
and live by what you say
Today is just another day
unless you set your sights and try to find a way
I say @#$> authority
Silent majority
Raised by the system
Now it's time to rise against them
We're sick of your treason
Sick of your lies
@$%> no, we won't listen
We're gonna open your eyes
Frustration, domination, feel the rage of a new generation,
we're livin', we're dyin'
and we're never gonna stop,
stop tryin' Stop tryin'
Stop tryin', stop tryin'
You know the time is right to take control,
we gotta take offense against the status quo
No way, not gonna stand for it today, fight for your rights,
it's time we had our say
on Sat, 11/07/2009 - 20:52
#123687
I'm going out and find that new hooker in town. But, I think Ras is missing something. Maiden Lane probably yields 40%, so they can take some losses. Also, the MBS the Fed bought pay around 5% I would assume and likely are guaranteed by FNM, so one year interest out of this crap pays for all of Maiden Lane. The Fed need only raise the rate of interest on all this money they have floating out there to 2% and the dollar is fine and gold goes in the crapper. My feeling is the world is now in 2 camps, those that have and those than owe. Those that owe are in 2 camps, those that can make payments and those that can't. Most of those that have are as clueless about the situation as those that owe and can pay. Those that are selling something know as much as those that are buying it and quite likely more and those that are buying stand a good chance of being the ones holding the bag. Over the longer haul, demand for everything is going to sink.
on Sat, 11/07/2009 - 21:09
#123688
"Over the longer haul, demand for everything is going to sink."
That's exactly right! Eventually, when all the bad debt unwinds there will be less money floating around to chase commodities.
on Sat, 11/07/2009 - 21:11
#123689
Those hookers are paying me well and I will keep'em work-n da track hard everyday cause it aint a gold bubble but a fiat currency system collapse. Stack-n barz and burn-n paperz.
on Sat, 11/07/2009 - 21:38
#123703
My indicators still say USD bullish.
So what will happen to Gold ?
http://www.zerohedge.com/forum/market-outlook-0
on Sat, 11/07/2009 - 22:33
#123715
I agree GS, but bullish smullish, if the fed wants the dollar down it will be down, trade accordingly....
on Sat, 11/07/2009 - 22:13
#123709
Gold bubble??!! HAHAHAHAHAHA!!!!!!
Excuse me for laughing so hard at this day dreaming.
Should gold ever come back to 1,000$/OZ level, you'd see China, Japan, India and the whole bunch of other foreign nations jump right out to buy every last ounce of it that is still on the market. That's literally a golden chance for them to unload the greenbacks stuck in their hand. Come to think of this: Why would foreign CBs hold dollars that pops out of Bernanke's behind like hyper-volcano while they can instead hold gold that cannot be counterfeited? Let's get real.
on Sat, 11/07/2009 - 22:21
#123710
Classic Goldfinger clip...
on Sat, 11/07/2009 - 22:40
#123714
RGLD, now there is a bull fixin' ta be my steak dinner... XRT is just begging for one bad number next week...
on Sun, 11/08/2009 - 02:03
#123761
Quandary: how to justify re-inflation in a deflationary environment? Age old answer: make war. Long bets on gold, oil, dollar = duh.
on Sun, 11/08/2009 - 12:35
#123937
Unfortunately, you may be correct. The US would be the rare empire to go down without a struggle.
on Sun, 11/08/2009 - 02:37
#123769
Gold and silver are to be bought.
http://www.youtube.com/watch?v=BePFbDTqmfg
on Sun, 11/08/2009 - 03:31
#123777
and Gummy Bears!
http://www.moviewavs.com/php/sounds/?id=gog&media=WAVS&type=Movies&movie...
Disclosure: long LD
on Sun, 11/08/2009 - 09:52
#123850
UUP was closed for trading while they had an emergency meeting to float 100,000,000 more shares. The interim caused a bit of panic and premium added to the share price. Hopefully this "premium" will disappear shortly unless the great "unwind" take over short term.
on Sun, 11/08/2009 - 10:04
#123853
There seems to be something overlooked here...yes, consumer debt is going down, but for how long?
I have a laptop computer the keys are falling off of, so out of date is becoming almost useless...I drive a 1992 Mercedes that has 187,000 and is start to develop some fascinating noises...I live in an apartment the size of a large closet so the thoght of entertaining friends or lounging on the deck or the yard is out of the question...and many of my friends are in similiar poor circumstances...and we are 50 years old! The fact is, many people will have to start spending soon or they will risk exiting the 21st century, and skipping backward not to the 20th but to the 19th century! This whole situation is starting to become bizarre to the point of incomprensibility...
RC
on Sun, 11/08/2009 - 17:12
#124070
Buckle your seat belt,more financial turbulence ahead. hope for the best and prepare for the worst.
on Sun, 11/08/2009 - 20:58
#124194
Late to the party again, for good reasons this time. Listen up for those that read down here....Gold in YUAN is rising, Stay Tuned. Oh gold, 1500. early next year. When they buy the world acts.