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Record Gold: The Real Journey Begins
Those of you who have been following this blog from its humble beginnings know that I have been consistently bullish on the long-term prospects of gold, and consistently bearish on the long-term prospects for the American economy. With gold sitting at $1,232 dollars and sovereign debt concerns entering the system, my thesis is unfolding before our very eyes. This is very unfortunate. I would much rather be wrong and lose money investing than be right when it entails hard times for Americans.
Over the past year or so, gold has erupted to inconceivable levels against a backdrop of a "recovering economy." I have been trying to expose the putrid stench of propaganda pushed by vested public officials. With unemployment pushing 10% two and a half years into this "recession" (Depression), the economic recovery thesis clearly carries no weight. If you still can't read the writing on the wall for our economy, then you are part of the 20% of people who give the truism "fool some of the people all the time" credence.
Gold serves as the canary in the coal mine, period. This is something I've often alluded to in my posts. The rise in gold is evidencing a collapse of confidence in government. Just take a look at the approval ratings of President Obama and Congress; this isn't some highbrow theory without basis- I simply follow the rhythm of history. Confidence in government will ebb and flow cyclically no matter what I say. The wise investor rides the wave; the inexperienced investor fights it.
To a lesser extent, gold is signaling higher inflation and a restructuring of the global currency system. This is very clear to me. A free-floating system with artificial cross-pegs is prone to chaotic upheavals from time to time. In the past, currency crises were relegated to closed regions; in the future, contagions will likely be global. Again, gold is signaling this to me loud and clear.
I believe gold is going to make a multi-month push to test $1,500 dollars. Then it is time to reevaluate. If the printing presses are still running, I will hold my position. Given the tendency of humans to "paper over" problems, this is the most likely scenario. A loss of the AAA-rating of U.S. denominated debt will likely occur in a 3-5 year timeframe. The mass bailout of bankrupt states will also occur in a 3-5 year timeframe. If you think this is dollar bullish, then I invite you to go long the dollar and short gold.
Now these are just probabilities; nothing is guaranteed. If you are worth your salt as an investor, you will hedge your long gold positions with long-dated puts as call options become expensive relative to puts. You will have many, many opportunities to do so between now and $1,500 dollars. I strongly urge people to do so.
Social Implications
Let me just say people won't be skipping down the street if and when gold hits $2,000 dollars. It won't be the end of the world either, although it will appear that way to many people. It is rarely ever that black and white in life.
Leading up to $2,000 dollar gold, you will likely see protests emanating from college campuses as the youth realize Art History degrees just don't offer the security they used to. Regular citizens will start to protest onerous levels of taxation, especially effective tax rates. The most obvious example of rising effective tax rates are property taxes that don't reflect depressed home values.
The American social model isn't meaningfully different from the Greek social model. Pensions are underfunded by trillions of dollars. Phony accounting that pushes fiscal obligations forward are rife. These are just facts, not my opinion. If the government recognized liabilities according to GAAP standards, we would already be bankrupt.
This is nothing more than "extend and pretend." Fundamentals always assert themselves in the long run. Debt levels unheard of in modern history will negatively impact our economy. A revaluation of debt is certain. Trillion dollar obligations will be inflationary. Again, just reading the tea leaves here.
Disbelief Fuels Rallies
If I could give you one tried and true indicator that will predict the extent of this gold rally, it would be the "disbelief" indicator. As long as Joe Six Pack watching TV all day thinks gold is "expensive", we have room to run. Trust me, you will see lines at gold shops when all is said and done.
The smart money (John Paulson, George Soros, David Einhorn, Paul Tudor Jones) is already positioned for what is going to shock the average person. This is a game changer. The arrogance of average people sticking up their nose to gold will turn to fear in a heartbeat. This I guarantee.
Taken from Expected Returns Blog
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Bonds? Stocks. Gold? Yep, yep, and, wait for it, yep.
Apologies in advance to the affected/offended, got to get the word out on this.
Deepwater Horizon Control Solution, version Deux
www.squareandc.net
Updated, gentler on the eyes, with a lot more information. Please post at as many places as you can, e-mail to your buddies etc. Times a wasting.
To all the snarlers from last time, thanks for taking a look at least.
Not farming for Ip addresses or anything of the sort. Just trying to reach an informed audience, from where it might leap into a meme-esque public consciousness and to the right eyes/ears.
I'm serious and so is the problem. If the oceans go, no gold, no s&p, no forex, no SHIT.
For the thousands who did visit from this site, thanks for stopping by, do so again and if called this time, spread the word. Incredibly hard to reach people on site or at BP etc., especially sitting here in India.
Keep the faith but know that this poor black swan (literal) is beyond sad.
Thanks. You can e-mail me from the site for friendly words of advice and encouragement.
Oh,
while I agree this is a mess...............
The Earth, has been able to care for far worse than this for millenia..and will continue to do so.
What I do not understand is why they have not used the microbe agents that basically EAT oil, not the use of the detergent( Bio Degradable) type to break it up.........before it got the size of Rhode Island.
Something I do find rather unusual, is 2 weeks prior to this Blowout, the Admin, ok'd the Offshore exploration for same................
There have been way too many coincedences of late, in regards to the Climate/Enviro BS.
Dos, a lot of actions in the recent past do not pass smell tests of any sort.
The use of chemical dispersants, totally ridiculous, especially after the post exxon valdez tests on said microbes or other bio-degradable dispersants.
There has been a certain scorched-earth policy from TPTB that defies logic.
We are in a no-so-good place as a people/culture I think.
Three to five years? No, my friend, more like 3 to 5 months. OK, make that 18 to 24 months, tops.
And a question for you: how can you bailout a bankrupt state, when every other state is bankrupt?
My theory is this: EU will mostly hold its ground, since the ECB will be very busy bailing out every Dick, Jane and Harry with paper money. Euro could crash, even in slow motion, since it has now firmly joined the camp of QE, Ben "let's-throw-money-from-helicopters" Bernanke and Turbo Tim.
UK will be next: with debt levels approaching Greece's level, there is no reason why the Brits should get off easy. The british pound will explode under the pressure. There will be blood on the streets of London.
Then, either Japan will be next, or China.
After that, the biggest target of them all will be the United States of America. But this could happen much, much earlier, especially if a big state (let's say California, for the sake of conversation) declares bankruptcy, or if there is some "Black Swan" event, probably politically-related (let's say a dirty bomb explosion in Washington D.C.).
And then: Game Over.
The destruction of the world economy would be pretty much complete. Men who thought themselves wealthy and safe will be destitute. Entire nations will slide back into irrelevance, crime and chaos. Poverty, perhaps even starvation, will descend on the entire world.
I am serious. There are no escape from this madness - implosion is the only possible outcome.
And, then, some sort of UN Conference will be announced, heads of state will assemble, sputter and dither and some sort massive, international regulation of finance will be decided. An official, international currency, available only to Central Banks for accounting purposes could be created ("bancor" for instance) and, if that is the case, would be probably be based, in part, on hard assets (Gold, Silver, Palladium, you name it).
Speculation and derivatives will become a crime, bankers will be jailed (or worse - much worse), and poverty will slowly be lifted. Economic activity will return, albeit very weakly, and some measure of order will return to the world.
All in all, it's going to be a horrifying 15 to 20 years. I look at my young children and I seriously despair for their future.
Naw. Ain't gonna happen that way.
Paper is free. They can print paper.
Oil ain't. It's in supply decline. Gonna be a big war over it.
People fret about fucking gold; it's been in supply decline since freaking 2000. We're not seeing anything other than mildly rising demand against SHRINKING supply.
What do you mean "going" to be a war over oil?
Have you been in a cave for the last thirty years? (and more recently, the last ohhh... seven or so?)
As far as gold, the production has been declining steadily much longer than 10 years.
Oh boy - what's going to happen when the demand is really going to go through the roof, then?
"And a question for you: how can you bailout a bankrupt state, when every other state is bankrupt" - that is the real question isn't it. Reminds me of the criminal who tries to defend himself by pointing out that the other guy is also guilty.
Hmmm... I smell a black swan in the air. It's name is Katla.
Could be.
Imagine if half the world -- let's say all the eastern seaboard of the US/Canada as well as 90% of Western Europe -- is left without airplane transportation. What's next?
AL,
" or if there is some "Black Swan" event, probably politically-related (let's say a dirty bomb explosion in Washington D.C.)."
I think with the purposeful LAX policies of the current regime on terrorism, we will see this, and it's an expected / desired event.............(Tin oil hat maybe?), but we have had FOUR duds thus far on this watch, it's just a matter of time...
Why so?................there will be no way, the entire takeover could be completed.
Martial Law, and a NEW kind of Governance..............
But Anton, it is illegal for the states to declare bankruptcy...
/sarcasm off
It is going to be horrifying.It will reorganize, but not before.
Well, considering California - if I remember well - already pays suppliers with I.O.Us, it's only a matter of time.
I partially agree. I expect, and have said before, that the best outcome the banksters can hope for long term is "merely" the reduction of banking to some kind of highly regulated utility function, with strict limits on leverage, capital ratios, lending activities, investment vs banking activities etc. HFT math geniuses will quickly learn to deny involvement and claim they were IT help desk. The worst they can expect is to be gibbetted on Wall Street right out front of their goddamned monuments to hubris. (note to Marla: I am not advocating the latter)
All in all, it's going to be a horrifying 15 to 20 years. I look at my young children and I seriously despair for their future.
We have two young adult children. I owe it to myself and to them to do everything possible to turn this pig shit system into manure for a fertile and productive future. That is why I have chosen to get involved politically with the only sizeable resistance movement that exists in my state. That activity gets me called lots of names; I have my motives questioned daily, including here at ZH.
People who engage in that name calling and motive questioning can go fuck themselves, as they take what they get and like it.
Stay the course SWR, ignore the noise...
Good for you.
Just remember the (truly wise) words of Robert Anton Wilson, that falling into generalizations is the greatest sin of humanity (or something like this - I don't have the precise quote in front of me right now).
I'm wondering if we'll see a Russian style devaluation of the Dollar. In other words, one day, Little Timmy over at Treasury says, "Good news everybody, we're going to a new and improved Dollar! Just bring in 100 of your old, worn out Dollars and we'll give a brand new Improved Dollar!"
Actually, I believe this scenario is going to be played several times, for both the US Dollar and the Euro.
Why do you think I bought that much physical Gold and Silver?
I also expect an iterative process; they will be unwilling to devalue enough the first time. I think we can count on them to continue to be unimaginably stupid.
That is an excellent point. A 5 for 1 or even 10 for 1 swap won't be enough. 100:1 might be a bit much though.
$300 dollars a gallon gasoline! Hahahackhackha! We'll make it! We live in America! We work harder than everyone else and, uh, innovate!
An implosion or dirty bomb in DC with CONgress in full session, every damned corrupt one of them, would be as joyous to the nation as a tidal wave washing the detritus out to sea.
This would not be anything but a boon to the nation and the world. Imagine a world without Specter, theBamster,Timmay, Ben, Summers, Napolitano, Holder, Frank, Dodd, Lobbyists and more all gone.
It's a fucking miracle is what it is to be embraced not forsaken.
I notice you only mentioned Democrats there.
Wouldn't you rather see the people that got us into this crisis affected?
My money is on that you'll vote for them again in 2012 like you did in 2000 and 2004. (and in congressional elections from 1994-2006)
Aren't there 5 1/2 million folks (not members of Congress) who live in the DC area? I guess by your scenario they'd be "collateral damage?" Perhaps you'll be a tourist in DC on the day the bomb takes its toll?
All right. Now imagine martial law imposed on the entire USA, with National Guardsmen patrolling the streets with shoot-on-sight orders.
Still think that dirty bomb would be a joyous event?
Because, mind you, this is also a distinct possibility. A possible scenario, if you will.
Not nearly enough resources to declare martial law in this country. Only small, predefined areas of the country could be "protected" All other areas, it will be every man for himself.
That was the scary part of the fall of 08, we were hours away from martial law. picture rodney king type riots in many areas of the country in that circumstance. The country is full of anarchists just waiting for any excuse to set the place on fire...
I've actually lived through that type of scenario three times...I have an uncanny ability to be in the right place at the right time. I was in D.C. in 1968, Los Angeles in 1992, and New Orleans in 2005. Trust me, you do not want to be around when the veneer of civilization is ripped off and the only means of restoring order is a heavily armed military marching through your streets.
The military? They might be inclined to be sympathetic to the proles.
Try Black Water (Xe) -- now those guys have NO allegiance.
Ask the folks in New Orleans for instance.
"Ask the folks in New Orleans for instance." I am in New Orleans. I'm not sure what you're referring to. The local police are the ones who seemed to be the most out of control during and after Katrina. During the LA riots local cops just disappeared, or arrested the property owners attempting to protect their property with firearms.
I was recalling the reported appearance of Black Water in NO during Katrina.
Here are some links that come to mind:
Blackwater mercenaries used in New Orleans Timothy Williams "New Orleans Begins Confiscating Firearms as Water Recedes Private Security Contractors Head to Gulf - washingtonpost.com http://www.change-links.org/blackwater.jpghttp://hamptonroads.com/node/66391
The Xe dude, have a shitpot full of problems right now..........
BIG BRO, has targeted them for Class III violations.........this will end badly for Xe.
That's what we see. You think that will be the end of mercenary activity inside the U. S.?
Heh. No way.
Nah, too happy an ending there. Poverty will not be lifted, it will be more broadly and equitably dispersed, with the mass of humanity doomed to a life of servitude and serfdom to their new lords and masters in the Criminal Elite.
The last bout of fedualism in Europe ended with the Black plague, when so many of the serfs succumbed to the pest that so few were left to work the land and therefore to support the elite. As a result, the elite started competing with one another by raising wages, ultimately allowing the serfs to bid themselves out of their servitude to a specific lord and master. But that was then and this is now. No shortage of available labour now.
And don't think you can simply retire to your back yard or farmstead and support yourselves with homegrown fruits and vegetables. The machinery of the Criminal Elite is infinitely hungry for resources, and the debts are so great that they will enforce the underlying perogatives buried in the title to your lands to declare that they are due an ever increasing rent/property-tax in exchange for allowing you to occupy and work "your" lands. You are no longer citizens, you are chattel.
We may as well admit that our 700+ year experiment with freedom and capitalism is over, and accept the party line that it was a failure and simply go back to the "well functioning" system of feudalism and the protection of our new lords and masters.
We are doomed!
last happy ending ...
10 million starved to death.
Feudalism is always a possibility.
But I'd like to remind you of two dates:
The people of the earth have been through feudalism before. Then, the two dates I mentioned rolled by and feudalism was done. I believe there are still people willing to fight for their freedom, people who will never be slaves, or serfs, ever again. The "Elite" as you call them know this, and they are afraid.
Push people long enough, and they will lash back. Greece and Ireland (recent riots there) are just the beginning, and, as I have said, bankers (many bankers) will be jailed. Or worse. Much worse.
The serfs of Russian weren't released until 1861.
Yep. About 80 years later they didn't even have to farm anymore. Free re-education in the camps! Sorry if 66,000,000 die - they needed education on social equality!
The powers that be have been strip-mining the middle class for about 30 years now.
A reclamation project is in order.
I tend to agree (mostly) with your outlook, and I too worry for my children. But the next 15 to 20 years need not be horrifying unless: You live in a large city, or are hopelessly addicted to this orgy of a lifestyle we have lived for the last 40 years.
If you think large cities will be ugly, just wait until you see what happens in small communities without access to any public services at all. Including health and law enforcement.
"Lord of the flies" comes to mind.
the argentinian fellow, ferfal, drew an image of being out in the farmlands with a dude w/ his gun, his dog, and a scared wife - trying to protect his 10 acres... something like "they can't hear you scream in the country"
i've seen too many images of large groups of city-folk stampeding to ignore that nightmare on the other side of the coin.
generally pretty ugly - but how ugly and for how long
Ha! Good point. I married law enforcement. She packs daily as do I.
We have cover routines that are for contingent use of firearms.
Gold has hit an all-time high but what's a fair figure for what the 1980 inflation-adjusted high (of $850 I think) is?
http://www.bloomberg.com/apps/quote?ticker=IADMGOLD%3AIND
Gold, inflation adjusted. If I take peak in the '80s as $850 and now at +- $1240 = 570; to reach the same peak, gold should be at $1850.
$850 in 1980 would cost $2261 in 2010 dollars, according the the inflation calculator over at the Minneapolis Fed. Thats if you trust their numbers in the first place.
Take a weighted price, not the peak bubble price attained only for a few minutes in one day.
If we get a gold bubble again, to make a new high, yeah...would require like 10k an ounce
Merc,
They Guessimate, approx $2,250.00 oz.(IMHO), until it goes past that number, there is not even a BEGINNING of a frigging bubble.
PERIOD.
that 2250 number is if you believe the inflation numbers that the gubmint puts out. I dont. Using the same equations/models used prior to 1980 you get a far higher inflation number...
http://www.shadowstats.com/
Considering how gimmicked government statistics are, nothing less than $10,000 will suffice.