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Stocks Close At Day's Indexed Lows, Down -0.76% In Gold

Tyler Durden's picture


As long noted, the long gold trade continues to outperform stocks. The daily "beta" in gold, as wrong as this statement is, continues to be higher than stocks, with risk assets underperforming gold on a daily basis now, which incidentally closed at a fresh all time high spot level north of $1,370. And yes, gold has far outperformed the stock market rally since September. In short: stocks, priced in gold, are down -0.76% for the day. This is better known as visualizing the Fed's dollar devaluation in relative and absolute terms. With each passing day, the upside in stocks lags the loss in purchasing power. Which is precisely what the Fed is hoping to achieve.



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Wed, 10/13/2010 - 16:18 | 647196 tmosley
tmosley's picture

Silvers not half bad either, having breached $24 in a rather sharp sudden spike.

Might be taking the family for that fancy dinner before the week is out at this rate (promised at $25/oz silver).

Wed, 10/13/2010 - 17:04 | 647358 hamurobby
hamurobby's picture

My old lady owes me for all the crap I had to endure for buying a bunch of silver earlier this year.

cheers to you! 

and GOOOOO silver!

Wed, 10/13/2010 - 19:35 | 647816 Shameful
Shameful's picture

I got a call from my mom to thank me.  I got them into their first big buy of silver at 13.  People notice when you don't blow their money.  Though grandma is never happy "It's to expensive to buy!", and after it goes up "You should have made me buy it if you knew it was going up!"  :)

Wed, 10/13/2010 - 16:19 | 647197 Cyan Lite
Cyan Lite's picture

Any word on mutual fund outflows/inflows?

Wed, 10/13/2010 - 16:24 | 647219 Tyler Durden
Tyler Durden's picture

The BLS is currently adjusting them seasonally and conforming to birth/death expectations of a $1 quadrillion inflow

Wed, 10/13/2010 - 16:30 | 647246 Max Hunter
Max Hunter's picture

Hmmm... and the revision will net??..

Wed, 10/13/2010 - 16:31 | 647252 NotApplicable
NotApplicable's picture


And lots of mirrors.

Wed, 10/13/2010 - 16:37 | 647273 schoolsout
schoolsout's picture


good one!

Wed, 10/13/2010 - 16:48 | 647308 AccreditedEYE
AccreditedEYE's picture

$1 quadrillion inflow

LMAO!! Nice! And sadly, it will come to that.

Wed, 10/13/2010 - 17:04 | 647362 Ragnarok
Ragnarok's picture

Any update on the shadow liquidity?

Wed, 10/13/2010 - 16:22 | 647209 midtowng
midtowng's picture

My CEF just keeps going higher and higher. Too bad it is barely keeping up with the fall of the dollar.

Wed, 10/13/2010 - 16:30 | 647249 NotApplicable
NotApplicable's picture

Meanwhile at my local coin dealer on monday, I was the only person purchasing. Everyone else it seems fills his day (both by phone and in person) trying to get some fed notes for junk jewelry.

Wed, 10/13/2010 - 16:40 | 647287 Sudden Debt
Sudden Debt's picture

I alredy said it a few times: Jane and Jhon Doe KNOW SHIT ABOUT WHAT IS HAPPENING!!

Nobody believes this!

Today I was talking inflation prospects to some collegues. I said this is going to spike to 4 to 5% at years end. All they know was deflation and all is well.

The second scary part is, people have no clue about the international economy, globalization! They just don't want to hear it, and everybody is spending like it's 2007 with a paycheck 1990 style.

Also, international politics JUST SUCK EVERYWHERE! It's like every country is waisting time on stupid projects!





It kind of all starts to piss me off...

Wed, 10/13/2010 - 17:19 | 647390 yabyum
yabyum's picture

My coin guy seems to sell alot more than buy...always someone in line. Sellers are shuffled off to the back for their buisness. Alot of people have to be selling! There is a sell yer' gold on every block...who owns these stores?

Thu, 10/14/2010 - 00:36 | 648388 LowProfile
LowProfile's picture

who owns these stores?


Wed, 10/13/2010 - 16:32 | 647258 mmlevine
mmlevine's picture

I can get my head around the idea that currency should be backed by something of value and that gold had been the value until the US went off the standard.

What I can't seem to get a handle on is what happens if a a brilliant mining company finds a motherload of gold - some ridiculous amount like a million tons.  Wouldn't that new supply crush the value of the currency?


Wed, 10/13/2010 - 16:47 | 647305 Sudden Debt
Sudden Debt's picture

Dude, America invented the international Morgan silver dollar.

The dollar went global with the silver trade dollars.

1 oz gold used to be a year salary in the 1900's.


Wed, 10/13/2010 - 16:51 | 647315 mmlevine
mmlevine's picture

But I'm still confused.  If I change my statement to "silver" mining company could you help me understand my question about finding new supply.


Wed, 10/13/2010 - 16:59 | 647339 cossack55
cossack55's picture

They will find that 1M tons right after they find John Galt's static energy motor.  They have only been looking for 3000 years.

Wed, 10/13/2010 - 17:17 | 647387 Dr. No
Dr. No's picture

Your thought expirement is interesting.  But the anwer needs to be taken into context with the odds of it happening.  Yes, if they discovered the mother lode, price would drop.  Before using this as a rationale on why not to use the gold standard, think is finding the mother lode as probable as Bernanke leaving the switch on for an extended period of time?  A currency needs to float and I wish it would float on real supply vs demand terms.  Not the artifical suppliy terms we are currently experiencing.

Wed, 10/13/2010 - 17:31 | 647420 RockyRacoon
RockyRacoon's picture

Read about the drastic effects the Aztec gold and silver had on the Spanish economy.

Wed, 10/13/2010 - 18:05 | 647529 Boba Fiat
Boba Fiat's picture

Google "Comstock Lode."

Wed, 10/13/2010 - 16:56 | 647328 NotApplicable
NotApplicable's picture

While possible, what you have to realize is that gold has the largest stocks-to-flow ratio of any commodity, with nearly every ounce ever mined being in someone's hands. New mine supply is tiny compared what's already above ground.

Wed, 10/13/2010 - 17:05 | 647364 tmosley
tmosley's picture

If there is a large find like that, the value of gold will simply readjust to the new size.  Unless they start finding mother lodes like that that are easily accessible once a month, we will still be far better off using gold as money rathe than paper which can be infinitely diluted in a second should those in charge of the press choose to do so.

Wed, 10/13/2010 - 17:10 | 647365 AugmentedFourth
AugmentedFourth's picture

I'm in the same boat. 

It's an interesting question. But as far as the current situation and my current holdings, it's purely academic. I mean we're NOT on a gold standard and my current investments are for insurance (If SHTF) and a hedge against inflation/currency collapse.

I do think the situation would be a bit more complicated. No matter how big and close-to-the-surface the "find" was, there is no getting around the fact that it STILL must be dug up and processed because it means nothing in the ground. Plus, it would be entirely against the interests of that mining company to destroy the value of their product. At least with it "in the ground" it is not in circulation and not affecting supply/demand. But for the mining company with resources to extract, it IS as good as "in the bank" for them. In other words, they WOULD NOT be financially motivated to dig it all up at once...Sure it might cause a small amount of gradual inflation as they profit on an increased supply. But, like everything else it would be physically limited and the market would have time to appropriately adjust.

I'm just thinking out loud. I could be way off. But the way I see it, even with the small possibility of a "massive find" like you mentioned, there are still PHYSICAL LIMITS that force restraint unlike with fiat. The way things work now, Ben Bernanke can create a "mother-lode" out of thin air whenever he sees fit. 

Sure, Gold isn't perfect...nothing is. But, it sure would be harder to manipulate.


Wed, 10/13/2010 - 17:33 | 647429 RockyRacoon
RockyRacoon's picture

Provable gold ground reserves have tremendous value.  Ever heard of a hedge book?

Wed, 10/13/2010 - 18:05 | 647531 AugmentedFourth
AugmentedFourth's picture

Right. What I was trying to say is that "ground reserves" don't have an immediate effect on the supply mechanics. It has to be mined and put in to circulation to have the inflationary effect that mmlevine was asking about. 

I'm sure that "proven reserves" if officially booked could have an effect too. But, what would be the motivation of the "finder" to purposefully debase the currency in this realistically-impossible hypothetical situation anyway?

Wed, 10/13/2010 - 19:24 | 647785 saulysw
saulysw's picture

How about gold in seawater? Earth's oceans contain about 25 billion ounces of gold. We have dug up about 3.3 billion so far, for comparison.


You can't get at it economically, of course, but it's there.

Wed, 10/13/2010 - 19:25 | 647789 mmlevine
mmlevine's picture

I appreciate the replies - thanks.

Wed, 10/13/2010 - 16:32 | 647259 Sudden Debt
Sudden Debt's picture

I wonder how the Azian markets will react and how they will start dumping dollars.

And if the Azians don't trash it, the Europeans will.

The dollar will go down to 1.52$ = 1euro in a short time.

Also, everybody is talking about gold, BUT WHAT ABOUT SILVER!!! +3,69%!!!

Wed, 10/13/2010 - 16:35 | 647270 traderjoe
traderjoe's picture

There's smoke coming out of the Crimex...

Wed, 10/13/2010 - 22:19 | 648141 tmosley
tmosley's picture

Looking like fire now.  $24.35

Wed, 10/13/2010 - 16:38 | 647279 George Costanza
George Costanza's picture

I have heard no one outside of the Zero Hedge world (or outside of CNBC) mention to me a word about Gold or Silver.    There is no bubble in precious metals, at least if the retail investor is an indicator.  

I also think the Fed does not really care if gold/silver rise, it is a consequence they can live with  ( Oil, not so much, at $82.98 they have room to let that run ... but can become a big problem )

Wed, 10/13/2010 - 16:44 | 647301 Sudden Debt
Sudden Debt's picture

I have bought a shitload of silver and also quite a lot of gold, and all my wife asks me is what the fuck I'm going to do with that.

Even my family thinks it's just some weird new collection Mc Scrooge phase.

But who cares, they have been warned.

And for the sellers of silver: I've bought 300 silver eagles today at 17$ per Oz. That's 7$ below spot. It's like a lot of sellers are dumping but on the other hand prices go up. Very strange.L

Wed, 10/13/2010 - 17:01 | 647348 cossack55
cossack55's picture

I like to lather my naked body in silver cleaner and roll around in Morgan/Peace dollars.  Some say its hotter in Eagles.  Your opinion?

Wed, 10/13/2010 - 17:08 | 647368 tmosley
tmosley's picture

!!  Where the hell are you getting silver eagles for $17/oz?  I want in on that action!

Wed, 10/13/2010 - 17:20 | 647392 homersimpson
homersimpson's picture

Sudden Debt - please don't hold back. Where'd u buy silver eagles for $17/oz?!

Wed, 10/13/2010 - 17:35 | 647432 RockyRacoon
RockyRacoon's picture

Strangely silent....

Wed, 10/13/2010 - 18:22 | 647577 digitalhermit
digitalhermit's picture

He bought them from some dude in Nigeria. Should be here any day now...

Wed, 10/13/2010 - 21:19 | 648017 Misstrial
Misstrial's picture

My records show that silver Eagles were in the $17.00+ per oz range on August 20, 2010.

There was a dip on that day price went higher and hasn't been back in that range since, AFAIK.

Eagles and other coins aren't sold at spot. They're sold at spot plus the coin premium which for silver Eagles is about $2.00- $3.00 per coin.


Wed, 10/13/2010 - 17:35 | 647402 John McCloy
John McCloy's picture


When your cliff diving into the Scrooge McDuck money bin we will see who is laughing. Also keep in mind if you remember Scrooge Mcducks vault there is only gold coins and no fiatskis.


Life is like a hurricane here in Ponzburg.

Wed, 10/13/2010 - 21:02 | 647983 lettuce
lettuce's picture

Nice one but I think this is the one that readers of this site would prefer to see...

Wed, 10/13/2010 - 17:27 | 647417 FreedomGuy
FreedomGuy's picture

Watch Fox Business News. It's on every day and virtually every show. Eric Bolling 8pm EST is doing the best job and has been looking at the rapid inflation of all commodities from the restaurant level to the exchanges. Great shows all around. I have started watching them more than Fox News because I like the business and economic angle better.

Wed, 10/13/2010 - 20:55 | 647969 Misstrial
Misstrial's picture

Agree. Even on weekends, FBN has interesting shows & guests.


Wed, 10/13/2010 - 22:03 | 648113 Fred Hayek
Fred Hayek's picture

Maybe I'll check that out.  I watched a little bit of CNBC and found it to be completely biased and largely worthless, an opinion that was reinforced here.  But I thought I had read folks here saying Fox Biz was no better.  No?

Wed, 10/13/2010 - 16:40 | 647281 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

BS has now said he will commit finance sepaku and buy all remaining "assets" imaginable.  Once the Fed owns everything-bonds, etfs-along with his buddy Shirakawa, and gold reserves- how will they manage to set prices appropriately?  This leads me to the scare that Nathaniel Rothschilde pulled on London after Waterloo.  He knew that because war is such a mindset, there was literally blood in the water for the finance structure.  If there was another financial panic now, or worse, how would the Fed respond?  Could the Fed pull something off that stands for them to benefit?

The fact that China has become a somewhat formal banker (however formal a banker is another question) has now determined a new player; but physics says from carbon comes carbon, so what was dusted?

Was the US put up for prosecution last weekend?  Why no words from the "emerging" nations concerning the currentsea wars and the trouble it brings as the endgame?  'Because there are no, and will be no currentsea wars.'  Says Timmah, and the man makes the suit.

The Yen is trading tight right now; an intervention would have gold responding accordingly.  The Fed has their back up against the wall: China will not loosen, and the Yen is set to marginally increase the value of the dollar but only to lift the price of gold more.  This and equities have kept their leverage.  The whole thing is ripe for a takeover, and there is blood in the water from years of financial destruction.  I think there will be a silent coup d'etat for nature; I expect man to be shrugged back to his place among, rather than ontop, of mother nature.  The great balance should be renewed soon.  Unless the US goes and does something dramatic and stupid, like trying to start another war.

Wed, 10/13/2010 - 16:39 | 647283 daneskold
daneskold's picture

This is complicated.

I shorted gld puts last Friday. GLD was up 1.6%

/gc was up 1.92%.

Nominally I am up 125% on the position, but effectively about 120%.

What a ripoff!

Wed, 10/13/2010 - 16:50 | 647312 Sudden Debt
Sudden Debt's picture

you made money with gold puts... please explain.

Wed, 10/13/2010 - 16:52 | 647317 Internet Tough Guy
Internet Tough Guy's picture

He sold them short.

Wed, 10/13/2010 - 16:43 | 647297 Internet Tough Guy
Internet Tough Guy's picture

This article is for Harry Wangers who want to learn to be rich and don't read about real value good.

Wed, 10/13/2010 - 16:54 | 647323 Sancho Ponzi
Sancho Ponzi's picture

Let me throw something out for ZH community comment:

It appears Bubble Ben is trying to create a worldwide dollar trap by debasing the USD and forcing other nations to sell their currency and purchase dollars to achieve a competitive trade advantage. Those dollars would then be held by the Central Banks as reserve currency which would put those CB's at risk as dollars accumulate and lose value. Dollars could be converted into US bonds, which would increase demand and help fund the deficit. It's a win-win situation for Ben. 

But what if the other guys now know the plan and collectively decide they don't want to play? And what better time to end the game than before QE2 is commenced? Things could come unraveled very, very quickly.  

Feedback is welcome 

Wed, 10/13/2010 - 17:24 | 647405 Arkadaba
Arkadaba's picture

I keep stumbling across a blog that does offer some additional points of view and the most recent post was on currencies:

Another good one is this:

Still a little reluctant about linking to this site because they prefer to operate in anonymity but hey - had the same issues when I first started reading Zerohedge.

I like their analysis because they do focus on the macro as opposed to what APPL is doing on any given day.


Wed, 10/13/2010 - 17:53 | 647487 Arkadaba
Arkadaba's picture

I don't adhere to the whole survivalist viewpoint on that blog - I live in a big city on the 22nd floor. What that blog fails to address is information. Number one in your "bug-out" bag should be is a battery-operated radio (with spare batteries).

Wed, 10/13/2010 - 18:31 | 647609 GoinFawr
GoinFawr's picture

I've a radio that runs on solar/winding. It was manufactured in China.

Robotrader and Leo ought to be pleased.

Wed, 10/13/2010 - 18:46 | 647659 Arkadaba
Arkadaba's picture


Wed, 10/13/2010 - 18:43 | 647660 Arkadaba
Arkadaba's picture

Very cool - I've heard about them. I want a laptop that I can power through winding. 

Thu, 10/14/2010 - 01:00 | 648434 GoinFawr
GoinFawr's picture

Hmmm, I also have an emergency flashlight that charges through winding; it has an outlet that I have yet to test with my voltmeter... supposedly it can be used for emergency charging a cell phone; it could be just what you're looking for, though I imagine you'd wear it or your wrist out pretty quickly trying to whir up a laptop battery, hehe.

Thu, 10/14/2010 - 01:40 | 648497 Arkadaba
Arkadaba's picture


Thu, 10/14/2010 - 01:38 | 648498 Arkadaba
Arkadaba's picture

HeHe - Not! (My wrists are fairly flexible)

Wed, 10/13/2010 - 19:14 | 647752 RockyRacoon
RockyRacoon's picture

Great stuff!  Thanks for posting the links.

Wed, 10/13/2010 - 18:25 | 647592 sushi
sushi's picture

French and Chinese financial authorities are rumoured to have had discussions regarding a new form of world reserve currency. Little is known of these discussions.

France takes over leadership of G20 on next cycle. Rest of the world is not happy with Benny and the Fed for exactly the reasons you mention. 62% of dollars are held outside the USA and those holders would be taking a haircut. So why hold the dollar? Largely because there is at present no viable alternative to the dollar. But something could be conjoured up: 1) SDRs at the IMF; 2) currency valued against a basket of commodities (would likely include pm and energy; 3) something else not yet known.


The other problem with Ben's plan (if he in fact has one) is that most of the new dollars would leave the US and be invested in EM where the rate of return was higher. The EM is then flooded with dollars and as you suggest the primary outlet for these would be US bonds. Basically the ROW the world gets to support the US consumption habit and accept a negative rate of return on US financial assets.


Response of some EM countries has been imposition of taxes on foreign capital or similar attempts to inhibit "hot" capital inflows. Expect these to become increasingly popular.


My view is that Ben is trying to pull the US out of hole using the same means that got the US in the hole in the first place. The ROW is coming to view the US as financially irresponsible (several trillion in MBS that was not properly securitized) and will seek path independence from US. I think this leaves US with massive debt and rapidly increasing debt service costs and the introduction of a "new" FRN 100 times better than the old FRN.


Wed, 10/13/2010 - 17:11 | 647371 Leo Kolivakis
Leo Kolivakis's picture

Pretty sure I put these two up yesterday. Check out the volume:

Keep your eye on this puppy too (thank me next year):

Wed, 10/13/2010 - 17:19 | 647389 citationneeded
citationneeded's picture

All I see is negative divergence.

Wed, 10/13/2010 - 17:21 | 647394 homersimpson
homersimpson's picture

Dammit - I can't trade these stocks. My outlook for holding and selling stocks is more than 48 hours. What am I thinkin' holding stocks for more than 50 nanoseconds?!

Wed, 10/13/2010 - 17:27 | 647415 Leo Kolivakis
Leo Kolivakis's picture

Doh! I don't day trade...can't compete with HFT...not interested in scalping for pennies!

Wed, 10/13/2010 - 17:45 | 647463 AccreditedEYE
AccreditedEYE's picture

Leo, your precious solars got SHAT on at the Value Investing Congress...

Wed, 10/13/2010 - 17:48 | 647470 Leo Kolivakis
Leo Kolivakis's picture

Great, love to hear that, will add more to my positions when they dip.

Wed, 10/13/2010 - 17:56 | 647497 godfader
godfader's picture

What does the price of gold have to do with "purchasing power". So if gold drops 50% my purchasing power for everyday goods goes up? Please.

Wed, 10/13/2010 - 19:30 | 647805 Hephasteus
Hephasteus's picture

If the price of gold goes up 50 percent in the currency you hold. You just lost 50 percent of your purchasing power. Which is standard. Yuan only lost 40 percent and euro only 44 percent. But euro will bust 1000 euro per ounce again and put you back in the shitter before long.

Thu, 10/14/2010 - 01:05 | 648446 Arkadaba
Arkadaba's picture

Thanks for the explanation. Trying to wrap my head around currencies and forex stuff lately without much success - I think I need to bite the bullet, gather some data and throw it in a spreadsheet or write a program.

One question I do have is when the USD is going down (like today) and the S&P is going up (like today) - is there some formula to account for the effect of currency depreciation? I think that one of the reasons equities went up today is because the currency was devalued? If I'm totally off-base feel free to say so. 

Wed, 10/13/2010 - 18:03 | 647522 Cpl Hicks
Cpl Hicks's picture

So isn't it just possible that gold is a bigger bubble asset than US stocks?

Wed, 10/13/2010 - 19:13 | 647748 AndrewJackson
AndrewJackson's picture

Isn't it possible that dollars are in a bubble? The end game is devaluation and hyperinflation. Jump on the bandwagon while gold is still cheap. 

Wed, 10/13/2010 - 19:33 | 647813 Hephasteus
Hephasteus's picture

Gold can't bubble unless banks get involved with CREDIT CREATION. I'm not borrowing money to buy gold so you can't pop the bubble by taking away the call money. Gold can not bubble like any other asset bubble that involves the banking industry. It could bubble if people got 10k credit cards and bought gold with it all over america. But until you see that you can not will not have a mythical "gold bubble".

Wed, 10/13/2010 - 20:39 | 647942 Jesse Liversore
Jesse Liversore's picture

I disagree with this.  The worst bubbles involve leverage (US Real Estate, Japan etc) as not only have they lost their capital but have created debt to purchase inflated assets.  The tech bubble was't fueled with borrowed cash but prices sure went to extremes and the bust was as bad as about anything we've ever seen!   

Wed, 10/13/2010 - 22:01 | 648112 prophet
prophet's picture

Something priced in worthless dollars did better than something else priced in worthless dollars.  Worthless nonsense.


Wed, 10/13/2010 - 22:09 | 648123 Cistercian
Cistercian's picture

 Buying Gold...the best way ever to say "fuck off" to Wall st and the Fed.

  Soon to be FRNs that is.

Wed, 10/13/2010 - 22:59 | 648225 Alchemist
Alchemist's picture

What I really want to see is the day when gold will be down more than S&P500 for Tyler to say that stocks are up in gold terms..

Tue, 11/16/2010 - 10:43 | 730640 daniel
daniel's picture

Really this is a great post from an expert and thank you very much for sharing this valuable information with us.
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