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Albert Edwards' Bleak Crystal Ball Reveals Gold Above $10,000; S&P At 450 ; And Sub-1% Bond Yields

Tyler Durden's picture





 

Just because some of the C-grade financial "pundits" out there may have been confused that Albert Edwards was turning bullish in recent months, this should help clear all confusion.

We still forecast 450 S&P, sub-1% US 10y yields, and gold above $10,000

 

My working experience of the last 30 years has convinced me that policymakers’ efforts to manage the economic cycle have actually made things far more volatile. Their repeated interventions have, much to their surprise, blown up in their faces a few years later. The current round of QE will be no different. We have written previously, quoting Marc Faber, that “The Fed Will Destroy the World” through their money printing. Rapid inflation surely beckons. But that will not occur without firstly a Japanese-style loss of confidence in policymakers as we dive back into recession and produce dislocative market moves.

 

Andrew Lapthorne passed me a great chart the other day of bond strategists? forecasts. It reminded me of similar charts for analysts? earnings forecasts from my former colleague, James Montier. There are some ever-present truths in this business. Economists usually forecast a return to trend growth and will never forecast a recession. Equity strategists tend to forecast the market will rise 10% each year and will never forecast bear markets. And since the equity bubble burst in 2000, bond strategists, in a discernible break in behaviour, now only ever forecast that bond yields will rise (see chart below).

 

I agree that bond yields will indeed be heading higher in the next 3-5 years ? much, much higher. But the consensus has still not accepted that we remain locked in an Ice Age environment that will see US (and UK and German) yields converge to Japanese sub-1%.

 

The late Margaret Thatcher had a strong view about consensus. She called
it: “The process of abandoning all beliefs, principles, values, and
policies in search of something in which no one believes, but to which
no one objects
.” The same applies to most market forecasts. With some
rare exceptions (like our commodity analysts? recent prescient call for a
slump in the gold price), analysts don?t like to stand out from the
crowd. It is dangerous and career-challenging. In that vein, we repeat
our key forecasts of the S&P Composite to bottom around 450,
accompanied by sub-1% US 10y yields and gold above $10,000.

Some other thoughts from Albert on 10 Year bonds:

US 10y nominal yields have been edging down recently to 1.70% and the gap with real yields has closed ever so slightly, but the gap itself (implied inflation expectations) remains high.

There is much more, but the most amusing is where SocGen (Edwards) disagrees with SocGen (Legland) on gold:

We have been asked extensively about the slump in the gold price,
especially in the context of our commodity strategist?s prescient report
calling for just such a decline ? link. My own view is that the reasons
for owning gold have not changed. I expect imminent recession to be
more likely than imminent takeoff and hence the real yield (a key gold
driver) should remain low.

 

 

Gold corrected 47% from 1974-1976 before rising more than 8x to US$887/oz in 1980. A steep correction is normal before the parabolic move. As Dylan said in his note of Sept. 2011, The market for honesty: is $10,000 gold fair value?, holding gold is a bet against central banks competency and given their track record that?s certainly a bet I?d be happy to still take.

 

* * *

Hopefully this should eliminate any confusion where Albert stands: certainly not with the rest of the fair-weather, momentum chasing pneguins.

 


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Thu, 04/25/2013 - 07:57 | Link to Comment Bazinga
Bazinga's picture

My only analysts are Ms. Silver and Mr. Gold...

Thu, 04/25/2013 - 07:59 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

I'm heavy Mediterranean paper.....gotta believe those guys are due for a break.

Thu, 04/25/2013 - 08:45 | Link to Comment monkeyboy
monkeyboy's picture

Gold @ $10,000.

 

Good times well and truly over for the mass population of the planet if Gold hits $10,000.

 

Fun times, unlikely. Defintely not a pretty picture.

 

Thu, 04/25/2013 - 08:55 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Ten years ago they told me $1000 would be lights out. I didn't pay any attention to them then either.

Thu, 04/25/2013 - 09:14 | Link to Comment francis_sawyer
francis_sawyer's picture

Ms. Silver and Mr. Gold...

~~~

They sound jewish

Thu, 04/25/2013 - 13:17 | Link to Comment LaoTzu60606
LaoTzu60606's picture

In reading the "Jew" comments here, it occurs that many do not know from history why Jewish people became bankers.

Simply, the Europeans misstrusted each other and needed someone to trust to hand over the Yayo (see Scarface)...

When an Englishman bought goods from an Italian, the Jewish banker in England (until circa 1300 when all Jews were kicked out of England) would settle with the Jewish banker in Italy, trusted him to hand over the briefcase as it were when the goods changed hands...

So, the Jewish banker, broker, trader, etc...

 

 

Fri, 04/26/2013 - 11:44 | Link to Comment mackeyreport
mackeyreport's picture

Reading too much into the comment. Silver and Gold are commonly Jewish last names.

Thu, 04/25/2013 - 08:06 | Link to Comment jimmytorpedo
jimmytorpedo's picture

But who will want to trade their gold for a wheelbarrow full of useless paper.

The higher the price goes, the less likely people who hold gold will want to trade it.

Thu, 04/25/2013 - 08:23 | Link to Comment azzhatter
azzhatter's picture

That's the funny thing about my stacks- there is no price in fiat that I would sell them for right now. I wouldn't take $100 oz for my silver and wouldn't take $5,000 an oz for my gold becuase all I would have is toilet paper

Thu, 04/25/2013 - 08:35 | Link to Comment BobPaulson
BobPaulson's picture

With respect, that is clearly hyperbole. I assume you buy things to sell it later, not to line your coffin. I bought mine as an insurance against a once in a lifetime event, not against a never in a lifetime event. I would argue if you don't know under what conditions you would eventually sell, then you shouldn't buy something, unless you use it every day, like land.

For example, if there was some kind of currency rout and real shortages on the streets for consumables and I had a once in a lifetime opportunity to buy a big farm or a section of forest with my gold, I would buy it and crystalize the win. I don't own gold so I can put it over my eyes one day.

Thu, 04/25/2013 - 08:50 | Link to Comment BeerBrewer09
BeerBrewer09's picture

Great post.

In theory, we would each like to ride each bubble up to its peak and unload onto the next one, exponentially increasing our investment. Land is the best thing to own (ok, so a bunch of people say you never truly own land, but what in life do you truly own, your thoughts/actions?) and if gold becomes so highly valued that people will trade their land for it, then I would certainly trade the shiny stuff for it.

Thu, 04/25/2013 - 11:16 | Link to Comment Harlequin001
Harlequin001's picture

True, the most important aspect of any investment is the exit...

Thu, 04/25/2013 - 13:28 | Link to Comment LaoTzu60606
LaoTzu60606's picture

your grandchildren may not like that statement

Thu, 04/25/2013 - 09:34 | Link to Comment venturen
venturen's picture

Ah but when to sell...you didn't sell in at $500, $1000, $1500...what about $2000, $3000, $4000? Would you sell at $20000? Paper currency, well the US Dollar is in the process of killing itself....I have some nice 100,000 Turkish lira bills I could sell you? How much would you pay? Oh wait is that pre or post revaluation?

Thu, 04/25/2013 - 23:19 | Link to Comment Jam Akin
Jam Akin's picture

Will need to average out at an escalating profit like anything else.

Thu, 04/25/2013 - 09:36 | Link to Comment ReactionToClose...
ReactionToClosedMinds's picture

 ....all true ... under the assumption you live in a place where you have confidence that your land or farm would never be taken.  Yet not too long ago some of the most brilliant minds in modern humanity did (and justified) that in over one-third of the world under 'collectivist' rationales.

Gold, can actuall 'move' if you think it through ..... land ... not so much

 

Thu, 04/25/2013 - 13:26 | Link to Comment LaoTzu60606
LaoTzu60606's picture

with equal respect, disagree with your disagree...

the reason for owning assets is the connectionto our DNA requirement for safety and security...

the settled mind is aided by assets that one feels protects him, 

so real intrinsic value to the ownership

I disagreed as I read it, but then in thinking, understand...if I sold all PM tomorrow, what would I do with the cash?

 

 

Thu, 04/25/2013 - 09:23 | Link to Comment markettime
markettime's picture

I would take it if I knew for sure I could go and get some more at todays prices :)

Thu, 04/25/2013 - 10:45 | Link to Comment Parabox
Parabox's picture

unless maybe I could pay off my mortgage and school loans with it.  What is the price of being debt free? (beyond mandatory rent for the gov)

Thu, 04/25/2013 - 12:51 | Link to Comment jimmytorpedo
jimmytorpedo's picture

Hey Azz, i think its funny that people down voted you for stating your preference.

Haha.

I prefer chocolate over vanilla.

Rum over tequila.

Women over girls.

Let's watch the downvotes roll in from vanilla lovers!

Thu, 04/25/2013 - 08:33 | Link to Comment JPMorgan
JPMorgan's picture

If you have any outstanding loan's like a mortgage you may find you have the means to pay it off though.

They can't change the intitial loan amount nominated in a fiat currency amount, only the interest payable.

Thu, 04/25/2013 - 08:45 | Link to Comment DeadFred
DeadFred's picture

With Cyprus and MFGlobal in the rear view mirror I'd be cautious in my assumptions about what they can or cannot do.

Thu, 04/25/2013 - 09:03 | Link to Comment Greshams Law
Greshams Law's picture

If I recall correctly, Argentina did exactly what you say can't be done. They kept loans denominated in USD and converted deposits into another new Peso.

 Of course, that could never happen here, again. Holders of Continentals were slightly pissed.

Thu, 04/25/2013 - 14:27 | Link to Comment Ratscam
Ratscam's picture

after the Weimar Republic hyperinflation ze German government decided to put on every property a mortgage of 20% that acted as collateral for their new currency. Uups, an immediate 20% increase of your LTV

Thu, 04/25/2013 - 09:37 | Link to Comment Ruger556
Ruger556's picture

Just my 2 cents, well, I would sell some if I had a contract (like a mortgage) written in US dollars and then I could own my house free and clear (except for the illegal taxes) .. but it depends then too, because if gold is 10000, then that means bread is like 100$ a loaf or something.  Usually when that happens your wages inflate too.. remember the lady from Weimar Germany who wrote a journal.. she was getting paid billions a week, at that point, I wouldn't have to sell my gold I could use those billions to pay off my contract debt.   The only catch is, how much contract debt can I accumulate and then time things right?  Not so easy.. either way.. hard assets fall in price with all this printing as people are not worried about land or houses when they have no food.  So that is when you trade some of your stash for land or that sherman tank you always wanted but could not afford, or a gulf stream V??  Just dreamin'.

 

 

Thu, 04/25/2013 - 08:06 | Link to Comment Fuh Querada
Fuh Querada's picture

More like Mrs Hand and her five daughters....

Thu, 04/25/2013 - 08:11 | Link to Comment Its Only Rock N Roll
Its Only Rock N Roll's picture

sung by the best......

 

http://www.youtube.com/watch?v=_bV3XUh_alg

 

Tue, 05/28/2013 - 16:21 | Link to Comment Remington IV
Remington IV's picture

Albert ........ never right , but never in doubt

Thu, 04/25/2013 - 07:57 | Link to Comment reload
reload's picture

Suits me: soon though......?---not holding my breath

Thu, 04/25/2013 - 08:01 | Link to Comment Quinvarius
Quinvarius's picture

This gives me a raging destructo-boner.

Thu, 04/25/2013 - 08:03 | Link to Comment a growing concern
a growing concern's picture

"You'll shoot your eye out."

Thu, 04/25/2013 - 08:00 | Link to Comment max2205
max2205's picture

We are not in Kansas Toto

Thu, 04/25/2013 - 08:03 | Link to Comment The_Small_Lebowski
The_Small_Lebowski's picture

As far as i can see this aint over. Guess the indicator ?

http://www.freeimagehosting.net/c7jaf

Thu, 04/25/2013 - 08:07 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

 
Biography: I want more money.

 

Would you just settle for some fiat?

Thu, 04/25/2013 - 08:17 | Link to Comment ugmug
ugmug's picture

I'll take Gold for $10,000 Alex.

Answer.....Gold Helicopter Blades

 

Question? What are Ben Bernanke's Teeth.

Thu, 04/25/2013 - 15:00 | Link to Comment Colonel Klink
Colonel Klink's picture

Pubes from the bankster elite he's been blowing?

Thu, 04/25/2013 - 08:05 | Link to Comment justinius1969
justinius1969's picture

Timing is everything..

Thu, 04/25/2013 - 08:07 | Link to Comment Archimedes
Archimedes's picture

You beat me to it. "When Albert? When?" Timing is indeed everythig and you have been making this call for many years now.

Thu, 04/25/2013 - 08:13 | Link to Comment dick cheneys ghost
dick cheneys ghost's picture

when the Dollar dies...........because will the world still use the Dollar for Int. trade? What will oil be traded in? Yuan, Ruble or Euro...?

The paraidigm changes when the world uses a different trade settlement system, not before

Thu, 04/25/2013 - 08:19 | Link to Comment buzzsaw99
buzzsaw99's picture

^This^

Thu, 04/25/2013 - 08:52 | Link to Comment AnAnonymous
AnAnonymous's picture

How old is Edward? If born before 2000, then elements of his predictions wont be during his lifetime.

Thu, 04/25/2013 - 08:08 | Link to Comment orangegeek
orangegeek's picture

If gold, priced in US Dollars, goes to $10,000, which is fine, then the value of the US Dollar will plummet - so more US Dollars would be required to buy the same ounce of gold.

 

Overlay of USD and Gold:

 

http://bullandbearmash.com/chart/gold-falls-dollar-climbs-vice-versa/

 

If the US Dollar falls, the Euro, Yen, Pound and CDN will rocket in value - not likely to occur.

 

And if the US Dollar plummet, the S&P500 will be 3000, not 450.

 

In spite of the 18% drop in gold, the largest drop ever in the history of the planet, gold prices are still going to the moon. 

 

Denial is a powerful thing.

 

Thu, 04/25/2013 - 08:11 | Link to Comment JFK.4PREZ
JFK.4PREZ's picture

http://www.reuters.com/video/2013/04/24/reuters-tv-3-myths-about-gold?vi... myths about gold   <== Have you guys seen this redonkulous reuters vid.   The guy in this video should get stoned.  ...Or is he?

Thu, 04/25/2013 - 08:11 | Link to Comment JFK.4PREZ
JFK.4PREZ's picture

The title is 'The 3 myths about Gold'  

Thu, 04/25/2013 - 09:02 | Link to Comment Quinvarius
Quinvarius's picture

He is reaching pretty hard to twist the truth in an environment he doesn't understand.

Thu, 04/25/2013 - 08:56 | Link to Comment Quinvarius
Quinvarius's picture

It all depends on how the companies navigate the mess.  A lot will go bankrupt.  A company is a living thing.  Gold is just money. 

Thu, 04/25/2013 - 09:03 | Link to Comment Quinvarius
Quinvarius's picture

Duplicate

Thu, 04/25/2013 - 09:06 | Link to Comment cynicalskeptic
cynicalskeptic's picture

COMEX expiration today.  Price is already headed back up nicely for both gold and silver.   Not even waitiong for the afternoon.   Anyone starting a pool on when/if theree will be a default?  Or is it simpler to go for when JPM's vault is empty (officially... odds are it has been since it opened)

 

For those intersted in such things, get your orders in for US Mint Gold Eagle Proofs before next week's price reset (seems like an increase will be in the cards after this week's reduction)

Thu, 04/25/2013 - 09:30 | Link to Comment Pareto
Pareto's picture

Most logical post I've seen on this thread yet.  Competing currencies will rally aginst $USD debasement, followed by competitive devaluation inturn.  In the meantime, US, like Japan's Nikkei will see SnP 3 times its current position.

Thu, 04/25/2013 - 08:08 | Link to Comment Charles Nelson ...
Charles Nelson Reilly's picture

What about Bitcoin?

Thu, 04/25/2013 - 08:14 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

What about it?

Thu, 04/25/2013 - 08:10 | Link to Comment Silverhog
Silverhog's picture

I'll be happy just to see the G/S ratio get back to something realistic. Christ, they must be a shit load of paper Silver out there.

Thu, 04/25/2013 - 08:12 | Link to Comment hugovanderbubble
hugovanderbubble's picture

and Spain 3.500 points

Thu, 04/25/2013 - 08:13 | Link to Comment Bad Attitude
Bad Attitude's picture

Gold and silver serve as a preservation of wealth assuming society doesn't have a near complete collapse. In other words, precious metals will have value so long as social order more or less remains. With all the people raised to believe they are entitled to the fruits of other people's labor - social justice - I'm just not seeing social order remaining, certainly not in the population centers.

Thu, 04/25/2013 - 08:39 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Gold and silver have seen their fair share of collapses in the last 6000 years.

Thu, 04/25/2013 - 08:45 | Link to Comment new game
new game's picture

if you didn't buy in 1300 range > fear won...

Thu, 04/25/2013 - 09:08 | Link to Comment cynicalskeptic
cynicalskeptic's picture

Seems like the number of regime collapses (and corresponding monetary system failures) far outnumbers gold and silver market collapses.

Remember - you can debase coinage too - though it takes more work than printing banknotes.

Thu, 04/25/2013 - 13:26 | Link to Comment Professorlocknload
Professorlocknload's picture

Assuming the total collapse of a government could be considered social collapse, during the last couple days of the fall of Saigon gold was the the last remaining item of value, unless one had a helicopter.

Gold was traded for a ride to freedom.

I would think gold is the go-to because of social disintegration.

Thu, 04/25/2013 - 08:13 | Link to Comment AlltheWine
AlltheWine's picture

If gold's run is to begin anew, this is likely where it occurs given this technical set-up, which seems pretty important in defining its secular bull vs. equities' secular bear.

 

http://www.onlypricesmatter.com/2013/04/25/gold-at-its-most-critical-juncture-since-1999-secular-lows-about-to-begin-out-performing-again/

Thu, 04/25/2013 - 08:25 | Link to Comment GVB
GVB's picture

Regarding gold, my best guess would be that recent "deposit haircut news" scared the sh*t out of the entire western world. Also very funny, that recently in the EU parliament, they've been debating (or addressing the problem of -) the fractional reserve banking system. Check the URL below, if you like. Looks like Cyprus never was a storm in a teacup, it appears now to have been the huge catalyst for who knows what. Gold as commodity/money is just one of the affected "items". VERY curious for further development regarding this mess. Editing comment: The next country to pose a depository haircut on its people will unleash unseen turmoil in the global financial world. Brace. And stack physical.

 

http://www.youtube.com/watch?v=eLWVPwi65Cs&list=UU-XsHHcuGtyzQMmuITIQCpg

Thu, 04/25/2013 - 08:16 | Link to Comment gmak
gmak's picture

If yields are sub 1% and GOLD = $10K, then it seems unlikely that SPX = 450.  It is a dollar-priced asset, like gold, that also takes futre cash flow discounts from the yield curve.  SPX would be up around 4500, no - based purely on the existing relations with USD fiat and the yield curve.

Thu, 04/25/2013 - 08:47 | Link to Comment Urban Redneck
Urban Redneck's picture

a path through time, not a point in it

 

Thu, 04/25/2013 - 08:17 | Link to Comment q99x2
q99x2's picture

How can you have a recession with fake numbers.

Thu, 04/25/2013 - 10:03 | Link to Comment cynicalskeptic
cynicalskeptic's picture

Same as a fake boom - only backwards.

Thu, 04/25/2013 - 08:20 | Link to Comment W T F II
W T F II's picture

Right on the "Funny Money"...??!! The sequence could be a bit off, though.

Thu, 04/25/2013 - 08:20 | Link to Comment Diablo
Diablo's picture

$10,000? PFFT!!!! poseur! if youre gonna go retard, you might as well go full-retard. mike baloney says its going to $20,000. thats more like it!

Can we get another clown with a 30,000 target?! how about $50,000?!?!

 

 

Thu, 04/25/2013 - 08:24 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

They promised me numbers like that a decade ago on the NASDAQ.

 

It didn't work out so well.

Thu, 04/25/2013 - 08:37 | Link to Comment Croesus
Croesus's picture

@ Diablo:

I'm calling it at $40,000+, when it's all said and done.

 

Best Regards,

Bozo

Thu, 04/25/2013 - 09:21 | Link to Comment Pareto
Pareto's picture

I tend to agree.  $10,000 gold implies arable land at roughly the same/acre.  I can't even conceptualize that.  Quarter section $1,600,000.  That would mean a loaf of bread is $20, eggs, $10, and that wages would have risen commensurately.  If everybody is broke, who would be buying?  I get the inflation hedge but........aww fuck who knows.

Thu, 04/25/2013 - 09:33 | Link to Comment toys for tits
toys for tits's picture

How long would it take to get to $10,000 toz. gold if prices started doubling every:

15 hours like in Hungary in 1946:

24.7 hours like in Zimbabwe in 2008:

1.41 days like in Yugoslavia in 1994:

3.7 days like in Germany in 1923:

4.27 days like in Greece in 1944:

5.34 days like in China in 1949:

12.5 days like in Armenia in 1993:

13.1 days like in Peru in 1990:

15.1 days like in France in 1796:

15.6 days like in Ukraine in 1994?

This should paint enough of a picture as these are just a few examples of the documented hyper-inflationary periods experienced in recent history.

OR IS IT DIFFERENT THIS TIME?

Thu, 04/25/2013 - 09:23 | Link to Comment toys for tits
toys for tits's picture

 

 

Are you serious, you don't know? Man, everyone knows you never go full retard.

Thu, 04/25/2013 - 08:22 | Link to Comment observer007
observer007's picture

No bubble on the gold market

We have compared the current gold price trend with previous bubbles and argue against the view of bubble formation. The fundamental environment of ultra-loose monetary policy, low real interest rates and the threat of a global depreciation race continue to speak for a rising gold price.

http://homment.com/gold-bubble

Thu, 04/25/2013 - 08:51 | Link to Comment dontgoforit
dontgoforit's picture

It's all bubbles, and everyone is blowing.

Thu, 04/25/2013 - 12:41 | Link to Comment Diogenes
Diogenes's picture

How in the hell can Gold be in a bubble when it has dropped $500 from its peak?

Thu, 04/25/2013 - 08:23 | Link to Comment SheepDog-One
SheepDog-One's picture

Can you believe Bloomberg has a headline right now saying gold will soon be at $800 due to 'CPI ratio' whatever the fuck that's supposed to mean? I want to see the CPI/Clownbux ratio. This is all just shit at this point.

Thu, 04/25/2013 - 08:24 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

I think it's pretty clear to everyone that the mayor has gone stark raving mad.

 

Oh wait....you probably meant the network.

Thu, 04/25/2013 - 09:19 | Link to Comment cynicalskeptic
cynicalskeptic's picture

Both have lost touch with reality.

Thu, 04/25/2013 - 08:25 | Link to Comment W T F II
W T F II's picture

S D-1,

 

What's wrong with $800 (or less) and THEN $10,000 (or more)..??

Thu, 04/25/2013 - 09:37 | Link to Comment Shell Game
Shell Game's picture

+1  That's the way I see it playing out.  What is it about the word 'decoupling' that people don't seem to understand?  The paper market is NOT the physical market.  When the sheep finally understand this it will be too later for them.

Thu, 04/25/2013 - 08:49 | Link to Comment Croesus
Croesus's picture

@ SheepDog-One:

Rhetorical question: Do you have the physical stuff? If so, sit back, enjoy the show!

The price (as quoted in Bernankecoin), is meaningless. Once the last ounce of physical is sold, the "price" will definitely fall.

When was the last time MSM ran a "pro-Gold" piece? When the MSM starts lining up behind Gold, then you know the proverbial shit will be hitting the fan.

That time is coming.

 

Thu, 04/25/2013 - 08:25 | Link to Comment Dr. Engali
Dr. Engali's picture

I agree that the S&P should be at 450, however I think the means in which it gets there is going to blow people's minds. I expect to see this "deep and liquid" market vaporize overnight.

Thu, 04/25/2013 - 08:36 | Link to Comment Dr. Engali
Dr. Engali's picture

Damn that's interesting. I'd like to hear what he has to say about that. My guess is his fiduciary responsibility is forcing him to back off on his thesis, although he would never say that. Gold hasn't exactly been a stellar performer, I'm sure heis feeling some pressure.

Thu, 04/25/2013 - 08:41 | Link to Comment fonzannoon
fonzannoon's picture

Doc if Bass does not have the ultimate ego, no one does. You gotta be kidding me with this. He is famous for that move (buying...and taking delivery). Now that the world is supposedly scrambling for every ounce they can find and Bass knows how easily the comex can go bust...he okay's a sale of physical?

If he announces his resignation from their board I will shrug my shoulders and agree with you. At this point I am waiting for Schiff to close down his precious metals firm and announce he is long the dollar.

Thu, 04/25/2013 - 08:42 | Link to Comment Dr. Engali
Dr. Engali's picture

That's the best reason I can come up with. He's not like you and me where we can sit and be patient. He is running institutional money and has to answer to a board.

Thu, 04/25/2013 - 08:47 | Link to Comment fonzannoon
fonzannoon's picture

I hear you, I am not asking you to explain it away. I am floored. Giving central bank tightening as the reason? I just heard Bass say that Central Banks won't ever tighten again.

I also thought Texas wanted as much gold there as possible.

Tyler...help?

Thu, 04/25/2013 - 09:24 | Link to Comment WillyGroper
WillyGroper's picture

Threat of a horse head in the bed?

Thu, 04/25/2013 - 10:23 | Link to Comment Honey Badger
Honey Badger's picture

If there was backwardation in the gold futures strip, and you had confidence in the ability of the exchange to deliver, then this move would make perfect sense. 

Thu, 04/25/2013 - 08:42 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Sounds like Kyle is fishing for some cheap gold.

Thu, 04/25/2013 - 08:38 | Link to Comment LawsofPhysics
LawsofPhysics's picture

They sold 375 million out of the 1.4 billion ahead of the price drop to make other investments (which are paying off).  Guess what the news will be in a few months?  This is simply smart management as far as I can tell.  This is an institutional trust fund, it cannot remain static, but still run by some folks with inside knowledge.  Simply means another sale on gold is coming.  

Thu, 04/25/2013 - 08:43 | Link to Comment fonzannoon
fonzannoon's picture

Laws you are right. I was wrong in saying he sold post crash.

However...

The University of Texas Investment Management Co., the third-largest U.S. academic endowment, sold $375 million in gold bars from holdings of about $1.4 billion and reinvested the proceeds in gold futures and equities.

In the three months that ended Feb. 28, the Austin, Texas-based fund bought $75 million in gold futures, $225 million in developed-market equities and $75 million in emerging-market equity futures, Bruce Zimmerman, the chief executive officer, said yesterday in a telephone."

They sold physical gold and bought gold futures? That goes against the whole ideology Bass put forward.

I'd argue that buying developed market equities at these levels seems like a move that goes against what Bass believes as well.

"“Our idea was to buy and hold gold, and when the world’s central banks begin tightening, we’ll sell,” Zimmerman said.“The price of gold has traded off, but the world’s central banks haven’t started tightening.”

That solidifies that whether their move was wise or dumb...they certainly were working off a pretty fucking stupid thesis.

Thu, 04/25/2013 - 08:42 | Link to Comment LawsofPhysics
LawsofPhysics's picture

The fact that Joh Stewart did a hit piece on gold full of all kinds of mis-informatin should scare the fuck out of everyone.  Gee John, it's down in "price" since 2011, but what compared with 5, 10, or 15 years ago?  Douchebag.  Something wicked this way comes.

Thu, 04/25/2013 - 08:45 | Link to Comment fonzannoon
fonzannoon's picture

I saw that piece. It was disgusting. He knows his place. So does Bass. That is why my mind is blown.

Thu, 04/25/2013 - 08:48 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Jon Stewart knows what he's talking about.......years of training on MTV has turned him into a financial guru.

Thu, 04/25/2013 - 08:52 | Link to Comment Dr. Engali
Dr. Engali's picture

His brother is the COO of the NYSE. Stewart got some marching orders

Thu, 04/25/2013 - 08:57 | Link to Comment Croesus
Croesus's picture

Is the Jon Stewart hit piece online anywhere?

 

Thu, 04/25/2013 - 09:03 | Link to Comment fonzannoon
fonzannoon's picture

Your best bet is the show's website. I have to run or i'd try to grab it for u.

Thu, 04/25/2013 - 08:51 | Link to Comment LawsofPhysics
LawsofPhysics's picture

They knew a beat-down was coming so they sold physical at a premium, bought futures dirt fucking cheap and are now making a huge profit (look how much GLD has recovered already), they will buy more physical and on balance sheet actually end up reducing the dollar cost average of their physical holdings. win-win.  I think the dollar will remain stable long enough for them to pull this off.   Smart management with inside information.

Thu, 04/25/2013 - 09:01 | Link to Comment tarsubil
tarsubil's picture

Exactly. They just made a good trade. It seems to confirm that the COMEX will be able to make deliveries for a while longer.

Thu, 04/25/2013 - 09:02 | Link to Comment fonzannoon
fonzannoon's picture

It's an awesome explanation. Confirms they had enough inside knowledge to know a beat down was coming....which means they probably are in the club and will get delivery. Otherwise it just ain;t worth the risk, especially if there are delivery failures happening already.

Thu, 04/25/2013 - 09:31 | Link to Comment Urban Redneck
Urban Redneck's picture

If they bought $75 million futures prior to the February 28 they most likely aren't up on the position, and I really hope they weren't buying Apr calls back in Feb...

Thu, 04/25/2013 - 09:39 | Link to Comment tarsubil
tarsubil's picture

Correct but they only used a portion of the sale of physical towards gold futures. They've had an opportunity to buy in the meantime.

Thu, 04/25/2013 - 09:40 | Link to Comment Urban Redneck
Urban Redneck's picture

Now, if they had SOLD $75 million in gold futures in the 3 months prior to February 28...

But what does a dumb Redneck know...

Thu, 04/25/2013 - 10:00 | Link to Comment tarsubil
tarsubil's picture

Yikes.

Thu, 04/25/2013 - 10:01 | Link to Comment WillyGroper
WillyGroper's picture

He's funny as hell.

Has a wide audience.

His brother Larry, COO of NYSE.

What else needs to be said?

Thu, 04/25/2013 - 08:49 | Link to Comment HoofHearted
HoofHearted's picture

Uh, Bass bought miners...levering up.

He's been off on Japan for a LOOOOONG time, but he will eventually get paid. Count on it.

Thu, 04/25/2013 - 09:38 | Link to Comment Urban Redneck
Urban Redneck's picture

Have a source for that?  What we're reading says-

In the three months that ended Feb. 28, the Austin, Texas-based fund bought $75 million in gold futures, $225 million in developed-market equities and $75 million in emerging-market equity futures, Bruce Zimmerman, the chief executive officer, said yesterday in a telephone."...

The latest investment didn’t change the fund’s overall exposure to the metal because of the leverage involved in its gold futures, Zimmerman said.

Thu, 04/25/2013 - 08:37 | Link to Comment Sean7k
Sean7k's picture

Notice it wasn't Kyle Bass making the statement? Texas is attempting to have their gold sent to Texas. With the recent selloff, perhaps Bass is losing some influence? Maybe someone said there are difficulties if you want your gold? Should be interesting to watch. I'm waiting for Bass to make a statement...

Thu, 04/25/2013 - 08:40 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Bass is not the only one on the board.  Notice the gold was sold ahead of the price decline and the other investments did well.  Not a static fund, and I wouldn't worry about it doing poorly, ever.

Thu, 04/25/2013 - 08:43 | Link to Comment Sean7k
Sean7k's picture

Sure, but choosing a spokesperson is important. How can you worry about a fund with billions in management and connections up the wazoo? I have to think Bass is stewing...

Thu, 04/25/2013 - 08:48 | Link to Comment LawsofPhysics
LawsofPhysics's picture

They sold physical at a premium, bought futures at a huge discount, are now profitting.  Guess what they will do next?  Buy more physical and end up reducing the balence sheet holding cost of their holdings.  win-win, smart management.

Thu, 04/25/2013 - 08:49 | Link to Comment fonzannoon
fonzannoon's picture

Those futures that they bought...they have to ask for delivery right?

Thu, 04/25/2013 - 08:50 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Don't know, but I imagine they did.

Thu, 04/25/2013 - 09:06 | Link to Comment new game
new game's picture

don't put kyle on such high esteem.  he is an insider-how could he not be?

front running info is smart? duh

you are not in the club-G.C,

that is why we are here second guessing...

lol

Thu, 04/25/2013 - 09:23 | Link to Comment new game
new game's picture

once again we ignore their place in history and fall for retheric

who has the money and influence?

just another pundit singing your anthem

QUESTION EVERYTHING and keep a thinkin...

kyle pile, sinclair is where?

money shills/and you aint privy...

Thu, 04/25/2013 - 08:54 | Link to Comment Urban Redneck
Urban Redneck's picture

You're assuming that 1) the futures position took turn out to be profitable and 2) they can get physical gold at a later date...

 

Thu, 04/25/2013 - 08:54 | Link to Comment fonzannoon
fonzannoon's picture

I am wondering when UT asked/asks for delivery of those futures if they will get settled in cash and will be 375 mil less in phyz.

Thu, 04/25/2013 - 08:57 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Without knowing the details of the transaction, who knows, but gee, GLD is up how much since Monday?  They will take delivery or Bass will resign.

Thu, 04/25/2013 - 09:10 | Link to Comment Urban Redneck
Urban Redneck's picture

The devil is in the details, they should have current period cash-flow from the black gold royalties if they wanted to speculate.  Their discussion of maintaining the level of exposure while changing the nature of the exposure and risk profile reeks of CYA or sheeple feed.   

Thu, 04/25/2013 - 08:42 | Link to Comment fonzannoon
fonzannoon's picture

Bass has such an ego. He said if they sold it he would resign. Literally his words. I am waiting for his resignation.

Thu, 04/25/2013 - 08:57 | Link to Comment LawsofPhysics
LawsofPhysics's picture

He may.  My wife went to school with Kyle, grew up down the street from him in Fort Worth Texas.  He is in a club, but what we are witnessing now are some very powerful people starting to betray each other as the various "clubs" get smaller etc.  What you or I do will never bring the world to war/change, but for some of these guys (many of who are former CIA and owners of military industries) its another story.  A friend of mine from Delta Force (still consulting for the pentagon) has confirmed an internal power struggle is underway.  This is how real change occurs and it is occuring all over, keep your tribe in order and hedge according (all we can do anyway).

Thu, 04/25/2013 - 09:06 | Link to Comment tarsubil
tarsubil's picture

Do you have a recommendation for a book or source that actually does a good job detailing the current different factions? Some are obvious but I'm not sure I see all of them.

Thu, 04/25/2013 - 09:24 | Link to Comment cynicalskeptic
cynicalskeptic's picture

If you're not part of TPTB you WON'T see any of the factions or real players.  The strings are pulled from the deep dark recesses out of view.   NOTHING is 'obvious' and if you think it is, then you're seeing only what they want you to see.

 

Thu, 04/25/2013 - 09:36 | Link to Comment tarsubil
tarsubil's picture

I can't give them that much credit.

Thu, 04/25/2013 - 10:01 | Link to Comment web bot
web bot's picture

Could you elaborate a bit more on the power struggle. This is interesting stuff.

Thanks.

Thu, 04/25/2013 - 08:49 | Link to Comment Urban Redneck
Urban Redneck's picture

Kyle is only 1 of 9 board members.

The path of least resistance is to five biggest rednecks on the board and sell them on the idea that paper gold is just as good as physical gold -- or even better because you can leverage your upside exposure and deploy additional cash into some of the other wonderful investment opportunities available right now, and save on those nasty storage, transportation, and insurance costs...

http://www.zerohedge.com/news/2013-04-22/china-hasnt-seen-gold-rush-20-y...

copying & pasting myself now...

Thu, 04/25/2013 - 08:42 | Link to Comment W T F II
W T F II's picture

Dr.,

 

A few too many "fake flash crashes" for comfort. Practice Rounds...??

Thu, 04/25/2013 - 08:47 | Link to Comment Dr. Engali
Dr. Engali's picture

That's the way I see it. Flash crashes cause a greater loss of faith, and drains more liquidity as more people throw up their hands in disgust and get out.

Thu, 04/25/2013 - 08:35 | Link to Comment W T F II
W T F II's picture

"Anti-Ramp"...quite probable...AND it crushes the EUR "by accident"...!!

Thu, 04/25/2013 - 08:41 | Link to Comment youngman
youngman's picture

I will take $10,000 ..it will cover some of my losses from last week.....I think whoever crashed it last week thought they were showing people how bad gold is as an investment....I think they opened the flood gates in the rest of the world...who knows its a great investment and wants it...many who have lived thru hyperinflation or big changes in their governments...and it did not end up well for wealth....and savings..in 5 years Asia will own most of the gold and silver..the real stuff....and we will play the paper game until they do....and them some more...because that is what we do..play..we do not work anymore..make anything..

Thu, 04/25/2013 - 08:42 | Link to Comment ATM
ATM's picture

100% back by gold hasn't been the norm. Inthe US I think using a mean ratio of 40% is much closer to the historical norm. That suggests a gold price of $4,440 right now - infinity later.

Thu, 04/25/2013 - 09:27 | Link to Comment cynicalskeptic
cynicalskeptic's picture

Be happy if you keep up with REAL inflation rates and preservation of principal - because very little is coming close to doing even that. It's about wealth PRESERVATION.

Thu, 04/25/2013 - 14:00 | Link to Comment ATM
ATM's picture

Absolutely. I'm all about wealth preservation.

Thu, 04/25/2013 - 08:43 | Link to Comment JohnGaltsChild
JohnGaltsChild's picture

JP's crackin'

Keep on stackin'

Thu, 04/25/2013 - 08:45 | Link to Comment WhiteNight123129
WhiteNight123129's picture

It is totally possible to have the Terasuries below 1%. It would require a war. If we have no war, not possible.

 

 

Thu, 04/25/2013 - 09:03 | Link to Comment andrewp111
andrewp111's picture

Why is a war needed? If one simply follows the current (and longstanding) trend, the 10y should cross the zero bound sometime in the next 4-5 years.

Thu, 04/25/2013 - 09:34 | Link to Comment WhiteNight123129
WhiteNight123129's picture

War is a justification to repress rates, and even then it did not work in 1919. It worked in China in the late 30s and in the US until 1950.

Now the problem is that in those two periods, the Treasuries were not widely used outside of the US.

The weakness of the Treasuries is that Treasuries are used outside the US. The weakness in the case of sub 1% rates comes from the actions outside the US.

If the Treasuries were used only in the US as a monetary asset little chance of repudiation.

The other weakness in the 10,000 Gold and sub 1% is the inflation expectations that it would trigger. This would trigger massive inflation expectations.

It is not a coincidence that many commodities exchange have annouced in the last 2-3 years that Gold would be accepted as a collateral.

Commodities exchange need to function no matter what or it is breakdown of the world logistics.

The world can afford a breakdown of the treasuries, but not a breakdown of logistics.

The Treasury problem is I am afraid a US domestic issue, not a world issue.

The world functioned with the pound as reserve currency, it can totally function without the US dollar as a world reserve currency. At this point the USD is the ~the United States currency and the United States problem~ not anymore ~ the United States currency and others problem~.

Australia is shifting to Yuan, BoC increases its Gold reserves. The world can function without the dollar.

It will neither be abrupt nor dramatic, just a slow change.

Now it is nice to be contrarian and speculate on Gold 10,000 with Bonds sub 1 %.

But how come was JBGs limit down while Gold was being wacked on the same day?

So yes the Treasuries Bubble can have a gasp rally or parabolic move but parabolic move rarely stay at the top, specially when the nemesis asset (Gold) goes very high.

In religious parlance (since people buy assets like they go to church), a move of Gold at 10,000 would make the Gold church very happy, but it would destroy the church of the Treasuries, guaranteed.

Again the problem is to control yields on treasuries outside the US.

 

Thu, 04/25/2013 - 09:13 | Link to Comment WhiteNight123129
WhiteNight123129's picture

As for bull markets, they never last for ever. That includes bonds.

 

Thu, 04/25/2013 - 08:48 | Link to Comment The_Small_Lebowski
The_Small_Lebowski's picture

GetZee - no thanks, im fine for toilet paper. Maybe should have put more thought into my bio.

Convinced there is another smack on the way however!  Its just looking too damn easy to me. I would expect at least three routs to really fuck with peoples minds and leave them cowering!

Thu, 04/25/2013 - 09:46 | Link to Comment WhiteNight123129
WhiteNight123129's picture

Absolutely correct, commodity cycles are vicious, Gold is money (for those who believe it, but what makes something is the belief in it, if the USD loses the confidence, USD is not money anymore, Gold has the advantage of not needing the trust in other people to manage this form of money, unlike USD Federal reserve notes) AND a commodity at the same time. It can not really if all commodities plunge. Soft commodities and Gold are joined at the hip.

Thu, 04/25/2013 - 08:51 | Link to Comment forwardho
forwardho's picture

Carry the implications of his logic to the end result.

Before gold hits $10k the world will be in full on Mad Max.

The U.S. currency will no longer hold reserve status.

If Gold is at that price what wil ounces of food be worth?

Thu, 04/25/2013 - 09:29 | Link to Comment cynicalskeptic
cynicalskeptic's picture

What'll 12ga00, 9mm and Nato standard be worth?    You have to diversify your metal holdings.

Thu, 04/25/2013 - 09:37 | Link to Comment forwardho
forwardho's picture

Since those items are currently not available, does that make them priceless.

Huge demand/no supply

Thu, 04/25/2013 - 09:51 | Link to Comment WhiteNight123129
WhiteNight123129's picture

The price of food in dollars will be to the moon.

If the loss of confidence is quick and swift, the standard of living adjust down very fast, the trade deficit is closed like in 1865.

The plunge of the Greenback meant that nothing was imported and the US was a massive exporter.

So US people are poor but they ahve a job quickly.

The other alternative is a protacted adjustment (that is what teh Fed is doing).

It would require though entitlment reform, end of war spending, and end of lobbies theft of tax extracted from the people.

It sounds a difficult reform. The United States could end up as a failed state.

 

 

Thu, 04/25/2013 - 08:50 | Link to Comment johnnynaps
johnnynaps's picture

If there isn't enough fiat to go around, how will anyone be able to afford $10k gold? Rising wages and employment are a thing of the past. Throw in vaporized equities and I just don't see how gold will be valued at that number from a supply of dollars perspective. The S&P would have to do the exact opposite for gold to go to the moon!

Thu, 04/25/2013 - 09:01 | Link to Comment andrewp111
andrewp111's picture

If the S&P is at 450 and the 10y is at 0.5% there is no way gold will be at 10K.  Gold will crash in price along with everything else. Now, gold could go to 10K afterward,  but one has to go through the ice-realm of deflation before the fires of hyperinflation consume everything.

Thu, 04/25/2013 - 08:54 | Link to Comment Bourbonite
Bourbonite's picture

After the recent slam down in PM's the bankers etc learned a lesson, and they will not repeat it any time soon. Gold will likely trade within a reasonably tight range for several months, 1380-1480 give or take, and physical demand will level off from the current rush to buy. It will still be a bargain, but the fuss will soon be over in terms of fuckwit media coverage.

Thu, 04/25/2013 - 09:35 | Link to Comment cynicalskeptic
cynicalskeptic's picture

Something big hit the fan behind the scenes.   This was a desperation move and likely one that cannot be easily maintained.  

They'll try and manage the media meme but I suspect the scramble for tons is on and nobody wants to be the last one trying to collect their bullion.  Look at the outflow from GLD lately.....  the authorized participants are cashing in shares for metal.  Could it be that all those leases are coming due and nobody wants to renew?  

Thu, 04/25/2013 - 08:58 | Link to Comment sunny
sunny's picture

I am absolutely convinced that he is correct on each point....  It's only a matter of timing. 

sunny

Thu, 04/25/2013 - 09:07 | Link to Comment andrewp111
andrewp111's picture

Yeah. The S&P may hit 450, the 10y may go below 1% and gold can go to 10K. However, only 2 of those 3 things can happen at the same time.

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