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Seth Klarman Expains When "Investing Is At Its Hardest" And Why He Is Not Joining The Momentum Trade

Tyler Durden's picture




 

If you thought that Baupost's Seth Klarman would be the next to join twitter (the New Normal Yahoo Finance), #timestamp his minute-holding trades, ignore the money-losing ones, trumpet his winners, always make money, scream at all those who don't agree with his "strategy", and otherwise become what is known these days as a (momentum) investor, we have some bad news: it's not happening. Here's why (from his most recent letter).

Most U.S. investors today have a clear opinion about what everyone else has no choice but to do. Which is to say, with bonds yielding next to nothing, the only way investors have a chance of earning a return is to buy stocks. Everyone knows this, and is counting on it to remain the case. While economist David Rosenberg at Gluskin Sheff believes government actions could be directly or indirectly responsible for as many as 500 points in the S&P 500, or 30% of its current valuation, traders have confidence in Ben Bemanke because betting that his policies will drive equities higher bas been a profitable wager. Bernanke, likewise, is undoubtedly pleased with these speculators for abetting his goal of asset price inflation, though we all know that he will not call them first when he decides to reverse direction on QE. Then, the rush for the exits will be madness, as today' s "clarity" will have dissolved, leaving only great uncertainty and probably significant losses.

 

Investing, when it looks the easiest, is at its hardest. When just about everyone heavily invested is doing well, it is hard for others to resist jumping in. But a market relentlessly rising in the face of challenging fundamentals--recession in Europe and Japan, slowdown in China, fiscal stalemate and high unemployment in the U.S.-- isthe riskiest environment of all.

And a word for those who believe that swing and/or momentum trading, about as effective as a coin toss in "forecasting" the future as a coin toss, is the way to go.

[O]nly a small number of investors maintain the fortitude and client confidence to pursue long-term investment success even at the price of short-term underperformance. Most investors feel the hefty weight of short-term performance expectations, forcing them to take up marginal or highly speculative investments that we shun. When markets are rising, such investments may perform well, which means that our unwavering patience and discipline sometimes impairs our results and makes us appear overly cautious. The payoff from a risk-averse, long-term orientation is--just that--long term. It is measurable only over the span of many years, over one or more market cycles.

 

Our willingness to invest amidst failing markets is the best way we know to build positions at great prices, but this strategy, too, can cause short-term underperformance. Buying as prices are falling can look stupid until sellers are exhausted and buyers who held back cannot effectively deploy capital except at much higher prices. Our resolve in holding cash balances--sometimes very large ones--absent compelling opportunity is another potential performance drag.

 

But we know that in a world in which being anti-fragile is good, what doesn't kill you can make you stronger. Short-term underperforrnance doesn't trouble us; indeed, because it is the price that must sometimes be paid for longer-term outperformance, it doesn't even enter into our list of concerns. Patience and discipline can make you look foolishly out of touch until they make you look prudent and even prescient. Holding significant, low or even zero-yielding cash can seem ridiculous until you are one of the few with buying power amidst a sudden downdraft. Avoiding leverage may seem overly conservative until it becomes the only sane course. Concentrating your portfolio in the most compelling opportunities and avoiding over diversification for its own sake may sometimes lead to short-term underperformance, but eventually it pays off in outperformance.

He is, of course, right. But for now, the hedge fund of Ben Bernanke and his Federal Reserve Onshore Capital LP, who appear to have removed all the downside risk of the manipulated asset class known as stocks, are making hedge fund managers across the country seem obsolete, and scratch their heads in wonder asking: "is this even worth it?"

 

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Sun, 05/05/2013 - 09:41 | 3531815 Dr.Engineer
Dr.Engineer's picture

Sage words of advice.  I actually needed to hear this. Not that my resolve was leaving but my inner-gambler was rising.

I keep a silver coin in my pocket to remind me daily about what is real and what is fiction held in a computer.  It helps.

 

Sun, 05/05/2013 - 10:03 | 3531861 orez65
orez65's picture

Funny!

I've kept a silver coin in my pocket since I started buying precious metals.

Sun, 05/05/2013 - 10:35 | 3531909 Pladizow
Pladizow's picture

"Margin of Safety", Bitchez!!!!

Margin of safety PDF: http://disgu.st/~jon/books/seth_klarman-margin_of_safety.pdf - original copys can go for $2,000.

Sun, 05/05/2013 - 12:25 | 3532043 Pegasus Muse
Pegasus Muse's picture

Good advice.  Here's some more from PCR. 

===

May 5, 1013

Paul Craig Roberts discusses the Government’s latest Employment (Non Farm Payroll) Report, published last Friday.  Explains the Federal Reserve’s purpose for orchestrating the big selloff in Paper Gold in the Futures Market two weeks ago and the unintended consequences of that act.  He talks about the European Union’s decision to deal with insolvent banks in Cyprus by forcing the Cypriot Government to steal Depositors’ Funds from their bank accounts.

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2013/5/5_Dr._Paul_Craig_Roberts_files/Dr.%20Paul%20Craig%20Roberts%205%3A5%3A2013.mp3

Sun, 05/05/2013 - 13:29 | 3532228 Precious
Precious's picture

Hey Kito.  Push it down this time, you fucking tool.

As RT further reports, during the attack, one Israeli jet was reportedly shot down by Syria's Air Force, according to Hezbollah's Manar TV channel, citing security sources in Damascus."

Sun, 05/05/2013 - 14:57 | 3532461 Ted K
Ted K's picture

"according to Hezbollah TV" Not a good starting point my friend. Members of Hezbollah regularly claim victory in their media/press directly after their own Mother was bombed and vaporized. You'd have better luck trusting your average FOX "news" broadcast.

Sun, 05/05/2013 - 11:51 | 3532045 Ponzi Pontiff
Ponzi Pontiff's picture

I upped ya for the link - many thanks.

"When bond yields are low, share prices are likely to be high. Yieldseeking investors who rush into stocks when yields are low not only fail to achieve a free lunch, they also tend to buy in at or near a market top"

I wonder what will happen to liquidity - and this so called "market" - when the algos realise that the only way to win is not to play?

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

Sun, 05/05/2013 - 10:19 | 3531890 zjxn06
zjxn06's picture

Klarman is a sharp dude and a very successful value investor.  

If you need more Klarman, he wrote a book entitled "Margin of Safety". Book has long been out of print.  You can buy used copies on Amazon for as low as $1,050. No joke.  People willing to pay a lot of money to read what he writes. 

http://www.amazon.com/Margin-Safety-Risk-Averse-Strategies-Thoughtful/dp...

Jim Grant is a good friend of Seth Klaman.  This is what Jim writes about Seth's book: "Seth is a brilliant investor who has written a brilliant investing book.  Consider it his gift to your net worth."

Seth acknowledges that Jim Grant convinced him, over the course of many conversations, that gold has utility in a world where currencies are being debased at a frenzied pace globally.  Seth has written more an more about gold in his letter in recent years. Only side references are made to gold in his book (published 1991).

Last time I looked at Seth's (Baupost Group) portfolio, he held several publicly traded gold miners.  One in Romania? looked quite interesting.

As for physical gold held for Baupost clients, can't be determined determine it since there are no filings.   

Tylers, thenk you for posting.

Sun, 05/05/2013 - 10:34 | 3531911 Pladizow
Sun, 05/05/2013 - 15:20 | 3532524 spine001
spine001's picture

For those who want to read it for free.

Www.my10000dollars.com/MF.pdf

And you are welcome!

Until next time,

Engineer

Sun, 05/05/2013 - 09:43 | 3531818 kito
kito's picture

tyler, is this klarman post part of the same letter that you posted a few days ago on klarman?

Sun, 05/05/2013 - 09:49 | 3531827 Tyler Durden
Tyler Durden's picture

Yes

Sun, 05/05/2013 - 09:51 | 3531832 kito
kito's picture

thanks

Sun, 05/05/2013 - 09:45 | 3531820 MythicalFish
MythicalFish's picture

It's actually not that hard. Buy physical gold and long-dated in-the-money (paper) puts. Reinvest dollar profits in bullion, roll protection. Sit back, have a drink, wait for shouts of "fire" in crowded theatre. I find cash a bit risky to be honest..

Sun, 05/05/2013 - 10:52 | 3531948 Gromit
Gromit's picture

Don't forget that your puts will pay off in cash if they can weather the counterparty risk.

Good luck to us all.

Sun, 05/05/2013 - 09:50 | 3531829 sgorem
sgorem's picture

The Infestment Market: Where you are guaranteed to make money for someone other than yourself. Buy high, Sell low. High Frequency Thievery. They don't call them BROKErs for nothing.

Sun, 05/05/2013 - 09:55 | 3531843 short screwed
short screwed's picture

Bernanke's not going to reverse direction. It's going to be pedal to the metal until we blow a piston or drive off of a cliff.

Sun, 05/05/2013 - 10:27 | 3531900 andrewp111
andrewp111's picture

And Bernanke will be gone in 7 months. His successor will most likely be the one driving when the rod or piston blows off the machine.

Sun, 05/05/2013 - 10:47 | 3531935 short screwed
short screwed's picture

Then he can come back and lecture us "a la Greenspan" about the dangers of bubbles and how monetary policy is no substitute for fiscal policy.

Sun, 05/05/2013 - 12:57 | 3532162 AGuy
AGuy's picture

Japan May blow up next year from its new QE program. This might result in Negative US interest rates as it could trigger another Asian economic meltdown (aka 1998)

OtterWood on Japan:

https://www.youtube.com/watch?v=AR3TyfKTeNE&feature=player_embedded

 

A Japan crisis would likely triggler a major correction in US Stocks and probably all stocks globally. In a way it make sense for US centric (Proxy) nations to blowup first. In Rome it was the border providences (proxy states) that blew up first. Roman managed to carry on for sometime after it proxy states started collapsing. The same could be said of other previous empires, The Russian Soviet Empire, that lost control of its eastern European satellites, The British empire lost all of its big colonies (Canada, Austrialia, India, South Africa, etc). Japan and Western Europe are proxy states of the US empire since they mostly follow US policies.

 

 

 

Mon, 05/06/2013 - 17:15 | 3535466 chart_gazer
chart_gazer's picture

central bank has never reversed. they let treasuries mature. no sense talking about reversing, they will keep QE and keep buying gov debt for a long time. they have to since there is no other buyer for the amount being issued. gov continues to run deficits---fed keeps buying the debt and the newly printed money goes to the primary dealers to prop up the stock market. you are dreamin if you think this will end anytime soon. its insane but reality

Sun, 05/05/2013 - 10:00 | 3531853 W T F II
W T F II's picture

Basically, he is saying he has trouble picking MAJOR turns...!!

Sun, 05/05/2013 - 10:02 | 3531857 fonzannoon
fonzannoon's picture

I don't think that is what he is saying....

Sun, 05/05/2013 - 10:14 | 3531879 kito
kito's picture

fonz check out my response.....

Sun, 05/05/2013 - 10:05 | 3531855 JustObserving
JustObserving's picture

More than 70% of trading is HFT and 70% of volatility is generated by HFT and not news.  If you can generate volatility in the markets, you have a license to print money.  Goldman Sachs, JP Morgan and others rarely have a losing day in the markets.  What are the odds of that happening by chance?  What are the odds of a 7 or 8 standard deviation move in gold as we had the other day?  Maybe 100 billion to one by random chance.  So it is very clear that the markets are manipulated to suit the banksters.

Bring back the uptick rule which existed from 1938 to July 6, 2007 if you want fairness in the markets.  That will never happen in the corrupt, crony US markets.  

Winning is hard in a rigged casino.

Sun, 05/05/2013 - 10:09 | 3531872 resurger
resurger's picture

I really loved the post by the privateer, in one of the sections bill says that the people back then (i guess in the early 1900's) knew the Financial Markets were for the rich, and they did not bother with it because they were engaged in doing real trades buying goods etc...

Maybe they knew that the entire market was rigged to benefit the rich.

 

Sun, 05/05/2013 - 10:29 | 3531904 drdolittle
drdolittle's picture

Yep.

I still have a 401 but am really thinking about cashing it in and paying my enormous tax bill. They're sure to be taken from us soon enough or expropriated or bailed in etc. I could pay off my mortgage, still have a pile of cash, my pms and money stashed for the kids college.

No good farmland close enough to buy. Live in WV.

For a dividend, assuming I've got pms for capital preservation, what could you all suggest?

 

Sun, 05/05/2013 - 13:19 | 3532209 Bam_Man
Bam_Man's picture

3M (MMM). Great innovative company, conservatively run. Somewhat over-valued today, but what isn't? Their record of dividend increases paid for solely out of earnings speaks for itself.

Sun, 05/05/2013 - 20:05 | 3533010 cornflakesdisease
cornflakesdisease's picture

CEF  Central Fund of Canada  50% gold and 50% silver vaulted in Canada, outside the USA.  With the PM dip, a great time to buy.

ONECK  a boring pipeline company that makes money in good or bad times moving propane, butane, and chemicals.

A 1916 D Mercury Dime PROOF.

 

Sun, 05/05/2013 - 10:03 | 3531858 tradewithdave
tradewithdave's picture

Is the creature from Jekyll Island swapping out the carry trade for a bathing beauty or is Blythe Masters taking the fall for Too Big To Fail?  

http://tradewithdave.com/?p=16466

Sun, 05/05/2013 - 10:04 | 3531862 resurger
resurger's picture

"Cockroaches for the long run!"

Dylan Grice

Sun, 05/05/2013 - 11:55 | 3532057 joego1
joego1's picture

"On a long enough time line the survival rate for cockroaches goes to infinity"

Sun, 05/05/2013 - 14:05 | 3532301 Dealyer Turdin
Dealyer Turdin's picture

Katana Koan there. Aint no hero's edge at Zero Hedge unless it's trading the cliff for the ledge.

Sun, 05/05/2013 - 11:14 | 3531866 Waterfallsparkles
Waterfallsparkles's picture

I believe that when the Market starts to make wild swings from 150 down days to 150 up days that it is time to Sell.  I think about AAPL trading toward $700 it went parabolic to the upside.  Then just months later it was trading at $385.  It appears to me that when Traders want to Sell they push a Stock to its upper limits so they can Sell into strength.

Sun, 05/05/2013 - 10:08 | 3531870 Rory_Breaker
Rory_Breaker's picture

Depends on where you are in the food chain. Squid at the top, everyone below the squid is going to get their asses kicked.

Sun, 05/05/2013 - 10:12 | 3531874 EhKnowKneeMass
Sun, 05/05/2013 - 10:12 | 3531875 Waterfallsparkles
Waterfallsparkles's picture

What I find really interesting is that Bernanke said that he would "increase" or "DECREASE" purchases.  The Street only herd increase, but I think this was Bernanke's way to say he is going to start to DECREASE pruchases.  I am sure that the Reserve Board is having a really good laugh at the Market reaction to pump Stocks when the word DECREASE was introduced for the first time.

Sun, 05/05/2013 - 10:13 | 3531878 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

Bid me up, before you go go

This whole market is a lot of mo mo ...

Sun, 05/05/2013 - 10:19 | 3531884 Lost Wages
Lost Wages's picture

Are we talking about that momentum trader with the shellac in his hair that frontruns the Fed in the stock market, says the rally is a sign of "growth stabilizing" and tells the Fed to get out of the goddamn way and let the strong dollar take the stock market to new heights? I'm expecting his company to go out of business by 2014, but I do like how his gold shorts put my bullion on sale.

Sun, 05/05/2013 - 10:17 | 3531888 Inthemix96
Inthemix96's picture

Sorry for yet another thread jack folks.  For the past couple of weeks I have been posting shit that is happening this side of the pond and not staying on topic and apologise, but you lot wont believe this.

Our esteemed honourable peodophiles over here think porn should be included in sex education for our kids at main stream schools. I am fucking livid with this absolute debouchery these fucking insane criminal bastards are getting away with.  This is being pushed by all three major parties over here as 'Good For The Children'.

Not only do these fucking pyscopathic idiots want sex education compulsory for kids aged 5 up, but now they want kids looking at porn in school hours.  I am at a loss why we allow and put up with this out right criminality in our societies, when will we fucking do something about it?

I am hanging my head in shame here at my fellow countrymen, and whatever happens here, you lot get in short order.  These fucking beasts should be locked up and kept away from the legislature, never mind anywhere near kids.

This world is trully fucked up, and none of us done fuck all to stop it.

Sun, 05/05/2013 - 10:31 | 3531907 ISEEIT
ISEEIT's picture

Relax bro.....No intro to keynesian 'thinking' would be complete without some kiddie porn.

It's just an economics class.

Now STFU and get back to the TV!

Sun, 05/05/2013 - 13:51 | 3532263 asteroids
asteroids's picture

Be thankful it's not Keynesian (ie gay) porn.

Sun, 05/05/2013 - 10:34 | 3531912 fonzannoon
fonzannoon's picture

Wow.

Sun, 05/05/2013 - 10:43 | 3531929 nmewn
nmewn's picture

Thanks for the info.

This why the government indoctrination camps should be under local control.

Sun, 05/05/2013 - 10:45 | 3531932 resurger
resurger's picture

In which country? The Not Great Britain

Sun, 05/05/2013 - 10:54 | 3531951 short screwed
short screwed's picture

Are British tax payers paying for convicted murderers sex change operations like here in Massachusetts? I just want to know what to expect from our state politicians.

Sun, 05/05/2013 - 11:12 | 3531980 Inthemix96
Inthemix96's picture

Not sure short,

But nothing, and I mean nothing would be off the cards for these maniacs.

Fucking class A mental over here now.

Sun, 05/05/2013 - 11:43 | 3532010 gwar5
gwar5's picture

Homeschooling is a great option. The average score for 2 million of them here in the US is the 87th percentile, across all subjects. This is higher than any public or elite private education system in the world, by far. And just two 2 years out of public schooling and into homeschooling catches a kid back up and avoids the pedophiles. 

 

Happy Anecdote

One homeschooling family in Alabama has ten children. So far, the six oldest have already gotten into college by the age of 12.  All the others are well on their way to doing the same thing. They expect it of themselves. They are not prodigies and neither are their parents. They are smart enough, but it is their homeschooling that has maximized and accelerated their learning. The 17 year-old is writing a book how to do it. 

 

http://www.today.com/news/meet-family-who-sent-six-kids-college-age-12-1...

 

Sun, 05/05/2013 - 12:16 | 3532091 Timmay
Timmay's picture

How ironic, show them how to reproduce and then abort the children. Wonder who is really funding this "effort"?

Sun, 05/05/2013 - 20:11 | 3533026 cornflakesdisease
cornflakesdisease's picture

Could it be, Satan?

Sun, 05/05/2013 - 11:10 | 3531977 shovelhead
shovelhead's picture

Makes sense.

Gotta get the boys ready for Cambridge and the girls to work the Mile.

Sun, 05/05/2013 - 11:13 | 3531978 gwar5
gwar5's picture

Because red hot emotional issues like having to worry your 5 year old child is being groomed for anal rape by politicians makes banksters stealing trillions look normal.

 

"Little Johnny.... come here and let me touch your pee pee, or I'll report you as a Hater."

Sun, 05/05/2013 - 11:21 | 3531997 Cursive
Cursive's picture

@IntoTheMix

Just hop the next steamer for the great Amercian South. The federals aren't your biggest worry down here in Dixie. If you can survive the locals, you'll be fine. God and guns are the norm down here.

Sun, 05/05/2013 - 16:13 | 3532628 sgorem
sgorem's picture

i guess my silly question is why doesn't someone on "your side of the pond", do like we do over here in the bloody good ole ussa, and waste a few of these sob's? i know, you guys don't have any guns left after they outlawed them all for the liberalization of people. they've opened the flood gates to immigrants, taken your guns, your money, your hope, and now they come for your children. there must be a lessen to be learned there somewhere. good luck 'mix.

Sun, 05/05/2013 - 10:21 | 3531891 toadold
toadold's picture

One nice thing about gold or silver coins is that they don't have serial numbers on them. You may have a paper record at the buy but once you have them you break the trail.  You may have to move them some distance but there will be people who will pay cash for them no questions asked.  It used to be big drug dealers would use gold coins but now regular people/businesses are using them to dodge government optorectomies looking to confiscate money because one didn't hold one's mouth right according to some government drone at a desk writing new and contradictory rules.

There are now people in war areas buying gold coins by wire. They'll sometime wire money to a trusted cut out, a family member usually,who has set up multiple bank/credit accounts, who will buy the coins from multiple dealers.   It is not just Indians and the Chinese getting portable anymore.

Sun, 05/05/2013 - 16:18 | 3532635 sgorem
sgorem's picture

shssssssshhhh!! :)

Sun, 05/05/2013 - 10:23 | 3531896 Atomizer
Atomizer's picture

RICO laws are just for kids.

Sun, 05/05/2013 - 10:44 | 3531930 russwinter
russwinter's picture

On gold at the European Gold Forum:

http://winteractionables.com/?p=1814

Sun, 05/05/2013 - 10:50 | 3531943 fonzannoon
fonzannoon's picture

Seth Klarman 2014 Newsletter:

"We initiated a strong buy today on Chipotle and went from buy to hold on Panera Bread. This was mostly due to us having panera yesterday and wanting burrito's today. In this environment we also like every other stock in the S&P however we are still in favor of the dow and Nasdaq even more."

Sun, 05/05/2013 - 11:00 | 3531950 Atomizer
Atomizer's picture

Cinco de Mayo = Today. Continue to report Seth Klarman’s brainfart news bulletins. Winks

Sun, 05/05/2013 - 11:04 | 3531966 knowshitsurelock
knowshitsurelock's picture

The "store of value" in gold will be the smart safe haven, but not until the dollar is defended to the very end, while all other asset classes get taken out behind the woodshed and severly beaten until there is blood running in the streets.

Remember, the petrodollar is a national fiat and controls all of the world for the elites, so they are NOT going to abandon it until they have raped and pillaged every other asset on the planet and are ready to bring in their new global digital currency.

I've said this before to deaf ears, that deflation will continue for another decade, gold will be at 750, silver at 12, housing down another 30%, the stock and bond markets totally destroyed.

Your only safe haven for the next ten years is the dollar.  I know I'm going to get blasted for such hypocricy, but think about it. Stack dollars and buy assets at fire sale prices in 2020.

Sun, 05/05/2013 - 13:11 | 3532189 Room 101
Room 101's picture

Diversification is a fair bet.  Unfortunately, most of the other world currencies suck as well.  That's the financial world right now.  Fiat dollars suck, but everything else seems to suck more. PM's are a good long term play, but are overpriced in FRN terms right now.  Perhaps have some as a hedge, but it's not something I'd want to bet the farm on.  

Best investments in my view right now: stored food, fruit trees, gardens and the skills to work them, livestock, and of course children.   

Sun, 05/05/2013 - 11:18 | 3531990 shovelhead
shovelhead's picture

Not too sure the rest of the world shares your unbridled love of the dollar unless you're counting in dog years.

 

Sun, 05/05/2013 - 11:49 | 3532040 knowshitsurelock
knowshitsurelock's picture

"Not too sure the rest of the world shares your unbridled love of the dollar unless you're counting in dog years."

 

Never said I loved the dollar.  I actually disdain it vehemently, but I'm trying not to get emotional about it.

Sure, there are the BRIC nations which are aligning against the dollar and attempting to go to a commodity based currency for national exchange, but how successful are they?  Do you know who the last four holdouts against the dollar are on this planet?

Yes, you guessed it.  North Korea, Venezuela,  Lybia, and Iran.  You saw how well Lybia did agasinst the banksters, and how well Iran and North Korea are doing, right?  No one goes against the banksters, ever.

The BRIC nations will get taken down for hoarding gold, and you will get taken down with them, as the petrodollar is retracted from circulation and becomes more scarce, and it's velocity slows to a crawl, while the Wall Street cronies load up on derivatives with the QE for the eventual pop. 

It will take ten years. 

Sun, 05/05/2013 - 15:26 | 3532537 spine001
spine001's picture

Look at how argentina is doing against the banksters. They are on the edge of civil war...

Sun, 05/05/2013 - 11:26 | 3532008 Room 101
Room 101's picture

The guy is right, but the comments in response are all too predictable.  Mostly variations of the theme: gold bitchez!

In truth, I think that as a long term strategy PM's have some merit.  But financial apocalypse most likely isn't coming in the next week or month. So what to do until then?

While holding durable commodities during inflation is a good thing, most of what we're seeing in the economic stats points to deflationCommodity prices typically drop during deflation.  But I guess this time is different, right?   

Sun, 05/05/2013 - 11:58 | 3532056 knowshitsurelock
knowshitsurelock's picture

You are absolutely correct Room 101 in you assesment of the situation, and have left your gold stacking emotions aside to look at the true picture.

No one is saying that gold and silver are bad investments, or that they are not an asset class which has been used for centuries to hedge against leveraging of fiat... all I am saying is that, unless you are young and able to ride a decade long round trip in gold, and don't care about your entry price or the appreciation against the fiat currencies, and just want to feel safe, then go for it.

Otherwise, time your entry to coincide with the bottom of the deflationary cycle and get gold at 750 and silver at 12.  Why pay 30 or 40 for silver when you will be able to get it for 12?

Sun, 05/05/2013 - 21:30 | 3533192 WAMO556
WAMO556's picture

When to plan for a STORM?

BEFORE the storm arrives!

If your planning is to prepare for the storm when it arrives, don't you think that their might be a "host" of others with SIMILAR plans.

What makes your plan better them theirs, when it is EXACTLY the same?

Mon, 05/06/2013 - 00:37 | 3533455 MeelionDollerBogus
MeelionDollerBogus's picture

This time is not deflation - that's for sure. There are no signs of deflation

Sun, 05/05/2013 - 11:42 | 3532031 tedstr
tedstr's picture

This market is starting to look parabolic but getting short here would be suicide.  The market can remain irrational far longer than you can remain solvent.  Don't forget we have crossed the rubicon.....the gubmint can NO LONGER AFFORD to let rates rise.  Last week there was some gubmint buy backs of Treasuries.  Few noticed, but this was the first early sign of the end of easy money.  UNlike anytime in history, the FED is not boxed in a corner and they cannot let rates rise until they pay donw a SHITLOAD of the debt, I would guess at least 50%.  So untill the debt gets down to around 8-10 Tril I would not worry about rising rates.  My guess this will take 3-5 years.

Sun, 05/05/2013 - 11:52 | 3532050 Monedas
Monedas's picture

Gold .... a "Barbarous Relic" .... and like many relics .... it is being bid up .... in the world auction !

Sun, 05/05/2013 - 13:13 | 3532193 Room 101
Room 101's picture

And? So were pet rocks and Enron stock. Not knocking PM's per se, and I think long term they're a good play....but they're overpriced right now in my view. 

 

Mon, 05/06/2013 - 00:36 | 3533454 MeelionDollerBogus
MeelionDollerBogus's picture

looks underpriced to me at least -200 / oz on gold and -10/oz on silver given current conditions.

Sun, 05/05/2013 - 11:58 | 3532062 Monedas
Monedas's picture

Negative rates are here already ..... restrictions, bail ins, regressive taxes, QE debasement, no delivery of gold .... you guys fill in the details .... I'm the concept guy !

Sun, 05/05/2013 - 11:59 | 3532067 Stuck on Zero
Stuck on Zero's picture

I like this statement:

Bernanke, likewise, is undoubtedly pleased with these speculators for abetting his goal of asset price inflation, though we all know that he will not call them first when he decides to reverse direction on QE. 

He will call his masters at JPM and GS, however.

 


Sun, 05/05/2013 - 12:45 | 3532088 Monedas
Monedas's picture

A "Bubble" .... that's disinformation .... a champagne bubble .... a child's soap bubble .... an old man snapping at his farts in the bath tub bubble .... no, no, no .... a "Pimple" .... all the pus gathers .... from other parts of the investment body .... then Bernanke .... splats it all on the bathroom mirror ! Monedas 1929 Comedy JIHAD World Tour

Sun, 05/05/2013 - 12:26 | 3532115 Monedas
Monedas's picture

"You'll know the END is near .... when you have to read between the lines of the SMALL PRINT at the bottom of the contract !" .... Monedas1929ComedyJihadWorldTour

Sun, 05/05/2013 - 12:29 | 3532120 Monedas
Monedas's picture

"You'll know the END is near .... when the SMALL PRINT portion of the contract .... takes up more space than the BOLD PRINT !" .... monedas1929comedyjihadworldtour

Sun, 05/05/2013 - 12:48 | 3532146 jeffgroove102
jeffgroove102's picture

While everyone is entitled to their own opinions, the current crop of peeps that prosper on grift and have no skin in the game, has reached a fevered pitch, in my opinion.

Sun, 05/05/2013 - 14:01 | 3532289 astoriajoe
astoriajoe's picture

same here.

Sun, 05/05/2013 - 14:52 | 3532441 q99x2
q99x2's picture

Buy gold and silver and gifts for the family.

Sun, 05/05/2013 - 15:38 | 3532563 devo
devo's picture

It's actually at it's easiest: buy SPY and never work again.

Sun, 05/05/2013 - 22:43 | 3533344 MagicMoney
MagicMoney's picture

Seth Klarman seems to be describing a economic bubble. The stockmarket is appearing bubblish, forming at early stages. Bernanke is basically going ahead with money printing, and cheap money. Bernanke can't, and more than likely won't defend the dollar when inflation hits, because being a neo-classical, he conflates economic transactions, with inflation, or deflation. If he defends the dollar against inflation, he has to create deflation in economic transactions, which was created by cheap money. Bernanke has no exit strategy, he thinks that printing money is the best course, and that he can exit simply by slowly, incrementally unwind interest rates, which have proven to fail to prevent economic deflation under Alan Greenspan. By the time Bernanke "defends" the dollar, it would be too late, and no way "he" prefers wide spread deflation risk over inflation. If you look at other central bankers, a lot of them have inflation in the economy they preside over, but doing absolutely nothing to fight it, because they fear less exports, their currency being too strong, or having a weaker USD. It's his dollar, your problem... Heh.

Mon, 05/06/2013 - 04:43 | 3533579 dunce
dunce's picture

Bernanke will not call them first because they will initiate the call telling him when to change direction. Goldman gives the orders, Bernanke is their puppet.

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