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Gold, Bonds, & "Maybe History Has Stopped"
Via Paul Singer's letter to investors,
THE TREND IS YOUR FRIEND... MAYBE
When markets are trending, they can appear unstoppable. Every sale in a rising market feels like a bad one, and every purchase in a rapidly falling market is punished by losses within minutes or hours. It is so much less painful to go along with the trend than to buck the trend – at least in the short or possibly medium term. Furthermore, in the modern world of super-leverage and group-think, valuations can go far beyond the estimates of every expert and practitioner. That is, of course, until they stop.
One of the main challenges of a long career in money management is that the distance (in terms of time and cost) between an intelligent conclusion that prices are massively wrong in either direction, and the actual reversal of valuations toward the range of “reasonableness,” can sometimes be too long to bear. One could have easily become stridently bearish on stocks in 1995 (as we did), when in America equity prices passed all-time highs by nearly every measure, selling at 22 times earnings, a level that was previously reached in only September 1929 and March 1972 (both serious peaks). But they did not top out until early 2000 at 40 times earnings. And, in October 2008, those who thought that markets had fallen as far as they possibly could, and backed that belief with massive buying, found themselves weeks or months away from what was an extraordinarily painful and confusing bottom, with horrifying losses mounting by the day.
Today, one could be bullish on the long-term value of gold and be not only sitting on losses but also experiencing incoming ridicule and schadenfreude. In the same vein, based on the extraordinary monetary policy being practiced by the world’s central bankers, one could be completely convinced that medium- and long-term bonds are staggeringly overpriced, with nowhere to go but down in price (up in yield). But watching bonds persist in their long-term uptrend regardless of money printing, and watching gold prices languish with no understanding by investors that throughout history gold has always been considered the only real money in a world of monetary fakery, is concerning to say the least. Maybe history has stopped.
We do not have a solution to the problem of assessing the outer boundaries of the price ranges of a host of financial assets, nor do we have a key to refining the timing of turning points in trends. The only appropriate answers are: “Who knows?” and, “Whenever they feel like turning.”
But we do have thoughts about survival as money managers, based on our own experience as well as observation and data. Every money manager with aspirations of a long career must govern his or her purchases to take into account the uncertainties we have described above. There must be a “Plan B” when purchasing or selling assets, so that capital is kept intact even if trends or turning points do not follow expectations. Being “wrong” may (or may not) be a temporary thing, but money managers who want to stick with long or short positions must determine how they are going to trade, hedge, or increase or decrease their positions if the prices continue to go against them. It is surprising how few money managers ask themselves: “What if I am wrong, or early? What do I do then?”
These are particularly important issues at present, with bonds across the globe still absurdly treated as “safe havens.” They are not safe havens with the 30-year euro swap rate trading at 1.85%, or the Japanese 20-year swap rate at 1.35%.
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My asshole is gay but the rest of my body isn't.
"You have the choice of investing in the faith competency honesty and prudence of governments, or in gold"
Singer is really knocking the cover off it. I presume all these posts are from a single letter to investors. Does anybody know this?
History has stopped and I'd like it to restart while the hands of the central bankers are caught in its gears.
Precious metals get cheaper while ammo gets more expensive.
A very strange world we live in.
Clearly you haven't bought ammo the past year.
Well, I have, and what the poster stated is true where I live. Where the fuck do you buy your ammo?
Look at gunbot.net, compare to last year. Everything is down 50-75%.
Your LGS must be ripping you off still. Panic and inflated prices is long over. Shit's below where it was early 2012.
Anyone who bought G+A or PM in 2012 got Sodomized.
Ironically enough, ZH was part of whipping up the libertarian masses into a shopping frenzy. It's not something that most ZHers or the Tylers will admit to, but it's the truth.
As a result, I've learned to be skeptical and cautious regarding whatever both camps (Perma-Bulls on CNBC and Perma-Bears on ZH) are forecasting.
the Great Gun Shopping Frenzy of 2012. very interesting period indeed. I found the imminent scarcity memes particularly strange
"libertarian masses"? is there such a thing? honestly don't know
.
mostly self-identified, with caveats added to personalise the meme, doncha y'know.
based on ZH threads over the past few years, yeah, the story was "best get out there and buy all the guns/ammo/scopes/etc. while you can" - it's a classic consumer meme - "going fast!!!" - combined with "they don't want you to have it, so BUY MOAR!!" ah well, it's what consumers do, consume.
nothing new under the sun.
24/7 infotainment, iPhones, Facebook/Twitter, wearable tech, meth/crack, flashmobs, etc...
When no one remembers anything —
You were skeptical about ZH over a year before you even joined?
Did the DHS and your local grammer school finally get all they need? I was in my favorite sporting goods store recently and they were well stocked with a nice selection of calibers. I thought they must've just put out the week's shipment.
They are, it's the Q3 Elliot Management letter to investors. I've looked for a full copy online but all I find is references to people in the media having it. It's 22 pages and seems to cover just about everything and blast just about everyone, there's literally hundreds of news stories written from that one letter.
I might see if I can get a copy from a mutual friend.
It's a 44 page letter: http://www.valuewalk.com/2014/11/elliott-letter-2014-argentina/
I have done very well betting on the incompetence and arrogance of Central Planners. I expect this latest round to be profitable as well.
So great for you! You realize you are dancing on quicksand? Quicksand being your massive ego. It will suck you down.
....just don't store it in a bank.
Bullshit! Nothing against gold, but... If I had a gold coin for every time a gold shill says "It's a good time to buy", I'd be rich.
Lemme think... In what other Industry do we hear the same Mantra? RE, anyone?
I'd rather invest in a 3D printers and its makers, or invest "Privately" (w/o the army of middle-men working for Wall St).
.
FUCK EVERYONE
lol you're so constructive
There it is...
Paul. Chill. It's rigged. For now.
I realize the U.S. is the cleanest dirty shirt in the hamper, but it defies logic that the markets continue to grind higher no matter the news or fundamentals.
cleanest dirty shirt?
Mon you holding out on us? You gots to share that mofo shit my man; else you just inhaled and have yet to exhale, like since you were in da high school. Ho Lee Fuk!
All that fiat money the Fed printed had to go somewhere (sure as shit didn't wind up in my pocket). Now that the gravy train has stopped (temporarily anyway), and the elctions are done, it will be an interesting to see if these "markets" continue to levitate.
Unless you lack IQ or have a Learning Disability, things always behave according to rules.
Your mistake is in persisting in the charming but invalid notion that "Fundamentals" are driving the so - called "Markets".
Unless you're in The Club, you're just another Outsider, trying to read Tea Leaves, or spinning the Wheel of Fortune.
For now... All us Outsiders can do is to hedge -- to "ALLHEDGE".
BS. Nowhere to go but down?
If the 30 year tbond goes from 3% to 1.5% yield, that is a 50% capital gain.
Singer is right about EU, Jap and all other sovereign and corp bonds, but he does not mention dollar bonds.
Deflation.
Falling credit markets are trillions.
QE is billions.
Cost of silver's main input - oil - down 25% over last six months.
Silver down 25% over last six months.
"Economatters" dude has already been carried out on a stretcher.
Don't join him.
Never listen to someone about finances if they can't price a bond.
If a 100 bill pays 3 $, that's 3%.
If it raises to 200, it still pays 3$, that's 3/200 = 1,5%.
His posting was not correct?
incorrect. $1000 bond 20 years 3% 30 x 20 = 600 interest in 20 years (plus compounding)
if rates go to 1.5% that bond now would produce 15 x 20 = 300 interest (plus compounding)
thus a gain of 300 in interest over 20 years or a bond priced somewhere near 1300 (30% gain)
A 30-year bullet bond paying a 3% coupon that yields 1.5% should be priced around 136% of par.
Something about "Those who control the present control the past, and those who control the past control the future." comes to mind for some reason, regarding history has stopped......
Economic law is gone. It's a computer program. All of you Econ majors have a useless degree.
When chimps (or school age chidren) beat most fund managers, that a big no-shitter. ;-)
Excuse me, "Finance" degree. It works until it doesn't.
History says most gold bears drop about 40%... we have droped a little over 40%. History says most gold bears last no more than 40 months. Ours is 37 going on 38. History.
I've been a commodity trader for 36 years. I can't tell you how often some market price takes a run up or down and the prevailing wisdom is that there is absolutely nothing on the horizon to change the trend. And then it changes. SOMETHING always happens then there's a new narrative to fit it. Trees do not grow up into the sky. EVERY market always changes trend - they never don't.
Everyone is infatuated with paper, it has happened too many times in the past to count. Stocks and bonds are as overvalued as tulips, as everyone sells gold and real assets to buy them. If you think it will turn out different this time, there are a lot of tears in your future.
well, oh well- fab(retrace) was historically right on: 1910>1184 three times! -.618 nuts on retrace. broke thru on grand slam, thru to present. where this fucker stops -50% retrace??(955), my best guess...under 1000, but not very long, load the barge.
anything under 1090, add to last buy at .618 retrace. history will be on your side anywhere in the present range...
For kicks i ran a monthly fib retrace from the $250 bottom to $1,920 top. Based on that the next stop is 50% or $1080. To confirm a continued bear a max retrace to $1180-$1200 is needed. From there paper would go to $885 61.8% and rock bottom of $645 - unobtainium price. I doubt phyz would be obtainable at anything less than $900 with premiums matching from there down.
I would target each of these levels as back the truck up with the higher being most probable. $1080 - load up.
agree no matter what your stategy is...
good stuff, my 1090 figure looked back as you did, thanks...
One ounce of gold a month will pay for a soldier. True for ancient Rome, true today. Basic soldier pay was about a dinarius per day (silver-based), or about 15 aureus (gold-based) per year. Julius Caeser's aureus had just over 8 grams of gold, or about a quarter of a Troy ounce. So you could say that it wasn't an ounce a month, rather closer to a third of an ounce. However, common soldiers were also farmers or laborers for some or most of the year.
Compare this to today's basic soldier pay:
From http://www.goarmy.com/benefits/money/basic-pay-active-duty-soldiers.html
Private (E1): $18,378
At 12 ounces per month, that works out to $1531.50 per month. Interesting eh?
I'd say that's a pretty decent inflation hedge across a couple of thousand years.
As for investing, remember this rule: Stay diversified but adjust your expectations to zero real return on average across all asset classes. This is due to corruption. Each nest egg will be raided. Diversification aids in having SOMETHING left in the end.
You only get to keep what you put in. If you're lucky.
Of course this implies a large drop in consumer spending to replace stolen investments and interest, which is like a permanent 1-2% drag on GDP......but hey, that's the price of corruption/tolerating corruption.
You guys really need to look into what they pay military people a little closer. He makes 19000 a year BASE PAY. he is also married , so he gets BAH, which, in a round about way, let's say it's 1100 a month. Now he is up to 33200. Also, he gets BAS(food allowance) of about 350 a month. Now he is up to 37400 a year. Then, add in that he has completely free everything healthcare for him and his family. Not sure exactly what that costs nowadays, but it would be a lot. Pretty soon this E1 is doing pretty well, especially since most that junior are under 20. That 25 year old E5 is pulling in around 50k. And remember, only the base pay is taxed.
Yep, all true. That 25 year old E5 is also required to visit "Ebola country" having to rely only on his gas mask and (maybe) a clipboard... That's only when he doesn't get blown to pieces in some shithole of the Middle East. I think I'll pass the easy money...
I was just comparing base pay to base pay. I cited my sources. Thank you for your input, of course, but unless you feel like comparing it to the 'total compensation package' of a Roman soldier, including booty, prisoner sales, health care, etc., I think it's just confusing the issue.
Not to worry. History will be back, and it will bring a vengeance with it. Before then, buy as much silver as you can afford. ;-)
Why is that financial pervert not locked up.
Tyler, can letter possibly be printed in its entirety? This guy is very eloquent and his analysis is very good.
I had a serious peak in March 1972...lost my virginity
One need not follow trends or turning points if one is _always_ focused on expectations, probabilities, and Probability Theory. Treat all financial transactions as behaviour based on expectations of market participants.
Participant expectations is the key determinant to watch and analyze to ascertain Ss response and predict Ss behaviour. The best predictor of future behaviour is past behaviour. The universal holds up to empirical testing in Experimental Psych and should be universally accepted by Economists/Quants in Economics/Finance et cetera. Only objective metrics should be utilized. Avoid subjectivity in favour of the observable and then adopt a behavioural model to yield prediction based on expectations which are ultimately quantifiable. The Scientific Method actually works, and if it ain't broke, don't fix it.
http://freekoolaid.com/2014/11/06/gold-and-silver-on-sale/
History hasn't stopped. Mr Singer just can't work out that $ denominated credit is a Ponzi scheme, despite "a world of monetary fakery".
In any Ponzi scheme, the 'winners' get out at the top, having bought at the bottom.
He's being ironic. He's not saying it's stopped. He's saying it hasn't stopped but that if you are five years out on your timing then you are screwed even if your analysis is correct.
gold is not money
gold is an asset in which you hide your savings from the government when it wants to rape you (simply because gold is easy to hide unlike land real estate or other assets which can be confiscated or taxed easily)
You're confused. Gold IS money. It sure is NOT fiat currency, and in most (if not all ???) places NOT legal tender. Yet it has all the properties of money, so it IS money.
According to US constitution gold is money.
What constitution ?
gold is money, theres no debate on that point.
Their realm is paper, everthing of paper they can control or paper over. EVERYTHING. But, they CANNOT paper over or print fizzical metal, otherwise known as honest money. They can print paper gold all day long and push futures down, up, to harvest suckers that are stopped out either way, short or long. They own the books, they know exactly where how many stops are on the long and the short side. As long as the fizz market does not break completely they will keep this demoralizing PM-crushing game up. Only question in my mind is, since they also MUST have a very clear view of the fizz market as well, where do they stop? Will they let things break (the CONex-paper-fraud as price setting mechanism of the fizz) ? What will happen should they not be able to deliver fizz in size? Not retail shortage of coins from the mint, but some big entity asking of delivery of say 100M ounzes of silver (heck, that's only a measly 160 billion dollars) or 2M ounces of gold? The latest run on eagles might hint at the fact that a critical mass of stackers are now awake and smelling blood?
Things are moving here and we'll find out very soon how this will all be resolved. History has not stopped, just like it didn't before the end of the London Gold pool, nor when Nixon "temporarily" cut the golden tie of the dollar. Compared to the "time ahead", ~45 years or so IS indeed only "temporarily" ...
Gold is obsolete as money. Besides hedging against the worst possible collapse, it's idiotic to hold.
I do have gold and silver, but everyone is a dumb idiot who keeps more than 15% of their wealth in these.
Maybe history hasn't stopped and gold is just another commodity with too much supply and flagging demand. Our Chinese friends who have been the buyers of last resort over the past year are clearly sitting on some big losses and the Shanghai price of gold regularly trades at a discount to the US and European prices. You'll need them to sell out before a decent bottom is in for Gold. USD850 looks a good level to start buying.
There may be gold-selling by Russia at the moment.
Other European governments may be lending gold to their distressed national banks, which sell it to raise cash. Eventually their vaults will empty.