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On Precious Metals, Patience, & Paper-Bugs
Submitted by Tim Price via Sovereign Man blog,
You can be for gold, or you can be for paper, but you cannot possibly be for both. It may soon be time to take a stand.
The arguments in favour of gold are well known. Yet they are widely ignored by the paperbugs, who have a curious belief system given that its end product (paper currency) is destined to fail. We just do not know precisely when.
The price of gold is weakly correlated to other prices in financial markets, as the last three years have clearly demonstrated.
Indeed gold may be the only asset whose price is being suppressed by the monetary authorities, as opposed to those sundry instruments whose prices are being just as artificially inflated to offer the illusion of health in the financial system (stocks and bonds being the primary financial victims).
Beware appearances in an unhinged financial system, because they can be dangerously deceptive.
It is quite easy to manipulate the paper price of gold on a financial futures exchange if you never have to make delivery of the physical asset and are content to play games with paper.
At some point that will change.
Contrary to popular belief, gold is supremely liquid, though its supply is not inexhaustible.
It is no-one’s liability – this aspect may be one of the most crucial in the months to come, as and when investors learn to start fearing counterparty risk all over again.
Gold offers a degree of protection against uncertainty. And unlike paper money, there are fundamental and finite limits to its creation and supply.
What protection? There is, of course, one argument against gold that seems to trump all others and blares loudly to skeptical ears.
Its price in US dollars has recently fallen. Not in rubles, and not perhaps in yen, of course, but certainly in US dollars.
Perhaps gold is really a currency, then, as opposed to a tiresome commodity? But the belief system of the paperbug dies hard.
The curious might ask why so many central banks are busily repatriating their gold? Or why so any Asian central banks are busily accumulating it?
It is surely not just, in Ben Bernanke’s weasel words, tradition?
If you plot the assets of central banks against the gold price, you see a more or less perfect fit going back at least to 2002.
It is almost as if gold were linked in some way to money. That correlative trend for some reason broke down in 2012 and has yet to re-emerge.
We think it will return, because 6,000 years of human history weigh heavily in its favour.
Or you can put your faith in paper. History, however, would not recommend it. Fiat money has a 100% failure rate.
Please note that we are not advocating gold to the exclusion of all else within the context of a balanced investment portfolio.
There is a role for objectively creditworthy debt, especially if deflation really does take hold – it’s just that the provision of objectively creditworthy bonds in a global debt bubble is now vanishingly small.
There is a role for listed businesses run by principled, decent management, where the market’s assessment of value for those businesses sits comfortably below those businesses’ intrinsic worth.
But you need to look far and wide for such opportunities, because six years of central and commercial banks playing games with paper have made many stock markets thoroughly unattractive to the discerning value investor.
We suggest looking in Asia.
As investors we are all trapped within a horrifying bubble. We must play the hand we’ve been dealt, however bad it is.
But there are now growing signs of end-of-bubble instability. The system does not appear remotely sound.
Since political vision in Europe, in particular, is clearly absent, the field has been left to central bankers to run amok.
The only question we cannot answer is: precisely when does the centre fail?
The correct response is to recall the words of the famed value investor Peter Cundill, when he confided in his diary:
“The most important attribute for success in value investing is patience, patience, and more patience. THE MAJORITY OF INVESTORS DO NOT POSSESS THIS CHARACTERISTIC.”
But the absence of patience by the majority of investors is fine, because it leaves more money on the table for the rest of us.
The only question remaining is: in what exact form should we hold that money?
“What will futurity make of the Ph.D. standard? Likely, it will be even more baffled than we are. Imagine trying to explain the present-day arrangements to your 20-something grandchild a couple of decades hence – after the Crash of, say, 2016, that wiped out the youngster’s inheritance and provoked a central bank response so heavy-handed as to shatter the confidence even of Wall Street in the Federal Reserve’s methods.
“I expect you’ll wind up saying something like this:
“My generation gave former tenured economics professors discretionary authority to fabricate money and to fix interest rates. We put the cart of asset prices before the horse of enterprise. We entertained the fantasy that high asset prices made for prosperity, rather than the other way around. We actually worked to foster inflation, which we called ‘price stability’ (this was on the eve of the hyperinflation of 2017).
We seem to have miscalculated.”
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Cash, Bonds, Gold...
'paper price'
http://www.investmentu.com/images/etfs.jpg
http://jutiagroup.com/wp/wp-content/uploads/2009/04/global-gold-etf-dema...
http://static4.businessinsider.com/image/4ba1145b7f8b9aad685b0000/chart-...
http://static.guim.co.uk/sys-images/Guardian/Pix/maps_and_graphs/2013/3/...
http://goldprice.org/images/monthly_dollar.gif
Demand:
http://www.goldmadesimplenews.com/wp-content/uploads/2013/05/gold-demand...
http://goldsilverworldscom.c.presscdn.com/wp-content/uploads/2013/08/gol...
"record demand for gold bars and coins compensates for ETF outflows in second quarter"
r u shure?
This issue on the ETF's has been covered a thousand times here before. They are not transparent nor accountable.
Why not just head over to Kid Dynamites blog James and and suck some JPM and HSBC Bankster loving dick?
As with all PM related posts at ZH, i say again that I've bought silver at $5 an ounce, I've bought silver at $35 an ounce and....,
I sleep just fine. For me it's not about capital gains.....it's about protecting existing capital.
dominoes....
"The U.S. Securities & Exchange Commission is seeking to suspend Standard & Poor’s from grading commercial mortgage bonds in what would be the agency’s toughest action yet against a major credit rater, a person with knowledge of the matter said. S&P parent McGraw Hill Financial Inc. (MHFI) is still in talks over a possible settlement with the SEC, which has been investigating whether the firm bent rating criteria to win business in 2011, said the person, who asked not to be named because the talks aren’t public.
The credit-rating industry has come under greater scrutiny since it was blamed for fueling the 2008 financial crisis by giving top ratings to bonds that later soured. If the SEC suspends part of S&P’s business, it would be the first such action against a major credit-rating firm. Catherine Mathis, a spokeswoman for McGraw Hill, declined to comment, as did John Nester, a spokesman for the SEC.
The possible suspension has been a focal point of the settlement talks, the person said. S&P has made efforts to avoid the sanction over concerns that the reputational consequences would harm its franchise, according to the person.
http://www.bloomberg.com/news/2014-12-08/sec-said-to-seek-standard-poor-...
I hear there's also an $18 trillion dollar debtor with an outstanding rating. I expect the SEC will be all over that, it's such an obvious fraud.
Truth is treason in an empire of lies.
Let's pump this debt up bitchez! Where's my fucking DEATH STAR!?! & while we're at it, let's build two!
Let's pump this debt up bitchez! Where's my fucking DEATH STAR!?! & while we're at it, let's post TWICE!!
Hey Republicans, are you gonna pass the spending bill before we get to see what's in in?
Welcome to government, Gomer Pyle style.
You shoulda linked the Gomer Pyle episode where he wins a sweet new cruising boat in a contest & the Sgt. sees it, gets stars in his eyes about it being a chick magnet, & convinces Pyle it would be a good idea to go 'PARTNER' with him & pay all the accompanying boating license fees, equipment, etc. (& then gets paid a visit from the IRS for the taxes on the winnings, & ends up having to seel the boat, at a loss, to a gefilte fisherman).
That one was hilarious!
"It is almost as if gold were linked in some way to money."
Sorry, you lost me. I don't see it.
Gov-Co can simply round up and execute anyone who owns gold. Problem solved !
Your moniker sells your remark.
And I've got some one ounce rounds for those who try to take my one ounce rounds.
Conspiracy Fact: UN reports confirm Israel aiding ‘rebels’, Al-Qaeda groups fighting in Syria
Israel bombed some folks...
Israel is the ultimate flamebait. The sheeple (especially the ones on ZH) fall for it every time. Israel is is a nice distraction TPTB provide every so often to deflect attention away from the financial crimes being committed via fiat currency, fixed interest rates, central planning and fractional reserve banking. Does anyone here even understand what the hell is going on in the mid east anyhow? The Zionists have been in a state of war with the Assad clan for over 45 years now. Some attack now makes the Zios al Qaeda kingpins! What a joke. But keep on toying with that idea folks, at least your minds will be taken off the central banking ponzi scheme for a few minutes....
I gotta poop...
It's an ACT OF WOAR: Islamic State plans to mint its own gold, silver and copper coins! I feel another precious metals smackdown coming on.
THATS THE SOUND OF THE OIL FRACKING INDUSTRY IMPLODING!
First the oil price comes down then the stock prices drop but they are still paying those dividends (you think to yourself) so I'll just hang on!! Then they cut their dividends and the share prices really get killed (I've seen this game played before) better sell all those oil assets and buy some real investment insurance!!!
Unlike the western central banks war on the precious metals, Saudis actually have the physical oil in their war on oil!
HMMMMMMM! Lets see now- demand for gold and silver skyrocketing! Demand for oil dropping like a stone- or that guy on the pole (or so were told)! where do you think we go from here!
“Gold is the money of kings; silver is the money of gentlemen; barter is the money of peasants; but debt is the money of slaves”
--
There are two mistakes one can make along the road to truth - not going all the way, and not starting." ... Buddha
"...Saudis actually have the physical oil in their war on oil!"
But it is much easier to squeeze oil from solid rock and sand than it is to pump it from the ground, you didn't know? The US is a Net Oil Producer...I learned that from the 'Murican MSM...and if it's on TEEVEE it must be true!
Yes one can be for both. Fiat as a medium of exchange and gold as a store of value.
It's what's coming so don't act all surprised when it happens. The world functions very well with fiat. The problem is fiat sucks as a long term hold. Countries always over print and borrow it so fiat loses value over time.
A solution has already been discovered. All that needs to happen is for the old system to croak....I think I hear a death rattle now....
Been hearing those death rattles for decades now, yet the corpse is still alive. I gave up trying to determine when the bitch actually dies, just print moar and the blood flows some more. I love real tantgibles like many others here, but fiat has it's place for sure as you mention in your post. I don't think rigor and mortis are knocking at the door quite yet,I can see them coming down the street, but they move really ...................really..............slow it seems.
I really don't see a lot of reasonableness nor prudence anywhere in the world; therefore, we are being buffeted by unreasonableness and imprudence. That's my take and I'm standing by it....
Wow the PSYOPS is thick tonight. Say anything offensive (truthful) about the tribe and you'll get an instant -1.
Which tribe the yarmulke heads or the dindu nuffins?
Both! But be advised the former has many more secret agents than the latter.
.
Why can't I be for both? Paper has it's place, or else contracts of any kind should not exist. Just because paper is being used to enact a form of modern slavery does not mean it is inherently bad/evil.
Until the US starts producing gold and silver coinage again and this coinage is accepted in all financial institutions, stores, and services, the value can be manipulated just like paper.
You can hold PMs for long term security but that long term may be measured in lifetimes not just a few years.
The time of developments taking lifetimes is over. In our age it seems shit hits the fan once or twice a decade.
The good thing about gold is that it's a one off inurance purchase. It requires no renewal, no policy document and it does not require the insurance comany to continue being in existence.
If on the other hand you don't like the idea of insurance or you cannot afford it sitting there making no interest, then go play with paper. It does at least have intrinsic value as toilet paper or confetti.
Paper does have more accessibility and flexibility in the market place - so in a crunch you can grab opportunities that an emergency may create - gold or silver may be a more risky trade item.
The author's grasp of reality is just stunning. How about some new reason why to hold Gold physically ?? I'm pro physicall BTW, and have been for 20 years.
My question to you, should any stocks be of any value greater than .01 cent? If you answered yes do me the favor of looking into symbol sd Sand Ridge energy and please tell me if you still think only gold or precious metals are or can be supressed. Stating "pick your side" paper or physical one or the other serves only your purpose while negatively hurting the readers to opportunity elsewhere. Also if you're able take a look at stock symbol clf, Cliff Natural Resources, I'm unable to post a 6 month chart but clf has been target in a ruthless short attack for months, from $25 to $7, there are many stocks now trading below book value while others like go pro skyrocket. Metal investors are not entirely alone in being targeted by shorts. On a personal view and seeing the 20 year silver chart I'm looking to re enter the physical silver market late 15 to early 16.
Stock symbols unknowingly referenced because I like ZH
bbry
tlm
Gold is shiny
Gold is right,
Just because you’re down a lot
Don’t give up the fight.
I often think about gold when I am recreating my comb-over in front of my gold-coated mirror. I have discovered that my conviction about gold increases quite a bit when I squeeze my butt cheeks very tightly (I of course workout very hard to be able to squeeze that tightly) and scowl a bit. It sucks that my vast trove of gold bricks don’t pay me rent, but three years ago I figured out that I could make a kind of gold-brick throne. It isn’t comfortable to sit on of course. I have had it moved into my ballroom. When I entertain, during my entrance I make my way to the throne. I wait until people stop kissing my huge gold ring (not the only thing that is huge) before I make my way to the bar for a gold tumbler of Louis XIII. That process (walking slowly to the throne, sitting on it, and sashaying unhurriedly away from it) is the best way I have discovered to recover some value while I wait for zerohedge to be finally be right about gold.
We don't cotton to no big city sarcasm around these parts, padner.
Bettr take yer gold shitter and yer louie 13th with ya and head outta town. I hear they like yer kind in Boston or Providence, or some one of those other eastern shitholes.
So git yer ass outta here before sundown if'n ya knows whut's gud fer ya.
Fuckhead.
I see clasutrum is another 3 year vet of ZH who has now posted all of two times.
Anyone see a pattern here? As CarlGreenskeeper said yesterday, "don't we merit better trolls than this?"
obviously valuing quality over quantity...
well @clasutrum, your rothschild script, fake money FRN has lost 98% of its purchasing power since 1913........so I will take gold/silver over that any day of the week....
Gold has found a short-term bottom. There is some money to be made for a while at least...
http://www.globaldeflationnews.com/gold-elliott-waves-forecast-a-multi-m...
http://www.globaldeflationnews.com/investors-hated-gold-at-precisely-the...
I heart silver.
Really, I really really heart it. posted on facefuck after the angry cat videos.
Killer punch not fallen in roubles or yen but it has in dollars. Which sytem is the most corrupt?
With alll the FED has done you can no longer put a value on anything measured in dollars. There is so much s%^t in the world you can no longer hsve faith in any particular system GETS GOOD NOW! With the QE rape train like any babe being screwed over first it was dollars then it was pounds. Then onto euros, settling in yen beforer flipping to yuan.
That is the game the central bankers are starting to play raping one population after another.
Said babe think populations the concept is legitamised financial rape.
24 22 18 14 hike
i think its a bad premise "gold or paper"
They're both two instruments to facilitate trade or store value in money. They don't necessarily compete.
In fact both should do great in high inflation environments
I would be very bullish now on paper - and when that collapses demand will go to gold - sequentially
Every long-term kondrietiff or credit cycle follows the same pattern of swelling demand
1) demand for equities/businesses
2) demand for bonds/debt
3) demand for bills/coin
4) demand for gold/hard assets
repeat every 70-100 years
In tough times, a gold coin will get you a night of great sex... a paper bill can be used to wipe your ass... What's in your wallet?...
Gold now 64,665 oz in Roubles
Average yearly wage after tax 28,195
No afford no bid
"You can be for gold, or you can be for paper, but you cannot possibly be for both"
We have no choice but to be a little for everything that's self-contradictory in pairs to have a hope of keeping anything in violent whipsaws of changing times.
One day cash could be demanded by law with no easy way to barter metal; next day cash could be trash with no way to buy food but metal. We must be prepared for all outcomes.
we papered some folks
hah..."paper bug"...I've not heard that before...I like it...
in the long game, rock always wins.