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Bill Gross Explains Why "We Are Witnessing The Death Of Abundance" And Why Gold Is Becoming The Default "Store Of Value"
While sounding just a tad preachy in his February newsletter, Bill Gross' latest summary piece on the economy, on the Fed's forray into infinite ZIRP, into maturity transformation, and the lack thereof, on the Fed's massive blunder in treating the liquidity trap, but most importantly on what the transition from a levering to delevering global economy means, is a must read. First: on the fatal flaw in the Fed's plan: "when rational or irrational fear persuades an investor to be more concerned about the return of her money than on her money then liquidity can be trapped in a mattress, a bank account or a five basis point Treasury bill. But that commonsensical observation is well known to Fed policymakers, economic historians and certainly citizens on Main Street." And secondly, here is why the party is over: "Where does credit go when it dies? It goes back to where it came from. It delevers, it slows and inhibits economic growth, and it turns economic theory upside down, ultimately challenging the wisdom of policymakers. We’ll all be making this up as we go along for what may seem like an eternity. A 30-50 year virtuous cycle of credit expansion which has produced outsize paranormal returns for financial assets – bonds, stocks, real estate and commodities alike – is now delevering because of excessive “risk” and the “price” of money at the zero-bound. We are witnessing the death of abundance and the borning of austerity, for what may be a long, long time." Yet most troubling is that even Gross, a long-time member of the status quo, now sees what has been obvious only to fringe blogs for years: "Recent central bank behavior, including that of the U.S. Fed, provides assurances that short and intermediate yields will not change, and therefore bond prices are not likely threatened on the downside. Still, zero-bound money may kill as opposed to create credit. Developed economies where these low yields reside may suffer accordingly. It may as well, induce inflationary distortions that give a rise to commodities and gold as store of value alternatives when there is little value left in paper." Let that sink in for a second, and let it further sink in what happens when $1.3 trillion Pimco decides to open a gold fund. Physical preferably...
From PIMCO's Bill Gross:
Life – and Death Proposition
- Recent central bank behavior, including that of the U.S. Fed, provides assurances that short and intermediate yields will not change, and therefore bond prices are not likely threatened on the downside.
- Most short to intermediate Treasury yields are dangerously close to the zero-bound which imply limited potential room, if any, for price appreciation.
- We can’t put $100 trillion of credit in a system-wide mattress, but we can move in that direction by delevering and refusing to extend maturities and duration.
Where do we go when we die?
We go back to where we came from
And where was that?
I don’t know, I can’t remember
Virginia Woolf, “The Hours”
I don’t remember much of this life, and like Virginia Woolf, nothing of the herebefore. How then, could I expect to know of the hereafter? I know at least that we all exist at and of the moment and that we make up those moments as we go along. I became a grandfather for the first time a few months ago and proud son Jeff asked for some fatherly advice as to how to go about raising his baby daughter Caroline. “We all do it in our own way, Jeff, you’ll make it up as you go along,” I said. Parenting, and life itself, is one giant experiment. From those first infant steps, to adolescent peer testing, flying from and departing the parental nest, gene replication and family building of our own, maturity and acquiescence, aging, decay and inevitable death – we experiment as best we can and make it up as we go along.
That death part though, oh where do we go after we have done all the making? There was another Jeff in our family, beloved brother-in-law Jeff Stubban who was as kind a man as there ever could be. Dying within three months of an initial diagnosis of pancreatic cancer, our family sobbed uncontrollably at his bedside as his breath, his spirit, his soul, departed almost on cue while a priest recited the rosary. Where had he gone, where is he now, what will become of him and all of us? Like many grieving families we look for signs of him and in turn for clues to our own destination. A lucky penny in the street, a random mention of his beloved New Orleans, an exterior resemblance of his shiny bald head in a mingling crowd. Where are you, Jeff? Tell us you are safe so that we might meet again.
Having now matured to trust reason more than faith I offer not so much a resolution, but an alternative to the unanswerable question of Virginia Woolf and the departed souls of Jeff Stubban and billions of others. If we don’t meet again – up there – then perhaps we’ll meet once more – down here. After all, the one thing I know for sure is that we got here once – and because we did, we could do it again. Rest easy, dear Jeff, and welcome to this world, dear Caroline. We’ll all just have to make it up as we go along.
The transition from a levering, asset-inflating secular economy to a post bubble delevering era may be as difficult for one to imagine as our departure into the hereafter. A multitude of liability structures dependent on a certain level of nominal GDP growth require just that – nominal GDP growth with a little bit of inflation, a little bit of growth which in combination justify embedded costs of debt or liability structures that minimize the haircutting of or defaulting on prior debt commitments. Global central bank monetary policy – whether explicitly communicated or not – is now geared to keeping nominal GDP close to historical levels as is fiscal deficit spending that substitutes for a delevering private sector.
Yet the imagination and management of the transition ushers forth a plethora of disparate policy solutions. Most observers, however, would agree that monetary and fiscal excesses carry with them explicit costs. Letting your pet retriever roam the woods might do wonders for his “animal spirits,” for instance, but he could come back infested with fleas, ticks, leeches or worse. Fed Chairman Ben Bernanke, dog-lover or not, preannounced an awareness of the deleterious side effects of quantitative easing several years ago in a significant speech at Jackson Hole. Ever since, he has been open and honest about the drawbacks of a zero interest rate policy, but has plowed ahead and unleashed his “QE bowser” into the wild with the understanding that the negative consequences of not doing so would be far worse. At his November 2011 post-FOMC news briefing, for instance, he noted that “we are quite aware that very low interest rates, particularly for a protracted period, do have costs for a lot of people” – savers, pension funds, insurance companies and finance-based institutions among them. He countered though that “there is a greater good here, which is the health and recovery of the U.S. economy, and for that purpose we’ve been keeping monetary policy conditions accommodative.”
My goal in this Investment Outlook is not to pick a “doggie bone” with the Chairman. He is makin’ it up as he goes along in order to softly delever a credit-based financial system which became egregiously overlevered and assumed far too much risk long before his watch began. My intent really is to alert you, the reader, to the significant costs that may be ahead for a global economy and financial marketplace still functioning under the assumption that cheap and abundant central bank credit is always a positive dynamic. When interest rates approach the zero bound they may transition from historically stimulative to potentially destimulative/regressive influences. Much like the laws of physics change from the world of Newtonian large objects to the world of quantum Einsteinian dynamics, so too might low interest rates at the zero-bound reorient previously held models that justified the stimulative effects of lower and lower yields on asset prices and the real economy.
It is instructive to mention that this is not necessarily PIMCO’s view alone. Chairman Bernanke and Fed staff members have been sniffin’ this trail like the good hound dogs they are for some time now. In addition, Credit Suisse, in their “2012 Global Outlook,” devoted considerable pages to specifics of zero-based money with commonsensical historical comparisons to Japan over the past decade or so. The following pages of this Outlook will do the same. At the heart of the theory, however, is that zero-bound interest rates do not always and necessarily force investors to take more risk by purchasing stocks or real estate, to cite the classic central bank thesis. First of all, when rational or irrational fear persuades an investor to be more concerned about the return of her money than on her money then liquidity can be trapped in a mattress, a bank account or a five basis point Treasury bill. But that commonsensical observation is well known to Fed policymakers, economic historians and certainly citizens on Main Street.
What perhaps is not so often recognized is that liquidity can be trapped by the “price” of credit, in addition to its “risk.” Capitalism depends on risk-taking in several forms. Developers, homeowners, entrepreneurs of all shapes and sizes epitomize the riskiness of business building via equity and credit risk extension. But modern capitalism is dependent as well on maturity extension in credit markets. No venture, aside from one financed with 100% owners’ capital, could survive on credit or loans that matured or were callable overnight. Buildings, utilities and homes require 20- and 30-year loan commitments to smooth and justify their returns. Because this is so, lenders require a yield premium, expressed as a positively sloped yield curve, to make the extended loan. A flat yield curve, in contrast, is a disincentive for lenders to lend unless there is sufficient downside room for yields to fall and provide bond market capital gains. This nominal or even real interest rate “margin” is why prior cyclical periods of curve flatness or even inversion have been successfully followed by economic expansions. Intermediate and long rates – even though flat and equal to a short-term policy rate – have had room to fall, and credit therefore has not been trapped by “price.”
When all yields approach the zero-bound, however, as in Japan for the past 10 years, and now in the U.S. and selected “clean dirty shirt” sovereigns, then the dynamics may change. Money can become less liquid and frozen by “price” in addition to the classic liquidity trap explained by “risk.”
Even if nodding in agreement, an observer might immediately comment that today’s yield curve is anything but flat and that might be true. Most short to intermediate Treasury yields, however, are dangerously close to the zero-bound which imply little if any room to fall: no margin, no air underneath those bond yields and therefore limited, if any, price appreciation. What incentive does a bank have to buy two-year Treasuries at 20 basis points when they can park overnight reserves with the Fed at 25? What incentives do investment managers or even individual investors have to take price risk with a five-, 10- or 30-year Treasury when there are multiples of downside price risk compared to appreciation? At 75 basis points, a five-year Treasury can only rationally appreciate by two more points, but theoretically can go down by an unlimited amount. Duration risk and flatness at the zero-bound, to make the simple point, can freeze and trap liquidity by convincing investors to hold cash as opposed to extend credit.
Where else can one go, however? We can’t put $100 trillion of credit in a system-wide mattress, can we? Of course not, but we can move in that direction by delevering and refusing to extend maturities and duration. Recent central bank behavior, including that of the U.S. Fed, provides assurances that short and intermediate yields will not change, and therefore bond prices are not likely threatened on the downside. Still, zero-bound money may kill as opposed to create credit. Developed economies where these low yields reside may suffer accordingly. It may as well, induce inflationary distortions that give a rise to commodities and gold as store of value alternatives when there is little value left in paper.
Where does credit go when it dies? It goes back to where it came from. It delevers, it slows and inhibits economic growth, and it turns economic theory upside down, ultimately challenging the wisdom of policymakers. We’ll all be making this up as we go along for what may seem like an eternity. A 30-50 year virtuous cycle of credit expansion which has produced outsize paranormal returns for financial assets – bonds, stocks, real estate and commodities alike – is now delevering because of excessive “risk” and the “price” of money at the zero-bound. We are witnessing the death of abundance and the borning of austerity, for what may be a long, long time.
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Hey look! Bernanke junked you... he DOES read ZH...
+1
Hey, can't be all that bad...after all, Billy collects baseball cards too!
Just think what would happen if that 1.3 T went into silver.
If China alone tried to get 10 percent of its FX reserves in gold, the price would roar past $3,000. Then there's the Saudis, the Singaporeans - the world is awash in Dollars. PIMCO is late to the party. I bought my gold back in 08 after the Lehman crash. That was a sweet time to buy - $700 an ounce. Sounds like a pipedream now.
And you were considered an idiot for doing so.....I was too...
+ 1 guys! Me too.
I remember for YEARS I would buy an ounce at the coin shop. I would feel FOOLISH paying $500 for an oz. $500! For one little shiny yellow thing...
I felt the same at $800. Same at $1000. Same at $1200. Same at $1500. Same the other day at $1700.
BTFSpike!
I bought my gold back in 08 after the Lehman crash. That was a sweet time to buy - $700 an ounce.
So I guess your name isn't Robert Prechter...
Prechter is, unfortunately, either stupid or insane (or both). What was that Einstein saying about insanity? Trying the same thing repeatedly and expecting a different outcome?
To be fair... I don't think he's either stupid or insane...
I do think he's been overly dogmatic with his paradigm... IOW~ He's been eating his own cooking for too long...
His "cycles" do have some merit in an unhindered socio-economic sense... The problem is, he's failed to account for 'meddling'... 100 years from now there will have to be a new chapter written about the subject of MEDDLING in socioeconomics on a global scale... He won't be around to write that chapter...
I bought mine in 1986 for $300 when Reagan proved that tax cuts and deficits don't matter. Everyone thought I was nuts. Took a while to be right, but now I have a ton of ammo too and they think I am nuts again.
I'd be careful... Looking at your avatar, all "statues" of guys who DIED IN BATTLE have their horses rearing up on their hind legs...
Oh crap we must be screwed then, here's the large pic of my avatar: http://socialexchangemedia.com/ . It means charge Francis, period. Survivability or winning is contingent on many factors.
Yeah, I used to keep stockpiles of all that stuff before I went sailing and lost all of it due to an unfortunate boating accident with my wife.
Luckily I escaped with everything important and dear to me (my pimco bonds and my budweisers). Too bad about the ammo, guns gold silver and wife though...
I too had a disaster, only the wife and I made it back to shore... The boat, the silver, the gold, the ammo and guns all perrished... Amazing story... Lucky to be alive to tell it...
I sold all my PM during the crash last year. Now I don't have enough to buy them back.
EmileLargo... I bought some in 08... and every year back to 1968... not many laughed at me cause I told few what I was doing.
My ex wife, ex mother in law, and 2 ex brothers in law snickered and probably rightly so. They were right for a lot of years but I only have to be right once.
Their businesses are now bk. Should I send an attorney to buy them up for peanuts when gold explodes to the upside? He who laughs last...
everytime this old, high profile, fart opens his effin mouth, market finds a way to screw him. while i am loooong gold, i am heading to close it down
You aren't long gold, just paper. Buy! Sell! Buy!
gross loves to talk, yet his actions dont seem to line up with his words.....
Bond traders are now the next in line to be unemployed.
"GaGa - AgAg" Palindrome Bitchez! Ship it in!
Yes, I agree, there is no longer an abundance of certain items.
Acute shortages everywhere.
I have a list:
- iPads
- Lululemom outfits
- Chipotle burritos
- Starbucks coffee
- Nike shoes
- Muni-bonds
- U.S. Treasuries
And a few other "must own" products out there.
lol...that was cute.
So, anyway.
Robo sooo close to breaking even on his "All in at Dow 12,700" call he can almost taste it!!!
- iPads
- Lululemom outfits
- Chipotle burritos
- Starbucks coffee
- Nike shoes
sounds like a local landfill... Are you Fred Sanford in real life (or do you just play him on TV)?
So, Robo, there must be an acute abundance of AMZN?
But what happens when I already own all of those things? Do I win a prize?
No I think he is seeing the death of his business...how can you be a bond business when that is going to be very boring for the next 10 years...I disagree with him on people or should I say Fund managers stuffing their money in a mattress..what I am seeing and hearing is the "chase higher returns" mantra.....anything with a high interest rate......of course this will be the new scam...and trillions will be "lost" there..until it is backstopped by the Feds again...a pension fund needs 8% gains a year to survive.....products will be invented by GS that will pay 10%.....trillions will be sold...they will fail....and here we go again boys and girls.....remember paper begats fees and commissions.....buying PM´s does not........got gold....
Ken Pruitt asks his status-quo disciple of the day "well, that's fine if you want to be sure your capital is returned, but what if you need yield? Where do you go for yield?"
What if you "need yield?"
I "need yield." I also need another candy pony and a blow job. Mr. Pruitt is confusing "need" with "want" and sometimes we don't get either one. Sorry to break it to you, Ken.
What if you "need yield?"
No problem, they can buy Greek bonds and get 400% yeild ...assuming they pay off at all.
Youngman... "...a pension fund needs 8% gains a year to survive.....products will be invented by GS that will pay 10%.....trillions will be sold...they will fail...."
..................................
Exactly what is going to happen! But, the Fed will continue to print so the 'pensioners' will receive their retirement checks each month... in near worthless dollars.
Separate the monetary functions? Kind of like the euro already has done for more than a decade? Gold as store of value, again achieved in the euro? Hey, this euro thing sounds pretty smart. I wonder if the euro architects saw this coming and designes a currency to survive the transition from the USD reserve currency?
Funny, I have no problem exchanging all sorts of paper for gold. The best part is with all the see-saw action in fiat I can move that paper around so that it requires even less paper per ounce of gold. You have a fucking point?
Yes, and you missed it. Shocking lulz.
So you really believe that the Euro paper is more "trustworthy" than any other fiat. Well, good luck with that.
This was a gret article.
my only quibble is one I oft have... and that is that IMO the Fed is more of a follower than a leader. I don't personally believe that the Fed truly "sets" the ZIRP, at least not in these days. Instead, it simply follows "market" signals.
The TBTF-Fed cartel obviously makes up a massive proportion of "the market", however looking at Fed actions I have found that it usually follows market cues, and doesn't anticipate them.
The Fed is in the classic balance sheet recession/deleveraging/credit trap. So called "pushing on a string". Without an exit strategy, except for one that hopes for "growth". Same as the BoJ found itself 20+ years ago.
Hasn't it been obvious for 3 years that the Fed would get stuck at ZIRP without a way out? Recent Fed statements discussing ZIRP through 2014 are not the Fed dictating policy, but rather responding to market indicators.
Look what happened once they announced this... significant stock market and commodity bounce. Imagine if they said otherwise (that they were raising rates)... you would see a crushing sell off across the stock market and commodity space. Obviously the Fed doesn't care about commodities except as a nemesis that thwarts their easing goals... but they clearly care about the equities market.
Hopes for growth...when the number of people working keeps dropping.....good luck on that one
I agree they care about the value of the stock market...it keeps the sheeple quiet.....they would panic if their 401k´s dropped 30% again....penisions would go bust....wealth would disappear.....not good for a civil society....so buy it up they do....to me its fake..so I can´t buy into it...I have fallen into the PM´s....that is my investment theory from here on out...
I agree that the hope is naive, but hope is all they have
I love it! The bond king has turned gold bug
I think the Bond guy, along with the top elite guys - deep down inside love gold. They have always loved gold.
Gold is ancient...just like them and what they worshhip...
"At the heart of the theory, however, is that zero-bound interest rates do not always and necessarily force investors to take more risk by purchasing stocks or real estate, to cite the classic central bank thesis."
Of course fucking not, because their ass isn't bailed out if they get creamed by a fat tail bogie.
If all your surplus capital representing many hours of toil and trouble is plowed into things called "NOTES", you must ask yourself - "What was I thinking?" If you haven't asked, you will.....
There is a very simple way to explain why no one wants to lend to anybody else, the more honest people have lost confidence in the less honest who have taken over everywhere. Everything has become politicized and subject to cronyism. There are no political solutions. Once people turn to politicians for answers, it becomes a bidding war with shakedown artists.
As we witnessed in the collapse of the Soviet Union, once the order breaks down those who can steal do so. It becomes one big game of "hungry, hungry hippo". It's the Wild West out there.
I agree. Eric Holder. Anyone seen him?
Bill Bonner today:
All the candidates think the American people want war. Or...what?
Actually, Americans don’t want war. The latest Pew Research polls show them more opposed to foreign military adventures than at any time in the last 15 years. They’re more interested in getting a job...and protecting their retirements. Given the choice, they would probably want to see military spending cut back and the money put into their own pockets.
But they won’t be given the choice. The system is rigged. Between them and the outcomes are 10,000 lobbyists and millions of zombies. This is why representative democracy doesn’t work.
Decent people will generally have decent responses to decent questions. Put to a ballot, how would American’s vote?
1. Should the US balance its budget...or continue to spend $1.50 for every dollar in revenue?
2. If you have to give up something, which would you rather do without: foreign wars...or domestic health and retirement benefits?
3. Should Congressmen be forced to leave Washington after a maximum of 2 terms?
4. Should members of Congress be forced to live by the same laws as the voters?
5. What do you say to a flat 10% tax rate, on all income...across the board...? Yes or no?
6. Should the President be allowed to kill or imprison anyone he wants, without due process of law?
Our guess is that the voters would do the right thing.
But they’ll never get the chance. The system is in the hands of the zombies now. Lobbyists, lawyers, connivers, chiselers, contractors, layabouts and scalawags and world-improvers — each one takes a little piece of the old republic...until there’s nothing left.
Representative democracy works fine if
A) Lobbyists are illegal
B) Donations are restricted to persons and fully transparent
C) Corporations are no longer considered people
D) Term limits apply to all positions
E) Electoral boundaries are not made to ensure a particular person or party wins forever
F) An independant organization counts the ballots, with all parties allowed to audit the ballot counts
G) No limit on number of parties, or system designed to prevent the formation of new parties / independants
What else am I missing here?
When you get paid nothing on your money, there's a risk to not owning gold.
Nope. His article is right on. I have not considered the point of banks, lets just say the few good ones still around, have little incentive to loan as the curve is as low as it can go. No incentive to give us money if there is little or 0 upside for them. This makes sense. We also have de-levered to the hilt. We look at our CDs earning .86% for 1 year and our mortgage at 4.9% and for us it is a no brainer. Might as well "earn" 5% and pay off the damn confetti based loan.
Buying anything on credit with the exception of a vehicle you need "to produce income" or a "cave" for you and your family makes 0 sense to us here. Why, Because, we deserve it. Bullshit. Time to pack it in, get back to basics and enjoy what life it about. Family, friends, the sun, taking a walk. This crap Super Bowl, millions in ads. Hype, ball players making millions to catch a ball and tear their opponent apart so the 10% can have a fun afternoon.
With this country in shambles on so many fronts. Sorry, not for me. Gross is really coming around. And as I understand it, he and Pimco have a couple of dollars in their portfolios.
well said.
We too paid off our mortgage for exactly the same reasons that you cite.
this is yet another facet of the deleveraging problem.
Those that have the credit quality to take out loans correctly assess that there is no reason to do so, and thus pay off debt.
Those too stupid to understand that credit is not a great idea right now can't qualify.
Those that already have debt cannot pay, which leads to default.
The loose credit conditions from 1998-2008 pulled credit demand forward. The only reason that most people want credit now is to roll over old debt and not to invest in new endeavors.
He's as terrified of Fed manipulation as anyone, but too polite to be more harsh about it.
As long as stocks keep going higher the sheeple will be content.
I'm not so sure about that.
Stocks/equities have always been owned primarily by the more affluent.
This changed starting in the 1990s when more middle class people joined up, (esp during dotcom boom) and obviously a lot of people have equities in their 401ks etc.
However, we have seen a mass exodus out of equities by the common person since 2007-8. thus, it would seem that most sheeple don't really care as much anymore.
The people who still care now are the affluent. The Fed cares about them. the media cares about them.
the sheeple may get a little info here or there about how the SP500 is up yoy or something by some Obama/Romney blurb, but I really think they are looking more at employment and GDP numbers (also fudged of course).
I work with regular folk. I'd bet that <5% of them would know what's happened in the stock market recently... but they ALL know what unemployment is. and they ALL know what housing has done. and they ALL know what has happened to their property taxes.
Hmmm +1...
After the stock mkt bottomed in crash of 1929, stocks did not regain their pre crash highs in nominal value until ~ 1953.
I believe that this is what Bill Gross is saying in this 'eulogy'... a period of 30 - 40 years of recession/depression is here... now.
If equities crash to ~ 1/3 of their current valuations, and the Fed is unable to reinflate the mkts, it will be a long time before most big retirement funds want to invest in equities again. But, the Gov will step in and force the big retirement funds to invest in Ts... Yet another disaster waiting to happen.
If your funds are in paper consider your options.
The covert central bank thesis is "rescue the banks and let the economy die". This was never about stimulating lending. Gross avoids that dangerous idea.
Bill's stance, however, ties in with Sinclair's argument that mainstream players will turn to PMs this year. And Pimco is about as mainstream as it gets.
Gross' Outlook has to be negative for bonds, positive for gold. $1750 this morning.
Net effect: very good for gold, which may well be entering the next bull phase.
The covert central bank thesis is "rescue the banks and let the economy die".
I wish! If it were only this then eventually people could show that our leaders care more about the banks than the economy, and we could overthrow them, or replace them with others who believe otherwise.
The truth is even worse. these are zealots who truly believe that the only way to save the economy is to save the banks. this is worse because it captures not only the evil and the greedy, but this line of thinking captures even those who might initially balk at saving the banks.
And in fact, it might even be true. We may not be able to save the economy that we have known for all of our lives if the banks go down. The banks have insinuated themselves everywhere, infiltrating and poisoning like a cancer. Extraction may not be possible.
If so, we will have to kill our economy to kill the banks, and then start anew. there really is no out.
the kabillion dollar question is: should we kill our economy to kill the banks so that we can rebuild a new economy? I have no idea.
I still think the most likely outcome of our current situation is multinational trade war, protectionism and nationalism that eventually leads to multinational (i.e. "world") war.
Nor am I optimistic about the prospects for world peace, but these are not true believers in one theory or another; those truly in power seek to retain and expand their influence.
I don't believe for a second that the CFR and its overlords care about the battle of ideas between Keynes and Hayek.
Ideologies, theories, all persuasions of fanaticism, are at best just tools for the ruthless and increasingly malevolent exercise of sheer power.
Standing still is the new moving forward.
Take it from a guy who once won a sailboat race by anchoring in a stong, head-on current.
Preserving wealth will increasingly be the strategy for those with significant wealth to preserve and certainly one of the tactics for achieving that will be to keep it outside the system and out of sight.
Take it from a guy who once won a sailboat race by anchoring in a stong, head-on current
great tactic.....
If the FED had been the race officials, they would have declared that tactic illegal & disqualified you...
And they might. Thats why you buy physical and bury it.
So let's see where we're at...
It costs $5 to dig it out of the ground... Then what? $5 more to bury it... But then you have to dig it back up again (but by then it may cost you $100 to dig it up because you'll need an army of protectors)...
Who's your gold digger - Anna Nicole Smith?
That's the kind of thing you want to do yourself - preferably at night, during a rain storm while laughing maniacally.
Yeah but in this case anchoring will cause -in part- the (official) economy to shrink. it's hard to believe that the price of capital won't be discovered by those who want/need it despite what Fed policy is and one result will be that grey/black markets will grow larger.
His equity fund has a top holding of GLD I saw.
Took Bill long enough to figure it out.
It's all too clear the Fed wants the 30 year bond Bull market to continue indefinitely...Square pegs and round holes...One way or another it's going through...
Even if Gross moves into metals he still has too much money. He is left fighting a losing battle against the FED.
only one place this thing can go, better have some real paper ready for the blow out coming, in the aftermath their will be a lot to clean up.
I don't get it, how do you fool the bond market?
Zero per cent interest rates? Really? With a $ (16,000,000,000,000) national debt? And that's just what we know about, one can imagine it's much worse. "Unfunded liabilities" - that means YOU.
Wait, I miss-spelled "Enemy Combatant". Hm.
You don't fool the bond market, you put it in a full- Nelson by deploying tens of trillions in interest rate swaps to distort the market and discourage vigilantes.
I know where credit goes to die. The hard workers of the world are sending their hard earned cash to financial centers and receive in turn electronic accounting for all their money. Billions of people think they have real assets because the little pieces of paper they receive every month tell them so. Someday the savers will be very sorry.
My name's Francis Sawyer but my friends call me psycho.
Any of you call me Francis, and I'll kill ya.
.
The lack of a positively sloped yield curve can be understood by reading the material at the below website.
The Hubbert curve also provides a strong reason to refute any claims from an analyst that refers to the current economic predicament as being cyclical in nature. There is nothing cyclical about the Hubbert curve. It looks more like a "one shot" pulse of energy from electronic circuit design and analysis.
From http://www.zerohedge.com/news/observations-engineer
Do 30 year home loans (or any long term loans of any type) make good business sense under a 2 percent decrease (year after year after year) in oil production which is the worlds most critical natural resource? Would they make good business sense under a 5 percent decrease (year after year after year)?
The currency is dieing because theres no more energy to back it.
Our currency is backed by energy, the energy of individuals to get into debt and produce goods and services, you can have wealth (real wealth not dollars) and you can have currency but if no one can work and earn a wage and get into debt , the currency dies and becomes worthless.
When that happens people default to mediums that are hard to counterfeit as a store of value (commodities), you can't fake a loaf of bread, you can't fake an apple.... etc.... I pick an apple, you pick an orange and boom we trade (no taxes, no middle man, no loss of energy) dollars rob people of their energy, you work harder, for longer for a store of wealth that depreciates over time.... holding dollars is like trying to hold sand in your hand while swimming.... atleast the gold has the material strength to stand the test of time.
A gold based economy doesn't have the power to grow rapidly, its designed for slow methodical and gradual steady growth.... the only problems with gold are thet bankers who counterfeit the shit out of it due to the demand for CREDIT.... people are driven to live outside their means, the banks know this and issue CREDIT (counterfeit currency) into circulation to feed the demand, this is very profitable because it ammounts to lending money you don't have and getting that individual you lent to to work essentially for free to pay you back the money, the bank wins no matter what (if the guy pays it to the bank they win, if he doesn't they still win because they more than likely can suck the money out of him slowly or take some of the assets (house/car/w.e).... so it ammounts to the banks counterfeiting money for free, and getting real assets for free (homes/cars/garnishing peoples wages).
You have to play the game offensively to win.
Quite good economic news today, markets higher all over. #WhatCrisis? Total Collapse anyone?
China increasing solar panel requirements from 20 to 50 gigawatts by 2020.
Can anybody imagine how much more silver they gonna need to meet this numbers?
Entire article at http://goldsilvercode.com/blog/
There optimists, that's providing we don't take a fuk nuke before years end. 2020 Ain't gonna happen, looks good on a futures chart though. The end is near my friends.. thank God!
Oh.. and just for the record, Bill Gross can "explain" his way out of a sunburn, just sayin'.
The only place abundance exists these days is Wall Street and the federal government ...because they get all the printed currency coming from the Fed.
That's the point. None of it is getting into the economy except ripple effects of government spending.
Wall Street isn't putting any of it into the economy, it's parked at the Fed as "excess reserves" ...earning 3% by the way.
Ok, they're taking some of it and buying Treasuries, the price they pay to play you might say, doing their "civic duty" to keep the Treasuries market inflated.
And yes they're buying Eurozone sovereign debt too, great yield ...if it pays off at all.
But no problem, they have CDS covering it.
Riiiiiiiiiiiiiiiiiiight. :)
Ah, ole Bill has made a decisive move here...rather than going with a marginally politically correct gender neutral 'his or her' or 'her or his' or even and her/is kind of alternative, he went straight for the gold metal of PC using exclusively "her" in reference to the generic person and investor. How progressive of you, of course, are you not excluding men in favor of women? I thought we are all completely and undeniably equal? I bring this up because Bill is right that 30 years of dovish credit has indeed created "paranormal" returns on assets etc, but has also created paranormal cultural changes along with it. I studied economics because I believe it's the alpha and omega of the human experience, after all, its all about facilitating individual survival with the efficient allocation of finite resources. That being said, even the most obscure corners of the human experience are inextricably linked and defined by economic conditions as we are all ultimately ruled by our primary instinct to survive. So, Bill in your acquiescence of the newly self-proclaimed superior woman, one of the things you may not be aware of is that all this "social engineering" is a function of credit expansion. Indeed, using "her" over him is not so much a grass roots political uprising or women being better than men, rather money has long been funneled into NGOs such as NOW or the presidents office for women and girls. And here we have the end result...the ROI of all that money - Bill Gross using "her" over him. Mind you, in absolute terms there is nothing egalitarian about this; in fact, it is the very thing that feminists complained about originally - gender exclusive. As such, we are exactly where we started (using the equality measure), thus negligible ROI, methinks. Such are the perversions and destruction wrought by malinvestment. Here is the kicker: Bill you may continue to choose to use "her" hitherto but will likely find that this is the nadir of femosupremacy since as the credit tide is receding so will the life-blood, credit and money, of any number of social engineering projects. And with that their poisonous influence, which has become increasingly despotic and dogmatic especially over the last few years. Where will those things go when they die...well they'll go into nothing, which is what they should have been had we embraced the responsible alternative of market forces and natural equilibriums.
You have a flair for the irrelevant.
Maybe so, assuming you're a man, here are your balls back if you'd like em. My point is, as we move out of this protracted period of easy credit, its not just the markets that will feel the impact. Real changes will occur across the socio-economic plane. Easy credit enabled enormous social engineering projects to occur that twisted and tested natural law, furthermore, these projects remain dependent on cheap credit in order to survive. What happens now? Well, these projects i.e. feminism will be greatly diminished. It might surprise you but there is a massive infrastructure behind feminism...much of it getting state based funding, we simply can't afford that any longer. The political correctness that pushed Gross to use "her" will not be sustainable for much longer. Yes, sir or ma'am I feel this is very relevant, because it’s not just feminism it’s any and all of the other social engineering experiments that have occurred over the last 30 years of malinvestment.
Maybe so, assuming you're a man, here are your balls back if you'd like em. My point is, as we move out of this protracted period of easy credit, its not just the markets that will feel the impact. Real changes will occur across the socio-economic plane. Easy credit enabled enormous social engineering projects to occur that twisted and tested natural law, furthermore, these projects remain dependent on cheap credit in order to survive. What happens now? Well, these projects i.e. feminism will be greatly diminished. It might surprise you but there is a massive infrastructure behind feminism...much of it getting state based funding, we simply can't afford that any longer. The political correctness that pushed Gross to use "her" will not be sustainable for much longer. Yes, sir or ma'am I feel this is very relevant, because it’s not just feminism it’s any and all of the other social engineering experiments that have occurred over the last 30 years of malinvestment.
Yeah - thats really irks me as well. its just so self-consiously contrived. You've gotta be a real brown-nosing, snivelling, pussy to use the exclusive "her".
I'm nominating your contirbution for Post O' the Day!
Worth Another Look! Gold Not Backed By Anything - News Girl:
http://www.youtube.com/watch?v=aX8lx9Mglcg&feature=endscreen&NR=1
There are many days when I question the rationality and practicality of my gloom-and-doom world view and decison to move out of a traditional market retirement holdings. There are many nights I lay awake wondering if my 'short stacking' is just a paranoid delusion and waste of resources / profit opportunity... Not to mention the time, effort and cash investment in a very large garden, small scale solar, and other seemingly reasonable but time-consuming 'self-sufficiency' protocols and 'assets'....
Reading this article serves as cold comfort. After years of watching this slow-motion cannabalistic implosion ignored by MSM and finding myself loitering during the work day on ZH and other alt-media to find some Truth, I can't get my head around the end game... Is there somehow a non tinfoil hat answer to 'WHY?' to this is and will happen???
I feel that pain and share your concerns.. Answers are only to be found on a gross macro level. Can a MF global occur in a healthy environment, can ZIRP occur long term, can bondholders be trimmed while a company is given to a union?
IMO, the direction is known, the timing of the tipping point / ending event could be brutally long and the suffering intense prior and in the aftermath.
Calm Yourself. I assumed in 2008 I was going to absorb some pain for attempting to do what is right. My new pet name must be King of Pain. The betrayal and thievery knows no bounds. I was pondered if stacking or storing raw goods would preserve me and my own. No. It doesn't, the Federal governments, state governments and even locals are all money plucking devices. I have found comfort and strength from my local network of friends and solace from national network online.
I have been told I am bright, clever. Perhaps like a fox. But alas, this is not living and so in the words of Patrick Henry, give me Liberty or death. Fight to compete is the choice, on what battlefield is the question. Not choosing means the battlefield is chosen for you. There is nowhere to run now on earth. The world has changed.
The really wealthy bought themselves time since 2008 and were further corrupted. Such are fearful, not knowing the way out.
There is no way out, only forward or stop. That is how our 3rd dimension is designed and we seem to be in our last major evolutionary cycle .
Fight the snake or be it's poo on the other side. God bless and may you have strength. Resist the evil and join others that also now conduct business honestly. I am quite a sinner myself so if I can do it...
Oh and I found lots of humor a necessity. That doesn't cost much ;)
well two things about europe today....someone manipulated the gdp #'s thats obvious and 2 recirculated the china bailout rumor unreal....just a matter of time BIATCHES
Gross has turned so melancholy because he sees the Fed (through perpetual ZIRP) eventually putting him and his friends that run other bond funds out of business.
It's pretty difficult to get away with charging that 0.5% "management fee" when that is the coupon of the entire portfolio.
The Chinese have know this for about a year now. One of their economic heads just stated, "Gold is the best hedge against risk in today's environment".
Hi All---I'm pretty much a noob to posting, but have been reading for a long time. I've been a corporate drone for decades & see the writing on the wall. I'm going to get hosed 9 ways to Sunday if I don't get a solid plan by March 30, re: pension (lump) & 401k. BTW, several people fretting about getting their hands on their 401's, if you're 55 by the time of seperation you can take a distribution on your 401 w/o the 10% penalty. I will provide the IRS link if anyone needs it. I'm looking for suggestions on buying PM. It is my understanding that a little provision slipped into the healthcare bill, calls for any PM transaction of $600 or more the buyer is to receive a 1099. I also recall someone posting that they w/d $600 & the used bills were in sequential order, which I find disturbing. I plan to go to another state where I will not have to pay state tax on it. Can anyone provide me with sound recommendations on the best way to go about it? Cash? Coins vs bullion? How much over the spot price is standard practice? etc.
I've pretty much got the rest covered. No debt, ammo, weapons, garden w/ no frankenseed. TIA
WG - I was in a similar position a few months ago. I can't comment on your PM transaction reporting provisions, state laws etc, but do have some experience in buying PMs.
If you don't want to trigger the reporting, $600 means small (~.25 Toz) gold coins - so that will be a drag. With silver, of course, alot more can be bought per <$600 amount - 15-17 Toz depending on coin or bar.
I have a mixture of gold/silver bars/coins. Silver coins, e.g. american silver eagles etc, seem to command about 7-10% over spot in my neck of the woods (although I've read some American LCSs charge less premium), gold coins usually 2.5-3.7% over spot - but some brand new 'boxed' bullion coins more like 5% over spot.
I think a mixture of bars & coins is good - bars for lowest margin over spot & coins for smaller chunks of PM & tradeability/sale (or maybe even for use as direct currency some day!).
There are several compare sites - comparesilver/gold or some such name that would give you an idea of current deals etc.
I never pay a premium (over the standard 2-3%) for 'numismatic' coins - I only buy if they're the priced as 'bullion', i.e. nothing fancy that comes with numismatic fineness rating. I simply don't know enough to know what's good & not much interested in the 'sweaty' end of coins anyway.
HTH
Bernanke and the Federal Reserve are adopting the Zimbabwe economic model long term. Just keep printing until you get the desired results.
The Fed's print your way to prosperity plan is their plan to counteract natural market forces. We could push deficits much higher, along with taxes.
Other countries are watching and US wages go down and debt blast off. Prices for everyday items are going up noticeably.
WMD
Weapons of Market Dislocation
Question: If the Americas become energy independent according to trend, but the global price of oil is more determined by OPEC (vs. Chinese demand) than ever, what the fuck do you need a global price of oil for?
Answer: You don't. Get rid of it. Have a hemispheric price instead.
Decoupling of markets according to major trading blocs could be the hallmark of the next phase of the crisis, er, plan, er, collapse, er, conspiracy, or whatever 'this life' is.
Energy independent according to trend?
Depends on whether Brazil stays friendly that is....
I don't think OPEC really has control over the market the way they used to, definitely would have to get Russia to play ball if they wanted to control market.
Besides, cost per barrel average in the Americas is pretty high comparatively....you don't think Exxon and the like would allow (yes I said allow) the US govt to cut into the profit margin, do you?
The possibility exists of simply retiring that debt, BUY IT BACK, repatriot the bonds, forcibly, for cash. Yes its inflationary, isn't that what they want? The difference between my pie in the sky idea and Bernanke, is that he has the tools. He's not really much smarter than any of us, but when the time comes, he can put together a policy solution using something previously unthinkable. No one thought ten years ago that TARP or QE were possible? The system will collapse! Bush took an entire war OFF BALANCE SHEET.
if Bernanke wanted to put 100T in a mattress, off balance sheet account he could. The BOJ did it, they parked cash in MM accounts for years, but what does that imply, to follow Japan through the lost decade(s)? After listening to Bob Prechter prattle about market confidence, there is no confidence problem when you own the market. People want corn, they have to come here to buy it. Fuck market confidence. I put cash in a mattress because we are in a deflationary spiral.
Eventually other countries open up an alternate market, trade oil outside the reserve currency, for gold rather than paper. Fine. It's like waking one morning and finding your freeway is a $10 toll road. Are you going to take the alternate? Forget confidence, did your confidence level in the highway just change? This road is overvalued, but here I go anyway.
Now that BG has suggested the outrageous, its really only a matter of time before it happens. 100T off balance (debt). Now when global population peaks, and or there is a labor strike in Communist China, speaking a oxymoronic labor management theory, and everyone is on a level playing field, then exploiting the wealth gap will be impossible, which is where the 1% vs the 99% really takes hold. They need the wealth disparity, to kick the can down the road. We see it as unfair and disappearing in the natural order of things, and things move a lot faster than they used to. We passed the signpost which said fiat currency a long time ago, those rules no longer apply, like debt has to be paid back. The real question is money supply headed in a sustainable direction (no, not with fewer workers and peak population growth and income disparity) and does velocity correlate (no and no, a 100T times no). Take a few trillion out of the system just to see how things work (hint the BOJ not only parked cash in MM it occasionally swept up the evidence).
Bill Gross is a shill. I am betting the powers that be are long gold and the miners. Time to light the candle for a while and drag in some new investors (suckers) before the next planned deflationary impulse. What a bunch of fuck heads. ZIRP to 2014 put too much of a bid under gold so have Plosser talk about an interest rate hike in 2012. Cross currents. Just keep moving folks, nothing to see here. IMHO they are going to let it rip to re-elect Barry. Then it will be take down time again. Maybe one of these times it will get out of hand, who knows. I am loaded to the gills with PM's and PM shares, but I am not married to them. All at a price. The only salvation here is that the world is waking up. $6 gasoline should have a nice effect on the protest environment. At some point we will get our own version of Kent State and this war will be over. The money will become sound again because the elite will not like the country they live in anymore. (random killings, assasinations, etc.) Just saying. I could be completely wrong.
" Let that sink in for a second, and let it further sink in what happens when $1.3 trillion Pimco decides to open a gold fund."
Good idea....it would give his customers a chance to hedge what he is selling....
re A 30-50 year virtuous cycle of credit expansion which has produced outsize paranormal returns...
Presumably these paranormal returns are only on ghost assets ?
I understand that Gold and Silver will continue to go up as long as there is a continued demand for the precious metals, but what happens when the rush to sell begins?
As I see it, there are three reasons people or organizations hold gold: 1) to hedge against inflation (for savings) 2) a commodity that can earn investors a good return and 3) as an assett of value which banks can use to leverage funds.
People are hording gold for a rainy day. Lose your job and you run out of cash, trade in the gold. If you are a company or a bank in trouble, you liquidate your assetts.
Well, isn't that day coming fairly soon? Many banks are in trouble. We're seeing a record number of bankruptcies. As this escalates, won't more and more people and organizations be forced to sell their gold and silver to keep them afloat? What happens when there are more people selling gold than buying? The price will plummet.
As I see it, the value of EVERYTHING is going to shrink by 25% - 75%. real estate, stocks, derivatives... and gold. It may rise as the Fed and ECB prints more moeny to keep it afloat, but that can't continue. Enevtually the bubble will deflate: question is, will it be slow, or will it POP!
Like many people I have bought a decent stock of Gold and Silver, so I would of course love to see it continue to rise. Can anyone tell me why i wrong in my assumptions?
Erikp, you are wrong in your assumptions because you don't understand gold. It's clear you believe paper dollars are real money. That's OK with me, because I do understand gold. You see gold as an investment, that you will later want to turn into dollar bills, which to you represent the true wealth. The clue to your misunderstanding is you would 'love to see it continue to rise, which I guess means you will want more dollar bills for your gold than you paid initially. The fact is that gold doesn't rise or fall at all. It's the dollar bill that goes up and down in value, as measured in gold, and not the other way around. It doesn't take more gold to trade for a dollar bill -- quite the opposite. Gold doesn't change. The gold you have is the same chunk of rock it was 5 seconds after the big bang, same atomic weight, same molecular structure. It has not changed and never will, other than to be shaped and molded into coins or bars or artwork or jewelry. Other than that, it doesn't change. Gold is real stuff. The paper dollar in your billfold has the term 'note' on it, which means debt. When you take a dollar, you accept debt as payment. You are being paid by a transfer of debt. Paying with a dollar bill says I am transferring debt owed me to you. So, everybody owes everybody, except for the guy who holds gold, who owes no one.
So you can have a pocketful of debt tickets, or a pocketful of gold. Your choice. It's the debt tickets that change in 'value,' not gold. Gold is simply the measure of that change, not the other way around. The capper that tells us you don't understand gold is your statement that 'the value of everything is going to shrink...' including gold. You confuse price with value. If I will accept your gold, and not your paper dollar, you tell me which has value, no matter what price is asked. If you had to put your wealth away in a safe for 20 years, a safe that could not be opened for 20 years, which form of wealth would you put in that safe? Would you use gold, or dollar bills, or just write a check? Your current fear is 'what happens when everyone rushes to sell?' I ask, sell for what? It's the dollar folks are rushing to get out of. Under what circumstance will the masses rush back into the dollar, which is being duplicated by the trillions annually? How do you rush into something that everyone is already knee deep in? What would be the reason to rush?
What zero bound? Negative interest rates may be coming up. There's no reason why the party has to stop so soon.
http://www.youtube.com/watch?v=qt6Q5TXNt-Q&feature=related
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