Brodsky On Gold, 'Credit Money', And Real Return Investing

Tyler Durden's picture




 

Macroeconomic issues currently playing out in Europe, Asia, and the United States may be linked by the same dynamic: over-leveraged banking systems concerned about repayment from public- and private-sector borrowers, and the implication that curtailment or non-payment would have on their balance sheets. Global banks are linked or segregated by the currencies in which they lend. Given the currencies in which their loan assets are denominated, market handicapping of the timing of relative bank vulnerability is directly impacting the relative value of currencies in the foreign exchange market, which makes it appear that the US dollar (and economy?) is, as Pimco notes, “the cleanest dirty shirt”. Is there a clean shirt anywhere – creased, pressed and folded?

 

QBAMCO's Paul Brodsky (in a deep dramatic voice-over) sets the scene: In a world where time series stand still... and real purchasing power value has no meaning... a few monetary bodies stand between economic death and destruction... between commercial hope and financial despair... between risk-free returns and return-free risk. Amid this set of conditions it seems entirely prudent to position purchasing power in vehicles that would benefit as the nominal stock of base money grows at a rate far in excess of the gold stock growth rate.

 

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QBAMCO - Real Return Investing

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Wed, 07/18/2012 - 18:04 | 2629968 SemperFord
SemperFord's picture

Makes me wish I had not lost all of my PMs on that boating trip! 

DAMN you Salazar, DAMN YOU!!!

http://www.youtube.com/watch?v=lu_r0mCuwa8

Wed, 07/18/2012 - 22:41 | 2630599 philipat
philipat's picture

"The market", whatever that means these days, seems to have linked Gold directly to QE, which probably isn't coming any time soon. This is probably a convenient way for the cartel to "Steer" Gold but, if not, how and when will Gold break free from this trap?

Thu, 07/19/2012 - 09:21 | 2631448 Lord Koos
Lord Koos's picture

No takers, funny because usually the wise guys on ZH have an answer for everything.

Wed, 07/18/2012 - 23:46 | 2630736 RockyRacoon
RockyRacoon's picture

@SemperFord

You read and digested that 16 page article within 11 minutes after it posted!  I'm impressed.

And such a thoughtful comment as well.

Thu, 07/19/2012 - 13:13 | 2632697 SemperFord
SemperFord's picture

RR, if you read enough of it, you will immediately catch some information which is very similar to other ZH articles on gold and it's actual "value". So I skim through paragraphs but yes I can not only read fast but trap the contents quite well if the material is interesting to me but you are welcome for the comments...I guess. Yes I get you are being sardonic.

Sat, 07/21/2012 - 11:03 | 2638740 RockyRacoon
RockyRacoon's picture

Why dintya just say so to start with?   Sardonic?  I'd say that is being kind.  I was being an evil prick.

Wed, 07/18/2012 - 18:08 | 2629978 New American Re...
New American Revolution's picture

Ding Ding Ding Ding Ding.... Give the Man a Qupee Doll.... haaeeerrrreeeee'ssss a winnah ladie's an gent'men.... step right this way please, right into the swirling blades mame', no, to the left dear.

Pay no attention to those screams Ladie's an gent'men...

Wed, 07/18/2012 - 18:12 | 2629985 WilliamShatner
WilliamShatner's picture

Gold or Quatloos...... tough choice.

 

NOT!

Wed, 07/18/2012 - 18:34 | 2630024 Long-John-Silver
Long-John-Silver's picture

You forgot about Gold Pressed Latinum (Known on earth as Gold Plated Tungsten).

Wed, 07/18/2012 - 20:45 | 2630311 ThreeWishes
ThreeWishes's picture

"eureka" Just like rotten eggs if it floats its not gold "Archimedes" 

Wed, 07/18/2012 - 18:12 | 2629986 FieldingMellish
FieldingMellish's picture

So the trade is short Treasuries, long the yellow brick road. Done.

Wed, 07/18/2012 - 18:13 | 2629989 fonzannoon
fonzannoon's picture

THis says it all to me.

From Forbes: Ron Paul then noted that when Bernanke claims the Fed stands ready to support Europe and other geographies during times of financial and economic crisis, it’s actually the American tax payer that is shouldering the burden. The Fed Chairman responded by noting that it is Congress which delegated the responsibility to manage monetary policy to the Federal Reserve.

Wed, 07/18/2012 - 23:30 | 2630705 GOLDTEETHSILVER...
GOLDTEETHSILVERFILLINGS's picture

Have you noticed that congress can't manage their weight? Don't you expect them to help any of the people?

Wed, 07/18/2012 - 18:14 | 2629990 Beam Me Up Scotty
Beam Me Up Scotty's picture

I like.........GOOLLLDDDDD!!

Wed, 07/18/2012 - 20:47 | 2630316 ThreeWishes
ThreeWishes's picture

I love Au and Ag.

Wed, 07/18/2012 - 18:16 | 2629994 Zola
Zola's picture

The FED and the Banks have been busy bankrupting all PM holders , and especially PM stocks holders (can't have competition with SPX...)since last summer.

Wed, 07/18/2012 - 18:27 | 2630011 Whalley World
Whalley World's picture

I suppose what they do not consider is that the miners have fallen to levels where it does not make sense to sell.  My juniors are so low (and i have been in for ten years) that they are a non expiring option that you would have to tear away from my cold, dead hands.

In 2002 I debated all phyz or stocks and phyz.  Should have just bought the metal but who could have seen the massive shorting by the powers that be on my hapless juniors.

Wed, 07/18/2012 - 23:26 | 2630699 GOLDTEETHSILVER...
GOLDTEETHSILVERFILLINGS's picture

Follow the yellow brick road...

Wed, 07/18/2012 - 18:21 | 2630003 Beam Me Up Scotty
Beam Me Up Scotty's picture

Shadow gold price at $9961 based on US gold holdings of 8300 metric tons.  You mean 8300 metric tons of tungsten?  Lets see the 8300 tons of gold.  Lets all see it with our own eyes!!

Wed, 07/18/2012 - 18:23 | 2630008 FieldingMellish
FieldingMellish's picture

I'm sure its here somewhere... I just saw it yesterday... I'm sure it will turn up sooner or later.... Oh Blythe! You know that shiny yellow stuff that I've been lending you for twenty years? You haven't seen any of it have you?

Wed, 07/18/2012 - 18:37 | 2630033 Long-John-Silver
Long-John-Silver's picture

Oh it's there. The only problem is the 100 people that think they own each ounce of it. There's going to be a fight as all 100 owners of that ounce try to figure out which one of them gets it.

Thu, 07/19/2012 - 02:06 | 2630881 Stormdancer
Stormdancer's picture

I doubt there will be a fight.  The "one" that will get the metal has long been established.  If it's not already secreted in some untouchable private warehouse it will be before any fight can begin.  Any fight that develops afterward will be between lawyers and amount to much fury signifying nothing in the end.

I suspect all that gold will remain hidden until it's time to create a new monetary system which will most likely require some reference to gold to gain trust in the new system.  When it's time to make some new rules, you'll see who has the gold.

That gold is not even "there" for nations....much less individuals, funds or even banks.

And where is Banco de Mexico's gold?

Wed, 07/18/2012 - 18:22 | 2630004 Spacemoose
Spacemoose's picture

tomorrow i diversify.  i'm heading off to costco to buy everything i can, that i might reasonably eat in the next 12 months.  i bet my rate of return on the food beats the living shit out of the 56 cents i made on the $9K i have on deposit in the credit union over the last 2 months.  might even beat PM's over the next 12 months (although not over the long run). 

Wed, 07/18/2012 - 18:25 | 2630010 FieldingMellish
FieldingMellish's picture

It certainly will when one day you turn up at the credit union only to find the account is empty.... and it's GONE!

Wed, 07/18/2012 - 18:32 | 2630019 Spacemoose
Spacemoose's picture

ha! you might be right but i think odds are over overwhelming that the gov would print, print, print  in that scenario.  what really concerns me is what happens when it suddenly occurs to all the other mary and joseph six packs that that food provides a much better rate of return on their money than the local bank on their piddly savings accounts.  what happens when the middle class realizes that food is their only hedge?  and you can eat it!

Wed, 07/18/2012 - 19:27 | 2630104 Al Gorerhythm
Al Gorerhythm's picture

In that scenario, which has been played out in the US with MFG and PFGBest, the "government" did sweet fuck all except support their colleagues in "the business". They are as one, Spacemoose.

You are onto something there buying food but it won't be too long after the fall that you will be labeled a "hoarder". I wonder if by hoarding dollars in bank account, that you could be construed as a hoarder as well? Shouldn't you be compelled to withdraw your savings and spend them into circulation? Why are you hoarding dollars, SM? Can't you see that it is good for the nation to just spend so that everyone is able to hold some? Those poor banks haven't enough to spread around, fractional reserve policies 'n all.

Thu, 07/19/2012 - 08:59 | 2631328 GeezerGeek
GeezerGeek's picture

All TPTB have to do is send interest rates on checking and savings accounts into negative territory. Use it or lose it.

Wed, 07/18/2012 - 18:31 | 2630012 Rainman
Rainman's picture

cool idea, I hear honey never goes bad.

Wed, 07/18/2012 - 18:32 | 2630020 blunderdog
blunderdog's picture

Gotta keep it away from babies, tho, the trace botulism toxin will fuck 'em up.

Wed, 07/18/2012 - 18:35 | 2630028 Spacemoose
Spacemoose's picture

the important thing is to buy what you use.  i've got 50 pounds of beans that i know are never gonna get eaten.  but tuna, pasta, rice, and canned tomatoes are consumed in large quantities in my home (2 teenagers).

Wed, 07/18/2012 - 19:13 | 2630085 SemperFord
SemperFord's picture

Mix some bacon and strips of steak with a pot of beans and your teenagers will it them, believe me!

Thu, 07/19/2012 - 09:24 | 2631458 Lord Koos
Lord Koos's picture

Yep, learn to cook!  Black bean soup, red beans & rice, etc, good stuff.

Wed, 07/18/2012 - 19:00 | 2630065 johny2
johny2's picture

the way bees are dropping off, that may be the best idea around.

Thu, 07/19/2012 - 06:35 | 2631014 petolo
petolo's picture

Honey futures, anyone? Don,t tell Jamie.

Wed, 07/18/2012 - 20:03 | 2630185 Miss Expectations
Miss Expectations's picture

But it must be stored in a glass jar, not plastic.

Thu, 07/19/2012 - 06:57 | 2630386 blueRidgeBoy
blueRidgeBoy's picture

As long as it's stored in an air-tight and moisture-proof container, honey will keep forever, even if that container is plastic.  Now, we can debate the health effects of plastic food containers, but that doesn't affect the storage life.  The reason honey keeps so well is because it contains natural anti-microbial and anti-bacterial compounds (edit: hydrogen peroxide, mostly).  Honey has also been used as a topical wound treatment and a preservative for other foods.

 

edit: liquid gold, bitchez!   (couldn't resist)

Wed, 07/18/2012 - 22:44 | 2630602 holdbuysell
holdbuysell's picture

Costco used to carry these in-store. But you can still buy online:

http://www.costco.com/Browse/Product.aspx?Prodid=11747940

Another site:

http://store.honeyvillegrain.com/


Wed, 07/18/2012 - 23:09 | 2630655 q99x2
q99x2's picture

Watch out for the glowing fin tuna.

Thu, 07/19/2012 - 08:51 | 2631273 GeezerGeek
GeezerGeek's picture

But if it glows, you'll be able to find it when the lights go out.

Thu, 07/19/2012 - 07:09 | 2631053 _underscore
_underscore's picture

Yes, good idea. I've personally 'sterilised' my requirement for all household pretroleuem based products by buying (on discount/special offer) all the washing/cleaning products I'll ever need (based on my expecatations of my life expectancy..!) My return, so far like yours, has been greatly in excess of any meagre return on deposit accounts. Any non-degradable consumable products, I beleive, will  also bear the same or greater return (as opposed to cash savings)  - toilet/kitchen tissue, oils, rice  etc.

The article above has been the best overall summary of why it's sensible to buy 'treasure' that I've read here (and I'd also include the more mundane 'treasure' you can buy from CostCo in the list above - or treasure for the common person) .

I do believe I'm slipping into Prepperdom.

 

Wed, 07/18/2012 - 18:32 | 2630023 blunderdog
blunderdog's picture

That's truly one of the strangest investment reports I've read.

Wed, 07/18/2012 - 18:34 | 2630025 vincent
vincent's picture

"over-leveraged banking systems concerned about repayment from public- and private-sector borrowers"


and with reality now setting in, realize that the Fat Lady is warming up.

 

Fixed it.

Wed, 07/18/2012 - 18:40 | 2630037 Spitzer
Spitzer's picture

US dollar (and economy?) is, as Pimco notes, “the cleanest dirty shirt”. Is there a clean shirt anywhere –

That is the biggest bubble/myth out there. First the Euro, then the creditor Yen, then the dollar.

Wed, 07/18/2012 - 19:07 | 2630074 fonzannoon
fonzannoon's picture

Spitzer why the Yen before the dollar? Would they dump all their treasuries on our head first?

Wed, 07/18/2012 - 19:31 | 2630108 Al Gorerhythm
Al Gorerhythm's picture

Whilst they still hold some perception of value, you bet your ass they will.

Wed, 07/18/2012 - 18:51 | 2630051 Zola
Zola's picture

This report is a keeper Tyler. However, this analysis was made in 2009/2010 by smart investors and the market action has been illogical and absurd ever since. Indeed with record negative real interest rates, the ratio of Shadow Gold Price to Gold price should have moved strongly towards 1. There is a high likelyhood there is global rigging of the Gold price.

Wed, 07/18/2012 - 18:57 | 2630062 Snidley Whipsnae
Snidley Whipsnae's picture

Ya think?... "There is a high likelyhood there is global rigging of the Gold price."

How many Fed Govs have to say as much before you will be convinced?

Wed, 07/18/2012 - 19:06 | 2630072 buzzsaw99
buzzsaw99's picture

I don't think OPEC would be too happy with one ounce of gold per hundred barrels of oil.

Wed, 07/18/2012 - 19:08 | 2630077 OsirisIsABlackGod
OsirisIsABlackGod's picture

I'm just gonna leave this here

http://mises.org/daily/4546

Wed, 07/18/2012 - 19:17 | 2630090 Downtoolong
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Anything but paper, that's my new motto.

Do NOT follow this link or you will be banned from the site!