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Guest Post: Is the Table Set For A Mania In Precious Metals?

Tyler Durden's picture




 

Submitted by Jeff Clark of Casey Research

Is The Table Set For A Mania In Precious Metals?

It may feel like I'm out of touch with the precious metals markets to broach the subject of a mania today, but I think the table is being set now for a huge move into gold and silver.

There are, however, very valid reasons to reasonably expect a mania in our sector. For one thing, manias have occurred many times before, but the main issue is that a mania in gold and gold stocks is the likely result of the absolute balloon in government debt, deficit spending, and money printing. Saying all that profligacy will go away without inflationary consequences seems naïve or foolish. Inflation may not attract investors to gold and silver as much as force them to it.

Now, one could make the argument that any rush into gold and silver will be muted if no one has any savings, especially given that demographers say a quarter of the developed world will soon be retired. But even if individuals are wiped out, the world's money supply isn't getting any smaller, and all that cash has to go somewhere.

I wanted to look at cash levels among various investor groups to get a feel for what's out there, as well as how money supply compares to our industry. Data from some institutional investors are hard to come by, but below is a sliver of information about available cash levels. I compared the cash and short-term investments of S&P 500 corporations, along with M1, to gold and silver ETFs, coins, and equities. While the picture might be what you'd expect, the contrast is still rather striking.

(Click on image to enlarge)

Naturally, not all this money or even a big chunk of it will be used to buy GLD, Barrick, or American Eagles, but it's clear that if any significant fraction of the cash sloshing around the economy were to be used to buy gold, it would have a major impact on the price of gold – which would trigger the mania I fully expect. Let's take a quick look at what kind of impact our sector could experience if just a small amount of available funds were devoted to various forms of gold and silver.

  • The entire worldwide value of all gold exchange-traded products (ETPs) currently represents just 2.1% of the cash and short-term investments held by S&P 500 corporations. If 20% of these companies decided to put a mere 5% of their available holdings into these precious metals vehicles, their value would more than double.
  • If just 1% of the physical currency (M1) floating around the system were used to buy gold Eagles, it would be 13 times more than the entire value of all coins purchased last year.
  • If corporations chose to invest 1% of their cash in silver ETFs, it would surpass the total current value of all such ETFs.
  • If corporations moved 5% of their "short-term investments" evenly into gold stocks, the market cap of every gold company would increase by 20%.
  • If they chose silver stocks, they'd each grow by a factor of six.
  • Five percent of M1 would increase the market cap of gold producers by 14%. The same fraction would be 3.4 times bigger than the entire current value of all primary silver producers.

This is just S&P 500 corporations – there are many more corporations in the world, as well as pension funds, hedge funds, sovereign wealth funds, mutual funds, private equity funds, private wealth funds, insurance companies, and other ETFs.

It's striking, when you really stop to think about just how big the impact could be if some significant fraction of the larger financial world started chasing the small niche market that is gold. Such cash inflows will send our industry to the moon.

In the meantime, keeping our eye on the big-picture forces that have yet to play out is the plan to follow. Sooner or later, though, I'm convinced the catalysts will kick in that will pull/push/drag/compel/force the mainstream into our sector. I suggest beating them to it.

And when the mania arrives, we'll all wonder why anyone doubted it in the first place.

 

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Wed, 06/06/2012 - 18:47 | 2501308 SHEEPFUKKER
SHEEPFUKKER's picture

The table is set for a mania in boating accidents. 

Wed, 06/06/2012 - 19:02 | 2501349 Winston Churchill
Winston Churchill's picture

Uptick in gardening mis-haps too.

Wed, 06/06/2012 - 19:12 | 2501377 CIABS
CIABS's picture

How did I guess that this would be a piece from the Casey organization?  Yeah, they're pretty much right about the markets, but I only skim these things, as they are usually just re-hashes of stuff that has been said endlessly already.

Wed, 06/06/2012 - 19:17 | 2501394 kengland
kengland's picture

Spot on. I can pull the old newsletter from 05, and it would be a carbon copy. Still waiting Doug. The real mania is represented by the newsletters you sell. Christ, it's unbelievable what they pay for your crap these days.

Wed, 06/06/2012 - 19:25 | 2501419 kekekekekekeke
kekekekekekeke's picture

can you really do that please it would be interesting to compare

Wed, 06/06/2012 - 19:51 | 2501453 Pladizow
Pladizow's picture

To: Kengland

Yeah, what a dumb ass Casey is, Gold and silver have only gone up four fold since '05'.

There are no prettier bubbles, then a golden one!

Wed, 06/06/2012 - 20:08 | 2501537 Colombian Gringo
Colombian Gringo's picture

Yeah, we should buy Bershire Hathaway since 2007 they are up, oops down 17.5%, while gold doubled. Yeah thats sounds like a good deal, NOT.

Wed, 06/06/2012 - 19:36 | 2501458 TWSceptic
TWSceptic's picture

Don't believe him, he's full of it.

Wed, 06/06/2012 - 22:34 | 2501986 Ignorance is bliss
Ignorance is bliss's picture

There are always new people awakening to find themselves in their own personal kobayashi maru.

Wed, 06/06/2012 - 19:04 | 2501352 BKbroiler
BKbroiler's picture

I thought it was the anchor... damn.

Wed, 06/06/2012 - 19:19 | 2501402 Future Tense
Future Tense's picture

Robert Prechter just released a special report to his paid subscribers calling for the top in the treasury bond market after being (correctly) bullish on treasuries moving higher for over 20 years. Here is an amazing video with him discussing the coming slaughter in the bond market:

http://www.ftense.com/2012/06/robert-prechter-on-capital-account.html

Wed, 06/06/2012 - 19:31 | 2501447 CharlieSDT
CharlieSDT's picture

Fabulous interview.

Wed, 06/06/2012 - 20:41 | 2501544 Bay of Pigs
Bay of Pigs's picture

So is he finally long gold then after a decade or more of bashing it? Or is he still on the "gold to $300" horseshit? 

Edit: I listened to the entire interview. Not only didn't he say anything worthwhile about gold, he totally avoided it. Same old story. Nice try Bob. 

Thu, 06/07/2012 - 08:11 | 2502919 narapoiddyslexia
narapoiddyslexia's picture

Although Lauren's nipple display was very tastefully done. Just a hint, with sufficient arm-waving to keep them on display.

Wed, 06/06/2012 - 19:38 | 2501467 FieldingMellish
FieldingMellish's picture

Prechter is bearish on bonds? hmm... I'd better buy bonds then. Or maybe not, he is such a bad indicator that i don't think I could even use him as a contrarian.

Wed, 06/06/2012 - 18:48 | 2501309 SemperFord
SemperFord's picture

Silver Bitchez!!!

Wed, 06/06/2012 - 22:59 | 2502046 Debt is Slavery
Debt is Slavery's picture

Came here for this.

Wed, 06/06/2012 - 18:51 | 2501324 Stoploss
Stoploss's picture

Man, that's a lotta If's..

Wed, 06/06/2012 - 18:52 | 2501326 Likstane
Likstane's picture

Long canoes and experienced divers.

Wed, 06/06/2012 - 18:59 | 2501327 hamurobby
hamurobby's picture

The mania will not come from j6p, it will come from CB's and heggies.

How about that 8 trillion sitting quietly waiting for someplace to go?

 

 

Wed, 06/06/2012 - 18:54 | 2501332 mademesmile
mademesmile's picture

I don't always have boating accidents, but when I do, I lose my change.

Wed, 06/06/2012 - 18:58 | 2501343 greenknightist
greenknightist's picture

good to be ahead of the curve.--------- great post  !

Wed, 06/06/2012 - 18:58 | 2501344 GubbermintWorker
GubbermintWorker's picture

Currently long on .357Magnums.

Wed, 06/06/2012 - 19:35 | 2501457 who-is-john-galt
who-is-john-galt's picture

Gotta go with the .223.  Besides, what's more fun than an assault rifle equipped with one of these? http://militarygunsupply.com/index.php?main_page=product_info&cPath=57&p...

Wed, 06/06/2012 - 19:59 | 2501516 JohnKozac
JohnKozac's picture

That looks like only part of the gun...are you going to beat your enemy with that?

Wed, 06/06/2012 - 21:16 | 2501770 In Vino Veritas
In Vino Veritas's picture

>>Besides, what's more fun than an assault rifle equipped with one of these?

An assault rifle equipped with one of these:

http://www.youtube.com/watch?v=O8UaDWdebMg&feature=relmfu

:-)

Wed, 06/06/2012 - 22:36 | 2501987 ArrestBobRubin
ArrestBobRubin's picture

"Besides, what's more fun than an assault rifle equipped with one of these?"

A burger run in one of these?

FPSRussia Goes to Whitecastle - In a tank...

I freakin' love this Russian. Da, Baby.

Thu, 06/07/2012 - 00:47 | 2502300 Maos Dog
Maos Dog's picture

Bah, wifey shoots better than that....

I have a great fear of getting into a gunbattle where my wifey is involved, I will be running behind her shouting "NO DON"T SHOOT THEM IN THE BACK WHEN THERE RUNNING AWAY, THATS MURDER TWO!!!!!"  "NO DON"T SHOT THEM IN THE HEAD WHEN THERE DOWN, THAT"S MURDER TWO!!!!"

 

 

Thu, 06/07/2012 - 00:54 | 2502314 RafterManFMJ
RafterManFMJ's picture

Yeah, I like it...but 350 bucks for 4 dollars of injection molded plastic? Naw, I'd rather not be gouged, thanks.  Besides, aimed fire is better than buring though a clip just to look cool.

Thu, 06/07/2012 - 07:34 | 2501346 Money 4 Nothing
Money 4 Nothing's picture

It doesn't matter... They're not advertising the actual price anyway. It should be over 3K troy oz for Gold right now and it's reflecting half. When and how will price discovery ever find it's way to print?

Wed, 06/06/2012 - 19:04 | 2501351 zerotohero
zerotohero's picture

just remember when it does shoot up to sell at the right time and not cling to it like it was your hot babysitter.

Wed, 06/06/2012 - 19:07 | 2501359 BKbroiler
BKbroiler's picture

that, my friend, is the hard part, and picking tops is harder than picking bottoms.  I prefer latina bottoms and my target is 3K, that's when I'm out.

Wed, 06/06/2012 - 19:10 | 2501369 SHEEPFUKKER
SHEEPFUKKER's picture

Maybe you could sell to Krugman at 3K BK. 

Wed, 06/06/2012 - 19:19 | 2501400 BKbroiler
BKbroiler's picture

Do I have a deal for you Paulie.  It's a heavy, useless, inedible, inflammable, soft hunk of metal that pays no dividends, is rampantly manipulated, and gets taxed as a collectible.  3K an an ounce for you pal, for helping us get there.

Wed, 06/06/2012 - 19:43 | 2501476 Pladizow
Pladizow's picture

To: BKbroiler.

Trading is like dating - you never get the bottoms you want!

Wed, 06/06/2012 - 19:50 | 2501500 BKbroiler
BKbroiler's picture

And like dating, the result isn't decided till it's over, and all trades and dates must come to an end.  

I'm pulling out just in time, before I own the ho.

Wed, 06/06/2012 - 20:44 | 2501649 Bringin It
Bringin It's picture

BK - and own what instead?  Where would you park your winnings in a world with POG @ 3K?

Wed, 06/06/2012 - 21:33 | 2501788 BKbroiler
BKbroiler's picture

I'm guessing that gold's peak is real estate's bottom.  Cash purchase of a couple of non-stabilized rental properties for college kids to puke in who don't care about renovations as long as they can light the joint off the stove.  That's my guess anyway, if I knew it all I wouldn't be here. one bubble at a time.

Mon, 06/11/2012 - 02:01 | 2513456 Bringin It
Bringin It's picture

Thanks for sharing.  OK, so maintainance you can skip but, you wouldn't worry about ballooning taxes?  Title clarity problems?  Collapsing infrastructure?  Institutions?   Like colleges? 

A friend is buying what you're describing now. 

Sounds like issues to me.

Wed, 06/06/2012 - 19:26 | 2501422 zerotohero
zerotohero's picture

Tis true - just can't get too greedy

Wed, 06/06/2012 - 19:27 | 2501429 GubbermintWorker
GubbermintWorker's picture

I'll sell you all my silver for ......$2800/ounce!

Wed, 06/06/2012 - 19:06 | 2501357 LeisureSmith
LeisureSmith's picture

What ever happened to those shipwrecks with all that silver that were in the news a while back?

If you are planning on boating while carrying Ag you should wear a west.

Canoeing seems to be the most hazardous.

Wed, 06/06/2012 - 19:23 | 2501413 XenoFrog
XenoFrog's picture

Likely tied up in lawsuits as people/countries try to claim it as their own. Then eventually eaten entirely by lawyers.

Wed, 06/06/2012 - 19:40 | 2501471 LeisureSmith
LeisureSmith's picture

Found it.

http://articles.cnn.com/2011-09-26/world/world_europe_gairsoppa-shipwrec...

7 million oz. Thats a cool stash.

But you are probably right, it seems there are some legal complications.

Wed, 06/06/2012 - 19:09 | 2501365 Bear
Bear's picture

As much as I would like to believe your 'if-only's  since I am 50% PMs - what SP 500 company would or could put their cash into a 'speculative' asset. The CFO of that company would have a lot of explaining to do ... but a stock buy-back or goberment bond now that's where he'll stake his job. If all goes south, he'll have built explanations. No one will ask ... "Why didn't you buy silver and gold you moron?"

Wed, 06/06/2012 - 19:12 | 2501374 A Lunatic
A Lunatic's picture

I am considering buying my own small scale mining property this year. Maybe even two. The window for this type of activity is getting smaller and smaller and it will be another lost opportunity perhaps even a few short years from now.

Wed, 06/06/2012 - 19:12 | 2501376 Dry Drunk
Dry Drunk's picture

I was briefly transported to the future and immediately doodleplexxed the word “Money”. This is what came back.

Mo – any item that can be freely exchanged between individuals for different mo in the present or at a future date. Includes knowledge, skills, actions, and promises. Items in the person’s possession, notably gold, are also viewed as mo for conducting impersonal exchanges.

 

Mojo -- the stock of mo possessed by an individual that could potentially be exchanged.

 

Gunmo -- Putting a gun in front of mo, forms the word gunmo. False mo brought about when otherwise free people are forced to exchange particular items by the power of the gun (for example, ancient legal tender laws), whose purpose is to finance the production of more guns and trigger wars. Gunmo provides ammo for wars.

 

 

 

Let's make the future come true. Stop calling it the US dollar and start calling it the US gunmo.

Wed, 06/06/2012 - 19:16 | 2501381 oldgasII
oldgasII's picture

When I woke up this morning my gold was pretty much the same oh, oh.

When I woke up this morning I was long and feeling lame, oh,oh. 

I can't sell because 'cause the spot will make me lose, oh, oh.

I bought my gold long, I feel something like a silly goose.

Every damn month I do a DCA, oh, oh.

Is my friggin investment ever going to pay?

Wed, 06/06/2012 - 19:23 | 2501388 lakecity55
lakecity55's picture

Some money manager I hear every now and then on Bloomberg Sirius today said something I never heard him say before (can't remember the guy's name), which was suddenly he was putting 10% of his portfolios into all 3: EFTs, Fizz, and Miners. But it was the way he said it, like, "oh, yeah, casual, casual," etc.

In days of yore, apparently the guy never kept more than 2% in EFTs

I'm doubling down on my miners Friday. My Fizz is still in a holding cell somewhere, probably glued to a JPM guy's fingers.

*****************************8

Ark! I just checked that account. The fizz is in the pipe. Tomorrow I'm raiding the coinshop for culls.

Wed, 06/06/2012 - 19:19 | 2501405 Henry Hub
Henry Hub's picture

Being long gold for a long time, I look forward to a mania in gold. However, I fear the economic catastrophe that would cause such a rise. Be careful what you wish for...

Wed, 06/06/2012 - 19:24 | 2501416 XenoFrog
XenoFrog's picture

I've actually had this argument with friends who claim that I want the system to crash by arguing that it will collapse. Predicting/Seeing that something is coming and preparing accordingly is definitely not the same as wishing it to come.

Wed, 06/06/2012 - 19:28 | 2501430 kekekekekekeke
kekekekekekeke's picture

of course, it vilifies you and makes their laziness noble

Wed, 06/06/2012 - 19:36 | 2501464 XenoFrog
XenoFrog's picture

Never underestimate the comforting power of denial.

Wed, 06/06/2012 - 21:04 | 2501728 Marginal Call
Marginal Call's picture

I'm in some metal and gardening as insurance.  My neighbor isn't convinced it's bad enough to take the plunge.

 

But he's not lazy in the slightest.  He works hard at his job.  Let's not conflate conditioned with lazy. 

Wed, 06/06/2012 - 19:47 | 2501490 SovereignSilver
SovereignSilver's picture

Going through the same thing xeno. They think I'm cheering on an economic collapse. Nothing could be further from the truth. For the most part I like my lifestyle, doesn't mean I'm naive enough to think the world's gonna stay the way I like it because I want it to. I tell my friends to hope for the best and prepare for the worst.

Wed, 06/06/2012 - 21:07 | 2501736 Marginal Call
Marginal Call's picture

All of us are attempting to justify the decisions we've made.  We want to be right, and we can't see the future.  We are no different than "them".

Wed, 06/06/2012 - 21:07 | 2501737 Temporalist
Temporalist's picture

Discussed enough times here on ZH - normalcy bias.

Wed, 06/06/2012 - 22:45 | 2502009 Ignorance is bliss
Ignorance is bliss's picture

I stopped bringing the subject up. I don't want people to think I am Mr. Armageddon, nor do I want them to know that the guy warning them may also have prepared. Kind of like the little pigs in the straw and stick house decided to work with the wolf to have a pork barbeque at the brick house. Preparations are great but we are past the point of no return. This thing isn't going to fall apart in 5-10 years. Its coming down much sooner then that.

Wed, 06/06/2012 - 21:19 | 2501778 jez
jez's picture

Changez vos amis -- de Gaulle.

Wed, 06/06/2012 - 21:22 | 2501789 atomicwasted
atomicwasted's picture

I want the system to crash because only after system crash can change come.  The system is too brittle to fix and has to collapse in order to reset.

Thu, 06/07/2012 - 02:55 | 2502502 slackrabbit
slackrabbit's picture

I don't bring it up anymore because its not my job to do other peoples thinking for them.

It was that 'thinking' that got us in to this mess in the first place.

If people don't want to use their brains, would rather watch Dancing With The Stars and  ignore the real news, thats their problem not mine.

Survival comes from using you brain; death comes when you don't...

Wed, 06/06/2012 - 19:20 | 2501407 dark pools of soros
dark pools of soros's picture

Money doesn't 'go into gold' when you buy it, it just sits on someone elses ledger until they do something with it.  The only time this money goes anywhere is when debt is paid and it is taken off the ledger

Gold shines best when no fiat can buy it

 

Wed, 06/06/2012 - 19:30 | 2501436 orangegeek
orangegeek's picture

Deflation is here.  It's picking up momentum.

Wed, 06/06/2012 - 19:31 | 2501441 kito
kito's picture

gold isnt going anywhere unless some major printing starts up. global money supply continues to contract. if there isnt a flood of money soon, gold will get crushed along with everything else......hold physical cash...its the only safe harbor in the deflationary storm...................

 

http://www.telegraph.co.uk/finance/financialcrisis/9311190/Global-slump-alert-as-world-money-contracts.html

Wed, 06/06/2012 - 19:36 | 2501463 SovereignSilver
SovereignSilver's picture

I tell you what kito, you can come over to my place and light my woodstove with those bills. I can send you a list of central banks that disagree with your statement.

Wed, 06/06/2012 - 19:45 | 2501480 RiotActing
RiotActing's picture

Clueless #1

Wed, 06/06/2012 - 19:56 | 2501511 kito
kito's picture

remind me to chuckle when the world's asset/commodity prices get absolutely obliterated. everything will crushed. everyTHING...you dont get the fact that everything has already been overpriced thanks to the godzillions of digital dollars that are fast distintegrating......the only thing precious will be all of those physical dollars that the zombies want...........

Wed, 06/06/2012 - 20:19 | 2501577 SovereignSilver
SovereignSilver's picture

I'll chuckle for you right now. My fact trumps your fact...my fact is called history. 

Wed, 06/06/2012 - 21:09 | 2501745 Marginal Call
Marginal Call's picture

Facts don't mean shit in the market.  Timing is everything.   Whales can eat your lunch before facts ever come into play.  That goes for phizz too. 

Wed, 06/06/2012 - 21:15 | 2501765 Bay of Pigs
Bay of Pigs's picture

These guys totally ignore the 12 year bull run in PM's. Amazingly, they still don't see it. How is that even possible?

Wed, 06/06/2012 - 22:09 | 2501921 mick_richfield
mick_richfield's picture

"It is difficult to get a man to understand something, when his salary depends upon his not understanding it."

Wed, 06/06/2012 - 22:53 | 2502033 Swarmee
Swarmee's picture

SS, I tend to agree with you, but I must reference our host's tagline: on a long enough timeline, etc.

{OR}

History can remain irrational longer than you can remain alive.

Although, if physical dollars are scarce and more valuable in a deflationary scenario, then how do you think we would fare with our $-denominated phizzical coins? I'm certain my $1 ASE will best a $1 FRN at the farmers market in any 'flationary scenario.

Thu, 06/07/2012 - 07:10 | 2502701 SovereignSilver
SovereignSilver's picture

That is an excellent point. A maple does have a $5 face value...if you had a choice, would you take the paper or the coin?

Wed, 06/06/2012 - 21:32 | 2501821 NakedSwanTrading
NakedSwanTrading's picture

We also think the scenario that will most likely play out is a sideways move for the rest of the year. Not much of bullish bias for gold right now. However we see a 40% downside potential in the worst case.

Wed, 06/06/2012 - 19:33 | 2501450 flying dutchmen
flying dutchmen's picture

Gold is just another fucknig asset, why not farmland, why not diamonds why not US realestate ( its down a ton) ... Why not timber.    Gold is up 500% if it is a true indicator of inflations there is a few soft commodities that need to increase that much.  Bull markets to not last for fucking ever and the people that buy in the mania are the last of the shitbag dummies.  Casey this pumping their book...

Wed, 06/06/2012 - 19:45 | 2501484 RiotActing
RiotActing's picture

Clueless #2

Wed, 06/06/2012 - 19:46 | 2501487 RiotActing
Wed, 06/06/2012 - 19:48 | 2501494 Pladizow
Pladizow's picture

Novice Troll?

Wed, 06/06/2012 - 20:08 | 2501538 WageSlave
WageSlave's picture

Beware flying dutchman, they worship PM's like the moon around these parts.

Wed, 06/06/2012 - 20:23 | 2501591 shovelhead
shovelhead's picture

Try trading a 2x6 for a sandwich.

Wed, 06/06/2012 - 21:21 | 2501783 Marginal Call
Marginal Call's picture

And when you're starving, you'll trade whatever you got to the guy with all the sandwiches. 

Wed, 06/06/2012 - 22:57 | 2502040 Swarmee
Swarmee's picture

Long yeast, flour, salt.

Wed, 06/06/2012 - 19:36 | 2501460 Gringo Viejo
Gringo Viejo's picture

Mania? Only when the Government front men such as JPM et al can no longer maintain any pretense of covering their paper trades. It's my personal belief China holds the cards here and when it happens....it will be swift and lethal.

Wed, 06/06/2012 - 19:51 | 2501501 crawldaddy
crawldaddy's picture

umm nah.. Euro full crisis first, then the fleeing to the us dollar, then the usd crisis and the us goes down with europe, then a PM run.  Still quite a few hoops to jump through.

Wed, 06/06/2012 - 19:56 | 2501508 prodigious_idea
prodigious_idea's picture

Trying to decide if I want to cash in all assets and go "all in" on PM.  BIG decision and timing is critical!  Can someone describe the events that might cause gold/silver prices to drop before beginning the, some would say, inevitable rise?  Thanks.

Wed, 06/06/2012 - 21:12 | 2501756 Temporalist
Temporalist's picture

Why do you tie your poop into knots?

Wed, 06/06/2012 - 21:16 | 2501768 hamurobby
hamurobby's picture

Why not just a little at a time? dollar cost average is best, because its easier to wish you had bought more, than wish you didnt. 

Wed, 06/06/2012 - 21:17 | 2501774 Gringo Viejo
Gringo Viejo's picture

Prodigious: It's a done deal. Believe me or believe the United States Government....your call Bud!

Thu, 06/07/2012 - 04:54 | 2502603 Anton LaVey
Anton LaVey's picture

Deflationary pressures and market panics are bad for PMs.

Money printing and the rise in money supply is good for PMs. Outright financial system implosion is very good for PMs.

In other words, at one point or another, there will be another 'crisis'. Stocks will plunge, banks will go bankrupt, entire nations may even go bust and people will start to throw around big words such as 'market bloodbath' or some such.

That stage will be (somewhat) bad for PMs, because margin calls and the fact that Gold & Silver are pretty liquid will mean they will be first to be sold to raise cash. People selling means the PMs price will go down for a while.

Once money printing -- which is pretty much the only solution to avoid an outright Deflation event -- starts in earnest and inflation picks up, the value of fiat money will go down (and down, and down, and...) and PMs price should pick up pretty quickly. That stage should be pretty good for PMs, especially if, as some fear, we enter an hyper-inflationary event due to all the money printing.

Complete implosion of the system is, of course, the most positive event for PMs. All three scenarios imply such massive economic dislocations that your PMs profits may soon fade into insignificance compared to the human suffering around you.

Never go 100% / "all in" in PMs: diversification is the key. Cash (very useful during deflation), Gold and Silver and, even more importantly, ZERO DEBT and a stable form of employment (but does that even exist anymore?) should be your main targets.

Wed, 06/06/2012 - 20:01 | 2501519 Stimulati
Stimulati's picture

Yes, all that money has to go somewhere.  It will go to a bank vault and it will collapse the V in M*V.

Wed, 06/06/2012 - 20:28 | 2501568 deflator
deflator's picture

 It isn't the 70 Trillion in G-10 debt that is the problem per se--the problem is that the 70 Trillion in G-10 debt is collateral for 700 Trillion in derivatives.

 This free floating exchange rate economic model has only been around for about 40 years--not 40 forevers. This current free floating economic model was implemented as a result of a crisis--that crisis was the U.S. debt exceeded U.S. production. In 1970 the U.S. was at the top of nearly every commodities production list. By extrapolating U.S. production globally, 40 years sounds about right for a global exceeding of production with consumption. Just the past 10 years of consumption globally accounts for 25% of production in the history of mankind! Just think about how high production rates need to be just a few years down the road to extrapolate those figures indefinitely into the future similarly as debt has been extrapolated!

 How many Ghawars will we need to find and produce to extrapolate Benbucks just a few more years?

Wed, 06/06/2012 - 21:16 | 2501773 StackAttack
StackAttack's picture

So, I have heard all about the amount of global debt vs the global GDP.  Does anyone know the current dollar value of all the world's hard assets?  That would be an interesting view into the actual value of the total fiat in the global money supply.  I'd like to know how much global fiat there will be chasing the global hard assets when all the SHTF.

Wed, 06/06/2012 - 20:17 | 2501572 Gringo Viejo
Gringo Viejo's picture

Those that deride gold & silver, have no connection to 5000 years of history. As if a 100 year experiment changes things.......lmao.

IT'S DIFFERENT THIS TIME!       NOT!

 

Wed, 06/06/2012 - 20:36 | 2501624 Ricky Bobby
Ricky Bobby's picture

I will consider selling my metals when interest rates are determined by a real market and governments live within their means.

Wed, 06/06/2012 - 21:12 | 2501757 StackAttack
StackAttack's picture

I wouldn't even say it was a 100 year experiment.  More like 40 years since Nixon closed the last bit of opening in the gold window.

Wed, 06/06/2012 - 22:52 | 2502025 Ignorance is bliss
Ignorance is bliss's picture

Fed was created in Dec 1913. That would make 99 years give or take a few

Wed, 06/06/2012 - 20:28 | 2501607 BeanusCountus
BeanusCountus's picture

I subscibe to Casey. But a couple what ifs here are not even practical. As a CFO, criminal to move any short term cash to gold or miners. Never happen. But I believe gold will go up when US dollar falls. And it will someday if we can't get US spending under control. I hope they do. But keeping 10 percent in metals and miners if they dont.

Wed, 06/06/2012 - 21:11 | 2501749 StackAttack
StackAttack's picture

Two words... STACK ATTACK!!!

Wed, 06/06/2012 - 22:03 | 2501900 JackT
JackT's picture

So *IF* there is a mania would would you dump your physical and wait for the new bottom and buy it back?

Wed, 06/06/2012 - 22:11 | 2501932 mick_richfield
mick_richfield's picture

This "bull market" in PMs won't end with a mania. 

It will end with a paradigm change.

 

Wed, 06/06/2012 - 23:02 | 2502059 pissing_excellence
pissing_excellence's picture

90% percent of life is to sleep it off, this is no different.  I say bullish for one eyed willy treasure maps in the future. hahaha

They dont have persian cats in their laps like pm's, fuck em.  youve been lied to all your life, this is just day 15,989.

 

Wed, 06/06/2012 - 23:50 | 2502143 HungrySeagull
HungrySeagull's picture

I prefer the Year of Horse myself.

Wed, 06/06/2012 - 23:49 | 2502141 HungrySeagull
HungrySeagull's picture

Stack it, get out of paper while you can.

I smell cut throat profits on dabay. But first have to wait until the usual suppliers suffer a shortage of ASE and GSE...

Thu, 06/07/2012 - 00:39 | 2502278 Clowns on Acid
Clowns on Acid's picture

Well Tyler...as just a lowly manservant to all who peruse these paginations...I have commented regularly that when it comes down to real businessmen versus the barking, porch shitters of the ECB and Fed...the real bizness men will have no patience...they want a real common currency....they don't care...that will facilitate payment for their goods and services...

In lieu of a currency that is not despoiled by the left wing facsists, the bidnessmen will opt for the most efficicnt trade facility...gold and silver. in some form or fashion.

Or indeed a bi-metallic standard of some sort. Buy PM futures with sensible stops or just stack physical...which ever is is realistic or practical by one's own standards.

The present dupes wearing the centarl bank badges...wil come to that thinking sooner rather than later.

Thu, 06/07/2012 - 00:51 | 2502307 CustomersMan
CustomersMan's picture

Question For All Precious Metals Buyers: How are you going to realize your gains?

What is NOT being considered is this. In order for you to benefit from the increase in precious metals, is that there needs to be a more complete mechanism for transactions, to be able to freely exchange gold , silver, platinum, etc.,  I've been to coin shops, they want your license or SS #... WTF.  After all, gold and silver are the terms used for money in the US Constitution, with weights and measured amounts for currency, NOT Federal Reserve Notes.

As such we should be able to exchange "real money" as defined by the Constitution, freely and easily, but that mechanism does not exist, as of yet.

 

In order for that to happen, means that the US Government, is either going to change it's mind completely, we are going back to issuing our own currency, NOT DEBT BASED (as in the US Constitution) or the FED is De-fanged or destroyed. That in turn means that the influence of Jewish Power, through the FED and all Major Member Banks, AIPAC, and all the other influential organizations are De-moated,  destroyed, outlawed, or their power stripped.

 

I'm all in favor of the PM's, sound money, preventing the FED from printing money for their friends / co-conspirators and using it to buy everything in sight, or increase their capital requirements and increase their hold on the rest of us at our expense, .... and getting rid of the FED and all the supporting organizations that support them is a primary objective.

 

But do you really think they will allow the precious metals to be traded "freely" between citizens, without first trying everything else ( and I mean everything, including killing people ) ?

After all this is their MAIN source of POWER in the US and thus the WORLD?

All else depends on it.

The US and the rest of the World needs to change the concept of what money is and how it is exchanged anonymously. This is what they want to prevent, at all cost.

Just thinking of potential complications.

Thu, 06/07/2012 - 04:54 | 2502602 mushi
mushi's picture

I don't think about it in the terms of gains. I only care about maintaining my miniscule wealth.

That's all I care for. Every fiat is going through an inflation at the moment and it's only getting worse by the day.

 

"But do you really think they will allow the precious metals to be traded "freely" between citizens, without first trying everything else ( and I mean everything, including killing people ) ?"

No. They will try everything you can possibly imagine to keep the power themselves. They won't let people have the real money.

But that's why I'm planning to hide my future PM's when I purchase more. Taking my entire stash with me last time I went boating wasn't so good idea after all...

Thu, 06/07/2012 - 08:02 | 2502886 Fred C Dobbs
Fred C Dobbs's picture

Move your gold to Hong Kong or Singapore.  I can imagine a USA where precious metals are illegal to trade.  

 

 

Thu, 06/07/2012 - 03:20 | 2502537 silverdragon
silverdragon's picture

Silver has 10,000 industrial uses and has been money throughout history.

Last time Silver roared we almost bled Hong Kong dry of Physical Silver.

Everyone I know is buying and no one is selling, its only a matter of time before they actually run out of Silver in Hong Kong.

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