A Short Story About Gold

Sometimes I think the dismissive attitude many people have towards gold is due to an arrogant attitude that bad things only happen to people in other countries, and that they are somehow invulnerable.

Asset Preservation : Why Americans Need Gold

Dr. Faber Discusses US Dollar

Marc Faber is back in the guest chair at Bloomberg Asia and talking about the economic state of affairs. I always find it interesting how much his comments on the future diverge from the slick BS of CNBC. He has made some pretty harsh comments on the US dollar in the past - such as saying there will be Zimbabwe-like inflation.

Here he speaks about the dollar and the future of the US. He points out that the US can be expected to continue to devalue the dollar in order to pay for all their imperial excursions in the mid-east. It is important to note that just about every empire has devalued their currency as they decline into insignificance. Simply chanting "USA, USA" at the sight of the star spangled banner, like the proverbial Pavlovian dog, could cause one to be fleeced - whether they are in dollars or the DOW.

Dr. Faber also talks about how the dollar shouldn't be seen as a store of value, but perhaps something like property or other tangible things could be used to save - a point that has been made on this humble blog and many other websites.

He also mentioned the concept of a currency 'based on discipline'. If only there were such a thing! Many have argued for a currency that is printed and issued by the government, rather than one issued by a cartel of private banks (The Fed). That would certainly be better than the current system, but I don't really trust government to exercise much discipline in any field, especially not in the greedy realm of money. I think things like precious metals and land should always be seen as stores of value above money.

Poor Mr. Buck

I and many other gold/silver folks believe there is a long term, concerted move away from the dollar - by the Chinese, the Russians and even regular investors that don't think it will be a good vehicle for saving. These two articles are just a couple of examples of the bearish outlook for the dollar.

The first is just a general prognostication by some investment folks at PIMCO and the second is about how Russia is looking to get away from exposure to the dollar, just like the Chinese. In this case, they are shorting the dollar in a kind of indirect way that would not be quite as obvious as if they were to alter their central bank reserves.

I hope more people begin to see the US dollar as only a medium of exchange for goods and services but not a way of saving. People ought to save with things that will retain their value, like precious metals (in sensible quantities) and land, which is real wealth.

Dollar to Extend Slide as Global Economy Recovers, Pimco Says

Russia Prepares to Short $18 Billion USD

Retirement

This is a link to a podcast I am fond of called The Survival Podcast, hosted by Jack Spirko. He does a great show on retirement here and makes some good points. Namely, that the advertisements you see on TV give you a picture of retirement that is often not realistic. Strolling down a beach with your wife and living life to the fullest.

Often people who are 65 or more have health problems and may have to deal with loneliness. The idea of waiting for most of your life to finally get out of the rat race seems stupid and Jack offers some suggestions on how you can go about planning for retirement (and rethinking what retirement is) so that you can achieve freedom and independence earlier.

I think a reexamination of what retirement is and what it should be for YOU is long overdue. With the problems we have with Social Security (a generation put its faith in that and it looks like Uncle Sam may have trouble paying out), I think people will become more and more receptive to this message.

Preparedness as a Retirement Plan

Work, Taxes and Death

I know this is not really connected with precious metals investing but I want to occasionally post articles and commentary that I think are important for an overall understanding of finances and the world we live in.

This article talks about something I myself think about : Should I try to earn as much money as possible? If I work extremely long hours in a 5 or 6 day week, miss time with my family and friends and neglect projects and interests that I enjoy, is it worth it? It's not just a mathematical calculation for me, it's a question of what is really important in life and what makes one truly happy and fulfilled.

I generally don't like the government and I don't like paying taxes to finance its often stupid and occasionally evil initiatives (I recently saw a commercial for some government organization called the National Fatherhood Institute or something - do we need government to tell us to spend time with our kids?). Maybe if we weren't taxed so much to pay for the National Fatherhood Institute we could spend more time being fathers!

But I digress. I think that one does not need a lot of junk and extravagant expenditures in order to be happy and if we did not chase after money and prestige we might have a better chance at achieving freedom and independence. We need to think outside the box not only when it comes to investing, but also to work, retirement and life.

When Work Doesn't Pay for the Middle Class

Currencies and Rumours of Currencies

There has been a lot of talk about a new currency for the world, something to act as an alternative to the dollar. The article I am linking to today is just one out of countless articles now swirling around the net where some official person or bureaucracy calls for a new currency.

The one thing I can say on all this is that we should not get ahead of ourselves. By that I mean : Yes the US dollar is and will continue to decline into insignificance, but that is a long process. The world has been using the greenback for oil and other things for quite some time now and you don't just switch over to something else in one fell swoop. Moreover, China and others have significant dollar holdings and though they would like to get out of them, that too cannot happen instantaneously.

I'm sure many gold bugs are pleased as punch to see gold now well over 1000$ but this process we have been predicting will happen over years.

UN calls for new reserve currency

A Picture Says a Thousand Words ...

(Special thanks to Jim Sinclair's Mineset for this image)

Interview with Byron King

This fellow worked as a geologist in the exploration and production division of a major oil company, so he has some views on gold from a 'geological' point of view. I never looked into the concept of 'peak gold' that much but it is something I've heard before. Byron King brings it up in this interview. In response to a question about why gold would go to 2000$ he said :

"Because we're in a world that appears to have encountered peak gold as well as peak oil. If you look at historical production, worldwide gold output reached a top right around the year 2000–2001. Overall output has declined and we're not replacing output from the big mines of the past. Despite discoveries here and there, miners have to dig deeper and deeper into the reserves."

He also mentioned inflation and interest in gold from China as reasons for being long gold.

His opinion on silver is that it should outperform gold percentage wise, an opinion I agree with. In fact I think many of us overlook silver, perhaps because decades of watching the Olympics have conditioned us into thinking gold is somehow better. I think everyone should have at least a sock full of coins stashed somewhere in their house.

Endless Stimulus and 2000$ Gold

The Arguments for and Against Gold

This is a good article that condenses a lot of the arguments for gold and finishes with a few links to a guy who does not like the metal. In it you will find comments from such luminaries as Alan Greenspan, Marc Faber, Adrian Ash and others.
I found the comments on gold in a deflationary environment interesting. I never really thought of deflation as being good for gold, I just knew I did not want to be at the mercy of a currency that I fundamentally do not believe in as a store of wealth. I wanted the stability of gold, and regardless of whatever deflation there was, I was sure that in the long run we would have inflation due to all the paper and digital dollars being created. But some of the pundits in this article say it doesn't matter if there is deflation or inflation, gold is a 'go-to' asset that will be much sought after.

Is Gold a Reasonable Investment?

Lorax2013 on the Importance of Taking Action

I posted a video by this fellow awhile back. I just thought I'd put this one up as well, as he makes the point that people who are aware of the problems with the dollar and the general direction of the US economy should not just sit and worry about it - they should take some very simple steps to control their own situation as best they can.

It's a point that ought to be emphasized. An individual has a surprising amount of control over the conditions in their life. The election of 'The One' (Barrack Obama) highlights the tendency of people to look to others, often politicians, to save them or to change the conditions they feel assailed by. Loren Howe (aka 'Lorax2013' on YouTube) explains this well in this video, where he talks about a book by a well-known Libertarian.

Taking control of your finances and mitigating (or eliminating) the influence of the banking industry on your life is one of the reasons to invest in gold and silver. This blog is not just about investing, but about financial freedom and self-governance. I think taking your fiat dollars and converting them to something (not just precious metals) that retains value is one of the most important steps you can take.

Is Gold in a Bubble?

I would say not. Too many people are either ignorant of gold or view it negatively. (I like when the talking heads on CNBC refer to gold bugs as crazy survivalists sitting in a hole in the wilderness clutching a shotgun).

I will look for fear buying as a sign we are heading into a new stage with gold. When large numbers of people start seeing it as some kind of last available shelter from the falling sky I might want to edge closer to the exit door.

I remember back in the fall and winter of 08', alot of investment advisers for wealthy, high-end people were saying their clients were asking about Krugerrands and gold Maples. Those were the upper-class folks. I think we need to see more average joe-six pack types buying coins before we can talk about a real bubble.

Gold: Signs of a Bubble?

Mark Faber on How to Trade the Dollar : "This is the short of the century ..."

Some comments of note include Dr. Faber's belief that stocks will rise by about 7% per annum but any gains will be eaten by inflation. Also he repeated a criticism he has made of Bernanke and Greenspan numerous times in the past; that they have succeeded in creating a bubble in everything (that doesn't sound good).

He likes Asian equities and of course, commodities. He advised people to buy physical gold and to store it out of the country.

On the subject of inflation, it seems to me that the 'lame-stream' media is becoming more accepting of the view that the dollar is going to lose significant value over the coming years. I suppose there will be a bubble in gold at some point, when everyone will be running to it, but I'm sure that day has yet to come.

Marc Faber Takes on Krugman, Links Bernanke and Mugabe

Advice from Dr. Doom

Some sensible advice on how to hedge against inflation. Don't listen to the USA rah rah rah morons on CNBC who think the dollar is king just because they get teary-eyed when the Star Spangled Banner is playing. There are a lot of things about America I love and respect but it aint' the country it used to be and it is not a rising star right now - nor is its dollar.

Faber Says ‘High’ U.S. Deficit Will Spur Inflation

Inflation, Boom, Bust

Here is an article with a great quote from Ludwig von Mises on inflation and the different stages it goes through. We are destined to live in interesting times ...

The Crack-Up Boom

Even More on China and Gold

Yet another article on the influence the Asian elephant could have on gold.

Interesting how it is mentioned that gold is being promoted to the common man in China. (I bet Jim Cramer is giving the ole' bullish 'boo-yeah' to some financial stock as we speak) :

"As recently as 2002, the private ownership of gold was prohibited in China. You could be jailed if caught with any in your possession. Beginning in 2009, in a stunning about-face, the central government removed all restrictions. In fact, as Mineweb and other sources report now it’s actively pushing folks to buy some personal metal, with China's Central Television, the main state-owned television company, running news programs cum[sic] infomercials, letting the public know just how easy it is to purchase gold and silver as an investment."

Article : What The Heck Is Going On With China

More on China, the Dollar and Gold ...

This article confirms what many have been saying about China edging towards the exit door at the dollar party.

Two important points I want to emphasize :

1) China wants to decrease their exposure to the dollar (bearish for the dollar)

2) China is looking at gold as one of the many places they could park all that money (bullish for gold)

Here's an interesting excerpt. (The man quoted is Cheng Siwei, a former vice-chairman of the Standing Committee in China) :

"“Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets,” he added.

The comments suggest that China has become the driving force in the gold market and can be counted on to buy whenever there is a price dip, putting a floor under any correction."

Chris Martenson on Gold Bashing

This is a great piece by Chris Martenson where he takes apart a mainstream article that puts down gold as an investment vehicle.

Dr. Martenson makes some guesses on why people in the mainstream media are always attacking gold - financial self interest being one of them. Whatever the reason, I think that this tendency to trash gold comes from very few people initially (just like a lot of 'views' and 'opinions' we see in the media) and then is simply repeated by the rest of the talking heads.

I know one thing. Gold (and other precious metals, most notably, silver) are excellent means of defending your wealth from the stealth theft that is inflation. So it would make sense that the Masters of the Universe would want us peasant folk to avoid it and invest our money in Goldman Sachs and the like.

Martenson article

Reuters bilge

Peter Schiff on the Gold/Silver Rally

He makes the important point near the end that China is planning on dumping the dollar. That is sure to be a gradual process so perhaps 'dumping' is not quite the right verb to user but he is absolutely right.

It's good to see guys like this doing an end run around the talking heads of CNBC and speaking straight to the people. Viva la internet!

Link to Video

China, Russia and Others to Increase Gold Holdings?

Jeff Nichols believes some big players in the world have much gold buying to do in the future. Moreover, he uses the fancy-sounding phrase "over stimulative monetary policy", which means lots of trees are being cut down so your bank account can depreciate in value.

Nichols : "We are bullish on gold for the next few years, largely because of our reading of the macroeconomic situation - and the high probability of an overly stimulative monetary policy for years to come. But a more positive official section attitude - with some countries wishing to increase the proportions of official reserves held in gold - is simply one more support for a much higher price over the next several years."

Article

Gold in the News ...

Gold has been going sideways for awhile now and somethings gotta give. Here's an article speculating on where the give might go.

More crystal ball peering here.

Meltdown 2.0?

An article like this on a main-stream site like Marketwatch.com is worth a look. Mr Farrell argues that we are getting set up for a bigger meltdown in the near future. (Here is the article, it has two pages).

I have heard the argument made that we will have a big bull run as a result of all this money being created and all the CNBC types will pump it as the return of good times. Then we will have an even bigger crash. Based on the enthusiasm with which the powers that be have provided more dope to the addict rather than let the bastard sweat the junk out of his system, I concur.

I also think that the social mood has a significant effect on the stock market. And this article is one example of the darkening of that mood. I think Obama will be a 'one-termer'.

Mr Farrell also writes about how this will happen :

"The culprit? The Fed, Ferguson says: "Without easy credit creation a true bubble cannot occur. That is why so many bubbles have their origins in the sins of omission and commission of central banks." So the next bubble (and meltdown) is virtually certain, thanks to Washington's $23.7 trillion explosion in debt."

It is too damn easy for people to get credit these days - too easy to go into debt. This does not make for a sound economy (though I imagine it makes certain parties quite rich).

I wish I knew exactly how to trade gold in light of all the inflation vs. deflation debate going on. No one can say for sure how it will play out. (Marc Faber has said there will be deflation first - then inflation through the roof). I think he's right and I would have no problem putting 5-20 % of my net worth in gold and silver and leaving it for 5 or 10 years. But he also has predicted volatility in all asset classes, just as a natural part of navigating the rough seas we find ourselves in there days.

For many of us, the best advice is probably to try not to figure out the short term and focus on the fundamentals : FUBAR.

Useless, Pointless Gold?

Is gold useless? It isn't a company so it doesn't actually do anything. That makes it a decidedly un-sexy investment. As well, it is true that some have taken an excessive interest in gold, marveling at it and lusting after it like Golem and the Ring of Power ("My precious!").

However, Golem's obsession was a metaphor for man's greed and lust for power. And these days, people's greed and lust for power has been expressed in a host of other securities and activities (too numerous and complex to delve into here). Owning some gold on the other hand, is a smart way to diversify your assets and avoid piling all your savings into paper money (or Lehman Bros).

What's more, gold is a very defensive asset, whereas many other securities are purchased by people with dollar signs in their eyes, thinking they're going to get rich and retire at 45.

Adrian Ash defends the metal here.

Silver Panic Coming?

The appropriately named David Morgan (Morgan silver dollars) writes about the potential for silver as a safe haven from paper money.

"I have been on record as saying I see silver going over $100.00 an ounce in US Dollar terms. Now I want to be very clear here: I'm very practical. For something to get to $100.00 it means it must get past $20.00 again and then it needs to get to $30.00 and $40.00 and $50.00 and on and on, so certainly I'm not trying to give any false hope or false indicators. But when the US Dollar goes this time, I believe, the panic of 1980 will look like a warm-up event."

The rest of the article.

Computer Problems

I'll be back to posting soon after dealing with some persistent computer problems.

Golden Shelter from Falling Giants

The Mogambo Guru delivers another eccentric article ...

"I was reading Michael J. Panzner’s book When Giants Fall, a scary-yet-scholarly look at how the hell we got into this mess, and I was impressed with how the title When Giants Fall so perfectly describes America (the heretofore ravenous, gluttonous engine of global economics based on the fraud of an expanding fiat currency) falling on its fat, stupid face."

Read the rest of the article here.

Advice on How to Invest in Precious Metals

The decision to invest in precious metals is always followed by a series of additional decisions that must be made. What to buy, in what form, from who, etc ...

Here is a good video about different ways to get into precious metals, and different things that must be considered. I believe it contains some good advice and the speaker also has some other good videos on money and investing.

Brien Lundin of The Gold Newsletter on Gold, Inflation, Government Spending, and The Power of Greed Over Fear

Some highlights from The Gold Report's interview :

"While we certainly still have deflation, we're transitioning into an environment where the massive government spending and stimulus programs will create inflation."

"[The Markets] are moving toward a fear of inflation, or a mindset where they're preparing for the return of inflation due to the massive deficits, spending and currency creation."

"One of the things I tell people is that fear is a great motivator but greed is the greatest motivator of all. It's very surprising to many how quickly greed can return to the market. The worst feeling of all for investors is not that they may lose a portion of their investment, but that they will get left behind in a rally. They're very much trend-followers in that respect, and as we saw this spring with the rally in the US stock market and in commodities, the valuations quickly got far out of hand and very much divorced from underlying economic fundamentals."

"Perhaps the last week or so of July and the first couple of weeks in August we should get a bottom in metals prices and conversely, in the mining stocks. It will be kind of a buyer's market. Historically, it is a time when people can pick up bargains, and I think it's going to work out that way again."

"Going into the fall and, more importantly, into next year, I think the bullish factors are right for the Gold Price to perform in a very impressive fashion."

"... the only way to erase this debt is to[sic] through inflation. ... Trading partners that hold tremendous US Dollar reserves will realize this eventually. So, it's going to be a harrowing three to five years."

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"WITH A CAREER now spanning three decades in the investment markets, Brien Lundin serves as president and CEO of Jefferson Financial, a respected publisher of market analyses and producer of investment-oriented events.

Publisher and editor of Gold Newsletter, launched in 1971, Lundin now figures that the worst of the financial crisis has passed and that the market "generally" will not test new lows. In this exclusive chat with The Gold Report, Brien also says we may be surprised to see how quickly greed and speculation replace the fear and trepidation that have gripped the market for the past year or so."

Read the rest of the interview here.

Gold Coin Collection

I thought for my first post I would avoid any technical analysis or commentary about precious metals investing and instead link to a video of a guy who has an impressive gold coin collection. I counted the coins he has here and I think he has at least 30 or 35 thousand dollars in gold.

He mentioned in the comments that he has made the perhaps unwise decision to basically put all his savings into gold - now that is a genuine 'gold bug'! That's a bit too heavy an allocation into metals for me, but then again, if his entire life savings were in some fiat currency, that might not be very prudent either.