(Editor’s Note: When we last featured the thoughts of Doug X, a broker at a Boulder wire house, he had sketched out some back-of-the-napkin numbers that showed why most Baby Boomers were unlikely to realize their retirement dream. In the think-piece below, Doug argues that Treasury Bonds are now the place to be as deflation takes hold. The essay begins with a reference to an analysis done by his good friend and colleague, famed bear David Rosenberg of Guskin Sheff.)
In the discussion about the outlook for Treasury Bonds, you have made the point that supply alone has been an inadequate focus for predicting future prices/yields. Cited as examples are the rise in the 30-Year Treasury Bond yield from 4.7% to 6.7% in 1999, even though bond issuance by the Treasury was practically nil; and the decline in Japanese Government Bond yields over the last 20 years, even though deficit spending has been spectacular in Japan and debt/GDP is approaching 200%. The last I saw, the JGB (10-year) was at 1.3%.
The problem with trying to assess either supply or demand in the current market environment is that everything is so confusing here in the early stages of this new secular paradigm of a global credit collapse. There is no way to get it completely right, so as Lacy Hunt has always maintained, it makes much more sense to assess the outlook for inflation as the primary effort in predicting Treasury rates. Simple and elegant.
Awesome Debt Supply
Still, I have some thoughts on supply and demand. Everyone knows that we are facing awesome supply of Treasury debt. The Congressional Budget Office has told us the deficit will be over $1 trillion a year, each year for as far as the eye can see, not to mention the $1 trillion plus of existing debt that has to roll over each year. Revenue projections are probably way low. Most observers expect a recession/recovery sequence similar to what always occurred when we were experiencing the secular credit expansion. It is easy to fall off the tax rolls in this country. It seems that the only people who pay taxes are those who make over $100,000. So supply is pretty well defined as enormous in most people’s minds.
How can we be bullish on bonds in light of those numbers? We can only be bullish if we have a very big view of demand. But demand analysis doesn’t offer the hard numbers that supply analysis does. Demand is a state of mind. It is dependent on how attractive the instrument (in this case, Treasury Bonds) is. And the attractiveness of the instrument is dependent on the perception of what is happening fundamentally in the economy and the markets. Bring out the Ouija Board! It has always been said that buying requires a lot more imagination than selling. But before throwing up our hands, and in recognition of the fact that we are required to have an opinion, let’s spend a little time enumerating what makes Treasury Bonds attractive. It’s a good place to start.
‘Bond as Enemy’
I am going to use the 30-Year Strip as my proxy for Treasury paper, because it is the purest form and the most outrageous iteration of the “bond as enemy”. We have said that the 0% coupon Treasury Bond is the benchmark, risk-free asset for funding actuarial liabilities. Read that again. There is no other investment vehicle on the planet that you can buy and know exactly how much money you will have 30 years down the road.
Today I bought August 2039 Principle Strips at 24.75 for a 4.86% yield to maturity. That is about inflation plus 3%. And it is compounded semi-annually at 4.86% so I have no reinvestment or credit risk. But wait, aren’t I forgetting about inflation risk? Only to the extent that I am also forgetting about disinflation/deflation reward. Consider this: 29 years ago, inflation was 13.5% and 30 year Treasury bonds yielded 15.25%. Inflation plus 1.75%. If they had 30-Year Strips back then, the buyer would have seen the spread go from inflation plus 1.75% to inflation plus 13% today and we still have a year to go. But that was then. Today inflation is below 2%. If inflation went back to 5% in the years to come, my purchase today would be chained to a negative real return, perhaps for decades. Then again, if we go to 2% deflation, which seems much more likely, I’ll be at inflation plus about 7%.
Thank Reagan & Deng
So, there you go. We’re back to predicting inflation. As previously mentioned, CPI inflation hit 13.5% in 1981 and now it is about 2%. What is so interesting is that from1981 until 2007, we experienced disinflation, even though we were in a credit expansion and the credit expansion morphed into a credit bubble. Credit didn’t begin crashing until 2007. Still, inflation continually declined at the CPI level. That was because airfares from Denver to NYC, like New York strip steaks, were flat for the whole period and things like computers dropped in price by 90%. It seems that the huge expansion of debt relative to household income or GDP that occurred primarily impacted stocks, real estate and other investment asset values that really don’t show up directly in the CPI. We can attribute the disinflation in the CPI to broad and dramatic improvement in productivity, thanks to Ronald Reagan, Deng Zhou Ping, and technology. Now that we are in a secular credit collapse, CPI won’t take the hit that stocks and real estate will. It is unlikely that New York strips steaks will go below $4 per pound or the flight to Newark will drop below $225. But for the next few years, 2% or 3% CPI deflation is not unlikely. Case-Shiller has houses down 36% from the peak and we are seeing similar numbers in commercial real estate. The S&P is down 31% from it’s 2007 high after a 65% bear market rally. All of the sudden, current inflation plus 3%, guaranteed and compounded seems attractive.
‘Gambler’s Ruin’
Which leads me back to demand as a function of attractiveness. Retirement income is an important topic these days. Baby Boomers are nearing the end of their working lives and pensions are underfunded. Which brings up the subject of “Gambler’s Ruin”. The term refers to the normal human response to losing more than you can afford to lose. That response is to bet more aggressively to recover, thereby causing you to fall off the table. PERA, the Colorado State Pension Fund, is woefully underfunded after years of losing money in stocks and real estate, while maintaining an 8.5% return assumption. At some point, doesn’t someone tell them to stop gambling, go to the cashier and fix their problem by working with contribution rates and benefit levels? One can imagine demand emanating from household savings accounts that are just looking for a coffee can and banks playing the yield curve. And with the currency markets being such an enigma, it may be premature to rule out ongoing “flight to quality” buyers from abroad.
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“But for the next few years, 2% or 3% CPI deflation is not unlikely. Case-Shiller has houses down 36% from the peak and we are seeing similar numbers in commercial real estate. The S&P is down 31% from it’s 2007 high after a 65% bear market rally. All of the sudden, current inflation plus 3%, guaranteed and compounded seems attractive.”
OK, so 2-3% deflation for a few years over the term of a 30 year bond makes up for the rest of the time? The economy has been all over the place in the past 30 years… 30 years is a long time to have money tied up.
The S&P may be down in dollar terms, but that’s not how you gauge the value of stocks. P/E ratios are in the high 20’s IIRC, which makes all of those stocks WAY too expensive.
The author seems to ignore the projection that demand for US debt is projected to be short by about $800B this year. What happens to yields then?
And I still don’t get the use of real estate values for inflation/deflation considerations. In 2005, no one was claiming that inflation was out of control when RE prices were at their peak. RE prices now are a function of an over-supply situation, and do not reflect a normal market.
What about default? How do you add that into your risk/reward?
While everybody is focussed on default, there are some economies which won’t. Specifically, those economies which have built up infrastructure to the point that they can pull through. And, there is currency devaluation still sitting in the tool box. Not only that, but a gold price with no fix will add to the ability of policy makers to exit from recession eventually as a mitigating factor.
That, essentially they will keep on rollin’ even if the commercial banking sector turns fails. And its the commercial banking sector which is in deficit far, far more than governments.
Keep in mind that long rates in the U.S. were as low as 2% in 1949, 20 years after the crash. We’ve got a long way to go. Default is trotted out for us when in matter of fact, the tables are turning from economics to politics.
I would be watching for policy rates for the short term discount rate to turn negative for a while.
OK, asset price deflation currently and for the near term. I have a house, fortunately bought before the dot com collapse, so how does falling RE values help me, except for a smaller property tax bill? In the meantime, consumer prices are going up. You know, those things that we have to buy every day.
I dunno, I’m no expert, but I think Bill Bonner is more right about the future of Treasury yields than this guy.
Why no mention in the essay of the impact on “risk-free” Treasuries when the US officially assumes or “un-assumes” Fannie and Freddie debt? Barney Frank gave us an un-official “heads-up” late last week. And, how about that Congressional Budget Office Friday night surprise!
There may be quite an undertow on F&F’s ability to pay principal and interest after the next “re-sets” of Alt-As hit the beaches of CA and FL this and next summer.
Guess what banks will have to sell when the inevitable bank runs re-start?
Other Paul, Barney Frank seemed to say that legally, Fannie and Freddie were on their own, but then said that doesn’t mean the Federal Government won’t back them anyway. How did you interpret what he said in that statement. It was double speak to me.
While long the longest bonds, particularly more volatile zeros, may be the less popular contrary position, Big4 currently short Bonds and the newer Long Term Bonds with maturities 25 years and up. Fact is, long zeros outperformed most other assets including gold and the S&P500 since 1981…
Default is coming either directly or more likely through inflation. Plane tickets,steaks,computers( doesn’t everyone know by now prices are supposed to go down even with inflation),and for the love of god CPI ! Whenever anyone mentions CPI in there equation just turn the page and move on,or better yet go to John Williams shadowstatistics.com. Any strategy involving CPI is like trying to drive forward in a car while looking through your rear view mirror that came from a funhouse with crap stuck on it. Finally did anyone see any mention of gold in the inflation discussion? Me neither.
Right on the money, I think.
If only I could have put it as clearly to some shmoe in another forum, I’m pretty sure I would have won the debate. Fallen revenues = higher interest, thus cutting taxes won’t have the expected effect. Nor would fallen revenues/cut taxes do for small businesses what they would be expected to do. That’s because the governments are the largest employers. Private sector is in shambles, and will need time to rebuild before a boom. We’ve got our feng shui cut out, for sure.
And retirement? Not much to ponder there. Old folks won’t be retired. They’ll be unemployed without pay, ’nuff said! And that’s probably why Obama is pushing for “free” health coverage. Lot of folks are going to need a whole team of spin doctors to get down that tough-to-swallow, evil, foul-tasting karmic pill.
Feel like a deer in headlights. On one hand deflation does make a lot of sense as touted by Rick, Prechter, and others. If one uses Case Schiller as part of the CPI calculation, deflation is much deeper than the government reports indicate. On the other hand, Bernanke’s money printing and the future risk of US sovereign default imply inflation.
My guess – deflation and sovereign default of foreign governments will initially drive bond yields down, however inflation will slowly creep back into the picture as focus shifts back to the US debt predicament. Seems like this would lend itself to a timing strategy rather than buy and hold.
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I doubt that inflation will creep when it finally comes. It can only be a precipitous hyperinflation, simply because the debt bubble being inflated away is hundreds of trillions of dollar large. RA
HL Mencken said…
“Democracy is the theory that the common people know what they want, and deserve to get it good and hard.”
The FINAL ripoff awaits. US T BONDS.
Enjoy !
johnjay,
You are correct. Barney double-speak. The F&F debt situation adds uncertainty. How long can ambiguity stay afloat with those red flags up on the beaches this summer?
Oh, and there are the commercial R.E. collapse and the construction loan thingies, too. Is Uncle Sam and the Fed going to support those markets or not? Ben and the Treasury have scars from “letting” Lehman collapse. More uncertainty about gov’t debt growth.
I’ll wait to read the prospectus on the Amero-denominated zeroes.
Rick or anyone else
I believe the PPT exists. if the us is printing money and buying futures with it( which I believe they are weather directly or indirectly) then the market can go up and up and up. and believe me I agree with everyone on all the problems printing money causes. and it doesn’t make sense to me that the market continues to go up but the fact is it is. my question is at what point? what/when has to happen for that strategy of the government to stop working for the PPT? will there be any signs? what can we look for? and how long do you think it could take?
It is interesting that few American bankers ever view Gold as store of value or as a destination in a “flight to quality.” Maybe they are thinking only of their trading funds instead of their investments but I doubt it. I think Rick will be right in that when inflation does kick off, it will be too late to change one’s strategy. It will be like being awakened by the clap of thunder after the lightning bolt has already struck.
Maybe Rick is putting out these controversial essays like Marios’ and Doug’s to see his readers rip them apart.
At 5% interest compunded that 30 year bond will end up being about 4 times its current dollar value in 30 years. IF Doug had said he was planning to sell these bonds in a few months or maybe a couple years, when yields have gone down even a little further, I’d maybe say that he was risking too much for the potential reward. But to actually hold this junk for thirty years is just insane.
The Fed last year began doing something that I believe was never before done, and spells the beginning of the end for the dollar…the FED began monetizing the debt. There are not enough dollars in existence to finance the federal govt’s reckless spending, and these monetized debt-dollars are esentially created from thin air without the formalities of selling bonds to entities that actually did something to get those dollars. Once the precedent is established, it is bound to happen again and again and at ever larger scales. Thus, the stage for the hyperinflation to come is set. Anyone trying to time it by holding dollars (or even worse….long-term bonds) to profit from a couple percent of deflation is playing with fire next to an open vat of gasoline.
And this is just one argument among many. Where do you think the federal debt will be in 10 years? Obama says $22 trillion (if we believe the trillion a year figure). Since government calculations of future deficits are alway conservative, it will more likely be $30-$40 trillion, and that’s assuming very mild inflation for the next decade. Now how about 20 years…or 30 years? I won’t even venture a guess, because I think it’s pointless. The whole eceonomic infrastructure will collapse long before then, and those bonds will have no value. Over the coming years the FED will take ever more assets (if you can call a US bond an asset) on its balance sheet, as the debt is monetized to an ever greater extent. States need bailouts. Cities need bailouts. Social Security needs a bailout. Banks need bailouts. Fannie and Freddie need bailouts. FDIC needs a bailout. The list goes on ad infinitum. And selfless souls like Doug will get much credit up above for so charitably bailing out all these needy and deserving entities.
The whole premise is wrong because it is based on the gov’s stated inflation rate. If you believe it I really have no hope for you. 30yr bond at 4% ? Worse investment of the century.
so many of you delve much more deeply into the complex details and explanations that I am not experienced in. Deflation is a limited, short term problem for a limited part of the American middle class economy including the real estate sector. However, the trend for the rest of the economy is inflation and the rest of the world’s ongoing development led by China’s price, property, rent, consumer goods and wage increases is very inflationary and American health care reform is inflationary and DaBoyz obvious relentless multi-part strategy of liquidity feeding the upward movement of the equity markets is inflationary and rising demand for agriculture and water supply and energy sources is inflationary.
Besides, nothing could be more obvious than the market falling only as far as Govt Sachs and friends will allow it to. Of course a genuine crisis announcement could foil their course of action and cause one of those nasty swings downward we’ve so pleasantly discussed recently and look forward to shorting if we get lucky.
If Govt Sachs allows the equity markets to fall and as they should and induce related fear, the flight to USD and treasuries goes up at lower safer yields. If they have to flood the market with much more debt supply, and indeed that is the case, then the world will demand higher yields for it. On top of that, all the inflationary factors mentioned above will also cause demand for higher yields. I buy into Nadeem Wayalat’s views for a continuing hyper inflationary trend with bull market…nuts indeed, but seems the agenda. There sure as hell isn’t any deflation in China/Asia….
Cheers, Mario
One of the rules the late great trader Jesse Livermore had was to not trade inside markets. He lost too much money trading trendless markets. Other than a few nibbles at new highs by the NASDAQ Comp and Russell 2000 that may or may not be confirmed, we have essentially been in sideways markets for the last coupla years.
Although gold bugs may find it discomforting, China’s head of SAFE, State Administration of Foreign Exchange, confirmed yesterday that US Treasuries, as the largest market in the world, will continue to be important to China’s growing $2.4 Trillion in reserves, as will strong foreign currencies and top credit ratings.
China tried to diversify into copper, iron, oil and other resources, but drove prices up too much for their industries.
Yi Gang dismissed the idea China will add to its 1054 tonnes of gold worth $41 Billion, pointing out as we have gold has not done well over the last 30 years, and is such a small market relative to China reserves that piling into gold or any commodity market would simply drive prices up without liquidity.
So GATA can complain to the high heavens all they want about bogus physical shorts, and tungsten gold, but a gold run is unlikely to happen, particularly since the folks that enforce and make the rules are still short.
It is more likely the great unwashed public racing into precious metals after they quintupled may experience significant wealth transfer. If we don’t know who the mark is, it is we/us.
Don’t understand how some people see inflation with an 81% money multiplier slowing and contracting credit, money supply and economy. For every monetary transaction, that’s a -19% haircut. Pretty soon you’re broke. Technically, the Fed is insolvent, with a little over $51 Billion in capital holding down almost $2 Trillion in contracting assets with Fannie, Freddie, Ginny and the FHA lining up for more relief. A pop in interest rates reflecting sovereign agency risk could quickly deliver the coup de grace to the entire Federal Reserve Banking system, not an argument for higher precious metals prices but massive deflation and lasting depression.
Literally the last thing the Fed may do is depreciate their assets and balance sheet further by taking cash out of reserve deposits and putting runaway currency into circulation. If they wanted to do that, they would have sent a million dollar check to each unemployed worker instead of putting taxpayer money into broken banks, corps and state governments with Stim and TARP.
So the only real question that remains, since we are still contracting credit, deflating assets and making cash scarce, is what happens to Treasuries?
Do they default or muddle through? Hint: last year $62 of bonds were bought for every dollar of equity. Hint: Insiders sold $62 for every $1 they bought. There is a silent scramble for liquidity to ease the giant sucking sound of deafult. Nature abhors a vacuum.
Fitch sees sovereign defaults in Euroland, which could send some flight capital our way for a time. But it ain’t happening now with the Big4 short the dollar.
Our late great friend Franz Pick, paymaster for the French Underground and Editor of the Pick Black Market Currency Yearbook, used to call Bonds guaranteed certificates of government confiscation.
If Jesse were still alive, he would be watching for a big breakout to trade, straight up or down, and he would add to positions as his equity grew…
Asia may be inflating for awhile, but the two largest economies in the world, by a factor of two, Amurrika and Euroland, are not. They are scrambling to pay their bills and debts. Even emerging economies are slowing because of less demand for their products. The Toyota accelerator thing is a sharp poke in the eye of the Tiger and there may be trade repercussions. Recall Japan was going to take over the world in 1989? They have had two lost decades so far. Can the BRICs be so far behind?…
In case anyone missed it, 90 day T Bills just broke out to 6 month highs at 1.5%, targeting 4.19%. Hello? Heck of an inflation we’re not having…
http://stockcharts.com/charts/gallery.html?$IRX
Rich-
I’ve read your posts, and visited your website, and I know you are a very successful trader with a proven track record. You like to use poker analogies in your posts, so I’m going to zero in on a couple of your tells:
“Yi Gang dismissed the idea China will add to its 1054 tonnes of gold worth $41 Billion, pointing out as we have gold has not done well over the last 30 years, and is such a small market relative to China reserves that piling into gold or any commodity market would simply drive prices up without liquidity.
GATA can complain to the high heavens all they want about bogus physical shorts, and tungsten gold, but a gold run is unlikely to happen, particularly since the folks that enforce and make the rules are still short.
It is more likely the great unwashed public racing into precious metals after they quintupled may experience significant wealth transfer. If we don’t know who the mark is, it is we/us.”
- So I infer from this that you don’t find the current US$ gold price attractive- Gold is, after all, just an inert substance with no real utility, right? I mean, human conciousness has certainly advanced beyond the need for fundamentally sound money that can only be created on the back of stern capital commitment (labor/time). Yi Gang certainly must be telling the unfabricated truth- I mean, he quotes 30 years of history as a justification for future results – Yeah, that ALWAYS works.
But the question remains- Why go through the hassle of committing capital to create wealth when we can simply put our faith and trust in the 7 people who comprise the Fed Board of Governors? They’ve proven time and time again that they know how to increase purchasing power and market liquidity simultaneously, haven’t they? (tongue firmly in cheek)
-I’m gonna call this bet- you are holding low 2 pair at best. We WILL see a run in the Gold price- and it will be when we least expect it- and it will likely happen regardless of the way prices in equities or other commodities are behaving at the time… No short position, however egregious, has ever turned the primary trend of a market. To speculate that this time will be different- and to leverage that assumption against the ONE substance that has re-asserted itself as money after EVERY SINGLE fiat currency in the history of Earth has gone to zero value puts you squarely on the wrong side of that trade, in my opinion.
Gold will not require further monetary supply inflation, or derived consumer price inflation, to continue it’s rise- the rise is being driven by a rising global awareness in the difference between price and value (more on this later)
Then you state:
“Technically, the Fed is insolvent, with a little over $51 Billion in capital holding down almost $2 Trillion in contracting assets with Fannie, Freddie, Ginny and the FHA lining up for more relief. A pop in interest rates reflecting sovereign agency risk could quickly deliver the coup de grace to the entire Federal Reserve Banking system, not an argument for higher precious metals prices but massive deflation and lasting depression”
And you follow with:
“So the only real question that remains, since we are still contracting credit, deflating assets and making cash scarce, is what happens to Treasuries?
Do they default or muddle through? Hint: last year $62 of bonds were bought for every dollar of equity. Hint: Insiders sold $62 for every $1 they bought. There is a silent scramble for liquidity to ease the giant sucking sound of deafult. Nature abhors a vacuum.”
- So, juxtaposing your disdain for Gold and commodity prices that are too high in US Dollar terms against the inherent risk of US Government debt backed by the same “insolvent” Fed Board of Governors who are supposedly diligently protecting the purchasing power of that same US Dollar- I take it you are diversifying your wealth into what? Carbon Credits? Windmills? iPods? Maybe IMF SDR’s? The premise of your argument is that US debt is the safest investment play at present because it is the market with the most liquidity? I assume we should simply ignore the insolvent nature of the boobs in Washington who are issuing all this debt?
-I call- you’re holding two suited face cards.
Your posts only obviate the fact that there are no safe assets, no safe currencies, and no safe equities… Against a tide of overwhelming debt- everything must fall, and it appears that the US Fed is more likely to let the world spiral into deflation than to simply shift their focus away from the rising Gold price.
So you know what?- I might as well take my money and go buy a bigger boat. Not because I think inflation is going to make a boat a good investment, and not because I like pissing money away as deflation wipes out the resale value of that boat in a dollar sense…
I think I’ll buy a bigger boat for the same reason I’m going to buy more Gold coins- because I can currently afford them, and because I WANT to own them (which infers the basic psychological premise that underlies all forms of value- the desire to own), and lastly, I’m going to buy them soon because I don’t expect them to be readily available in the intermediate future at any price- high or low. The same can NOT be said for US Treasuries.
So you keep buying your Treasury debt on the expectation that it will soon be worth even more debased dollars, and have fun with that. I just hope you REALLY want to own those certificates.
You see- this inflation/deflation debate is patently moot- because either scenario taken to it’s logical extreme will result in economic collapse; and in either scenario- I’ll end up with a boat, and some pretty little yellow tokens, and you will have worthless printed paper that I will be unwilling to accept in any amount in exchange for the fish that I’m out catching out on my “worthless” boat, but because I VALUE those little yellow tokens, I MIGHT be willing to trade one of those for a fish here or there….
I may be a Millionaire on paper, but I am much more proud of my garage full of tools, and my ability to use them to repair my other depreciating assets that actually work just fine, and of my ability to grow vegetables from seeds, and of my ability to hunt and fish… In short- I’m proud of my PRODUCTIVE nature.
My assets may become worthless in a currency sense, but that won’t matter in a real sense, because I understand that each of these assets, when combined with root capital (labor/time) will yield economic productivity, and the real value of that productivity can NEVER be debased by an infusion of liquidity by bankers, governments, or high end traders and yield chasers….
Increasing or decreasing liquidity does NOT serve to simultaneously increase or destroy value. In the purest sense- liquidity only disguises real value in the eyes of the superficial speculator- That’s the ONLY reason why this economic climate is different than past recessions (in my opinion)
We are experiencing a global decoupling of price (which is simply an arbitrary number) from value- which is an in-born psychological condition driven by the desire to own…
At some point, the current system will have to result in the government passing laws that mandate people like me (who are inherently productive and cling to value) to channel the output of our productivity to the masses of unproductive “paper people” who have blindly chased and relied on price changes to bring them wealth and prosperity – and you know what? I won’t play along- because the inherently productive people also just happen to be the ones who have the guns; and guns have historically demonstrated their value time and time again when people determine en masse that prices have become irrelevant and markets collapse.
Inflation, Deflation- who cares? Either scenario takes us back to the most basic argument that printing and trading paper to increase market liquidity is not the same as wealth creation, and it serves no economically productive purpose.
I’m not really this bearish, but when people declare that any form of paper being printed by other people is the best speculative path to prosperity- I have to laugh and offer a counter argument that has at least SOME foundation of economic reality beneath it…
Saving beats borrowing and trading hands down- every time, and no other saving vehicle preserves purchasing power like gold (the last 30 years of the 5000 year history of humanity not withstanding, of course)
As Keynes put it so eloquently- “In the long run- we’re all dead”
My kids will inherit a boat, and some gold, and the skills to grow or kill food. Your kids will inherit whatever remains of the digital numbers that remain after the government carves off whatever arbitrary amount they deem necessary.
You keep relying on your data, and your trends, and I’ll rely on my inate understanding of historical reality…. To each his own.
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Interesting comments, Robert, but the quotes you’ve attributed to me are from Mario Cavolo, an occasional contributor to Rick’s Picks. Regarding gold, I simply follow my charts, and they have rarely steered me wrong. I am currently projecting 1244 (basis the April Comex) if and when 1144 has been decisively exceeded. RA
Glad I went long physical gold/silver and the miners manyyears ago (late 90’s, early 2000’s) . Buy and hold has worked for ten years running now. I find it hard to comprehend much of the anti gold blather around here because most of it is utter nonsense. The only two deflationists that had it right on gold are Faber and Shedlock. The rest of them have missed the boat completely, especially guys like Prechter. I believe gold is going to continue to outperform almost anything, and silver could do even better. I base this mostly on dwindling world supply and increased investment demand. We all have to place our bets and hope for the best. Good luck all.
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I’m a deflationist, Mitch, and I had it right on gold. RA
I’m not convinced that we can’t have both deflation and a rise in USD gold prices.
A little off topic…but more pertinent to reality…is anyone else out there itching to dump all your longs and load up on slightly out of the money SRS (triple short REITs) and TZA (triple short Russell) call options that expire in a couple months? I’m not buying this rally…and I don’t think we’ll breach the January DOW highs. I’ll continue watching GS for some guidance on timing.
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My current rally target in Goldman is 177.00, a Hidden Pivot that I’ve suggested shorting with a tight stop-loss. RA
“Interesting comments, Robert, but the quotes you’ve attributed to me are from Mario Cavolo, an occasional contributor to Rick’s Picks”
Hi Rick-
My comments above were actually directed at Rich from Jubilee (or anyone else who can propose that a long T-Bill/short Gold position is good for anything more than a very high risk near term trade.)
I would never call out the amazing Ackerman. Heck, there was a time that I was ready and willing to stand by you on your Goldman/hula skirt call as the trade of the century…
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