Très instructif. Merci pour votre analyse et remarques….

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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My current rally target in Goldman is 177.00, a Hidden Pivot that I’ve suggested shorting with a tight stop-loss. RA

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I’m a deflationist, Mitch, and I had it right on gold. RA

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

http://stockcharts.com/charts/gallery.html?$IRX

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