Category Archives: Notable Posts

Previous articles and posts of interest.

Bond Safety?

By Biiwii

[edit]  Upon re-reading, it’s another of those posts I sometimes receive critiques about.  Few conclusions and no clear direction.  Maybe that is just the point though.

@ Fidelity…

Equity outflows at 15-week high as investors seek bond safety

And there they go, conventional lemmings jumping from the frying pan, into the fire, soon to realize the fire is way too hot, and heading for that cliff over there.

(B)ut (i)t i(s) (w)hat (i)t (i)s and (N)otes (F)rom (T)he (R)abbit (H)ole are so named because we are all about anti-convention, as global markets have not been comfortably conventional since the late 1990’s, I think.  This most recent cycle has existed to put all of us malcontents, cranks and alarmists back in a box under the bed, if not into the dustbin of history.

Well today, conventional sheep are flocking to conventional positions.  “Bond safety” is what they run to when they are afraid of stocks.  Of course, with gold now showing strength, the promoters over there are retooling their former “China/India demand” and “employment growth will spur inflation, which will drive people to gold” pitches to something more appropriate for the times, when global economic contraction comes to the fore and deflation is front page news.

Imagine that, investors flocking to bonds while DEFLATION! is all up in the headlines.  Reminds me of Q4 2008, just before the next INFLATION.

This market is now officially fun again after the post-October drudgery that last month forced me to admit that my trading sucks and that I needed to take a time out and sit on my hands (as the market’s swings became too frequent and too contracted).

Do you see?  Investors are seeking safety in bonds.  Media are managing a global stock crash.  Bull trend followers’ heads are spinning (‘Am I still a brave, resolute, trend following stock bull?  Should I keep posting as such or is my inner fear barometer stronger than my resolve?’) and oh yes, the precious metals are bouncing while commodities continue to tank.

There are only a few entities who have called this environment.  One is an influence of mine, Bob Hoye (decisively, but on what some might find an inconveniently long time frame).  Another is NFTRH (less decisively, but on a very tight time frame).  This is a market that is going to put all the carnival barkers (including gold touts) in their rightful places because now changes are happening and it will not be so simple as ‘stocks are tanking, buy bonds!’ and obviously, the whole ‘economy brings inflation, buy gold!’ promo.

Tops are spinning on the table and it all makes perfect sense.  And I am not even a stock market bear.  I just do not buy or hold tops.  I look forward to a real bull market in the gold sector, but there is yet work to do folks.  The US market’s big trend is still up and gold’s is still down.  Not saying change is not in the offing, just saying trends have not yet changed.

With respect to gold, this summer’s event is so much more in line with fundamentals that matter than last summer’s Ukraine→Russia→Ebola pitch that was nothing more than promotion.  But there remain some rocks beneath the surface.

As to the article linked above, this certainly does put Martin Armstrong front and center, with his ‘final flight to the safety of the government bond bubble’ analysis…

LONDON (Reuters) – Equity outflows hit a 15-week high of $8.3 billion in the past week, with fears of a China-driven global economic crisis pushing investors towards safe-haven money-market funds and Treasuries, Bank of America Merrill Lynch said on Friday.

I have not really known what to make of Marty and his computer, but this is 100% in line with his forecast.

I just love a market where things are in motion.  Robo market was a dead thing, momentum waning and hopes fading.  Now resolution is to the downside.  From this point, it is now time to throw out the easy analysis and be prepared for the counter-cyclical environment we have expected upon completion of the post-2008 economic recovery (and all that paper and all those digits behind it).

Now you do not get points for just showing up and following the trend.  Now you find out if that which you hold true actually is.

Opinion

By Biiwii

Right here at 8:30 AM US Eastern time, in the midst of a precious metals bounce that we (NFTRH) projected due to sentiment, price/volume dynamics (in less fancy terms, the market puke in mid-July) and especially the bullish CoT alignments for gold and silver, I state to you that there is still something unhealthy going on in the gold sector from a psychological standpoint.

This does not even include some still negative macro fundamentals that have not pivoted yet to join the improving sector fundamentals.  This is pure sentiment.  We have no way of knowing for sure whether or not a new bull market is starting right now and that is why we projected it to be a bounce, until all fundamental and technical ducks line up and start quacking.  Speaking of quacks…

Continue reading Opinion

Peak Oil? Peak Stocks?

By Biiwii

Are Stocks the Next Oil (or Uranium, Copper, Silver)?

See:  Oil collapse couldn’t come at a worse time for industry

See:  2007, when everyone was convinced of ‘Peak Oil’ and there were websites named ‘Peak Oil’, ‘Oil Drum’, etc. constantly reinforcing the mania.

I remember being away on business one day in 2007, with nothing better to do in my hotel room than watch the congressional debates about ‘peak oil’ and what to do about the evil speculators that were driving prices up.  I enjoy watching a good mania as much as the next guy.  I realized that what we were seeing was ‘Peak Hysteria’ with respect to this phenomenon.  I thought, ‘Yup, Prechter’s right’.

See:  This hilarious video someone made about those who promoted the pitch to the public.  Some of these people have re-tooled their scripts for a deflationary world today and others keep fighting the good fight I guess, or are living in a hole somewhere.  Joe Kernan actually did a great job with the mania’s star promoter.  “I’m the expert you guys, not you…”  –T Boone Pickens (ha ha ha).

Moving on, what do the charts below say about the stock market? The oil mania was a manifestation of inflation.  Inflation is willfully deployed against what is a structural global deflation that is always in play and trying to exert pressure.  The charts below show where the inflation went on this cycle.

Oh, it’s Biiwii… he’s a perma bear!  Well maybe, I sure do not think the stock market is sustainable and I sure do think it is getting the same treatment as Oil circa 2007, Uranium 2007, Copper 2010, Silver 2011, etc.  But I am more than willing to call it ready to bounce or even not yet ready to end its bull market, if only an interim correction ends up being the most probable view.  But tuning out all that casino patron stuff, what does this big picture monthly chart say to you?

spx.mo

What does this chart say to you?

spx.irx

I keep hammering this chart in particular not because the Fed should do something or should not do something with respect to ending ZIRP.  I hammer it because whether it was the Fed’s intention or not, a large and conspicuous distortion has manifested.  Period.  Here is what NFTRH 355 had to say about it…

“Pardon me if I hit you over the head too often with the following chart.  But we have just wrapped up a couple of weeks that saw the Fed receive congratulations again for doing nothing (FOMC) and speak out of both sides of its mouth (Lockhart and Powell).  We also saw another okay Payrolls report come and go.

Of course, with commodities crashed and inflation expectations well contained, must the Fed actually do anything?  One might imagine that they also look at some representation of this chart and think ‘golly, that’s one hell of a distortion built into this market’.

I can’t think of many other reasons why a rate hike would even be on the table.  They’ve seemingly got it all; a booming stock market, no inflation and no need for stern monetary policy.  I believe that the Fed is as aware as we are that there is an imbalance of epic proportion out there somewhere.  Will they try to repair the imbalance now, after 6 years?

The chart is the chart and while I cannot speak in details (since I don’t know them), I can see what historical imbalance looks like.  Either the market’s laws have been repealed or something is going to seek equilibrium one day.  If the former, well, how does it feel operating in a remotely guided market?  Risky, if you ask me.  If the latter, the risk in finding equilibrium is almost unfathomable.  This is not meant as hyperbole, it is a chart.”

Back to real time.  We have noted (as the chart above shows) that in normal times the stock market goes up as the Fed Funds rate is increased, until one day it breaks and the Fed steps on the gas (drops the Funds rate) in response.  The market could follow the rate up again on this cycle, but the distortion has severed ties with the historical comp of the last 2 cycles and that is the concern.  Oh and the Fed has not even tapped the break yet.  The stock market is in uncharted waters.

[edit]  So we noted the Hammer (bullish reversal) candles on Friday, and as if by magic in flies Stanley Fischer for a little micro management and a bullish reversal (bounce).  It is sort of a low grade Bullard per the chart above.  We also note that these jawbone parties are not real and that the S&P 500 is going to break one way or the other soon… Hammer Time Foretells Bounce Time; Now What?

“FrankenMarket”

By Biiwii

“…this is a Frankenmarket of their own creation…”

Ha ha ha, good one Chris.  I see my phrase resonated well in 2004.

Anyway, Chris Martenson can talk like nobody’s business.  I cannot verbally express myself the way he does.  Not nearly, not publicly.  He once woke me up with a late night phone call going on with the energy of a true believer, and I’m like ‘wow this guy is driven and on a mission’.  Me paraphrased:  ‘Ya ya ya Chris, things are bad and I think it’s great you are going to [oof, I am still listening as I post and I just heard “deflationary impulse”, another Biiwii-ism, although to be fair I’ve heard that one around elsewhere over the years.  At least I have not heard ‘Inflation onDemand’© or the ‘Continuum’© going around the internet] try to tell the world about it… hey, what time is it, anyway?’

Doctor Martenson came from the same group of alarmists that I came from early in the Greenspan Inflation around 2002-2004.  It is one thing to be alarmist (we were proven correct in 2007-2009, but my preferred tack was to play these macro swings driven by out of control policy.  First off, secure true monetary value (hint hint) and second, get rid of personal, and in my case business, debt.  Then go forth and speculate (this included bullish stock market positions in 2003-2007).

Where I disagree with certain types of gold bugs and alarmists is that you do not live your ideology or even your deepest held beliefs on a daily basis; not in the financial markets you don’t.  You continually remain vigilent as to negative potentials and you go forth and you enjoy life as best you can in sometimes insane circumstances.  But you do not scare the shit out of people in the here and now, because most of those people receiving the information are going to make emotional moves in real time and then… the macro crawls along ever so slowly to where it is going.

That is why I tune these things down, despite the obvious intelligence of the speaker.  It’s all psychology my friends.  I put the Armstrong input I get in the same category.  These are the financial markets, not some war of ideology.

This interview came my way via LinkedIn.

[edit]  I have not listened to Chris in a long time.  How long has he been talking about deflation?  I thought the big focus had been on inflation.  The contrarian in me is curious.

Armstrong Phenomenon

By Biiwii

I call it a phenomenon because not since being bombarded with Jim Sinclair-isms last decade have I taken in so much input centering around one man and his unique view.  Not since ole’ Jim has this input been so unquestioningly in line with the view of the guru producing it.

Usually I use the word guru in a negative light, meaning something closer to charlatan or promoter than anything positive.  But with Martin Armstrong I don’t feel that way.  Indeed, the main thing that makes me uncomfortable is not his theses (from what I gather from my email contacts).  It is that he seems to have come from the very place he scorns, the gold “community”.  I seem to remember him being held up by Sinclair many a time as a bullish gold forecaster.  I have heard from several people who have pretty much converted to Team Armstrong from Team Sinclair (CIGA anyone?).  :-)

Continue reading Armstrong Phenomenon

More Ritholtz on Gold, and Another Response

By Biiwii

Anyone who has been bearish on gold for the last 4 years has been right.  They have been right in Euros and though the trend appears to have been gently changing over the last year or two, they have been right in Canada & Aussie (i.e. commodity currencies) dollars as well.  Certainly, they have been right that gold as measured in most global stock markets has been (and remains) bearish.

They have also been right in that gold as a hedge against the kind of inflation that global policy makers have promoted non-stop for years now, has utterly failed.  And for gold as an insurance and value asset, a small phase like 4 years is like a blip.  Yet still, so many people throw their hats into the ring on gold, constantly micro-managing its every twist and turn.

In 2011 it was what we used to call the “Gold Generals” touting hyper inflation, even as the second to last arrow was about to be inserted on our ‘Continuum’ © chart, indicating that anyone taking an aggressive inflationary stance in their investments was also taking a big chance that it would be different this time and the Continuum would break the limiter AKA the 100 month EMA.  It wasn’t and it didn’t.

tyx

This brings me to Barry Ritholtz again.  His piece at Bloomberg titled Good Luck Bargain Hunting for Gold Miners at Bloomberg is more about the valuations of the miners vs. the metal, but it is some of the wording that I want to address here.

The primary reason is straightforward: Gold is bought and sold based on a narrative that has turned out to be patently untrue. As we move further away from the great credit crisis of 2008-09, the global financial system has stabilized, undercutting the appeal of gold as a hedge against catastrophe. The U.S. economy is improving, as are those of many other countries. The wild inflation and collapse of the U.S. dollar that was going to lead to the demise of civilization and make gold an essential for investors? None of that has happened. Instead the world has low inflation or even deflation and the dollar, the world’s reserve currency, has risen to multiyear highs.

He is right to criticize the hyper inflationist ‘death of the dollar’ contingent of the gold bug “community”, itself a word that belies group-think and susceptibility to bias reinforcement by the group.  Did you catch the little ‘Overt Inflationary Effects’ planet in our handy Macrocosm graphic (don’t take its planetary guide literally, it was mostly for fun) from last weekend?  There is a reason that I assigned that gold input to the second tiniest planet in the Macrocosm; because it was a wrong headed thesis when Uranium, Crude Oil, Copper and Silver were proven to be bubbles (with relentless inflationist touting of the ‘resources’ and ‘hard assets’ sectors in each case) and it is obviously still wrong now.

macrocosm

This is not to say that inflation cannot be a fundamental input for gold.  It has often been a major input.  But on this cycle the inflation is not manifesting in rising prices, at least not in relation to the stock market, investment in which can be seen as a ‘hedge’ against price inflation bubbling up in certain services sectors of the economy.

The commodity bubble is all done.  The inflation, with the aid of a persistent and powerful global deflationary force, is working in a ‘Goldilocks’ manner and flowing into risk ‘ON’ speculation in paper of all kinds and in some hard assets, just not the kinds that traditional commodity and resources gurus had foreseen.  Mainly, the public is doing just fine buying and selling appreciating homes.  Who needs several tons of Copper sitting in the garage?

Anyway, back to Barry Ritholtz…

“Gold is bought and sold based on a narrative that has turned out to be patently untrue”

Agreed; the majority of gold bugs have believed the wrong narrative.  It was wrong in 2008 and it was wrong again in 2011, and you are using an incorrect narrative as the foundation of your stance in these mainstream media articles that are so cartoonish even the public can understand it.

“the global financial system has stabilized, undercutting the appeal of gold as a hedge against catastrophe”

Again, agreed.  The system has stabilized but how many times do we have to review this chart before we can all agree that it has taken extraordinary (and incredibly, ongoing) measures with the implication being that neither you Barry, nor I, know how the fallout is going to go based on embedded distortions that no one can fully understand?  You call gold a “hedge against catastrophe”.  I have never called it that because I don’t see it that way.  I have always called it monetary value (which can fluctuate depending on market sentiment) and insurance.  Period.

irx.spx

“The wild inflation and collapse of the U.S. dollar that was going to lead to the demise of civilization and make gold an essential for investors? None of that has happened.”

Barry (not that you read this little out of the mainstream website, but work with me here), do you see the larger planets in the Macrocosm above?  They represent the kinds of things that drive people to liquidity and a risk ‘OFF’ stance.  What is the ultimate risk ‘OFF’ hard asset in a monetary world that while still working fine, has gone utterly mad in its pushing of traditional policy boundaries?  Why, it’s gold.  But what is the first and most intense repository of that liquidity?  It is none other than dear old Uncle Buck, for US citizens and the way things are currently structured, much of the rest of the world as well.

I have criticized the ‘death of the dollar’ and ‘hard assets/resources’ promotions every which way from Sunday for years now and it is due to a view that before the US dollar falls apart it is likely to totally annihilate hyperinflationists first (per Prechter and Hoye to name two).  Hence the big planets above are economic contraction, gold rising vs. stock markets, confidence declining and yield spreads indicating systemic stress (inflationary or deflationary).  This is why I have remained completely out of the way of the gold sector destruction for 4 years now, with my market report well in tune with that stance.

So yes Barry, “none of that has happened”; thankfully, or I’d have been wrong in my own thinking (always a possibility).  But I have seen nothing to dissuade me yet that I am, as a once and future gold bull (and constant valuer of gold as insurance), on the right course.  Several macro fundamental aspects need to come into line and we need to find a bottom technically, sure.  But your article adds another input to the bullish camp because you are teaching people who should not be in the gold market (mainstream public) at a real bottom lessons based on the same incorrect assumptions made by the Gold Bug “community” that you seem to provoke.

Maybe you even enjoy stirring the pot and getting the hate mail.  I can relate to that.  While he did not give me permission to reprint his email, a long-term gold bull emailed me the other day noting my “subjective, gold bashing rhetoric” and my “delusional, fiat money bliss” (ha ha ha).  This despite the fact that he and I are of the same long-term orientation.  It’s just that our inputs are different and so he sees me as basically one step above Satan (what does that make you Barry?  Just kidding, but  you get my point).

Misconceptions are everywhere and the stuff you base your articles on do not help that situation.  I write that as the other side of the coin that gives much critique to misconceived pro-gold promotions.

The ‘Real’ Reason the Fed Wants to Raise Rates

By Biiwii

In case you thought you were smart enough to know why the Fed wants to do what it supposedly wants to do [1] MarketWatch sets you straight with the real scoop.  We’ll use this as a talking point and see what comes of it…

Here’s the real reason the Fed wants to raise rates

Policy makers want to give themselves some room to maneuver

That is the commonly held belief and who am I to dispute it?  A big part of the problem is and has been their refusal to begin a journey toward normalization 2 years ago, when the economy began to visibly (we noted the seeds of that improvement in January of that year) improve.  They had no confidence and I was left to wonder (aloud here, frequently and I am sure, sometimes obnoxiously) why Grandma [2] (and her 0% savings account payout) had to continue to bear the brunt of this non-action despite a recovering economy.

Continue reading The ‘Real’ Reason the Fed Wants to Raise Rates

Precious Metals Extremis?

By Biiwii

The precious metals, which happen to be my anticipated next big macro (long) trade have been bearish since HUI lost 460 for the last time back in oh, what, 2012?  And that was being lenient.  Not being a cycles guy, I was not able to time the top.  I merely observed support parameters and informed NFTRH subscribers of technical violations first, and early eLetter readers subsequently as well (the eLetter was launched after the bear market began).

So now here we are, with the precious metals doing what they usually do when looking to end a bear phase; they are becoming extreme, as in waterfalling…

gdx

There is a solid contingent of analysts and writers now bearish on the precious metals.  There are also the perma-pom poms and idiotic hallucinations like the “drop dead gorgeous bull wedge” on GDX above (it failed as expected about 15% ago).  There have still been too many of these guys out there, obsessing on the precious metals every step of the way calling play-by-play for transfixed gold bugs.

Anyway, what there also is is an HUI target from 2012/2013 of around 100, based on the old monthly H&S top.

hui.mo

This is cross referenced with a gross looking pattern on the weekly chart.  Below is the blown up view of a more detailed chart, showing the pattern.  Here’s the NFTRH 351 excerpt that went with it…

Below we blow up the above chart (no pun intended) to show the breakdown.  The little pattern measures roughly 210-150 = 60; 160 (breakdown point)-60 = 100.

 What I find interesting here is that for years now, the big H&S top on the monthly chart has had a target of 100 (+/-).  While nothing in TA is set in stone (it’s an art based on probabilities, not a science), confluence adds to the probabilities.  The weekly and monthly charts each have independent patterns indicating the same general target.

hui.wk

For years now the sector has been bearish, but at the same time, being a macro trend trader (i.e. my desired mode is not this daily and weekly trading I have had to do in the mature stock market bull, it is to try to anticipate a big new trend or macro theme and be positioned for it) I am thinking like a predator or hunter, as has been advised in NFTRH.

In a situation like this, all you can do is have patience and your best laid targets and plans.  I hold exactly 5 junior miners (as of this writing), all of which have charts that are vastly better than HUI and GDX (and GDXJ for that matter) above.  I also have been shorting NUGT and holding JDST for full protection against what has been an uninterrupted bearish technical view and an incomplete macro fundamental view.

I know that NFTRH subscribers are prepared and hope that eLetter readers and website readers are prepared as well to the extent they have been able to read gain information and between the lines.

While I have conflicts going on (like the still <barely> intact Semiconductor market leadership vs. the deplorably bearish looking Palladium-Gold ratio) I think we are heading into Extremis, Q4 2008 style.  Timing?  Not sure.  Only regular work will help tell that story.  A short-term bottom could come about in the PM complex at any moment, before THE bottom.  However, THE bottom could come sooner rather than later if that waterfall continues to spill.

Regardless, whether it is measured in hours, days, weeks or even months still, it is time for the real gold bugs (the ones who long ago tuned out the cartoon characters the sector holds aloft) to be ready to act.

Ritholtz on Gold

By Biiwii

I linked Barry Ritholtz’s gold bug swipe along with other items in an Around the Web post.  Anything linked (or republished from guests for that matter) on this site is to be taken as 100% their view, not mine.  You, the reader are tasked with using your own brain to consider, discount or ignore any of it as you see fit.

What do I think of Ritholtz’s view on gold, personally?  I think ole’ Barry is picking some easy, low hanging fruit to use up virtual ink over at Bloomberg, per his contract (real or implied).  I mean really, gold did not react to Greece and he takes that as a negative for the metal?

The fact that gold did not do what legions of promoters and fear mongering pitch men insist it is supposed to do is a positive, not a negative.  It brings us closer to the resolution of the bear market as opposed to delaying it with fear mongering promotions (ref. last summer’s Russia-Ukraine-Ebola triple play of unsound ‘fundamentals’).

Gold Shrugs Off Armageddon

“I thought gold was an investor’s best friend during Armageddon.”

Really Barry, I think that you have gotten caught up in a personal ‘back and forth’ with the more unsavory of the gold bug “community”, as Daddy Gold Bug Jim Sinclair calls it.  You are using the same cartoons in reverse that the worst of the “community” uses when it tries to stir fear and greed in naive cult members followers.

As those of us who actually care about reality (as opposed to media-driven hype) have tried to point out repeatedly over the years, gold is not about Armageddon (Bird Flu, Ebola, Cyprus, Greece, war, death, destruction or any of that crap).  Gold is simply a marker, a barometer showing the state of confidence in the financial system and its managers (Central Banks) at any given time.

“Further reducing enthusiasm for gold is the gradual improvement of the U.S. economy. Despite forecasts of imminent collapse, the major economic data — including employment, wages, spending, housing, autos and consumer sentiment — have all trended higher over the last five years. Tales of an impending depression were greatly exaggerated.”

I could not agree with you more, Barry.  Back in 2012 we began gauging big breakdowns in the technical case for precious metals and by January of 2013 we (well, NFTRH) cross referenced the ratio of Palladium (cyclical) to Gold (counter cyclical) with a ‘channel check’ of the Semiconductor Equipment industry to put forward a view that an economic bounce – beginning in manufacturing and later to spread out to the services sectors – was likely to come.

I am a gold bug.  I saw the “improvement of the U.S. economy” when it was appropriate to see it, ahead of time.  When you obsess on the other kind of gold bug, the media star with the Armageddon-like predictions and inflammatory ‘analysis’, or Kool-Aid drinking hate mailers, you do a disservice to your readership because you only present the other side of something that is not real to begin with.  You in essence stand up a Straw Man and periodically set fire to him, really to no one’s benefit.

“Regardless, gold seems to [be… jeez msm, edit much?] going nowhere fast. Feel free to send me an e-mail explaining how wrong and stupid I am. I have an archive of all the messages warning me that gold would teach me a lesson in humility. “You’ll see” these e-mails smugly assure me, “your comeuppance will be here any day now.” My plan was to respond to each on its fifth-year anniversary with a chart showing the performance of gold versus all other asset classes and the details of how much money has been lost.”

Gold is going to be relevant again when confidence wanes and the current boom cycle starts to show its age and reveal its unsound origins.  Until then, gold is a dumb rock that people can hold as insurance and nothing more.  That is all it ever was, anyway.  But that does not sell in the mainstream media to mainstream people.  Cartoon-like depictions of half insane Luddites clinging to that dumb rock do.  Media stars lampooning those Luddites do too.

Bernanke on Warren-Vitter & Last Resorts

By Biiwii

Ref. Warren-Vitter and the lender of last resort

[edit] I have had some complaints about writing that I “like” Bernanke and Obama.  That is telling of how divisive today’s financial and political climates are.  I did not write ‘I like the jobs they have done’, after all.  I have not “liked” the job a Fed chief or President have done since I can remember.  It was wording in a post simply implying that I think they are probably nice men.  Sheesh… it would help if some people would actually make the effort to pick up on nuance.  It’s a post answering the assertions of a former Fed chief destined to see the annals of history one day revoke his “Hero” status.

I have always liked Ben Bernanke, in that I think he is a soft-spoken, nice guy who took the hand off from Alan Greenspan in stride, heroically making chicken soup out of the chicken excrement he was left with.  He kept his dignity and calm demeanor during the days when inflationist gold bugs codified the term “Helicopter Ben” and turned it into just another accepted way of saying “Ben Bernanke”.

Mr. Bernanke met the impossible challenges left him by the Greenspan Fed and the Bush White House, and being a scholar of the Great Depression and an intellectual Keynesian, did what he was always meant to do.  He employed tried and true Central Bank policy-making against a natural bust (i.e. reaction to Greenspan’s policy-induced 2003-2007 inflationary boom) of the system.

Continue reading Bernanke on Warren-Vitter & Last Resorts

Gold, Ideals & Management

By Biiwii

49erGiven its ancient history as money and jewelry, its religious connotations, the fact that it is both beautiful and laborious to dig out of the ground, process and store, gold is an asset that promotes strong and often emotional views and so it is the perfect central figure for this thought exercise.

I want to be careful in criticizing fellow market participants because as a lowly human myself, I am subject to the same pitfalls as anyone else.  But being an advocate of the sound reasons for owning gold, even through a violent bear market, I have learned a lot over the last few years about how many market participants think.  That includes myself, which I will address first.

Management

I have learned that I am able to compartmentalize my ideals, biases and beliefs in service to simply being in alignment with what is going on in the greater financial sphere (e.g. the bubble in governmental credit/debt as a stimulant for asset market appreciation), regardless of whether or not I agree with its origins or believe in its sustainability.  I have only firmed on the idea that I am a manager as opposed to promoter of my most closely held beliefs.  Inflationary monetary policy is working exactly (I would assume) as officials have intended as the right assets, equities, have been rising on this cycle.

As part of that management and compartmentalization process, I have kept the idea that gold is long-term and eternal monetary insurance and not an asset to game or speculate upon.  This view is unchanged from when Biiwii.com and NFTRH warned about the speculative blow offs most notably in silver, but soon to follow, also in gold.  I state clearly that I for one had no idea how bad the ensuing reaction would eventually become (and made no predictions thereof), but also as a manager I did not need to know.  Part of management is discipline and the tools of discipline are parameters and indicators.

So I have been able to function well with the idea that gold is insurance and in this phase a payout from insurance has not been needed.  It’s a concept everybody is familiar with; you pay your Homeowners’ insurance every year and hope that those premiums remain dead money.  That is a healthy way to view gold.  When the effects of official financial wrongdoing do crop up again, you suddenly place value on that insurance premium.  It’s not rocket science.  These concepts are as old as the hills but they are critical to adhering to healthy behaviors within the gold market.

Promotion of Ideology

Which leads to the unhealthy stuff.  Even back when when I was bullish not only on gold’s value proposition, but also its price, I used to try to include words about value and long-term reasons for holding gold.  That is because even in the first phase of its bull market being a gold bull was akin to being at war (an ideological one).  In a war you get killed if you are not 100% buttoned down in your defensive postures.

Defensive posture in this case was the above noted view of the actual metal as insurance, a long-term holding of value, which fluctuates over various market price cycles and investor confidence cycles.  Another defensive posture is to tune out wrong-headed ideas long-since proven to be illegitimate, like buying oil and copper and silver and gold and other ‘natural resources’ as protection against the evils of inflation.  Finally, the most defensive posture possible is probably the most difficult to attain; remembering and respecting but not being controlled by your beliefs.

I have watched certain entities not change their tune when it comes to using the usual hooks to pull in readers, followers, subscribers, customers, etc. (i.e. humans).  Apparently there are tried and true methods that work on the maximum number of marks, that is, people.  These usually involve establishing an easy to understand narrative, promoting it through thick and thin and when things get rough, accenting its ‘us against them’ and/or ‘you are one of the few who really understand’ components.

What it actually is though, is b/s.  Fear, greed and even religion and political agenda can be used as tools for tending the gold herd.  Recently we noted one entity going on about “so much money” it has made in ‘resources’ (seen the CRB lately?) and how in-the-know investors are going to get rich in the coming Asteroids and Nanotech booms; after the next big run up in resources, of course.  This garbage, which I’ll not identify (it was posted at Biiwii, readers may recall) here was actually packaged in a mocked up interview/infomercial with a commodity and resources guru of prominence.  NFTRH has had several subscribers over the years note to me that they were refugees from this entity.

A more personal instance happened last week.  I often selectively reproduce posts at various LinkedIn groups that I feel are relevant to the groups’ agendas.  A Biiwii ‘guest’ post about governmental debt expansion was sent to a group formed to talk about Austrian Economics.  “What does this have to do with Austrian economics?” responded one disgruntled member.  Apparently, to the letter of the law he is expecting an inflationary ‘Crack Up Boom’ and any talk of a deflationary debt unwind simply will not do.  <insert here obligatory joke about ‘Crack’ use>.

I moved on from the group-thinking group.  Like the political war of cartoons that will array in the United States over the next 1.5 years, it seems all too many supposed investors are aligned to their caricatures and speech balloons.  And the real pros who work the crowd know this all too well.  They also know that gold, with ancient historical, religious and ‘good vs. evil’ mythologies all rolled up into it, is well suited for the old ‘Heart Strings’ play.

Friends Like These?  Tune Them Out

You don’t need friends in this realm.  You need your own two feet and you need to stand on them.  Your ‘friends’ are often trying to sell you something, or sell you on something.  I am trying to sell you something too.  With this simple post I am trying to sell you on deprogramming and understanding all aspects of your investor-self.  With NFTRH I am trying to sell you on letting me do the work of deprogramming, managing and macro positioning.  But there is only one thing that people really need in the investment world and it is internal confidence born of education and perspective; their own perspective, not confidence bought or consumed from someone else.

goldGetting back to gold, I would be wary of those telling you how bearish or bullish gold is and realize that gold as a monetary ‘asset’, just is.  It just was when it was rising from 600 to 1900 and it just was when it was dropping from 1900 to 1100.  It is the value assignment toward insurance during a time of high investor confidence that changed.  Gold did not change.

The best part is that when you have your ‘insurance vs. speculation’ or ‘value vs. asset price’ ducks in a row then you can go forth and speculate – in any market, including the gold sector – to ‘make some coin’ as casino patrons like to say.  But the bedrock idea is to understand what is value and what is price speculation.  That takes management, not only of assets, but also of one’s own psych profile.  Only an individual can manage her own psych profile and ideology.