When we look back at the last 9 months (the last 90 days in particular) in hindsight, I believe it will turn out to have been THE biggest “fake out” in the history of history. The operation that has been pulled off has made some of the biggest gold bulls to question their logic and at this point those who “could” be shaken out have been. Investors in the East have looked at the price drops as a gift from heaven while many Westerners got the “deer in the headlights” syndrome and looked on in despair.
It will be obvious in hindsight that gold and silver were THE lifeboats after the currency crisis. “How could anyone have been fooled?” will be the word of the day. “Why in the world would anyone have considered selling anything gold or silver?” “Were they stupid?” Yes, hindsight is 20/20 and with the “result” a known entity it will be easy to look back and wonder “what were they thinking?”
Please understand that all of the reasons to have purchased gold in the first place are not only still firmly in place, they are now more severe. Some purchased gold because it was trading at or below the cost of production; others believed the banking system was going to come down. Is the banking system any better today than it was even in the fear days of 2008? I would tell you that if it wasn’t for the banks’ ability to price nearly any asset at any price of its choosing that systemically they are ALREADY dead. Think about the derivatives market, how is it possible for 2 banks trading with each other, both on opposite sides of the trade to be carrying the trade as a “profit?” In reality this cannot be possible …and lends credence to the thought process that the “winner” will become a loser when the loser fails to nor can “pay up.”
Others bought gold because they were crazy enough to think that the U.S. Treasury would default either through nonpayment or debauching the currency. In retrospect, these “crazies” were right! The Treasury is only “solvent” at this point because the Fed (the buyer of last and now only resort) is buying Treasuries that no one else will. Could the Treasury afford an interest rate structure at the “exorbitant” rate of 5%? Could they go forward paying double the interest that they are paying now? Triple or more?
There were still others who bought gold simply because they believed that the Fed would “inflate,” were these buyers correct? Are the “official” inflation numbers correct? I would like to remind you what exactly “inflation” is…it is the creation, or better said OVER creation of currency. Does $85 billion per month qualify? When looked back upon, “QE” will be synonymous and interchangeable with the word monetization, period.
How about those who feared the breakdown of society and the rule of law? Were they correct? Just look around you, would MF Global ever have been allowed in the past? Or bail ins? What more do you need to know than the FDIC changing the rules and saying that “depositors” are creditors…and apparently unsecured at this point. How about all of the spying? Race baiting? Are these conducive to a society going in the right direction?
I could go on and on but there is no point. The real point is that ALL of the reasons that people bought gold in the first place are still here and now much more severe. “Because” the paper markets were used to crash the price, many have questioned their logic. Many “paper” holders have panicked and fled while physical buyers stepped up to the plate and have been gorging themselves. As mentioned in the title, when all is said and done the current correction will be viewed as one gigantic fake out. fake rolex. Most of us probably know that if you’re paying 50 bucks for it, or buying it from a guy in a trench coat on 6th Avenue, a Rolex is probably a fake. I believe that this manufactured correction will go down as one of, if not THE best buying opportunity in the entire bull market. We are in the midst of the greatest transfer of wealth in human history. Just look at the export (from the West) and import (to the East) numbers to see this as true… If you believe that the dollar will “strengthen” while it is being over issued and the gold is fleeing our shores then “fake out” is an excellent description.
I don’t think that with the way the dollar index is fluxuating that it is unreasonable to think that gold will rise to 1,350 an ounce or even 1,400.
Bill,
You are 100% correct again.
The Asians know a lie when they hear it, but Americans just buy into all the bulls@@t.
Not only is this the buying opportunity of a lifetime, it will not probably occur again in our lifetimes.
This is your ONLY chance to keep your wealth in your entire lifetime!
Will you do your own research and be on the right side or loss it all like the 95+% that believe the lies being told to all of us?
It’s now or never and I suspect those 95+% just will wait until it is too late. SAD.
July 15, 2013
Rock-A-Bye Baby
Not that any of this matters, provided that nobody cares that the Fed has very quietly strayed beyond monetary policy and into fiscal policy. See, the Fed calls the interest on the bonds it holds “profits”, which are returned to the Treasury, while the Fed calls its losses a “deferred asset.” In Bernanke’s words, the losses of the Fed are an “asset” in the sense that they result in a reduction in the amount of future payments of interest handed back to the Treasury (and the public) as that interest is received by the Fed. Put another way, the public will end up paying interest on Treasury bonds, to fill the hole in the Fed’s balance sheet, and without that interest being handed back to the Treasury for public benefit. All this, without the need for any Congressional budget item. The larger the loss, the larger the “deferred asset” on the Fed’s books. This is as Orwellian as one can get.
http://hussmanfunds.com/wmc/wmc130715.htm
Bill,
Time after time over the past year of horrid PM news and plummeting metal prices, you, and the others at Miles Franklin, mentioned that virtually none of the Miles Franklin clients were “selling”. There is a solid reason for that. It should be pointed out that the cartel, in doing it’s best to “fake out” PM holders and shake out metal from the uninformed, failed to separate Miles Franklin clients from the only wealth that will get them through the financial holocaust that is imminent. It is not chance that the Cartel’s ploy did not work on the informed PM owners that read you, Andy and Dave. Thanks,congratulations and bless you.
Bless you all.
B.
Thank you Bob, we have seen better than 20-1 buyers over sellers.
The real fake out is the fact that people would rather hold fake fiat dollars and not convert them to what is real hard assets. I was told money is a tool(medium of exchange) used to get what we need(goods and services). If that is the case and the dollar is what we call money today, then why are people storing the medium of exchange and not the assets? To me that is the greatest fake out in history when we look back. A depression happens every 70 to 80yrs and 1929 was the beginning of the last one. 2008(78yrs later) was the beginning of the second one. You are right Bill, we will never get this chance to keep our wealth again at least not in our lifetime. The next depression will be at a time when my son is 83yrs..LOL!
Bill,
Can you explain this sentence in more detail:
“how is it possible for 2 banks trading with each other, both on opposite sides of the trade to be carrying the trade as a “profit?””
Do you have a concrete example of this because I have heard it stated before, but would be interested in hearing who are the banks and what are the trades?
Regards,
Michael.
all you need to do is look at what happened in the Treasury market recently. An 80 basis point move up, off of a 1.80% base in less than 30 days…and we heard nothing but crickets? This market alone is over $250 trillion and no one fessed up to a loss…of any size? There are 2 sides to these trades yet no one lost any money?……………………???
Bill,
I think that is a too simplistic view to take on this element of your (otherwise great!) article. Of course there were big winners and losers in the recent 80 basis points up-move in the Treasury market, but moves of this nature are happening on a daily basis in the Forex markets for example and they don’t necessarily mean that someone has taken a massive loss. The banks are typically ducking and diving in these markets and in my experience it is the Corporates (i.e. Funds and Companies) who get slammed on moves like this. I’ve just finished reading FIASCO by Frank Partnoy and he sets this out very well.
On the other hand, I’ve no doubt there is another Joseph Jett of Kidder Peabody infamy just waiting to be exposed!!
BTW – I’m long Gold myself and it has been a painful few months, but thankfully I’ve been reasonably well diversified!