What we focus on, we see

Everyone says GOLD is in a bubble. They show a chart against the USD, like the one below.
Next to the USD line is the Mexican peso...they are tracking quite close. Strange isn't it?

Yet let's look at the 20 year period starting 1980...the Mexican peso was in trouble due to their economy...(marked in red)...was gold in a bubble, going up 15 times in 5 years then another 3 times in the 1995 period?

 

It's not gold going up...it's the currency going down...think about it.

“To see things in the seed, that is genius.” Lao Tzu

without comment, because when we comment we direct
when we allow others to ponder they discover

from Mr Lipps' book Gold Wars...

The Role of Oil Wealth and OPEC

   
At the beginning of the 1970s, wage and price inflation soared, leading to lofty energy prices and vice versa. The Arabs were very slow to understand dollar debasement, the currency in which their
bills were paid. For a long time they did not understand they had been cheated for years. The paper money they received for their black gold had dwindled in value. In 1973 and 1979, they massively increased their prices to compensate for the increment in the American Consumer Price Index. The sudden quasi quadrupling of the oil price turned many energy producers into megamillionaires in a very short time. In 1973, one barrel of oil bought one bushel of U.S. wheat. In 1980, the same barrel of oil bought nine bushels of U.S. wheat. By the middle of the 1970s, the demand for gold by investors from oil producing countries exploded.

Not only individual investors were buying gold, but OPEC nations were also in the market. Timothy Green commented: 

.[the] single most important development in the gold market since 1970 has been gold buying by

central banks (or other government institutions) in oil producing nations: Indonesia, Iran, Iraq, Libya, Qatar and Oman have all acquired gold..



comment: maybe many of us are slow to understand dollar debasement

Two questions

1. Why do Central bank hold gold?
http://www.smh.com.au/business/markets/central-bank-buying-gives-gold-a-boost-20121026-28950.html


2. Why are they demanding their gold back?
http://www.telegraph.co.uk/finance/financialcrisis/9631962/Bundesbank-slashed-London-gold-holdings-in-mystery-move.html

Australia - the lucky country...really?

http://www.marketwatch.com/story/australia-facing-a-hard-landing-andy-xie-2012-10-25?pagenumber=1

And Xie has got it right - the timing is the only question.
Those inside the bubble can't see it...2013 may be a little too early...but if this was a debt supercyle, why do Australians, with their love affair with debt fuelled housing think they can survive it's conclusion? They can't.


Any foreign capital-inspired asset bubble bursts when the flow reverses. It causes the monetary system to contract. As the central bank replaces the outflow with new money, the currency value drops, which frightens Asian retail investors who hold Australian dollar deposits. Their flight causes the currency to tank more and liquidity to tighten.

The property market will fall with the tightening liquidity and capital flight, which frightens away more foreign capital in the property market. The new equilibrium is defined by a much lower currency value and property price. In this new equilibrium, the currency value could be half of its peak value.

Mr Lipps, a Swiss private banker wrote in 2001

http://www.fame.org/pdf/Gold%20Wars%200-9710380-0-7%20%20-%2001.21.02.pdf

I demand to know from Western bankers and portfolio managers what confused logic compels them to leave no room for gold in their portfolios. They should know from history that the future of fiat money does not bode well for the survival of their clients. portfolios. I address the Western bankers because the people of the East have a better understanding of gold. Do the portfolio managers really think that stocks of companies with no earnings or bonds in troubled currencies are sensible long-term investments?

Should they not be more interested in sound monetary conditions? It would make their work easier.

I ask the central bankers of this world: Are you really concerned with what should be the main purpose of your jobs: to protect the purchasing power and the integrity of your country.s currency? Are you really sincere and acting to the best of your ability when you decrease your country.s gold holdings only to replace it with continuously depreciating paper claims that may not be honored? Remember, no serious farmer would sell his seeds. If not, you are clearly useless and should get out of the business.

I will not ask anything of the politicians because they will never change. All they have done with their politics is to destroy the purchasing power of money.

Be right and sit tight...Jim is the master at this for good reason

http://www.jsmineset.com/2012/10/24/manufactured-market-drama/

"And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars, I want to tell you this: It never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine-that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader, after he knows how to trade than hundreds did in the days of his ignorance."

Jesse Livermore

Whatever happens in the gold or any market...

will not change this one bit :-)

1 video explaining bubbles forming...and one to form

http://www.youtube.com/watch?v=b4zOAHoncF0&feature=relmfu


then 1 article which articulates well, what few really understand...

Thankyou Lan

http://www.economicsvoodoo.com/quantitative-easing-0-1-2-3-and-federal-reserve-banks-love-affair-with-its-member-banks-and-mortgage-bonds-levitating-the-black-hole/

The black hole is the balance sheet of the banks

a facade "papered" over with fiat paper.

In the late 70s, in the midst of a dollar crisis...it was clear what was needed

Clarity is coming on the unattractiveness of "paper"


http://www.laffercenter.com/1979/10/a-return-to-convertibility/

A Return To Convertibility
Tuesday, October 30th, 1979

Making the Dollar ‘as Good as Gold’

By Arthur B. Laffer

L.A. Times 10/30/79

The events of the past several weeks have served to make interest rates, reserve requirements and money supply targets of cocktail talk at all proper meeting places. What appears to be missing, however, is any serious discussion of a word understood by virtually everyone: gold. In my view, any successful solution to the monetary crises occurring at ever-more frequent intervals must include a reestablishing of dollar convertibility. Historically, convertibility of a currency has been into gold.




this is why those with grey hair get it...because it's not that new.

In 1977
http://www.foreignaffairs.com/articles/29522/jahangir-amuzegar/opec-and-the-dollar-dilemma
...
OPEC's worries about the continued erosion of its purchasing power, and the market's fears about the oil exporters' reactions, have been both serious and real. Between January 1977 (when the crude oil price was last raised) and April 1978 (when the dollar showed faint signs of stabilization), the U.S. currency depreciated by more than 22 percent against the Swiss franc, 21.5 percent against the Japanese yen, nearly 14 percent against the deutsche mark, 10 percent against the pound sterling, some 6 percent against the French franc, and even a small 3 percent vis-à-vis the Italian lira. While the decline of the U.S. dollar over a 21-month period, weighted in terms of U.S. trade, was much less than these figures might indicate1 - actually, only 7.5 percent - the damaging impact on OPEC as a whole, and particularly on some of its members, was considerable...

Insight from a successful money manager

Stephen Diggle - a successful hedge fund manager - having made around two-and-a-half billion dollars during the financial crisis.

what's he like now?

Watch the presentation and see...then reflect...finally decide for yourself

http://www.youtube.com/watch?v=6vqqHVUYXmc&feature=player_embedded&noredirect=1

in 1965 Charles De Gaulle said this...

“The fact that many countries, accept as a principle, dollars being as good as gold, for the payment of the differences existing to their advantage in the American balance of trade,” said De Gaulle, “this fact, leads Americans, to get into debt and to get into debt for free at the expense of other countries. Because what the US owes them it is paid, at least in part, with dollars the are the only ones allowed to emit. Considering the serious consequences a crisis would have in such a domain, we think that measures must be taken on time to avoid it.

We consider necessary that international trade be established as it was the case before the great misfortunes of the world, on a indisputable monetary base, and one that does not bear the mark of any particular country. Which base ? In truth no one sees how one could really have any standard criterion other than GOLD !”

http://www.americangoldreserveonline.com/why-precious-metals/flashback-de-gaulle-and-the-gold-standard/

Yet people have "faith" to flock to dollars now?

People think I'm negative

"Why all the focus on this? It sounds all doomsday."

I once got that response. Was I being negative trying to highlight something that was both coming and had implications for people and what they should be doing?

If I was a resident of Greece, telling people to get their money out of the banking system in 2009, would I be called negative? It's only negative if you only consider it from where you "think" you sit.

I wish you the opposite of ignorance.

When confidence is lost...it happens quickly

Shhhhh Warren, Daddy's talking

I warn you that politicians of both parties will oppose

the restoration of gold, although they may outwardly

seemingly favor it. Also those elements here and abroad

who are getting rich from the continued American

inflation will oppose a return to sound money. You must

be prepared to meet their opposition intelligently and

vigorously. They have had 15 years of unbroken

victory.

But, unless you are willing to surrender your children

and your country to galloping inflation, war and slavery,

then this cause demands your support. For if human

liberty is to survive in America, we must win the battle

to restore honest money.


Howard Buffet in 1948....Read the whole thing here...
http://www.fame.org/pdf/buffet3.pdf

 

Egon makes a good case (he has protected his clients over the last 10 years)

You don't have to agree with everything Egon says - but try to understand it before you dismiss it.

http://goldswitzerland.com/printing-money-price-of-gold-preservation-of-wealth/?utm_source=subscriber&utm_medium=rss&utm_campaign=rss

Printing Money – Price of Gold – Preservation of Wealth

by Egon von Greyerz – October 2012

1. Worldwide money printing continues unabated
2. Just In 10 years $120 trillion have been printed making global debt $200 trillion
3. World GDP has gone from $32 trillion to $70 trillion 2001-2011
4. Thus $120 trillion debt is required to produce a $38 trillion annual increase in GDP
5. The marginal return on printed money is negative in real terms
6. Thus the world is living on an illusion of paper that people believe is money
7. This illusionary paper wealth will implode in the next few years
8. The initial trigger will be the collapse of the world’s reserve currency – the US dollar
9. The dollar is backed by $120 trillion of US government debt and probably NO gold
10. All currencies will continue their race to the bottom and lose 100% in real terms against gold
11. This will create a worldwide hyperinflationary depression
12. All assets financed by the credit bubble will go down in real terms
13. This includes stocks, bonds, property and paper money of course
14. The financial system is unlikely to survive in its present form
15. The banking system including derivatives has total liabilities of around $1.2 quadrillion
16. With world GDP of $70 trillion, the world is too small to save a financial system which is 17x greater
17. This is why there will be unlimited money printing and hyperinflation
18. The only asset that will maintain its purchasing power is gold Click here for chart
19. Gold has been money for 5,000 years and will continue to be the only currency with integrity
20. Western countries’ 23,000 tons of gold is probably gone. See recent article by Eric Sprott.
21. The consequence is that most of the gold in the banking system is likely to be encumbered
22. This means that Central Banks one day will claim it back against worthless paper gold IOUs
23. Thus gold and all other assets within the banking system involve an unacceptable counterparty risk
24. Gold should be held in physical form and stored outside the banking system

Egon von Greyerz
9th October

Lao Tzu said many centuries ago...

Life is a series of natural and spontaneous changes. Don't resist them - that only creates sorrow. Let reality be reality. Let things flow naturally forward in whatever way they like.
Can you "see" reality as it is or how you have conditioned yourself to see it?

Kyle Bass says about the US Fiscal Cliff...I can't fix it

http://www.zerohedge.com/news/2012-10-03/kyle-bass-federal-budget-i-dont-know-how-fix

Mr Bass likes gold. He seems to know history and he certainly understands the maths.

US budget hole cannot be plugged!

Why all the focus on gold?

It's a measure of things not right...

- fiat currencies are being debased
- political promises cannot be kept
- budgets cannot be balanced
- financial systems cannot be trusted
- the imbalances in wealth need to be corrected

This is not new. But it is on a grand scale.

The odds of a smooth transition are lower than 50%...but a transition will occur. And in that process the healing will begin.

PIMCO says - the US is walking a tightrope...oh so own gold...

http://www.pimco.com/EN/Insights/Pages/Damages.aspx


Investment conclusions

So I posed the question earlier: How can the U.S. not be considered the first destination of global capital in search of safe (although historically low) returns? Easy answer: It will not be if we continue down the current road and don’t address our “fiscal gap.” IF we continue to close our eyes to existing 8% of GDP deficits, which when including Social Security, Medicaid and Medicare liabilities compose an average estimated 11% annual “fiscal gap,” then we will begin to resemble Greece before the turn of the next decade. Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow and the dollar would inevitably decline. Bonds would be burned to a crisp and stocks would certainly be singed; only gold and real assets would thrive within the “Ring of Fire.”


http://www.pimco.com/EN/Insights/Pages/GOLD-The-Simple-Facts.aspx

For more than a millennium, gold has broadly managed to maintain its real value, even as various currency regimes have come and gone.

The supply of gold is constrained, and we see demand increasing consistent with global economic growth on a per capita basis.

Given current valuations and central bank policies, we believe investors should consider including gold and other precious metals in a diversified investment portfolio.

Comment: Large institutions and then smaller ones will take heed of the advice;
then advisers; then clients...the tidal wave is heading to shore...