Honest, hard look at the current "bottom" in PMs

[bushi]

Well, boys n gals, there was an idea dawning on me for a while, that I am now ready to share and get it X-rayed by others. Here's my scenario about the short/medium term of Market Reality (as opposed to THE reality, which will catch up, eventually - or rather - Market Reality will catch up to it )

1) Fed will NOT stop printing/QEing to infinity- there's no way they can do that, without collapsing the bonds markets, stock market, building industry, and the whole fecking rest, together with it

2) It is clear now, that most/all of this air, is going into stock market/reinflating building bubble, and we KNOW, that it will continue - it is guaranteed by the Fed, and the Fed is one and only reason for it.

3) Naturally, PMs are reverse-correlated to "bull(shit)ish" stock markets. So, for as long as the rally continues, more and more weak hands will cut the loses, bite their lips, sell the heck of their gold/silver (paper, 90%, I think - because if anyone went through the troubles of buying physical metals - well, he/she is aware that the fundamental reasons why he/she get into phyzz, are only getting stronger), that they were buying all the way up to $1900/$50/OZ, two and a half year ago, and ever since), and just shrug & get into the stock market - you know, "the ticket is the ultimate truth" thing.

4) This will last for as long, until it doesn't. In the meantime, stackers will keep stacking (me including - but I will try to buy on significant dips, anyway), physical demand will beat records month after month, quarter after quarter (I don't think we are getting to get into "years" here ), but the PM's price, will generally trend downwards, I think.

5) If/WHEN it stops working, the whole shithole circus collapses and burns AGAIN - and perhaps, this time, beyond resuscitating capacities of the Fed & other CBs. Well, if this is the case, we have DEFLATIONARY crash. That will INCLUDE gold & silver, at least initially (welcome to 2008 vol. 2). THEN I think, will be the ultimate buying opportunity, that will NOT repeat itself, until a VERY long time (ie, perhaps not in our lifetime) But honestly, I think all bets will be off at this time, and God knows, where we end up, or if it will be possible to buy ANY physical gold then. This is going to be a "panic" moment, to put the money anywhere BUT the mainstream system.

One way or another - I am about 10% in red on my stack in total ATM, but I expect I will be much more in red, before it gets any better, in any significant way( but when it starts to get seriously better, man, fasten your seat belts). Rather not for years/decades, but still for months/quarters, I think (some patience required). I plan to size my purchases carefully, from now on, steadily, until we hit some iceberg/another market shock (be it butterly flapping it's wings in Amazon, or WW III) - then I will size them up SIGNIFICANTLY. Because I am pretty sure, that after the initial shock of crash, if/when deflation prevails - there will be HUGE flight to safety later, and NOT into paper this time, I think - why? If deflation wins again, that will signal to anyone with any brains remaining, that the Fed/CBs are NOT in control - because they are trying to achieve inflation, at ALL costs, by ALL means necessary, and if the deflation prevails anyway - well, they've failed, haven't they. Not that I would be crying my eyes out if that happens to them.

What ya think?

 

[rblong2us]

Bushi

your predictions are based on the people at the fed and their immediate surroundings, acting like deer in the headlights.

We are probably more aware than most what they are doing but I cannot accept that they are trapped, as so many commenters think.

They have a lot of advantages and are likely preparing multiple strategies and options for differing scenarios. If they are not, I would be genuinely surprised.

The fundamentals for gold and silver remain intact and they now know that bashing the price increases the paper / metal separation process so I agree that PM's remain a safe place but it may be that they never really take off because of cunning plans to ensure this outcome.

I am 20% down on my metal investments and while originally I was thinking that it didnt matter what the paper price was, as I could live off an ounce of gold a month but now Im moving towards an eco build project that is essentially off grid and self sufficient in food production and I may need to convert metal to cash to achieve this

So betting against the fed and hoping for some kind of collapse to create some kind of payback for all our suffering, may not in the end, be the best strategy

 

[Jay]

not in the red, but I do have a couple of "misses".

 

[Aubuy]

I can see your reasoning with #1-4 and you make some good points. I completely agree with #1 that the FED can't stop what they started, but I am unsure how we actually ever get to #5 unless we have some kind of terrible Black Swan event that is really awful (pandemic flu with high death rate, meteor strikes earth, the internet goes down forever, somebody nukes us), in which case we're all toast.

If we're not toast (whew), then I think things are just going to keep muddling along, with more swings up, and more swings down, depending on what crazy bubble has grown or popped next. I do worry there is a disconnect starting to occur between paper currency and electronic currency and we are in uncharted territory with that. When someone can hand you a plastic card that can turn into a meal, or a phone, or gas, or free medical services, are you really going to care how many zero's are being added to underlying "dollar"? This would give the government and CB's almost complete control over the economy and most people would happily go along because it would all be so easy. What if people just eventually stopped transacting with anything physical? I don't have trouble imagining that future. I remember Black and White TV so it's not hard to guess where money might be headed.

I hope that PM's continue as some kind of parallel value system, because they certainly are portable and easy to trade. If they remain a small part of economic exchange, or have a little niche as collectibles, that is probably the safest thing that can happen because why waste time swatting mosquitos when you're managing a multi trillion dollar economy. If PM's ever get really important, and people are clamoring for coins etc. the odds favor that the government is just going to make it illegal to have them (as before) and then the risk of using them will not be worth it because they don't have beer and satellite TV in jail. :flail:

So I am trying to be more optimistic, but also prepared for a variety of circumstances (thus diversified) so I am hoping that #5 is avoided somehow, but I also think stacking (a little) on dips is probably not a bad idea either, but don't let PM's be a major part of your financial plan. $.02

 

[pmbug]

War is always a good distraction from a bad domestic economy. Things may get interesting in July.

Aside from that, spot is already below production costs and the mining industries for both gold and silver are already showing stress from it. Supply shocks are coming in the physical market if prices don't rise soon.

 

[MasterQ]

I agree with ya there PMB.

The canary in the coalmine is the physical market NOT SPOT!

Any drive to go lower will be due ONLY to the over extension of physical-less backed paper.

Hell the bank ratio is something like 10-1 in cash holdings for loans!

Check out the gold lease rates themselves if you want to get a better picture bushi!

The lows are in for this year and anything below them will truly be short lived.

2008?

The recent peak high in 2008 was 21/oz for silver before it dropped 57% to $9/oz.

Our recent high in silver was $49/oz before dropping to it's recent lowest of around $20/oz or 59%. We've already witnessed 2008 again.

What more are rather (less) are you looking for brother?

-Q

 

[DCFusor]

Jus keep stackin. DCA isn't stupid, and it'll lower your cost basis in times like this. Sure, you might want to save some dry powder for the case of a real drop in physs - but we're not seeing that as much as in paper - premiums are high for the real deal...for some reason (and we think we know what that reason is).

The only nefarious thing I can see the CB's doing (well, the governments they own) is declaring a lot of paper stuff void by "fiat" in the original sense of the word - after all, the banks say it's all a hedge or net-zero, and at some point, someone might force them to liquidate all those bad derivatives, or just declare them all null & void.

Obviously, they are lying about it all being net zero, or they'd do it already on their own. They all think they'll be standing at the exit when someone shouts fire, and will have that chair when the music stops, or they'd have gotten out of all those positions a long while back. Obviously, this can't be true for them all - someone's got to go first, and hang the rest.

My contention is all the banks are essentially insolvent. There's this "temporary" FASB rule that allows them to mark to other than market. The first large bank that really did have a good balance sheet would be screaming from the rooftops for that rule to be rolled back, so they'd look good compared to the competition, yet what we hear is crickets - the dog that didn't bark.

 

[bushi]

Bushi

your predictions are based on the people at the fed and their immediate surroundings, acting like deer in the headlights.

We are probably more aware than most what they are doing but I cannot accept that they are trapped, as so many commenters think.

They have a lot of advantages and are likely preparing multiple strategies and options for differing scenarios. If they are not, I would be genuinely surprised.
(...)
So betting against the fed and hoping for some kind of collapse to create some kind of payback for all our suffering, may not in the end, be the best strategy

...they are operating under false paradigm, assuming that we can grow our economies indefinitely. Secondly, that we can grow debts indifinitely, but the long term growth in debt accumulation is WAY ahead of long-term GDP growth, globally (while both being exponential, debt is "MORE exponential", for decades ). Take away those two FALSE assumptions, that are cornerstones of Keynesian economic theory, and Fed and all other folks up there, are working against the MATH, which powerful as they are, they cannot POSSIBLY win. I am not looking forward for the shit to hit the fan, I'd rather not, but I am afraid, it will. BTW, going off-grid and self-sufficient, is about one of the best investments, one can possibly make today, IMHO - I just am not in the position to do that right now. But I am working towards. So I envy you, and am sure, that your rate of return, if you convert part any part of your stack into achieving that, would be much higher, than possible with PMs, in any scenario.

(...)but I am unsure how we actually ever get to #5 unless we have some kind of terrible Black Swan event that is really awful (pandemic flu with high death rate, meteor strikes earth, the internet goes down forever, somebody nukes us), in which case we're all toast.

If we're not toast (whew), then I think things are just going to keep muddling along, with more swings up, and more swings down, depending on what crazy bubble has grown or popped next.

...each pop, will result in more people saying "F you, mainstream finance system!", and at least diversifying more into PMs. So after the initial dump in prices, PMs will recover & make well up the initial drop. "Correction", if you like. I just have a hard time seeing more than ONE last "pop" in the future, without getting us all BEYOND the capacity of CBs to restore "business as usual", at ANY price.

I do worry there is a disconnect starting to occur between paper currency and electronic currency and we are in uncharted territory with that. When someone can hand you a plastic card that can turn into a meal, or a phone, or gas, or free medical services, are you really going to care how many zero's are being added to underlying "dollar"?
(...) I remember Black and White TV so it's not hard to guess where money might be headed.

...oh yes, you are going to care, if the number of zeroes on the price tags increases much faster, than the zeroes on your paycheck . Which again, is the case, for decades - only, it is accelerating now.

I agree with ya there PMB.
The canary in the coalmine is the physical market NOT SPOT!

Any drive to go lower will be due ONLY to the over extension of physical-less backed paper.

Hell the bank ratio is something like 10-1 in cash holdings for loans!

Check out the gold lease rates themselves if you want to get a better picture bushi!

The lows are in for this year and anything below them will truly be short lived.

2008?

The recent peak high in 2008 was 21/oz for silver before it dropped 57% to $9/oz.

Our recent high in silver was $49/oz before dropping to it's recent lowest of around $20/oz or 59%. We've already witnessed 2008 again.

What more are rather (less) are you looking for brother?

-Q

I don't know, but big correction, after big move up feels/smells totally different to me, than a big plunge, after medium-term bearish trend... It is a big correction now, I don't question that, and I do see it as a buying opportunity, for lowering my DCA and all that stuff - my point is, if you are average investor, why would you keep investing in PMs, if "the economy is improving, there's no inflation, Bernanke have saved the world, and stock market is making you a fortune, if you are in it", yadda yadda yadda. Why?
So, to turn people back into PMs, we would need another shock, I believe. In which case (and I will be betting on "sooner rather than later"), initially - there would be sell-off (paper, most certainly), yet pushing the prices down nonetheless - thus giving the ultimate buying opportunity - because after initial shock and awe, people will start looking for "get me the hell out of here" buttons, and I cannot imagine at least SOME of them redirecting at least SOME of their assets into PMs.


Appreciate all your thoughts, good to have different angles on things!


EDIT: BTW, if it goes below production costs - GREAT! Then I will be buying MORE, and without too much hesitation. IF it puts few miners out of business - sorry for them, but that's even better for me. I am strong believer, that fundamentals are all for PMs, but if the fundamentals were all that matters... There would be no money to be made as speculators!

 

[DCFusor]

While I DO stack, I also believe that investing in oneself is the best - and if it's not, serious questions ought to be asked about why. In my own case, I do still invest in myself, or at least in the farmstead and tools, though I'm not about to go do another startup, just due to age and tiredness - takes too much to do that again.

Any prudent investor should have some gold/silver/otherPM, and it should be "on hand". To heck with storing it somewhere else - if you can't drop it on your foot and go ouch, it's not yours. This does not mean that PMs should be the *only* thing you invest in - one trick pony investors make the news when they are lucky - but it's luck, and we don't hear about the much larger number of one-trick guys who go bankrupt.

It's the entire point of diversity - yes you give up a little to not be all-in whatever is zooming right now - but you also don't lose your ass when just one thing (or class of things) goes down.
People forget this in the search for yield right now - since nothing but riskier-than-stated (in the normal markets) investments yield anything much.

On the other hand - the new solar and garden work, and "investing" sweat equity into moving the new free source of horse poop in there - now that really yields, and it's better than money in the bank to have a big patch of very rich, watered, soil. So, stacking wood, food, tools, ammo etc - all good as well.

Much harder for some bureaucrat to ctrl-x, ctrl-v away from you as well. Note, this can include PM's you *think* are safe in someone's vault. All they have to do is deny access, and where are you now? Trying to break into a vault to get your own stuff?
Good way to get shot at.

They gotta come and get it, and don't forget the chicken-plate behind your kevlar when you do (not that it works against anything real). Being lazy and fearful - they'll take the easy pickings long before that kind of thing.

We have a couple things going on in gold right now - for one, due to the insane market rises, the fear-factor price-adder is more or less gone - it was the boom in price that was partly fake, in other words, just like the "boom" in housing.

Remember, no one puts on their tinfoil hats when things they are "in" are going up, even though it is precisely as likely that the going up is an anomaly as the going down is. The people who make the moves happen know this - and they know that there is less attention paid when they fake things going up...so they get away with it. Witness our current situation - any whining when house prices were going up?

The fear/greed induced wiggles are what I trade in various markets. Gold just lost a huge fear adder to the price, for now. It will be back, I feel safe in predicting. Just when, who knows? Could be soon enough, or not. Current struggles over energy might bring it back, or Japan's collapse, which looks pretty close - that little depressor of the price is going to go away before too much longer.

But this is a long game, you have to step back a little to play it well.

Seems obvious to me that the CB's are allowing naked paper shorts under the table to knock down prices too. They have a motive - repatriation - they don't have the gold to send back, so they need it at a low price to get it for say, Germany - who obviously had some reasons to believe their gold wasn't safe (or in existence) here.
I'd say they (having you know, their own security apparatus/spy agencies) they're in a better place to know than most all the "commentators" here and elsewhere. And their knowledge made them say "just gimme the gold". Shades of Kyle Bass!

This is on top of the tinfoil hat stuff about needing to make fiat look more credible - sure, that's in there, but I don't think it's the main factor. The real deal is...they don't have what they claim, and that becoming general knowledge is what they truly fear the most - not just loss of credibility in fiat, but in *everything they do*. Once they get their gold, they'll quit and want to drive the price up! (and I also feel safe in predicting that the gold bugs won't look at the man behind the curtain when they do) Hell, they even gave a timetable, it's just that it's past most people's attention span - 7 years.

 

[CharlesMcLain]

It hasn’t actually sunk in that precious metals have actually nosedived this dramatically and so-oh fast. Nonetheless it’s a buying opportunity for value-minded investors like me. Just stumbled upon this piece of information that Bank of America calls for gold at $2,000 an ounce by 2016.

 

[Unbeatable]

I came across this graph which compares the recent price drop in gold to 1976, they do look eerily similar and of course after the price drop in 1976 gold went up over 800% in less than four years...

 

[Aubuy]

Here are the top 10 TV shows of 1976 next to the top 10 of 2013. The comparisons of 1976 to now are equally eerie. Note particularly number 10

1. All in the Family/ The Big Bang Theory
2. Lavern & Shirley/ The Voice
3. Rich Man Poor Man/ Modern Family
4. Maude/ American Idol
5. Bionic Woman/ The Following
6. Phyllis/ Two and Half Men
7. Six Million Dollar Man/ Grey's Anatomy
8. Sanford and Son/ NCIS
9. Rhoda/ Revolution
10. Happy Days/ 2 Broke Girls

 

[Unbeatable]

I dont know enough about those tv shows to know if you're genuinely suggesting that there are some interesting comparisons or if you're being sarcastic and making a statement about past performance being no indication of future results?

 

[Aubuy]

I dont know enough about those tv shows to know if you're genuinely suggesting that there are some interesting comparisons or if you're being sarcastic and making a statement about past performance being no indication of future results?

I am only suggesting that "the more things change the more they stay the same". I also thought it was ironic that "Happy Days" turned into "2 Broke Girls" Sometimes attempts of humor do not translate well on the internet.


Your comparison chart was most informational. Thank-you for posting it.

 

[Unbeatable]

Cool, I was just too young to have watched any of the shows from 1976 and I haven't watched 1/2 of the ones in the top 10 today.

But yes, going from 'Happy Days' in 1976 to 'Two Broke Girls' today is pretty funny Sad, but looking at the way our world is going and the 150% rise in Greek prostitution this year, I wouldn't be surprised to see a sitcom set in a strip club/brothel breaking into the top 10 soon enough!

 

[ancona]

Back in '76 I was 14 years old and watched maybe a few hours of TV a week. My Pop called it the idiot box and became furious when we watched anything other than what he approved of. That included The Waltons, The Wonderful World of Disney on Sunday night, All in the Family and the news.

TV has become absolutely horrific in my lifetime and I believe it to be a primary cause of the complete loss of our moral compass. Children are soulless little automatons anymore. When I listen to the language falling out of their foul little mouths it makes me want to scream. Their total lack of respect for anyone or anything is quite disturbing at best and catastrophic for our societal fabric at worst.

 

[rblong2us]

TV has become absolutely horrific in my lifetime and I believe it to be a primary cause of the complete loss of our moral compass. Children are soulless little automatons anymore. When I listen to the language falling out of their foul little mouths it makes me want to scream. Their total lack of respect for anyone or anything is quite disturbing at best and catastrophic for our societal fabric at worst.

does this qualify as rantette ? :clap:

and eerrr .......... have you seen anything lately that could raise your faith in the human condition :flail:

 

[Aubuy]

does this qualify as rantette ? :clap:

and eerrr .......... have you seen anything lately that could raise your faith in the human condition :flail:

Well, landing that rover on Mars cheered me up quite a bit about the human condition. It would be interesting to find out if we had some long lost cousins somewhere out there, or not.

 

[bushi]

Well, landing that rover on Mars cheered me up quite a bit about the human condition. It would be interesting to find out if we had some long lost cousins somewhere out there, or not.

Well, we've never been better in terms of technological abilities, but these are on the other side of the Grand Canyon from "human conditions", to be honest

 

[Aubuy]

Well, we've never been better in terms of technological abilities, but these are on the other side of the Grand Canyon from "human conditions", to be honest

Sadly true. There are an awful lot of people in the world who lack even basic sanitation and clean water. I don't see any real solutions on the horizon either, and the systems that are in place, however minimum, always seem to be at maximum capacity, or on the verge of collapse. The knowledge base to solve the basic problems is readily available, but it probably has something to do with people helping themselves rather than trying to help each other.

 

[Jay]

Sadly true. There are an awful lot of people in the world who lack even basic sanitation and clean water. I don't see any real solutions on the horizon either, and the systems that are in place, however minimum, always seem to be at maximum capacity, or on the verge of collapse. The knowledge base to solve the basic problems is readily available, but it probably has something to do with people helping themselves rather than trying to help each other.

we cannot solve the basic problems. there are too many of us. when I first got married, we lived in Tondo. Bing knocked a rat off her plate at dinner one night and said, "leave that alone, thats my food".