Cramer Says to Buy Gold

I wonder why Goldies don't realize that in today's world, gold is just another over-leveraged vehicle waiting to implode . . . ?

stevejhx what are talking about. Just take a look at this link and you might think differently about Cramer

http://www.youtube.com/watch?v=gUkbdjetlY8

oh steve, what will it take to get you to understand? perhaps watching that mises institute video in its entirety?

i hate cramer. i really do. but Gold has always been the standard when civilizations resort to hyperinflation to resolve dire problems.

how many times can history repeat itself? over and over and over... germans, zimbabwe, brazil over and over and over. guess what, it is NOT different this time around. it's the same deal.

Gov't will risk hyperinflation to avoid deflation. Bernanke has asserted this over and over and over again.

wait till the we get to the parabolic blow-off stage for Gold. that's exactly what i'm waiting for. it happened before. it will happen again. $850 in 1980's money is over $2,200 in today's worthless FIAT dollar money.

still have ways to go. and with the gov't ready to unload the nuclear bomb magnitude money printing press, just pass the popcorn over.

Not really pro or con gold but must admit almost pushed in at 730/73. Wish I had. If the market doesn't tank in October it will tank November 5. I also read somewhere that the last run-up (bubble) in gold in the eighties in todays dollars would have be $2000 oz. Hmmmm.

Cramer is a douche. He has called the bottom more times than a nymphomaniac with no legs.

spunky, hold and buy more on the dips. anything under $800 is a gift (it costs more than $800 just to get it out of the ground).

increased my position a lot when it dipped under $770. there will be volatility, but get ready for the blow-off top and parabolic rise to start soon- this will mark the last phase of this Gold bull market which has been running for many years now.

those who label Gold as a barbarian relic will soon realize that derivatives, SIVs, financial engineering of securitization, and fiat money is all dead.

the current credit crisis is *merely* the appetizer.

the real deal is when the *main course* arrives, in the form of a USD currency crisis.

watch as the US Dollar hegemony unfolds, and the Bretton-Woods II currency pact unravels into a new world reserve currency backing.

A nymphomaniac with no legs? I am still digesting that one. baffling. burp.

MMafia I too bought some more when it was trading in the 7 range. Who would of ever thunk that I actually profited from MMafia's advice. The only worry is Cramer's buy recommendation.

"but get ready for the blow-off top and parabolic rise to start soon- this will mark the last phase of this Gold bull market which has been running for many years now." MMAFIA

Not sure what you mean please explain.

Spunky, we haven't seen the blow-off top and parabolic rise in Gold yet.

the rise we saw recently was primarily due to short covering by the, how should we label them, "big boiz". open interest in the futures market for gold confirm this. once the big boiz complete short covering, we will see another rise that should put it above $1,000/oz.

but that is not the parabolic rise i'm talking about. the parabolic rise will occur when the average joe understands the concept of FIAT money- when retail start re-allocating through their IRA, pension funds, and personal accounts to Gold- that's when the parabolic blow-off will occur.

that is what happened before in the 80s. Gold has been an underperformer in the commodities space. it's in the middle of a secular bull market. the bull market will end with a drastic rise that firmly places it in the realm of an undoubtable bubble (much like real estate was in).

there will be (we just saw it) volatility and massive corrections on the way. this is what happened in the 70s when Gold was in its last bull cycle which ended in the parabolic rise and blow-off top ending in the $850s (of 1980s USD value which I have mentioned time and again is over $2000 in today's USD). at one point, in the early 70s after Gold rose drastically, it fell almost 40%. we could have just seen that repeat itself with the most recent sell-off. from there, it catapulted and skyrocketed to $850. just look at historical charts to understand what happened then, and what will probably happen again. only when the individual retail investors blew up the 'bubble' did Gold finally collapse. we still have ways to go before we see that.

Basically, when you hear your cab driver and barber talking about how they're in Gold and expect to become millionaires- that's when you should start selling and realizing the profits. just as was the case with the now dead real estate bubble.

right now, the average american doesn't understand this yet. even the 'big boiz' are only beginning to understand this. it takes time before the smart money (big boiz) translates to dumb money (retail investors).

btw- cramer is a douche Juice. but even morons get something right once in a blue moon.

Thanks MMafia

No problem Spunky- just remember to stay the course. This was hard to do when Gold came crashing down last month, but in the end, it presented an incredible buying opportunity, which I'm glad you took advantage of along with me.

Remember- the Fundamentals have not changed. US gov't will have to inflate to avoid deflation. They will not increase taxes to pay for the $trillions to bail out the banking system- they will monetize (aka "print money"). So in the short term, they will stabilize the credit markets.

but only to postpone (yet again as they have been postponing grief as was the case with the Dot Com bust, etc) the pain, which will manifest itself in an even BIGGER problem than the current credit crisis (scary how something even worse is lurking in the near future thanks to all the interventions going on) in the form of a USD currency crisis (the main course following the appetizer). do people really think that the trillions of dollar will not cost anything at all? there is no such thing as a free lunch as they teach you in day 1 of economics.

I must admit i am with MMafia in this one, althoug Cramer has proven himself wrong on many many occasions with his bottom calls...

I have a sig amount of gold via GLD and DGP. The deleveraging of commodities that we experienced did deflate the bubble, and now people are starting to realize that gold is money, safe haven, and in times of financial crisis, a good hold. People that I consider to be way ahead of the curve, and very savvy on the front lines of wall st, agree that when gold trade starts to go, it will get stupid, crazy and parabolic...some belive 2000 by end of 2009, Im not sure I think it will fly that much, but anything is possible in these turbulent times. If we consider the main street after effects from credit deflation and housing deflation and still stubbornly high commodity prices, I think the fed will ease. ben and co clearly wants to inflate, and its clear they are bailing out everyone.

2009 trade? Gold and short longer term treasuries? I got my gold, I got my tbt, and Im done with shorting the financials trade. the environment has changed way too much to mess around with that. Oh, and I am short VNO, and publicly stated that on this site a few times before for next year or so.

Its hard not to take profits in gold, but I do think the craziness is yet to come. Instead, buy a 3-4 month put to hedge if you think its bubbly or may experience more delevarging before the run. If it pops though to 1050 or so, watch out, because I know many firms got short some commodities assuming a global slowdown is inevitable, and if gold breaks the bear stearns high, i think it will pop.

good discussion...Hey spunky, good to see you again. remember our arguments debating this crisis way way back in oct-nov-dec 2007!

MMafia, i agree that most do not understand the gold trade looking ahead. Treasury will print print print like there is no tomorrow. I worry about a treasury bubble for the longer end, so Im holding tbt and will buy more on dips, as a multi year trade. Not sure when that will really pay out though. Got a position at like 59. Keep in mind, that the smart money shorted MBS as early as 2005 and had to hold, wait, and see pain before they made enormous profits! They knew the story, got in early, and waited for things to unravel.

ps - tbt treasury trade. With all the bailouts will come a question of credit worthiness of usa...should we experience a rating downgrade OR if foreigners slow down funding of our debt (started to happen already with sales of agency debt before the fnm / fre rescue), watch out for spiking yields.

everyone is long treasuries, and all I know is, tons and tons of new issuance is coming to fund these bailouts. you know what happens when there is way too much supply and everyone is on the same side of the trade, now dont we?

Sorry, but Cramer isn't right about just about anything, though he did get the disinflation thing right last week, though this week he's complaining about inflation. Go figure. And every time Tim Seymour says something on Fast Money, it proves to be disastrously wrong.

All I know is that the Chinese government announced a concerted plan to inflate its stock market. The last time they announced a concerted plan to deflate their stock market, they did a marvelous job of it. I'm taking them at their word, though it's a little painful in the short-term.

After 8 disastrous years of George W., the engine of the world economy is no longer the United States. It is China.

"Treasury will print print print like there is no tomorrow."

Treasury isn't printing money - they're borrowing it. Quite the different thing. Not necessarily a good thing, but it could be worse.

Yes, please buy gold again so that I can short it for $80 down. Thanks.

Oh, while you're at it, please buy Oil at $140, and please, please, buy shares of alternative energy firms. I hear they have a great future if Oil is going to be at $500

"The deleveraging of commodities that we experienced did deflate the bubble, and now people are starting to realize that gold is money, safe haven, and in times of financial crisis, a good hold."

The commodity issue was that China turned off all its factories for the Olympics. They've turned them back on now - give it a month.

Gold has no intrinsic value. If I got hit investing in things that do have value - countries growing at from 6% to 10% with no inflation - you could wake up in the morning and your gold positions could be worthless. It's happened before. I'd be very careful.

Volatility should diminish when the bailout plan is passed, most likely in the next day or so. After that, watch when the shorting rules are repealed, if that repeal is not accompanied by an reinstatement of the uptick rule.

Have to respectfully disagree. I've bought a 1 oz. Krugerrand every month since I was about 30 years old and tossed it into a safety deposit box. It's always been part of a way for me to easily diversify a portfolio. It's not been so much about making money in this specific case, as preserving it.

On the other, the idea of trying to bottom tick/top tick gold right now doesn't interest me in the least.

"I've bought a 1 oz. Krugerrand every month since I was about 30 years old and tossed it into a safety deposit box."

Surely you need a vault by now.

steve - LMAO - hardly a vault required - unless you think I'm a REALLY old man!!!!! :)

steve - so youare saying there is no speculation in commodities, then if the reason for the selloff in commodities was fundamentally tied to china's actions?

it had nothing to do with speculative unwinding of large commodity holdings tied to the dollar trade that reversed course when our fed talked tough about inflation and ecb blurbbed about slowing growth, sparking a bear market dollar rally?

i got protections in place, always do. lets see how things work out i guess next year

and yes volatility will diminish when bailout plan is announced, and im sure commodities will give back some of the huge moves...but if fed has to ease when economic data finally reflects this crisis, what do you think will happen to our dollar, in addition to the sde effects of all these bailouts?

i meant treasury will conduct massive issuance...to fund these bailouts; dollar negative

malraux, I don't know how old you are, but I thought that was f*cking funny.

UD, undoubtedly there was some speculation in commodities as there was speculation in everything. But watch the price charts and overlap them to what China did for the Olympics - closed all their factories to reduce pollution.

You will also see that commodities and commodity players are vastly oversold based on the fictional slowdown in the international markets. Developed economies are slowing, but not emerging. Singapore is switching into emerging, China has promised to reflate its stock market.

Singapore's GIC Turns to Emerging Markets for Returns

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aLZEVVbYI93k

Which is why I think Cramer is wrong and Bob Doll is right.

As of late, I've pretty much bet against anything Cramer says.

Cramer is a media man. Not an investor. The investors don't have time to spend all day on tv.

Ever since Cramer recommended buying Gold it may never go up again. How unfortunate.

Watch the FXI after Tim Seymour said to go long on the EEV.

How could he reasonably say that when he knows that China has announced its intention to reflate its stock market? Brazil is traded as a commodity play (wrongly), but as China retools watch it go up as well.

The bailout is 2 weeks late.

MMafia - notice how gold has disconnected from dollar relation over the past 2-3 weeks? Dollar rallies, commodities tumble as global growth concerns rise, yet gold hangs on? Still think its 2009's trade for the silliness.

Exactly Noah- we are passing the 'silly' phase of RELATIVE currency valuation with respect to Gold.

In other words, once the Central Banks begin massive coordinated reflationary policies, the relative values of currencies with respect to Gold doesn't matter anymore. ALL FIAT currencies will be debased. Gold will rise with respect to ALL currencies.

Target is $1,500 with $2,000 not being such a far-fetched price anymore given the severity of the crisis and the amount of currency debasement required to battle 'deflation'.

im long GLD, DGP as my gold positions. I think they own physical gold, but I worry that maybe there are complex derivatives trade on that may open up possible counterparty risk should the system really fail. Are you long physical gold or etfs?

ETFs for now. But I do share a similar concern that in the event of total collapse, or some crazy gov't intervention (they made it illegal to own Gold before and confiscated all consumer Gold assets), ETFs could become susceptible.

However, unlike complex derivatives, GLD for example is a simple Fund. It buys physical bullion. That's it. There's no 'house of cards' inverted pyramid scheme that brings in the counter party risk that CDO/CDS and other derivatives secretly hide.

Even if your broker goes down, your positions would just get shifted as the ETF is akin to a stock and has a live market price unlike instruments of the Shadow Banking System.

To be safe, consider BullionVault.com and stash the physical Gold you purchase across Vault Deposits in Swiss and London. That way, even if the US Gov't comes after you, which they might do if they bring up back the Gold Standard that Nixon ditched in the 70s, your Gold is in a foreign country and they can't claim it.

Swiss is a good place to park bullion for that reason. They never do crazy acts such as the confiscation of Gold.

Agreed - if you have a significant amount of physical gold, it is wise to split it between banke in the US and Europe. That's what I do. But I travel abroad pretty regularly, so it's not a major headache. It could be for those who don't.

Hope you guys loaded up on some Gold when it was meandering in the low-mid $800s.

You may not see it again. If, for some lucky reason you see it drop back to the low-mid $800s, it's another gift given to you to buy more. The train might have already left the station though.

Expect more coordinated fiat currency dilution- exchange rates and other commodity prices have no effect on Gold now. It has taken its final step in its secular bull market.

Let me repeat: exchange rates and prices of other commodities have no effect on Gold now. it has decoupled from them.

This is the sign that the last and final leg of this long secular Gold bull market has started. This is the most fierce leg, and will eventually lead to a parabolic rise / blow-off top. Of course, nobody knows the exact timing, just like nobody knew *exactly* when the housing bubble was going to pop, but mark my words- it will happen. I am as sure about it as I was that the housing bubble would pop years ago when people were still drunk on real estate.

"This is the sign that the last and final leg of this long secular Gold bull market has started."

I doubt it. Last night central banks made it clear that they will do anything and everything to support the financial system. Gold is a psychological phenomenon, much like bank runs and the panic we've seen on the stock market recently. Like your "fiat currency" - which has some validity - gold is worth only what people think it's worth, as it has no or few intrinsic industrial uses not readily met by copper. It's problem is that elemental gold is inert.

"exchange rates and prices of other commodities have no effect on Gold now. it has decoupled from them."

Be careful of "decoupling."

Okay MMafia what's your forecast of how high gold will rise to before it pops. A rough estimate is fine and I realize is just guess.

meant to say it's just a guess--sorry

Malraux, if your concerns regarding collapse come to fruition, canned goods, guns and ammo will be more valuable than gold. I don't know anything about trading gold, so I have no opinion as to where it will go. However, one things is certain, when your choices are, end of the world, and recovery at some point, the only bet that makes sense is recovery at some point. The fact is that this process will take time to unwind. I know that this is not a popular or fun position for those of you who like to day trade in stocks, commodities, etc. vs. football, boxing and horses. However, it seems to me inevitable that Gold, like oil and wheat and other commodities will overshoot to the upside and then come down hard. I guess the only way you can play that is to bet on a number it will go to, like roulette, and then sell when it hits that number. Unless you have the doomsday scenario and you want to barter with the gold, in which case the only thing you should own is actual gold (coins, bullion, etc).

I meant MMAafia

mh23:

As of yesterday, I've sold out of all positions and hard assets, including my real estate holdings, art, gold - AND CASH, as well.

I have now spent every dollar on a fully stocked larder in my underground emergency shelter complete with a JTL-E .500 S&W Magnum (12" barrel), and unlimited amounts of .500 S&W Magnum cartridges, Red Bull, and canned Armour Vienna sausages.

"Last night central banks made it clear that they will do anything and everything to support the financial system"

This is exactly why Gold will continue to rise.

Search online - lots of people have analyzed Cramer's picks. At best he's a coin flip, at worst his picks are profitable shorting opportunities (in the extreme short term):

http://seekingalpha.com/article/11461-can-you-make-money-from-jim-cramer-s-picks

As for commodities, I'm with steve. Gold is worthless. It has no intrinsic value, making it a drawn out pyramid scheme. Sure you can sell it at a profit if you time the market right, but someone will be at the bottom of the pyramid sooner or later. Then again, the market can stay irrational longer than you can stay solvent, so that bottom of the pyramid may not materialize for another 100 years.

Instead, buy useful precious metals. Copper is incredibly useful in electronics. Silver has some use. Oil's usefulness is unquestioned.

Better yet, buy companies who mine copper (and don't hedge against copper's future). That way you're buying a profit-producing company, instead of the zero-sum game of commodity ownership.

tech_guy - umm, that strategy would have lost you tons of dollars!

GOLD IS MONEY! Why do you argue this. Steve came out when Gold was at 845 and said once the bailout bill is passed, gold will lose volatility and fall, and to be very careful. Its up almost 10%!

No intrinsic value? yea, go and invest in the banks where all the value is. This is a global slowdown and commodities, including copper, are getting destroyed. Taking your advice people would have bought companies like POT, FCX and lost their shirts.

With the global printing presses on, destruction of credit wealth, and deflation, I'll stick with gold where I am long from the low 600s. Buying the miners opens yourself up to leveraged companies, management decisions, financing, etc....

Did you see a chart on FCX lately? Granted I bought some at these levels to nibble for a rally, but man, these guys are getting whacked as people wake up to the global slowdown and deflation.

For some reason people think deflation will last a few months and then its up and away. Not so.

I suggest you read Mish's take on GOLD, as he has proven himself to be spot on for years, play by play about this awful crisis as it unfolded.

June 2007: http://globaleconomicanalysis.blogspot.com/2007/06/misconceptions-about-gold.html

REAL GOLD IS SOARING: http://globaleconomicanalysis.blogspot.com/2008/10/real-price-of-gold-soars.html

I mean, compare gold to price of copper, silver, etc.. and you are proven wrong. Dont be like Spunky who buys C at 31, MER at 45, and claims he has a 2-3 year hold because the stock is simply down from a higher price. Understand why things are behaving the way they are!

You know, up until a month or so ago, people were still worried about inflation and expected rate hikes. Man they are so wrong and just dont GET IT!

Malraux, nice. For me it's a Remington 870 loaded for buck, a Colt .45, and a pistol grip Mossberg 550. I don't like pistol grips at all, but my wife is semi-comfortable with that vs. the stock barrel, so it's there if she needs the stopping power.
Anyway, the way I see it, people are just selling to sell. The ones who got screwed were the ignorant elderly who were positioned in 90% stock a couple years out from retirement, they rode this thing down all the way and are selling at the bottom. The time to have gotten out was when things approached 14000, I admit that I got out before that, but early enough to realize my objectives. I may have been a bit early in building my positions in BAC and WFC, but I can't pick a bottom any better than I can a top. My time frame is long enough and flexible enough that I can wait for for these companies to start earning the enormous returns that they will when this whole thing settles down.

I see that there are still some who don't understand the Gold trade.

Excellent. We still have ways to go before the the Gold Bull turns into a Gold Bubble.

Until you understand the Gold trade, you will have to simply accept its ongoing price appreciation (or more accurately, fiat currency debasement) and call it an "anomaly" or "irrational" while others who understand the Gold trade will profit from it.

Once the general public en masse gets it (as in my barber and taxi driver telling me his/her get-rich schemes by buying Gold), we will have hit the parabolic rise at which it would be time to sell. Clearly, we are not there yet.

Here's a hint: ask yourself, why do ALL the central banks in the world have a Gold reserve where they stash away physical bullion? and why have they declared recently, one after another, that they will stop selling their Gold and even buy more? Why would Central Banks in every nation around the world do this?

I can tell you, these Central Banks are not hoarding Gold to build gold-plated wires or other manufactured goods. If you understand why the Central Banks are hoarding Gold, then you will have a basic understanding of the Gold trade. It has absolutely NOTHING to do with usability in manufacturing goods. It has absolutely EVERYTHING to do with monetary and currency policies.

Spunky, we all know that the last time Gold had it parabolic rise and blow-off top in 1980, it was around $850, which we know in today's value is easily over $2,000. The problems in the 70's that caused that Gold rally is dwarfed by what's going on now. So I expect a similar rise to $2,000 at which point we should start hearing the barbers and taxi drivers talking about how Gold will make them millionaires. That is when it's time to realize the profits and move on to other asset classes, perhaps in 2-3 years.

Spunky - sorry for the stab before, was just to make a point. Inflation adjusted gold is $2,200. Right now, we are simply back at highs we made in 70s for gold, non inflation adjusted. No we all know there was inflation here. Gold could very well be the safe haven for 2009-2010 and could easily go parabolic and get stupid for a while.

Im not one to make crazy predictions, but with the situation the global economies are in, and the responses that will come from governments and central banks, we could see gold POP to 1,500 by end of 2009. When oil was at $50, and people were bullish on the dollar debasing and global growth story, they discussed $100 oil. Well it went up 300% and got silly! Gold could easily act in a similar manner. Time will tell. All I know is, because of my gold investments, Im up 25% over the past 12 months and totally messed up my shorts and didnt ride with them, unfortunately. SKF, SRS, EEV are going nuts now! Those that bottom pick the financials and tried to find value in IBM, GE, INTC, etc.. are getting hurt badly.

We are yet to even see a negative GDP report! Now honestly, how will markets react when these reports come out and how will dollar trade? And we didnt discuss the massive treasury issuance upcoming to fund these resuce packages!

You want another great trade setting up, but likely a bit early now. Short the long end of the curve for 2009-2010 trade.

lol....MMafia, people will think we are the same person!

urbandigs: I'm not talking short term trades here. I'm talking long term. In fact, your first linked article *agrees* with me - it just draws different conclusions from the exact same observable facts. It sees that:

"If gold's price were determined by fabrication demand alone (jewelry and industrial uses), it could not possibly trade at a price of $650 oz."

And determines "gold is money!". I see that exact same fact, and see "gold is a bubble". What other things have had valuations far above their real intrinsic value, but traded at much higher valuations simply because the current owners wouldn't sell for lower, and there was a steady stream of new buyers who accepted those prices? Tech stocks in 2000? Real estate recently?

"We can therefore conclude that there must be a source of gold demand that is of far greater importance than the jewelry and industrial demand components, and that demand constitutes the true driver of the price of gold in terms of fiat money."

The value of an asset is driven purely by demand for holding that asset as an asset, not for consuming it and doing anything useful with it? That doesn't sound like a HUGE red flag to you? Note that even jewelry is considered "useful" here, and Mish discounts that component in valuing gold.

"gold is actually best described as the 'degree of reluctance of the current owners of gold to part with their gold at current prices' since, as mentioned above, some 160,000 tons are owned by somebody already."

Valuation simply because a ton of people already own it and refuse to sell it at a loss? Gold has a LOOONG history, and it would not surprise me one bit if it took 100+ years for this bubble to pop, and for the world to realize this shiney yellow metal really has no actual value. Though it also wouldn't surprise me if that bubble starts to fizz in under 10 years, which is why I won't touch it.

Then again, I'm a passive investor. I like talking about markets, but I readily admit I don't put my money where my mouth is. I'm 100% in a Total Stock Market (worldwide), rain or shine.

puaaahaah, that is the typical behavior in this board- anytime people share the same idea, they *morph* into a single identity by those who don't share the thought.

=D

tech_guy - Ive been in gold since last summer. Its not a day trade. Its a 2-3 yr hold or when it gets silly Ill sell. It hasnt yet. besides, I dont see anything else out there Id rather be in at the levels Im in at.

MMafia has it right, CB's are holding their gold and I expect them to start buying. With all gong on, its hard to trust a paper currency interfered with by governments and CB's. I dont see gold as being bubbly at this level. In fact, I expect we will see bouts of deleveraging from those that hold gold but have to sell it because they need to meet margin calls or raise cash. But I am going to hold this. The reason I got into gold was because I saw an end to credit boom, destruction of banking sector, dollar debasement, global cuts, and global govt's bailing banks out. This was late last summer when it was in the mid 600s...its up like 30% since, but I feel it can get crazy.

Your saying that gold is a sell, is bubbly and that other metal that have industrial use are the way to go. I simply disagree, and disagreed with that statement multiple times over the past 3-6 months here on this board. I'll stand by this thinking. We have not seen the end of US govt intervention yet, or the end result of it. My only concern is that the gold stocks I have fail because the system fails and they have counterparty risk. But I dont think that is the case. I think they own physical bullion and buying GLD is like buying physical gold in a vault somewhere.

We're talking past each other. I admit I'm the outlier - this thread was about short term trades, not long term (or even excessively long term) calls. Despite that, my point is that gold's sole demand is the expectation of future demand. You keep talking about how much demand there is from central banks. Those 2 points don't contradict - in fact, your point supports mine.

Eventually, the world will realize such an archaic measure of wealth is just plain dumb, and will stop having such a demand for gold. That may not be for a LONG time, but it will plummet hard when it does.

"Eventually, the world will realize such an archaic measure of wealth is just plain dumb, and will stop having such a demand for gold."

I guess the Global Central Banks are pretty "dumb" then. They must know less than you do.

This 'barbaric relic' argument is typically the initial reaction to those who haven't understood the Gold trade yet. In reality, it's nothing more than propaganda by the Central Banks and Politics (thank you Nixon for abolishing the Gold standard in the 70s when France called your bluff and you didn't have enough Gold in Fort Knox to pay France back).

Meanwhile, while they fooled the masses into believing the 'barbaric relic' propaganda, the very same Central Banks are now accumulating Gold behind your back.

Many will get taken.

MMafia, you're only furthering my belief that the only real demand is... expectation of future demand. I understand it far better than you give me credit for. Countries consider gold as if it was a universal money system, uninflatable by any government's fiscal policies, and in (relatively) rare supply. The problem is "gold" isn't in any way special or unique - anything else that's relatively rare could work equally well as the uninflatable-money.

So why pick gold? Its not that the central banks are dumber than me. Its that they have an *incredibly* vested interest in keeping this the standard, because they're the ones holding all this gold. That status may hold true for a long time - they are the market makers - but its still a very unstable equilibrium that can come crashing down rather quickly from just a few cracks.

Put another way: if none of the central banks had any gold today, they would certainly NOT jointly decide to start buying up gold and use that as the defacto uninflatable money. If they wouldn't choose to enter this position from 0, you can guess what the true value of that position is.

Once those cracks hit, we'll see which of us was the fool :-)

tech_guy, i'm not calling you a fool =] we just have differing opinions on this subject.

However:

"So why pick gold? Its not that the central banks are dumber than me. Its that they have an *incredibly* vested interest in keeping this the standard, because they're the ones holding all this gold."

Is absolutely not true.

Central Banks *hate* Gold. In fact, they were selling so much of it before that they had come to an agreement that actually LIMITED the amount of Gold that Central Banks (and the IMF) can sell (see central bank gold agreement) so that the price of Gold did not outright collapse.

Basically, in the past two decades or so, the world's central banks basically got together and said, hey, we all want to get rid of our Gold (that barbaric relic that has no use anymore since we've proven that fiat currency floating/pegged to the US dollar which is based on our implicit *trust* in the Fed/US Gov't works). But we can't all sell at the same time, so let's get rid of it slowly... and agree to maximum limits of how much of it we can sell into the markets.

However, given the current situation, the Central Banks are forced to hedge their massive fiat currency debasement by curtailing their Gold sales and even starting to buy it. That must really keep them up at night, to have to buy something which they hate so much.

In other words, the implicit trust and faith of the US Dollar, which is the Fed/US Gov't appears to be wavering around the world.

I've been telling people on this board for a while now...

This credit crisis is but a mere APPETIZER. You think this is bad??? LMAO.

The main course is when the contagion metastizes into the currency markets, and the trust of the USD as the world's reserve currency is questioned and/or challenged. That is the end-game and environment in which the parabolic rise and blow-off top in Gold will occur.

That is when you will hear your taxi driver and barber talking about Gold.

And, most importantly, that is when we should sell into that bubble and realize our profits.

Noah and I have a similar time frame for such events... 2-3 years.

As far as why Gold and not Plutonium or Tulips as a currency or store of value?

Watch the entire video and you will see exactly why and how we ended up with Gold through our history:

http://mises.org/multimedia/video/Fed.wmv

This is the same video I asked stevejhx to watch in its entirety- he saw parts of it, but to really understand, you need to sit and watch the whole thing.

Extremely illuminating.

MMAmafia. What would be the incentive for those who are holding dollars, e.g. China, to challenge or question the legitimacy of the dollar. How would that benefit them? Anyway, wouldn't it be more likely that there would be a distrust of all fiat currencies on a global scale. I may be missing an obvious point but I want to understand your argument.

Exactly, thanks for explaining it. look at CDS on US! If the markets start questioning the credit worthiness of US ability to repay debt (im not saying the US will default, Im simply saying if the markets themselves start to question it), it will have a very negative effect on dollar. We are on this path. Massive treasury issuance coming. Massive! Long end of the curve will see higher yields. End game.

Think back to bond insurer debacle. They were NOT downgraded until much later, BUT the market started to question the AAA rating on the insurers and basically downgraded on their own. The official downgrade came much later on, but the markets did it way earlier. This is an example of what I mean by the markets questioning credit quality.

The end game of all this issuance, printing, rescues, when all is said and done is very dollar negative (right now the dollar is rallying as a direct result of overpriced foreign currencies adjusting to their percieved coming slowdown; an unwind). Should the US dollar as a reserve currency be questions, should the credit quality of this country be questioned, should foreign funders sell their treasury holdings to handle their own problems, etc..gold will go parabolic.

Of course this is the story as I read it. Clearly MMafia agrees and I did not just make this up. Many very savvy front line traders I know think this way. Its scary I know. I dont want it to happen. But it seems we are on this path, so I'll place my bets.

MMafia, that video doesn't explain the gold standard. Its pure political rhetoric. Worse, its very far from mainstream political rhetoric, meaning it has zero chance of becoming a reality. Why should I waste 30 mins of my time watching it? If such rhetoric is the only defense you have for why gold as opposed to plutonium or tulips, you're on worse footing than I ever expected.

When you have an unbiased, apolitical film, I'll watch it in its entirety.

Let me put it another way: you asked if I thought I was smarter than the world's central banks. I don't, which is why I don't participate in the gold trade at all. Not a buyer, seller, shorter, nothing. Let me throw that question back at you: do YOU think that you're smarter than the world's central banks? Buying gold is a zero sum game. Gold doesn't produce anything - it just sits there.

They're the market makers. As you said, they've engaged in cartel-like behavior to fix the price of the market for their own selfish benefit. They're the bulk of the demand. What makes you think you can beat them in a zero-sum game?

I'll sit on the sidelines and watch :)

urbandigs no problem but I would like to know MMAFia's prediction for the fun of it where he thinks gold may run up to.I might be wrong but during the past depression and in recessions I don't believe gold perform all that well. If you have any info to prove otherwise I would like to know.

Jim Cramer is a shock-jock and says anything to get publicity. His stock picks have historically underperformed. To be honest, he's an idiot.

MMAfia sorry for not seeing your response. Thanks again and I really do enjoy reading your views on gold.

"Let me throw that question back at you: do YOU think that you're smarter than the world's central banks?"

Nope- which is why I'm following them, and what i'm telling you is that at this moment, they are limiting Gold sales and buying more of it. that is a huge shift in a stance that has not changed in decades.

try to buy physical bullion. good luck. demand skyrocketed and now it's extremely scarce. people are paying prices above the paper spot price of Gold. there is a large disconnect between Gold paper and physical markets.

and here's why:

The FX market. Due to the de-levering and resulting massive volumes of calls, the temporary strength in the USD has caused dislocations as foreign USDs are repatriated back, causing a huge spike in the USD and causing Gold to drop quite dramatically.

History has shown that this was predictable, as past financial crisis resulted in an initial reaction of USD repatriation.

So the virtual spot price of Gold adjusted downward technically due to the USD's RELATIVE strength to other currencies. However, traders in the virtual paper market are shielded from the physical market's rapidly shifting condition where you're lucky to find a dealer with stock ready for immediate delivery at spot price.

Here's the deal:

What will MOST LIKLEY follow is a crisis of confidence in something else other than credit. The crisis of confidence will be in the USD as the world's reserve currency. Once the repatriation process completes, the crisis will begin.

"MMAmafia. What would be the incentive for those who are holding dollars, e.g. China, to challenge or question the legitimacy of the dollar. How would that benefit them? Anyway, wouldn't it be more likely that there would be a distrust of all fiat currencies on a global scale."

Mh23, the incentive is fear. the idea that the US, by creating $trillions out of thin air is decreasing the value of their USD assets. first one to sell gets out at parity or better. then there is the mad rush out by everyone else. a panic scenario, hence, a currency confidence crisis.

the real question is: who blinks first?

MMAmafia. If your nightmare scenario occurred, wouldn't the U.S. view such a move as a form of monetary warfare, which it would follow up with actual warfare? Would the government allow itself to be destroyed without at least make some type of military response? Also, how would it benefit China to crash the economy of one of its best customers that also happens to owe it a ton of money?

Well, the US can't wage war with the rest of the world if they all want to sell.

You see, here's the deal:

The rest of the world has to work really hard to earn USDs by creating and exporting goods to the US. Yet, the US will simply print an astonishing amount for itself.

I never said China would be the one to blink first. China knows it can't blink first unless it absolutely have to, because it knows that if it were to try and buy all the Gold it has in USD reserves, the price of Gold would explode so much that they won't be able to acquire enough of it.

MMAfia: what makes gold immune from the "who blinks first" problem that the USD has? The entire argument is that gold is special, its not a commodity, its money. If so, why doesn't it face the same problems that real money (USD) faces?

As for what others said, waging war against anyone who engages in "economic warfare": I'm not positive, but I think we lose our AAA rating if we invade countries who sell our bonds.

Wow gold went up again. After being down in the morning it shot up 31 bucks while the Dow reversed from positive 150 to negative 685 points. What a the heck is going on here. Maybe every time gold goes down people sell their equities and put it into gold. Looks like a lot people really do enjoy buying gold when it's falling which keeps the price in balance with other currencies

Okay - if spunky likes gold it must indicate the top.

Take heed, mmafia.

Okay - if spunky likes gold it must indicate the top.

Good point can't argue with that one. Wouldn't be surprised to see a nice sell off soon.

The Dow is down 25% in a little over two weeks, the streets are filled with blood and everyone's screaming armageddon. Meanwhile, gold has been hovering lazily around $900. Shouldn't this be the perfect occasion for gold to fly up to $1,500? I don't quite get it. Goldmongers, please explain.

Cramer said to buy GOOG and that it was going to $400, then $500, then $600, then $700. Well, it did, but it isn't worth that, its down 55% from the high, maybe now it is priced at what is should be worth. But Cramer encouraged people to buy buy buy, part of the overvaluation of the past 3 to 5 years. Same applies to GS.

look at how long end of curve is acting on these selloffs! TBT/PST! Very telling

urbandigs can you please elaborate

When the markets selloff huge, you expect yields to fall and bond prices to rise. Treasury market is arguably in a 20 yr secular bull market. With such massive treasury issuance upcoming to fund these bailouts/rescues, I get very wary. Whenever any huge supply comes to market i get wary. Think of a stock doing a massive capital raising by selling common stock or preferreds and diluting shareholder value. What happens to the stock?

The treasury trade I refer to goes a bit beyond that but I correlate that statement to the amount of issuance upcoming. The long end of the curve has yields artifically low. I think this will change and change big time. Even yesterday, you would expect yields to be lower on a fierce market selloff, but it didnt happen.

You know the path I think we are on and how I think the story will evolve. Should the credit worthiness of the US come into question by the tradable markets (forget a downgrade, just come in question) OR our friendly funders become not so friendly or they slow purchases of our treasuries, stop purchases of our treasuries, or worst case, sell their T-holdings to deal with their own problems at home, expect the long end of the curve to see surging yields.

Shorting the long end of the curve means I am betting that yields on 20/30yr are going to rise, and bond prices fall. Unfortunately, if this happens, borrowing costs and lending rates will surge and it could mean the 4th or 5th reason why housing is pressured.

TBT seeks to short the 20 yr Lehman Treasury Index. PST seeks to short the 7-10yr Treasury index..of course we must be on look out for counterparty risk with any of these etf's that rely on third party complex derivatives traders to seek their desired goal.

Hahaha, ok ok you got me.

Cramer says to buy so it must be time to sell. Spunky says to buy so it must definitely be time to sell (oh spunky, remember the good old days when we used to argue back and forth about this? =)

i think noah and i have put in some decent high level analysis already in this thread.

check back next year and let's see how Gold is doing- that will be the ultimate answer to all this back and forth which is not changing anyone's perception and understanding.

=D

thanks Noah for the explanation. MMafia this time I hope you are right.

no prob...did you catch Jim Rogers on CNBC with Maria 45 min ago asking him what recent positions he took? One of them was specifically shorting the long bond! A nice vote of confidence for the multi year trade on shorting the long end of curve I was discussing. Its an interesting trade for medium term. Like, shorting MBS back in 2005 and having to wait 2-3 years to get it paid out. Or shorting the subprime mess/ credit markets last July, but having to wait 14 months to see the panic occur in the markets as a result

only have 500 TBT from mid 57 or so..

cant find video

One more for this trade!

Julian Robertson on CNBNC with Erin discussing is FAVORITE TRADE. Want to guess what it is?

drum roll please....

"CURVE STEEPENER" TRADE! buying derivatives to profit from the steeper curve trade! Hence, shorting the long end of the curve betting that long end will rise and steepen! Getting a bit worrisome though that this trade gets so much press. Bring TBT/PST down first so we can buy more baby!

http://www.cnbc.com/id/15840232?video=888359495&play=1

sorry instead of " Hence, shorting the long end of the curve betting that long end will rise and steepen!"

I meant "Hence, shorting the long end of the curve betting that long end yields will rise and curve steepen!"

I think this is what will hurt real estate in the next PHASE of this downcycle as borrowing costs rise as yield curve steepens.

If you want more detail on shorting the long end of the curve (betting long rates will rise), read MIchael Pento's piece:

http://www.deltaga.com/market-commentaries/the-debt-vs.-interest-rate-conundrum.html

urban, interesting trade. is tbt/pst the best way for an individual investor to short LT treasuries? what's your view on gold at these levels today?

as far as I know, TBT/SPT are the ways to play. They are new etfs, and barclays now owns them. I think its 2009's trade though.

Im long gold, although I sold about 35% of the position about three weeks ago, and I have DEC puts on GLD to protect the position near term against deleveraging. This morning I actually refilled about 20% of what I sold of my DGP position around 14.90. Ill buy more if it falls more but you need the puts to protect against deleveraging in near term that most may not be able to stomach

when you say deleveraging, are you referring to general hf/mf deleveraging or more specifically deleveraging related to gold because its a crowded trade?

prob a combo of both. Many bought Gold over past 3 months after HF deleveraging took it to 750 or so, and they bought in on the crisis/fear trade. Especially in mid-late Sept. Well, gold didnt reach new highs so Im sure some got out of that trade.

Look, it will be bumpy, I think it can go down, I mean oil is down 50%, and gold is only down like 25% from its high, but I think its a trade for a few years as a hedge against all the printing we will do to get out of this mess. I think its tied to the short the long end of the curve trade

urban, thanks for your thoughts. i'm concerned about the massive printing we are doing and trying to figure out the best trade to benefit from that.

Today is a nice day to add two new positions fcx, and fdx. I spent all weekend looking at fcx and chk, but when fcx jumped 11% yesterday, I of course did not buy. I bought some today at the open at 33.63, and if it goes down to 30 I will buy more. I started to build a position in fdx because I always liked that company, but it has finally come down to a price that I find attractive. I bought some CAT last week at 41 before earnings, and if it breaks through 38 today or tomorrow, I might buy some more.
When Cramer told people to buy gold, it was much higher than it was today, but then again, he told everyone to dump their stocks at around 8500 in anticipation of a great depression. I don't like the fact that the market has run up so much so fast, but I suspect that when you see investors like Kass saying it is time to get in, people realize that all of the forced selling and panic selling created a great entry point for value investors with a five year plus time horizon. I am actually being a little more aggressive than I like because I think that we may actually be within 300-400 points of a bottom, and I could easily see some panic buying sending the market irrationally higher within the next two months. If that happens, where we somehow appreciably crest over 10k before January, I will be selling everything and starting over again next year.
Over the past three weeks and two days I have been building positions in bac, v, ge, cat, fcx, fdx, nwl, mhp. I am looking to perhaps start building positions in chk, bks, x, and some others.
As for gold, when it gets below 700, I will probably buy some to keep as a permanent part of my portfolio.

Ive beeen day trading FCX lately, and POT...very tough these guys. I did have a position in it for the 900 pt rally and yesterdays rally, but didnt sell for yesterdays..Just be cautious here. Copper is collapsing, and although I love the value of FCX here, you have to be able to stomach it. POT is much faster.

I hear you. It is a definite possibility that copper and gold will be down for quite a while (although I am one of the few who believes that global demand for copper for infrastructure will be up sooner rather than later), that being said, the dividend works, and the entry point looks good to me. I don't know too much about POT. I looked at it last Wednesday and it seemed pricey, I will check it out.

I just bought some DD. This is a company that I have always liked, and when I see an entry point like this, I have to take it. And again, the dividend is attractive. DD, NWL, FCX, BAC, CAT, MSFT, MHP, GE, all pay dividends higher than what one could get in any savings account. While it is true that they could all cut their dividends (as BAC did, although even after the first cut since like 1978 it is still very attractive) it is unlikely that they will cut them below what a prime FDIC 7 month CD yields when you factor in the tax consequences.

With the exception of MSFT.

For those wondering if deleveraging in gold is over, probably not although the move was crazy these past few days, please read this about the gap between physical gold trading and paper trades

GOLD MARKET CLOSE TO BREAKING

The gap between the physical gold market and paper gold market is widening. An example bears this out. In Toronto this week, a major off-market gold transaction took place. The price paid was $1075 per ounce on the physical transaction. Its volume was in the multi-million$. There was no US involvement in the transaction, and the settlement was in euros. Enormous repositioning is ongoing by the groups that will participate in the new, partially gold-backed currency. My take is this movement is from a large financial entity with global activity, and ties to central banks. It might be tied to the upcoming split in the euro, into a Nordic Euro and trashed Latin Euro. The Nordic version might contain a gold component. This and other transactions are taking place with European settlement. They are being satisfied in the alternative market, far from the distortions of COMEX. This was a physical transaction with the real metal being moved. Big shifts occur behind the scenes. A couple of months ago, 400 metric tonnes were moved into storage with the Royal Canadian Mint by a sovereign entity.

The more massive the paper manipulation, the more violent the coming correction. The asylum managers are losing control of their paper-physical arbitrage. Watch the gold lease rates, and silver lease rates, which have each more than tripled in the last two months. Lease rates precede price movement. Bullion bankers, including central banks, are reluctant to lease their physical supply. This time is no different, an event to come after the COMEX criminality is swept aside, or simply overwhelmed in return. One well-informed source, with over two decades of gold market experience, actually expects arrests to take place among COMEX officials before long.

1

John Embry of Sprott Asset Mgmt has raised the possibility of a December gold futures contract default. He is not predicting it, or claiming it as certain, but rather mentions how talk centers on the December gold contract as having extreme stress for actual delivery. Pressure is building. The December contract not only is end of quarter, but end of year. He suggests a possible default. He said, “there is probably going to be such an event to change perceptions.” He cited a possible force majeure that could act as a “seminal event that defines the whole situation.” He explained that the physical gold price would then dictate the paper gold price, a return to normalcy, and with a gigantic move up in the gold price. Right now the paper gold market is overwhelming the physical side, but the physical side is constricted on supply. He explained that hedge funds are being unwound on a massive scale, slaughtered by margin calls. The long side must call for delivery on many contracts. He also expects there will be many questions on the Exchange Traded Funds soon as well, although those are surely not as important as the COMEX contract defaults. Watch and listen to his interview on the Canadian Business News Network (CLICK HERE), and be sure to move to the 10 to 11 minute mark.

Interestign read - http://www.financialsense.com/fsu/editorials/willie/2008/1023.html

urban, i'm a little confused. i have price of gold at $724 and GLD trading at $70.65. A little off, but not too much.

well GLD is an ETF. They own physical bullion, so they say, in a warehouse. When you buy shares, you get a receipt for the equivalent value in gold. As a fund, they charge fees, hence the difference in price.

This article is a bit whacky though, I dont see any defaults upcoming, and I still see gold as a multi year trade, not day to day or even month to month. Let it get clobbered by deleveraging with everything else, and dabble according to your risk tolerance. Good to have some gold in your portfolio anyway.

i'm not sure i understand the point of the article. is he saying gold market will break and prices go down or up??

"Good to have some gold in your portfolio anyway."

Why? It doesn't pay a dividend, and has virtually no industrial uses not equally served with copper at a much lower price. If paper money is fiat, gold is worse.

That said, I also have no clue what that article means.

picking a discussion again Steve. Put it this way, if you diversified and held gold for past 18-24 months or so, because this forum is always talking medium-longer term investing, you would have gold from high 500s-low600s, and be UP about 20% right now even with the massive deleveraging that is hitting everything.

Unfortunately, if you were invested in corporate America over this time period, you are down about 25%, if you were lucky enough not to invest in any financials in which case you are down closer to 40-50% or more.

Do I need to explain why you should diversify and have a bit of gold in your portfolio? Or will you come up with a brilliant response again?

Industrial use? Steve, are you kidding me? What is copper doing right now? Silver?

Copper '06 = $3.20/lb
Copper Today = $1.85/lb

Granted, copper is looking awfully sexy at these levels. I own FCX down here around $27.50. Who knows where bottom is, but anyone caught holding this rock solid play in past 18-24 months, is hurting big time with the global slowdown going on. Its the new dot com. Lets just at least admit that these industrial metals overshot on upside, and will overshoot on downside. With todays financing markets, who knows which company over exposed themselves or over-invested or mis managed, or made untimely buyout, etc..too much counterparty risk at a time when demand is slowing to a halt. The real world still will need to consolidate or die away

"Do I need to explain why you should diversify and have a bit of gold in your portfolio?"

Absolutely not. I'll never invest in gold. It has no intrinsic value beyond dental fillings and a few high-tech electronics applications. The problem with gold is that it is elementally inert - it doesn't combine with anything, so you can't turn it into very much.

"What is copper doing right now? Silver?"

Everything is oversold right now, but both copper and silver have industrial applications, so there is a demand for them, or there will be. But gold? Name an industrial application for gold.

If central banks decided to sell gold tomorrow - which they might - the market would crash.

I view gold as money. That is why Im investing in it. Its the one thing I dont really trade, I just leave it and sell portions of when it goes on a nice run. When it delevers, it falls hard. Always does. I'll refill.

I view it as a currency. And I think this is a time where I want to own a solid currency, unexposed to derivatives.