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Old July 22nd, 2009 #21
Igor Alexander
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Quote:
Originally Posted by Rick Ronsavelle View Post
I didn't want to detract from North's article, but I have known for a very long time that Gary wants theocracy.
Under Alex's decentralized system, he and like-minded people can have their theocracy, as long as they keep it white.
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Old July 31st, 2009 #22
Alex Linder
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The Spot Price
July 30, 2009

This is a question we get over and over, so I thought I'd just answer it. (Notice that premiums of gold and silver over 'spot' have decreased as of Wednesday!)


The "Spot price" of gold and silver is at the mine, and the "spot price" of milk is at the milking station on the farm. The 'spot' price of oil is at the wellhead, and the 'spot' price of anything is at its basic point of origin, before any manufacturing, transportation or distribution takes place. In other words, no one can buy anything at the 'spot price.' The 'spot price,' is merely an indication of the market's position, and not the price of anything physical.


Gold and silver ore at the mine, have to be milled, smelted, and then manufactured and distributed. Coins must have round 'blanks' made, so that the actual coin can be stamped out of them. Gold and Silver Eagles are made from blanks made other places than the U.S. Mint at West Point, New York. Some are made in Idaho, and some in Australia. After the coins are made, they must be distributed, and that means there is a distributor who distributes them to dealers. The distributor has to pay to have them shipped to him from the mint, so there is transportation involved.


Krugerrands, for decades, had prices pretty close to the spot price, because they were all imported back in the 1970's and 1980's, and were merely re-circulated among buyers and sellers. Those are all gone now, and new 2009 Krugerrands must be imported from South Africa, with customs and shipping paid for by the distributer, so the new Krugerrands are more expensive than they used to be when we had the 1970's and 1980's dates.


Our distributer, A-Mark, is one of the largest distributors of precious metals in the world, and , maintains well guarded storage at Brinks warehouses in Salt Lake City and Los Angeles. Obviously, Brinks charges for secure storage, shipping and packing. The US government buys gold and silver from A-Mark to make the Gold and Silver Eagles, because of course, they have none. A-Mark must make a profit, the mints must make a profit, and Brinks makes a profit also, and no one can fault them for that or change that. My son David, and daughter Melissa, as well as myself, also must make a profit to live and pay our expenses, so costs at all of these levels of manufacture and distribution are the reason that nothing can be bought at 'spot price.'


Obviously also, things sold at 'spot price,' such as metals, oil, steel, lumber and the like, must be produced at a profit so they can be sold at the spot price, meaning they probably are produced at below spot price. Think also of the taxes involved. Taxes on the phone lines, packing materials, labor at all levels, property taxes, and income taxes at all levels. Property taxes on the mines, mills, smelters, storage facilities, transport vehicles, distributor offices, Brinks storage, and payroll taxes on all levels. Taxes on fuels, electricity, and taxes on the property of every single component from spark plugs, fan belts, telephones, computers, etc, plus income and Social Security, and Medicare taxes from every single employee even remotely involved in anything made for something sold at 'spot price.' Then there are the additional costs of making and selling things after manufacturers buy raw materials at 'spot prices.'


It was at one time estimated that a dollar loaf of bread (a long time ago!) had 95 cents worth of taxes on it at every single level of its production, sales, and grain growth. Taxes on fertilizer the farmer uses, the tires on his tractor and home, taxes on the super market, trucks, employees, and it can go on and on. With metals, the gold and silver mines have not only taxed labor, but taxed properties, and taxed fuels, air compressors, drill bits, rails, and every single thing a mine uses, be it bolts, light bulbs, or machinery used by a miner. The mines run "man trips" to get miners back into the mines, and the insurance must be horrendous.


When then, one can buy a hundred ounce bar of silver made by Johnson-Matthey in Salt Lake City for 85 cents over 'spot,' I think it shows great efficiency along the whole line. And when it can be bought for 60 cents over 'spot' in lots of 5,000 ounces, it shows even more efficiency, I believe.

Look then, at the spot price to determine whether the markets are up or down, but remember, the spot price does not include lots of property taxes, taxes and costs of shipping, manufacture, distribution, insurance, hundreds of payroll taxes, and lots of telephone lines, computers, tons of machinery, and even risk at all levels. This is why a Gold Eagles sells for $35 over the 'spot price,' and other items less. Beware of these many TV ads for gold! These guys are absolute crooks, and if you ever call them, you are on their 'list,' and you can expect to be bothered endlessly from these creeps in their little cubicles trying to make a sale. Who do you think pays for the ads? The suckers who buy from them. We call no one. If someone wants something, they call us. If someone has something to sell, which they will make a large profit on, they will call you, and it's just that simple. We NEVER bother anyone, and don't even advertise. My columns and our web site, plus lots of word-of-mouth, and our customers, are responsible for our success, and we thank you!

http://www.coloradogold.com/archive/...Price-882.html
 
Old July 31st, 2009 #23
Alex Linder
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The Spot Price
July 30, 2009

This is a question we get over and over, so I thought I'd just answer it. (Notice that premiums of gold and silver over 'spot' have decreased as of Wednesday!)


The "Spot price" of gold and silver is at the mine, and the "spot price" of milk is at the milking station on the farm. The 'spot' price of oil is at the wellhead, and the 'spot' price of anything is at its basic point of origin, before any manufacturing, transportation or distribution takes place. In other words, no one can buy anything at the 'spot price.' The 'spot price,' is merely an indication of the market's position, and not the price of anything physical.


Gold and silver ore at the mine, have to be milled, smelted, and then manufactured and distributed. Coins must have round 'blanks' made, so that the actual coin can be stamped out of them. Gold and Silver Eagles are made from blanks made other places than the U.S. Mint at West Point, New York. Some are made in Idaho, and some in Australia. After the coins are made, they must be distributed, and that means there is a distributor who distributes them to dealers. The distributor has to pay to have them shipped to him from the mint, so there is transportation involved.


Krugerrands, for decades, had prices pretty close to the spot price, because they were all imported back in the 1970's and 1980's, and were merely re-circulated among buyers and sellers. Those are all gone now, and new 2009 Krugerrands must be imported from South Africa, with customs and shipping paid for by the distributer, so the new Krugerrands are more expensive than they used to be when we had the 1970's and 1980's dates.


Our distributer, A-Mark, is one of the largest distributors of precious metals in the world, and , maintains well guarded storage at Brinks warehouses in Salt Lake City and Los Angeles. Obviously, Brinks charges for secure storage, shipping and packing. The US government buys gold and silver from A-Mark to make the Gold and Silver Eagles, because of course, they have none. A-Mark must make a profit, the mints must make a profit, and Brinks makes a profit also, and no one can fault them for that or change that. My son David, and daughter Melissa, as well as myself, also must make a profit to live and pay our expenses, so costs at all of these levels of manufacture and distribution are the reason that nothing can be bought at 'spot price.'


Obviously also, things sold at 'spot price,' such as metals, oil, steel, lumber and the like, must be produced at a profit so they can be sold at the spot price, meaning they probably are produced at below spot price. Think also of the taxes involved. Taxes on the phone lines, packing materials, labor at all levels, property taxes, and income taxes at all levels. Property taxes on the mines, mills, smelters, storage facilities, transport vehicles, distributor offices, Brinks storage, and payroll taxes on all levels. Taxes on fuels, electricity, and taxes on the property of every single component from spark plugs, fan belts, telephones, computers, etc, plus income and Social Security, and Medicare taxes from every single employee even remotely involved in anything made for something sold at 'spot price.' Then there are the additional costs of making and selling things after manufacturers buy raw materials at 'spot prices.'


It was at one time estimated that a dollar loaf of bread (a long time ago!) had 95 cents worth of taxes on it at every single level of its production, sales, and grain growth. Taxes on fertilizer the farmer uses, the tires on his tractor and home, taxes on the super market, trucks, employees, and it can go on and on. With metals, the gold and silver mines have not only taxed labor, but taxed properties, and taxed fuels, air compressors, drill bits, rails, and every single thing a mine uses, be it bolts, light bulbs, or machinery used by a miner. The mines run "man trips" to get miners back into the mines, and the insurance must be horrendous.


When then, one can buy a hundred ounce bar of silver made by Johnson-Matthey in Salt Lake City for 85 cents over 'spot,' I think it shows great efficiency along the whole line. And when it can be bought for 60 cents over 'spot' in lots of 5,000 ounces, it shows even more efficiency, I believe.

Look then, at the spot price to determine whether the markets are up or down, but remember, the spot price does not include lots of property taxes, taxes and costs of shipping, manufacture, distribution, insurance, hundreds of payroll taxes, and lots of telephone lines, computers, tons of machinery, and even risk at all levels. This is why a Gold Eagles sells for $35 over the 'spot price,' and other items less. Beware of these many TV ads for gold! These guys are absolute crooks, and if you ever call them, you are on their 'list,' and you can expect to be bothered endlessly from these creeps in their little cubicles trying to make a sale. Who do you think pays for the ads? The suckers who buy from them. We call no one. If someone wants something, they call us. If someone has something to sell, which they will make a large profit on, they will call you, and it's just that simple. We NEVER bother anyone, and don't even advertise. My columns and our web site, plus lots of word-of-mouth, and our customers, are responsible for our success, and we thank you!

http://www.coloradogold.com/archive/...Price-882.html
 
Old July 31st, 2009 #24
Rikert
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Quote:
Originally Posted by Alex Linder View Post
Interesting. I don't follow either all that closely, just read the coloradogold.com guy's column and look at the prices. Thing about silver is, as Steve mentioned, you don't need much of it to have something that is a pain in the ass to lug around. I think gold is a better investment than silver, not least for weight.
There are many firms that allow you to trade precious metals electronically on spot. If you want to do the same thing with oil, there is a $10,000 FEE. What does that tell you?
 
Old August 10th, 2009 #25
Randolph Dilloway
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During the last Great Depression, hundreds of thousands of people, with no hope of finding work, started panning for gold. Only 10% of them managed to make a living from it.

I have studied a little on gold panning and discovered that:

1. Only 1/2 of the known gold has been found.

2. Most of it is still in the same areas where the gold mines once were, but are in areas that are not economical for large miners to deal with.

3. It has been over 70 years since many of the streams have been prospected, and all that time, due to storms and other natural events, placer gold have been accumulating in those streams with "color".

4. I am not going to tell you where, but most streams near where I live have "color" in them. If someone is willing to work 40 hours a week, one can accumulate an ounce of placer gold. Think about it, $950 a week, that is nothing to sneeze at.

5. If you like adventure, there is a stream that leads into the Tennessee River, near Tellico Plains that has all the gold that you can get your hands on. But, a) you will have to scuba dive for it; and b) get it before the feds shoot you. (A friend of mine is a decendent of the family that owned that gold mine before it was submerged under water by the TVA dams)
 
Old August 10th, 2009 #26
Alex Linder
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Quote:
Originally Posted by Rikert View Post
There are many firms that allow you to trade precious metals electronically on spot. If you want to do the same thing with oil, there is a $10,000 FEE. What does that tell you?
Sounds like a liquor license.
 
Old August 10th, 2009 #27
Xuxalina Rihhia
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Quote:
Originally Posted by Randolph Dilloway View Post
During the last Great Depression, hundreds of thousands of people, with no hope of finding work, started panning for gold. Only 10% of them managed to make a living from it.

I have studied a little on gold panning and discovered that:

1. Only 1/2 of the known gold has been found.

2. Most of it is still in the same areas where the gold mines once were, but are in areas that are not economical for large miners to deal with.

3. It has been over 70 years since many of the streams have been prospected, and all that time, due to storms and other natural events, placer gold have been accumulating in those streams with "color".

4. I am not going to tell you where, but most streams near where I live have "color" in them. If someone is willing to work 40 hours a week, one can accumulate an ounce of placer gold. Think about it, $950 a week, that is nothing to sneeze at.

5. If you like adventure, there is a stream that leads into the Tennessee River, near Tellico Plains that has all the gold that you can get your hands on. But, a) you will have to scuba dive for it; and b) get it before the feds shoot you. (A friend of mine is a decendent of the family that owned that gold mine before it was submerged under water by the TVA dams)
The feds are honorary talmudic Jewvandal$! They are the enemy along with the Zhid!

FDR was a Zhid and he did his fellow Jew$' bidding by confiscating the gold bullion/coins and then pulling the wool over the sheeple's eyes with his damned
"Fireside Chats!" May he roast in Hell in torments, forever!
 
Old August 10th, 2009 #28
Rikert
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Quote:
Originally Posted by Alex Linder View Post
Sounds like a liquor license.
Why does the customer need a license? I mean if you want to buy any oil on spot, you need to pay $10k up front. The reason for this is because it is relatively easy to predict absolute movements in the price of oil, while it is difficult to predict what the price is going to be within a specific time period (futures). The fee is a way to stop these jew owned trading firms from hemorrhaging cash. It is one of the many evidences that these firms can't handle playing without loaded dice. I'm sure the few people that would find a way to put up the $10k fee to trade oil on spot would quickly find it seized due to the violation of some arcane jew based "rule" if a series of winning trades were executed from that account.
 
Old September 8th, 2009 #29
Igor Alexander
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Gold hit $1000 about 9 hours ago and has been hovering slightly above it ever since.

http://news.yahoo.com/s/afp/20090908...priceinflation

Quote:
Gold price jumps above $1,000 an ounce
Tue Sep 8, 6:50 am ET

LONDON (AFP) – The price of gold rose above 1,000 dollars an ounce here on Tuesday, reaching the highest level for 18 months, as a weaker dollar fuelled demand for the metal, dealers said.

Gold hit 1,007.70 dollars an ounce on the London Bullion Market, the highest level since March 2008 when the metal had hit a record high of 1,032.70 dollars.

Gold last broke through 1,000 dollars in February before falling back.

The yellow metal rose on Tuesday as a falling dollar made the commodity cheaper for buyers holding rival currencies, pushing up demand.

Gold has also won support in recent months from investors seeking a safe-haven amid the global economic downturn and owing to the risk of higher inflation.
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Old September 8th, 2009 #30
Alex Linder
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[Bonner is a source of good advice, in my opinion. He's aware of what he doesn't know, and admits it. He does not overstate his case.]

But gold? Should you buy gold and hope to get rich when gold shoots up to $3,000 an ounce? A bad idea, in our opinion. You should buy gold to protect your assets. The risk is in the paper money...because they can create as much of it as they please. And they're under pressure now to create a lot. You buy gold as insurance against inflation, a dollar bust, a bear market in stocks and bonds, or a financial crisis. Gold is nature's money. It is better than manmade money. Because, with gold, what you have is what you've got. They can't artificially depreciate it or easily increase the quantity of it. That's why the feds don't like it. It won't support their cause du jour – whether it is a war, a bailout, stimulus, health care, or whatever. Gold doesn't cooperate with the financial engineers. That's why it's a good thing to hold when you think the financial engineers are making a mistake.

http://www.lewrockwell.com/bonner/bonner412.html
 
Old September 8th, 2009 #31
Igor Alexander
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Quote:
They can't artificially depreciate it or easily increase the quantity of it.
That's what the folks at GATA think they're doing, by surreptitiously dumping the gold reserves of central banks onto the market, among other means.
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Old September 15th, 2009 #32
Alex Linder
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Are We Still in a Gold Bull Market?

by Bill Bonner

Gold closed at $999 on Tuesday. Then, yesterday, it closed down $2.

There’s a time to buy gold; and there’s a time to sell it. Which time is it?

The question rose with the gold price itself. It needs an answer.

The price of gold today, adjusted for inflation, is about where it was 26 years ago. After peaking out at nearly $2,000 (again, in 2009 dollars), in 1980, the price fell to the $1,000 level (in today’s money) in 1983.

We were gold bulls back then. And we were idiots. It was the end of the gold bull cycle, not the beginning. The gold price fell for the next 17 years.

Some people draw the wrong lesson from this experience – that gold is always a bad place for your money.

Yesterday’s Financial Times:

“In spite of low interest rates, that make owning gold cheap, the opportunity cost of owning it is still unattractive in the long run. Smarter ways to anticipate inflation include bricks and mortar, mineral rights or even equities, all with vastly superior historical returns.”

But we would prefer to look at it a little differently. Gold is not always a bad place for your money; and we are not always idiotic.

What were the returns from stocks over the last 10 years? The Dow has lost about 15% in nominal terms. In real, inflation adjusted terms, it is probably down nearly 40%. Meanwhile, gold has nearly quadrupled.

Was it smart to buy stocks or bricks and mortar during the ’70s? Not at all. Stocks bounced around, but they were no higher at the end of the decade than they were at its beginning. Meanwhile, high inflation rates took a big toll on real values. Stock market investors lost 75% of their money – maybe more. As for those who bought bricks and mortar, they lost too – but it’s hard to say how much.

And meanwhile, gold went from $41 an ounce to over $800.

Which would you prefer?

As you can see, dear reader, timing is everything. There are times to be long gold. And there are times not to be.

For thousands of years gold has been the money of last resort. It is the money you can trust. They can’t make more of it. They can’t counterfeit it. They can’t put extra zeros on it and pretend it is worth more.

But it is most useful when other money goes bad. Inflation rates in the United States during the ’70s went over 10%. Clearly, gold was a better thing to own to protect your wealth than dollars. You could have bought an ounce of it (outside the United States…it was still illegal for private citizens to hold gold in America) for, say, $45 in the early ’70s. By 1982, you could have used that single ounce of gold to buy up the entire list of Dow stocks. Gold and the Dow traded at a ratio of only one-to-one that year. Then, if you’d held onto those stocks, you could have sold them in 2006 for $14,000.

Not bad, huh? Two transactions. Forty-five bucks to $14,000. Invest $100,000 and you would have ended up with $30 million.

But let’s get back to where we are now. Still in a bull market in gold…or at the end of one? Are we idiots for holding it now…or idiots for not buying more?

As you know, we’ve begun a new project: the Bonner & Partners Family Office. It’s our own family office that we’ve opened up to a few non-family members. But just as soon as the non-family members came in the door they started asking questions. Specifically, they wondered why…after all the preaching we’ve done about buying gold…we don’t have more of it in the family portfolio.

One our new partners wrote a very shrewd comment. We’ll pass along a little of what he had to say, but first, some context. The feds are desperate to restart the economy. The only way they can imagine is by increasing the money supply…and inducing people to spend money. They want inflation, no doubt about it. And they’ll get it – no doubt about that, either.

The question is when. Our view is that they’ll get more than they expect, but later than they want it. We’re looking for another crack in stocks…followed by more fear and loathing in the economy. This will have two major effects. First, investors will turn to the familiar dollar for safety. Second, everyone will hoard money…speculation will cease…and prices will fall – including the price of gold. Our first writer disagrees:

“One mistake [your editor] might be making is his belief that we are already in another Great Depression. We probably will be in a depression or some other form of economic calamity, but not yet. Every Depression (or monetary contraction) in history has followed a similar pattern – expansionary monetary policy followed by a contraction of the money supply… While we have experienced a huge monetary expansion/easy money in the ’90s, we have not yet experienced a real monetary contraction (which is a scary thought). Instead, the central planners did the opposite and doubled the monetary base (keep the addict happy with more heroine). These extra paper dollars have to go somewhere, and we are seeing the results in higher prices for stocks, oil, copper, sugar, gold, so far…”

Well, yes…as long as the economy seems to be on the mend, investors’ “appetite for risk” improves. They want to speculate on the recovery. But then, when the recovery proves an illusion…they’re going to run for cover.

Then, another new partner came to help us roll our stone.

“Bill is correct, not from money supply & credit data, but from ‘black swan’ type events such as: how deflationary forces will play out for lenders and holders of mortgaged-backed bonds both commercial & residential, in a disruptive resetting of interest rates for Option ARMs, ALT-As and various other prime borrowers in the next 6–12 months… Will we witness another series of major bank failures from this next round of resetting? And if so, how disruptive, in a deflationary sense, will this be?”

Either way, the result is the same. Market events – such as another big break in the banking sector – could bring a deflationary collapse. If not, the Fed itself may have to step in to protect the dollar. In either case, gold is not likely to reach its final, bubble phase until this contraction is over.

In the meantime, our advice remains unchanged: buy gold on dips.

We continue to laugh at recovery sightings. Yesterday, for example, the Fed reported to the nation that a recovery was underway. But even the Fed couldn’t ignore the fact that consumers aren’t spending money the way they used to. The New York Times comments:

“The prolonged slump in consumer spending has been one of the most serious points of worry for economists, and the Fed’s warning about it deflated some of the market’s optimism. About 70 percent of the economy depends on spending by consumers.”

The other sticky wicket in this game is unemployment. Jobless ranks are swelling like a floating corpse. But the jobless numbers don’t tell the whole story. There are 34 million Americans who live on food stamps. One out of every nine people depends on the government for his daily bread. The Financial Times fills in the details:

“Less attention has been paid to those still in the workforce, whose incomes are also being squeezed. The average working week is now about 33 hours, the lowest on record, while the number forced to work part-time because they cannot find full-time work has risen more than 50 per cent in the past year to a record 8.8m. Wages and benefits have decelerated.

“The food stamp data suggest that ‘the labour market problems are more significant than you would expect, given just the unemployment rate’, said John Silvia, chief economist at Wells Fargo. ‘For me it suggests the consumer is not going to rebound or contribute to economic growth for the next year, as the consumer would in a traditional economic recovery.’

“Consumer spending has traditionally been the engine of the US economy, making up about two thirds of GDP. Economists fear that people may be unwilling to resume that role.

“Food stamps are distributed once a month on electronic cards that can be spent at many grocery stores. The $787bn stimulus bill added about $80 (€55, £50) to a family’s monthly allowance, which now stands at an average $290.

Nothing very original about keeping the masses fed with government food. The Romans figured it out 2,000 years ago. You have to distract the mob with pane et circenses (bread and circuses). Otherwise, they vote you out of office…or burn down the capitol.

“Everything, now restrains itself and anxiously hopes for just two things: bread and circuses,” wrote Juvenal.

September 15, 2009

Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis and the co-author with Lila Rajiva of Mobs, Messiahs and Markets (Wiley, 2007).

http://www.lewrockwell.com/bonner/bonner414.html
 
Old September 15th, 2009 #33
Alex Linder
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Are We Still in a Gold Bull Market?

by Bill Bonner

Gold closed at $999 on Tuesday. Then, yesterday, it closed down $2.

There’s a time to buy gold; and there’s a time to sell it. Which time is it?

The question rose with the gold price itself. It needs an answer.

The price of gold today, adjusted for inflation, is about where it was 26 years ago. After peaking out at nearly $2,000 (again, in 2009 dollars), in 1980, the price fell to the $1,000 level (in today’s money) in 1983.

We were gold bulls back then. And we were idiots. It was the end of the gold bull cycle, not the beginning. The gold price fell for the next 17 years.

Some people draw the wrong lesson from this experience – that gold is always a bad place for your money.

Yesterday’s Financial Times:

“In spite of low interest rates, that make owning gold cheap, the opportunity cost of owning it is still unattractive in the long run. Smarter ways to anticipate inflation include bricks and mortar, mineral rights or even equities, all with vastly superior historical returns.”

But we would prefer to look at it a little differently. Gold is not always a bad place for your money; and we are not always idiotic.

What were the returns from stocks over the last 10 years? The Dow has lost about 15% in nominal terms. In real, inflation adjusted terms, it is probably down nearly 40%. Meanwhile, gold has nearly quadrupled.

Was it smart to buy stocks or bricks and mortar during the ’70s? Not at all. Stocks bounced around, but they were no higher at the end of the decade than they were at its beginning. Meanwhile, high inflation rates took a big toll on real values. Stock market investors lost 75% of their money – maybe more. As for those who bought bricks and mortar, they lost too – but it’s hard to say how much.

And meanwhile, gold went from $41 an ounce to over $800.

Which would you prefer?

As you can see, dear reader, timing is everything. There are times to be long gold. And there are times not to be.

For thousands of years gold has been the money of last resort. It is the money you can trust. They can’t make more of it. They can’t counterfeit it. They can’t put extra zeros on it and pretend it is worth more.

But it is most useful when other money goes bad. Inflation rates in the United States during the ’70s went over 10%. Clearly, gold was a better thing to own to protect your wealth than dollars. You could have bought an ounce of it (outside the United States…it was still illegal for private citizens to hold gold in America) for, say, $45 in the early ’70s. By 1982, you could have used that single ounce of gold to buy up the entire list of Dow stocks. Gold and the Dow traded at a ratio of only one-to-one that year. Then, if you’d held onto those stocks, you could have sold them in 2006 for $14,000.

Not bad, huh? Two transactions. Forty-five bucks to $14,000. Invest $100,000 and you would have ended up with $30 million.

But let’s get back to where we are now. Still in a bull market in gold…or at the end of one? Are we idiots for holding it now…or idiots for not buying more?

As you know, we’ve begun a new project: the Bonner & Partners Family Office. It’s our own family office that we’ve opened up to a few non-family members. But just as soon as the non-family members came in the door they started asking questions. Specifically, they wondered why…after all the preaching we’ve done about buying gold…we don’t have more of it in the family portfolio.

One our new partners wrote a very shrewd comment. We’ll pass along a little of what he had to say, but first, some context. The feds are desperate to restart the economy. The only way they can imagine is by increasing the money supply…and inducing people to spend money. They want inflation, no doubt about it. And they’ll get it – no doubt about that, either.

The question is when. Our view is that they’ll get more than they expect, but later than they want it. We’re looking for another crack in stocks…followed by more fear and loathing in the economy. This will have two major effects. First, investors will turn to the familiar dollar for safety. Second, everyone will hoard money…speculation will cease…and prices will fall – including the price of gold. Our first writer disagrees:

“One mistake [your editor] might be making is his belief that we are already in another Great Depression. We probably will be in a depression or some other form of economic calamity, but not yet. Every Depression (or monetary contraction) in history has followed a similar pattern – expansionary monetary policy followed by a contraction of the money supply… While we have experienced a huge monetary expansion/easy money in the ’90s, we have not yet experienced a real monetary contraction (which is a scary thought). Instead, the central planners did the opposite and doubled the monetary base (keep the addict happy with more heroine). These extra paper dollars have to go somewhere, and we are seeing the results in higher prices for stocks, oil, copper, sugar, gold, so far…”

Well, yes…as long as the economy seems to be on the mend, investors’ “appetite for risk” improves. They want to speculate on the recovery. But then, when the recovery proves an illusion…they’re going to run for cover.

Then, another new partner came to help us roll our stone.

“Bill is correct, not from money supply & credit data, but from ‘black swan’ type events such as: how deflationary forces will play out for lenders and holders of mortgaged-backed bonds both commercial & residential, in a disruptive resetting of interest rates for Option ARMs, ALT-As and various other prime borrowers in the next 6–12 months… Will we witness another series of major bank failures from this next round of resetting? And if so, how disruptive, in a deflationary sense, will this be?”

Either way, the result is the same. Market events – such as another big break in the banking sector – could bring a deflationary collapse. If not, the Fed itself may have to step in to protect the dollar. In either case, gold is not likely to reach its final, bubble phase until this contraction is over.

In the meantime, our advice remains unchanged: buy gold on dips.

We continue to laugh at recovery sightings. Yesterday, for example, the Fed reported to the nation that a recovery was underway. But even the Fed couldn’t ignore the fact that consumers aren’t spending money the way they used to. The New York Times comments:

“The prolonged slump in consumer spending has been one of the most serious points of worry for economists, and the Fed’s warning about it deflated some of the market’s optimism. About 70 percent of the economy depends on spending by consumers.”

The other sticky wicket in this game is unemployment. Jobless ranks are swelling like a floating corpse. But the jobless numbers don’t tell the whole story. There are 34 million Americans who live on food stamps. One out of every nine people depends on the government for his daily bread. The Financial Times fills in the details:

“Less attention has been paid to those still in the workforce, whose incomes are also being squeezed. The average working week is now about 33 hours, the lowest on record, while the number forced to work part-time because they cannot find full-time work has risen more than 50 per cent in the past year to a record 8.8m. Wages and benefits have decelerated.

“The food stamp data suggest that ‘the labour market problems are more significant than you would expect, given just the unemployment rate’, said John Silvia, chief economist at Wells Fargo. ‘For me it suggests the consumer is not going to rebound or contribute to economic growth for the next year, as the consumer would in a traditional economic recovery.’

“Consumer spending has traditionally been the engine of the US economy, making up about two thirds of GDP. Economists fear that people may be unwilling to resume that role.

“Food stamps are distributed once a month on electronic cards that can be spent at many grocery stores. The $787bn stimulus bill added about $80 (€55, £50) to a family’s monthly allowance, which now stands at an average $290.

Nothing very original about keeping the masses fed with government food. The Romans figured it out 2,000 years ago. You have to distract the mob with pane et circenses (bread and circuses). Otherwise, they vote you out of office…or burn down the capitol.

“Everything, now restrains itself and anxiously hopes for just two things: bread and circuses,” wrote Juvenal.

September 15, 2009

Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis and the co-author with Lila Rajiva of Mobs, Messiahs and Markets (Wiley, 2007).

http://www.lewrockwell.com/bonner/bonner414.html
 
Old September 21st, 2009 #34
Alex Linder
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All That Glitters

by Bill Bonner

Of all the many miseries that man faces on his journey from cradle to grave, few of them can be eased by enlightened central banking. And a credit contraction is not one of them. Japan proved it. After the Japanese market collapsed in 1990, public officials went to work with their characteristic energy and incompetence. They lowered the cost of borrowing to nearly zero. But did consumers take up the money and add to the demand for bread and bicycles? No. They didn’t want to borrow. They wanted to save. They had speculated during the previous bubble years and lost money. Then, with retirement approaching, a penny saved was worth even more to them than a penny earned. They saved more than ever…and the consumer economy sank.

The Japanese persisted. They lent so freely that the yen became the “funding currency” for a worldwide boom. Prices rose all over the planet – except in Japan itself. The land of the rising sun couldn’t seem to get up in the morning. Property investors lost money. Stock market investors lost money. Japanese consumers sewed their pockets shut.

And now that the dollar is the world’s “hot money” the world’s surviving gold bugs see their moment of rapture fast approaching. Gold is not an investment category. It is no investment at all. Instead, it is more like a religion or a political position. True believers stick with it through thick and thin. When gold goes up, they are insufferable. When it goes down, they are unrepentant.

The price of gold peaked out in real terms in 1979 at over $2,000 in today’s money. Briefly, an ounce of gold was so loved – and stocks so despised – that you could buy all the stocks in the Dow index for just a single ounce of gold. But then, the gold martyrs suffered a terrible persecution – nearly two decades of steadily falling prices. Not just in real, inflation-adjusted terms, but in absolute terms. By the end of the period, it took 43 ounces of gold to buy the Dow stocks, and gold bugs were gathering in small groups praying for salvation and awaiting the end of time. It seemed as though the cult might be extinguished; few were still alive. Fewer were still solvent. Of those, even fewer were still sane. But then, like Christians huddled clandestinely in an unheated Soviet apartment, the wall fell. Gold began a comeback.

What inspires this little reflection, apart from a night of heavy drinking, is the price movement. At the beginning of the week, gold closed comfortably above the $1,000 an ounce mark. Then, on Wednesday morning…it shot up. The end of the world has been delayed, perhaps indefinitely. And yet, gold – an option on financial chaos – trades as if it were coming next week.

What gives? Here on the back page we keep an eye on the yellow metal. Not because we expect the end of the world. Still, you never know; maybe the gold bugs are onto something. No monetary system lasts forever. This one – an impromptu experiment, at best; premeditated larceny at worst – has already lasted longer than most marriages. The bust-up, when it comes, threatens to be nasty and expensive.

The easiest story to sell in the current marketplace is the inflation story. In an effort to revive the go-go economy of the bubble era, the feds are adding to the money supply. They will continue doing so until inflation rates go up. They make no effort to hide it. They have as much as warned the world: prepare to be robbed. According to the popular story line, the gold market now anticipates inflation. Investors should too. We have told this story ourselves; we still believe it. But today, we caution readers: there may be a plot twist.

The problem with inflation is that there is none. Consumer prices are falling in China, Europe and America. And if we look harder, we find out why. The feds are pumping the money supply as hard as they can. David Rosenberg reports that the monetary base rose at a 141% annual rate over the past four weeks. But the money fails to reach the real economy. The money supply figures that relate to actual cash in people’s hands – M1, M2, and MZM – are shrinking, at –28%, –4.9% and –6.2% respectively. Why? Because the banks don’t lend and consumers don’t borrow.

In short, the feds’ money goes into cool bank vaults and hot speculative trades. When it tries to find its way to the consumer, it gets lost. As Rosenberg explains it, the transmission mechanism has broken down. We live in a bust economy, not a boom one. In a bust, consumers cannot borrow. They have nothing to borrow against. Both their wages and their assets are going down. Who would lend to them under those conditions? Not a bank that almost went broke itself 12 months ago.

And even if consumers had access to credit, they wouldn’t take it. Consumers too, almost went broke a few months ago. Instead of saving money during the boom years, they spent it…or gambled with it. Then, when the bust came in ’08, they realized that they were 10 years closer to retirement with little money saved. Now they have to make up for that lost decade, by cutting spending and saving as much money as they can.

Still, gold speculators think they’ve got God on their side. They march into the coliseum confident that the feds will inflate consumer prices and cause the price of gold to soar. Maybe gold will rise. If so, it will be thanks to speculators and Chinese central bankers, not consumer price inflation. The smart money is still on the lions.

September 19, 2009

Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis and the co-author with Lila Rajiva of Mobs, Messiahs and Markets (Wiley, 2007).

http://www.lewrockwell.com/bonner/bonner416.html

Last edited by Alex Linder; September 21st, 2009 at 12:27 AM.
 
Old October 1st, 2009 #35
Alex Linder
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Quote:
Originally Posted by Igor Alexander View Post
Under Alex's decentralized system, he and like-minded people can have their theocracy, as long as they keep it white.
Even you, Igor?

Jesus P. Christ - the fact that I quote from someone does not mean I endorse anything, most, or even 15% of what they say, unless I state that. I'm quoting one thing they said either because it is a pertinent fact or an interesting idea, or a true idea. Do I really have to state every time I quote a libertarian or a Nazi that I am not a libertarian or a Nazi, or a libertarian theocrat that I do not want to live in a Christian state?
 
Old October 1st, 2009 #36
Alex Linder
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[From a Gary North article. Does quoting Gary North mean I agree with him on everything? No. No, it doesn't.]

Historically, the only society that has maintained a gold coin standard for 1000 years was Byzantine society, from the fourth century until the 15th century. That was the longest period of monetary stability in the history of man. Eastern Rome was wealthier than Western Rome, and the most important single reason for this was the fact that Eastern Rome had a stable monetary order for 1000 years.

http://www.lewrockwell.com/north/north763.html
 
Old October 1st, 2009 #37
Alex Linder
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Do you see the pertinence of the above fact to a White state? I do!

The most intelligent men the world ever produced agree that you don't try to excogitate something new out of your cabeza and stun an unwilling world with it, rather you use what already happened (and I do not agree with the Nietzsche and the jews that history doesn't exist until someone invents it, nor that words have no ready meaning save through an interpreter) and innovate only where new conditions make it more or less unavoidable. There is nothing new under the sun, and it is much easier to destroy than to build - two solid principles to keep in mind.
 
Old October 2nd, 2009 #38
Nick Apleece
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Quote:
Originally Posted by Alex Linder View Post
There is nothing new under the sun
There you go, Brother Alex, quoting the Bible again.
 
Old October 2nd, 2009 #39
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Quote:
Originally Posted by Nick Apleece View Post
There you go, Brother Alex, quoting the Bible again.
I've said it's my favorite thing in the shit book.

My religious view is that objective reality exists. Anything in accord with it gets respect. The truth is there is very little that is new, just variations on a theme.
 
Old October 2nd, 2009 #40
Alex Linder
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The Bible is best viewed as a turd dipped in chocolate. The turd is the jewish lies and hatred that make up the old testament, combined with the soppy love-n-forgivenness of wet Jeboo in the new. The chocoloate is the poetic language in which the turd was encased by King James's artists.
 
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