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Severe Financial Weather Avoidance Radar

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  • Tue, Dec 08, 2009 - 05:34pm

    #1
    Davos

    Davos

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    Severe Financial Weather Avoidance Radar

Severe Financial Weather Avoidance Radar

Is gold in a bubble?

  • Tue, Dec 08, 2009 - 09:04pm

    #2
    Peak Prosperity Admin

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    Re: Severe Financial Weather Avoidance Radar

Davos, great analogy!  Easy to understand, and right on the mark.  Love it!

+1

  • Tue, Dec 08, 2009 - 09:10pm

    #3
    Peak Prosperity Admin

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    Re: Severe Financial Weather Avoidance Radar

Hi Davos,

I think it might be a mistake to assume that the general public must be involved in a market for a bubble to occur. I know of no one in my personal life that owned tech stocks in the late nineties. I knew many people that owned stocks, but none of them owned tech stocks. Also, nobody that I knew personally, bought or sold real estate in an effort to profit from the bubble in that market. Most of the “bubble” in the real estate market was in selected locations along the coasts. That leaves a lot of people who didn’t participate in the bubble throughout the country.

I would also argue that a healthy portion of the “wall of liquidity” that has recently hit all the markets has found its way into the gold market as well. How ironic? That must piss off the central bankers.

Also, I have these concerns:

  • It seems like every gold article that I see lately is projecting gold in the 4-5K range.  Forecasts like these are very similar to the climate of the Nasdaq in the late nineties, and of select cities along the coasts in the mid-2000’s.
  • AM radio and late night TV are flooded with advertisements to buy and sell gold.
  • You can even buy gold from vending machines in German airports.

The one thing that makes a bubble is the unshakeable belief among market participants that the particular asset can only go higher in price. I think the gold market has that in spades right now. 

I’m sure I will be the lone dissenting voice on this….but thats my 2 cents.

All the best…Jeff

  • Tue, Dec 08, 2009 - 09:35pm

    #4
    Peak Prosperity Admin

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    Re: Severe Financial Weather Avoidance Radar

Hello Jeff: You may be spot on. What I wrote are just my beliefs—-I don’t profess to have all the answers, time will tell, take care

  • Wed, Dec 09, 2009 - 01:28am

    #5
    Peak Prosperity Admin

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    Re: Severe Financial Weather Avoidance Radar

Davos,

Congrats on publishing this article to FSN. Way to go!

  • Wed, Dec 09, 2009 - 01:36am

    #6
    Peak Prosperity Admin

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    Re: Severe Financial Weather Avoidance Radar

[quote=JAG]

Davos,

Congrats on publishing this article to FSN. Way to go!

[/quote]Thank you

  • Wed, Dec 09, 2009 - 03:07am

    #7
    Peak Prosperity Admin

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    Re: Severe Financial Weather Avoidance Radar

Nice article Davos.  It nails it.

 

Jeff,

OK, what cave were you off meditating in when the tech boom hit?;-)  Contrary to your experience, I hardly ran into anyone under 60 who wasn’t into tech stocks.

On the gold bubble issue, all the articles about the projected high gold prices has me a bit concerned too but, for the life of me, other than farmland, timberland, and cash, there’s nothing else that I trust to put my money into.  Right now, due to the liquidity issues with land and the erosion of value in cash, I trust PMs more than anything else.  Until I can see any realistic way out of this catastrophe (which I just can’t) and any substantive change in the public attitude with regards to PM purchases (which I haven’t yet), I’m staying in PMs.  There’s a ton of talk about gold but among the many folks I know who are reasonably savvy investors, very, very few have gotten into PMs.     

  • Wed, Dec 09, 2009 - 03:43am

    #8
    Peak Prosperity Admin

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    Re: Severe Financial Weather Avoidance Radar

Good writing Davos,

It’s always great when the writer can visualize the message and you sure did that.

Unfortunately, we are flying into a storm and government, banks and the corporate media have “gained down” our forward observation.  Not that it would matter that much as they control the financial weather and can abruptly change the conditions.

I think we have to ask ourselves why the readings are “gained down.”  Misinformation will cost many a large portion of their savings or worse.  If you had to guess, do you think that this from incompetence or an an intended crash?

Larry

  • Wed, Dec 09, 2009 - 12:38pm

    #9
    Peak Prosperity Admin

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    Re: Severe Financial Weather Avoidance Radar

[quote=DrKrbyLuv]

If you had to guess, do you think that this from incompetence or an an intended crash?

Larry

[/quote]Thank you for the kind words. 

I honestly don’t know and would have a 50% chance of getting that one right. I remember years ago hearing a clip on NPR (don’t worry I read Drudge also and try to stay in the middle) about New Orleans and that any Cat 3-5 would wipe it out. Then I watched the government botch, re-botch, and botch over anything and everything they did with Katrina.

Something tells me that was a dry run preview for what we are about to see – only this time it will be an economic Katrina and on a global scale.

If I had to pick a or b – and let me digress for a second, I’m almost leaning towards c (corporate controls everything and only does what is in their best interest and if Jamie D Lucifer becomes the treasurer next week then that will be confirmed.

Anyway if I had to guess a or b I’d say that like the union I served as vice chairman for whenever you get a group of smart people together they collectively act as stupid as a bag of rocks. Politics, self interest and egos all assembled without any guiding principles.

Take care

  • Wed, Dec 09, 2009 - 03:28pm

    #10
    Peak Prosperity Admin

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    Re: Severe Financial Weather Avoidance Radar

Great writing, Davos. I love the aviation analogies. As an investor/trader, I frequently find that aviation training and the disciplined thinking about how to deal with extraordinary events helps a lot.

The problem here is that all the pilots are used to all the regular and normal procedures. Is the coming storm an Airmet or a SIGMET? Actually, it’s neither. It’s more like declaring SCATANA. The problem is that even though SCATANA is defined in the PCG, nobody knows what it really means or the extraordinary connotation of significance it carries, because it’s something that never happens in real life, mostly. The fact is, it’s happening now.

BTW, both pilots and controllers are so ignorant of SCATANA procedures that it was never officially declared during 9/11, even though that’s exactly the sort of scenario it was designed for. But when something happens that is so outside the norm that nobody can believe it, they all freeze up and don’t know what to do. Even when a specific procedure is in place (i.e. SCATANA) for a specific scenario, if that scenario had never occurred in the lifetimes of either the pilots or controllers in the system at the time of the event, the value of the procedure is lost. In contrast, everyone knows what a SIGMET is but it’s not adequate to describe the gravity of a really extreme situation.

In short, human beings are designed to deal with normal and abnormal situations, but not extraordinary situations. When the extraordinary occurs, such as now, humans just aren’t designed to cope.

Erik

 

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