Forum Replies Created
Good responses, some thoughts about the little guy, TA and liquidity:
Dave, I want to be clear that I really value your work, I believe you are an intelligent and sincere guy. I try not to try to come across as personally attacking, I apologize if I do. I strive to attack and defend ideas, not people. I do read your excellent and well-written posts, because, as I said above, I try to follow price signals to determine cost-efficient entry points, and just generally to see if things are moving ala toward a meltdown, just as Chris follows bond spreads among others.
HughK, While I do consider myself very blessed and rich, I have worked in Haiti, the poorest country in the Western Hemisphere. I am aquainted with the true little guy. Ironically, I would say some of my friends in Haiti are some of the richest and happiest people I know. They have close families, many have a deep and rich relationship with God, and have active days. Many believe what the pastor of a Haitian church said in his last sermon I attended, "only those who are without God are poor". That said, they and I both know there lives would be easier and better with more resources, and thousands of generous people in the U.S. try to share some of what we have with them.
When I say Little Guy, in the U.S., I mean when I buy gold and silver in the "free" market, I am lucky to scrounge up enough money to buy a few dozen gold and silver coins. Note that I had to use real money, from real savings and real profits from real companies, not fake leverage dollars and money-printed dollars that the Big Guys use. I am going up against commercial banks and ETF custodians who A) have billions of dollars on account to spend, B) can leverage their billions of dollars into hundreds of billions of dollars into phantom "Credit Dollars", C) can bribe (I mean "contribute to") elected officials, to put in to place laws and regulations that won't convict them of immoral practices, D) can create thousands of contracts paper gold and paper via naked shorting that, in any normal commodity market would be illegal and punishable by jail, E) is best friends with a Federal Reserve central bank that provides them with billions more fiat dollars and government cover to deploy and leverage to push the market and make profit, while at the same time generally keeping PM prices lower than "market value". So yes, I consider myself the little guy.
With respect to "climate change" (I assume that it is still called climate change and hasn't been rebranded as something else besides global warming as I write this), I think you oversimplified my position. I am not a climatologist, however I am a Ph.D. scientist with a B.S. in Chemistry, and I know how to critically read. 1) I think the strong majority of evidence is that the earth is in a warming trend, perhaps a "warmer" warming trend than in the past. I note that the earth has been in warming and cooling trends since before the industrial age. I would like to hear more discussion and scientific investigation about the cause of pre-industrial both global warming and cooling, if for no other reason than there are more of these observation than the singular era we live in. The fact that such research is so small amd so lacking reinforces my critique of the global warming crowd as significantly overlapping with the leftist, central planning crowd 2) The greenhouse gas theories and limited, non-planetary scale, true experiments, support a general notion about greenhouse gases having a physiochemical property to be able to trap heat. That said, it seems this phenomenon is only a piece of a much larger and less explored puzzle of CO2 removal by plants, chemical interactions etc. Thus I very cautious firstly about making precise predictions about the trajectory of warming and secondly about the degree of human contribution.
Even if all the theories based only on observations and not on true experiments are correct, I am not confident if we wiped all humansand their associated CO2 production off the earth if that would deflect the current climate trends a little, a lot or not at all. I don't believe any honest scientist knows this either. Further, I am quite sure if we could convince every single terrible CO2-generating, resource-consuming American to immediately cease their current life and live off of river water and berries, I am 100% confident that the world's largest CO2 producer, China, will do nothing but continue to live as they are now and probably take over the USA because we are sitting around eating berries and drinking river. Once in control, they would then convert the USA into another China, putting even more CO2 into the atmosphere than before our river-water/ berry era. 3) I believe there is a big overlap between global warming scientists, and statists /fans of strong central-planning government. And statists do not have the same global perspective about individual rights and responsibilities that I do. I have no desire to empower the left in this country any more than they already are.
I know for certain that academics who live and die by grants and famous papers have a strong bias towards sensational conclusions and theories, because, if perchance, the truth was that we were not having as dire an effect as purported, then they would get much less to no fame and funding. For the record, I am a big supporter of science, even government-sponsored science, and I would want the truth whatever its ability to sell newspapers and grants. I just know human nature and how the system works, thus I am very cautious in published data and theories. 4) My position is whether there is no AGW or lots of AGW, I believe I can align with the AGW community in that I want to "get off of" fossil fuels, because they are dirty, limited and seem to cause global wars because they are concentrated in certain geographies. The leading candidate to replace fossil fuels right now, in my understanding, is improved nuclear (Thorium, better uranium) and a combination of PV, wind, geothermal, hydro, tidal, the last group best mainly for low wattage, local uses. I look forward to the day we will have this type of energy, and per Chris' encouragement, plan to "invest" significant dollars in local i.e. home energy generation and energy conservation. I think it is a great investment, perhaps better than the stock and bond market.
Finally, I think your asymmetric vilification of Americans is unfounded. You should be against oppression everywhere, and for liberty everywhere. While there is an element of collusion, either intended or unintended, by governments and corporations to the detriment of the people you describe, you leave out the most important factors. The people themselves. We have the American system ("had" perhaps) because we have two main ingredients: 1) great leaders of high character and great skill, 2) an at least plurality of citizens who shared the leadership's views and were willing to follow them and fight for those ideals. With civil disobedience and beyond. All other factors are secondary. There is not a country in the world that could not achieve great prosperity and great opportunity for all its citizens if those factors are present. You bring up Mexico. Do you think that Mexico has great leaders and a population that highly values liberty? I see a corrupt and inbred government and a citizenry where the many of the ambitious folks are leaving for the US rather than to stay fight for freedom. I know about the Mexican Revolution. Guess what, that didn't work. Time to try again. The current climate in Mexico and everywhere else which is self-centered and frankly of weak character, is not a recipe for national success in my experience. Perhaps the time is coming when we will be asking the questions about Americans.
Dear HughK, Dave,
Hugh, your questions are important, however, we need to reframe the perspective a bit.
As far as big picture in gold/ silver, you should understand a major difference in viewpoint in the PM community. The types of analysis that Davefairtex presents is called Technical Analysis (TA). I, and many like me (JimH) would be considered "stackers" (explained below). Dave and his analysis are for "traders". Traders try to time short term movements for profit making, in, well, anything. Gold and silver are just numbers on a screen, to be exploited for cash. To be clear, I don't begrudge anyone using whatever tools they want to make money, but perspectives and a reality check are needed.
I find the main value in TA is to time major purchases in gold and silver, especiallly if you don't dollar cost average your purchases, or have a larger tranche of money you want to deploy. That said, TA analysis, but more importantly, commercial bank Comex trading positions, say now is a very favorable time to buy. Could you buy today and the price drop to $1100? Yes. Do I care? No. Please read further on.
While I very much respect Dave's effort, earnestness and contribution, and I read his posts because he has an informed perspective, I believe your question illustrates a danger of fixation on trading and shows you need to consider the key differences between the proverbial "trading" and "stacking" mindset.
Your comment about "PM cheerleading" and Dave's about "evil paper longs" merit a reply. While I understand there may be a few funky apples that are abnormally attracted to gold and silver because they are pretty and glittery, thus the term goldbugs, if you think they make up the majority of the members of this movement, you are greatly missing the mark.
The big majority of the people you and the mainstream media and permanent gold critics called "goldbugs", with an intent to belittle and dismiss them, these people are first and foremost are cheerleading the fall of Keynesian economics. The majority are people you call "goldbugs" are like most PPers, including Chris and Adam, who simply see our current system as unsustainable, likely to collapse / transition, with very negative and unpredicatable consequences, who hate the unfairness and immorality of our current financial setup that favors giant banks, and huge corporations who are closest to the feed trough of fiat i.e. 'fake' money printed by central banks.
In short, "goldbugs" believe that those not in the small group of those with special financial access (who by the way, contribute very little to nothing productive to society at large) are being massively and immorally exploited by the politicians and system who enable this system. These groups (government and big banks) have been described as 'declaring war' against the majority of unknowing, hard-working citizens. Using the metaphor of warfare, gold and silver represent a major weapon by the "little guy" in this battle.
Rather than work slavishly to earn electronic money, put "money" in the bank to be destroyed by taxes from a recklessly spending government, inflation and money-printing by the Fed, or to be invested in a gamed and stacked-deck "market" that is the stock, bond and forex markets (well, all electronic markets), "goldbugs" are fighting back by buying physical gold and silver, taking personal possesion of these forms of wealth, and preparing for the transition that is sure to come.
So please, consider why you are buying gold and silver in the first place, and don't belittle "goldbugs" who from where I'm sitting are for the most part, the sound money good guys who are fighting back with one of the few tools they have.
With that preface, if you hold the same perspective about the instability of the current system and the intrinsic value of holding gold and silver, bottomline, I would not try to time things precisely. Please read my earlier posts with Davefairtex about timing. In short, the time to get right and sit tight is now.
To take a quick sidenote, if you don't believe in the value of gold and silver as protecting your family's wealth, then why are you focusing on only gold and silver to do TA trading? Why not a more broad-based strategy to look across the spectrum to buy things that are technically oversold or sell things that are technically overbought? If I truly believed I had a secret sauce for TA, I wouldn't limit myself to PM. But I digress.
Make a thoughtful determination of how much gold and silver you want to own in physical possession, and then go buy it. There are multiple metrics, 10- 70% of net worth, depending on the strength of your convictions about what's coming, a year's salary, a certain number of oz per family member.
If you don't believe in the value of holding physical gold and silver, then you may as well be playing with your money in technical trading for coffee, wheat, lumber, AAPL, or anything with electronic prices.
Not for me, not in broken markets and at a time in history where we are dangerously close (one month? one year? five years?) to a major transition and monetary reset. Maybe dave can explain why TA is especially well suited to gold and silver versus anything else.
Second question, I believe we are in real danger of a deflationary crash, and the real market is trying to deflate but the Fed and world CBs won't let it. Where as you describe, everything gets sold off and everything's prices drop. Parenthetically, one of my personal attraction to gold, is that, even though its price falls during deflation, it value seems to hold up better in deflation than other investments, and it does extremely well in inflation. Since it is so hard to know whether inflation or deflation is coming, gold is a key asset to hold. One larger view is that both deflation and inflation are devaluing processes, for real estate, durable goods, for labor, but gold is still, well, good as gold.
However, I believe in a deflationary environment, cash is king as they say. I think it is a good /great idea to have up to 25% of your networth in cash, especially now that we sit on the knife-edge of natural deflation v. central bank inflation/ hyperinflation. If we go through another bad to severe recession and attendant deflation, cash can be used to buy real assets at fire-sale prices- mainly for me: public companies that make real things (pharma, consumer goods, autos etc), real estate, and durable goods- cars, chainsaws, any great tool (or yes, plaything) that I have had my eye on.
I am personally holding 25-40% net worth in cash as part of sit tight and be right. Because I can't tell yet who will win the inflation/ deflation war. By the way, if get the clear sign that the central banks are getting the 2.5% inflation or greater that they want (meaning in reality 10-15% inflation), I will downsize my cash and rotate into, well gold and silver among other things.
Hope this helps explain one perspective.
Great article, you may call it a rant, but I would simply call it a POV (point of view) article. Thanks for sharing your insights.
I agree with many of your sentiments, but see a more dangerous side of this. These people are generally on the statist central planning side of the equation. They are entited to their opinion. However, like our current leftist Elitest-in-Chief, they have a fundamental notion that they are better than everyone else. You know, "the rich are not like you and me" mentality.
My experience teaches me that the rich are exactly like you and me.
They have their good moments, moments of charity and selflessness. However, more often they have their moments of greed, competitiveness and need to stamp out their "competition".
This is exactly the mentality you describe, and it also quite correctly describes the left i.e. Democratic Party in the country right now. We should acknowledge that the right can have moments that they can suppress ideas and competition, but I find the left is more instinctively and pervasively anti-American in that they believe so strongly in central planning and control by the intelligent elites.
It's not clear what percent the Silicon nouveau-riche you write about break down re power-hungry leftists or useful idiots. I just know when they work with statists like Booker and Obama, they are taking the country to a very dangerous place.
The America I believe in is based on fair competition, openess to discourse on ideas, freedom to coexist even in disagreement, encouragement of those who have truly new ideas and are willing to work to realize them. These guys are garden-variety command-and-control statists.
As a public service, it is too disturbing for those with weak hearts to see pictures of this disingenuous and scary man.
Please for the sake of public health Arthur, don't post any more a this person that was just few votes away from the presidency.
Thank you for your generous offer. FWIW, the only vendor I am familiar with is Honeyville grains, and I have wanted to order some bulk food from them, i.e. buckwheat, oats, corn etc. 40% discount would make it very attractive.
I'll throw my interested hat in the ring. What is the minimum buy (volume, dollars) to be considered a "group"?
FWIW I had independently read Cognitive Dissonance's part Two before I came across this forum topic. I thought it was a remarkable piece of prose. Very thought-provoking. I believe this series of three will be a reference point, at least for me, in the years to come. It is that provocative.
To thc's question-here goes a few:
Cog Dis' analogy of decaying barns in North Carolina is apt. A decline phase of a society can be both- crumbling for a long time then collapse. I tend to think the downward phase of any complex thing, be it cars, refrigerators, computers works the same way- slow decay to a point then sudden collapse. Actually, don't most mechanical things that are put into cyclical stress testing machines, for example, a steel beam, go through a slow stress decay over 50,000 cycles, then a 'catastrophic' failure in one cycle. Perhaps this is simplistic, but it's a principle that makes sense to me.
Just as main post timbers are eaten out by termites, but look and function fine for now (they still hold up the roof just fine), close inspection by an inquisitve and trained examiner shows the reasons to worry. Then, all of a sudden, SMASH! The exact thing could be said of the housing market in the early 2000's. Kyle Bass and others correctly focused on a small thing that others ignored, the divergence of house prices and income (the termite holes before the housing collapse). Historically these cracks were mainly ignored by the MSM and unknown to 99% of the population.
I would argue that the same principles hold now. We are seeing the termite holes. For subscribers to this site, I think we find it amazing that others are so easily able to ignore these cracks. Abnormally weak employment rebound phase after a deep recession (no expected V-shaped recovery). Abnormally low GDP growth after a deep recession. Need of ZIRP seemingly forever. Need for Fed monetizing debt seemingly forever. No income growth. In retrospect, all these things will seem obvious just like the home price-income spread did. With the growth of the internet, we will have an archive of the voices (like Chris') that were warning people of the obvious.
Another feature of the CD analogy is apt. Once conditions are 'ripe' i.e. the main timbers are 90% hollowed out, it does not take a force of large amplitude to create the collapse. For the barn analogy, this could be any of a number of things, a gust of wind, a tree limb falling on the roof, an animal climbing up the post. Conversely, things that would be expected to knock the post over, don't. The main support survives a direct hit by a tractor bumping into it. So our economy survives a Hurricane Sandy no problem. But a single trader in an interest rate swaps desk loses a billion dollars and starts an increasing amplitude set of financial failures that lead to collapse of a national currency. That is the concept of how I expect to happen.
A note on risk. In the 1930's, we were much less inter-dependent, much more "anti-fragile" (to quote Nassim Taleb). People had pantries, their own gardens, wells, could use a firearm, could hunt game. Oh yes, and saved money for a 'rainy day'. If a disaster occured, such as a dust bowl, most people could survive on their own and with help from their neighbors. That freed up national resources to address the core problem. Today we are so much more specialized, and so much more dependent on other specialists to provide even the simplest needs- food, water, energy, health care, security, shelter. This makes a domino effect of a black swan event much worse in final amplitude. Resources will have to be diverted, i.e. triaged, to provide simple basics, which will significantly deepen and prolong the transition period.