Tuesday, November 24, 2009

What Bubble?

Welcome to Stage Two of Gold's Bull Market
By James Turk
November 23, 2009 – Bull markets are marked by three distinct stages, and when gold climbed above $1,000, it only entered its second stage. In other words, gold has much further to climb in the months and years ahead.

So don’t be misled by what you may hear or read in the mainstream media and even much of the alternative media. After all, how many commentators have correctly identified gold’s bull market, now a decade old?

As Robert Blumen cogently argues: “Many of the financial media have a pronounced anti-gold bias. Of the writers and news anchors now calling gold a bubble, not only did they fail to identify the stock market bubble in the 90s or the subsequent housing market boom as a bubble, they actively promoted the excesses of those unsustainable booms, encouraging their viewers or readers to participate. For the most part, these pundits have failed to identify a rising gold price as an investment trend at any point in the past ten years (during which gold had a positive return each and every year).” Robert then goes on to observe the silly incongruity of their warnings about gold: “Witness the irony of the financial media transformed from hypesters who never saw a bubble they couldn’t promote into bubble vigilantes, issuing concerned warnings to ‘get out [of gold], now, before you get hurt.’”


Viva la Restoration
This is an excellent must read work by one of GATA's earliest supporters. Robert K. Landis, partner of Reginald H. Howe in Golden Sextant Advisors, gave the keynote speech at last week's FINews.ch gold conference in Zurich. Landis addressed the most basic [but seldom acknowledged] financial question... the question of what money is or should be, and how the choice inevitably leads humanity toward liberty or totalitarianism.

Because bad ideas have bad consequences.

11/20/2009 - Recent Speech by Bob Landis

New gold bugs making gold investments mainstream
SAN FRANCISCO (MarketWatch) -- Gold has long been favored by a fringe of the investment world, but this year some of the world's leading hedge-fund managers have loaded up on the precious metal amid concern government efforts to avoid another Great Depression that could undermine major currencies and fuel rampant inflation.

"I have never been a gold bug," Paul Tudor Jones, chairman of hedge-fund giant Tudor Investment Corp., wrote in an Oct. 15 letter to investors. "It is just an asset that, like everything else in life, has its time and place. And now is that time."

Hayman Advisors, a Dallas, Tex.-based hedge fund firm run by Kyle Bass, became another proponent of holding physical gold this year.

Most precious-metal investing has historically been done via paper futures contracts on COMEX, part of the New York Mercantile Exchange, owned by CME Group.

However, Hayman expects more demand for physical delivery of precious metals. That could cause problems because there are only enough inventories in COMEX warehouses to supply 15% to 30% of open interest on futures and options contracts, the firm explained in a presentation to investors earlier this year.

"It is prudent to focus efforts on obtaining physical delivery of metals backing paper contracts 'while supplies last,'" Hayman wrote in its presentation, a copy of which was obtained by MarketWatch.


Gold Contrarians Will Get Killed
By Jordan Roy-Byrne, CMT
In the last ten years, the financial world has experienced quite a few bubbles. Ten years ago there was the tech bubble. Then the housing bubble. And then the credit bubble. There was an Oil bubble too. With all these bubbles popping up, so to has an increase in bubble calling and contrarian thinking. As a result, sentiment analysis has become more popular.

One has to look at three things: fundamentals, technicals and sentiment. For contrary thinking (in terms of sentiment) to be most powerful, either technicals or fundamentals need to agree. As an example, I anticipate a reversal when sentiment is overly bullish and that market is running into technical resistance. Just because sentiment is bullish, doesn’t mean a reversal is coming.

The reality however and this is very important to understand, is that sentiment follows the trend most of the time. A secular bull market evolves as more and more people become bullish and invest in that market. Over time, sentiment is going to be more bullish because there are more participants in that trend. That is what causes higher prices. It is the very nature of a major bull market for sentiment to be bullish.

How can anyone call Gold a bubble when gold production continues to decrease? How can anyone call Gold a bubble when monetization is rampant? How can anyone call Gold a bubble when the FHA and FDIC will need to be bailed out? How can anyone call Gold a bubble when the US deficit is in the trillions of dollars? The deflationary forces plaguing us are bullish for Gold. That is what the market is saying and that is how traders and investors are reacting.

There is a reason the recognition phase in a bull market comes after that major breakout. Humans are reactive and when it comes to the markets, they follow the herd. It is only after price breaks out do the fundamentals become so obvious. The views of the bubble callers and wanna be contrarians are baseless, misguided and ironically, coming at the worst possible time.

Why Silver’s Breakout Could Bring It Out of Gold’s Shadow
The Sovereign Society
From a speculator's perspective, the total return potential now in silver is probably greater than gold.

On a percentage basis, the price of silver can easily outpace gold over the next few years as both metals hit record highs after adjusting for inflation since 1980. Silver might achieve that goal far more quickly than gold.

Birds of a feather flock together.

This old adage is especially true in the precious metals arena whereby gold and silver tend to rise or fall in tandem. Silver has lagged gold over the last several weeks as the latter has hit fresh nominal highs this year while silver remains $2.07 an ounce below its highs this decade. Silver hit an all-time high of $50 an ounce in 1980.

Adjusted for inflation since 1980, silver prices should trade north of roughly $128 an ounce now…while gold should fetch at least $2,200 an ounce.

The Dollar Bubble [Video] excellent!
The Dollar Bubble starring Peter Schiff, Ron Paul, Marc Faber, Gerald Celente, Jim Rogers, and others. Prepare now for the U.S. dollar collapse.

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