Friday, February 26, 2010

GATA's Uphill Battle, and The Last Ones to the Party

There's a bone that needs to be picked with gold proponents the world over - something that has bothered me for a long time.

As a gold bug, and even as a free market economic student in general, it is your duty to hate central banking and everything it entails - even with gold backing a currency, gold bugs hate central banks because the price of gold is fixed and can't "rocket to the moon" based on market forces.

With fiat currency, gold bugs should hate central banks even more, because they have a monopoly on the issue of worthless pieces of paper that are only assigned value because two people agree on it (legally, hence the signatures on the bills), all debts settled in court must be denominated in legal tender, and people actually buy into this crazy paper system.

My question then:  Why is it that the very institutions that cause such economic malaise and mayhem in the long term are celebrated for their "wisdom" in purchasing gold?  Why is this always treated as a bullish signal for gold?

My thinking is that central banks are generally the last ones to the party - they are essentially an extension of government and as such are guilty of acting "after the fact" and at peaks in the general mood of society. For example, the Federal Reserve has thrown $1 Trillion of debt-backed securities right onto their own balance sheet, leaving them in an extremely vulnerable position.  Despite the fact the "market value" is not 0 on an exchange, the securities are essentially worth 0 dollars in real terms.

So why is it that when the Fed or any other central bank throws something on its balance sheet it is worthless trash, but as soon as the world's central banks are net gold buyers, they are the brightest guys in the room?

For the record, gold will never be worth "0" dollars (unless dollars cease to exist one day), because it is not a promise to pay and for all those other wonderful reasons. However, a quick look at central bank activity relative to price for the past 30 years shows that central banks are a pretty good contrarian indicator relative to gold's price action.  See here:




















Seen here, the bullish case for worldwide net central bank selling doesn't hold much weight.

The trend up indicates a response to increasingly pessimistic mood towards gold.  It also coincides nicely with the market bottom in the gold price.



Clearly, the trend for the past 5-6 years has been down for net selling activity, coinciding with highly elevated optimism towards gold.

To me this flashes a warning signal that there is a lot of positive psychology that needs to be unwound in gold.

And besides, unwinding this positive psychology in the midst of the coming deflationary environment might just yield the most positive long-term results for the metal that we could hope for.

In regards to manipulation in the markets, price suppression, central bank's open market futures operations, etc, GATA has done some excellent work - the very best in terms of what they do.  However, for some reason, they just keep getting stonewalled and people really don't pay attention to the reams and reams of data that they have put together.

Why the heck is that?

Well, it all goes back to the overall level of optimism or pessimism towards an asset - a good example is the case of Bernie Madoff.  As long as the assets in his fund were going "up" in value (on paper), and optimism towards stocks was rising, he was sailing smooth.  People just don't care about that kind of stuff in bull markets - they don't ask questions and they certainly see no reason to question why their shrewd investment is climbing in value.

In bear markets, however, when people are unconsciously  becoming more negative towards particular assets, the conscious part of these people want to know why is this losing value?.  And so they start asking questions.  Generally the data is already there, it's just waiting to be accepted and acted upon by the general investment community.  I remember reading an interview in the WSJ with a fund manager who had purchased a good chunk of Madoff's investments, and this fund manager saying something along the lines of "a lot of us in the finance industry knew his numbers were too good to be true, and that something wasn't quite right, but it was still making us money so we didn't really look into it".

So if gold bugs are truly gold-buggish, they should welcome and embrace the prospect of a decline in the price of gold, now that many investors are using paper trading vehicles to own gold, and gold has an elevated level of positive psychology (along with its price).  Once the bear market is complete and the gold price has dropped substantially, the various frauds for which there is so much documentation will be forced into the light by a plethora of angry gold investors.  This will take gold one step further from being an "investment" and one step closer to being money.  And it will really stick it to the central banks that they hate but also love (see above) at the same time.

As to the gold price itself, in the mid-term.  It looks as though there is one more high to be made in gold before a resumption of the downtrend to lower lows.  $950/oz is our minimum downtrend target for the correction, with the potential for further downside being very high still.  Ultimate gold should make a lower-low than it did in 2008, at around $650 per ounce.

 
All the Best!
Derek.

97 comments:

  1. NO a true gold bug is someone who hoards gold and wants nobody to get in at a lower level then he has gotten it at. Maybe never sells his gold.

    ReplyDelete
  2. Just a question, shouldn't that chart of sector sales go back to include the 1970s before the run up in gold??

    ReplyDelete
  3. Facebook pic still there..Surfs up!

    ReplyDelete
  4. Someone else now sees the H&S pattern in silver that I've been writing about for past 3 weeks:

    kitco dot com/ind/Thomson/feb262010 dot html

    Target downside is only $14.50, which is what I have been saying since I re-interpreted the H&S pattern last week.

    -Shelby

    ReplyDelete
  5. Note that H&S above is much more short-term pattern than the one I have been looking at, and it is more balanced, and the initial downside price target is same.

    You can see my chart:

    goldwetrust dot up-with dot com/precious-metals-f6/gold-as-an-investment-t60-165 dot htm#2712

    -Shelby

    ReplyDelete
  6. derek,

    In my opinion we have a bottom in for Gold at $1050. If china purchases the balance of the IMF Gold I hope you are willing to admit the error in your "model". I think you may be headed for a major bear trap. You have made some good short term calls but I think you may be missing the big picture.

    Don't let anyone give you grief about your photo.

    ReplyDelete
  7. "As to the gold price itself, in the mid-term. It looks as though there is one more high to be made in gold before a resumption of the downtrend to lower lows.

    $950/oz is our minimum downtrend target for the correction, with the potential for further downside being very high still.
    Ultimate gold should make a lower-low than it did in 2008, at around $650 per ounce."


    Derek, help a dummie...............

    I read this, and with the world UNFOLDING like a cheap hat, is there not a chance the Euro, and EU countries( as wel as the rest of the West), is going to crash like a palane w/no fuel?.

    America included....the GDP to debt ratio is over 100% NOW.

    We make Greece,the PIIGS, all look like school yard kids..in comparison.

    I guess my question is WHY would anyone,after watching the PM's at prices close to $1,300.00oz, not get a MAJOR run started, as the Western economies continue to fold up.

    Thus creating a run on the metals, makng it nigh unto impossible to BUY physical metals at these prices.
    Especially when, THIS time, THE REAL BUBBLE of Bubbles will make it's appearance..........
    Folks have spoken, written about BUBBLES for the last 1.5yrs, in the Gld Mkts.

    I do not see it,never have.....

    Because John Q Public( as in everyone and their dogs)has NOT dove into the mkts.
    99% of the folks I know, do not own Gold, or Silver................and are actually in La La land, as to what's going............

    ReplyDelete
  8. Terry,

    America will be the last to fall because of the fact their currency is the reserve currency of the world. I am not expecting a LONG term bear market in gold by any means - moreso a very volatile period pushing the price lower before a bottom is found. Will it hang around the bottom? Probably - some of that damaged psychology will be left to beat out of the speculators so we might see lower range-bound gold (similar to what's been happening the last 2 weeks) for a longer period of time.

    I am expecting gold to take off again, but first thing's first - the USD will appreciate due to deflation and demand - this will benefit the US government short term because there won't be much cash to have, so they can pretty much issue Treasuries at whim and should have them filled for a short time.

    But then guess who's left holding the bag?

    Derek.

    P.S. for the record, I have never said that there was a full-blown bubble in gold - more like a rush of misallocated assets as a result of its standalone performance in 2008-2009 relative to everything else, and the "always safe" psychology that has accompanies it being much more pervasive. Even if the average person isn't investing in gold, chances are their fund manager is.

    Derek.

    ReplyDelete
  9. Derek,

    Thanks, yes sir, I understand your premise.
    Also, sorry, I did not mean YOU had been the one Yelling Bubble...........It wasn't..........

    But, you know who I speak of.
    TV Commericals, and Sell you Scrap Gold, doesn't constitute a Bubble....

    A bubble is when everyone and his dog wants IN, and the coffers empty,and the prices are really OFF the Wall.

    This of course is why, most folks are paying $1000+ for it now............

    They want to make sure their COVERED, even if it cost them an extra 20-25%+................

    Fiat is ZERO...................

    A Loss is a loss, but it beats destitution, and serfdom.

    Thanks a ton............
    Have a great weekend...............


    Terry

    ReplyDelete
  10. Derek,

    BOTH the dollar and gold will appreciate just for the reasons you mentioned. Then people will realize that yes even the dollar, the reserve currency, is mortally wounded and the only safe store of value is gold. Very short term the dollar may indeed appreciate relative to the Gold price but I think you have badly underestimated the upcoming currancy crisis. Listen to Jim Roger's take on the pound. even if half of what he predicts is true it will have grave consequences for the USD. Right now don't you think a more prudent postion would be 50% usd and 50% gold?

    ReplyDelete
  11. I've been into PMs, especially silver since 2000. I never chase a rally and i only buy on panic selloffs. I use EW momentum and supp/res to time my entries. There are NO exits! The trend is solidly up as in "freight train" and much moreso now than in the last 10 years. To bet against this steamroller is asking for trouble. Yes i see all the same stuff Derek sees and yes some things look bearish, but from the most bearish of signals come the most bullish whipsaw buy signals. The only thing i care about is the longterm (im talking monthly) trend is solidly up and i just loaded up at solid longterm support (< 15.00). I have seen this scenario many times before and if i am wrong i will not bail! I will buy double at the next major support. PMs (physical) should never be sold (in this economy), only bought on panics (full moons are good for this). Stocks/ETFs should be traded. Derek, you are a good technician, but we all see stuff differently, Shelby, like your stuff and am going to subscribe to your site for the articles. I would like to differ with your H&S though as we are now pushing the head...soon to be support...like i said a fake sell...is a strong buy...best of luck.
    Jerry

    ReplyDelete
  12. Jerry, answer honestly please, what prices did you buy at in 2008? Did you buy only at $9, or did you also buy some higher?

    -Shelby

    ReplyDelete
  13. I will stick with my prediction for bottom not before March/April:

    goldwetrust dot up-with.com/precious-metals-f6/gold-as-an-investment-t60-165 dot htm#2745
    (paste in your browser and replace dot with . to see some charts)

    -Shelby

    ReplyDelete
  14. Ah, The final rally begins! Yes, it is I. March 1, 2010 to October 2010. Dow 12,000 S&P 1,200 gold $1500.

    ReplyDelete
  15. Derek, you lie you said straight to $650. You mentioned no support at $950 or so.

    ReplyDelete
  16. Shelby,
    Its hard to remember because i bought all the panics but that one i can remember because it was very emotional. I admit i bought higher, probably in the 14 buck range but i also remember buying large amounts near 9 when i counted W5. Like i said if im wrong i buy double on the next support. I know this goes against every investment book out there about doubling down....in a downtrend yes you will get killed, but in a strong uptrend this works for me.
    Jerry

    ReplyDelete
  17. RSI hourly on XAG is strong, indicating a pending breakout of 16.50 high. There may be a pullback in between (i dont care).

    Jerry

    ReplyDelete
  18. I have to say that i give Derek credit for his analysis because what i am seeing right now is a typical pre-crash technical condition in the general market BUT this is also the point from which a huge huge rally could develop so in other words i think it would be crazy to make a prediction from here. All we can do is trade according to what the market hands us. What can be sure is whatever the market decides the move should be significant from this point. I think Derek's selloff scenario will come most definitely but this one is a fakeout, wait till we build more compacency the selloff will come.

    ReplyDelete
  19. "I will stick with my prediction for bottom not before March/April:"

    Shelby, i agree, and im with derek that the psychology really needs some negative reversal. I would rather see a big shift in sentiment than have to wait another year for a rally...the PMs are getting tiring for the best of us but you can be sure the minute most of the diehards throw in the towel will be the moment of glory. I also agree with those that say most people have no clue about gold and that is why the bull market silently marches on. For me this is just fine as this stuff has returned far more than any investment out there in the last 10 years. I am now diversifying into land. Tangible assets are the way to go regardless of what form they may take.

    Jerry

    ReplyDelete
  20. First of all, I know I have bumrushed my way into your forum, and im sorry for that. I am however, relatively versed in short term concerns. THE IMF currency fund, IS TRYING TO TAKE THE PLACE OF THE US DOLLAR AS THE WORLD CURRENCY. The Chineese will jump at this, becasue they can pin their currency to the IMF instead of the US dollar. THIS IS WHY THEY WANT TO BUY THE GOLD OFFERING AS WELL AS INDIA. MARK MY WORDS, Im concerned about China and India on the prospect of them "pricing" gold at the world market, and im concerned about which currency to carry into for the short term, but while you all are trying to figure out where to put your money to make more, all I can say is, Robert Zoellick (of the world bank) and Dominique
    strauss-KAHN and Richard Debsis are trying to take over the world. I am watching them on c-span from today at the bretton woods committee and they are all exited about all of the financial "developments" in the world, including global warming and the unrest financially and opportunities to be able to intervine. they and the Ogliarths,(fellow philanthopist) are talking about lowering the US and the g7 to the rest of the world, and he (Zoelleck) is "having talks with them" (the US) to do just that. The g20 he says want this. They are talking about the amount of money that the US is making in third world money and how the world bank could profit form being in the middle of that, and taking the capitalist out of the middle and inserting themselves instead of the US CAPITALIST, (wow, competition at a world level!) These guys are going to bring the rest of the worlds level to the United States, (visaversa) lower wages and massive inflation to our dollar... what are you watching, the argument about health care on fox? :-) They are all about WORLD control, listening to them right now, they are talking about controling African health care, and how the African market and the "huge potential of the financial crisis" is to the world bank, and move their resources to that, from Christmas shoes for children..please check this out, I AM ASKING YOU TO VERIFY THIS, and I urge you to find the bretton woods committe annual meeting 2010 and WATCH it and you tell me im reading anything into what they said, because its almost verbatum. And now I will tell you, at a greater good of all, thats fantastic, but im not ready to give up my meager place in society for the good of all. Im glad the IMF is selling their gold, they are selling themselves down the river, but it will be to the POWER players of the future, and that is just what is planned, including economic stability "through stimulus in the world", incongruent with conservatism. Imperial monetary policy, a new world order is being formed.
    hamurobby

    ReplyDelete
  21. Who is Zoelleck talking to (his words!) in the US? Bernake? (who else?) I am buying gold and silver, the hell with price. I bought some real estate out past bfe and getting used to being out there. I just listened to Pelosi LEAVING her press conference, and on the new prez health care bill, she was asked about it, she said she wanted to "make sure there was enough reasources for the afordability......for the middle class" (LOTS OF LAUGHTER) I fall into that category as a small business owner, Im glad they think of us as such.
    Robby

    ReplyDelete
  22. GLD next resistance = 115, 120, 131, 153
    If we take out the top the next major top will be at 131.

    Jerry

    ReplyDelete
  23. Jerry, thanks for admitting you purchased in the mid-teens in 2008, I did too. I also purchased before $9. Mostly what I was doing all the way down was selling arbitrage on the physical premiums which temporarily went as high as 35% on my canadian maples and Englehard 100oz bars, converting to 1000oz bars which I manufactured into rounds and sold on ebay, so I was able to increase my oz of silver. I got out of that business and back in my core expertise which is computer programming.

    I think it was Adam Hamilton of Zealllc.com who recently published an article showing that the mining companies gave signal of false bottom in 2008, before the bottom was reached. Indeed on the last bottom at roughly $14.64 earlier this month, I was watching GDXJ on the 10 minute chart in real-time, and it turned up on % basis more than silver and gold right at that hammer reversal. I also notice someone dump roughly 2% of the GDXJ market cap right at that bottom in a panic sell. I should have purchased, that was a classic signal of near-term bottom with oversold panic.

    But was that the final bottom?

    On the weekly charts, all the MACD are still wide open to the downside, with patterns very similar to 2008.

    Silver has two H&S patterns (one short-term, symmetrical, incomplete; and another not as symmetrical, complete but with throwback) and at least one in gold (didn't look lately).

    ...continued in next post...

    -Shelby

    ReplyDelete
  24. ...continued from prior post...

    Gold has been falling (a lot more % wise) in dollars, anti-dollar except euros, and (than it is) rising slightly in euros, since bottom in dollar Nov/Dec 2009. This is similar to Sept 2008, where gold rose in euros but feel in dollars, but less significant rise in euros so far this time. However, the big difference is that almost all things are positive for gold now. I can't think of any outcome going forward that is negative for gold. Even if dollar rises to 90, this is going to be explosive to gold.

    And silver I suspect is going to repeat its 2004-2006 performance (after 2001-2 reflation), and at least double, or probably take out its former high of $50.

    -Shelby

    ReplyDelete
  25. I mean after the rise to 90, would be explosive to gold because of the implications on europe, etc. And 'feel' should be 'fell'.

    I think the IMF rumor is noise. The India sale was a surprise, that came before a big rise in price. I think the IMF rumor is a buy the rumor, sell the news type. But all of this is just "shaking the trees" by the banksters, this is not a reversal of the gold and silver bull markets.

    There is no way to reverse the gold and silver bull markets. There is nothing the banksters can do about that. If they push too hard down on price, they will lose control of the physical market.

    -Shelby

    ReplyDelete
  26. And I meant 'before $9' to be 'below $9'.

    ReplyDelete
  27. Ben-u-over-nake has promised to end QE in March. I say sell that rumor and buy the news.

    We are in a deflation scare (a republican senator just blocked renewal of Federal unemployment benefits), but the western society has no choice but to fail now (and I don't care how they go about it, money printing or not). That is positive for gold.

    With a long-term view you can't lose. No matter what price you buy gold and silver, as long as you buy physical and stop trading and get to work earning more income to buy more with, and reduce your expenses, debt, and leveraged assets to near 0, then you are doing to do very well.

    The rest of the folks trying to "make money" in the casino of trading markets that are controlled by JP Morgan, ... well you are going to lose everything, even guys like Stewart Tompson that keep most of the money in the ETFs are going to lose big time. Only those who hold physical things will survive unscathed.

    -Shelby

    ReplyDelete
  28. Financial default of the USA (and few other western nations) is virtually guaranteed. Here follows the calculation:

    goldwetrust dot up-with dot com/economics-f4/inflation-or-deflation-t9-330 dot htm#2747

    And you think the dollar and bonds will outpeform gold in that scenario? Why? They can not survive.

    ReplyDelete
  29. Looks like the masses sold at the bottom in 2008, not at recent top, that is not the sign of a top, but the sign of a major secular bottom:

    gold-eagle dot com/gold_digest_08/wright022610 dot html

    The fiat central banks have been on decades (actually centuries) removal of gold and silver from their monetary systems. Now we are bottoming and the only govts that can survive are those that re-capitalize with gold and silver and other real unleveraged assets. The western central banks are still selling gold via the IMF (I speculate it was sold as leasing years and decades before, now just being officially announced).

    -Shelby

    ReplyDelete
  30. One more point, then I will try to shut up for a long while if I can.


    If go to my prior post about Pretcher (and other deflationalists, see link in post above), the mistake of their analysis is that they assume there exists the possibility of stabilizing the economy with deflation on bonds and dollar, but in fact there is no possible deflation that can render the US govt solvent. Every road (money printing or not) renders the US govt insolvent and in default. That is why gold will outperform in this deflation.

    -Shelby

    ReplyDelete
  31. Both the USD and the EUR are falling together, the Yen is actually the worldest strongest and is a place where deflation is already taking place. Derek, the dollar is losing value to gold and this upcoming week will be huge in terms of confirming this idea. Gold will run in dollar terms for the weeks to come, it may fall to the Yen as it has thus far this year but the USD is done, how couldnt it be after the way the printing presses have been running over the past years!

    ReplyDelete
  32. Interesting post and analysis. I think the Dow/Gold ratio will come to play as always in the Summer and Winter Kondratieff Cycle. Normally the ratio approaches somewhere between 2:1 or 1:1. As such either the Dow will lose a lot of value relative to gold or gold will increase dramatically from here or somewhere in between. For those interested in long wave cycles take a look at the Longwave Group's site and recent article: http://www.longwavegroup.com/publications/special_editions/2009/091222_Dow1000.php

    ReplyDelete
  33. Shelby,
    I agree wholeheartedly with your analysis. I admit i do tend to put more weight on the technical picture than the fundamental when making my decisions but definitely follow both. Yes the weekly MACD is still solidly down BUT the monthly is solidly up and if this turns out to be a weekly ABC things could change quickly. We will most likely see one more push down or sideways though before resumption of the major trend. That push down will probably come after a run to 115 but will probably fall no lower than we are right now. Of course this is all an educated guess based on probabilities and in no way am i predicting absolute prices. Although we reached extreme oversold levels some market internals (volume) still look extremely dismal and we could still see a selloff but like i said i will not panic if it happens and prepare to buy more on next support 96-99 GLD range. FYI, i am also a programmer by trade.
    Jerry

    ReplyDelete
  34. That leaves only gold standing in the end. Go back and look at Exter's Inverted Pyramid again.

    I am writing a new computer language called Copute, and I hope to displace Python and all the rest:

    code dot google dot com/p/copute/issues/detail?id=8#c26

    If you have time and readily available, could you email me some charts you are look at?

    antithesis at coolpage dot com

    Thanks,
    Shelby

    ReplyDelete
  35. Jerry, where are you seeing the ABC pattern that indicates this pullback is complete? The pullback is way too short in duration (3 months) thus far, to show ABC pattern on a monthly chart. You need several months to see any such pattern on a monthly chart. I do see a ABC down pattern on the Weekly chart for gold, but go look at the ABC on the Weekly gold from March to August 2008 (I've been saying for weeks we may be approaching that August type juncture, and not from March to June 2008 because June dip wasn't lower than the April 2008 B start), then you see gold proceeding to drop more to Oct 2008. So it turned out that August 2008 was the start of the B wave, not April.

    That is the problem with Wave analysis, it really doesn't tell you anything except maybe some probabilities about potential turning points and ratios (but 2 wave chartists can come up with entirely opposite conclusions and thus I think it doesn't even help on probabilities but I haven't studied it exhaustively). The probabilities always favor the bull (as long as he doesn't use leverage and trade too frequently) in this secular bull market for gold.

    I would like to see or hear your reasoning on the ABC wave being complete.

    So must for not posting more here :D

    ... continued in next post...

    Thanks,
    Shelby

    ReplyDelete
  36. ...continued from prior post...

    The Weekly chart is not oversold, the RSI is over 50 and the MACD is still open for more downwide. The Slow STO is down near bottom but this can go on for a while (or even go lower) or quickly move up then reverse.

    As for all that money printing, actually I showed that last summer, the Fed actually stopped increasing the money supply and has only started again since October:

    goldwetrust dot up-with.com/precious-metals-f6/gold-as-an-investment-t60-135 dot htm#2668

    Also did you see Schmidt's long-term timing chart:

    goldwetrust dot up-with.com/precious-metals-f6/gold-as-an-investment-t60-135 dot htm#2654

    Thanks,
    Shelby

    ReplyDelete
  37. I noticed I had my forum set so that visitors could not read without login. I just fixed that. Apologies. Also I feel it is incorrect for me to try to get readers from Derek's readership, but no worries as I will soon stop writing in my forum as I need to complete my physical metal buys and go back to being engrossed in technical life of computers.

    So you can go back and retry the links I have given in past, you should be able to read them now.

    -Shelby

    ReplyDelete
  38. I was referring to oversold on a daily timeframe back at the feb 5 low, not the weekly, but even on a weekly it hit a relative oversold level. I am talking relative to other levels in this trend. No not as low as 2008 but definitely as low as most of the major retracements we have seen. Re the ABC pattern i guess should clarify what i was talking about. I was referring to a weekly or daily ABC pattern from the high until feb 5. The 2008 ABC you are referring to is what i see as a much higher magnitude correction than the current one ie. major W2. The current correction i am looking at as being 2 magnitudes smaller ie. W2:W3 Yes, this could be part of a larger corrective zigzag and simply be WA of a larger ABC which is why i have a target of 115 to complete WC:WB. If it exceeds 115 and especially if we get a gap above the old high and it trades above 122 will signal me we are in W3:3 ...of course this is .. continued

    ReplyDelete
  39. continued...
    wishful thinking but we need to be prepared for all poissible scenarios and change the strategy as the chart validates or invalidates this premise.

    Jerry

    ReplyDelete
  40. So to summarize what i said, i believe we are either in WC:WB:W2:W3 or W1:W3:W3.
    An alternate more bearish count i have is W4:W3:W5 which doesnt really fit with the economic scenario and but i am not discounting it. The main thing to note is either scenario point to a rise. I dont believe the run to 120 was a W3:W5 because it is = W1. That means it is either a W3:W3:W5 or a W1:W3:W3... my that sounds confusing...lol! ;)

    ReplyDelete
  41. Agreed for gold weekly chart, we've already broken up and now skirting the top of one downward wedge channel, and if we break out of this new less wedgy downward channel to upside, then you probably have the correct interpretation. Otherwise we can bounce around inside the downward channel while moving lower.

    Agreed there hasn't been enough time since reflation started, to get another 2008 event. For that to happen, we have to be wrong about the certainty that the USA will either default or hyperinflate. That is the only way we can get 1930s style outcome. But USA was massive creditor nation then, now we are massive debtor (BANKRUPT IS MORE ACCURATE) nation.

    Again I urge all to read this:

    goldwetrust.up-with.com/economics-f4/inflation-or-deflation-t9-330.htm#2747

    Folks you are playing around with brokers, ETFs, bank accounts, etc.. These will not exist in near future. The govt will forced to seize these.

    -Shelby

    ReplyDelete
  42. You dudes are 90% over my head, and I wish the hell there were a way to do an ANON 1, 2,3,4,5......Obviously your are Prechterites, and throwing down Wave cycles.
    Tough to see, when no charts are available.

    Instead of leaving us with your Opinions, as Opposed to Dereks.....

    Leave us w/ SOLID reasons, why your BELIEFS are different than his are.

    ReplyDelete
  43. What Jerry and I agreed (I think), is that no person on earth (except perhaps for JP Morgan who allegedly :wink: have access to all the data from the brokers with our stops and bids), can predict the price direction. We are discussing different possibilities for the charts based on wave counts and chart patterns, but that is more or less meaningless. Any one who is trading the price action is going to get allegedly :wink: eaten alive by JP Morgan's (an Goldman Sachs) rigged computer trading system over time. Note I can't publicly accuse JPM and GSachs of something which I suspect :wink: but can't prove :wink: :wink: (got it!).

    So it really doesn't matter on the short-term opinions. Everybody has an opinion and they are all worthless.

    As for the long-term, what is really happening in the world, I already provided a link in my prior post. Go read it. It contains all the SOLID reasons. I gave the math to explain that the USA is bankrupt and bonds/dollar can not survive.

    Conclusion: own **PHYSICAL** gold and silver or lose everything. Simple. I hesistate to say own land, because the bankrupt govt will have to tax that to death also. Stop playing around in the markets, they are rigged and they will go poof and disappear (like what happened in Argentina, people woke up one day and they were told their money was gone forever).

    -Shelby

    ReplyDelete
  44. When i said land, i didnt mean residential which is overvalued, i meant farmland. Good deals are hard to come by but they are out there, in canada anyways. Hey people gotta eat, and some food commodities are cheap right now. Speaking of Argentina, the 401k grab is probably a done deal already, and here in canada i wouldnt trust rrsps either, in fact i never have. Whenever you get something for nothing, like deferred tax or even the new TSFA (tax free savings account)in return for them using your money, there is reason to suspect is left unattended long enough that money may disappear.
    Jerry

    ReplyDelete
  45. Hi Derek,
    you say at the end of Fridays update
    "As to the gold price itself, in the mid-term. It looks as though there is one more high to be made in gold before a resumption of the downtrend to lower lows".

    Do you mean this new high will be higher than the December 3rd $1225 ?
    Or just higher than the January retrace of around $1170 ?

    I am confused at present. Your opinion as to a possible high would be appreciated.
    Thanks.

    ReplyDelete
  46. @Goldbug,

    If you refer to the GLD chart posted in the article, we are expecting on final push up to the resistance band and to fill the gap-down that occurred on the 22nd. Upside past that point is extremely limited and the next leg down in price should ensue from there.

    As to the physical gold (futures) price we are expecting, at the highest, a retracement no higher than $1163.00 before the next leg down begins.

    Hopefully that clears things up for you. Thanks for the question.

    Derek.

    ReplyDelete
  47. Jerry,

    I knew you were referring to farmland, but I didn't know you were in Canada. I have not looked closely at Canada's fiscal outlook. Also I think Canada can split in regions again, if for example Vancouver has higher real estate driven bubble debt than other parts of the country. Actually I think it is the same as in the USA, that rural areas are solvent, so we can't really get a civil war, but rather a war between cities and counties. I actually experienced this war first hand in 2003, when I had to battle my own father who had the city officials in his back pocket, but not that county sheriff. The county sheriff was much more connected with "sane" perspective on the issues.

    But the question is what form will the war take and will the cities have more power over taxation because they will control the State govts. So I am wary of even farmland in the western nations. If you look at the Rothschilds, they are investing in farming in India (and keeping the people on the land as "debt slaves").

    People say food is cheap, but it seems to me basic foods (rice, vegetables, meat) are rising at least +20% a year. They moderated a bit during 2008, but have resumed upward. I think oil is a big factor (transportation) and that is why you can't really value the farmland, because the main input cost is the oil. I don't believe in Peak Energy, but I do believe in peak cheap oil (its a function of the death of the western debt bubble).

    ...continued in next post...

    -Shelby

    ReplyDelete
  48. ...continued from prior post...

    So I would stay away from land. The best investment going forward is technology (even in the worst of times), but you have know a lot to invest in that. Actually gold is not an investment, it just keeps you even (compensates for negative real interest rates), i.e. it is savings. Society abhors idle capital, so holding gold is falling behind what you could be gaining in developing world, if you can figure a vehicle. I am targetting technology, but not yet to the capital intensive phase.

    -Shelby

    ReplyDelete
  49. Silver may be the way to invest in the developing world. I had a post with the calculation some months ago:

    goldwetrust.up-with.com/precious-metals-f6/silver-as-an-investment-t33-210.htm#2342

    Thus silver is not only likely to outperform gold in the end, but it should be more than just "keep pace with negative real interest rates". It should leverage the growth of the developing world. If you have no other place to put 10 - 20% of your net worth, silver is a good one. Another 10 - 20% in gold. Then try your best to find real productive investments with the rest.

    P.S. Here is the post about silver's bull market stalling:

    goldwetrust.up-with.com/precious-metals-f6/silver-as-an-investment-t33-210.htm#2477

    -Shelby

    ReplyDelete
  50. Why silver is leverage and gold is not:

    goldwetrust.up-with.com/precious-metals-f6/silver-as-an-investment-t33-225.htm#2751

    Refers back to a lot of my prior research and thought process.

    A ha!

    Actually the best possible outcome would be a falling fiat price for gold, and everything else falling even more so, i.e. a deflation relative to gold but with falling prices for everything more so.

    That would be preferred, as we gold bugs would increase our purchasing power and pay no capital gains taxes.

    So obviously that will not be the outcome, because the system will not want to let the gold bugs win with their idle capital. I covered this in more detail in the link just above.

    Thanks,
    Shelby

    ReplyDelete
  51. Shelby,
    I agree with you on silver, physical is the way to go and my gambling is with HZU.to.
    I also believe one should own some gold and palladium. All of the physical should be in recognizable form, ie. cdn Maples.
    The land i am buying around 640 acres is for my own personal use, possible future farm and inheritance for my kids, and it is "dirt" cheap because it is in the middle of nowhere. No i dont really believe food is "cheap" i meant cheap relative to future prices, if we get heavy food inflation we will see farmland inflation.
    I sent you a couple of charts with my wave counts to your email, did you get them?

    Jerry

    ReplyDelete
  52. I am buying mostly shot (small pebbles) or junk 90% coins. Recognizable marks (market premiums) are owned by the state. Jesus said roughly render unto Caesar what is his, and render unto God what is his. Bible says those who let wealth sit idle, will lose it. Remember God owns everything on earth, we are mere stewards:

    goldwetrust.up-with.com/economics-f4/what-is-money-t44-45.htm#2273

    Land for personal use is not an investment, it is a depreciating liability. Land incurs taxes, and society will not allow you set land idle without a fee. Land in the boonies maybe less so, but it is more illiquid (large buy/sell spread/loss if sell quickly). Difference oversold opportunities and always-to-be-ignored opportunity costs sinkholes. Man has weakness against nature to desire multi-generational property rights, which is what got us into this current debt problem.

    Oil could rise more than food or lumber prices, so the land could decline in real value (even if price rises nominally).

    Retirement by idle capital is not supported by nature. Retirement is on the back of those productive in society, and Westerners have turned their kids into marshmallows. How many westerners are investing in their kids to live in China to learn Chinese as Jim Rogers has done?

    -Shelby

    ReplyDelete
  53. Land investment, in the next 5-10yrs, is going to be a losing game.IMHO.................

    Being totaly liquid,money/asset(hard) rich, is THE way to stay solvent.

    Land will be ( as previously stated), seized, or taxed to the point you cannot afford to keep it.

    Personally I am debt free, own home outright, in the richest county, fastest growing in Texas.

    I wish I did not own it.

    Taxes are attrocious, and even though Texas has not suffered hardly at all, my city continuously builds schools,(about one every 120 days starts) and public facilities, and any other project they can think of.,,,,,,,,,,,if they need $$, they just raise taxes.

    Whether you have it or not.

    Ownership(deeded items), are going to get us killed,$ wise.Or, a forced sale, to keep from losing your lifetime investment/home.

    The only option to that, IMHO is as in Canada, snag a SMALL section(5-10 acres),to live on, and out of an area subject to municipal control.

    Lowest tax rates possible( here it's Argri Land).
    City homes already are a millstone......

    As we all know, city gv'ts, and states do not know what BROKE is, and continue to tax accordingly, to keep their coffers filled.

    Ross Perot Sr, owned( think his son has it now), a MAJOR part of Alliance Airport.........( wealthy Texans for those who do not know them).

    To keep from paying major leauge taxes, they simply put around a hundred Longhorn cattle on it, and declared it Aricutural!.
    Higher Taxes....POOF!...............G_O_N_E.

    ReplyDelete
  54. Shelby,
    You have no clue of my situation and as such cannot make those judgements on anothers personal assets/ investments. FYI ag land in Canada is 1/5 to 1/10 $ that of the US, is of the same or higher quality and the taxes are low if you know your laws. The land i am buying is one of 3 parcels i own and is less than $300 an acre. I am debt free and the lease income on the land for cattle will pay it off in < 8 years. Furthermore this prime hunting area will generate free food and firewood and fish from A small lake that will be stocked with trout this spring. I am not going to crawl into a hole with bags of silver BBs and wait for the end or am i going to move to china. I will enjoy my ranch, being self sufficient and the land will appreciate along with food. My opinon , sorry this is not the USA and there are opportunities..to diversify Jerry

    ReplyDelete
  55. Oh, whatever Canada.... Go live in the damn woods and eat bark for all we care.

    ReplyDelete
  56. @Anon - You're just upset because the Canuks took gold in hokey - I mean hockey.

    ReplyDelete
  57. Ouch... Texas you really got me now :(

    Well it seems the USA also beat up on Canada in the first game against the Canuks. So hey give the Canadians their due. Now we can all go back to sleep and they can return to their cabins or igloos or whatever.

    ReplyDelete
  58. Hey Derek,

    Why the backflip in gold? You now think it's going to new highs before breaking down? Just seeking to understand why you now think it will rise before going back down?

    Thanks

    Luke

    ReplyDelete
  59. Jerry,

    I had previously admitted that I wasn't well versed on Canadian situation:

    Shelby wrote:
    "I have not looked closely at Canada's fiscal outlook. Also I think Canada can split in regions again, if for example Vancouver has higher real estate driven bubble debt than other parts of the country. Actually I think it is the same as in the USA, that rural areas are solvent..."

    Your income in cattle depends on the USA. If USA reduces eating meat (because they can't afford it any more), then you will ship your cattle to developing nations? Maybe you sell locally, but that is because others are able to export. Canada and USA are tied at the hip, as is Mexico.

    It is positive that you are trying to work the land, and that is not idle capital. I am not convinced that land prices will rise with food prices, because indications are that rising fuel costs will constitute a significant portion of the rise in food prices. And I don't trust taxes to stay low. I read that Canada has big fiscal problems coming too, on a delay from USA, and will be exacerbated by the fall of the USA which will pull Canada into deficits and defaults.

    $300 per acre sounds great for good cattle land. I've read that farming is a rollercoaster business.

    Agreed it desirable to diversify, if one can find something as liquid and positive in stagflation as gold and silver. How did farm land do in the 1970s with rising fuel prices and gold? You've got the problem of competing against billions of farmers in the developing world. They are underemployed. You've got right location if USA was not imploding.

    I prefer high tech if possible. Maybe hire 2 programmers for the same capital $180,000 and change the world.

    ReplyDelete
  60. $300 per acre for cattle land sounds very good. I think you can't even find that price in Argentina, maybe Paraguay only. But again I know hardly nothing about that. I know of several rich people that have gotten cattle business. Must be something desirable. But you said you only earn 12.5% income per year on the land. That is not a very good return. Most people in asia expect 30 - 50% return on that level of capital investment. That means you are falling behind (the west is!).

    People need to get used to a new era, where land price rises do not exceed inflation. That is the norm (or long-term reversion to the mean).

    ReplyDelete
  61. Jerry, as far as I can see, I never received any charts from you in my email. Maybe you spelled my email address wrong?

    antithesis at coolpage dot com

    Also I do appreciate very much your sharing of your insights. I was not trying to say that you have many all the wrong decisions. Obviously, you've made some good decisions with respect to precious metals over past years.

    I am trying to say that land is not a precious commodity in North America. We have declining birth rates, imploding debt-based economies with massive nascent retirement bubble. Unless you will be producing food that can be export around the world, then the value of land is intimately tied to the economic outlook for North America. And if you are exporting food to the world, then proximity and fuel costs are a significant factor. There may be a reason that land is only priced at $300 per acre. It is because the income return is only 12.5%, taxes are low and can only go up, and farming is a rollercoaster business for many reasons. Farming is also one of the largest budget items for USA federal govt, meaning a subsidy that can be lost in future, then letting the developing nations be competitive again.

    If food prices are going up, then feed prices will too, which means the increase in price of cattle will not feed back in increased income and land value.

    The wisdom I am trying to give you is that God (society) will not reward us for being isolationist. We must get out there and compete to help the poor people rise up. The fastest growth is in those regions with high birthrates and oversupply of labor. The Bible was not joking about "go forth and multiply".

    -Shelby

    ReplyDelete
  62. "For sheep must be slaughtered before the feast can begin." Jesus the REBEL...

    Gold will get to $1182-1185 by April 2-5, 2010 which should coincide with the US index low of 74-77, it should drop below the trendline to scare of the sheep.

    Then gold will drop to $640-614 by Jan 2011/June 2011. While the world and all the Satan running it proclaim depression and all the other BS Gold will go to $2,400-$10,000 by 2015/16. I will have a better gauge of price once $640-614 come by. Silver will get to $8.00-8.57 and should not go below the last low of Oct 28 2008 as it did not make a new high on Dec 2 2010

    The "future" is known to those that believe...be a Rebel and YOU will get it. Rebel in Thought and Action ( no Violence...only when you want to take back America from Satan.)

    The best thing Obama and the rest of the gov't puppets can do is to RAISE THE MINIMUM WAGE IN EVERY STATE SO PEOPLE CAN MAKE A DECENT LIVING and stop Globalization. But they want...YOU should know why..."Goyim."

    Good luck

    Jesus the REBEL.

    ReplyDelete
  63. I read so much non-sense, I do not know why I bother to refute it.

    Raising the minimum wage will just make more people unemployed. You do not understand that economics routes around regulation to the best opportunity cost.

    There is no way to fix USA. It MUST implode.

    ReplyDelete
  64. Derek,

    I was wondering why you have as many 'Nuts' per square inch posting on your site. Maybe it's
    because so far it is free! When you start charging a reasonable membership fee
    they will disappear as most inmates in psycho
    wards may have access to computers but they usually don't have credit cards.However in some
    perverse way they are somewhat entertaining!
    Perhaps you might run an ad offering discounts on shock treatments as an additional profit center!

    ReplyDelete
  65. More nonsense. A closed market does not generate better results than a open one. And I wrote the prior comment stated that raising the minimum wage will cause more unemployment, in fact it already has! The youth unemployment has skyrocketed to over 50%.

    -Shelby

    ReplyDelete
  66. Apparently Bernanke admitted what I have be writing about lately, that interest rates will go up and even 100% taxes rates can not stop the default of USA govt:

    gold-eagle.com/editorials_08/souleles022810.html

    -Shelby

    ReplyDelete
  67. The USA does not have to implode, at least not in the next few centuries. The FairTax is a remedy for many, many of the ills that face America today.

    Agreed that raising the min wage is NOT the answer. In fact, the best thing the US federal govt can do is step out of the way. FairTax!!!

    ReplyDelete
  68. The FairTax would not change the fact that it is mathematically impossible for the USA to pay off its debt, again study the math again:

    goldwetrust.up-with.com/economics-f4/inflation-or-deflation-t9-330.htm#2747

    The problem is that the interest payments on the debt are more than the production we can generate as nation. As long as people do not realize that, we can get away with lower interest rates, which delays the realization, because we can borrow more money to keep paying the interest on the debt.

    But any mathematician can look at that equation and tell you that the outcome is GUARANTEED. The USA must default on its Treasury bonds.

    The USA will implode when it defaults, because we do not produce enough energy nor manufactured goods to provide for our people. We have to import them. To get back to producing enough of those will take decades. In meantime, massive inflation and rationing. Probably a world war too. Mathematically GUARANTEED.

    -Shelby

    ReplyDelete
  69. Btw, why do you think our military went to capture the Middle East oil?

    Oil is needed to fight a world war.

    :wink:
    (same person)

    ReplyDelete
  70. The problem with the math as it relates to the FairTax is that it assumes deficit spending is unavoidable. As I said, the FairTax addresses many problems. One of the immediate impacts would be as a jobs engine. More jobs -> more production -> more revenues.

    Actually, to state it most accurately, the FairTax does not tax production. It taxes consumption. However, if there are more people working, then there is more consumption. The FairTax also allows for revenues to rise WITHOUT requiring ANY increase in production by taxing all of the foreign dollars spent in the USA.

    ReplyDelete
  71. Ben, I agree that downsizing the govt and removing taxes on production, would help to restore production, but as I wrote above, that will take at least 10 years to counter-act the immediate effect of imploding the economy because any such system is going to not initially provide enough revenues and will accelerate the default on the national debt. And during that crisis time, the banksters can take advantage of the public's desperation (Hilter comes to mind, seems I saw similar emotions when Obama was elected, and we haven't even seen yet in the USA the coming super hard times like the WW1 reparations that caused the German people to want to "perfect the world").

    Besides there is no political solution, because you've got more than 50% of the population who can't eat without a big govt. Instead the way these things always go is the same. They explode in a grand finale of massive socialism, as the people who thought they were on sound footing realize they too are bankrupt and the debt implosion sucks everyone into "bail me out so I can eat and feed my family".

    Very few self-sufficient farmers now in USA, and very few in jobs that can't be done by people in developing world for 10 times less cost. And USA is not self-sufficient in energy, which is why I say farm land is not a good risk as I explained to Jerry in earlier post.

    I still like technology. Developing world needs it, and I am more expert than Indian programmers at what I do. But I do not know what to advise others, you have to think this out in terms of your strengths. Compete.

    -Shelby

    ReplyDelete
  72. There is nothing wrong with a farm for personal use, if you don't spend much on it, and you are willing to put in effort to grow your own food. But this is applicable for retired people who want to remain productive and keep their expenses low, while keeping as much of their savings in gold & silver as possible.

    But for those of us still in our income earning years (I am 44.8 years old), then that would be unwise, because the nature trend towards maximum division of labor means we should each do what we are expert in and trade. I made sure I located myself where their are abundant local farmers who are already expert at what they do. This frees up my time to focus on what I do best (which hopefully isn't getting addicted to posting in blogs, I need to stop!).

    Good luck everybody. I hoped I helped some readers understand what is really going on. God bless (and no church dogma implied).

    -Shelby

    ReplyDelete
  73. Why do you think Warren Buffet spend something like $40 billion to a buy a railroad? Because he sees the collapse coming and he knows we import our net energy, so thus transportation via trucking will become too expensive, because railroads use much less fuel than trucks.

    We use very energy/fertilizer intensive farming methods in North America, and these have a NEGATIVE net energy output (food contains energy, it is called "calories"). The small farmer who uses an animal and plow, and or organic/nature methods, can produce a POSITIVE net energy. For example, I read one farmer polishes his cattle (or was it pigs?, I forget), by letting them feast in forest on acorns. This eliminates need for many injections, etc..

    There is a poster SRSrocco (in my forum and else where) who has detailed a lot of this. Also Franklin Sanders of the MoneyChanger who nows writes on solari.com with Catherine Fitts, is expert about many of these farming issues. Find his website and research...

    -Shelby

    ReplyDelete
  74. Somebody else has stated what I have been posting about:

    http://www.financialsense.com/fsu/editorials/trendsman/2010/0301.html

    "In other words, banks are not lending and so the velocity of money is declining.

    This is correct as to why we don’t have REFLATION.

    There is an important difference between REFLATION and HYPERINFLATION."


    "Hyperinflation occurs when a country’s bond market breaks. In other words, the sovereign nation is no longer able to fund itself."


    "Why didn’t Japan have hyperinflation in the 1990s? It didn’t have to monetize its debt. It had the internal savings to be able to finance its budget."


    "The other point to make about severe or hyperinflation is the fact that it doesn’t come about steadily. The preconditions and causes are all the more subtle as hyperinflation occurs suddenly or dramatically."

    -Shelby

    ReplyDelete
  75. I am not a large scale farmer...i am doing organic and selling to friends but i dont eat much beef. My property is loaded with deer and Elk, as well as ducks and geese, and is what i prefer to eat for meat. There is pure limestone filtered water here and and enough firewood for 10 lifetimes. You really think 12% per year is a bad investment? Dont forget the capital gains! Farmland will rise if you get a good deal and know how to negotiate. In case you need help reading a trend take a look at the following chart: I am in Manitoba by the way. Not as cheap as Sask but on the way up. I can think of enough reasons to fill a bok why this beats the heck out of city living...and i am the same age as you 46, i have enough PMs for now....its time to branch out..i will buy more PMs if we get a huge correction in future...im set for a while.. Jerry

    http://www.farmlandinvestor.ca/about-us/2-why-saskatchewan

    ReplyDelete
  76. Also FYI, since you mentioned Jim Rogers you may be interested that Jimmy boy has joined on as an advisor to the Agcapita farmland fund.
    I am bullish on Wheat , corn and foodstuffs in general. My 2 cents. Jerry

    http://www.farmlandinvestmentpartnership.com/pdfs/Agcapita%20Brochure%20-%20FIP.pdf

    ReplyDelete
  77. http://seekingalpha.com/user/260337/comment/279364

    ReplyDelete
  78. Shelby,
    I did send some charts to that address and got no return mail...maybe it exceeded the max limit, was
    about 3 mb...? Jerry

    ReplyDelete
  79. Where the hell is Derek lately?

    ReplyDelete
  80. Interesting chart, I assume AB prices skyrocketed due to tar sands? Another biggest risk you have is that tar sands are non-economic and will implode dragging all the land values around down. However, the implosion of the tar sands economy could possibly be after this big transistion from cheap oil to nuclear/electricity.

    I see on the chart that by 1974, gold had climbed 4x and farmland < +50%, ditto now. But farmland increased 5x more by 1982, ditto gold.

    The other PDF is the typical "they don't make it anymore" Malthusian hysteria about land, e.g. the acres per person declining and all that. We have never farmed all the land in the world and we probably never will need to (for technology reasons).

    I am also bullish on grains, but on the grains themselves, not necessarily on the land to produce them. Capital gains can be destroyed by taxes. Some people do not pay capital gains on physical gold, but I am not advising on that. Where else are the govts going to go to get revenue when they are about to default? I think Argentina's farmers are taxed to death (when they export?), which is perhaps why land prices remain depressed there?

    Value of land flourishes under the rule-of-law where property rights are respected. I think we are entering an epoch where property rights will be torn to shreds in the West! I really don't know how bad it will get, but why risk it? What is the benefit? Besides I hate snow. To each his own. The fresh water and native fowl sounds great.

    ..continued in next post...

    ReplyDelete
  81. .continued from prior post...

    Interesting chart, I assume AB prices skyrocketed due to tar sands? Another biggest risk you have is that tar sands are non-economic and will implode dragging all the land values around down. However, the implosion of the tar sands economy could possibly be after this big transistion from cheap oil to nuclear/electricity.

    I see on the chart that by 1974, gold had climbed 4x and farmland < +50%, ditto now. But farmland increased 5x more by 1982, ditto gold.

    The other PDF is the typical "they don't make it anymore" Malthusian hysteria about land, e.g. the acres per person declining and all that. We have never farmed all the land in the world and we probably never will need to (for technology reasons).

    I am also bullish on grains, but on the grains themselves, not necessarily on the land to produce them. Capital gains can be destroyed by taxes. Some people do not pay capital gains on physical gold, but I am not advising on that. Where else are the govts going to go to get revenue when they are about to default? I think Argentina's farmers are taxed to death (when they export?), which is perhaps why land prices remain depressed there?

    Value of land flourishes under the rule-of-law where property rights are respected. I think we are entering an epoch where property rights will be torn to shreds in the West! I really don't know how bad it will get, but why risk it? What is the benefit? Besides I hate snow. To each his own. The fresh water and native fowl sounds great.

    The thing about every great trend, is they end. At least with gold, you can sell instantly. With land, you've got to time with some good foresight. Just a lot of hassles all the way around managing purchase, farm, taxes, regulations, selling, closing, negotiating, etcc, and I can double capital every year or even faster in technology mostly sitting at my desk. Where to put all the money and keep it productive. I do not want to keep putting everything in gold & silver.

    Any way, the main point is to remain productive. If you really love farming, then I say go for it. As long as it is not some unrealistic dreaming.

    Bottom line, is do what you love and be the best at it. I have to stay focused on programming, so that should not leave me enough time to think about all these other things (if I stop reading and posting in blogs). Gold is simple to understand. Keep buying more until real interest rates turn positive. Very simple.

    I think my email incoming limit is set to 4MB per email. I can't find your email, shelby

    ReplyDelete
  82. I just remembered another reason I am wary of farming. The globalists are determined to use "madcow", H1N1 and another hoax they can to bring european level control over farming to NAU. I've heard from Belgium farmer for example, that your chicken can't even lay an egg without the new egg being register with a tax identification.

    Land and farming is just too darn political for my tastes. I don't want to dig myself a hole for a quagmire to find me. I want to keep my mind and my capital free and mobile, so I can quickly attack new opportunities.

    I do not know how Canadian politics will react to this globalization, but I suspect there are many socialists in Canada, judging from the health care system and the royalty trusts illusions and others types of "guaranteed fixed income" that Canadians love, which are going to blow up in their faces.

    Again a small farm, if you can find a free caretaker, is probably wise.

    ReplyDelete
  83. I just remembered another reason I am wary of farming. The globalists are determined to use "madcow", H1N1 and another hoax they can to bring european level control over farming to NAU. I've heard from Belgium farmer for example, that your chicken can't even lay an egg without the new egg being register with a tax identification.

    Land and farming is just too darn political for my tastes. I don't want to dig myself a hole for a quagmire to find me. I want to keep my mind and my capital free and mobile, so I can quickly attack new opportunities.

    I do not know how Canadian politics will react to this globalization, but I suspect there are many socialists in Canada, judging from the health care system and the royalty trusts illusions and others types of "guaranteed fixed income" that Canadians love, which are going to blow up in their faces.

    Again a small farm, if you can find a free caretaker, is probably wise.

    ReplyDelete
  84. Shelby,
    I would just like you to answer me one more question ... all may very well turn out as bad (or worse) than you envision when all private property will be seized. ...so in that case (and frame of thinking) what do you suggest we all do...live in a one bedroom apartment like caged animals with no possessions or hope for the future just dwelling on doom and gloom? I could never live that way...If that scenario happens then nothing including gold and silver (or silver pellets) will save you. If it gets that bad you wouldnt be able to sell them anywhere. Yes i know things are bad but we still need to live and have some hope that this time will lead to better times. I believe things will get worse for sure and gold and silver will skyrocket because of the fear of just what you speak of...that is why it is a great investment ..it goes up when bad stuff happens and also because of the fear of what will happen...and the greed of course.
    Jerry

    ReplyDelete
  85. Jerry I see your emails, will reply more later.

    Default of USA may NOT be imminent:

    http://goldwetrust.up-with.com/economics-f4/inflation-or-deflation-t9-330.htm#2758

    ReplyDelete
  86. Well living on a few acres doesn't have to be expensive. I don't see why one has to choose a small apartment. I think for about $20,000 or so (if you build out-side of building code areas and use a clever design) one can live in a paradise setting in a rustic small house with all necessary things and beautiful scenery.

    I guess I am just wondering what the benefit is of the headache of 640 acres? I mean if that is something you've always wanted to do, then consider it a luxury item. But I am not finding compelling investment case for it. But I don't think it is totally stupid either. Just a hassle that is all. I prefer to stay liquid. Actually I would prefer to find businesses that can capture the huge growth in Asia, being driven by the carry trades and export pegs.

    Jerry I see your emails, will reply more later.

    Default of USA may NOT be imminent:

    http://goldwetrust.up-with.com/economics-f4/inflation-or-deflation-t9-330.htm#2758

    ReplyDelete
  87. Derek,
    I confess I do not know which way gold will go from here, though I tend to think it will go up rather than down.

    But...

    I also feel the current central bank picture is bullish for gold. This does not mean I think they are experts.

    Firstly there are many central banks divided roughly by east and west. The western central banks have without doubt proved they are either idiots (a la Gordon Brown selling half of UK gold under $300/oz) OR they were not concerned so much about how much they recieved for their gold as they were about suppressing the gold price. Personally I believe they are mostly idiots :) But recent IMF announcement that they plan to sell 191 tons of gold does look like an attempt to lower gold price BEFORE they sell. So maybe it's a bit of both.

    But the Chinese and Indians are buying and the europeans have stopped selling. Besides this the Chinese have trillions of dollars and still are acculumlating more so they will continue to diversify into commodities and hard assets. I'm willing to believe this is not bullish if a clear argument is laid out but I can't see it right now.

    -Chris

    ReplyDelete
  88. Chris,

    Go WITH your GUT all the time. If feel one way than the other your gut knows all.

    ReplyDelete
  89. Jerry, if cattle is such a great income business, why not just lease the land and put your capital into the cattle themselves? Land is not the precious commodity. And if you can't make the investment case for the cattle business, then I don't know how you can make the investment case for the land, where you are taxed on capital gains, more illiquid, and face more risk from the govt if it goes bezerk. And you can't move land, nor can you eat the land itself. The only reason to buy the land is the capital gains argument, but land did not outpace gold (not even close to silver) when we had a creditor nation in 1970s. Now we have massively in debt society.

    I know it sucks to not be diversified, but I think the powerful argument against most capital investments at this time, is precisely why gold is going to the moon. The financial system is a failure, because of the overhang of the huge debt. There is only 2 directions we go from here, either massively more global debt or a reset/implosion. The former will cause the latter to be much worse, but on delay. Either case is massively bullish for gold. The former would allow for income based investment for a few more years, but who wants to be sitting on a taxable asset when the implosion finally comes?

    -Shelby

    ReplyDelete
  90. Whereas, Buffet bought a railroad. They are not unlimited. Railroads are an huge loss making capital investment that has been amortized over 100 years already. He figures it will be cash cow, when energy is priced upwards to account for 3 billion new BRICs moving into global workforce.

    An analogy for land is if I thought basketballs were going to increase drastically in price, would I go buy basketball courts and pay taxes on large chunks of land where there is sufficient density of people to consume my courts? No. I would buy a basketball marketing company.

    -Shelby

    ReplyDelete
  91. A little (big) something most people don't realize about silver:

    http://goldwetrust.up-with.com/precious-metals-f6/silver-as-an-investment-t33-225.htm#2760

    ReplyDelete
  92. Will we continue to repeat the exact same pattern as the 2003-4 reflation and thus get a lower low in about 1 month?

    http://goldwetrust.up-with.com/precious-metals-f6/gold-as-an-investment-t60-180.htm#2761

    ReplyDelete
  93. Ah finally! The key epiphany:

    http://goldwetrust.up-with.com/economics-f4/inflation-or-deflation-t9-330.htm#2759

    ReplyDelete
  94. Buffet's advise, I think applies to why I don't like to invest in that Canadian land being promotoed in brochures:

    http://finance.yahoo.com/banking-budgeting/article/108927/the-oracles-tips-for-the-rest-of-us

    * Stay liquid
    * Don't get suckered by big growth stories
    * Understand what you own
    * Defense beats offense
    * Value, value, value
    * Buy when everyone else is selling
    * Don't buy when everyone else is buying

    -Shelby

    ReplyDelete
  95. Using Jerry's link that showed the appreciation of farm land and gold was roughly the same from 1974 to 1980/2 (slightly better for gold actually and it peaked sooner so higher annualized return), then assuming one does not report their gold sales (no capital gains tax), then the capital gains tax would need to fall below the annual income on the land (9 - 12.5%) in order to make it better to buy the land than to hold gold.

    ReplyDelete
  96. More validation that a "FairTax" would be too slow:

    http://financialsense.com/editorials/casey/2010/0302.html

    "If Ryan’s Roadmap were adopted, however, the CBO estimates that debt/GDP would peak at 100% in 2043 and “decline thereafter, reaching zero by 2080,” then move into surplus. (For the complete CBO report, go here.)"

    -Shelby

    ReplyDelete
  97. Judging by the amount of people on here that say farmland is a bad investment further reinforces my belief that this (candian) is a solid investment. Just as the numerous followers here that are ready to short all the markets confirm to me that the markets are going higher. Shelby, further to your tax reasons not to own farmland, here in Manitoba we have a 70% farmland tax credit meaning i get 3/4 of my tax back making it almost nil. Also if you consider 1% a month appreciation a bad investment added to the income from the land i would say you must know more than Buffet or Rogers do. Yes i like PMs better, but diversification is not a bad thing. Especially if you are buying in the path of a rural development! I know several aquaintances that have subdivided 40 acres farmland packages on the edge of my town into million dollar profits.
    It often pays not to have tunnel vision.
    Jerry
    http://www.fcc-fac.ca/en/Products/Property/FLV/Fall2009/index.asp#mb

    ReplyDelete