Friday, November 1, 2013

Crafting a Gold Strategy For the Near Term

I have always enjoyed Halloween. I am not sure why exactly.

I only had about 20 trick or treaters last night. That was up a little bit from last year. Secretly, I have always wanted to buy one of those theater sized boxes of Mike and Ike's candy. When the little shitheads arrive at my door, I want to shake one of those Mike and Ike candies out and place it very proudly in their bags. I think the look on their faces would be hilarious.

This is the kind of stuff that I do to amuse myself.

I have noticed that not only has gold been getting it's ass kicked all year- but there is simply no explanation for it. Demand has been extremely heavy, the money printing and skyrocketing debt continue upward, and yet gold cannot break 1400. A level it was at just a few years ago.

Do I think gold's head is held underwater by bankers and unlimited short positions? Yes,  of course I do. You would be an idiot to believe otherwise. When will it end? I'm not sure.

Here's what I know for sure. I cannot buy gold at these levels and I'll tell you why.

This country has not had a deflationary event since the 2008 crash. This country cannot get economically well until that entirely normal, deflationary, event takes place. Five years of stimulus and QE has done little more than create another bubble. Bernanke's hypothesis was wrong.

Bernanke and the FED have been able to delay the deflationary event- but they cannot prevent it. I think most people who follow markets realize this.

There are only two alternatives for the US economy right now. End QE and watch equity markets fall off a cliff (deflation) or continue QE indefinitely and watch as every last sheep in the world gets funneled into equity markets while chasing return. (hyperinflation)

I think the first scenario is most likely. In a deflationary event, the price of everything will drop dramatically. This is a normal consequence of bankers trying to delay the inevitable pain of their pre- 2008 credit expansion and recklessness.

Only after the deflationary event takes place- will the table be set for the hyperinflation stage.

I think it's really that simple.  

Why buy gold now when you can pick it up 30 or 40% cheaper after QE ends? Why, indeed.

Very often, I laugh at people who price gold against the American dollar. Why? Because the American dollar is a worthless currency that for lack of any better alternative- people are still accepting.

Unfortunately, or fortunately as the case may be- we still use currency to buy gold. We can buy more gold as the price reduces. If you already own some gold- I see no immediate or compelling reason to add to positions here. You are protected somewhat already. If you do not own any gold- I would suggest averaging in right away. Buying a half ounce, or quarter ounce, per month over the next 12 months would be a sound strategy. If the price drops suddenly- buy more.

Regarding price.

As for the daily, weekly, monthly and now yearly fluctuations- don't worry about the price of gold based on an unbacked and worthless currency. I don't buy gold to speculate with. I buy gold to hedge against the greatest global and inflationary event in the history of the world. It is going on right now.

The bankers do not have a solution. Sooner or later, they will have to take their medicine for the shit they pulled prior to '08. Do not be fooled simply because they have been able to delay the inevitable and pretend like nothing's wrong. Plenty is wrong.

Don't be fooled and don't get depressed if the price of gold drops. It's going to- particularly if we get a full blown deflationary event.

There are folks who are calling for 55,000 dollar gold in a hyper-inflationary event and relatively soon. Their chances of being right on both counts? Probably slim and none. Can you imagine paying off your mortgage with a couple of ounces of gold?

One day the world is going to wake up and figure out the truth. The world's debts are not going to get paid by people without jobs or with GDP that does not exist. People will begin to figure this out. I don't know when that will happen exactly- but it will sure be nice to have a little insurance for that moment when it arrives.


3 comments:

Jim at Asylum Watch said...

Brian, I always thought you wee in the "hyperinflation" camp. When did you switch to the deflation camp? Or am I missing something?

Brian said...

I have always been in the deflation first- hyperinflation second.

You see all Wall St., Bernanke, and the Fed are trying to do is stop deflation. they HATE deflation. It screws big debt holders like the government. We've had 5 years of the FED shoveling funny money to Wall St- all of which was done to desperately stop the deflation death spiral because we are a debt based system

I do not believe they can stop deflation unless they manipulate the money supply.The alternative of course is to keep printing forever and hyperinflation starts.

Look at this ridiculous fucking stock market. Does anyone think that the US is 1.5x better off than we were at the March 09 low of 6300? Of course not. We have a hyperinflated stock market that is at least 6000 points inflated. It is a one way joke.

The FED has screwed the pooch. Either way they are fucked. But I think they will just keep printing especially with Yellen which means the hyperinflation event looms ever larger- every day. If they try to taper- hello deflation. They know they are fucked. Their only policy tool at this point is to try and baffle us with bullshit. Really. That's all they got left.

Jim at Asylum Watch said...

I believe they will print til they drop and hyperinflation will have to run its course. It's the only way the banksters and the super rich can protect their wealth.