John Ward August 1, 2011 gold.

Debt crisis over, stocks rise, gold falls

SO BUY INTO GOLD NOW

Well, you read it here first….two months ago: the debt ceiling crisis is over. If you thought the ceiling was the problem, you’ll now be among the Goforits buying stocks. If you’ve seen the price of gold plummet, you may be wondering if you should take profit.

Stick with Gold. Just as with the EU fix (they don’t do quick fixes, only slow ones) this ‘agreement’ in America is absolutely no solution at all to the US debt/economic structure problems. Nor is austerity alone an answer to ours. Nor is Chinese anti-inflation activity working. And Asutralia will fall hard when a combo of poor demand and high interest rates stop the CPR from buying its raw materials.

Think of it like this: every time a fantasist sees another Elastoplast on the melanoma and buys stocks, it makes it cheaper to buy into gold all the more. The strategy is foolproof for one simple reason: you’re right, and they’re wrong. Also, the Chinese can’t get enough gold as part of their drive to complete self-sufficiency. And as the Indian middle class grows, they’ll buy more and more of the stuff for decorative and religious purposes.

Two problems: one, bank paper can’t be trusted, because the banks are heading for another calamity. And two, bullion involves a ripoff premium, handling costs, and the difficulty at the moment of trading it once the balloon bursts.

The safest medium-term bet now is to buy into gold producer shares. That’s what I’m doing. It’s up to you what you do.

Please note that I am not licenced to give investment advice, and cannot take responsibility for any loss of money by readers acting upon my personal viewpoint

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1

Dust hurricane on June 27, 2012 at 8:58 pm

Report fails to emphasize bank crime.

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2

Dust hurricane on June 27, 2012 at 11:40 am

Plain and simple – greed alongside overpopulation. The more people, the more greed.
On top of this, workers wages frozen, CEO’s massive pay rises.
We bail out the banks , now they stop us from taking our money out and say they have a computer glitch. When will people wake up ?

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3

CRASH 2: Time to put your head between your knees….or in your hands | The Slog on August 4, 2011 at 7:00 pm

[…] Slog posted three days ago to suggest Gold would be a good move: it’s now at $1675. Yesterday I compared the situation […]

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4

banquo21 on August 2, 2011 at 9:10 pm

Gold at $2000 by September.

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5

AJC on August 1, 2011 at 8:42 pm

“And Asutralia will fall hard when a combo of poor demand and high interest rates stop the CPR from buying its raw materials.”

A double wammy if Gillard and her eco-lunes get their way?

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6

Robin Banks on August 1, 2011 at 6:06 pm

Gold miners have tended to under perform the price of gold, which unlike the dotcom market, indicates that gold isn’t in a bubble. Hot money would have ramped up prices which isn’t the case.

I think the Tim Morgan report is too rosy when it comes to the UK economy because it does not include the effects that a marked Euro area/US slowdown will have on the UK. Time to short UK gilts which can be done with an EFT (although how safe are ETFs).

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7

banquo21 on August 1, 2011 at 5:06 pm

Too late the market at 18.00GMT is already back up to where it was before the “exceptional agreement”, supposedly designed to clam the markets.

Exceptional failure if you ask me.

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8

Jeff Wood on August 1, 2011 at 4:26 pm

Ah, yes, Robin. You posted the link yesterday, and late last night I downloaded the report and read it. Now I get the chance to thank you.

I think.

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9

tigreeye on August 1, 2011 at 4:11 pm

Count on it. We’ll be digging out of this fascist economic mess well into this century. Debt ceiling, debt schmeiling. It doesn’t mean squat. We’ll go on having a debt whether they raise the ceiling or not. We will always have a debt as long as we have an extortionist bunch of thugs called the “Federal” Reserve. It was all political theater to take entitlements like social security and medi-cal and to do their little fear tactics on the American public. They claim they may cut $1 trillion in military spending. I’ll believe it when I see, but the crazy a$$ military industrial complex will fund its own hell till the war coffers come back up if necessary.

…There’s a tango in the Congress over a debt impasse
And bankers fiddle, whilst the flag flies half mast…

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10

james c on August 1, 2011 at 2:44 pm

Not sure about gold, but there certainly as a significant risk that the US recovery will be killed by the spending cuts.

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11

Robb714 on August 1, 2011 at 2:39 pm

Sounds like sound advice to me, even if you are not licensed to dispense it. I feel if those who were, knew what they were talking about, they would be rich. Thanks for sharing.

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12

Richard G on August 1, 2011 at 1:35 pm

I think a lot of UK Ltd problems were down to short termism I.e large profits in very short timescales (probably just about the same as a parliamentry term of 5 years) that meant prices were higher than competitors and the mediocre final quality of anything supposed to be “adding value” as opposed to profit meant that foreigners profited.

From personal experience and from 1985. An engine research test cells had to be a profitable cost centre such that the prices rose till it was only used by internal customers

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13

Bankrupt Taxpayer on August 1, 2011 at 12:56 pm

That is indeed an interesting report. I can’t stop myself from quoting this piece which outlines the causes of our mess:
—————————————————————————–
“Together, the severity of Britain’s indebtedness and the challenging outlook for the economy mean that the UK is now mired in a high-debt, low-growth trap. Minimising the inevitable damage requires the clearest possible understanding of how this situation
came about.
Britain’s fiscal and economic problems result from grotesque mishandling of the economy under the 1997-2010 Labour administration. Gordon Brown’s reform of the financial regulatory system, and his insistence that the Bank of England determine monetary policy on the basis of retail inflation alone, resulted in a reckless escalation in mortgage lending. The ensuing property price boom spurred unsustainable growth in a plethora of housing-related sectors, and underwrote a rapid expansion in consumer borrowing. Believing that this bubble was real growth, Brown spent up to, and beyond, the apparent expansion in the tax base that had resulted from the property-driven boom. Real public spending increased by 53% in a period in which the economy expanded by just 17%.
As soon as the bubble burst, a chasm rapidly opened up between excessive spending and falling tax revenues. In addition to skewing the economy towards debt and public spending, Brown and his colleagues imposed ever-increasing regulatory and fiscal burdens on business, and simultaneously transferred resources from private industry into a public sector whose productivity was subject to continuous decline. This weakened the overall productivity of the British economy.
Labour’s period in office was characterised not just by economic and fiscal mismanagement but also by the promotion of a culture of moral absolutism centred around spurious and selective concepts of ‘fairness’. This culture, and the accompanying sense of individual and collective entitlement, is the biggest obstacle in the way of effective economic reform.
—————————————————————————-
It kinda blows away Brown’s claim that Britain’s economic collapse was caused by the Americans. And the report is actually being quite kind to Brown by not calling his model of economic mismanagement what it really was: “a credit-fuelled Ponzi bubble”.

And let us not forget that Mr Brown is the man that Mr Blair frequently referred to in office as “a brilliant Chancellor”. ho-ho.

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14

Richard G on August 1, 2011 at 11:20 am

even just checking WSJ – doesn’t actually say deal has been agreed. Does it have to be in place before Aug 3rd or is there some leeway now it is all but there?

The Senate and House are expected to vote on the deal Monday, so the agreement still needs the support of many House Republicans, who have proven a restless, independent group in recent days. But if it passes both chambers, it culminates an extraordinary display of political and economic brinksmanship, coming just days before the government could have been unable to fully pay its bills.

The deal would raise the debt ceiling by $2.4 trillion in two stages

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15

Evo on August 1, 2011 at 11:18 am

WOW!

Excellent link Robin. A must read for anyone left in the UK who might be concerned for their and their children’s future.

Thank you.

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16

Maria dos Santos on August 1, 2011 at 11:17 am

In the meantime,China has established a Pan Asian Gold Exchange,which up front is rather like Comex but unlike Comex there is an opportunity of accessing real Gold.However,the real function of page is shocking.Using their vast USA Treasuries,China have borrowed from international banks using these treasuries as collateral.With this real actual money they have been purchasing assets,PAGE is a mechanism via the 90 day spot rolling contract,to access the Renimbi.Who are sitting on these vast Treasury holdings which now reside outside China?

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17

Altergoman on August 1, 2011 at 10:04 am

JW the smart cookie on gold matters was Jimmy Goldsmith selling all his timber stocks for gold producers in 1990’s around time G Brown decided to sell the UK’s gold reserves at around $300 an ounce.

As apparently 95% of the world’s assets are owned by 5% of it’s pop. An awful lot of money is slopping around in short term speculative markets.

Take your pick you may be lucky, but I doubt if logic and facts will prove the prime movers in any.

I am sure derivatives will be, and they are just bets.

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18

oldasiahand on August 1, 2011 at 9:59 am

My advice, if you can buy them, are the two gold mining ETFs trading in New York, GDX and GDXJ. They are trading as if gold were still $1,000. I have owned them both for several years. Gold may hit $2,000 before the next US Presiderntial election and then gold mining stocks may become the next dot comers.

John is correct about the Chinese. A group of Chinese from a SOE are today looking at a small gold mining company in the Philippines, in which I have a position. Price negotiations should follow.

I also like Royal Dutch Shell. It is trading at 7-8 times earnings and yielding 4.5 per cent. It is breaking out of a 10 years trading range and should work its way north from here. There is plenty of romm for the divi to increase.

Caveat emptor and free advice is worth what it costs.

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19

Robin Banks on August 1, 2011 at 9:46 am

Fair comment on gold. I tend to follow Peter Schiff whose been spot on with his predictions for housing, credit crunch and the price of gold. His predictions for $5000 gold and $200 silver over the next few years could be bang on the money again as the effects of QE lead to inflation. QE 3/4 should provide further support to gold. There will be a dip in gold when the markets tank this autumn (all boats sink when the tide goes out) but gold should be seen as a long term investment.
Posted this link on a previous thread but for those who haven’t seen it I do strongly recommend that you read it. One of the best reports on the UK economy I’ve read in years.

Click to access Tim_Morgan_Report_007.pdf

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20

TheRagingTory on August 1, 2011 at 9:05 am

The problem with “producers” is the governments who control the local armed forces have a track record of helping themselves to the gold produced when they’re in trouble.

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21

william, on August 1, 2011 at 9:02 am

If you think,rightly,that metal prices may be due a dip(as in the next leg of an economic downturn),then crude oil is overpriced,and that is not good for gold.As I have said before,we are on schedule for a market event end September,but the assets of choice are Norway and Singapore(currencies),shares in big pharma,and for risk,December 2012 Barclays puts.The Russian art market is silly now,but there is still great stuff from Latin America from the NY auction cartel.

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22

Gemma Laming on August 1, 2011 at 8:11 am

JW, whilst you are not a financial adviser does not mean that those who are give sensible advice.

You can do as I do. I haven’t much money, but there are silver spoons out there in the charity shops costing as much as €1 – for an ounce of pure silver.

Okay, it isn’t much, but it still represents an investment and given that they are very nice in my cutlery drawer in the mean time, it is a genuine investment.

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