Market today

nobull

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Sep 27, 2010
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so far Bernanke for better or worse, I think better has broadcast his sentiments and stuck with it. This is so different from Greenspan. So I don't see any QEIII in the picture at all.

Once oil drops then industrial production and commerce goes sky high. Then what I think you will see is Bernanke raising the interest rates thus twarting a second drive of commodities into bubble land.

You picked it square on. Gas at $3.50 stops the US economy cold. Gas at $4 destroys the commodity bubbles. So what we are seeing now is a good commodities whipsaw and if these speculators think they can get on the other side of that trend, they are truly the smartest on the street. Commodities have an uncanny means of destroying speculators in big numbers.

Late night infomercials are in fact selling gold and silver coins. Just like the late night informericals were selling real estate schemes for nothing down properties. Face it... logic says... if Gold or Silver is going to double in value in a year, you don't make a living selling it, you make your money by buying it. But therein is the rub. The gold sellers tell you that gold will go to $5000 but there they are selling it to you for $1500. What a deal we should all get...

The commodities whipsaw is causing so much bloodshed this time around it is incredible. As El Toro pointed out the "wall of water" theory had them all lined up in the gasoline and oil longs. Then it just flat went the other direction and none of them could get out. So the hedge fund carnage is huge. I am certain a dozen of them went flat bust. They are definitely getting redemptions and they are selling stock indiscriminately. It is blood in the streets and we have not see this much hedge selling since March of 2008. I have to buy these market.
 
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Late night infomercials are in fact selling gold and silver coins. Just like the late night informericals were selling real estate schemes for nothing down properties. Face it... logic says... if Gold or Silver is going to double in value in a year, you don't make a living selling it, you make your money by buying it. But therein is the rub. The gold sellers tell you that gold will go to $5000 but there they are selling it to you for $1500. What a deal we should all get...

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods.

The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.
- Alan Greenspan
 
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods.

The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.
- Alan Greenspan

IMHO partial gold coverage on the dollar is essential if we want a gradual return to stability. Full 100% gold coverage of the dollar would be a disaster. Gold in stock vs. dollars and debt outstanding... well hell, the ratio is extremely troubling. Tiny steps are needed, not radical blowout disruptions.

A 100% gold/dollar ratio would show everyone that the dollar is virtually worthless. I mean, full coverage of the dollar by gold would mean that gold should be priced about... what?... $10,000/oz in dollar terms?Hell, Maybe $20,000? Honestly, I don't have a clue. But the dollar devaluation would be be catastrophic for us and many other countries.

We don't want to blow up the dollar. We don't want to destroy it. We just want it to reach an equilibrium without (or in spite of) the Fed's disruptions.

100% convertibility of dollars for gold got us into this mess when the 100% convertibility window was closed and gold confiscation was enacted. After that, we got the Federal Reserve.

In the modern age, a gold/dollar ratio still makes sense. But the connection was severed in the Nixon administration. We went to a 100% floating currency. Why can't we go back to the middle ground?

The price of gold and dollar coverage are meaningless if a benchmark is not established. So, on one fine day we might declare the dollar is backed by 10% gold. And we mean it, of course. This is no ruse. We have an agenda and we'll stick to it

At this point the dollar isn't about value. It's about price. Yet the USA is now in the business of challenging both price and value. There will be no discussions about "worth." The dollar will be "worth" what backs it. And the defense requires hard assets. What better hard asset than gold?

Some asked "At what price must gold be valued to provide this partial coverage?"

I don't like any question that asks about price and value. Am I to address price, value, or both? Am I supposed to discuss the difference between price and value? I will not.

The pricing/value question is a subective assignment. And it smacks of a trick question.

AT ANY POINT THE DOLLAR CAN BE DECLARED TO BE TIED TO GOLD. But when gold goes over $1500.00/oz and continues climing, I dare say the Fed needs to assess their policies and consider a gold/dollar connection. If gold goes to $2000 and higher, the Fed better get serious about the dollar/gold ratio.

When the Fed and/or politicians finally decide there will be a fixed dollar/gold ratio, the price/value question will be moot. Their actions will only be about price vs. gold and other currencies.

The election spinmeisters will start ramping up, and the administration will find some unexpected measures to make the dollar go up, the markets go up, and their campaign for re-election go up.

Ah, but will the Fed cooperate? Not this year, methinks.

Regards
doug
 
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GenSenerca..
When the US Economy realizes the benefits of $2.50 gasoline again, commerce will be spurred and every aspect of US business will improve. Gridlock will keep the socialism in check.

It is shocking to me that CME and the Federal Gov has allowed so much speculation in the commodities to the extent that their main purpose of supply and demand has been replaced by bubble after bubble. Nobody seems to learn that high priced energy is the death knell of any economy even the biggest economy. Every recession and every double dip has been preceded by an oil bubble. It just kills the consumer and business activity. It is a war between citizens and the goldmans of the world. The hedges caused the recession with the mortgage derivatives, then the gov, the eternal blind eye bailed out the hedges at the expense of the gov that picked up the debt. Goldman had a great Christmas bonus year while the citizens got destroyed. The stupidity of small investors to buy bubbles has me baffled. A bubble is a bubble I don't care what the rationale. It is all tulips. Silver, Gold, oil, corn, wheat. There is not one compelling supply and demand story, just an irrational bubble mentality. Then one glorious day Capitalism rips the speculative bubbles to pieces as if it knew all along and was just waiting to take them down at the peak of their arrogance.

regards
doug
 
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