Commodity bubble ???

Fiscal issues can lead the public to worry about hyperinflation. Hyperinflation would be a direct cause, fiscal issues that may cause the public to worry about hyperinflation would be an indirect cause. I think that is what quarter means.

 

Log in or Sign up to hide this ad.

Just make sure that your yuans are the real deal and not Chinese fakes!

 

Agreed, and not enough lay investors believe/understand this. When the market broke in 1980 people were trying to sell and getting offered $5/$7 under spot for their silver, when they had paid $3 over in their rush to get into the silver market just a month before. There is very heavy dealer profit margins to overcome when trying to invest in physical commodities. Yes, when you buy at $10 and the price is $30 you will make a profit, commodities just are less liquid and/or much more expensive transaction costs than other investments.

To be fair to dealers, since they cannot trade these immediately they are taking a timing risk, so they charge more when the market going up, and pay less when its going down. I am not begrudging them anything, just explaining how the market works.

 

I take it another step and distinguish between fiscal and monetary factors. Government spending and debt are fiscal matters. High levels of debt tend to be deflationary since the debt has to be serviced from current income and either paid or defaulted. On the monetary side, the Fed can choose to monetize the debt, or not. Right now they are attempting a partial monitization, a sort of middle ground to avoid either deflation or hyperinflation. Will it work? Nobody knows [but there are a lot of opinions out there]. The Federal Government cannot cause hyperinflation since they must borrow or tax to spend -- an "even" exchange in the GDP formula. Only the Fed can hyperinflate but the Fed Board of Governors realizes that this would not be a smart thing either economically or personally for them to do.

 

I agree. It is important for bullion investors to sell into a strong market while prices are still rising. After the top, and there will be a top someday, it is too late.

 

Just as an aside, I have been listening to the PM pushers a lot the last couple of months, (I definitely think PM ads are way up), and its just like 1979, every single market movement is advancing their argument. Market up, proof that you need to get in quick, (but not too late), market down, great buying opportunity, market flat, better get in while you can. I wish I could get paid for market advice regardless of market activity.........

Seriously, these same firms have been predicting huge PM market upswings my entire life. Anyone who listens to them or their reasons are listening to the equivalent of a car salesman why you should buy their car. Be smart, look at the markets and listen to your gut, not sales propaganda. Cloud is right, you can make money swimming with the stream in any major market movement, but at a certain point you can be playing the "greater fool" game, betting on being able to sell for a profit to someone with even less knowledge. There will be a top someday, maybe we have seen it, maybe it will be $70, but there will be a top, and heaven forbid if you try to sell at spot then.

 

I'll agree about the PM pushers. But here's something to keep in mind as well-- the US dollar has much, much less buying power than it did in 1979 (I paid $300 a semester tuition at a state university, and spent the night at several decent hotels for less than $10-- can you do that anywhere today?), so precious metal markets will adjust themselves accordingly. The question is, by how much.

 

/agreed. I crunched the numbers a few months back, and it surprised me. Depending on discount assumptions, silver should be between $16 and $20 today if they were effectively the same price as the early 1930's. I didn't realize it would have been so high, and it kind of stopped me from selling when I was thinking about it. I am not throwing stones at todays prices much, but a 50% or higher movement I would be.

 

I think it's true that there are enough PM pushers out there to become worrysome. And it is also true that there has been so much inflation since 1979 that a case can be made that PMs are still not too highly priced.

The thing that makes me think the PMs will move higher is that despite the PM pushers, public participation is still very low. I recall in the late 90s that AOL was running chatrooms with hundreds of individuals spread among them preaching the gospel of tech investing. I was a frequent participant trying to argue the other side. It was great fun. I don't see anything close to that level of excitement about gold and silver, so I expect the bull market to continue.

P.S. The tech investors in the 90s turned out to be correct -- as long as they had an exit strategy, which most probably didn't. The only folks who got really burned were those who bought, bought on the subsequent dips, and held no matter what. They were sort of like some people here.

 

I came to the conclusion that $20 would likely be the new base price after the current bull market is over [assuming no hyperinflation]. So I have never purchased above that price. But it could fall from $50 to $20 or even from $100 to $20.

 

I thought freedom of speech still exhisted in the U.S. provided no one is degraded or insulted.This Bullion section is a good forum to discuss the out of control U.S. debt and it's relationship to Gold but apparently this is something you are uncomfortable talking about.Many members as do I ,enjoy this topic and enjoy opinions of others.If the moderators choose to close this forum because I mentioned the names of 2 politicians who really do care about the future of the U.S. economy then so be it but it will change nothing.The debt clock will keep turning at $2 million dollars per minute or $3.5 million dollars per day.
I am not a Republican,Democrat or member of the Tea Party.I am only someone who can see that if things don't change soon you will be on your way to becoming a 1924 Germany.

 

If we could only get that over to people who want a Democratic Republic.

Pep

 

Howdy folks,

I've been following along but haven't had a chance to chime in. Agree with much of what's been said. The original postie was about a commodity bubble. I feel that commodity prices are holding firm in real terms, but becoming pricey when expressed in terms of dollars. We know the dollar has lost 96% of its value since 1913. We know they're injecting as much liquidity into the system that they can to try and stimulate the economy without going overboard (as cloud mentioned). Nopers, commodities are all about the same relative to gold. They've just become more costly in terms of dollars.

There are so many facets to the gold and silver markets that we know a little about - think of those we know nothing. Right now there's a bit of a pullback that seems to have started with some more active players deciding to take some $ from pm's and move them into stocks. Stocks are doing well and this is all about yield. Some of the safe haven money is starting to chase yield also. Add to that some of the fast money - hedge, etc. - starting to move on, and you've got a 10% pullback. So long as it doesn't get a lot worse, I'm looking at it like the pimple on the elephants ass. feh.

They've got somewhere between $75-105T of unfunded liabiliites to deal with and when you cut benefits as much as possilbe AND raise taxes as much as possible, they still can't cover it. They're left with no other option but to monetize it. [read: it's called Quantitative Easing these day, the Greeks called it debasing the currency]. I've read that in order to be able to even attempt to pay the bill, they need to halve the value of the dollar over the next decade. Er, without trashing it, causing painful inflation, or resulting in a downgrade of our debt.

Let's say they do it. I want to own gold and silver and other real stuff. Let's say the don't. I want to own gold and silver and other real stuff.

Oh, and BTW, the unemployment is running about 22% nationwide if you use the broad measure and calculate the number using the formulae they used during Reagan's Presidency. The big change in stats has been with inflation and the CPI. 20% is housing and based upon rents. 50% is subject to hedonic adjustments (doesn't count if it's New and Improved), etc. It's really about 7-8% right now. Funny that their QE hasn't caused any worse CPI numbers, but if you count cheap goods from overseas AND that the banks haven't been lending, heretofore, at painfully low rates thereby dampening the velocity of money. So far. Anywho, check out www.shadowstats.com

peace,

rono

 

Wow, so much to respond to since I last took a look a the board. Rono kind of paralleled my inflation speach (on another thread) including hedonic adjustments. With the new CPI math it's difficult to find inflation even when burning a little hot. Makes me wonder what the real rate of inflation would be if the core number made it's way up to 6%. With regard to a bubble, I absolutely believe metals are forming a bubble and I believe it will keep inflating for at least another 3-4 years. The market is reacting to a weaker dollar and some supply issues but more importantly to the prospect of future inflation fully manifesting itself in consumer prices.

Interesting to note that physical demand for metals is still strong but prices have come down in reaction to people trading out of metals ETF's and into equities.

 

Yes, you can consider that true on a podium somewhere, but not on this private forum where the rules of posting are specific. The rules say no political agenda or rhetoric. Some discussion of the position of debt may be acceptable, discussion of the USD and other foreign current interaction has a place. But please limit discussions to specific as to bullion investing and not political agendas.

​

The forum generally bans violators rather than closing a thread.

Thank you for your future cooperation.

Jim

​

 

That seems to be the key. The Fed is neck deep in the liquidity trap.

 

I believe it can be greatly simplified jist by watching the prices of crude. I hate to be bullish on China, but that government is subsidising their businesses and promoting research and education, continuing to expand their economic base, while ours is not. Even Steve Wynn has stated that he intends to move his company headquarters to China. Given that he pats no taxes ro Nevada except about 6% on gaming revenue while he pays 50% of gross gaming receipts in Macau, gives one reason to think. Could it be that we are shrinking while they continue to expand ? Anyway, that's what I have been reading.

gary

 

I'm not convinced that China is the real deal. They are a large manufacturer, but also have crushing poverty. The whole economic story reminds me of Japan in the 1980s when everyone expected them to become the #1 economic power with a 30% savings rate and world class manufacturing base that everyone was trying to copy. It all turned around very quickly.

 

Without getting political, or commenting on anything but corn (and it's profound affect on food prices)...
Corn is in a government created bubble by being diverted from the food supply, both in the form of corn, corn byproducts, and essential feed for meat/dairy animals, for use in EPA mandated ethanol production.

They claim ethanol is less polluting, but don't take into account the pollution from fossil fuels to cultivate the corn, pollution from the fossil fuels used to transport the products, pollution from the added fertilizer used to farm more corn, and pollution from the manufacturing facilities making the ethanol.

They claim ethanol can be made cheaply.... However, the ethanol in our fuel raises the price of the fuel, even after huge subsidies for each gallon from the taxpayer to industry. Corporate welfare, payola, scheme, whatever you want to call it. It costs more to make than they could ever sell it for.

Back to fossil fuels vs ethanol... They claim that ethanol replaces fossil fuels. Yes, at the pump it does. However, they say that when you take into account the fossil fuel used to culivate, transport, and manufacture ethanol, 1.6 gallons of fossil fuel is burned to make each gallon of ethanol.

Finally, food prices... Diverting the corn from the mouths of people and farm animals raises the price of EVERYTHING!

 

Howdy,

Found this article today from another forum. Apparently, one hedge fund manager decided to liquidate a huge position in gold futures. Add to this the safe haven investors wanting greater returns and lusting after the equity action from this past year AND some hot money looking for other ops.

Feh. This is why I have not attempted to trade this bull market. The pullbacks are severe but so fast acting that unless you really know your charts and are jack be nimble quick, you're just asking for a trip to whipsaw city. I'm good with the fundamentals and so I just wait these pullbacks out.

Anyway, here's the article: http://www.zerohedge.com/article/meet-man-behind-liquidating-hedge-fund-blew-gold-market

peace,

rono