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Soros Gold Bubble at $1,384 as Miners Push Buttons
When it worked to create the fund, one concern was that the exchange-traded product might contribute to a bubble. Burton and his investment team worried that too much success would shoot gold prices up too fast, resulting in a crash like the one that occurred in January 1980, he said. Back then the bubble burst in one day and took two decades to recover.
Pushing Every Button
Ultimately those engineering what would become SPDR Gold decided it wasn’t their job to worry about it.
“Our primary mission was to find every button we could push to stimulate demand,” Burton, 59, said in an interview in London. “We also knew that we had launched something that we could not control.”
...
“There was a potential perfect storm scenario where suddenly gold would fall into the clutches of hedge funds and momentum traders in very, very aggressive, leveraged plays, which could spike the price and then drop the floor out from underneath it,” Burton recalls of the talks.
“Our biggest concern was it would burn another generation of investors and you’d start the whole goddamned tale of tears over again,” he says.
Who is James Burton? He's the former CEO of the World Gold Council.
In July of 2010 I pulled this quote from the World Gold Council's website.
World Gold Council vs. National Association of Realtors®
The World Gold Council’s mission is to stimulate and sustain the demand for gold and to create enduring value for its stakeholders.
I could not find that quote today but I could find this one.
The World Gold Council has a strong track record of delivering value for its members, its partners and broader society as a whole. The success of our programmes and activities is measured by their ability to maximise value for our members and our partners. As a result, value creation is at the forefront of all of our activities.
They've moved from "enduring value" to "value creation". How is one ounce of gold any different today than it was 10 years ago? It is the same gold is it not? Wasn't that supposed to be the allure? Gold's value is neither created nor destroyed? It's timeless?
We create value in a number of ways. Our authoritative research, insight and advice helps our stakeholders better understand gold and its role, both now and in the future. This authoritative position informs our innovations, allowing us to intervene in markets to create a step-change in the demand for gold.
Investors do seem to love financial "innovation" and market "intervention" paradigms. For example, our banking system certainly believed in "innovation" and "intervention" to "create value" for its shareholders. Right? How did that work out over the long-term?
Tuesday: Case-Shiller House Prices
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[image: Mortgage Rates] From Matthew Graham at Mortgage News Daily: Mortgage
Rates Start New Week With Some Hope
Last week wasn't great for mortgage rates....
3 hours ago
7 comments:
The Russians are on it.
Tremors in the Gold Bubble
Fortunately a team from the Research Institute of Mining Geomechanics and Mine Surveying (VNIMI) and the Russian Academy of Sciences (PAH) has taken up the problem, and published their working results this month.
...
This method places the critical time point in the first week of July 2011. Putting together all three analyses, the authors predict that the gold bubble is at greatest risk of collapsing in May or June of 2011, and that the price per ounce will top out in the $1500–$1600 range.
I should also point out an excellent disclaimer.
Despite the accuracy of many (though by no means all) of Sornette's analyses and the additional checks that Tsirel, et al. performed against their primary analysis, a crash in gold is far from inevitable.
And his final conclusion...
Not being prone to selling short myself, I'm rooting for a leveling-off rather than a crash. Nonetheless, I definitely would not want to be a buyer of gold right now.
Sounds like me.
Mark
Here are some quotes from Mike Stathis, author of America's Financial Apocalypse (copyright 2006, I purchased this book in the early part of 2007 and he was correct about a lot of things):
"Anyone who knows anything on Wall Street will tell you that gold is NOT, and I repeat, NOT a hedge against inflation. I have discussed this at length previously."
Mark, I believe you have made that argument also.
Here he is on the current gold situation (this was written 5/27/10, the Beck he refers to is Glenn Beck):
"Unlike the clowns Beck interviews, I do not sell gold. Yet, I made a forecast for gold to soar in America’s Financial Apocalypse. The fact that I have turned sour on it now shows that I only care to tell the truth. I want to warn investors that they are not getting the truth."
"If I were bashing gold for years, one could argue that I have a bias. This is clearly not the case. Now, I see a gold bubble that is forming due to the various media hacks who are being paid to promote it. If gold was such a great investment, why in the Hell is everyone so desperate to sell it to you?!"
http://tinyurl.com/2wethfa
He said the gold bubble is forming, that was last May.
I can't even guess how far it is going to go before popping but I do recall a saying that goes something like this:
He who panics first panics best.
watchtower,
I got your comment in my inbox but it was not posted here.
You officially win a prize!
Blogger thought you were SPAM and I had to slap Blogger with the crazy stick. Hahaha!
That means you are the first suspected SPAM that was not SPAM. Congratulations!
I'll comment on your comments in my next comment.
watchtower,
"Anyone who knows anything on Wall Street will tell you that gold is NOT, and I repeat, NOT a hedge against inflation. I have discussed this at length previously."
In my opinion...
1. The ideal inflation hedge would be something that exactly tracked your future expenses. No more. No less.
2. A good inflation hedge would be something that you could sell at some point in the future and not lose any purchasing power.
Gold has not done #1 in the last century. It has been way too volatile. It has made fortunes for investors and lost them.
Gold has done #2 for those in the last decade, so far. However...
A. The safest time to buy gold is when it is well below its inflation adjusted long-term average.
B. The riskiest time to buy gold is when it is well above its inflation adjusted long-term average.
Although there are other factors, I think those two criteria pretty much go without saying if you believe in return to the mean (which I do).
And lastly, if you buy gold and all it does is keep up with inflation long-term then it is not a good inflation hedge unless you wish to be a criminal in the eyes of the IRS. You'll have to pay taxes on the inflationary gains. Those taxes will ruin gold as an inflation hedge. Right?
Some might not care about that but keep in mind that gold's price is also pushed around by those who do care. The rich with much to lose will more than likely wish to declare those taxes to the IRS. I don't consider myself rich, but I paid the full tax on all my gold and silver purchases made in 2004 and sold in 2006.
watchtower,
"If I were bashing gold for years, one could argue that I have a bias. This is clearly not the case. Now, I see a gold bubble that is forming due to the various media hacks who are being paid to promote it. If gold was such a great investment, why in the Hell is everyone so desperate to sell it to you?!"
That's pretty much how I've been.
I was a believer in gold when it was cheaper. As it grew more expensive relative to the expenses in my life, I grew more and more critical of it.
That's no different to how I "bashed" real estate or stocks as they became expensive. I'm an equal opportunity heckler.
I wish you could have heard me last night.
They are now selling 14mg gold coins in TV ads run on CNBC. Good frickin' grief. 14mg? I could probably breathe that much gold and not even know it. That's down from the 51mg coin ads that I saw a year or so ago.
For the record, there are 31,103 milligrams in a troy ounce.
There is therefore 1/2220th of an ounce of gold in those coins. Limit 5 per household? Why? Would they feel guilty selling too many to any one person?
I'd be scared as hell seeing that as a gold bug. I'd want and need to see investors buy real gold instead of that.
watchtower,
"I can't even guess how far it is going to go before popping..."
Me either. It's not like I'm shorting it.
"...but I do recall a saying that goes something like this:
He who panics first panics best."
My version of that is slightly different.
Our Next Panic Attack in the Making (Musical Tribute)
You know what they say. If one must panic, at least panic first.
And then there is Ben Stein with his own theory.
August 19, 2008
Don't Panic
The S&P 500 closed that day at 1,266.69. He's almost back to that point again. Way to ride it to the bottom Ben, lol.
Hey, I just read my own words from that Ben Stein link.
"I should state for the record that I am very indifferent to the price of the stock market at its current levels though. I tend to think it may merely stagnate from here, much like it did throughout the 1970s."
I kind of nailed that one so far! The S&P 500 has gone virtually nowhere since August 19, 2008.
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