27 November 2009

The wisdom of Calvin J Bear

a bit of a second coming for Gold and aussie nous and cred, imo.

The Second Coming

TURNING and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

Surely some revelation is at hand;
Surely the Second Coming is at hand.
The Second Coming! Hardly are those words out
When a vast image out of Spiritus Mundi
Troubles my sight: somewhere in sands of the desert
A shape with lion body and the head of a man,
A gaze blank and pitiless as the sun,
Is moving its slow thighs, while all about it
Reel shadows of the indignant desert birds.
The darkness drops again; but now I know
That twenty centuries of stony sleep
Were vexed to nightmare by a rocking cradle,
And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?

William Butler Yeats

A jockey places his horse in such a bad position - or finds himself in such a bad position - that he is '10 miles off' (the pace) 'in the dark' (behind too many horses and can't see the way out), 'in a fog' (and that speaks for itself in whatever iteration of the metaphor, even the literal one.)

Analysis of the gold price movement you see widely these days is often widely off the mark.

When I post I try to be conscious of the fact that many people - intelligent and reflective people here - are involved in serious personal endeavours to make money from market investments. These efforts are more than a little difficult these days because of gross manhandling of various factors by government agencies as well as artificial market makers deriving from enforced pension and insurance funds and well-placed software infrastructure that may be somewhat unfairly advantaged against external and independent players.

My post now is aimed at enabling as clear an understanding as possible for those wondering what the record high prices for gold mean in terms of the present forward price projections that may be guessed at in an educated way.

You might look at a 40 per cent move over the last 12 months and say 'hey gee I've missed it, what a damn shame.' Or maybe you're wondering what to do next.

Although there obviously is a relationship between what interest rates do and the price of gold in the current environment, it isn't as clearcut as saying that because one shifts direction then the other will reflexively. This is because the consequences of a major trend are often not comprehended until the condition is actually obtaining and people then suddenly see what previously they did not have the perspective from which to see.

The moves in gold have not been small; they have consisted of 300+% over say twenty years.

The consequence of a 40% change is different from the consequences of a 300% shift.

Moreover, there are widespread misunderstandings about what all the Fed 'money' does or is used for. It is used to keep banks going with a guaranteed stream of income from the taxpayer - it is not used to keep the toxic assets afloat, really. In the long run worthless things will be written off and there will be lots of changes to balance sheets.

Will there be a discounted secondary market for government securities?

That is the crucial question you need to deal with before coming to a firm understanding about the price of gold.

Which comes first, the chicken or the egg.

Rampaging economy wide inflation is unlikely to bring the gold price down. Whereas real estate bubbles can - and did.

The Fed is not on the track that refloats or reinflates real estate bubbles. It is on the track of keeping banks alive and contracting the employment base until rationalisations across the entire economy develops strong holders of government securities versus the present 'everyone must have them' bank system and structure. Strong holders become NET SELLERS in order to realise cash (money) - and then and only then does it all turn into 'money.' At the moment it is all just lifesupport via interest coupons at drip-feed rates. Believe me you can't exchange a government security of a hundred billion for a real hundred billion dollars of real gold!! In spite of the government concept of legal tender the market imposes its own rules there.

All those who believe they have missed the gold price boat may do well to realise that 300% moves don't retrace overnight, and neither can they due to the relationship in this case to national currencies and trade - such as, trade between China and South Africa, or Australia, and trade between the gold market and India, and the context of the US Dollar and China trade, and so on.

The theory that if the Dollar firms, then gold will suddenly fall is the conception in the head of the jockey, back in the field, behind too many horses, running in the dark, in a fog 10 milles off the pace. This jockey has been backed by places such as Dubai, London, Washington, and teams of addicted gamblers like Goldman Sachs, and the Federal Reserve.

It is like saying that if the horse at the rear of the field suddenly picks up speed, necessarily the horse out front will falter. There is no direct connection other than which horse has more stamina and which had the worse run thus far.

If this particular horse - the Dollar - moves forward, the leader, (gold) will only move that much further ahead still.

Of course there can be short term drops. There cannot be any longer term ones at the moment and not for a very long time to come yet. I do not feel the market has reached a true overbought point yet. Which may mean there is a bias still to the upside even for short term trading.

Calvin J. Bear

Every day. EVERY day. I read articles and stuff from people - doctors lawyers philosophers and economists, not to mention politicians and tv commentators - that include phrases such as 'bad lending/bad loans' or 'derivatives' or 'leverage...'

You know, all that kind of stuff.

Well has anybody actually SEEN any of the documents that enshrined these financial instruments?

I have.

There is a certain genius in them and something about all of them I have not ever seen anyone expose.

These days I have almost completely lost the ability to speak that clearly in ordinary english, or write that well. It's something to do with the fact that yer tend to get lazy and just plain careLESS after years of being in this racket.

Anyway, the best way I can explain what I'm trying to say is say what a subprime or leveraged securitised mortgage bond document looks like.

Firstly it is about sixty pages long - the smallest I have ever seen was thirty odd pages in smallish print. It has about three or four law firms listed on it as references on the legal and finance and banking and other obscure codified regulatory ramifications. These firms are almost all New York-based.

There are contained in the body of the document quite exorbitantly wide-ranging legal opinions on the responsibilities of various parties - even down to the idea that anyone over twenty one bears a 'ought to know/ought to be responsible' role when they sign any financial obligation.

And then, there are a few rather exciting pages to do with selling the idea of 'a commitment from a bank to possess the right to receive a premium...'

Do you understand?

The whole thing goes by the idea that if you sell a bank or a bunch of banks on the idea that they can and should become a party or counterparty to a transaction in which they RECEIVE a stream of premiums over say twenty years - but without having a clear borrower yet - then what you can do next is sell the document as a legal obligation offer document to any borrower at the rate of premium attached. And then next - since it is explicitly allowed within the original document - you can float the premiums to other banks or investors as if there actually were money already having been lent out and with collateral committed in. IF there ever turns up anyone actually asking to borrow the principal sum, then, depending on the collateral (which virtually never happens for real) they are prepared to provide A BANK, some bank, any bank MIGHT, in theory or at least COULD if it had the liquidity and wished to take the risk LEND out real cash, add further premiums, invoke some weird clause forclose on the collateral, sell that and cash out hopefully at a profit.

...But if none of that happened, the documents would still go around 'the capital markets' as showing a bank on one end of a deal and therefore with the implicit - although wrong assumption - that the deal involved any kind of real and/or sound lending with real and/or sound collateral there... ...which it almost never is.

A bank late on the scene could then buy into the premium streams at a tiny additional premium... ...and get to have a sixty page document registered as a financial bond of a particular kind and look to sell it off to the next fool for a profit but meanwhile collecting the original premium streams. The premium streams are called some strange obscure term like rated, underwritten or insured mortgage premiums.

And of course within all of that nonsense ya often get a few idiots who actually lend out money and get all caught up in a real business somewhere that no one can or wants to run into a profit.

Many trillions and godzillions of dollars later we arrive at today - a place in which no one that originated this cute idea really wants to abandon the concept of buying (or as in this case) SELLING something that looks real and big for not very much and selling it that many times that they can retire to a Florida condo by August every year.

The End

Alfred Damon W. Runyon

(Cal J. Bear)

[another name completely, but then, that is the whole idea afterall; a derivative...!]

Are you kidding?? Well, okay, it's another article from a bunch of dunces.

Basically, it says - we don't want to buy gold because it pays a low rate of return/interest(?), it has low comparative liquidity, and the cost of storage is high... And this is from China's top think tank? My god, they've got the Wall Street Disease.

...Come to think of it, recently, I have heard a whole lot of crap from people supposedly in elevated places, about gold: what they think, what they think they know, and what they think is happening.

All I can say is last week on this board I said that Max Presnall was the best horse racing journalist in the world. And he was at the time being widely quoted in the global racing media as clearly tipping Shocking to win the Melbourne Cup. The fact that it subsequently did, and at 10/1, demonstrates the difference between a professional who knows his jellybeans and the salarymen and bonus junkies who get a lot of face that they certainly do not deserve.

No one in the professional league of money movers gives a hang whether China buys gold or not or for that matter if any other country buys it either.

The price of gold is going up for reasons not mentioned anywhere public that I have seen.

And if it is really true that the 'top Chinese think tank' doesn't want to buy gold then it shows what little they really know and/or how pathetically they think!! Especially if you think that Genghis Khan once rulled there and backed his paper money with gold.

Other than the fact that gold must for very ordinary reasons sometimes pull back 10/20/30/40/50 dollars in its present phase, there are no scenarios at all for a halt in the continuing upward overall year-on-year movement of the price of gold. And that includes a war with Iran which would only push the thing even higher even quicker - ALTHOUGH IT MIGHT PULL BACK UP THE USD...

Oh yes, an understanding of the reason for gold's present shine is the 6 billion dollar question, as it were. So much so I am certainly not giving it away here. But I will tell you when that upward flight is over and it ain't for a very very VERY long time to come yet. Oh but I guess these geniuses in the top think tanks want the US economy to prevail and the consumer to come back strong and buy all their slave-made junk.

Well if the MPS is down AND the MPC is down ain't no one going to be buying much of anything no matter how many shares in BOA or Citibank are shoved into the Treasury and no matter how many more 'bondlines' are er 'expanded' through so-called QE.

Marginal Propensity to Save. Marginal Propensity to Consume.

As I have said on many prior occasions, don't make the mistake of thinking the man with the official money printer has more 'money' than the financial resources of the private marketplace and its Leviathans, because he doesn't. Bernie Ecclestone has more money push and more power than the whole of Toyota and that's just a fact; if they want to play in the real F1.

Right now, Ben Bernanke is not playing in the real market and he knows it. He's just getting away with it because of the politics of propaganda, rather than the politics of real Democracy. And that's why the MPC is down and the USD down too. Of course gold has no liquidity to enable 10 trillion dollars of bailouts and exec salaries - how about that though! That's nothing to do with gold's so-called 'lack of liquidity' per se. Moreover it's not really true that 'gold pays no interest.' Gold pays no comparatively competitive interest when a sound production-based currency is well-traded and asset values have not yet over-bubbled or burst (i.e. where there is still growth possible). Growth MIGHT be possible via the fiscal measures recently taken, BUT, we have ludicrously low MPS/MPC's and not enough of the bubbles have actually completely burst - thus way too low velocity and no demand push. Clearance rates of assets are highly likely to be falsified - this is not growth, this is a false number on a piece of paper.

Calvin J. Bear

I have a report on my desk dated exactly 15/10/2007 which contains these words:

"There is only one logical outcome of the present condition of world currencies, and that is, while ever there is no official admission of a crisis..." Et cetera et cetera.

That was in October 2007 and the report went on to say: "It is even possible to calculate to what price levels a barrel of oil will reach... ...and/or gold."

Personally I have not seen ANYONE in the intervening time explain as cogently as this report does why the gold price was certain to advance. There have been gold bulls, yes, but they are very wide of the mark as to understanding what is going on. There have been bullish tekno-voodoo-chartists, yes, too. But they never guarantee anything ever anyway.

It helps me to seem a little eccentric; people have doubts that you can be so astute or so correct, thereby leaving you a free road to buy cheaply at will. Of course it doesn't help outsiders to know that the report has had hands with green and/or red inkstains over it.

I have another report coming to me soon, maybe within the next two weeks. These reports do make guarantees.

I don't know anyone from MI6 these days but I understand from listening to the BBC that they used to send notes signed at the bottom with green ink to some of their best people. I know they get copies of these reports - because the reports are essentially KGB-sort of sourced. And I guess the red ink is the best I can do as an equivalent metaphor.

I have seen a draft of the upcoming report and I can tell you that it contains positive references to the Canadian company Broadfield.

George Soros doesn't have an office next to mine anymore and maybe that is why he is so far off the money talking about Carbon schemes and all this right now. Not to worry, he's a smart guy and pretty soon he'll be back to the real stuff.

You can't go wrong following ol' Cal. He knows. He has no money because he had it all fully committed.

Oh no, wait a minute - he probably does have some money now. And that is not the same thing as saying it is time to sell gold! Calvin will now be moving liquidity around to buy more and more and more gold. And pretty soon he will be a bank. I'm seriously thinking of calling my bank "Jellystone Financial Capital."

Calvin J. Bear

My philosophy about modern investing is that it is vital to have the fullest possible grasp of the underlying mega forces. Like tectonic shifts and pressures, these are the elements of the global structure that have the greatest assurance of a clear directional movement.

Greenie's earlier quoted comments (post re a move away from currencies) discovered by Denver Dave: 'it is strictly a monetary phenomenon,' are emblematic of his obsession, or, that is ANTI-obsession, with gold.

Not only IS gold a currency, it is also legally a currency via the Basel Agreements of Banks that ALL developed nations are signatories to. It is quoted in all major financial newspapers in the currency columns, as well as in specific precious metals columns.

However, Greenspan's last idea about 'strictly monetary' is a transparently bitter, and misleading piece of propaganda.

There are about 200,000 new reasons every day that it has upward demand/price pressure. And here I will quote from one of the finest missives ever written on gold - from that well-known Reuters reporter Circa 1958 - "the population of the world is increasing at the rate of five thousand four hundred every hour of the day. A small percentage of those people become gold hoarders, people who are afraid of currencies..."

Anyway, today the world's population is increasing by around 200,000 per day. More than double the rate of increase of around fifty years ago.

The argument is often made that today's technology allows greater and better access to the world's natural gold resource in ways that have never before existed. And that would be fine if the brilliant sapphire stone under god's feet when Moses saw him was different from the brilliant crystal stone under Hermes feet when Atlantis was founded, or under Alexander's feet and buried with his crypt somewhere, or under Vyasana's feet in the cave in Shambala in the Himalaya's, and so on and so on - there is an upper limit to maths, science and technology beyond which finite resources are only repeated and re-iterated through a different set of names, times and other conditions, otherwise causing things to seem as if they are new, whereas they are only new to new-born eyes.

The reason the gold price is going up is not only monetary, but also to do with the new and rising middle class wealth of China, and the global population increase rate. It is a fundamental reason to do with supply and demand, and the COSTS of supply versus the value of demand.

I have never yet seen a new technology whose development costs were not heavily impounded into the net manufactured costing by the Hermes Ibis cult of today (the chartered and public accountants) resulting in no new additions to the shareholders paid out profits. Have you?

And thus we see the wisdom and truth in the ancient lore of the distant past - Loki and Hermes and all these kinds of fellows (and they will not censure me here if the cap fits...), are known as slightly devious and passing cunning. Today we say it like this: 'there are lies, damn lies, and statistics.' And the vendors thereof are accountants.

The Greeks say Hermes invented human writing, Prometheus taught it to Mankind, and a lot of the world's problems arose thereby.

And to extend the myth even more elasticly, I see nothing wrong in stuffing Greenspan's mouth with as much green as it can span, seeing that he loves it that much, until he chokes as did Croesus once before him.

I do not love gold. But I admire and am interested in the sea of electrons on its surface that causes it to shine brightly.

Calvin J. Bear

Bhagwan Prechter Yesterday, 08:09 PM
Post #2

Black Bear

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Posts: 191
Joined: 1-August 09
Member No.: 5,315

Reminds me of a story a Seattle gold dealer shared. He had a female client from India who came to work at Microsoft and she would put a third of her pay into gold. After five years she went back to India. To get the gold back home, she had him get the gold made into thick arm bangles and she took them home with no issues.

Generations of uneducated Americans can barely spell gold let alone understand it. Now we gave billions of people striving for a middle class life in Asia and India who are educated about golds role.

"Where are all the customers' Rolls Royces?"

Thomas. Yesterday, 08:29 PM
Post #3

Grizzly Bear

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Of my 30 colleagues, I have maybe two who have bought gold (with many aware of my gold holdings). No signs of a mania here yet.

bearking Yesterday, 10:06 PM
Post #4

Skunk man to the rescue!

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From: Caliskunkafornia
Member No.: 4,173

investing in Ipods would have proved far more profitable.

Several hundred thousand billions of derivatives...
While my guitar, gently weeps

aussiebear Today, 04:55 AM
Post #5

Last dancer standing; Shiva

Group: Members
Posts: 1,650
Joined: 3-August 06
From: Sydney
Member No.: 4,200

Well said. Gold is part of the architecture of those universal archetypes and its mastery of electronic space is its secret message to us that it remains pertinent . I speck it as bullish, myself...

Any one who thinks, and is determined to let nothing stop him from thinking, is a philosopher . . . R. G. Collingwood

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