Thursday, June 27, 2013

Marc Faber View On Gold’s Decline Is Similar To That Of Wall Street During 2008: Buy The Dips

Marc is one of my favorites as noted on here many times.  He  has gotten a lot wrong this past cycle including remarks that the Euro was honest money and China was essentially going to inherit the world.  Both of which were positions I mocked at the time.   Why?  Because the qualitative understanding of quantitative factors has never supported these belief systems.  He has eventually come around to reality and “righted” his views of reality as an adaptable mind always does.  It’s not about always been right.  It’s about being able to adapt and admit our beliefs are inaccurate.  It’s amazing how many people are still rigid thinkers in this environment.  they are still Republicans.  Still Democrats.  Still believe gold is honest money.  Still believe Obama is their savior.   Still believe humanity is the primary cause of global warming. (Although the U.N.’s chief climate pinhead now admits the planet has not warmed in 17 years and the rigid beliefs of those who are so fanatically certain they know what they are talking about, even though they don’t even have a basic scientific understanding of what other factors may be in play, still rabidly and rigidly support their saviors at the U.N.  That includes Obama.) Rigid belief systems are driven by a subconscious intent to control.  And that is driven by the ego and its endless subconscious deceits that attempt to subvert discovery and truth. 

Faber spoke a few days ago on Bloomberg.  As usual, he’s good for a few chuckles and contrarian insights.  He makes a few remarks about gold that bring up a topic I discussed a lot on here before the 2008 crash.  That is, sentiment.  I wrote that sentiment would eventually fail as an investment indicator and it did.  Sentiment was horrible the entire way down in 2008 yet asset prices kept collapsing.  Every Wall Street schmo that they could waltz out on CNBC and Bloomberg kept telling us to buy the dips and they kept getting crushed.   And I kept saying the bottom was not in.  Because I wasn’t using sentiment to catch a falling knife. 

Well Faber is attempting to use sentiment to time the gold market with his comments.  Once again, everyone else has been remarking gold has been oversold (bearish sentiment) for months and they have been buying gold only to get their asses handed to them.  Faber notes that commercial hedgers or miners have their lowest short exposure in gold futures since 2001.  And that is a good reason to buy gold.  Okay.  That’s great.  Who cares?  In the mean time gold miners are writing down their assets and losing money based on the plunging price of gold.   Miners are covering their bets because they are getting their asses handed to them.  Because they were wrong.  Faber is using miners as smart money.  Just as many use the sentiment on Wall Street as smart money.  Neither are true.  They are big money.  But, both are at the mercy of exogenous factors neither control.  Gold miners need a liquidity bailout just like GM and JP Morgan did.  I know how this chafes many gold money advocates but gold is reliant on bailouts from the very organizations they abhor; central banks.   

I noted on here before its 2008 collapse that gold is a proxy for liquidity.  That gold is imploding right now should give everyone an indication of what I wrote was happening for the last year.  That is, liquidity is draining out of the global economy at a record pace.  Much more broadly than 2008.  The entire global economic system is on fire.  And Bernanke is not going to save it because he seemingly doesn’t understand what is going.  Increasing the quantity of money is not a panacea for this global monstrosity.  He’s simply trying to save the system as it currently works.  That gig is up.  Forever.  The problem is not that we need more printed money.  The problem is that corporate capitalism and global finance is dying.  That’s why this is a global crisis. 

So, back to Faber’s remarks.  They sound eerily similar to the buy the dip equity market crowd in 2008 under the same precept he is using today.  As I noted on here before, gold needs a bailout.  Just like equities got in 2008.  Just like gold got in 2008.   I noted on here within literally just two or three days of their bottom in 2008 that the only investment that looked attractive to me were gold stocks.  Ain’t seein those same factors at work today. 

While I can’t accurately predict the future bottom in gold, the next stop is likely around $850 as I noted before this current wave of falling prices.  Miners will keep covering their shorts as price continues to drop.   And they’ll keep losing more and more money.  Until the price of gold bottoms or until they go bankrupt.

This is a cycle that is going to destroy countless institutions of the ego as is a long time thesis on here.  And that means the ego-driven beliefs that support those institutions that are so pervasive in the world today are going to literally be blown to bits.  They are going to be destroyed.   Money itself is an institution of the ego or an institution of control.  As noted on here before, if it fails, gold is going with it.   Obviously, were that to happen, sentiment will be very bearish on gold when it goes to zero.  Just like happened with Bear Stearns and Lehman Brothers.  Sentiment was very bearish as they went to zero.  A contrarian would have been buying using sentiment alone.   And would have lost everything.

Sentiment is not the primary reason to ever buy or sell  anything.  Without liquidity and without demand, sentiment is useless.  There is no net demand for gold right now regardless of what you read on some gold-pumping blog or web site.  If this economic-financial-monetary system fails again, there will almost certainly be no more attempts at reflation.  That means no more bailouts for gold or stocks or bonds or banks or corporations or politicians or elites or private, for-profit capital.  And that means greed will have been sufficiently punished when speculators lose everything in the Ponzi scheme we call globalization.

posted by TimingLogic at 8:59 AM

Links to this post:

Create a Link

<< Home