When Zombies Buy Gold

(excerpt from Bill Bonner’s great article)

“We’re sitting in a JetBlue airplane as we write…heading back up to Baltimore. Each seat has a TV screen on the back of it. A few years ago, you could get away from TV by getting on an airplane. Now, there it is right in front to you…

…which is all part of the creeping zombification of the US. Music plays all the time. It’s in cars. It’s in shopping malls. Some people even listen to it when they work. It’s like prison…or the Orwellian future…where noise is blared out 24 hours a day, so you never have a chance to think.

And now there are all the Blackberries, iPhones, iPads…to say nothing of regular cellphones and portable computers.

And then, there’s TV. You go to a bar. In addition to the music, there’s often a TV screen.

With all these sources of distraction people don’t have any time to think. Who has time to wonder how the dollar has any value at all? Who worries that those pieces of paper could go the way of all trash…to the dump? Who thinks about it at all? Not many people…

Instead, most people go through the day like zombies – watching TV…listening to someone else’s music…surfing the Internet…chatting…schmoozing…distracting themselves…

The passengers on the plane act like zombies…watching other zombies on TV…listening to music…reading airport novels….

Then, on the screen in front of us, there’s a fellow selling…gold! He’s the second one we’ve seen. “Should you own gold,” is the caption on the screen. A man named Scott Carter is advising customers to buy the yellow metal. Apparently, his company has been in the business for 50 years…

Hmmm… This is something new. The last time we saw gold on TV was an ad for a fellow who was BUYING gold. “Got gold? You can get CASH” was last year’s ad. The advertiser told viewers that they should take advantage of high gold prices to get rid of their unwanted jewelry…exchanging it for cold, hard cash.

Only the cash wasn’t all that hard, after all. That was about a year ago. And today, the cash is worth about 20% less than the gold.

But who cares? We’re talking zombies here. Who cares what happens to them?

When the zombies start buying gold, though, the bull market enters its last stage. Ordinary people do not own gold now. They do not understand that the financial system is in jeopardy. And they cannot imagine that the dollar is not a safe place for their wealth.

….read the whole article HERE

Investing in Gold With a Watchful Eye On Mr. Market

What ho!

The price of gold just keeps going up. It rose $2 again yesterday, to close at $1,310. The Dow fell 22 points.

We’ve been waiting for a sell-off…for a downturn…for a resumption of the “risk off,” fear-driven markets of 2008-2009. It should be coming. People are still unemployed. Stocks still aren’t cheap. And houses are still getting cheaper.

The latest Case-Shiller reading signals renewed weakness in the housing market. Prices are falling again. (More below…) How much farther will they go? Maybe 10% down. Maybe 20%. As we discovered on a recent trip to Florida, you can already get properties discounted 75% off their peaks. How much more is left?

Probably not much on that one. But most houses are down only about 20%. They’ve got a ways to go.

And stocks? We should see them selling at P/Es close to 5…not the 15- 20 that they’re at today. So stocks have a long way to go too.

But Mr. Market always has his tricks. What if he’s preparing a run on the dollar…and a big blow-off in the gold market…BEFORE the sell- off in other assets? We expected stocks to go down…then, gold to go up. What if it happens the other way around?

What if the final stage of the bull market in gold has already begun? What if investors and speculators begin to panic out of the dollar now? What if they sell the rumor of quantitative easing…rather than wait for the real thing? What if they drive the price of gold up to the moon, without giving us another chance to buy more at a lower price?

Anything is possible. Mr. Market is a cagey, son of a gun. He could do anything. We wouldn’t put it past him.

Still, we wouldn’t bet the farm on it either.

Investment pros seem to be turning bullish on gold.

“Gold forecast to hit $1,450 an ounce,” says a headline in The Financial Times.

That’s the consensus view from the precious metals industry.

“It’s hard to be pessimistic about gold in the short term,” said Kevin Crisp, chairman of the London Bullion Market Association. “At worst, you’re neutral.”

We’re seeing more and more bullish forecasts for gold. But so far, actual gold holdings by institutional investors attending the aforementioned LBMA conference are still tiny…less than 5% of their portfolios.

As for individual investors, they’ve scarcely even heard of gold. Few own any at all. When they get on board – it will mean huge new demand for the metal.

And there are the central banks. They have been net sellers of gold for many years. Typically, bankers are the worst investors in the world. They buy high and sell low. Someone should tip them off; that’s not the way it’s done. But they dumped beaucoup gold just as it was hitting all-time lows in 1998-99. And now that it’s 5 times as expensive, they’re beginning to buy again.

When they really start buying, we’ll know the game is over; it’s time to get out of gold. But for the moment, they’ve barely begun.

The biggest buyers will probably be the emerging economies. Why? Because they don’t have much gold. China has only 1.6% of its reserves in gold, for example. And because they’ve got the paper cash to buy it.

China could be a major buyer for 10-20 years…and still have a relatively small percentage of its reserves in gold. So could India. And Brazil. And Russia.

So, maybe Crisp is right. Maybe it is hard to pessimistic. But so many people are so optimistic…we can’t help but wonder: what’s Mr. Market up to? What devious, devilish, infernal brew is he concocting?

We’re not pessimistic on gold. Far from it. We expect the price to go to $3,000…or $5,000 before this is over. But it bothers us that so many others think so too.

It would be just like Mr. Market. Get the Johnny-come-latelies into gold. Whack them hard. Then, take gold much higher.

And more thoughts…

This just in, from The Washington Post:

A new wave of distressed home sales is rippling, more quietly this time, through American cities and suburbs… Several years after the US foreclosure crisis erupted, the U-Hauls are back.

Completed short sales have more than tripled since 2008, and 400,000 of these deals are projected to close this year, according to mortgage research firm CoreLogic. The giant mortgage financier Fannie Mae approved short sales on 36,534 home loans it owned in the first half of the year, nearly triple the number in 2007 and 2008 combined. Freddie Mac, its sister company, approved 22,117 in the first half of 2010, up from a mere 94 in the first half of 2007.

*** Meanwhile, zombies are on the march. Literally.

We got a news item from Europe. “Thousands of protestors took to the streets in dozens of European cities,” it told us.

What’s their problem? They don’t like cutbacks in government spending.

And now Bloomberg tells us that the feds want to keep track of all money transfers into and out of the US:

Financial institutions have long been required to report all cash transactions, whether domestic or overseas, exceeding $10,000 as well as transactions that they deem to be suspicious. The proposed regulations would expand the requirements so that banks would have to report all cross-border transfers of any size, whether or not cash is involved. (For money-transfer businesses, the threshold would be $1,000 as opposed to that at banks, which would report all amounts.)
If you send $500 to your daughter in London, what business is it of the feds?

Why do you ask, do you have something to hide?

The feds say they are preventing terrorism and money laundering. What they are really doing is gaining power. It can’t be too much longer before you need permission to send money overseas. And then, the “rich” will be fitted with the equivalent of an electronic ankle bracelet…to monitor their financial movements and prevent them from getting away with anything.

But wait. Are we becoming paranoid? Are we having a bad dream? Are we “losing it”?

Maybe. But soon, finances could be a matter of US national security. And transferring money out of the country, unauthorized, could be a crime.

The zombies are counting on your money. They won’t give it up without a fight.

Regards,

Bill Bonner,
for The Daily Reckoning

Bill Bonner,
for The Daily Reckoning

Joel’s Note: So where exactly is Bill’s money, his “long-suffering” readers want to know. What is he doing with his own wealth? Is he buying gold? Gold stocks? And, if so, which ones? And what about emerging market stocks, domestic blue chips, currencies, international real estate?

After years of being asked the same questions – and just as long spent researching them, building his own wealth and developing a contact list around the globe – Bill decided to open up his own Family Office. Want in? You won’t have to pay millions to join, just check out his invitation here, and decide if it’s right for you.

1) Peak Gold Is Upon Us. If you had any doubt about what the driver has been for gold’s meteoric rise to $1,300, take a look at the chart below showing the spike right at the Fed’s announcement that QEII was in the cards. With the speed of a mainframe running the latest algorithm, this bid spread to the other precious metals and commodities as well.

Last week, gold ETF’s purchased a staggering 16 tonnes of the yellow metal worth $582 million. The 800 pound gorilla, the (GLD) now owns $38.5 billion of the barbarous relic, making it the sixth largest owner in the world, ahead of Switzerland and China.

These are heady inflows into such a small space. All of the gold mined in human history, from King Solomon’s mines to the bars still in Swiss bank vaults bearing Nazi eagles (I’ve seen them) would only fill 2.5 Olympic sized swimming pools. That amounts to 5.3 billion ounces, about $6.3 trillion at today’s prices. For you trivia freaks out there, that is a cube with 65.5 feet on an edge.

….read more HERE

Now that gold is muscling its way towards $2,000 an ounce, the forces of ignorance embodied by post-secondary-accredited yet nonetheless clueless commentators are being given voice by government sponsored media outlets such as CNN. Tokyo Rose was the generic handle accorded to any of a dozen women who, during World War 2 broadcast programming designed to undermine the morale of American troops over the radio.

Coverage such as stories like today’s “The Case Against Gold” on CNN Money are designed to undermine the determination of gold accumulators who are genuinely frightened about the purchasing power of their dollars as their government ‘quantitatively eases’ the economy back onto its feet. By continuously counterfeiting fiat currencies and flooding the markets with such ersatz lucre, the final rush towards economic collapse is momentarily cushioned.

But make no mistake. The acceleration of the rate at which gold increases – the average has been $87 per year since 2000, and in the last 365 days from today, that number is $317 – is an analogous signal that the rate of deterioration of the global economic system as a whole is itself accelerating proportionately. Contrary to the misguided tone in the CNN article suggesting now is not the time to get into gold, the correct sentiment should be that now is the time to put ALL of your liquid, dollar –denominated wealth into gold. All of it.

Here’s what is going to happen next:

….read 1-4  HERE

“We live in an amazing world. Everybody has big budget deficits and big easy money but somehow the world as a whole cannot fully employ itself. … It is a serious question. We are no longer talking about a single country having a big depression but the entire world.” Former Fed Chair Paul Volcker. Read More