Mark McHugh

If you’re thinking about buying Gold now – Think again (please)

In Gold, stocks finance on Thursday, May 21, 2009 at 11:03 pm

The answers to life’s problems aren’t at the bottom of a bottle, they’re on TV!”

~Homer Simpson

I guess it was morbid curiosity that made me put on CNBC  for the first time in a couple months (and that’s all I got to say about that).

All day, between Wonder Hange commercials, the forbidden word was uttered repeatedly.  Gold. If I were more ambitious, I’d create a montage of people saying the word gold on CNBC Today.  But it could never compare to MJK’s four minute plus montage of Homer Simpson saying, “D’oh”, so whats really the point?  Well, the point is the bobbleheads were so busy saying the forbidden word that I’m surprised no one collapsed from lack of oxygen. Gold gold gold GOLD gold………get the picture.

Gold was up about 17 bucks, while the dollar, stocks and bonds retreated. Of course normally, when gold’s up 17 bucks my favorite morons forget to mention it.  They treat gold like some sideshow curiosity that was once considered money….go figure…. But from time to time, they actually suggest that you should buy gold.  And if you’re paying attention, you know that is the time you should sell gold.

Of course when I say “gold”, I mean make-believe paper and pixel gold, not shiny yellow metal.  There’s really no connection between the two.  The “prices” that you trade on are figments of  imagination; no more real than the $35 “price” claimed by the Bretton Woods system.

The losses that you can suffer listening to the quacks on TV, however, are quite real……

more………….

You may think I’d also call these guys calling for $10,000/oz. gold kooks, but that’s not the case.  Those lofty estimates are based on the re-monetization of gold.  The problem is no one in power today wants to see gold re-monetized, because it’s obvious when you’re broke.  So what’s been set up is the ultimate crooked card game, where the vast majority of participants  bid on something they can never actually possess (read the GLD prospectus).  Just to refresh your memory, the point of a crooked card game is to steal from the rubes (that would be you).

Rube Spotting

The best way to gauge rube sentiment (at least for gold) are the ultra-super-double-bubble leveraged ETF’s (the best wealth-destruction vehicles ever invented), specifically DGP (2x-long) and DZZ (2x short).  I track the money flow on each side to see whose going to lose money (the side with more to lose).  Surges in speculative forces have been followed by gold price corrections since the inception of these funds.

goldspecmayThe ratio of long to short speculation is now approaching 3.5.   So, if you are expecting a gold surge, you’re already very late to the party, and in case you haven’t noticed, the late-comers usually get stuck with the bill.

Technical Analysis by Elmo

For those of who want gold now, because the dollar is tanking:

ELMO TA1

Quite frankly, Elmo’s analysis of gold is a little more muddled:

ELMO TA2

Manipulating the gold market is both easy and profitable for big banks, and no one is the slightest bit interested in stopping them right now (and that includes me).  I mean, why spend taxpayer’s money when they’ll give it to you of their own, free (albeit misguided)  will.  In my opinion, an honest gold market would destroy the world’s economy, and I’m just not in a hurry to see the apocalypse.  Sorry if this seems cryptic, but I’m saving the story of how you can manipulate the price of gold and what would happen if you fail for another time.  Trust me, anyone who thinks about it, can get it, so don’t get me started why it’s not on the NYT’s front page….

Priorities:

For a minute, imagine you’re driving this train wreck.  What would you want to happen?  You’d want to keep as many people as possible paying their bills (making your friends richer).

So you need to:

1) Keep house prices as high as possible.  Pop quiz hot-shot, how much more does a 6% 30-yr mortgage vs 5%?  11% more!  With an estimated 30% of all Americans “underwater” on their mortgages, an additional 11% drop in prices would probably convince millions that the best financial move they can make in 2009  is to stop making mortgage payments.  So you need to…….

2) Keep interest rates as low as possible.  Losing control of interest rates is “game over”, which would be awesome for the price of gold, but for civilization… not so much.  No worries though, just repeat the amazing Super-Collosal strong-dollar trick we saw last fall.  This will collapse US stocks (again) and create a flight to quality (I throw up in my mouth a little every time I hear that), which means people will be so scared, they’ll gladly snap up the Trillions in new government debt.  Interest rate problem solved!  Sure, this vaporization of wealth prolongs the recession, and would hurt our exports, if we had any, but it serves Priority 1. You see, printing money’s not so bad if you can destroy it somewhere else (we’re talking about your 401(k)).  It’s all in the game.

Consider the Source…

If I worked for a hopelessly insolvent dinosaur (that would be General Electric – parent of CNBC), I’d want people to lose money at every turn, because that’s the only way people would ever become desperate enough to buy into this government-backed ponzi-scheme (117 years – half a trillion in debt!).  If the government is going to print up money for Jeff Immelt, it would be nice if he destroyed some money in return, right?  Gotta keep the Universe balanced.  So you have your bobble-heads talk up gold when it’s about to get whacked, and talk down the dollar when it’s about to rebound.  It’s the perfect crime, because GE didn’t hit the “place trade” button, you did.  Wise up.  Who do you think you should trust, Dennis Kneale or Elmo?

Fool me once……..shame on………………shame on you……………….but fool me-can’t-get-fooled-again.

~George W. Bush

Hope you like Hot Dogs…

Ah, long Holiday weekend.  A chance to catch up with old friends and find out exactly how susceptible they are to suggestion.  So don’t be surprised when you hear, “Dude, the dollar is toast, I’m buying gold,” or “I’m just waiting for a little pullback to get back into stocks.”  If your really, really lucky you’ll get a gem like I did last summer:

A friend of a friend intruded on a conversation about why certain people (like me) feel the need to fix things themselves, even when it makes more sense to hire  someone.

“I don’t want to know how anything works,” he declared boastfully.

I was compelled to inquire, “What kind of work do you do?”

“Vice-President… Finance,”  he gloated.

I just smiled and nodded.

Previously:

How Hot is Gold?

Squashing Gold Bugs

It’s the Currency, Stupid!!!

Can You say ‘Fiduciary’?

Recommended:

General Electric: Genuine Risk of Collapse? — Seeking Alpha

by James Quinn of TheBurningPlatform.com

Charts from Quote.com

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  1. money isn’t thinly sliced tree… it is flexible, basically a fabric and made from cotton… the fibers that surround the seeds, which provide oil and a protein-rich flour. I remembered this when I wrung out my bathing suit before removing the bills I’d left in the pocket… still in great shape.

  2. [...] Posts M. C. Escher – EconomistIf you're thinking about buying Gold now – Think again (please)HOW THE FUCK DOES THIS HAPPEN, MARY?Giant Leaps Today's WTF – GLD tradesThe 'Uptick Rule' (A.K.A The [...]

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