The Barrons Gold Miners Index, which has been around a long time, is cheaper now than any time since 1941 in relation to gold. BGEIX, a long lived mutual fund of larger gold miners was trading above 11 when gold was at $427 per ounce at the beginning of 2005. It is trading below that level as of yesterday and may drop below 10--its spent 20 of the nearly 2100 market days below 10 since 2005. It is truly amazing--these offer such value it is really hard to believe.
I just bought some RBY--it will pay off and I'm not worried about what happens in the next few days or weeks.
Not only is higher inflation a near certainty, history tells us that once it grabs hold, it can quickly spiral out of control. Given our crumbling fiscal state, we must consider the possibility that price inflation could kick in abruptly and rise rapidly.
Amity Shlaes, a senior fellow of economic history at the Council on Foreign Relations and a best-selling author, provides some examples from the past century of US inflation that was at first subdued but then abruptly rocketed to alarming levels. Look how quickly inflation rose in just two years from "benign" levels.
According to Shlaes, US inflation was 1% in 1915 (based on an earlier version of the CPI-U). Within just two years, it soared to 17%. As she states, it happened because the Treasury "spent like crazy on the war, creating money to pay for it…"
In 1945, the official inflation rate was 2%; it accelerated to 14% in 24 months. Inflation registered 3.2% in 1972 and hit 11% by 1974.
It's clear that the arrival of inflation can be sudden, and that prices can quickly spiral out of control. Given the profligate amount of money being printed by many countries around the globe, we could easily become victim to rapidly rising inflation. If we matched the increases in the chart, our CPI would register 11%, 15%, and 19% respectively, by February 2014.
Regardless of the timing, though, this is a clear warning from history: expecting the CPI to remain low indefinitely is a dangerous assumption.
It is a fact that high inflation reduces the real cost of servicing debt. Our debt levels have grown so high that the only politically acceptable way to deal with them is to inflate the currency. Politicians and central bankers have no incentive to stop, and thus will continue until disastrous price inflation emerges. Just because it hasn't occurred yet doesn't mean it won't.
Other political solutions simply aren't realistic. There is no amount of politically acceptable increase in tax revenue or austerity measures that can meet existing and future obligations….
CL this is the third time I've tried to post here--I expect UUP ($USD ETF) to close the gap from Sep and Nov 2011 between 21.20 and 21.40 and possibly move lower..
Gold stocks are undervalued by any measure and gold sentiment is as low as it has ever been. If we go into an inflationary scare period that usually preceeds a stock market route like we did in 2008 and we did several times in the Great Depression, gold shares and commodites should do well over the next 5-10 mos. If UUP gets to the target or lower it will be time to buy HDGE and TLT or Zero Coupon bonds (EDV) and hunker down for the next crash.
AUD and CAD are the things to watch in the near term--if they get stronger, same will be for commdoities. The committment of traders is looking more favorable on both.
CL, it seems the biggest danger is the money creation that results in higher prices that are unreported by the crooks in Washington. Of course this is the same game as has been played since 1933--problem is now our options for real wealth creation are much less than back then, because our manufacturing base has been gutted.
By the way--last I checked, unless you have a significant amount in a Roth, da boyz will do all right any time you want to tap into your retirement.
Its a slow vaporization of what once was wealth--we'll all just keep taking the pillz that finance most of the modern media today (LOL)
“According to INK Research, there are now seven precious metals stocks on the TSX with insider buying for every one with selling. That’s a near doubling of the ratio since mid-January – and represents a level of lopsided transactions that is usually only seen during major market peaks or valleys.
“That is the type of insider buying we saw in the broad market during the height of the great financial crisis in late 2008 and early 2009,” points out Ted Dixon, CEO of INK Research. “A similar situation now seems to be in place among gold and silver miners.”
Insiders are typically contrarian investors –buying shares when they perceive them to be undervalued. Right now, it appears many think the stocks are going for fire-sale prices. They are usually early, too. Historically, insider transactions often foreshadow market moves six- to 36-months in advance.
While that may be quite a wait, it’s interesting to see insiders display this level of confidence in a sector that the broader investment community has been fleeing.
Mr. Dixon points out that while gold is well off highs near $1,900 (U.S.) an ounce in 2011, the macro backdrop hasn’t radically changed. Central banks are working hard to keep real interest rates in negative territory, and the threat that bond-buying measures will eventually lead to inflation – gold’s best friend – remains intact.
While gold stocks have significantly underperformed the bullion market recently for various reasons, including rising production costs, Mr. Dixon thinks miners have a lot of emerging factors working in their favour.
Several CEOs have recently been fired for investing in projects that ultimately hurt shareholder value, suggesting they'll be more prudent going forward. And technicals suggest gold stocks are cheap in relation to gold; last week, the NYSE Arch Gold Bugs index, made up of U.S.-listed gold companies, hit the lowest levels versus the SPDR Gold ETF – an investment in physical metal – since the Lehman Brothers collapse.”
I'm not sure term limits would help that much. Whoever holds office gets it by promising to steal from the declining middle class to fund JP Morgan's food stamp program or to fund all the pensions that former CONgresses have promised or to fund the revised, easier to qualify for disability programs where they have shipped most of the unemployed.
That and just printing up new "wealth" that bankstas can leverage into higher assets costs until they blow it up again and get the next mulligan. What I want to know, is when Bennie heads back Princeton to be with Paul Krooksman--does he stop off to participate in Dancing with the Stars? We have our priorities ya know!!
#$%$ seems the most important thing is to keep the military in alert and fit status. Obummer or whatever liar takes over and CONgress will need all the protection they can get someday :)--either from another trumped up war or from domestic pitchforks.
Go to the finviz site--there is a declining support line from 12 down to about now--for the past couple of years. When this thing pops, it really pops and all it takes is some mom-mo playrz on board. A move to 17 would not be bad from here
CL--indeed i did see the grain markets--I have further orders for WEAT at 17.99 and 17.49 and will take what they give me. Compared to last year at this time we have moderate drought conditions in 52% of the USA compared to 36% in 2012. Extreme drought conditions are at 17% now in the last week of March compared to 7% at the same time in 2012 and most of the extreme drought conditions are from the Dakotas into Texas--the wheat belt.
Wheat commercial traders are relatively long wheat and I would expect they added to their positions yesterday--they will not be selling into a panic, if hisotry is any guide and they usually win, although patience is necessary. I am not concerned by the drop yesterday. I am looking for more than an ultimate 10% increase that we had before the drop and I still like what I see and hope to capitalize on any long tail dives in coming weeks.
Eventually all this money printing by Keynesian s will cause an inflation scare. Now that they have cleaned out the commodity holders, they can zoom things up with the least number of investors benefiting. Same old game.
I think commodity producers will soar before it all cracks up--we are in recovery mode, albeit fake, because the central banks will just keep printing--commodities will be favored in this environment (a year, six months, I don't know) and the most beaten down are the best to buy because they have the most potential upside. Coal, Uranium, Rare Earth and Gold Miners are pretty shattered. If the climb 15-20% from their lows the mo-mo fund buyers will jump on.
The Fed has increased its holdings of treasuries of all maturities by over 4X since 2009. It costs them nothing to create more Bennie bucks--well at least for now. Until faith in the US dollar wanes, they can play the game 24/7. That's why they love PIGS/Cyprus/Japanese inflation, etc.
That is why you should avoid GLD and SLV and only buy physical and mining stocks that have gold in reserve. Gold itself can't be printed so it is not fiat. The US dollar has not gone above 84 since the 08 crash despite all the Euro troubles. Bennie and friends will do ANYTHING to devalue it--same game since 1913. 100 years--whopee!! See also, yearly inflation rates right after the Fed was created.
Jan 1, 1920 16.97%
Jan 1, 1919 17.86%
Jan 1, 1918 19.66%
Jan 1, 1917 12.50%
Jan 1, 1916 2.97%
Jan 1, 1915 1.00%
Jan 1, 1914 2.04%
Seems like old times these days.
Bruce--thanks for posting--like I said before TIP on crack--good luck with it.
Zirpidee doo dah, zirpidee day,
My oh my what a wonderful day
Plenty of Bennie bucks coming my banksta way
Zirpidee doo dah, zirpidee day!
Looks like the great escape is on in TMV again :)--in the longer context of things, long treasuries are probably in No. 27 of the three peaks and domed house chart pattern--you can look it up--we can't link anything here because of the Yahoos. After we get done with No. 27, i would expect the 30 yr yield to rise for most of the rest of the year and give TMV holders hope once again.
In the meantime I expect gold to take out the previous high THIS year. I would expect the 30 year T-bond to yield less than 2% in early 2015 and the S&P 500 to go below the last low around then. Then a new bond market bear will start and stocks will take off again. Oh yeah--once gold goes above 2000 this year, the public will pile in just like Mar 2008 when it went over 1000. Just like then a serious bear market will develop in the PMs.
10 year note hit its lowest point of the year today.
CL, the only thing that will change that is a whiff of inflation combined with QE forever--of course there is no choice but QE forever--no matter what they say--we certainly have inflation, but it has been managed by the Guv to the effect that nobody cares so far.