Was Harry Brown Wrong? Market Manipulation More Possible in 2015? Gold/Stocks?

[rickb]

It's not that this stuff isn't happening. But… what's the actual effect? Is it depressing the price $1,000/oz? Or is it only succeeding in depressing the price $50/oz? Or $5? Or zero, because the market arbitraged away the manipulation? Isn't every person who buys and sells in the market for their own personal gain "manipulating" it?

You can not be serious about this?
If you are intending to steer the market with your purchases/sales then that is manipulating, which is obviously something you can never do.

The Fed and/or other banks however can do this easily, it's not so hard with papergold that can be shorted to infinity with unlimited "money".

When was the last time the FED was audited...? Right...

I'm not denying that it's happening. I'm simply questioning its magnitude. Do you think that the price of gold would be much higher today but for all of this manipulation?

The whole point is that the manipulation prevents the "true" price of whatever is being manipulated from being discovered.  No one knows what the "true" price would be absent the manipulation.  Presumably higher.  How much higher?  No one knows.  I've seen analyses that come up with a "true" price for silver north of $100/oz.  This is about 6x its current price.  If manipulators can keep the market price of silver at 16% of its "true" price, why not gold also?  Of course, maybe the manipulation analyses are skewed.  If they're off by a factor of 2, we still have a 3x "manipulation factor".  I think we're talking at least whole numbers of magnitude (not 10% or 30% but 200% or 500%).

[craigr]

Here's what a lot of people that worry about manipulators are missing:

If you aren't an active trader their activities long-term have almost no affect on you.

It's only when you are jumping into the crowd trying to trade against those guys that you will get skinned.

When the markets want to move on a particular asset, there is no organization large enough on the planet that can stop it.

[Stewardship]

The whole point is that the manipulation prevents the "true" price of whatever is being manipulated from being discovered.  No one knows what the "true" price would be absent the manipulation.  Presumably higher.  How much higher?  No one knows.  I've seen analyses that come up with a "true" price for silver north of $100/oz.  This is about 6x its current price.  If manipulators can keep the market price of silver at 16% of its "true" price, why not gold also?  Of course, maybe the manipulation analyses are skewed.  If they're off by a factor of 2, we still have a 3x "manipulation factor".  I think we're talking at least whole numbers of magnitude (not 10% or 30% but 200% or 500%).

I just don't see the problem.  I mean, if we believe we're being sold silver at a price far below its "true" price, then we should be thanking the powers-that-be for the discount.

The only concern from a PP perspective is whether gold still responds strongly to inflation.  I've seen no indication that it doesn't.  When I try to imagine the price of gold being manipulated so that it doesn't offer protection in a hyperinflation scenario, I see the inventories of cheap gold quickly running out and the "true" price of gold being discovered by the masses desperately trying to preserve their purchasing power.

[mathjak107]

i see lots of underfunded retirements on the horizon as folks waste valuable investment dollars and the most precious commodity ,  time on betting that some remote calamity will happen  that conventional investing has not survived through just fine  all ready over the typical 25-40 years  of an accumulation stage.

want to keep 5-10% of investing dollars in gold as a speculation , fine  , i think that is okay. but to consider it with the full weight you would  the traditional investments  i think will once again leave that money coming up short. you likely may do better in just a cd ladder.

we can insure every aspect of our lives if we really wanted to  . there are things that stand a great chance of playing out and things that are so remote you may as well  forget it the chances are so slim.


in my opinion today a long term care policy , especially a state partnership one would be much better use for insurance money than gold will likely be and be far more useful and protective than gold might ever be.

if you want to buy things that act as insurance at least insure against the correct things..

there is a far greater chance you lose everything to  needing uncovered care in your life then we have hyper inflation here and gold is the winner as opposed to the money going in to currency's , options and short selling.

if you really want to insure results at least do it correctly.  manipulating life insurance and single premium immediate annuities or longevity insurance with your stocks , bonds and reits  will likely do a whole lot more insuring your retirement savings and  income than gold will

[Stewardship]

I believe most here would perceive a portfolio of 100% paper assets as speculation.  Just sayin'.

[mathjak107]

i will gladly take 146 years of paper specualation that has generated more long term  growth than any thing else any day .

no matter what the worlds events were  that paper speculation and ownership in real company's  has been through it all over the long term .
but we have seen gold fail for decades to react when it should have  or to even keep pace with inflation its supposed claim to fame .

at the end of the day once again ownership in companies will probably out perform anything else  , but again we are talking long term .

like everything else in life when you try to cover all the bases you really end up covering little in comparison and get a mediocre performer that can create long lasting ramifications  like far less growth than you need to meet retirement goals ..

even all season tires are really no season . they do not perform well in any type of weather . they  come up short no matter what.


are they a balance of seasons ?  yep they are  , but they will never deliver the performance a true tire for that season will and that can be fatal. better off owning two sets and switch off.

that is why no portfolio should remain fixed forever . investing should mold to the season as the investing climate changes over time.

investing and financial planning is not nearly as simple as we want to dumb it down to . most small investors suck at it and the numbers  reflect that fact .


most need way more help in planning then they realize and a far more active hand going forward since we are in uncharted waters today.

unconventional times may not need gold as much as they do insurance products helping out.


old harry never had to imagine low rates and high valuations as bed fellows as they are now. a particularly awful combo going forward.

today more than ever we may need to own those multiple sets of tires and switch to them as the road a head changes.

my feeling is right now a conservative mix of equity's and short term maturity's will be the way to go .  at least 40-50% if trying to grow money as best as you can but are gun shy.

once rates rise and are underway you need to evaluate the big picture and just nudge things , perhaps if a creep up in inflation is showing its head go with a mix of tips ,equities and short term floating rate bond funds .

what is going to be the hardest to squeak out gains i think is a portfolio fighting itself since rising rates and high valuations do not indicate a strong trend in bonds or stocks but stocks tend to do much better as long as rates do not rise to fast.

stocks are dependent more on the speed of a rise than the amount things rise .  bonds only care about a rise and seeing the equivalent in a 350 point drop in the dow  yesterday in TLT  was more sensitivity to a rise in rates then i would ever want near the bottom of a rate cycle..

especially when gold is in the toilet and stocks are just squeaking out gains.

[Stewardship]

Too bad we can't go back in time 146 years so you can make that bet.  Now the question is whether the next 146 years will be the same.  I don't know, but I sure am glad I have the option of owning physical gold.

[mathjak107]

we had a mix of depressions , high inflation , wars , and almost total financial collapse and the long term results are all within spitting difference of each other.

what else could happen  that wouldn't be a remote flyer ?

if you had to pay one million dollars for that protection against that remote chance happening would you ?

that is exactly what that protection cost in my lifetime.

with 10k invested the pp game in at 97k almost 30 years later while a growth model came in at 203k.  on A `100k investment that protection cost you more than a million bucks.

[Stewardship]

Further elimination of the middle class wouldn't be remote, IMO.  Nor would a general mistrust/declining demand for all things paper/digital, forcing the govt to clamp down and stop convincing everyone that its their friend.  Pessimism, I know, But I've already learned to not try to predict the future, time the markets, or even place trust in anyone wielding economic power.  These are the biggest dangers to retirement planning.  Hence my interest in the PP, or the all-season tire, since I know what season it was yesterday, but can never seem to accurately predict what season it will be tomorrow.

The PP isn't about trying to protect against every possible remote thing that can go wrong.  It's about breaking everything that can go wrong into four general categories.  I encourage you to read the book if you haven't already.

[Cortopassi]

I would guess most people on this forum are either in retirement or 5-25 years from it.

If I had 146 years to smooth out all the peaks and valleys in a majority equity portfolio, I am probably with you mathjak.

But I've only got ideally about 12 years until I want to "retire" and there is no way I want to take that chance of getting into an extended slump in equities that could easily last that long.

I still see no better way than a straight 25% split to hopefully grow and protect downside in that timeframe.

[mathjak107]

i am in total agreement that the pp is perfect to switch to 5- 10 years before retirement .

as i stated many time it is to untested for my taste in retirement .

prior to being 5 to 10 years the pp is a poor growth vehicle over the long term leading up to that time

all you need is 20-30 years to make everything  smooth out  using  conventional investments , whether through the great depression , the world wars , the high inflation 70's and acts of terrorism .  that is a typical accumulation stage .

whatever the pp is supposed to protect against for a stiff price time made just fine for free.

[dutchtraffic]

all you need is 20-30 years to make everything  smooth out  using  conventional investments

This is just false.

[LC475]

I find it near impossible to believe that people exist that think there is no manipulation in this market.

Im-Posss---ible!
But the world is full of zanies and fools,
Who don't believe in sensible rules,
And won't believe what sensible people say,
And because these daft and dewey-eyed dopes keep building up impossible hopes,
Impossible things are happening every day.

https://www.youtube.com/watch?v=nHtoxJ8as1s

Count me as one of those zanies.  Sorry, dutchtraffic!

Prices of items are determined by supply and demand.  The existence and use of sophisticated instruments and derivatives do not alter that fact.  The two things you mention, coinstar, "options contracts and doing things like shorting the ETFS" are not even very sophisticated nor complicated.  I think that people like you are spooked by them largely because you do not understand what they are. 

"Shorting" is simply "borrowing a security and immediately selling it, and then later buying the security and paying back the loan."  That's it!  It's really nothing nefarious, nothing manipulative, nothing mysterious.  People could do that with physical gold, too.  Go down to the jeweler, borrow 100 ounces, immediately sell them to someone else, and then in a few months buy 100 ounces (plus whatever the interest was) and bring them in to the jeweler to pay him back.  Manipulation!!!!!...?  Not hardly.

Options are simply contracts that parties make between themselves, which might say things like "OK, I agree that you have the right to buy 100 tons of wheat from me in 6 months for such and such price, in exchange for some money upfront."  It's just a contract giving you the right to do something, an option which you may or may not choose to exercise.

Neither of these things allow manipulation of the market.  They are both just types of contracts, freely and voluntarily entered into, and they affect the price of the good concerned no more (nor less) than simpler contracts like just straightforward buying and selling.

Also, coinstar, you are wrong that in Harry Browne's time "in order to manipulate the gold market, you would have to take physical possession of the gold."  Ridiculous.  Contracts (written, eek!, on paper) have existed for a long time.  Telephones have existed for a long time.  Before that, postal delivery had existed for a long time.  Obviously people participating in the gold market did not always take physical possession of the gold.  I'm not going to go more into it, because you cannot even be bothered to be right about the spelling of the person's name you are alleging to be wrong.  The chances of you comprehending this post... well, I wouldn't buy futures on it.

[mathjak107]

all you need is 20-30 years to make everything  smooth out  using  conventional investments

This is just false.

really ?. show us a 30 year time frame stocks were not a head in dollar terms where they were 30 years prior  regardless of evenst here in the usa  and wasn't a head of the pp with a standard growth model of 80/20  which is even the basis for most target funds

conventional growth models have blown the doors off the pp here . are you doubting that ?  in fact 40/60 wellesley has beaten it pretty bad too over almost all long time frames spanning 20 years or more

[dutchtraffic]

all you need is 20-30 years to make everything  smooth out  using  conventional investments

This is just false.

really ?. show us a 30 year time frame stocks were not a head in dollar terms where they were 30 years prior  regardless of evenst here in the usa  and wasn't a head of the pp with a standard growth model of 80/20  which is even the basis for most target funds

conventional growth models have blown the doors off the pp here . are you doubting that ?  in fact 40/60 wellesley has beaten it pretty bad too over almost all long time frames spanning 20 years or more

You are looking at the US only, that's not exactly a good way to measure this.

The US is not the world, and the dollar's reserve currency status can not go on forever.

[LC475]

conventional growth models have blown the doors off the pp here . are you doubting that?

Yes, obviously we are doubting that.  Yes, every scholar who has done research into this issue is doubting that.  "Growth models"!  Hah!  What the research shows is that a reliable "growth model," something that can outperform the market, is a chimera.  Conventional "growth models" as a whole lose badly to index funds.  Badly.

Now if you only look at the winners and cut out all the losers from consideration: Voila!  Wow, investing in growth funds and models looks Unbelieveably Awesome!  Why isn't everyone doing it?  Obviously it's the way to go.  Wait... am I missing something?  Some subtle point?

[mathjak107]

conventional growth models have blown the doors off the pp here . are you doubting that?

Yes, obviously we are doubting that.  Yes, every scholar who has done research into this issue is doubting that.  "Growth models"!  Hah!  What the research shows is that a reliable "growth model," something that can outperform the market, is a chimera.  Conventional "growth models" as a whole lose badly to index funds.  Badly.

Now if you only look at the winners and cut out all the losers from consideration: Voila!  Wow, investing in growth funds and models looks Unbelieveably Awesome!  Why isn't everyone doing it?  Obviously it's the way to go.  Wait... am I missing something?  Some subtle point?

well you can simply look at the newsletter i have been using , fidelity insight for 27 years.  they use nothing special fidelity funds .  you can look at any funds with a long history , even conservative funds like wellesley beat the pp in just about every 20-30 year period  period and by a lot.

and yes , i only discuss investing here as even if i lived elsewhere i would invest in the american markets .

heck just look at the s&p 500 as a reference and compare 20-30 year time frames.  even 100% equity's came out okay living through the same time frames you are paying the pp a heavy price to protect you  in 

[dutchtraffic]

I find it near impossible to believe that people exist that think there is no manipulation in this market.

Im-Posss---ible!
But the world is full of zanies and fools,
Who don't believe in sensible rules,
And won't believe what sensible people say,
And because these daft and dewey-eyed dopes keep building up impossible hopes,
Impossible things are happening every day.

https://www.youtube.com/watch?v=nHtoxJ8as1s

Count me as one of those zanies.  Sorry, dutchtraffic!

Prices of items are determined by supply and demand.  The existence and use of sophisticated instruments and derivatives do not alter that fact.  The two things you mention, coinstar, "options contracts and doing things like shorting the ETFS" are not even very sophisticated nor complicated.  I think that people like you are spooked by them largely because you do not understand what they are. 

"Shorting" is simply "borrowing a security and immediately selling it, and then later buying the security and paying back the loan."  That's it!  It's really nothing nefarious, nothing manipulative, nothing mysterious.  People could do that with physical gold, too.  Go down to the jeweler, borrow 100 ounces, immediately sell them to someone else, and then in a few months buy 100 ounces (plus whatever the interest was) and bring them in to the jeweler to pay him back.  Manipulation!!!!!...?  Not hardly.

Options are simply contracts that parties make between themselves, which might say things like "OK, I agree that you have the right to buy 100 tons of wheat from me in 6 months for such and such price, in exchange for some money upfront."  It's just a contract giving you the right to do something, an option which you may or may not choose to exercise.

Neither of these things allow manipulation of the market.  They are both just types of contracts, freely and voluntarily entered into, and they affect the price of the good concerned no more (nor less) than simpler contracts like just straightforward buying and selling.

Also, coinstar, you are wrong that in Harry Browne's time "in order to manipulate the gold market, you would have to take physical possession of the gold."  Ridiculous.  Contracts (written, eek!, on paper) have existed for a long time.  Telephones have existed for a long time.  Before that, postal delivery had existed for a long time.  Obviously people participating in the gold market did not always take physical possession of the gold.  I'm not going to go more into it, because you cannot even be bothered to be right about the spelling of the person's name you are alleging to be wrong.  The chances of you comprehending this post... well, I wouldn't buy futures on it.

http://www.zerohedge.com/news/2015-07-0 ... ion-prices

Somewhat explained here.

[l82start]

i am in total agreement that the pp is perfect to switch to 5- 10 years before retirement .

as i stated many time it is to untested for my taste in retirement .

prior to being 5 to 10 years the pp is a poor growth vehicle over the long term leading up to that time

all you need is 20-30 years to make everything  smooth out  using  conventional investments , whether through the great depression , the world wars , the high inflation 70's and acts of terrorism .  that is a typical accumulation stage .

whatever the pp is supposed to protect against for a stiff price time made just fine for free.

so how can you be sure that after holding your equity portfolio for 20 to 30 years it wont all of a sudden hit the beginning of a long down turn? leaving your buy the PP 5 to 10 years out from retirement plan in ruin because if you make the switch now you are selling at the bottom and buying safety assets at their top...? do you have to postpone retirement?

[goodasgold]

[/quote]

It's not just gold, it's the entire 'market'.

Look at china going completely desperate, threatening to throw shortsellers in jail even now...
And a million other examples, worldwide, there is no real market, and yes i am convinced in a REAL market, prices would look A WHOLE LOT different.

Remove papergold and see what happens...do not need to be a genius for this.
[/quote]

Out of curiosity, if the papergold *were* removed, what be the real price of gold?

[mathjak107]

i am in total agreement that the pp is perfect to switch to 5- 10 years before retirement .

as i stated many time it is to untested for my taste in retirement .

prior to being 5 to 10 years the pp is a poor growth vehicle over the long term leading up to that time

all you need is 20-30 years to make everything  smooth out  using  conventional investments , whether through the great depression , the world wars , the high inflation 70's and acts of terrorism .  that is a typical accumulation stage .

whatever the pp is supposed to protect against for a stiff price time made just fine for free.

so how can you be sure that after holding your equity portfolio for 20 to 30 years it wont all of a sudden hit the beginning of a long down turn? leaving your buy the PP 5 to 10 years out from retirement plan in ruin because if you make the switch now you are selling at the bottom and buying safety assets at their top...? do you have to postpone retirement?

the pp is great for preserving capital if you are that close to retirement and made the bulk of your retirement nest egg already . .

i cut my growth model back from 80-90% equity to  about 50/50 7 years prior just for that reason.

a rising glide path can work fine to if you are nervous about an early on hit.

reduce equity's  down to 35% or so and increase  about 2% a  year until you reach your desired allocation.  i would not do this with long term bonds in the mix though.
retiring in 13 more working days . 

[jason]

One of the prevailing theories as to why anyone would want to manipulate the gold market, besides the obvious reason of profiting from the manipulation, is that "they" want to keep gold and silver prices down to hide inflation and the fact that the dollar is weakening.  But my thinking is, if the prices of cars, rent, gas, food, and just about everything else is going way up, how well would a low gold and silver price hide anything from the public?  Will that really be enough to trick the public into thinking that the dollar is going about as far as it used to, even though the price of everything else is shooting up?  That seems a bit far fetched to me.

[sophie]

Philosophical question: how is manipulating a market any different from participating in it? Is manipulation just participation that we think hurts us?

Great question!  which you know when it generates multiple pages of answers.

My thought was that in a sense I don't care if the gold market is being "manipulated".  Even if some bright person manages to find a way to artificially move gold prices, gold doesn't exist in a vacuum.  It's part of a larger market with many moving parts, that is way, WAY too big for any individual party to manipulate.  Something else will just move in response.  So I agree with Tyler:  stay diversified, then sit back and enjoy the extra rebalancing benefits that you will get from the added volatility.

[mathjak107]

it is like when  folks talk  about the "big boys"  manipulating the stock market.

we are the big boys. all the mutual funds we have our money in , the pension funds ,etc are all the "big boys "

we have met the enemy and he is us!

[dutchtraffic]

it is like when  folks talk  about the "big boys"  manipulating the stock market.
we are the big boys. all the mutual funds we have our money in , the pension funds ,etc are all the "big boys "

Ehm, no, pensionfunds are absolutely not "the big boys".
Frontrunning and other 'games' are affecting pension funds possibly even more than retail investors.

In 2012, 84% of all stocktrades were done by algorithms, you can only imagine how much it is in 2015...

"HFT Firm Reveals 1 Losing Trading Day In 1238 Days Of Trading"
If you think that is statistically possible by being honest, you need to think twice....