Gyroscopic Investing

Saying to myself, you've GOT to be kidding me, gold at $1390 what, barely TWO weeks ago, and now trying to hold above $1300!!  6% down!  How many times can those darn manipulators mess with the gold price.  I hate gold, etc., etc.

Instead of my overall account values being down nearly 6% (or even more with miners) with my previous allocation, I am down about -0.4% with PP.

I still hate it that gold seemingly will never get out of a bear market, but at least the PP is buffering the loss.

Mike

Shouldn't you be posting in the "Gold scream room" thread? 

Why do you think it's gold price manipulators?

Why can't it just be gold going down?  It went down all-but consistently over a 20-year period, and is the PP's most volatile asset.  Why is this a surprise?

Gold is in the middle of a 12 year bull run.  it has outperformed stocks in that time frame so there is no bear market.

tnt wrote: Gold is in the middle of a 12 year bull run.  it has outperformed stocks in that time frame so there is no bear market.

He was talking about the 80s and 90s.

Isn't it possible the bull run has ended? Or that this is just a blip in the run? There seem to be a lot of possible reasons why gold isn't doing great recently other than just price manipulation, no?

It is possible, however for PP, gold is a hedge to remove volatility and it does that very well.  Since gold accounts for a lot of the market noise that does not fall into common sense or stock and bond talk, it is nearly impossible to say.  In the 80's it averaged -3% and -6% in the 90's but +12.3 in the last 13 years.  I actually saw a common sense comment from a Morgan Stanley guy who simply said, "you have to understand what gold is, it is only a hedge position not an investment with expected return".  Of course i understand some people believe the other way but that is another can of worms. 

Pointedstick wrote:

tnt wrote: Gold is in the middle of a 12 year bull run.  it has outperformed stocks in that time frame so there is no bear market.

He was talking about the 80s and 90s.

Isn't it possible the bull run has ended? Or that this is just a blip in the run? There seem to be a lot of possible reasons why gold isn't doing great recently other than just price manipulation, no?

Personally, I can't think of any other reasons than that, given the terrible fiscal position of the US and most other developed countries.

What are your thoughts?

Libertarian666 wrote: Personally, I can't think of any other reasons than that, given the terrible fiscal position of the US and most other developed countries.

What are your thoughts?

Frankly I don't know. But if I had to guess, it would be some combination of interest rates rising relative to inflation, the budget deficit falling in recent years, and general sentiments of cautious optimism about the economy becoming more widespread.

Pointedstick wrote:

Libertarian666 wrote: Personally, I can't think of any other reasons than that, given the terrible fiscal position of the US and most other developed countries.

What are your thoughts?

Frankly I don't know. But if I had to guess, it would be some combination of interest rates rising relative to inflation, the budget deficit falling in recent years, and general sentiments of cautious optimism about the economy becoming more widespread.

Maybe. But it's obvious to me that the Fed and other central banks have manipulated gold prices in the past and I see no reason for them to have stopped.

If people are selling because they think the economy is improving they are making a wrong decision based on an incorrect interpretation of objective reality.

Ergo, you "ought" to be buying gold at these bargain prices.

Wait, this isn't the morality thread right?

Well the fed openly manipulates the system so it is not too far fetched to believe that sentiment.  However, the market is willing to allow us to have 7-9% returns if we are disciplined enough to do it and I intend to take it.

Kshartle wrote: If people are selling because they think the economy is improving they are making a wrong decision based on an incorrect interpretation of objective reality.

Ergo, you "ought" to be buying gold at these bargain prices.

Wait, this isn't the morality thread right?

Well, it seems to me that when a person has a traumatic experience, as many investors had in 2008-2009, it can leave an imprint on the mind that creates a certain "narrative shape" to the interpretations of future events.

Thus, for example, following the 1930s, many investors were skeptical of the stock market for 10-20 years, even though the 1939-1959 period was one of staggering economic expansion.  Their past trauma kept them from seeing these events clearly because the narrative shape that their prior experiences created was a continual "the market is just about to crash again" feeling.

By most objective measures, the economy has been steadily improving for five years now from the trough we reached in the spring of 2009.  Profits are up, unemployment is down, the stock market is up, money is moving out of the bond market into other assets, gold has been pummeled, etc.  Robert Prechter isn't on TV much anymore.

I understand the point about the government's finances being a mess.  The trouble with this argument is that the government's finances were in a similar mess in the 1980s, and I spent most of that decade convinced that Reagan's enormous budget deficits and out of control national debt were going to lead to catastrophe.  The thing is, though, that didn't happen.  In fact, exactly the opposite thing happened--the economy charged ahead and we had one of the greatest bull markets for stocks in history.

So maybe we are in worse shape right now than we think...or maybe we are actually in better shape.

In any case, I don't think that citing "objective reality" as the basis for saying that the economy is not improving is a proper use of the concept of objective reality, especially since so much of economics is based upon countless individual perceptions of future events, which are by definition based upon perceptions of subjective reality.

MediumTex wrote: So maybe we are in worse shape right now than we think...or maybe we are actually in better shape.

In any case, I don't think that citing "objective reality" as the basis for saying that the economy is not improving is a proper use of the concept of objective reality, especially since so much of economics is based upon countless individual perceptions of future events, which are by definition based upon perceptions of subjective reality.

Well..."improving" is subjective so my post was partially tounge in cheek.

MT unemployment numbers serve no practical purpose since it only measures people working and those with a desire to work. In this way.....welfare lowers the unemployment rate. Of course some will argue welfare is good for the economy. These are the people who will argue they aren't getting wet while standing in a monsoon.

Actual employed and especially as a % of the population is down. This cannot be the sign of a healthy economy. People haven't stopped working to live off their vast savings....Americans have meager savings. They have stopped because of handouts and lack of acceptable opportunities.

This will all get exposed if rates move up. As buffet says.....when you let the water out you get to see who's been swimming naked.

If they want to keep suppressing rates they'll need to print, particularly if the economy is "improving".

Kshartle wrote: MT unemployment numbers serve no practical purpose since it only measures people working and those with a desire to work. In this way.....welfare lowers the unemployment rate. Of course some will argue welfare is good for the economy. These are the people who will argue they aren't getting wet while standing in a monsoon.

I know that.  I'm just saying that unemployment as reported by the government has been headed straight down for five straight years now.  It's not a great statistic, but it was headed up steeply from early 2008 through mid-2009 and then it started heading down, as one would expect following a once-in-a-generation financial crisis not accompanied by a war or a revolution.

This will all get exposed if rates move up. As buffet says.....when you let the water out you get to see who's been swimming naked.

It would depend on why rates move up.  If rates move up simply because people begin feeling a little more appetite for risk and sell their bonds, then I would say it's nothing to worry about.  If short term rates go from zero to 3%, that wouldn't be cause for alarm IMHO.

If they want to keep suppressing rates they'll need to print, particularly if the economy is "improving".

I feel like a kid sitting around a campfire with a stick in my hand.  I feel an intense urge to poke the fire with my stick, but I'm going to resist.  I want to start talking about how "printing" is an illusion if the government is seeking to offset the contraction of private credit by expanding public credit, but I'm not going to do that.  I'm going to sit and enjoy the fire without disturbing it with my stick, even though I really want to poke it. 

MediumTex wrote:

Kshartle wrote: MT unemployment numbers serve no practical purpose since it only measures people working and those with a desire to work. In this way.....welfare lowers the unemployment rate. Of course some will argue welfare is good for the economy. These are the people who will argue they aren't getting wet while standing in a monsoon.

I know that.  I'm just saying that unemployment as reported by the government has been headed straight down for five straight years now.  It's not a great statistic, but it was headed up steeply from early 2008 through mid-2009 and then it started heading down, as one would expect following a once-in-a-generation financial crisis not accompanied by a war or a revolution.

This will all get exposed if rates move up. As buffet says.....when you let the water out you get to see who's been swimming naked.

It would depend on why rates move up.  If rates move up simply because people begin feeling a little more appetite for risk and sell their bonds, then I would say it's nothing to worry about.  If short term rates go from zero to 3%, that wouldn't be cause for alarm IMHO.

If they want to keep suppressing rates they'll need to print, particularly if the economy is "improving".

I feel like a kid sitting around a campfire with a stick in my hand.  I feel an intense urge to poke the fire with my stick, but I'm going to resist.  I want to start talking about how "printing" is an illusion if the government is seeking to offset the contraction of private credit by expanding public credit, but I'm not going to do that.  I'm going to sit and enjoy the fire without disturbing it with my stick, even though I really want to poke it. 

A 3% jump in ST rates across the board would be massive. We aren't talking about the difference between 15% and 18%, we're talking near zero to 3%. Everyone using credit is going to get squeezed. Companies issuing debt to fund expansion will have to slowdown or stop, consumers CC bills will be jumping up, stock buyers on margin will have to sell, at least a portion.....there are so many effects it's hard to name them all. Not to mention the biggest debtor out there that issues 600 BN to 1 TR a year.....and growing as the boomers retire. It has to roll over something like 4-5 TR also if my memory serves. on 5 TR 3% is 150 BN added to the deficit.......all of which needs to be borrowed/printed, unless you think they can steal more through direct taxation (Laffer curve anyone?).

When I say print money I mean they have to keep expanding the money supply. Do you really think private credit is contracting more than they are printing? Do you have any reliable M3 or total money supply data? All I can seem to find is the M2 from the Fed I think that shows average growth of 7% or so annually for the last five years.

That would be pretty consistent with the price increases I see when I go to the grocery store, maybe a little less in some things and more in others. Some things are definitely up more, particularly if you take into account packaging manipulations.