Gyroscopic Investing

I have finally caught up and listened to ALL of Mr Brown's podcast library on his investing series and he talked several times about the markets, specifically gold, being not possible to manipulate. In one particular story he mentioned working with a broker on the London exchange who claims they set the gold price and would know what would happen but the gold market was too big for any one person or small group of people to know or control.

However, when that happened, in order to manipulate the gold market, you would have to take physical possession of the gold. Or at the least, write up a futures contract to take possession of the gold in the immediate future, with the high possibility you would have to eventually take physical possession and have some place to put it in the next 30 or 60 days or however long futures contracts were for.

In 2015, there are several ETFS that trade gold. And I imagine people can write up options contracts and do things like shorting the ETFS, which puts downward pressure on them. While I cant argue that the gold market CAN be fully manipulated because I dont know, I CAN argue that all things fall along some spectrum and in 2015 theres significantly MORE ability to manipulate the gold market than in Mr Brown's time. Whether it is manipulable enough to make a difference, thats the point of this post to explore.

A few things I have noticed is a significant spike and subsequent decline in gold prices over the last few years. It seems to me market manipulation is afoot. Is the opposite of a PUMP AND DUMP possible? Instead of buying up a bunch of an asset to raise the price and dump it, could large players like entire countries be dumping their gold on the market, alongside hedge funds who independently decided to SHORT the ETFS because they notice the downward trend.

Meanwhile, because of the international QE going on, regular investors aren't buying up the gold because the stock market has been artificially inflated to the tune of 20% or so per year up until this year. And with gold being dumped and shorted, why buy the losing asset when stocks are being inflated?

Of course we in the PP know better and continue to rebalance and buy gold. The one concern I do have is added volatility to the PP given the new options for market manipulation in 2015. Since the PP components arent allowed to course correct naturally, without the additional new manipulation, they can stay out of whack for much longer.

http://www.zerohedge.com/news/2015-06-2 ... have-proof

http://www.zerohedge.com/news/2015-07-0 ... -soar-1260

And the other side:

http://kiddynamitesworld.com/more-gold- ... rs-busted/

Along with some other links at the end.

I too, had fallen for the gold is manipulated theory.  And I can still occasionally be swayed.  But it gets quite old when you read some of these blogs (Miles Franklin, TF Metals, etc) and the end of the world is *just* around the corner continuously.  And that China and India are buying all the gold the West is selling.  Or there is always talks about the drops, but not the rises as manipulation.

If it is manipulated, take heart that at some point the manipulators will want to make money on the other side of the trade, and your rebalancing will work out as planned.

Cortopassi wrote: And the other side:

http://kiddynamitesworld.com/more-gold- ... rs-busted/

Along with some other links at the end.

I too, had fallen for the gold is manipulated theory.  And I can still occasionally be swayed.  But it gets quite old when you read some of these blogs (Miles Franklin, TF Metals, etc) and the end of the world is *just* around the corner continuously.  And that China and India are buying all the gold the West is selling.  Or there is always talks about the drops, but not the rises as manipulation.

If it is manipulated, take heart that at some point the manipulators will want to make money on the other side of the trade, and your rebalancing will work out as planned.

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

My perspective is to accept that people do manipulate gold (or at least try very hard to).  They also manipulate stocks and bonds and dollars.  When nothing can be trusted, it's more important than ever to stay diversified.  Even if manipulation is the primary driver behind all price movements, the motive is profit which means the money still has to go somewhere. 

Manipulation only really screws you when you think you know the future. 

There are days and weeks and months I feel exactly the same, and then I read the opposite side like the Kid Dynamite, or Trader Dan, and they do a good job of convincing me the manipulation theory is bogus and it is all market forces.

But I am sure every market to some level is manipulated. 

+1 to what Tyler said.  Might as well participate in ALL the manipulated markets and not just the one that always seems to go down!

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

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

I hope this is not a serious question.

(no offense)

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

Why do people keep claiming facts are conspiracy theories? Afraid of the truth or what? There is tons of proof.

http://www.bloomberg.com/news/articles/ ... nipulation
http://www.ft.com/intl/cms/s/0/08cafa70 ... z3fK8CZEMx
http://www.bloomberg.com/news/articles/ ... nipulation
http://www.forbes.com/sites/greatspecul ... ipulation/

How much proof do you need? There are hundreds if not thousands.


And now jpmorgan steering commodities with 3.9 trillion USD worth of derivatives, that all seems legit to you as well? 

Really, what is needed for most people to see reality, do they need to come on tv and say "yes we manipulated" ?

dutchtraffic wrote: Really, what is needed for most people to see reality, do they need to come on tv and say "yes we manipulated" ?

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? At what level of transaction size do we balk?

Bottom line, this just doesn't seem like it's having much of an effect to me. The recent fall in gold prices is most likely due to lower inflation expectations once the gold market woke up to the fact the stimulus and QE were't inflationary like they originally believed. If gold's true price was much might higher than what we see, where's all the inflation and the impending U.S. collapse that would be driving that?

Pointedstick wrote: 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...

dutchtraffic wrote:

Pointedstick wrote: 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?

Pointedstick wrote:

dutchtraffic wrote:

Pointedstick wrote: 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?

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.

dutchtraffic wrote: 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.

Ok, so what's the answer? What is your personal investing strategy for coping with this?

That's the million dollar question no one on gold sites has an answer to.

Basically, it is always trying to divine the latest reason gold has dropped, the next major event that is going to send gold back positive, and to "keep stacking."  If that next event sends it down instead of up, hey, it's a sale, keep stacking...

I've been there and done that.  Too much of my time was spent being pissed off thinking that gold just kept on being manipulated.

I am happy with 25% gold.

Cortopassi wrote: That's the million dollar question no one on gold sites has an answer to.

Basically, it is always trying to divine the latest reason gold has dropped, the next major event that is going to send gold back positive, and to "keep stacking."

I just explained, it's not gold alone, it's the entire market.'

And about 'what to do about it', there is no clear answer, the only thing that we do know is that it obviously makes the PP less safe.

dutchtraffic wrote:

Cortopassi wrote: That's the million dollar question no one on gold sites has an answer to.

Basically, it is always trying to divine the latest reason gold has dropped, the next major event that is going to send gold back positive, and to "keep stacking."

I just explained, it's not gold alone, it's the entire market.'

And about 'what to do about it', there is no clear answer, the only thing that we do know is that it obviously makes the PP less safe.

If it's the entire market, doesn't that make all portfolios less safe?

In which case, why bother thinking about it? Any portfolio you pick will theoretically do worse than it might have otherwise done, so why not just use it anyway?

The only reasonable course of action I ever saw to reduce all market exposure was to take everything I own and buy a 12 flat apartment building or something along those lines and ideally live in a unit, live off the income from the others, and grow that to more and more units.

I don't know how you can get out of all markets otherwise.  Start a business and create your own market?

Cortopassi wrote: The only reasonable course of action I ever saw to reduce all market exposure was to take everything I own and buy a 12 flat apartment building or something along those lines and ideally live in a unit, live off the income from the others, and grow that to more and more units.

Which is a very reasonable course of action!

…Unless the area is politically unstable.

…Or the property taxes on the unit would squeeze your profit down to low levels.

…Or the unit has significant maintenance expenses that you lack the skill or cash to deal with.

…Or the cost of carrying insurance on the unit is prohibitive.

…Or the rental market is so weak that you would have high vacancy or turnover.

Etc. You're just exposing yourself to different markets and different risks, nothing more. In fact, real estate is much more heavily regulated by the government than investment products and commodities are. If ever there was a market that's "manipulated," it's real estate!

And you pretty much enumerated most of the reasons I didn't do it!

So instead I started a side business with a friend in 2012.  And I just got bought out of it (at a loss...).  Good concept, but market wise it was a niche product, loved by some, but most didn't care.  It sucked the life out of me at times, and some good times too, generally a lot of good experience to apply for the next time.  Or not.

Pointedstick wrote:

dutchtraffic wrote:

Cortopassi wrote: That's the million dollar question no one on gold sites has an answer to.

Basically, it is always trying to divine the latest reason gold has dropped, the next major event that is going to send gold back positive, and to "keep stacking."

I just explained, it's not gold alone, it's the entire market.'

And about 'what to do about it', there is no clear answer, the only thing that we do know is that it obviously makes the PP less safe.

If it's the entire market, doesn't that make all portfolios less safe?

In which case, why bother thinking about it? Any portfolio you pick will theoretically do worse than it might have otherwise done, so why not just use it anyway?

The whole point here is that there are certain markets that are favored by the powers that be such as stocks, bonds(till recently) real estate, and others. Precious metals are NOT a favored asset by the powers and are be. Gold is real money and it is what all central banks have in their vaults. They do not want it appreciating especially since the last crisis of 2008 when trillions upon trillions of money printing has taken place. Precious metals are a real threat to the credibility of all central banks especially given the unprecedented money printing that has taken place. Gold and silver started to react after this and went through the roof up to 2011. Ever since then the pattern of naked short selling has intensified significantly in an attempt to bring prices down and keep them down. It has been successful. You can follow this website for more information and facts not conspiracy theories. www.gata,org.

As far as the implications for the PP here is what I think: The PP needs more than one engine out of the 4 to deliver long term results. In the situation that we are in now cash is not going to do it, because it yields zero, whereas it used to yield 3-4% or more consistently through modern history with some exceptions. The FED wants to bring short term rates back up to about 3.5 % but that is going to take time. Until then dont count on your cash for any help with offsetting losses.

LT bonds are not going to do it at this point, because it increasingly looks like we are at the end of a 40 year cycle of low interest rates. The FED will probably have to raise at this point, because zero rates are hurting insurance companies and other market participants whose business models traditionally factored a minimun FED funds rate of about 3 %. Insurance companies balance sheets are getting weaker and weaker because the prolonged ZIRP environment. So the FED has no choice but to raise. barring some catastrophic event happening, I would not count on bonds to help the PP.

Stocks have had a great run, and they may continue to go higher, but they are the only winning leg of the PP at this point. BTW, the S&P just entered into a bearish chart pattern just recently. LT bonds have been in that same pattern since mid June.

All I can say is unless gold is allowed to appreciate, the PP will significantly under perform. There is some hope since China will introduce a Yuan priced gold contract this fall. No one can be sure though what will China do at this point, and price suppression may continue.

flagator wrote: The whole point here is that there are certain markets that are favored by the powers that be such as stocks, bonds(till recently) real estate, and others. Precious metals are NOT a favored asset by the powers and are be. Gold is real money and it is what all central banks have in their vaults. They do not want it appreciating especially since the last crisis of 2008 when trillions upon trillions of money printing has taken place. Precious metals are a real threat to the credibility of all central banks especially given the unprecedented money printing that has taken place. Gold and silver started to react after this and went through the roof up to 2011. Ever since then the pattern of naked short selling has intensified significantly in an attempt to bring prices down and keep them down. It has been successful. You can follow this website for more information and facts not conspiracy theories. www.gata,org.

As far as the implications for the PP here is what I think: The PP needs more than one engine out of the 4 to deliver long term results. In the situation that we are in now cash is not going to do it, because it yields zero, whereas it used to yield 3-4% or more consistently through modern history with some exceptions. The FED wants to bring short term rates back up to about 3.5 % but that is going to take time. Until then dont count on your cash for any help with offsetting losses.

LT bonds are not going to do it at this point, because it increasingly looks like we are at the end of a 40 year cycle of low interest rates. The FED will probably have to raise at this point, because zero rates are hurting insurance companies and other market participants whose business models traditionally factored a minimun FED funds rate of about 3 %. Insurance companies balance sheets are getting weaker and weaker because the prolonged ZIRP environment. So the FED has no choice but to raise. barring some catastrophic event happening, I would not count on bonds to help the PP.

Stocks have had a great run, and they may continue to go higher, but they are the only winning leg of the PP at this point. BTW, the S&P just entered into a bearish chart pattern just recently. LT bonds have been in that same pattern since mid June.

All I can say is unless gold is allowed to appreciate, the PP will significantly under perform. There is some hope since China will introduce a Yuan priced gold contract this fall. No one can be sure though what will China do at this point, and price suppression may continue.

Ok, so given all that tea leaf reading, what's the plan? Gold is manipulated and artificially in the toilet… bonds are about to crash when rates rise… cash is trash because it returns nothing… stocks are overvalued and may tank at any time. It's easy enough to complain, but what kind of portfolio would you advocate in this environment?

Please, yes, someone answer that question!

flagator, mentally I am very close to the points you make, and I was there years ago.  However, since I got into the PP the only positive segments of the PP are stocks and bonds from the point I got in, which, quite honestly, I never would have expected, given my previous mindset.

From the gold side, there are a great many people (I won't use the term bugs) who simply have moved everything into gold and silver.  That is the only plan I see from a lot of these site, other than acknowledging there is manipulation and some of them taking advantage and trading both short and long.  "Stack and wait" is their mentality.  Since we don't know the future, who knows, it might pay off.  I started seeing that as too lopsided a bet a few years ago and started diversifying.

I don't know.  All segments have their major negative aspects currently.  Bond prices are fluctuating +/-2% a day lately.  I cannot imagine that was typical in the past.  Stocks are getting more volatile again.  Cash sucks.  Gold sucks.  What to do??

Cortopassi wrote: Please, yes, someone answer that question!

flagator, mentally I am very close to the points you make, and I was there years ago.  However, since I got into the PP the only positive segments of the PP are stocks and bonds from the point I got in, which, quite honestly, I never would have expected, given my previous mindset.

From the gold side, there are a great many people (I won't use the term bugs) who simply have moved everything into gold and silver.  That is the only plan I see from a lot of these site, other than acknowledging there is manipulation and some of them taking advantage and trading both short and long.  "Stack and wait" is their mentality.  Since we don't know the future, who knows, it might pay off.  I started seeing that as too lopsided a bet a few years ago and started diversifying.

I don't know.  All segments have their major negative aspects currently.  Bond prices are fluctuating +/-2% a day lately.  I cannot imagine that was typical in the past.  Stocks are getting more volatile again.  Cash sucks.  Gold sucks.  What to do??

If I was with the PP for a long time and had enjoyed some nice returns out of it, I'd probably stay the course for now, and re-evaluate after the Yuan denominated gold contract goes live this fall.

If China intends to allow gold to be priced higher after this fall it will be very positive for the PP. This will brake up the strangulation of the metal since 2011, and lift PP returns significantly.

I used to trade gold in the mid 2000s and accumulated from 2006-2007 till the summer of 2011 when I liquidated all my positions.

Gold is the most weak element in the PP because of its non favored status with the FED.
If China manages to brake this strangulation it will be great.

If you have not been in the PP for long, then quarterly purchases over two years will be a lot safer, or picking a more traditional mix of 60/40 with global stocks and 5-7 yr treasuries would be a fair choice.

One thing needs to be clear more than anything here: a fair gold price is critical for PP success now and in the future. It is abundantly clear from the evidence that this is not currently the case.

Just my two cents worth....so to speak.