Perpetual Capitulation


An ode to the end of a con

How long can deception go on?

When prices are set By banks printing debt

All trust in the “markets” is gone!

There is no stand-alone Narrative regarding gold today (June 2013), as there was in 1895. Today gold is understood from a Common Knowledge perspective only as a shadow or reflection of a powerful stand-alone Narrative regarding central banks, particularly the Fed … what I will call the Narrative of Central Banker Omnipotence. Like all effective Narratives it’s simple: central bank policy WILL determine market outcomes. There is no political or fundamental economic issue impacting markets that cannot be addressed by central banks. Not only are central banks the ultimate back-stop for market stability (although that is an entirely separate Narrative), but also they are the immediate arbiters of market outcomes. Whether the market goes up or down depends on whether central bank policy is positive or negative for markets. The Narrative of Central Banker Omnipotence does NOT imply that the market will always go up or that central bank policy will always support the market. It connotes that whatever the central bank policy might be, it will drive a market outcome; whatever the market outcome, it was driven by a central bank policy.

The stronger the Narrative of Central Banker Omnipotence, the more likely it is that the price of gold goes down. The weaker the Narrative – the less established the Common Knowledge that central bank policy determines market outcomes – the more likely it is that the price of gold will go up. In other words, it’s not central bank policy per se that makes the price of gold go up or down, it’s Common Knowledge regarding the ability of central banks to control economic outcomes that makes the price of gold go up or down.

Instead, the focus of the mainstream Narrative effort moved almost entirely towards what open-ended QE signaled for the Fed’s ability and resolve to create a self-sustaining economic recovery in the US. And it won’t surprise you to learn that this Narrative effort was overwhelmingly supportive of the notion that the Fed could and would succeed in this effort, that the Fed’s policies had proven their effectiveness at lifting the stock market and would now prove their effectiveness at repairing the labor market. Huzzah for the Fed!


gold IR

Negative News Tends to Cluster at MAJOR bottoms:

  1. Gold Could Go To $350
  2. Gold Sends a Message
  3. Gold Could Plunge to $800

My Jaw Dropped: Long gold, short US stocks, Short US Dollar

low gold


commodities and emerging market equities


Will the US Dollar Continue its Rampage Higher? 272660136-Raoul-Pal-GMI-July2015-MonthlyRate hikes and goldRate hikes are “bad” for gold?

rising rates bad for gold
Zweig Calls HighStocktoCommodityAtAllTimeHighInvestors above flee tangible assets for financial assets. Taken to an extreme, input costs for companies will go to zero and profit margins to infinity. Reality?

Biotech Fantasy2Biotech Fantasy

9 responses to “Perpetual Capitulation

  1. Having bought, RBY, RTRAF, GQMNF, SGSVF, AKG, TORXF, TAHO, NGD, SAND, CLD, BTU, HNRG, SLW, CCJ, I wait for the next five years.

  2. What do you think guys it is good timing to raise capital for tech-startup right now because the valuations are insane?… We all know how this will ends.

    • Be careful of your reputation if you burn investors. The net value of the bio tech start-ups is almost mathematically certain to decline within five years.
      What are the odds of a return on investment since the future is uncertain?

      Prices are fueled by ponzi capital (fiat currency and FRB) coupled with desperation. It isn’t DIFFERENT this time.

  3. So, what’s the purpose of mentioning Jason Zweig’s article from 2011 where he said gold mining stocks were cheap? How was he wrong? It’s easy to look back in retrospect and say that he was. I do find it interesting that he would say that, since he remarked that they were selling at a ttm P/E multiple close to that of the S&P (14 and 14.5, respectively) and a P/B greater than that of the stock market (2.4 and 2.0, respectively). He also mentioned that the miners were selling at a ratio relative to the price of gold itself that was one of the lowest ever, which would seem to suggest now that that valuation metric might not be entirely useful.

  4. Correction, miners as a whole were selling at a P/E of 18, not 14.

    • Thanks. The main point is to always NORMALIZE cycle company earnings. Buy miners when earns negative and sell when at new all-time high in earnings. So a homebuilder stock showed 5 P/Es in 2005–SELL! They had 5 P/E AFTER the biggest US housing boom of the past 10,000 years.

  5. Isnt it better to rest the gold stock a little longer? and bet on the rising dollar..then after that bet on the gold stocks?

    • What makes you think the dollar is going to rise further? You’re not trying to nail the bottom in gold stocks nor trying to time it perfectly in order to buy them right before they take off. You want to buy them now because they are cheap and should want to continue to buy them for as long as they stay cheap. Then you play the waiting game.

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