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SELL Your Gold Now! Get Out While You Can

Posted on July 23, 2013 | 11 comments

I updated this post: http://wp.me/p2OaYY-245

Lee Munson of Portfolio LLC says “Sell the gold rally“. (A hilarious video)

The question for investors and speculators alike is if gold has at long last marked the end of a wrenching nearly two-year pullback from the 2011 highs over $1,900. Lee Munson of Portfolio LLC says any rally marks a chance to make a graceful exit from their positions.

“Investors are confusing the fact that [gold] holds its value super long, hundred-year periods of time versus inflation versus making actual growth,” Munson says in the attached video. “It just holds its value. That’s not a reason to hold anything.”

Those who quibble with that analysis, parsing the numbers to maximize the apparent returns of gold versus stocks are missing the point. Gold has worked over shorter periods as a speculative vehicle but the die hard goldbugs have seen minimal returns at best and dramatically underperformed stocks.

Since 1940 adjusted for inflation the only period over which gold has outperformed stocks is 2000 – 2010; and that lead is slipping fast. History suggests gold is extremely volatile in shorter terms but dramatically lags U.S. equities for the truly committed gold enthusiasts.

Munson has simple advice for gold investors enjoying the terrific rally from the recent lows. Sell. “Exit out of the trade. Get serious. Get real.”

Disingenuous or Clueless? (from “Mish”)

I do not profess to know what the price of gold will be at any time, but Munson seems to think he does, so much so that he screams sell after a measly rally.

Munson is certainly clueless about the fundamentals of gold.

If you don’t understand the fundamental driver (and it’s not jewelry or central bank selling) please consider Plague of Gold Bears Now Say “Gold Unsafe at Any Price”; What’s the Real Long-Term Driver for Gold?

Gold outperformed between 2000 and 20010 for a reason. And that reason is global central bank debasement of currency. Gold also outperformed in the late 70s for the same reason, but it did get ahead of itself.

Additional Reading

Cash, Bonds, Equities, or Gold?

You have to put your money somewhere (and somewhere includes cash).

This is not about being a “die hard gold bug”. This is about understanding the case for gold as it exists now.

The fundamentals of gold are strong, yet sentiment is so extreme that bears says “gold is unsafe at ANY price”. Now Munson says this puny rally is a chance to exit.

With sentiment this extreme in the face of strong fundamentals and a rally, I like my chances here.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Read more at http://globaleconomicanalysis.blogspot.com/2013/07/fools-say-sell-gold-rally.html#5AsKu1e0jpiSssK3.99

http://globaleconomicanalysis.blogspot.com/2013/07/fools-say-sell-gold-rally.html

http://globaleconomicanalysis.blogspot.com/2013/06/plague-of-gold-bears-now-say-gold.html

http://globaleconomicanalysis.blogspot.com/2006/04/us-vs-japan-land-prices-pictorial.html (A GREAT post for financial history buffs)

11 Comments

Posted in Investor Psychology, YOU

Tagged CNBC, Mish, Talking Idiots

Case for Owning Gold Has Collapsed; A Perspective in Silver; Reader’s Question;

Posted on April 24, 2013 | 5 comments

Money transmits value, Mises taught, but money does not measure value. This distinction is fundamental in Mises’s theory of money. “Money is neither an abstract numeraire nor a standard of value or prices. It is necessarily an economic good and as such it is valued and appraised on its own merits, i.e., the services which a man/woman expects from holding cash. (Human Action, pp. 414-415). Gary North, Mises on Money

Read more on the value of money: http://www.mises.org/daily/6380/The-Value-of-Money

What is, then, the best monetary policy? He argues that in light of his previous considerations “the state should at least refrain from exerting any sort of influence on the value of money. A metallic money, the augmentation or diminution of the quantity of metal available for which is independent of deliberate human intervention, is becoming the modern monetary ideal.”[17] He adds: “The significance of adherence to a metallic-money system lies in the freedom of the value of money from state influence that such a system guarantees.”[18]

The Case for Owning Gold Has Collapsed; Yellow metal could be headed much, much lower http://is.gd/h5KW6v. Gold could be headed not much lower, but much much lower. This was written on April 18, when the value assigned to the monetary relic (AKA its nominal price) resided at $1391 per ounce. So be warned, Mr. Gold advises that gold could go much much lower. Gold bugs take heed; Mr. Gold himself has put the double ‘much’ whammy on you!

The article: The Gold Dilemma. The article is riddled with logical fallacies. Using CPI and GDP to measure anything meaningful is a fantasy–even forgetting that those indexes are politically constructed by bureaucrats.

Another view of gold’s history: 99816519-Special-Report-Gold-2012-In-GOLD-We-TRUST.

Why I own gold bullion–as a hedge against monetary chaos. Own what the government can’t print.

All the Silver Ever Mined

A reader’s question from the prior post: Am I 100% in cash? No, I have cash, gold bullion, selected precious metals mining companies, a few other companies, and a tiny short position in certain stocks like GE and CRM. If you think holding on through thick and thin after buying at the highs EVEN with UNSUSTAINABLE Fed manipulation of money and credit is a good plan, then view page 8 here: A Lesson in Financial History by Mish. Also, for more perspective on the unsustainability of current corporate mean-reverting profit margins see: An Unsustainable Equilibrium_Hussman. View the video presentations here and consider a donation to cure ALS: http://www.winecountryconference.com/2013-speaker-presentations/. People love to follow the crowd and momentum while mal-investment increases, so expect more S&P 500 movement to the upside until–unexpectedly–a surprise hits and people need to sell their “hot potato.”

But if you own great franchises at good prices then you have few worries. I wish I could find them now.

Short the SPY and Long PHYS for fun (not for real) at the highest offer for PHYS ($10,000 at $12.30 for PHYS) and lowest bid for SPY ($10,000 shorted at $158.10) on April 25 and lets see where we are in 12 months.