|
Well, what better time to publish a gold-bullish article than the day
after the relic was down a hundred bucks? Here is an excerpt from NFTRH176
(2/26/12) illustrating the continuing case for gold, which probably has more
downside 'price' work to do in the near term (pending rebound attempts), even
as the value proposition remains just fine.
By now, a decade-plus into the secular bull market, you have
likely heard all the reasons. Back when the stuff was selling for $300 to
$400/oz. the case for gold seemed like more of an outlier. I thank the market
gods that I found some old gold bugs at Gold-Eagle.com back then and read
everything the more rational among them had to say. It made sense, as Alan
Greenspan was beginning to engage the era of Inflation onDemand.
Now? Well, it is harder for people to think about buying
gold because its price has gone up relentlessly since then, and their
purchasing power has not kept up. Being a relatively early victim of anxiety
toward Greenspan’s inflationary policies, I saw to putting my house in
order on multiple fronts a decade ago, ironically after reading Robert Prechter’s Conquer the Crash. It is ironic because
while I consider him brilliant, Prechter has
apparently not been able to cure his chronic blind spot on gold and its value
proposition (http://is.gd/YOHQWd) over the decade since I first heard him predict
in an interview that $350/oz. was probably ‘the top’. Then came
the $390 ‘top’ and then…
Why gold? All I can say is that people who are 100% cash or
paper investments and subject to the inflationary whims of policy decisions,
are still vulnerable to those decisions and right now, it appears policy makers
are continuing a systematic regimen of issuing and manipulating debt in
service to money printing (inflation). The rudiments of gold’s
investment case have not changed; they are insurance and retained
‘value’.
Look at the chart above and tell me what you see. I see a
top panel item – the venerable S&P 500 listing of the US stocks
– having gone through a violent series of ups and downs since the
mainstream finally became aware (‘Too Big To Fail’ HBO docudrama
and all) of just how broken the system is. I see a bottom panel item that has
been relatively calm – during the 2008 meltdown and during the 3 year
recovery out of it.
One is a play, pitched by everyone from Warren Buffett* to
your friendly local Mom & Pop financial adviser (excepting you Michael,
Gary, Mike, Paul and others I have come to know in the NFTRH subscriber base
;-)) and one is simply a no-dividend paying lump of enduring monetary value
that simply keeps up with the value eroding policies employed by officials to
try to keep the thing in the top panel and other indices like it around the
world, inflated.
The SPX is rising strongly. Great! It is at resistance,
which it may or may not break through. Okay fine. But an honest view of the
chart shows an index that has benefited from TARP to QE2 to ZIRP on out to
whatever the hell they are doing in the control room now; and still this
mess, while near recovery highs is nowhere near all time
highs.
Meanwhile, the relic in the bottom panel has formed a
bullish flag after burning out last summer on the dangerous Euro panic
momentum. Since then, the usual characters have jumped into the limelight
with Gartman making a grand pronouncement, Roubini tweeting and taunting gold bugs and now Buffett
ruminating from on high about gold’s lack of utility vs. stocks.
Look, I don’t know what the future holds, but I have
seen enough of these media stars to know that they have not dealt me a
straight hand since I was issued my ‘Gold Bugs Union, Local 350’
card a decade ago. As I was repeatedly told by one of my teachers back then,
“gold is not about price, it is about value.”
Peoples’ buy, sell, hold or ‘do
nothing’ decisions are their own. All I can tell you is that gold
remains – as it was when the bull market began against a credit bubble
that was then just a twinkle in Greenspan’s eye – insurance
against the destruction of the paper money of the realm.
Confidence in paper money is being systematically used and
abused as the fuel to keep asset markets (including the Oracle’s
beloved stocks) buoyant. Whether or not this policy succeeds in continuing to
enrich asset holders, there is a place for the simple monetary relic that
more than keeps pace with the process.
* Long-time gold bugs know that
the mainstream serves up periodic shots at the barbarous relic (and its
simple value proposition) by people pitching equities and other paper
instruments, or otherwise serving masters other than the individual and her
direct needs. This long-running tradition was most recently voiced by none
other than the god of equities himself, the Oracle of Omaha.
|