Official Gold & Silver Price Thread 1 1

[World Colonial]

On 12/8/2021 at 11:39 PM, Quintus Arrius said:

@World Colonial

While I have difficulty identifying the sources from which you base your prognostications -- the hue and cry has been raised many times before -- I have to admit I find your comments to be insightful and at times bewildering and confounding but refreshing in that you hold nothing back. It is almost as if there ought to be a trailer reading, fail to take heed at your own peril.     🤔 

There aren't any specific sources.  I do a lot of reading to obtain ideas from elsewhere but I don't need to rely on someone else to form my own conclusions.

There is no "trigger event" or "black swan" necessary to end this mania because this mania (and the associated fake economy) aren't the result of any economic "fundamentals" but manic psychology.

The mania will end when the psychology enabling it ends, it's as simple as that.  When collective psychology changes, it won't matter what the government or any central bank does because anything they do will be viewed as inadequate or a failure.  This is what happened during the initial stage of the GFC which is why both the government and FRB did what they did in 2020.

It "worked" last year but with the side consequence of blowing the bubble even larger and distorting the economy even more by further "kicking the can" down the road.

[GoldFinger1969]

On 12/9/2021 at 9:18 AM, World Colonial said:

It isn't just certain pockets.  Look at the entire bond market.  Are you going to tell me it isn't in a massive bubble?  The US stock market (which has also never been more overpriced) isn't the only market and doesn't exist in a vacuum.  The "good value" you infer is based upon the fake economy. At market peaks, the economic fundamentals never look bad to most people.  That's how you get manic bubble valuations.  Why would you expect anything else?  Do you think the environment looked bad at the US stock market peak on September 3, 1929?  I don't expect an economic collapse like the one into 1933.  The economy and actual state of American society (and much of the world) is far worse now but optimism and belief that government can prevent declining living standards means that politicians are guaranteed to do "something" to try to prevent it, just as they did last year and during the GFC.  As for market prices, I ultimately expect a decline worse than the 1930's but I don't know whether it will be quick or extended.  I also don't know whether the decline will be worse measured in nominal or inflation adjusted prices.  US stocks lost 89% from September 3, 1929 to July 8, 1932 but the decline was less (excluding dividends) adjusted for price changes than from February 9, 1966 to August 13, 1982.

Stock gains or losses can't be "relative" or inflation-adjusted.  While I understand the 1966-82 "Standing Still" arguments, the fact is that the 1929-32 decline of 90% even with prices falling 25% is unparalleled in our nation's history.

I agree bonds are bubble-like.  But that is going to provide support for the stock market.  Money has to go SOMEWHERE and if you can't get 4% in a money market fund....or 5% in a bond....you'll buy stocks yielding 2-4% with the chance of capital appreciation.

Economies are much less boom-bust than in 1930 or before.  Plus, our knowledge of economics, monetary policy, and automatic stabilizers is much more today than pre-Keynes and pre-Friedman.

[GoldFinger1969]

I'm not a fan of BitCoin or crypto.  But Tesla and some other SPACs have grown into their valuations.  The bear argument on Tesla has been proven wrong -- just as it was on Amazon.com.

[World Colonial]

On 12/9/2021 at 10:13 AM, GoldFinger1969 said:

His point is that if you believe that inflation, interest rates, and ERPs are going to march slowly higher over the years it is a tight analogy.

I disagree with him.

On 12/9/2021 at 10:13 AM, GoldFinger1969 said:

I said that valuations today are on the high side, compared to pretty low in 1946.  But that does NOT mean a bubble.  Tech stocks were in a bubble in 2000 because they didn't have earnings for the most part and those that did (like CSCO or MSFT) sold at 60-80x earnings. Today, Big Tech is pricey but often sells at 20-35x EPS.  Not cheap, but not a bubble.

You are still only measuring it by earnings.  That's why we continue to disagree.

What I would like to know is, if today isn't a bubble, then what exactly is one?

It's also not possible to separate the debt bubble (global debt, not just US federal) from the stock market.  That makes no sense.  Increasing debt and the debt mania is the enabler or at least a rationalization for the rising stock market.  It lowers the P/E by inflating earnings from lower interest expense, borrowing for share repurchases, and sustaining the fake economy to inflate revenues.  Since 2008, corporate America has effectively performed a collective leveraged buyout concurrently gutting its balance sheet.  How do you not see that?

On 12/9/2021 at 10:13 AM, GoldFinger1969 said:

Our debt is high but we are a reserve currency superpower.  That means betting on our demise is going to be a losing proposition even if turns out to be right because neither you nor I will be around to see the payoff (see my GREECE analogy above).

I'm not specifically referring to US federal debt but global debt from all sources.  If you want to make this argument, the US cannot prevent a "credit event" from occurring anywhere else in the world and neither can any other central bank.  Whether any response "works" or not is psychologically determined.  See my above response.

On 12/9/2021 at 10:13 AM, GoldFinger1969 said:

"Normalizing" fiscal (already being done) or monetary policy (coming) will mean SLOWER growth it does NOT mean an economic depression.

You are joking right?

Both fiscal and monetary policy have been anything but "normal" since 2008.  There also isn't even a hint that there is any intent to do it, unless of course, your definition of "normalize" is entirely different than mine.

[World Colonial]

On 12/9/2021 at 10:26 AM, GoldFinger1969 said:

I agree bonds are bubble-like.  But that is going to provide support for the stock market.  Money has to go SOMEWHERE and if you can't get 4% in a money market fund....or 5% in a bond....you'll buy stocks yielding 2-4% with the chance of capital appreciation.

Today, "money" is mostly someone else's debt.  It can also disappear into nowhere just as it appeared out of nowhere.

What you are now admitting is that one mania (bonds) is supporting another asset class (stocks) which you claim is not in a bubble.

On 12/9/2021 at 10:26 AM, GoldFinger1969 said:

Economies are much less boom-bust than in 1930 or before.  Plus, our knowledge of economics, monetary policy, and automatic stabilizers is much more today than pre-Keynes and pre-Friedman.

I know there is less boom and bust than in the past.  I addressed this in a prior post above in this thread.  The belief you state is almost universally accepted.  

[World Colonial]

On 12/9/2021 at 10:28 AM, GoldFinger1969 said:

I'm not a fan of BitCoin or crypto.  But Tesla and some other SPACs have grown into their valuations.  The bear argument on Tesla has been proven wrong -- just as it was on Amazon.com.

We disagree again, except on crypto.

So, Tesla is reasonably valued in the vicinity of a $1T market cap?

Is this based upon earnings, revenues or some other fundamentals I don't know about?  Or Wall Street hype using something which isn't tangible?

The EV market is growing but it's at the expense of the ICE market.  There is no volume growth in most auto markets and where there is, Tesla isn't either there at all or is a minor player with numerous competitors (like in China).  Any revenue growth in the US is entirely from increasing MSRP which a noticeable proportion of the customer base can only pay due to basement level credit standards and artificially cheap money.  It's entirely due to the fake economy.

Tesla's market cap fell recently but last I checked was comparable to the seven largest auto companies (by market cap) in the world: Toyota, VW, GM, Ford, etc.

If Tesla was of equivalent size to even one of them (meaning it's revenue and especially profits was a multiple of current levels), it would be considered a "mature" company just like the rest of them and its market cap would be worth a fraction of current levels.

So yes, I can reasonably conclude Tesla is selling at bubble prices, just as its ratios demonstrate.

[GoldFinger1969]

On 12/9/2021 at 10:37 AM, World Colonial said:

What I would like to know is, if today isn't a bubble, then what exactly is one?  It's also not possible to separate the debt bubble (global debt, not just US federal) from the stock market.  That makes no sense.  Increasing debt and the debt mania is the enabler or at least a rationalization for the rising stock market.  It lowers the P/E by inflating earnings from lower interest expense, borrowing for share repurchases, and sustaining the fake economy to inflate revenues.  Since 2008, corporate America has effectively performed a collective leveraged buyout concurrently gutting its balance sheet.  How do you not see that?

The numbers disagree with you.  Check out the corporate balance sheet information from the JP Morgan link I gave you -- debt levels are MUCH LOWER especially in the Energy sector where the problems were 2016-20.

GMO of Boston has done extensive work on bubbles.  They are value investors and believe stocks will LOSE MONEY from here.  Even they say that most of the market is very pricey but NOT a bubble.

To me....a bubble is one that needs to decline 75% (or more) to reach fair value.  That's what the NASDAQ did in 2000-02.

[GoldFinger1969]

On 12/9/2021 at 10:37 AM, World Colonial said:

You are joking right? Both fiscal and monetary policy have been anything but "normal" since 2008.  There also isn't even a hint that there is any intent to do it, unless of course, your definition of "normalize" is entirely different than mine.

The ECB tightned in 2010-11 and it precipitated the Euro Crisis.  We had a 4% 10-year Treasury in early-2011....we had a tightening Fed in 2013 and 2018.

I agree on balance the Fed has been spiking the punchbowl but they have also taken it away at times.  And they are preparing to do so again. 

[GoldFinger1969]

On 12/9/2021 at 11:03 AM, World Colonial said:

So yes, I can reasonably conclude Tesla is selling at bubble prices, just as its ratios demonstrate.

The market for TSLA is discounting not only auto but software services (higher margins) and batteries, solar, and electricity re-sales.

I personally would not buy the stock here but you can VERY EASILY justify the price if they execute perfectly.  If they don't, it's overpriced by 20-30%.  If they screw up bigtime, it's overvalued by 50-75%.

[World Colonial]

On 12/9/2021 at 11:51 AM, GoldFinger1969 said:

The numbers disagree with you.  Check out the corporate balance sheet information from the JP Morgan link I gave you -- debt levels are MUCH LOWER especially in the Energy sector where the problems were 2016-20.

GMO of Boston has done extensive work on bubbles.  They are value investors and believe stocks will LOSE MONEY from here.  Even they say that most of the market is very pricey but NOT a bubble.

To me....a bubble is one that needs to decline 75% (or more) to reach fair value.  That's what the NASDAQ did in 2000-02.

I can find numbers to agree with me too.  It's not like its one-sided belief.  I've read Jeremy Grantham (GMO) where he has claimed it's a bubble, including recently.  I read Hussman regularly where he uses empirical data to support his claims.  I presume you disagree with him too.  I also read Elliott Wave International who are considered super bears because their long-term US stock market forecast has been wrong to this point.  But they have been right on numerous in other markets and with US stocks over shorter horizons too, including identifying the peak pre-GFC and the exact low on March 9, 2009.  If they were not, they'd be out of business now.  They have cited numerous indicators (both valuation and sentiment) to support it's a bubble.

Corporate debt levels are much lower compared to when?  Certainly not pre-GFC. 

[World Colonial]

On 12/9/2021 at 11:55 AM, GoldFinger1969 said:

The market for TSLA is discounting not only auto but software services (higher margins) and batteries, solar, and electricity re-sales.

I personally would not buy the stock here but you can VERY EASILY justify the price if they execute perfectly.  If they don't, it's overpriced by 20-30%.  If they screw up bigtime, it's overvalued by 50-75%.

There is no absolute value, only relative.  I can never justify Tesla's current value or any company similarly valued, as I consider it to be based upon complete fantasy.  Those other businesses are competing with the utility industry.  Same logic I used for the auto industry in my last post.

[World Colonial]

On 12/9/2021 at 11:53 AM, GoldFinger1969 said:

I agree on balance the Fed has been spiking the punchbowl but they have also taken it away at times.  And they are preparing to do so again. 

Ok, last post on this topic, for now anyway.

One thing I want to make clear is that I am not always uniformly bearish, even in this environment I call a mania.

Over the last year, I have mentioned the oil stocks a few times.  I didn't buy any because of my personal situation.  It's not that I don't have the money but cannot afford to be wrong now for other reasons.

The oil majors (CVX, RDS and XOM) were substantially depressed, historically on a relative basis.  These examples more than doubled from the 2020 lows (somewhat more than the S&P 500) but were (and are) much better values despite the relative performance.  Even buying noticeably above the 2020 lows would have been a big winner.  Good cash yield for waiting with a strong (though weaker than previously) balance sheet, as opposed to practically everything else.

Maybe next time, whenever it happens.

[GoldFinger1969]

On 12/9/2021 at 12:02 PM, World Colonial said:

I can find numbers to agree with me too.  It's not like its one-sided belief.  I've read Jeremy Grantham (GMO) where he has claimed it's a bubble, including recently. 

Read the other guys at his company, like Ben Inker.  They're very smart and tend to rely more on numbers whereas Grantham relies more on emotion.  Don't get me wrong....they are all super-smart and even when I disagree with them, I respect their smarts.

Great website, glad you are aware of it.  I'm actually looking to move some $$$ into their funds for my parents if they don't have the minimums I think they do. 

On 12/9/2021 at 12:02 PM, World Colonial said:

I read Hussman regularly where he uses empirical data to support his claims.  I presume you disagree with him too.  I also read Elliott Wave International who are considered super bears because their long-term US stock market forecast has been wrong to this point.  But they have been right on numerous in other markets and with US stocks over shorter horizons too, including identifying the peak pre-GFC and the exact low on March 9, 2009.  If they were not, they'd be out of business now.  They have cited numerous indicators (both valuation and sentiment) to support it's a bubble.  Corporate debt levels are much lower compared to when?  Certainly not pre-GFC. 

Hussman has great data -- but he's been wrong for decades.  He never turns bullish, even at the bottoms in 2002, 2009 and 2020.

I once met Robert Prechter who was THE MARKET GURU in the late-1980's.  Is he still with the site ?

Yes, corporate debt levels and LEVERAGE are much lower than pre-GFC.  For instance, banks/financial companies have more TANGIBLE EQUITY than they did TOTAL EQUITY at any time going back to the 1950's.  Leverage is down from 40x to 15x. 

On 12/9/2021 at 1:27 PM, World Colonial said:

The oil majors (CVX, RDS and XOM) were substantially depressed, historically on a relative basis.  These examples more than doubled from the 2020 lows (somewhat more than the S&P 500) but were (and are) much better values despite the relative performance.  Even buying noticeably above the 2020 lows would have been a big winner.  Good cash yield for waiting with a strong (though weaker than previously) balance sheet, as opposed to practically everything else.  Maybe next time, whenever it happens.

That was a panic crash with negative futures oil prices.  The stocks are STILL good value between dividends and capital appreciation.  My ex-colleague Paul Sankey runs a free (for now ! ) website with his insights and stock picks.  He was probably the best oil analyst on Wall Street during the 1990's and 2000's.  Check him out.

Edited December 9, 2021 by GoldFinger1969

[World Colonial]

On 12/9/2021 at 2:42 PM, GoldFinger1969 said:

Read the other guys at his company, like Ben Inker.  They're very smart and tend to rely more on numbers whereas Grantham relies more on emotion.  Don't get me wrong....they are all super-smart and even when I disagree with them, I respect their smarts.

You are the one who brought Grantham up to support your position.  So, now you don't agree with him?

On 12/9/2021 at 2:42 PM, GoldFinger1969 said:

Hussman has great data -- but he's been wrong for decades.  He never turns bullish, even at the bottoms in 2002, 2009 and 2020.

Totally irrelevant to this discussion. 

The data is the data.  We can debate what it means but that's what the data shows. The decision to buy into this historically overpriced market or not is a different consideration altogether.

I'm aware of the counterarguments.  I have heard it all: "It's different this time", TINA (There is no alternative), FOMO (Fear of Missing Out", Fed put...whatever.  If anyone wants to buy into this market or any asset, great.  But that doesn't change that it is historically overpriced.  Just buy into (or not) and live with the consequences.

The US stock market has been relatively overvalued for most of the time (literally) since the late 1990's versus prior history (all but mid-2002 and the low during the GFC) and hasn't been undervalued even once, except maybe by the distorted P/E ratio Wall Street uses (forward "adjusted").

To anticipate one reply, I'm aware that Wall Street also uses interest rates as a counterargument.  That's why I told you that this argument is based upon the bond and debt mania which supporting this entire house of cards, both the financial markets and economy.  So, these people use the rationalization of one mania (bonds) to support another one (stocks) claiming it's "fairly" valued or not particularly overpriced.

Bonds are the biggest and worst mania.  Aggregate credit quality both in the US and worldwide, given balance sheets and the economic "fundamentals", has literally never been lower in the history of human civilization.  It's at the lowest interest rates ever, with the lowest credit standards ever, and the loosest terms (where it applies) in history too.  Even the US government, at minimum the worst since WWII and probably since the US Civil War.  Doesn't matter that they can "print" to pay it back.  Everyone knows that and did.  So can Argentina if they could borrow in their own currency.  It's the value of what you are (likely) to get back.

On 12/9/2021 at 2:42 PM, GoldFinger1969 said:

Yes, corporate debt levels and LEVERAGE are much lower than pre-GFC.  For instance, banks/financial companies have more TANGIBLE EQUITY than they did TOTAL EQUITY at any time going back to the 1950's.  Leverage is down from 40x to 15x. 

Financial and non-financials are totally different animals.  You may be correct in the aggregate versus immediate experience prior to the GFC but not for non-financials.  These companies have gutted their balance sheets since the GFC through share buybacks.  

It's also evident looking at any number of individual big cap stocks.  I have looked at many of them.  Balance sheets are stable rags and hardly pillars of strength.  Companies like UPS and Coca Cola which used to be "AAA" are now loaded to the gills with debt.  The interest coverage ratio is often low because of inflated profits (substantially or entirely from the fake economy) and artificially low interest rates but their balance sheets still suck.

This is also evident from credit ratings which are lower than in the past, even though I'd never rely on them either.  Credit ratings are low even with the agency's low standards.

On 12/9/2021 at 2:42 PM, GoldFinger1969 said:

That was a panic crash with negative futures oil prices.  The stocks are STILL good value between dividends and capital appreciation.  My ex-colleague Paul Sankey runs a free (for now ! ) website with his insights and stock picks.  He was probably the best oil analyst on Wall Street during the 1990's and 2000's.  Check him out.

I'd call these stocks relatively good values but that's all.

[GoldFinger1969]

On 12/10/2021 at 10:52 AM, World Colonial said:

You are the one who brought Grantham up to support your position.  So, now you don't agree with him? 

No, I think JG makes lots of good arguments.  I always read him and like his thoughts, agree or disagree.

I'm just saying that Inker and some of the other folks have nicer charts, tables, and numbers. 

On 12/10/2021 at 10:52 AM, World Colonial said:

Totally irrelevant to this discussion.  The data is the data.  We can debate what it means but that's what the data shows. The decision to buy into this historically overpriced market or not is a different consideration altogether. I'm aware of the counterarguments.  I have heard it all: "It's different this time", TINA (There is no alternative), FOMO (Fear of Missing Out", Fed put...whatever.  If anyone wants to buy into this market or any asset, great.  But that doesn't change that it is historically overpriced.  Just buy into (or not) and live with the consequences.

 As Jim Cramer says...when you cash in your profits or investment returns, they don't ask you to return them if you made them on overpriced stocks or not.

No professional money manager would survive adhering to Hussman's mantra.  And no retail investor would earn ANYTHING by staying in cash or gold, WC.....money market funds yield 0.1%.....bonds yield 2% or less.....stocks at least can offer decent yields (3-6%; leveraged vehicles 6-9%) and maybe capital appreciation.  But if I buy a stock yielding 5% a year, unless it loses 50% over the next decade, I'll get a positive return.  If it's flat, I make 50%.  Any capital gains are a plus.

I agree that stocks are not GREAT values.  They are OK in the aggregate if your time horizon is a few years or a decade.  Personally, I'm waiting to scale in lower.  So we overlap on valuations with the difference being you don't want to buy either bonds or stocks or cash (?) and I realize that unless money market funds go to 2% or higher, you have to have some bond and some stock exposure.

BitCoin and gold won't cut it.

Edited December 11, 2021 by GoldFinger1969

[Henri Charriere]

A LITTLE LEVITY...

🐓 🐓 🐓:  "He keeps returning to this thread... You're not thinking of getting rid of us are you???

Q.A.:  ALL options are on the table.

 

[GoldFinger1969]

Gold vs. Silver:  Kinda snuck up on me, but I see that silver has definitely been weaker than gold the last few weeks.

Don't know why those premiums on ASEs are so sticky.  Gonna Google some stories to see what's up esp. since gold premiums are much more modest.

[Revenant]

On 12/9/2021 at 10:53 AM, GoldFinger1969 said:

agree on balance the Fed has been spiking the punchbowl but they have also taken it away at times.  And they are preparing to do so again. 

Everytime they tighten the highest interest rate they reach before dropping again gets lower. Every time they loosen the rate they loosen to gets lower until they hit zero in 2008, and now real FED funds rate is -6.8% with inflation. And the reason is that dent overall keeps getting bigger and it needs a lower interest rate to make it bearable. But 0% rates and negative real rates can't continue forever. Eventually this wolf we have by the neck - the debt levels - have to be reckoned with at all levels- federal, state, local, corporate, individual...

I don't know when but I do think this is a debt bubble and the music will stop... one day.

Edited December 12, 2021 by Revenant

[GoldFinger1969]

On 12/11/2021 at 8:20 PM, Revenant said:

I don't know when but I do think this is a debt bubble and the music will stop... one day.

Maybe.....but the market can remain irrational longer than we can remain solvent.  

If it takes 5 years or 10 years or 15 years to work itself out.....we can't sit in cash, gold, and BitCoin until then, right ?