Click here for Martin Armstrong’s latest release on the gold action this week.
Click here for Martin Armstrong’s latest thoughts on inflation, deflation, and gold, dated January 27, 2012. Martin lays out his computer daily gold model.
Click here for Jim Sinclair’s comments on Martin’s thoughts.
Groovygirl’s thoughts: whoever is trading gold and silver at this stage of the game doesn’t get it. Please leave that to the professionals. Groovygirl stopped trading gold at $1200. We are in a risk-on investment environment in every sense of the word (from the Fed’s actions to the European debt crisis to debasement of the dollar to the 100xs paper gold market to MF Global). Regardless of where the gold price goes next week, you trade at your own risk.
Buy as low as possible the hold physical gold and silver (but don’t freak if you didn’t buy the lowest low). Let physical gold and silver be at least 20% of your total wealth. Then relax, physical gold and silver are going higher long-term. There will be a time to sell, but we are far from that time.
GG,
Fooey on discourse! Crank up the flamethrowers!
(just kidding)
Note that Martin has a daily panic cycle for next Tuesday.
-Lemming
Comment by Lemming — January 27, 2012 @ 5:25 pm
Yes, I saw that panic cycle.
gg
Comment by totallygroovygirlfriday — January 27, 2012 @ 5:27 pm
LOTS OF WIDE CHANNELS
drive A TRUCK THROUGH blindfolded
Comment by chop — January 27, 2012 @ 6:04 pm
Here, respectfully are my two cents: “Velocity” is not actually part of the definition of inflation. Inflation, whether referring to “monetary” inflation or “price” inflation, are both essentially functions of supply and demand. Rather, velocity of money is one of several causative factors in price inflation. To state it in linear form;
1- monetary inflation is an increase in the supply of money.
2- whether or not monetary inflation leads to price inflation is partially a function of velocity, i.e. how fast money circulates in the economy. The faster money circulates, the higher the effective demand on goods/services (all else being equal), and thus prices tend to rise (inflate). Conversely, the lower the velocity of money, the lower the demand for goods/services (all else being equal), and thus prices tend to drop (deflate).
Put in the context of today’s environment, banks are tending not to lend the money being “created” by the FED, consumers are tending not to borrow the new money, and consumers are also a bit restrained on spending what money they already have…. thus the velocity of money -the speed at which money is moving through the economy- is relatively slow. Thus, (price) inflation is relatively subdued. Again, all else being equal. If for example, crop failures result in less available food, the price of food would tend to rise (price inflation) even if monetary inflation and velocity remain the same.
So, money velocity, although again, not part of the definition of inflation, and I say this not to split hairs, but rather to lend clarity to a poorly understood and often poorly explained (to the public), is a FASCINATING component to price inflation. or DEflation! That is the interesting part. Bernanke can create all the money in the world with his printing presses, but unless the banks lend, and the money gets into the hands of consumers, and is spent, spent, spent in the marketplace, we don’t get rising prices. In fact, if spending stops, prices fall dramatically. Which is why Ben has threatened to drop money from helicopters!!!
——-
OK. I am a student of inflationary theory. Not a master. Which is why, although I am a big fan of Armstrong, I find some of his essays poorly articulated…. such as this one, For example, he makes the point that higher rather lower interest rates cause inflation to rise. Interesting! But did he clearly explain why? I don’t think so.
Also, he made the point that low interest rates are not being passed on to consumers. Hmmm. How about record low mortgage rates?
Cheers
Comment by jim — January 27, 2012 @ 7:40 pm
To clarify, may I please also add that my prior comment is related to Armstrong’s inflation/deflation link posted by gg, and gg’s comment that velocity was part of the definition of inflation (with respect to gg).
Also I did not first read the link to Sinclair’s comments on what Armstrong has been forecasting about the price of gold. Sinclair’s comments also deserve comment I think (gee I guess I am just in a disagreeable mood today!). Jim is criticizing Martin for being wrong in his forecast. I don’t think Armstrong has been wrong though. Without going back and highlighting ever single forecast in the past year’s essays, my take on Armstrong’s forecasts is that he has been fairly close. Armstrong has alluded to lower prices (like the 1100 target Jim refers to) but did not predict it. He allowed for it. Big difference. He gave some targets IF gold continued its downtrend. He also gave some targets if/when gold resumed its long term uptrend. Armstrong was in fact pretty close to the year end price he actually did forecast, if I am recalling correctly. Even in the most recent essay of his that gg is linking to, I am not reading Armstrong as predicting lower prices. He is simply stating he is not convinced the downtrend has been aborted.
Regarding Jim, I am getting more and more suspicious of commentators who steadfastly believe that gold *must* go up this year and who don’t pay respect to the idea that we have a multi trillion dollar unwind in derivatives hanging over our heads. Between the threat of a 700 trillion dollar derivative unwind, a panic out of gold by hedge funds, a possible temporary drop in the price of physical gold when the paper gold market blows up, the possibility of further gold leasing by central banks, manipulation shenanigans by the usual suspects, and 10 other reasons I can’t even imagine….. gold achieving Jim’s targets this year is not a done deal. Yes, the dollar may collapse and gold will go to the moon, but there are too many moving parts to say for sure what will happen. I doubt if even GOD knows what gold will do this year.
cheers
Comment by jim — January 27, 2012 @ 8:13 pm
Jim,
All excellent points in your comments. Thank you for your two cents.
gg
Comment by totallygroovygirlfriday — January 27, 2012 @ 8:19 pm
Quite frankly, gg, Martin said too little of substance to comment on. Sure, Gold is going up. It has to, because the FED is creating money to swap out Europe’s debt.
Comment by Louis Wheeler — January 27, 2012 @ 10:05 pm
When the bullish news is released for gold, the recent buyers will sell to the suckers who rush in to buy. manufactured moves.
Next week the Japanese Yen should make a higher high than this week and then decline. May not be a fast decline since the boys already ran the sell stops this week. perhaps they’ll run the buy stops next week in fun.
icd
Comment by icd — January 28, 2012 @ 2:46 am
Hey Jim,
Some good hashing-out of your thoughts. Permit me to quibble by assuming explicitly that we mutually define Deflation as contraction in money supply, and Disinflation as lower prices.
Money Supply and Velocity are independent variables, both capable of lifting prices. In circular fashion, rising prices naturally also mean greater velocity.
I don’t agree with Armstrong re: rising interest rates. The Fed is holding them down because they allow the phenomenon to manifest more broadly and obviously. Bernank can’t stop inflation. He just conceals it for a while.
A liquidity crunch drags down EVERYTHING temporarily. It happened with Homestake; it happened again after 2008.
Isn’t it exciting, waiting for the process to take hold? People will study this period for many years to come.
The unspoken factor – presently enforced with aircraft carrier groups – is CONFIDENCE.
Comment by Lore — January 29, 2012 @ 1:04 am
It’s like GG said, only I won’t be so diplomatic.
Morons, you should’ve moved to the high ground of physical way before now.
Things went bust in 2008, DUH! Gomer, didn’t you all do some research and put 2 and 2 together at that time.
Sure PMs will pump up and down (due primarily to manipulation. don’t believe that …. watch Kitcos chart, when PMs dive its a sudden nose dive down, just as would happen when the PTB send huge paper shorts into the market).
Comment by grr8@juno.com — January 29, 2012 @ 1:14 am
grr8,
Groovygirl is fine with people trading gold as long as they understand the risks (old and new) and have their core physical position. Most people do not understand these issues, so gg warns against trading.
GG doesn’t want to deal with the risks or the extreme movements in price. She would like to sleep at night, so she has stopped trading.
gg
Comment by totallygroovygirlfriday — January 29, 2012 @ 9:09 am
I suspect we have gone beyond the edge, gg. Holding anything in paper assets is riskier than Physical PMs, food and firearms. Housing for consumption is a necessity, but is ill advised for investment.
It takes time for events to unfold. Monetary Velocity is a symptom of panic. The old normalcy bias of relative stable prices gets replaced slowly with a new bias toward fear and uncertainty. The more people who take evasive action, the more volatile the markets get. You and I are positioned very early in these markets; we got in very cheaply. Hence, we should stay out of trades, except to acquire more PM’s on price retreats. Soon enough, we will be unable to trust the physical exchanges due to price volatility.
It is time to change our thinking. We must keep ourselves from anxiety over the next few years.. We should stop being dollar centric. Take housing for instance. Let’s say the average house in the US is $140 thousand. How do you determine if this is a reasonable price? The trend line suggests that this house is going below a hundred thousand dollars and might bottom out at $70 thousand. This depends on location and I wouldn’t buy in California, Illinois and New York State at any price.
Is this something to be concerned about? It is far better to take that housing price and divide it by the Precious Metals. So that same house, at the current markets, would be 80.56 ounces of Gold or 4,135.4 ounces of Silver. A realistic price for Gold, based in the increase in the Money Supply since 1913, would be $50 thousand an ounce. So, if that house declined to $70 thousand due to a lack of buyers, it could be picked up for 1.4 ounces of Gold, or 22.4 ounces of Silver at the historical exchange rate of 16 to one.
If we made the same mental check for food, then it is getting cheaper because the PM’s are outpacing price inflation. Of Course, if the government enforces wage and price controls to combat the coming higher prices, then the grocery store shelves will be vacant. The only available goods will be on the Black Market. So, you must have excess goods to sell.
Comment by Louis Wheeler — January 30, 2012 @ 5:02 pm