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Deal Addict
Aug 12, 2004
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Calgary
Mark77 wrote: $2508 != $1900. And the tragic (mis) assumption is that the US stated CPI actually applies to the cost of mining.
Cost of mining has no impact on the actual cost of gold. Clearly you should get that in your head; if you ever did you would see why you keep on being on the losing end. Reserves of gold in the world are huge. Just look at the oil sands or natural gas and you will see why commodity costs doesn't matter. If it's not profitable to mine, it simply won't be mined, which at the same time, doesn't get the company profits. Again, that's another reason why gold mining companies are such a poor investment.

Again, there is not a single gold mining company with enough of a monopoly that will be able to affect the cost of gold. Barrick Gold is not OPEC. Even OPEC is marginalized nowadays.
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Feb 15, 2008
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Firebot wrote: Gold was in a continuous decline for well over 20 years after the 1980 gold bubble.
Correct. Although it largely was stabilized in the 1990s in the $400-$450 USD$/ounce range. Only eclipsed by the lure of the tech sector in the late 1990s and the very strong USD$. 1997 was a very good year for gold mining stocks, and not just the obvious one, Bre-X.
We are currently in the 2nd year of what looks to be a similar decline.
Maybe to you. I view last year's events to be an ordinary cyclical correction in a long-term bull market. Bull markets generally don't end until there's a sort of crazy mania and dramatic industry expansion. But as it stands, the gold industry is hard pressed even to replace its depleting mines.
You constantly preach of historical norms when speaking of why real estate should go down, yet you ignore them completely when a much bigger bubble in gold has taken place?
I don't see a gold bubble at all. Again, go back to that list of psychological/behavioural indicators I wrote in a posting to gomyone. Test gold to see if very many of those exist. Most don't, or only amongst early adopters/zealots. But they pretty much all exist for Canadian Real Estate, for instance.
Again, your 1974-1976 region is clearly matching the 2008 era in my graph, and even the timeframes are similar. Even that's covered.
Did the financial system fall apart in 1974-1976, causing massive selling? I don't think so, but admittedly, I wasn't even alive.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
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Firebot wrote: Cost of mining has no impact on the actual cost of gold.
Are you kidding?
Clearly you should get that in your head; if you ever did you would see why you keep on being on the losing end. Reserves of gold in the world are huge.
Huge, as in, less than an ounce for every person on Earth? How much commerce do you think you could personally transact if all you had access to was $800 in your bank account?
Just look at the oil sands or natural gas and you will see why commodity costs doesn't matter. If it's not profitable to mine, it simply won't be mined, which at the same time, doesn't get the company profits. Again, that's another reason why gold mining companies are such a poor investment.
Gold mining companies are awesome investments, especially when it is very difficult to build new gold mines (ie: see Barrick's Pascua-Lama project).

I gave this example in another thread, but if you have a $100k house, and the identical house next to you sells for $500k -- don't you think that your house is 'worth' more than $100k? Of course. Well, new projects are costing 3-5X as much to build as they did a decade ago (largely because energy costs have gone up 3-5X, especially crude oil!). Effectively this should cause the value of existing projects to appreciate. Barrick, for instance, will probably end up spending $10B to get Pascua-Lama in production, to produce a mere 800k ounces/year in gold. Barrick's production overall is roughly 8M ounces/year. So should Barrick's enterprise value (equity + debt) not be approaching $100B? Instead of what, ~$25-$30B today? The firm is trading at dramatically less than the replacement cost of its assets. Remember the wise Warren Buffet who said that he wants to buy companies at dimes and nickels on the dollar -- that's what you're doing when you buy many of the gold miners these days whose assets have not appreciated to reflect the reality of replacement cost appreciation.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
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Dec 14, 2008
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matt0148 wrote: Not too optimistic about pricing though.

http://www.marketwatch.com/story/jp-mor ... 2013-12-13
Of course not. They get their customers to sell and they purchase for their house accounts. Believe me, if they were internally not bullish on gold, they would not have taken delivery of 96% of the December Comex gold deliveries. How could you think that a company that has recently paid close to a billion in fines for illegal banking operations would be ethical in their forecasts to their sheep? (Sorry...I mean their customers)

http://rikgreeninvestorforum.blogspot.c ... ivity.html
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Feb 15, 2008
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deal_with_singh wrote: If you're going to be looking for biased articles in either way, its not hard. I can show you a dozen predicting golds move in either direction. It is why I said anyone who thinks they know anything, know's nothing.
Most economists who make predictions have to deal in probabilities, extrapolations, etc. Sometimes they get disconnected from the real world though. For instance, a fairly classic economist 'mistake' in Canada was believing that interest rates were on their way up after the BoC tightened its policy target to 100bp. However, actually getting out into the real world, or simply calling up HR and asking them about how many resumes they were receiving per job advertised, probably should have been able to tell such 'economists' everything they needed to know about the capacity slacks that exist in the Canadian economy.

As it turns out, now the BoC is profoundly concerned about deflation, is fairly consistently unable to meet its inflation targets by increasingly wide margins, and the bias is now very clearly towards loosening monetary policy.

I suspect the "economists" will be proven wrong on gold as well, for the reason that most of them live in a sort of insular bubble where they're being paid very well by their employers and don't see that the world's economy is melting down and moving increasingly towards competitive devaluations to combat the deflation problem.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
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Aug 12, 2004
4447 posts
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Calgary
Mark77 wrote: Did the financial system fall apart in 1974-1976, causing massive selling? I don't think so, but admittedly, I wasn't even alive.
http://en.wikipedia.org/wiki/1973_oil_crisis

http://en.wikipedia.org/wiki/1973%E2%80 ... rket_crash
All the main stock indexes of the future G7 bottomed out between September and December 1974, having lost at least 34% of their value in nominal terms, and 43% in real terms.[1] In all cases, the recovery was a slow process. Although West Germany's market was the fastest to recover, returning to the original nominal level within eighteen months, it did not return to the same real level until June 1985.[1] The United Kingdom didn't return to the same market level until May 1987 (only a few months before the Black Monday crash), whilst the United States didn't see the same level in real terms until August 1993—over twenty years after the 1973–74 crash began.[1]
Yes it did. In fact, the graphs of both 1974 and 2008 are almost carbon copies of each other.

Unfortunately for you, I am well informed and don't just spout whatever nonsense I can think of, and pass them as facts, such as the definition of subprime.
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Feb 15, 2008
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1973 isn't 1974-1976. And certainly you can't possibly expect events to exactly repeat themselves verbatim, do you?
Unfortunately for you, I am well informed and don't just spout whatever nonsense I can think of, and pass them as facts, such as the definition of subprime.
The definition of subprime isn't nonsense. Its well known fact, derived from Latin, and derived from well-known definitions. It means, literally, less than prime. And prime's definition is fairly simple -- loans or assets that are considered high quality by the investment community. Also derived from another Latin root. In the Canadian context, it means loans that can be taken up by the banks without extraordinary charges against regulatory (ie: Tier1) capital.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
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Aug 12, 2004
4447 posts
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Calgary
Mark77 wrote: 1973 isn't 1974-1976. And certainly you can't possibly expect events to exactly repeat themselves verbatim, do you?



The definition of subprime isn't nonsense. Its well known fact, derived from Latin, and derived from well-known definitions. It means, literally, less than prime. And prime's definition is fairly simple -- loans or assets that are considered high quality by the investment community. Also derived from another Latin root. In the Canadian context, it means loans that can be taken up by the banks without extraordinary charges against regulatory (ie: Tier1) capital.
LOL, read the articles, you are truly grasping at straws. What part of "bottomed out between September and December 1974, having lost at least 34% of their value in nominal terms, and 43% in real terms." doesn't fall within 1974-1976?

You claimed that there was no financial collapse in 1974-1976, I just proved to you there was.
The 1973–1974 bear market was a bear market that lasted between January 1973 and December 1974. Affecting all the major stock markets in the world, particularly the United Kingdom,[1] it was one of the worst stock market downturns in modern history.[2] The crash came after the collapse of the Bretton Woods system over the previous two years, with the associated 'Nixon Shock' and United States dollar devaluation under the Smithsonian Agreement. It was compounded by the outbreak of the 1973 oil crisis in October of that year. It was a major event in the 1970s recession.
Recession? Oh golly! What happened after 2008 and the stock market crash? Recession. What happened after the 1973-74 stock market crash?

http://en.wikipedia.org/wiki/1973%E2%80%9375_recession
he 1973–75 recession or 1970s recession was a period of economic stagnation in much of the Western world during the 1970s, putting an end to the general post-World War II economic boom. It differed from many previous recessions as being a stagflation, where high unemployment coincided with high inflation. The period was also described as one of "malaise" (ill-ease; compare "depression").
You are in clear denial that 1974 and 2008 were very similar, or trolling. We all know which one you are guilty of.

Pick up a history or economic book someday (you might learn the definition of subprime while at it).
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Jun 28, 2007
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Mark77 wrote: Bonds' only intrinsic value is in the eyes of the beholder as well. So not sure why you feel this is an argument. After all, when your bonds mature, what do you get in exchange? More bonds. With fiat currencies, ultimately there's no absolute right of redemption into anything except more paper. The only way you are able to redeem bonds and fiat currencies into goods and services is because they have "value ..in the eyes of [the] beholder".



Historic ratios of gold to the size of the monetary base. Historic ratios of the market capitalization of gold and the gold industry relative to historic numbers. Even gold prices relative to prices on other commodities such as oil. All would appear to point to much higher gold prices.

I read somewhere that in the 1980s apex, the all-in cost of producing an ounce of gold was around $100, and gold sold for $850 at the peak. Today the miners really can't produce for less than $1200 all-in (capex, opex, etc.). Do a simple ratio on that, and yeah, you're still back to $10k/ounce gold.

Also, consider for a moment what happens to the wealth that flows out of long-term debt when interest rates rise.
Umm perhaps you don't understand what a bond is - it's a fixed income security. it pays you a coupon to hold it - cold hard cash. It's notional principal value may change at the end of it's holding period but it's value is as much about the cash it pays out as it is it's principal value at the end of the hold. So no, it's intrinsic value is not solely about what an investor is willing to pay for it. In fact, it is the polar opposite of gold: the investor isn't paid to hold it. The investor "pays" to hold it. So it's intrinsic value is solely determined by what an investor is willing to pay for it. Which is also why it's an asset class far more vulnerable to speculation and bubbles than most other asset classes.

PS you should try not "sucking and blowing" too much in these threads. In one breath you go on ad naseum about debt deflation - in the next breath you talk about higher interest rates. Of course any one with an elementary understanding of economics would know that deflation is consistent with very low interest rates, not higher rates. It's also consistent with low gold prices since the "theory" is that gold is hedge for inflation and currency debasement - neither of which looks like it's happening.
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Jun 28, 2007
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Mark77 wrote: Most economists who make predictions have to deal in probabilities, extrapolations, etc. Sometimes they get disconnected from the real world though. For instance, a fairly classic economist 'mistake' in Canada was believing that interest rates were on their way up after the BoC tightened its policy target to 100bp. However, actually getting out into the real world, or simply calling up HR and asking them about how many resumes they were receiving per job advertised, probably should have been able to tell such 'economists' everything they needed to know about the capacity slacks that exist in the Canadian economy.

As it turns out, now the BoC is profoundly concerned about deflation, is fairly consistently unable to meet its inflation targets by increasingly wide margins, and the bias is now very clearly towards loosening monetary policy.

I suspect the "economists" will be proven wrong on gold as well, for the reason that most of them live in a sort of insular bubble where they're being paid very well by their employers and don't see that the world's economy is melting down and moving increasingly towards competitive devaluations to combat the deflation problem.
It's too bad most economists who are highly paid by their employers aren't rejected in favor of serially unemployed engineers who troll the internet to pass their time away. He wait a minute, maybe these economists are highly paid by their firms because their " calls" make their firms a lot of money.

I wonder how much money unemployed engineers (who live in their own internet bubble world devoid of any reality) generate when they call for house prices to crash by 50% every year but are wrong. Or when they call for the loonie to shoot past parity but it ends up closer to 90 US cents. Or suggests that interest rates will be cut yet they haven't in three years with only move since 2009 being higher. Or in keeping with the topic of this thread, suggests gold ( and it producers) would be stellar investments but both crashed last year. ;)
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Feb 15, 2008
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Okay, so since gomyone started this thread, its here for all permanence and we can test if his bearishness on gold proves to be a good strategy over the next few years.

Gold started the trading on Jan 1/2014 at roughly $1200. Already $1228 tonight.

Only time will tell if gomyone (and supporters) are heros...or laughing stocks for being so adamant.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
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Mark77 wrote: Okay, so since gomyone started this thread, its here for all permanence and we can test if his bearishness on gold proves to be a good strategy over the next few years.

Gold started the trading on Jan 1/2014 at roughly $1200. Already $1228 tonight.

Only time will tell if gomyone (and supporters) are heros...or laughing stocks for being so adamant.
Well so far the only laughing stock are those who thought gold would continue to go up in 2013 but instead crashed by more than 30%. The even bigger laughing stock are those that said that housing would crash by 30% in 2013 yet it kept rising. But enough about you.

I'm not sure what to make of gold for this year. I admit that I cashed out all of my gold exposure two years ago after going long on it since 2005. But I don't completely dismiss the potential for it to go 'somewhat' higher in the near term after such a vicious correction this past year which is partly why I started this thread. But I would make this just a short term play because I think economic fundamentals are not supportive of gold over the longer run.
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Feb 7, 2006
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Mark77 wrote: 1973 isn't 1974-1976. And certainly you can't possibly expect events to exactly repeat themselves verbatim, do you?



The definition of subprime isn't nonsense. Its well known fact, derived from Latin, and derived from well-known definitions. It means, literally, less than prime. And prime's definition is fairly simple -- loans or assets that are considered high quality by the investment community. Also derived from another Latin root. In the Canadian context, it means loans that can be taken up by the banks without extraordinary charges against regulatory (ie: Tier1) capital.
You seem to have an issue with consistency. Why just a few days ago you quoted:
Mark77 wrote:
nonprime = subprime. And in Canada, its 2/3rds of the loan base in addition to the stuff that is held in the private sector that's explicitly subprime. So far more prevalent than even in the United States.

As I wrote earlier, Fannie Mae/Freddie Mac topped out in the $5-$6T basis. CMHC, with the re-insurance of the 3rd parties, is at ~$900B. Figuring the typical 1:10 ratio between Canada and the USA, we have substantially more government/GSE involvement in Canada than the USA had even at its peak.



Mr. Tal is simply mistaken or he is using an incorrect definition of subprime.
Note the difference over a short time period for "your" definition of subprime. Which is it? By the way the last sentence in your 2nd quote is a the best ever. Seriously makes you look ridiculous! "sigh"

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