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Notes to myself, possibly of interest to others.
-- Bill Northlich

Thursday, May 13, 2010

Comment on Gold. Warning: Political Musings.

If you've read this blog consistently, first, my sympathies, and, second, you know I post a number of pro-gold pieces.  That would lead one to believe I continue to be wildly bullish on gold.

I'm pro-gold, certainly.  I'm very exposed to gold here personally.  I have consistently recommended my clients be in gold since 2008.  I like them to have 5% exposure.  For any who are very aggressive, if I look into their eyes and think they can handle the volatility, I "permit" them to go over 5%.  :-).

Otoh, FWIW, I think, for a number of reasons, including that gold's RSI shows it is overbought now, that gold may well drop as much as 10% over the next few months, into the late summer.  Fall is traditionally a strong time for gold.  I'm prepared to sell a substantial part of my holdings if I see gold weakening; I hope I won't have to do that.  But if I do, it will be temporary.  That is a trading outlook, not a fundamental one.

Long term, gold will do well.  Gold is starting to slowly become a core holding for an increasing number of people.  My own belief is that that will continue for years, until the US, at least, is back in to growth mode, and the concept of being in "business" is understood to be mainly focused on producing goods and services for use in the general society, instead of, as now, being focused on how to become a hedge-fund.   Given employment, housing, and the continued disfunction of the credit markets/environment, that may take until well past 2020.  So, gold has a long time to grow in popularity.  Yesterday I posted a comment by David Rosenberg - hardly a wild-eyed speculator, that gold is likely to hit $3000.  Er - he did not give a date, but the implication was, as I read it, "in a few years".  I don't disagree.

I personally own a small amount of physical gold but most of my holdings are in options (which is a plan only for people who can watch the market every day).  I plan over time to acquire more physical gold, although I'm not rabid about buying real gold.

I have some friends who are basically Armageddonists who believe that the financial system is toast due to huge public and private indebtedness, and that the only prudent thing to do is hold gold to protect themselves from the inevitable collapse of the consumer society we've known for so many years.  I don't share these views.

I post a lot of more liberal political things here.  Although I'm in fact a registered Republican (gotta change that...), I believe the Republican party has been captured by aliens. By promoting the "no government" idology for so many years, they've gotten what they've asked for, ie, an ungovernable country.  It may take a generation of one failure after another to allow the uber-free-market know-nothings die out, but since the US can't really just crash, it won't.  And, eventually, the majority of people will begin to understand, that, yes, there are things like evolution and global warming, and there will be a new few, but enough, votes, to reinstitute a semblance of a concept called public policy to American life.

And at that point, growth might be able to resume, under regiemes of Law and Order in the business sphere, like there are now in most venues in the social sphere.  Utopian?  Maybe not.

So - it's my belief that gold will hold and increase it's value with respect to our base currency, until is becomes clear to most that the society has been substantially de-rigged from it's current signal focus of enriching an amoral few.  Somewhere, somehow, a Brandeis* will emerge.

*Woodrow Willson in a letter in 1916 recommending Louis Brandeis for the Supreme Court; my bold:
"I cannot speak too highly of his impartial, impersonal, orderly, and constructive mind, his rare analytical powers, his deep human sympathy, his profound acquaintance with the historical roots of our institutions and insight into their spirit, or of the many evidences he has given of being imbued, to the very heart, with our American ideals of justice and equality of opportunity; of his knowledge of modern economic conditions and of the way they bear upon the masses of the people, or of his genius in getting persons to unite in common and harmonious action and look with frank and kindly eyes into each other's minds, who had before been heated antagonists."

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