Gold & Silver - Biggest Commodity Bubbles Of Our Time

[meconium]

If property went up 6 fold in a decade, we would call it a bubble and most of us would be selling our IPs. Contrast this with the current madness in precious metals prices.......now that is surely a bubble that will end in tears.

Gold and silver bulls say that precious metals are a hedge against inflation. True enough. And yes, the world has seen inflation before. The pernicious bouts back in the mid 70s- early 80s come to mind. Not to mention the two world wars and the Korean war.

But inflation today is pretty tame in comparison, even with the current horrendous oil prices. We've certainly seen worse inflationary times before. One cannot argue that inflation today is anywhere as bad as it was back in the late 70s.

Gold buyers have overreacted - the gold price has gone up almost 6 times off its most recent bottom, almost 10 years ago. Great if we'd got in back in 2000. Not so great if we get in now.

Gold must surely be one of the biggest bubbles of our time. Anyone encourging mum and dad investors to get into gold anytime soon must be either mendacious or totally deluded.

The same applies to silver. With digital photography knocking down demand for traditional photography, future demand for silver looks equally unpredictable.

I expect the madness to persist for a little longer and for prices to keep edging up. Then, as was the case with the last market top in 1979, it will all end in tears.......

 

[meconium]

The World Gold Council puts out decent, honest statistics. They'd prefer a sustainable gold price to a succession of bubbles and busts. If anyone wants stats, here is a good way to start:

http://www.gold.org/investment/statistics/investment_statistics/

Don't be deceived by the self-interested flat earth brigade.....do your own homework on gold and decide for yourself if a 6 fold gain in a decade is sustainable.

 

[Chomp]

What about the trillions the US is printing and out own Governments billions, has to give somewhere?

 

[meconium]

What about the trillions the US is printing and out own Governments billions, has to give somewhere?

Printing money, although not to be encouraged in developed countries, has been successfully carried out on a massive scale many times before. It happened on a huge scale during both World Wars. Inflation followed, but it was manageable. The world didn't end.

That said, to be fair, there are countless examples (the Weimar Republic, Zimbabwe, Venezuela, Argentina etc etc) where printing money got out of control. The reasons varied but the results were the same......out of control inflation. Thee years since the GFC began, I don't see that happening in the USA.

 

[profit]

Printing money, although not to be encouraged, has been done before in developed countries.

To this degree? Trillions?

 

[meconium]

To this degree? Trillions?

As a % of GDP, I daresay US government spending during
WW2, largely funded by printing money and issuing bonds, exceeded current spending by a wide margin.

The difference is this......these past 3-4 years, the US government has printed money not to fund a major world war, but rather to take over assets - this is the simplest way of defining a "bailout." Of course, some would argue that these assets are duds. Then again, when Chrysler was bailed out by the US government in the early 80s, people said the same things they say today ie. Detroit has no future etc. Nevertheless, Uncle Sam did rather well out of the Chrysler deal.

Karl Marx would be laughing in his grave. The greatest capitalist government has, through no fault of its own, effectively nationalized General Motors and a whole host of other companies. Memories of what a soldier said to a news journalist during the Vietnam war....."sir, we had to destroy this village to save it."

 

[FormerLurker]

Given your responses in other posts I tend to think your trolling with this 1.

Also you compare apples and oranges when you compare housing and precious metals.

My opinion DYOR and invest in what your research says is good (or pay some "expert" to do it for you).

P.S. Mine says property flattish in short term then growing and precious metals continuing to climb short term then I don't know will assess again then.

 

[meconium]

My opinion DYOR and invest in what your research says is good.

P.S. Mine says property flattish in short term then growing and precious metals continuing to climb short term then I don't know will assess again then.

I agree with what you say. Namely, on doing your own research.

Also, I agree that the madness of precious metals will continue for at least a few more months before reversing.

But rather than generalize about all property ("property flattish" you said ) I will say the Australian median will be flattish. The RBA Governor said the same last night in London, but he seemed to be referring to averages rather than medians.

Now for the interesting part - those who buy at or below the lowest quartile or decile medians in larger cities (outside NSW) will do very well indeed, with the richer pickings to be found in Melbourne.

 

[Sunfish]

I think FL is right: You're trolling.

But you want a response so how about: You're driving via the rear-vision mirror. You should seek the opinion of forward thinkers and we are blessed with many who publish their ideas. Sadly miserable Aussies and Poms don't contribute much and we are forced to rely on the Yanks more than we should.

 

[meconium]

Sunfish, you are right - I have rather a lot of time today. I usually don't post as prolifically as I have been today. Secondly, my mum was badly hurt in the great gold bull market of 1979. She was one of the crowd followers who got in late. So yes, I'm biased. I don't think most mum and dad investors should be speculating in bullion.

You should seek the opinion of forward thinkers and we are blessed with many who publish their ideas. Sadly miserable Aussies and Poms don't contribute much .

Who is your view is worthy? Surely not WW - he left in a huff because he didn't feel appreciated here. Anyone else?

And hey, careful, not all Aussies are miserable......there are some very positive people here. Our Obsession and Propertunity come to mind, they always have something nice to say.

 

[Sunfish]

It seems your world starts and ends here on SS.

My "miserable" comment was directed at our economic commentators who contribute nothing to open debate, Mr Keen being an exception. Love him or hate him he gives his opinion freely.

There are wealthy Americans who understand what's happening that I can read/listen to for free. They are so rich they could ignore us but there is a generosity among Americans that they are willing to spend the time to inform anyone interested enough to listen.

Seek and ye shall find.

 

[meconium]

It seems your world starts and ends here on SS. .

Might I remind you that your daily post-count far exceeds mine for virtually every day but for today?

My "miserable" comment was directed at our economic commentators who contribute nothing to open debate, Mr Keen being an exception. Love him or hate him he gives his opinion freely.

I'm no fan of Keen. Didn't he finally concede he was wrong? Someone told me he walked up a mountain to express his contrition.

There are wealthy Americans who understand what's happening that I can read/listen to for free. They are so rich they could ignore us but there is a generosity among Americans that they are willing to spend the time to inform anyone interested enough to listen. .

The Americans don't ignore us. Like all savvy investors, they are always on the lookout for good deals here. Jim Rogers is a fine example, he has travelled around Australia twice. Once on a motorbike, and another time in a souped up Mercedes. He was shocked when told that foreigners are not allowed to freely buy property here. He planned to buy a fixer-upper in Darwin for his delightful lady friend (now his wife) but it didn't pan out as the FIRB did not at that time allow foreigners to buy older homes. Rogers is very bullish on gold and other commodities btw.

Another American fund manager (and author) John Train travelled around Australia looking to buy up large farms, the sort of stuff that one needs a plane to survey. His love for Australia cooled rapidly when he heard the refrain "Yank Yank Septic Tank." No shortage of twits and prejudice here, no doubt about it - and it's costing us dearly.

 

[Sunfish]

The Americans don't ignore us.

Again you are introspective. I didn't use "us" in a limited way referring to Aus any more than my reference to "miserable Australians" was referring to SS posters.

"Us" is the world wide group trying to beat the markets. There are many wealthy/knowledgeable Americans who I believe try to give honest opinions which can help us get ahead. Jim Rogers is just one. You just have to look for the rest.

 

[Indifference]

Meconium, I actually agree with the title of this thread...

Yes, I really do agree, surprising as it may seem. We are indeed on the verge of one of the biggest commodity bubbles of our time, probably the biggest and bigger than 1979/80.

I don't think that you have a real grasp of the "why", only the "what". We can not simply compare current events to the past, without factoring in some fundamental differences. Ie. We (meaning the entire world) went off the gold standard in 1971. This is a significant deviation from times & events prior. Additionally, the commodities spike in '79/80 was significantly overinflated by a unique event I.e. the Hunt brothers....

Now, to current times, the currency expansion in the last 2 years can hardly be likened to those expansions of the past. Increasing the world's reserve currency base by 4 times in under 2 years, will debase that currency. This is an economic reality. Whether that debasement is realized through a currency collapse or an extended lateral movement through time, a debasement is inevitable. Why? Because the currency expansion has not been supported by GDP growth or any other real growth for that matter.

SO, yes, we are headed for a significant commodities bubble. Many fortunes will be lost & made during this time. Rather than be all D&G, some us actually see this as a time of opportunity! And if commodities explode, it will also mean higher inflation and debasement of currency & that means a short term property downturn..... So yeah, I suppose it is a little crazy to have been putting cash into commodities lately.


Keep up the trolling...

 

[meconium]

Now, to current times, the currency expansion in the last 2 years can hardly be likened to those expansions of the past. ..

Economic history is far more interesting than Economics itself. The world has seen bigger currency expansions in the past, if only people would care to look back far enough. Consider the two World Wars. These were seriously cataclysmic events. Money was printed freely and dodgy bonds issued by all major economies. As a % of GDP, the monetary expansions of those times far exceed what we have seen recently.

Yes, inflation inevitably followed. But it was mostly kept in check. Commodities prices rose.....and fell soon after. The world did not end.

Am I trolling? No, I'm taking a stand against those doom and gloomers who seem to predict the end of the world every time they read the front page of the tabloid newspapers. I'm standing up to self-serving panicmongers who tell mum and dad investors never to buy property (its going to crash you see) and instead put their hard earned savings into gold or silver. Heck, it'd be safer under the bed!

Getting into precious metals was a great contrarian idea back in 2000. Getting in now is a gamble and more than dangerous. Gold is up 6 fold in a decade. It this likely to be sustainable? Probably not.

 

[Indifference]

Economic history is far more interesting than Economics itself. The world has seen bigger currency expansions in the past, if only people would care to look back far enough. Consider the two World Wars. These were seriously cataclysmic events. Money was printed freely and dodgy bonds issued by all major economies. As a % of GDP, the monetary expansions of those times far exceed what we have seen recently.

Yes, inflation inevitably followed. But it was mostly kept in check. Commodities prices rose.....and fell soon after.

Am I trolling? No, I'm taking a stand against those doom and gloomers who seem to predict the end of the world every time they read the front page of the tabloid newspapers. I'm standing up to panicmongers who tell mum and dad investors never to buy property (its going to crash, you see) and instead put their hard earned savings into gold or silver. Heck, it'd be safer under the bed!

It would be safer under the bed? Really? This is a clear display of not understanding the fiat currency system. No-one is suggesting mum & dad go and leverage 95% into commodities (well not that I have seen here anyway).

Some have said, myself included, that it is worth considering hedging against inflation by using surplus funds on hand. I fail to see how this is panic-mongering. It shows a degree of investment acumen to consider not only wealth creation, but also wealth protection. I have learnt this in part through my involvement with this forum and have found it to be sound wisdom.... Manipulating SSers intentions by misrepresenting their posts, is not taking a stand, it is blatantly irresponsible.

 

[willair]

The same applies to silver. With digital photography knocking down demand for traditional photography, future demand for silver looks equally unpredictable.

I expect the madness to persist for a little longer and for prices to keep edging up. Then, as was the case with the last market top in 1979, it will all end in tears.......

One can only hope,the ASX is down over 5-10% property sales are going backwards and depending on what happens over the next month in the middle east and the big ticket item on the world price of "OIL"then your wish may come too fact,this is the time to have some cash at hand because the Dow is just starting too slide also so enjoy the ride on the downward slide,and wait who's to say some of the top asx listed companies lose 25 % of their face value over the next 9 weeks
it's happened before and will happen again just depends on your idea of risk,but too give you an idea i have a appointment with a bank manager
at ten this morning and i'm putting 2 unemcumbered properties on the block again and wait till the time is right,not property just high end asx listed companies that i think are about to have a hammering in their face day trading value,experience is not what happens to you experience
is what you do with what has happened..
Plus study up on how much silver is used in the chinese solar industries..

 

[meconium]

Manipulating SSers intentions by misrepresenting their posts, is not taking a stand, it is blatantly irresponsible.

My "attacks" (as you would no doubt call them) are not directed against SSers. Rather they are meant to provide some balance to the constant negativity that is so often seen on this forum in recent times - most of it originating from a few malcontents who seem convinced that the world is about to end. Like dear departed WW, to name just one. On your part, you certainly derive a good measure of joy in manipulating my own words. Perhaps, being the great Silver bull that you are, because what I say is not what you want to hear.

It would be safer under the bed? Really?

Yes, really. Mum and dad investors who are hedging their bets by doing as you say (ie. getting into commodities) could get better returns at the casino! Gold is up 6 fold in barely a decade. Show me any investment grade commodity in the 20th century that maintained such massive price gains without falling precipitously. Can you? Bet you can't.

study up on how much silver is used in the chinese solar industries..

Accepted. A good point. Thank you for that. The newer laptop batteries also consume a good measure of silver, I am told.

 

[zed_kid]

Lithium is the next boom commodity... when the car manufacturing industry figures out how to mass produce electric cars. Get on the lithium!

 

[meconium]

Lithium is the next boom commodity... when the car manufacturing industry figures out how to mass produce electric cars. Get on the lithium!

There is some merit in what you say. It's worth a punt if one has a few spare bucks and an understanding of how the lithium market works.

That said, I don't think mums and dads should be selling their IPs to do it, as some of the more vocal commodity bulls would no doubt want us to believe.