The Goldwatcher

 

Perspective on current and previous bear markets: 

The above chart, best seen by clicking the chart at source on d.short.com, illustrates the severity of the current and previous bear markets. Thanks to Doug Short for persmission to reproduce the chart.

Additional insight on ’irrational exuberance’ from The Goldwatcher:

 Alan Greenspan made his famous ‘irrational exuberance’ remarks in December 1996:

‘Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade? […] ‘

Pity he didn’t act on his better instincts and prick the dot.com and housing bubbles. Even a blind mad could  have seen them (see The Goldwtcher Pages 146/7)

Gold and the equity bear markets:

Gold is a financial asset with a different risk reward profile to equities and other financial assets.

 

CNBC’S interview with Frank Holmes, Goldwatcher co-author yesterday: 

Following dramatic rises in the gold price yesterday - and even more dramatic falls  in equity and commodity markets world wide -  CNBC interviewed Goldwatcher co-author Frank Holmes,  one of the world’s most authoritative and respected voices on gold.  

The CNBC interview covers key issues investors must keep in mind and is supported by comments from CNBC analysts. Frank Holmes’s headline advice is straightforward  ’Don’t buy gold to get rich - buy gold for protection.’

 You can  Access the CNBC interview through this link.

The Goldwatcher and this blog contributed by co-author John Katz:

My content in the Goldwatcher is unbiased. I am an independent analyst and neither a gold bull or bear. In a nutshell my contributions point to when owning gold makes sense and when it doesn’t and when gold prices make sense and when they don’t. The Chapters I contribute address the questions investors interested in gold must ask,  starting with their motivation, timing and strategy for making and managing their investments.  

The most recent update on gold price prospects in this blog was posted on 22nd January

The Goldwatcher book and the blog address the issues of the day affecting demand for gold,  other currencies and other assets. They include subjects ranging from  the wars in Iraq and Afghanistan to our once rock solid British Banks now going bust.

The Goldwatcher Book Chapters follow this sequence

 Foreward by Dr. Marc Faber - starting with this comment:

‘Years from now, the events of late 2007 and early 2008 will be remembered as a classic case of the flawed thinking by Governments that choose to use monetary policy to try and sustain an unsustainable economic bubble, and how that action broadens and deepens the pain when the bubble inevitably busts.’

Part 1 : Written byJohn Katz  ‘The Goldwatcher’ in this blog -  e-mail address : john@thegoldwatcher.com

1:  Introduction : Why Gold?

2: The Gold Mining Industry : What price gives producers a worthwhile profit?

3: Gold Supply and Demand : Do Central Banks still need gold, and does gold still need Central Banks?

4: The Rise and Fall of the Gold Standard : Did Gold Cause the Great Depression?

5: The Dollar Standard and the ‘Deficit without Tears’ : Is the dollar again America’s currency and everyone else’s problem?

6: The Economic Consequences of 9/11 and George W. Bush : For how long will Asians go on lending for Americans to go on spending?

7: The End of Cheap Oil, Chindia and other Tipping Points to Instability 

 Will alternative energy come to the rescue?

(The causes and evolution  of the present economic crisis including the housing boom and bust, the CDO racket, Alan Greenspan’s misguided views on regulation  etc are all covered in the above Chapter)

8: Globalisation and Global Economic Rebalancing

Can the IMF avoid global financial meltdown?

9: Gold Prices : Inflation,Deflation, Booms and Busts

Do trees grow to heaven?

10: Investing Choices . What Gold?

Part Two : Written by Frank Holmes:

11: Inside US Global Investors

12: Investing in Gold Equities

13: Gold Mining Opportunities and Threats.

PART THREE : THE FACT BOOK APPENDIX - includes detailed analysis of global gold mining production, fabrication, scrap recovery and central bank holdings, sales and intended sales;  a Chart Book, Chronology and Webliography.

The Goldwatcher is available from Amazon and all leading booksellers

Alistair Darling

Stealth socialism:

Following a further shock loss of 11 billion pounds announced by the Lloyds TSB Group Britain’s star crossed Chancellor Alistair Darling was reported by the BBC today revealing his latest visionary discovery. The key to sorting out the Lloyds TSB - Halifax Bank of Scotland (HBOS) fiasco, Mr. Darling says,  is ’getting banks to identify their bad assets so they could be removed from the system.’  Yes Virginia. This  statement was made today by the same Chancellor who was associated last autumn with orchestrating, sponsoring and, according to some reports even forcing the merger of solvent Lloyds TSB Bank with the insolvent Halifax Bank of Scotland Group (HBOS).

When the deal was done HBOS was bust and facing liquidation. But,  if shareholders in solvent Lloyds TSB  could be persuaded to throw their capital in to support HBOS, the bothersome HBOS liquidation could be avoided.  Now, in the comment quoted above, Mr. Darling implicitly acknowledges he allowed Lloyds Bank to do the deal before he knew, with absolute certainty,  that HBOS had come clean and identified to the last penny their bad assets and removed them from the system.  And, adding insult to injury, he has since staked billions of pounds of taxpayer’s money in the merged bank, again without adequate due diligence to confirm that all bad assets are out of the books.

Plundering Lloyds TSB Shareholders.

One year chart Lloyds TSB source Wall Street Journal

The BBC also report today  the blunt comments from  Conservative Front Bencher and former Chancellor Kenneth Clark on the Lloyds TSB - HBOS merger.  It was a disaster for Lloyds TSB shareholders that ’should never have been allowed to happen….  Lloyds TSB was a boring bank, it was a steady bank, it hadn’t done silly things.’  So, we can conclude, shareholders with their savings in Lloyds shares had also ‘not done silly things.’ Where does Mr. Darling go from here?

 Will he  call in the serious fraud office to investigate the circumstances that led to  Lloyds TSB shareholders being fleeced? Will he admit, as President Obama has following a misjudgement,  that ‘he screwed up?’ Perish the thought.

Britain at the cross road of credibility: Gold stays on the agenda

Britain’s political stability, effective legal system and traditions of fair play have, by and large, supported universal trust in her financial institutions. If this trust is lost  creditors will no longer  support  borrowings and investors won’t buy British shares.

Owning gold over  the last year protected investors from the sterling and London Stock Exchange crashes and returned a handsome profit.  Each of us have to decide for ourselves now whether prospects for  investors in British financial assets are better or worse than they were a year ago.  Present revelations tend to remove  doubts about the answer.

Gold remains on the agenda.

* Note added 15.02.09 :  Speaking at the G7 summit in Rome yesterday afternoon Chancellor Alistair Darling tried to quell speculation that the Lloyds Banking Group could be nationalised. He said banks are “best run in the commercial sector and privately owned.’

* Note added 16.02.09 : Accepting that the report read yesterday on nationalising the Llloyds TSB Group was not accurate the above blog has been modified.