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Tuesday, October 7, 2014

Yay! Barry Ritholtz cares about my opinion on gold! Or if not, I'll make him care!

POST-IKN RECCIE UPDATE: First off, now that IKN reccied this post, I gotta clarify:

1. I don't think gold is money.

2. I'm agnostic on the gold chart. As said below, and to be clear, I will buy junior miners when gold goes up again. I don't believe in anything that's going down.

3. But I do own bullion. And I do rub it against my body to pleasure myself, just as ancient forgotten kings did millennia ago. And I hoard canned goods and have a bugout bag too. But nobody will let me have a gun. Literally. I've asked people to go to the reserve and buy me some guns, and nope! It's like they don't want me to protect myself or something.

Anyway, in sum, I did not write this to take the side of rabid goldbug true-believers. I don't like them. They're either Nazi fundie fruitcakes, or people living in a perverted fantasy world.

I wrote this because while Ritholtz could have posted an informative and empirically valid article to frighten goldbugs, he instead simply reblogged a big stinking turd that he stole from a technical analyst, and in doing so committed the psychological errors that he himself loves warning people about.

"Technical analysis" is bad enough, Barry. But using "technical analysis" to beat up on the retarded? Beat up on my retarded stepbrothers and... well, I don't care about them, actually. But in the neighbourhood where I come from it still gives me the right to beat up on you. And I think you're fat and slow and a panty-piddler, and I could take you.

So here goes....

Ritholtz - ha ha gold sucks you guys suck (again). Quote:
Gold is one of those topics that always generates fierce pushback whenever I write about it. Yesterday’s column How Low Can Gold Go? was no different. A deluge of emails and over 150 comments soon followed.

I may post some of the more informative, vociferous and misguided comments / emails from readers later today as a public service to everyone else.
That must mean me, right? I mean, I'm informative, vociferous and misguided, ain't I? Or do I need to kick it up a notch?

Anyway, in the rest of the article he mentions Ned Davis' downside target of $660 for gold, and in doing so commits a couple of those psychological errors he's so fond of supposedly learning from. Let me point them out.

First, here's a quote from Ned Davis that he reprints:
“[F]rom its peak in January 1980 through its trough in February of 1985, gold suffered 65.8% losses. So far in this cycle, it’s lost 35.7% from its August 2011 peak, so if it were to follow its 1980s path, it could easily slip below $700 an ounce.
Oh good, argument from analogy. Why is this gold drop supposed to be an analogue of the 1980-85 gold drop? This thing is not like that thing, Barry. You're drawing a false equivalency from a dataset of two gold drops, one of which (maybe) isn't done yet.

Now, I'm a bit of a weirdo, in that while most goldbugs insist that "gold is real money" and the US has "devalued the dollar against gold", I do the opposite and hold that the pre-Nixon dollar peg was actually a price control on gold.

(In other words, before the Nixon Shock, the dollar was not "pegged at one thirty-fifth of a troy ounce of gold". That's bullshit, it's stupid, it's meaningless. In reality, a troy ounce of gold was pegged at a recognized price of $35. When you flip it around, it's obvious there was an official price control on gold. That's my opinion, anyway.)

So, the 1980s gold price spike happened as a result of the earlier US price control on gold being lifted. And the subsequent trend down was the reversion to mean as supply & demand re-established equilibrium.

Nothing like that has happened since the Brown Bottom of 2002. Thus, this time is not like that time, because its starting points are qualitatively different.

Also, back then you could only buy futures or paper. Since the 2000s we've been able to buy gold in ETF form. That also could be expected to change how the market responds to price movements. The 1980s peak should have been higher, and the 1980s selloff should have been slower.

So, generally, comparing this time to last time is completely unjustified and uninformative. Ned can't even start the argument with "if we assume that this time is like last time", because it's not.

Feel free to take the other side of the trade from what is widely regarded as the most astute technical analysis firm in the world . . .
Oh come on, Barry! You just forced argument from authority and argument from consensus to have sex with each other. Your logic is bad and you should feel bad.

And what happens if Ned has drawn a false analogy from a dataset of two? Are they still the most ass-toot TA firm in the world now? Or can we ignore them from now on?

Actually, come to think of it they might still be the most astute TAs, even after throwing basic empiricism out the window. After all, most TAs pull stuff out their asses with insufficient or nonexistent justification, don't they? Regularly, with impunity, right? I mean, just because it sounds clever, right? Or just to fill space in their mailer, right?

Anyway, here's more Ned:
It is oversold, but is trending poorly. Like gold, the overall commodity super-cycle looks to be dying.”
Yup, it's trending poorly. I won't argue with the charts, and thus I'm a goldbug watching from the sidelines til gold no longer sucks. May take a year or a decade, but it's easy to watch when you're not in.

And hey, I won't even argue against the possibility of $660 gold. If EM currencies collapse, then mining labour costs will go down; if fuel prices collapse, then mining power costs go down. Countries that rely on mining income for forex might subsidize the industry, bringing mining costs down. Efficiencies can be found in the industry. That's just what happens in secular EM/commodity bear markets, right?

And hell, when junior miners have the odd 25% pop in this bear market, like we saw in June, I can still make money off them. I know how, and I still follow that chart every day. So I'm not complaining.

And yup, the overall commodity super-cycle looks to be dying. But per Jim Rogers, who is widely regarded as the most astute commodity trader in the world*, that must mean that we're in a secular bull market in the US for the next 10-15 years or so, Barry.

Which means you should just buy the damn SPY for your clients, and quit piddling your frilly pink girl-panties every time there's a goddamn 3% pullback.

Now print that, you sissy.

* - not just said for the irony. Jim Rogers has his own commodity index. Where's your commodity index, Barry?

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