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Saturday, January 28, 2012

It's all gambling

When the banking system itself is a giant casino - every financial move you make - or do not make - is a form of gambling.

Buying any stock is a gamble that the price earnings ratio will expand or contract.  It's a gamble that the company's stated earnings reflect the company's real earnings.  It's a gamble that the economy in which the company operates will continue to function efficiently.

Buying any bond is a gamble on the direction of interest rates and on the underlying credit-worthiness of the issuer.

Keeping you money in any given currency is a gamble that the currency will retain its value relative to other currencies and relative to its current purchasing power.

Buying real estate is a gamble on the value of a house and the continued efficiency of the economy of that neighborhood, that state, that country.

Even Gold is a gamble.  It is a gamble that other more liquid currencies will continue to be debased.

That is the only contingency affecting the future price of gold.  It has nothing to do with jewelry purchases, with Commitment of Trader data, with mine efficiency, or with moving averages, or Fibonacci retracements, or any other foolishness that you may read about in any economic publication.

You can go to the Kitco website right now and read the work of some jackass - employed by a gold-selling website - who's analyzing gold as a commodity.  This is precisely why gold has a long way to rise.  When everyone grasps the fact that gold is a currency it will have stabilized near it's new market value.

There are two currencies more liquid than gold: The Dollar and the Euro.  The Yen, Yuan, the Real, the Indian Rupee are other currencies that compete with Gold, yes, but only the Dollar and the Euro are appreciably more liquid on the global market.  And both currencies, the Dollar and the Euro, are being printed in unmeasurably large quantities (unmeasurable because the activities of these central banks are unauditable) and funneled into moribund banking systems.

This makes gold a pretty good gamble.

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