Friday, January 4, 2013

Gold & The Internet Type Too

All hail the power of deep web metasearch, for a rich new vein has been discovered, with nuggets literally just lying around down there, and mining has begun.

Obviously we agree with the opening line from this 2002 psychic episode below, but other than that have just inserted a few charts, facts and linked to various relevant contradictory statements or actions, (flip flopping back and forth like a good little retail trader) prior or since, and will let readers make up their own minds.

What Garth Turner Says About The Doom & Gloom Market!

Here's a no-brainer:   
After weeks of U.S. accounting scandals making huge headlines and as stock markets grind lower, a new poll finds almost 40% of Canadians have no faith in the financial system. They think CEOs, CFOs and maybe even UFOs are lying to them. And another poll found only a quarter of people believed audited financial statements.
Of course, most Canadians wouldn't know an audit if they fell over one. Even fewer know how to read a financial statement, and about one in 100,000 of us have ever even seen a balance sheet.
Nonetheless, thanks to the media know-it-alls, we have been told that corporate executives are lying crooks out to steal the money of hapless investors. 
So, it's a quick segue to net redemptions of $ 1.1 billion from mutual funds last month, to a prediction from the stock market columnist of one of our national newspapers days ago that a bull market in hard assets, like gold and houses, is at hand.
[Turner's colleague was in fact correct. Turner, not so much.] 

Face it: Folks are in a funk. Distrust is rampant in the land. Everyone in the financial business is out to fleece someone. The great motivator for most people has turned 360 degrees in less than two years, from greed to fear. 
And there are those who are always ready to capitalize upon naked fear.
In the I 980s, a time of inflation, stock market turmoil and a massive real estate bubble, U.S. prognosticator Ravi Batra scared the juice out of a lot of people with his book, The Great Depression of 1990. He predicted real estate values would go to zero and the American government would default on its bonds, ushering in the mother of all crises. But, he was wrong. 1990 was just fine, followed by a mild recession.
A decade later, Bay Street financier Andy Sarlos published "Fear, Greed and the End of the Rainbow" in which he predicted a stock market crash akin to that which ushered in the Great Depression, which would impoverish an entire generation. Anyone who followed his advice missed one of the greatest bull markets of history.
As the last decade ended, of course, there was the Y2K with many otherwise-sensible people predicting that the entire world's financial system would be tested and probably defeated by the millennium bug. Canadian financial advisor Stephen Gadsden tried to scare a lot of people with his co-authored "Krash." Of course, no krash took place, and not even a crash.
So, it is happening again - a new batch of disaster books as the current bear market comes to its inevitable end. The current crisis flavour of the month is "Conquer the Crash," by Elliot Wave theorist Robert Prechter, who is predicting massive deflation which, a la Ravi Batra, will send stock markets tumbling at the same time it wipes out every dollar you have put into your house.
There is a simple lesson in all of this:
Make up your own mind. Right now the economic fundamentals in Canada are excellent - some of the best conditions we have had in a generation. There is no inflation, and yet a rapidly growing economy. Interest rates are low and job creation is on a roll. The government has a surplus, not a deficit, and the national debt is being paid of for the first time in generations. We're in the middle of a technological revolution as, every day, more and more people become bound together through the Internet. In short, there are serious reasons to have faith in the future, not to run screaming from it.
This may be the best time in years to invest in the stock of good companies, when it is truly at a discount.

[whoops, not again -14.5% in one week this time]
As for hard assets like houses, there is always room in a good portfolio for real estate and I do not foresee any massive devaluation on the horizon. 
But neither do I see a sustained housing boom, thanks to demographics and the absence of inflation. 
Stocks, mutual funds and other financial assets should be held for the predictable growth they will give, while real assets play a role in giving you shelter.

The most extreme danger to investors today comes from extreme positions, which are in evidence all around us. There is no magic bullet strategy. There is no reason to have all your wealth in cash. 
There is no Depression on the horizon. In fact, rarely in the last 50 years has the world been this prosperous, or this much at peace. 
Those retreating into the perceived safety of gold, cash, bricks and mortar or Harley-Davidsons should stop reading the newspaper. 

Except this one, of course.
Garth Turner

A mere 8 months later here he is joining the tail end of the herd and all bullish on Gold as it takes out previous highs, (but of course not understanding the reasons - negative real interest rates - here's a 2002 article by someone who did understand to compare with Turner's advice in hindsight) for the start of the decade-plus long bull run, as he still does not understand to this day.

This is quite funny, eight short months earlier,
"Those retreating into the perceived safety of gold, cash, bricks and mortar or Harley-Davidsons should stop reading the newspaper." 
Now watching gold run without him and thinking it goes up because of wars and terrorism, but using that to pump something else entirely in his newspaper. No, Mr Turner, gold goes up because the (rest of the) world knows the US will print money to pay for their wars, as they have since Vietnam. 

Interestingly Turner references John Embry of Sprott Assett Management in the above article, and with a 100% correct call at the beginning.  Here is an MP3 of a John Embry interview on Jan 01 2013, compare and contrast with Turner's current predictions

Later in the article:
"And for those with the stomach for leverage, there is 100% financing available, you can even pay the money back in quarterly installments" 
To buy mining stocks. Nice. In reality it appears to us that the most extreme danger investors face today is from assuming that Garth Turner has the foggiest clue about anything to do with money, investment and timing 

1 comment:

  1. Great rebuttals to GT's dogma. He should get some credit for helping to bring awareness of the housing bubble into the mainstream. He is obviously wrong on the timing and even more importantly wrong on the economic and monetary fundamentals and the role of precious metals. Fortunately I found Eric Sprott and many others who tell it like it is.