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Rosenberg Says Buy Gold, Buy Oil, Buy Commodities

Economist David Rosenberg expects the US dollar to fall. His Recommendation is to buy commodities

That image of the dollar index is relative to June 2001. This is the chart I use.

Technically Speaking

Technically speaking there is no support until 80 or so. That appears to be what Rosenberg is talking about.

Fundamentally Speaking

I believe expected rate hikes will not happen. Moreover, the US deficit is out of control and worsening. This is dollar negative.

However, widely expected ECB rate hikes and tapering are also unlikely. This is Euro negative (dollar positive).

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Unlike Rosenberg, I suggest: Forget oil, buy gold.

Why?

Oil is an industrial commodity and the global economy is weakening. We may be in late stage inflation similar to the surge that took oil to $140 in 2008.

Globally, if central banks fail to meet hiking expectations, gold rates to be a beneficiary regardless of what the economy does.

Mike "Mish" Shedlock

"I believe rate hikes are priced in that will not happen. Moreover, the US deficit is out of control and worsening."

Once again, your US-centric forecasts will not end well. The Fed is raising rates to postpone the pension crisis, and the deficits of foreign countries are way worse than the US - 13 countries are already in default, and 100 nations are on the verge of a debt crisis. Wait until rates and the dollar rise, which will happen because collapses always occur from the periphery to the core.

Gold is fine, if you don't keep it in a safety deposit box, where it can be considered laundered money and ripe for asset confiscation.

The market can be irrational and then more flexible for longer than most people can afford to keep betting against it without losing major opportunities in the interim.

Sidenote: When I was young I hiked up Jura, past the cottage George Orwell wrote "1984", up to Kinuachdrachd then over to the Corryvreckan whirlpool. Just wondered if your user name was related.

themonosynaptic -- Yeah! You caught me. Did that same hike up the island of Jura to the whirlpool. Beautiful calm weather, so the whirlpool was not dramatic. The deer ticks, on the other hand, were quite fierce. Story I was told was that Orwell wrote "Animal Farm" in that house, and the farm at Kinuachdrach at the north end of Jura formed part of his mental model of the scene for the book. I am a big admirer of George Orwell.

Kinuachdrach(d): The locals probably make up different stories about which book Orwell wrote :) I'm also a fan of his. Like you, I went on a quiet day, but could hear the whirlpool a couple of miles away. The whisky at the end of the day made everything even better (I was only 14, but things were a lot more relaxed back then).

I am surprised by those advocating putting your money into such a small, concentrated pool of investments (ie putting all your eggs into a few baskets). Seems way too risky to me. I prefer a diversified portfolio of investments, focused on the long term. This has worked exceedingly well for me for many decades, in spite of the occasional corrections in some markets along the way.

What about silver?

@killben, silver is money too. Especially of interest at these ratios to gold.

Mish dollar short is a very crowded trade although I admit the chart does look extremely bearish.

The problem with gold is it's painfully obvious CBs will try to suppress the price. You're basically betting against the world governments. The ones that control everything,

I would think the only way you could suppress the price would be to sell a lot of it. But, given a limited supply, in the end it's a losing proposition. It's much easier for CBs to push prices up because they can always be the highest bidder. I don't know how they would get folks to sell to the low bidder.

The CB's suppress the price of gold thru paper contracts. No real gold is exchanged. T

The idea that the Fed is raising interest rates to save US pension funds makes sense only if the funds invest primarily in T-bills or other short-term paper, where increases in rates do not have much impact on the price of the security and they roll over relatively quickly and benefit from the increased rates.

They do need to keep cash equivalents on hand to meet current obligations but that is not the bulk of their holdings.

Short-term paper is not where pension funds primarily operate as they need to match assets with long-term liabilities. Pension funds buy bonds, stocks, real estate (e.g., MBS and loans), and other assets. Raising short-term rates does not necessarily cause long rates to go up. Even if it did it would hurt the funds' existing bond investments and, in time, equities, which is much larger than their cash-equivalent holdings.

@JohnSellers
The CBs and Govs can’t directly suppress the gold price. Instead, what they have done, and will continue to attempt doing, is pump up the gains (leverage * appreciation) available to those choosing to instead buy other stuff. Indirectly rendering Gold less attractive relative to other assets. Hence reducing demand for it.

Since such asset pumping produces exactly not one single iota of real wealth whatsoever, yet somehow renders asset holders wealthier, it quite obviously relies, 100% full stop, on nothing more than simply stealing every penny of those gains from others. Namely those holding fewer, or less-favored-by-pumping-policies, assets. Hence the racket will inevitably, at some point, collapse from simple lack of anything left to steal from those who increasingly have nothing.

But since that has never stopped a single totalitarian government, at the end of it’s rope, from doubling down on one last Hail Mary attempt at pretending that it itself is still solvent, while the ever shrinking clique of privileged asset holders it exists to enrich are still doing a-ok; there is little reason to believe the particular Junta we’re stuck with, will behave any differently. They’ll double down and double down, until all they’re left doing, is push on a string. It’s at that point, they can no longer continue their indirect suppression of the price of Gold. But up until then, the mechanism that has worked for them so far, is still, even if perhaps less conveniently, available.

To RedQueenRace: Pension funds are required to project both assets and liabilities as far as 75 years into the future in order to determine viability. These projections include future contributions, payouts, and expected investment returns. These projections are linked to a “discount rate” which is itself linked to inflation expectations and long bond rates. One of the reasons that many pensions (in the US) are underfunded is because of the calculations using the long bond rates, which are at historically low levels. Only a small increase in the long bond rate can make a big difference in improving the funding level in a pension. I am over-simplifying this for brevity, but I believe this is what Blacklisted is referring to. Also, the situation of many pensions is far worse in the US than in many other countries. As I have mentioned many times, I suggest you look North to Canada for examples of well run pensions. (CPP, HOOPP, OTPP, CDPQ, AIMCO, OMERS, etc).

You are always making the assumption that American political leaders desire to have well run pension funds. How would a well-run pension fund maximize shareholder value in the long term?

Hi Jon. Are you saying that American pensions are being run poorly intentionally? Wow! For what reason? As to how to maximize shareholder value in the long term, look at any of your neighbour’s pension funds in my previous list. They aren’t all perfect, but they look pretty good to me.

@Realist

Any “Pay me now, I promise someone else will pay you back long after I’m gone” scheme, is always set up to maximize how much you pay now, while minimizing how much you’ll get paid back later. That is, after all, how you maximize the amount available to those running the scheme in the first place.

Pretending people are in the business of maximizing your utility at some point long past when they themselves are likely dead, over their own utility in the here and now, is pretty unrealistic for a realist……

US or not US has exactly nothing to do with it.

“Requirements” and “projections” are no more than minor bumps in the road. Which need to be lobbied and obfuscated into supporting the scheme runners’ ability to lay claim to as much as possible of the available money for themselves.

Realistically, that’s just how people work. All people. All the time. Not just the people the man on “our” TeeVeee says are somehow baaaad. As opposed to the ones he says are gooood, so we should be happy that they allow us to give them our money in exchange for promises that they really care about little us, and have a degree stating that they are unusually gifted at picking random numbers.

CBs target lots of prices. If you look at what happens with gold many times. Someone dumps hundreds of millions if not billions of contracts all at once when there's light volume. No individual has enough of a position to do this and no one would be dumb enough to do that. Only someone trying to drive the price down, who doesn't care if they profit, would do that. I've seen the same thing happen when stocks tank. In the opposite direction. Some idiot buys a lot of index futures during light trading. Way more than an individual could buy. They're trying to pay the maximum price. Not the minimum.

Hey Stuki. Not sure what your point is. I suggest you take some actuarial courses so you understand how math works.

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