The Citigroup Gold-At-$2000 Story
November 28th, 2008WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
DISCLOSURE: I am a BullionVault client and affiliate. I am a Nitro-Pak affiliate. I am an Impact Guns affiliate. I hold DBA.
Oh my, the Citigroup Gold-At-$2000 Story is making the rounds.
If Citigroup analysts knew their collective ass from a hole in the ground, maybe the bank wouldn’t have been nationalized as a result of its bad decisions and catastrophic losses. However, since a broken clock is right twice a day and since gold is substantially lower than earlier highs this year—apparently consolidating in the low 800s—this article is worth mentioning as just another data point for your consideration.
If you read this and think, “This is a sure bet! I’ll go mortgage the house and buy gold,” you are almost certainly going to lose your ass and wind up reading Cryptogon wearing a barrel or a set of sandwich boards.
Diversify. Diversify. Diversify.
So, besides land with decent soil and a reliable water supply, gold and cash, what else looks good? Here are some things to consider, in order:
3. DBA. People have to eat. My stop is $23 on this.
4. Oil. I don’t trade oil. However, the recent Goldman Sachs note, indicating that there wasn’t much upside potential for oil, pretty much describes the near term technical bottom:
Goldman Sachs to end oil recommendations; doesn’t expect ‘significant upside potential’
November 20, 2008: 06:10 PM ESTNEW YORK (Associated Press) – Goldman Sachs, which earlier this year said it expected oil to reach $200 a barrel, said it is discontinuing its crude-oil trading recommendations as it does not see “significant upside potential” to oil.
Goldman said Wednesday in its weekly energy report said that while continued weak demand and constrained credit would keep prices under pressure, it hoped that high volatility would provide a better exit point for trading.
“The volatility in the past few weeks has mostly been to the downside and the pressure on the oil complex has increased,” the report said. “In the near term, we do not expect significant upside potential and as a consequence we are closing all of our trading recommendations.”
Oil has fallen 66 percent since hitting $147 a barrel in July. It fell $4 Thursday to settle at $49.62 a barrel.
The same crooks, you might remember, were trying to shill it higher near the top. So, with Goldman Sachs publicly talking down oil, and some Peak Oil bloggers taking the consolation prize of economic collapse, oil is looking interesting here, mostly because of the double-bottom-esque chart pattern.
Options 3 and 4 assume that the dollar will go on to break down again. If you don’t understand the connection between the dollar and commodities by now, DO NOT even consider these options.
I don’t see how you can go wrong with options 1 and 2. You see stories daily about the food situation and Obama Clause is a rabid gun banner. With regard to the guns, what happens to prices on things that are banned? Hint: They don’t go down. The reasons for recommending that Sig piece are somewhat arcane, and will bore most readers. But, if you’re looking to make an investment in an outstanding assault rifle, very briefly, here’s why I recommended the Sig556: 1) Kalashnikov-type gas system, 2) Legendary Sig fit and finish, 3) It’s a relatively rare weapon, unlike the AR and AK variants which are made by dozens of manufacturers. The Sig556 is a very solid investment. There are always going to be lots of ARs and AKs around. But how many people do you know who own Belgian FN FALs, German HK91s, Israeli Galils, or Finnish Valmet M62s? Someday, the Sig556 will be one of those weapons that’s gone forever. That’s where the investment potential comes in.
A short anecdote:
When I was 16, I walked into a gun store with my dad. I had a wallet full of cash. I was there to buy a Colt AR-15 HBAR.
“Son, that’s a fine weapon,” said the man behind the counter. “But why not get yourself something that will appreciate in value?”
“Oh, I want that AR,” I said.
“What did you have in mind?” my dad asked the man.
And off the rack it came.
“There’s one more new in the box in the back and this one. That’s it. There won’t be any more. Ever.”
He laid out several leather mats on the glass gun case. He cocked back the bolt and it locked open on the empty magazine with a distinctive metal on metal snap. He removed the mag and laid the weapon on the leather mats. The sound of that action going back drew a small crowd of other customers. They murmured things like:
“What is it?”
“That’s not American.”
“Damn, that’s expensive.”
“That’s serious f*ckin’ business right there.”
(Don’t ask what it was. It doesn’t matter.)
I wound up taking the man’s advice and (technically, my dad) bought the weapon that he suggested, even though it cost three hundred dollars more than I had tucked away in my already bulging wallet. My dad let me borrow the rest.
Needless to say, the man behind the counter was right. It was a much better choice than that AR. (Don’t get me wrong, I like ARs.)
I didn’t buy a Sig556 all those years ago (Sig assault rifles were not available for purchase by civilians back then), but I’m telling you the story because that Sig556 is the equivalent option now.
Don’t dawdle.
Via: Telegraph:
Gold is poised for a dramatic surge and could blast through $2,000 an ounce by the end of next year as central banks flood the world’s monetary system with liquidity, according to an internal client note from the US bank Citigroup.
The bank said the damage caused by the financial excesses of the last quarter century was forcing the world’s authorities to take steps that had never been tried before.
This gamble was likely to end in one of two extreme ways: with either a resurgence of inflation; or a downward spiral into depression, civil disorder, and possibly wars. Both outcomes will cause a rush for gold.
“They are throwing the kitchen sink at this,” said Tom Fitzpatrick, the bank’s chief technical strategist.
“The world is not going back to normal after the magnitude of what they have done. When the dust settles this will either work, and the money they have pushed into the system will feed though into an inflation shock.
“Or it will not work because too much damage has already been done, and we will see continued financial deterioration, causing further economic deterioration, with the risk of a feedback loop. We don’t think this is the more likely outcome, but as each week and month passes, there is a growing danger of vicious circle as confidence erodes,” he said.
“This will lead to political instability. We are already seeing countries on the periphery of Europe under severe stress. Some leaders are now at record levels of unpopularity. There is a risk of domestic unrest, starting with strikes because people are feeling disenfranchised.”
“What happens if there is a meltdown in a country like Pakistan, which is a nuclear power. People react when they have their backs to the wall. We’re already seeing doubts emerge about the sovereign debts of developed AAA-rated countries, which is not something you can ignore,” he said.
Gold traders are playing close attention to reports from Beijing that the China is thinking of boosting its gold reserves from 600 tonnes to nearer 4,000 tonnes to diversify away from paper currencies. “If true, this is a very material change,” he said.
Mr Fitzpatrick said Britain had made a mistake selling off half its gold at the bottom of the market between 1999 to 2002. “People have started to question the value of government debt,” he said.
Citigroup said the blast-off was likely to occur within two years, and possibly as soon as 2009. Gold was trading yesterday at $812 an ounce. It is well off its all-time peak of $1,030 in February but has held up much better than other commodities over the last few months – reverting to is historical role as a safe-haven store of value and a de facto currency.
Gold has tripled in value over the last seven years, vastly outperforming Wall Street and European bourses.
Posts like these where you break it all down are really helpful, Kevin. I don’t think I’ve seen such a detailed guns post on crytogon, either.
Anyone have thoughts about a gun suitable for the suburbs, less pricey than the Sig556, and whether that would be a rifle or just a shotgun? (Assuming a handgun is already taken care of.)
I’d strongly suggest NOT using weapons based on center fire rifle ammunition for “home defense” purposes. There’s too much potential for inadvertently killing your neighbors, in addition to the attacker.
The 12 gauge shotgun is an extremely versatile weapon.
I’d get a semi auto, either the FN SLP or the Remington Model 11-87 Police. I’ve used Benelli Super90s for a long time, but Benellis are too expensive for me to recommend anymore.
For pump, consider a tactical variant of the Remington 870 or the Mossberg 590.