Northwestern Mutual Makes First Gold Buy in 152 Years
June 4th, 2009WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
Disclosure: I own gold. I am a BullionVault client and affiliate.
Here’s an excerpt from an email that I sent to a core contributor three days ago:
Re: Changing the subject to gold: I think the thing that gold longs
should find impressive is gold’s resiliency during the recent counter
trend crank/short squeeze on the dollar. When gold gets knocked down,
there’s support lurking beneath the market.
My guess about the nature of this support, that’s consistently lurking
beneath the surface, has to do with the cracks appearing in the U.S.
government debt. THERE AREN’T ENOUGH BUYERS FOR THE BONDS. When U.S.
bond auctions fail, the Fed just prints the unsold balance into existence!
While we both know that They’ve been able to pull tricks out of their
hats for a long time, those U.S. bond auctions have never failed before.
This is uncharted territory.
Just a guess, but I think we’re seeing gold becoming an alternative for
people who see U.S. debt for what it is: a gigantic Ponzi scheme.
I called the U.S. “a system scale Lehman Brothers” in an extended
comment here:
The thing is, the U.S. government debt market is THE LARGEST CASINO IN
THE WORLD, outside of the day to day churn of forex. I don’t know
exactly what the numbers are, but you would measure the difference in
sizes between the bonds and the gold in terms of orders of magnitude.
(The stock market is a tiny pimple compared to the bonds as well.)
What percentage of the U.S. debt action could move into physical glod
before something weird happens? .01% .001%? .0001%? Anyone (I’m talking
sovereign players) who wants to shift from bonds to gold is going to
have to be VERY careful about how they go about it because, unlike the
U.S. Treasury that can just print more U.S. debt into existence, gold
doesn’t work that way, as we know.
That’s why I think we’ve seen gold holding up so well. Some big players,
who used to be happy to buy U.S. bonds are now buying gold. They just
have to go slow, and buy the dips, or risk sending gold much, much
higher too quickly, that is, while they’re still holding U.S. Confetti
Bonds.
—End Excerpt—
Via: Bloomberg:
Northwestern Mutual Life Insurance Co., the third-largest U.S. life insurer by 2008 sales, has bought gold for the first time the company’s 152-year history to hedge against further asset declines.
“Gold just seems to make sense; it’s a store of value,” Chief Executive Officer Edward Zore said in an interview following his comments at a conference hosted by Standard & Poor’s in Brooklyn. “In the Depression, gold did very, very well.”
Northwestern Mutual has accumulated about $400 million in gold, and Zore said the price could double or even rise fivefold if the economy continues to weaken. Gold gained 10 percent last month, the most since November. The commodity has more than tripled since 2000, rising for eight straight years. Gold futures for August delivery slipped $4.80 to $975.50 at 4:03 p.m. in New York.
“The downside risk is limited, but the upside is large,” Zore said. “We have stocks in our portfolio that lost 95 percent.” Gold “is not going down to $90.”
Policyholder-owned Northwestern Mutual, based in Milwaukee, ranks third by 2008 life insurance premiums according to data from the National Association of Insurance Commissioners. The data excludes annuities.
The hedge funds aren’t buying gold, they’re buying GLD. It’s still a con that works to the central banks’ benefit, but we’re getting ever so closer to the global currency reset. The Chinese, however, are most likely buying Au and not paper. There’s much speculation why the Chinese are dissing the US and our $’s which will cost them wealth as they’re one of the biggest holders of US debt. Well, wars cost money, don’t they?