Always nice to see people talk out of both sides of their mouth.
Here is currency speculator George Soros (ex of legendary hedge-fund Quantum) at the World Economic Forum at Davos:
“When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment. The ultimate asset bubble is gold.”
So far so good. Mis-price money (cheap interest rates) and people don’t want to keep their savings in it. They want it in something that isn’t subject to mis-pricing (so they hope) – hence gold.
But then Soros shows how disingenuous he’s being by adding this:
“I think that since the adjustment process to the recession is incomplete, there is a need for additional stimulus. Some countries, like the US and European countries, have plenty of room to increase their deficits. The political resistance to doing so increases the chances of a double dip in the economy in 2011 and after that.”
That is, he’s suggesting running more deficits and keeping the money spigot going, just the thing that’s caused the gold price to rise.
So how do we understand this?
Gold is due for a technical correction, but it’s also probably responding to deflation in the general economy. It’s not going down that fast, because a lot of people are also buying it speculatively.
That’s the tug of war.
Meanwhile, who know what Soros’ holdings are and who knows what his motivations are in making such contradictory statements.
But anyone who takes these sorts of pronouncements as any kind of lead for their own investments/speculations, should be prepared to part fairly soon from their money.
Trying to tie this post in with Jim Rogers saying he is long Both the Dollar And Gold… lucky him, he can play both sides of the trade?
Another thought comes to mind:
If you don’t know who the sucker is, you’re the sucker. Even If you think you know who the sucker is, does that mean you aren’t included too?
I bought a very small amount of silver yesterday. If silver drops to $4 per oz. somehow, it wouldn’t do me damage, and if it did, the Dollars I have left might buy more than before, so I wouldn’t exactly come out behind overall. I would still have something, a shiney bright dense portable form of dirt. I still want dirt though, renting some seems like a good play right now, but that terrible cultural norm to own rather than rent is a strong pull.
With gold, I would think a price drop might seem painful, cured by future rises in the price, so long as it doesn’t take twenty years to go back up, but that would require a strong Dollar for real and/or huge increases in the gold supply,… not so likely?
P.S.
I’m liking this whole: “I Won’t Tread on You,… if You, Don’t Tread on Me.” and I won’t call you a flaming idiot right away – thing more and more as I try it. It sure isn’t easy though.
Well yes…
I think the speculators are long gold..
publicly.
But you know, long is a relative thing.
I doubt they have more than 10% at the most, and even that, probably divided between physical and juniors..
I really think beyond a 5% diversification allocation, the average person is still much better off with income generating property, as long as its paid off and he is sure can generate income from it.
The numbers have to be solid.
I’m not worried about the dollar in the near term. It’s strengthening.
I think you’ll see some of the emerging currencies take a hit.
I bought the UUP a while back and it’s up..
Should have bought more but hey..caution is better than loss.
Lila,
Congrats. Nice trade on the UUP. The DX passed 80 today for the first time since July 2009 and the Peso jumped from 19.20 to 19.50. Looking for a hard 20.
Thanks
Peso is at the top end of its cycle…
Real is overvalued too..
I read that technically most of Latin America is out of recession, but you know much of the growth is dependent on Chinese investment and trade.
I do think the speculator crowd, led by certain hedge funds are orchestrating an attack on China…
which is of course helped greatly by the excess capacity that’s built up..