Jon Nadler: The Gold Bugs Have It All Wrong (GLD, IAU, SLV, PHYS, AGQ)
Dominique de Kevelioc de Bailleul: If there’s an interview that almost proves beyond a shadow of a doubt that Kitco’s Jon Nadler has an agenda outside the interests of the American investor, the Jun. 22 interview on Bloomberg with Tom Keene serves as strong evidence. It’s a remarkable demonstration of complete ignorance, or worse.
“If we didn’t have the melange of easy monetary policy from the Fed, the aggressive dehedging of the world’s mines and, of course, the advent of gold-oriented ETFs and the hedge fund speculators that instrument brought to the marketplace since about 2005,” Nadler began his interview in his typical affected speech, “my opinion is that we would probably be muddling along somewhere in the $860 area. And that’s fair value currently in gold,” Nader continued, throwing in the word, “melange” to give his presentation a bit of James Grant gloss, simialr to Dennis Gartman’s affected speech.
“I think $1,200-$1,300 could be in the cards [for the price of gold] inside less than a year,” he speculated.
Instead of Wall Street’s lackey Keene challenging Nadler by saying, “Well, Jon, why are mining companies dehedging? Isn’t it logical for investors to hedge against negative real rates? How do you derive at ‘fair value’ of gold at $860? Since, you’ve been wrong about the direction of gold for so many years, why did my producer ask you onto the program?”
And it’s gets better. Nadler tried to paint the picture that everyone was expecting hyperinflation after the Fed embarked on QEI and QEII.
“Another interesting chart I noticed in you interview of Mr. Bullard was this great disinflation since we’ve had in place since 2009,” Nadler revealed his love of Fed statistics. “You know, that’s a long-term process of deleveraging and you know an adjustment back to norm, which, albeit, with some interruption, has really disproved the case for this advent of this Zimbabwe on the shores of the Hudson. And I think that is also playing into this equation to some degree, because after QEI and QEII, we still haven’t had this hyperinflation that everybody was convinced would result.
Firstly, Nadler has to tighten up his sloppy language when using the word, “everybody”.
Secondly, if he was listening carefully to economists who don’t whore for the Fed, such as Mr. Bullard, he would have noticed that most credible analysts of the gold community (independent analysis) said the Fed has embarked into the process of hyperinflation, and that, hyperinflation is not a monetary event, it’s a political one. Read a little von Mises for a primer on the subject of hyperinflation, Jon!
Moreover, the process of triggering an eventual panic out of a currency, as von Mises explained so diligently, through, in this case, the Fed’s debt monetizing plan (which it hides through its primary dealer network), can take some time as the global community finally loses confidence in the U.S. dollar as a viable store of value. Psychologically, the global investor is presently at the stage which precedes a complete loss of confidence in the U.S. dollar; that is, the fear-of-losing-principal stage. Seeking a store of value from currency debasement years comes next.
von Mises called the process to hyperinflation, the Crack-up Boom, whereby there is a period of ‘disinflation’ as the financial system ‘deleverages’, then followed by a period of awareness, a tipping point, that debt obligations cannot ever be repaid. Then, the fight against the Kondratiev Winter by central banks begins in earnest through hyper-inflating the currency into oblivion after the markets reprice debt to reflect erosion of purchasing power and default risk, such as the case with Greece, and now Spain and Italy.
In fact, according to the economist many ‘gold bugs’ follow to yardstick the Crack-Up Boom process is John Williams of ShadowStats. Williams has recently move up his hyperinflation scenario to some time in 2014, from his original estimate of the end of the decade. So who is Nadler taking of when he says ‘everyone’ expected hyperinflation during QEII?
Keene asked, “What do the gold bugs have wrong, Jon? I mean, are they trying to relive those early 80s?”
“In part, I’m afraid that’s exactly what they’re trying to relive,” Nadler said with a chuckle.
He added, “But I think the other part they have wrong is that they believe the Fed is some how going to take its hand off the steering wheel, lose control, and careen into the hyperinflation ditch. And I think we’ve had proof enough, with all the criticism that we can level at the Fed, one thing they’re cognizant of is what happens when they don’t watch the brake pedal.”
Ha? Does Nadler have some advice for the Fed as to when to apply that proverbial brake? So far, the Fed has stated in it FOMC statements that the brake won’t be touched until 2014, at the earliest. And of course, the Fed is aware of what could happen if it doesn’t apply the brake. The question is, Jon, how can the Fed apply the brake without soaring carrying costs of $15.2 trillion of federal debt (not to mention state and local interest costs) without entering into a Greece-like fiscal debt spiral?
Nadler really come across sounding as silly as Warren Buffett, Charlie Munger and Bill Gates have.
The last crazy analysis by Nadler comes from his response from Keene’s question regarding the idea proposed by the EU of a gold-backed version of an ESF. Nadler said it would end up being a “double-edge sword” for the gold price, with the initial plan being bullish for gold as central banks would highlight to the world that gold has no counter-party risk. But in the end, according to Nadler, it would be bad for the price of gold in the event of default. The gold backing the lending scheme would end up being dumped into the market, therefore depressing the price. A sophomoric analysis, at the very least, and at the most, proof that Nadler is completely full of bull—a whore for the Fed.
If the arrangement to back a default by the Italians, Spanish, Ireland, Portugal and any other country which foolishly decides to sign onto such a suicidal arrangement by pledging its gold, why would Germany, the supposed lender in the scheme, dump the gold into the market after a default? Wouldn’t these indebted countries and the eurozone be right back to where they started? And what would prevent China, or any other central bank, from buying the gold?
And finally, why won’t Jon Nadler take up Peter Grandich on the $2 million bet that gold will reach $2,100 before it hit $1,000?
Nadler is all talk and a fraud. He appears to suffer from the same disease as Dennis Gartman and Jeff Christian suffer from. None has any shame and appear to not be moved by an entire gold community laughing at the spectacle of these three men appearing on television programs after making one bad call after another. It took Goldman Sachs years to ‘downgrade’ Abby Joseph Cohen. How long will it take Bloomberg to figure out that the viewer has figured out that Bloomberg intentionally gives Nadler airtime to whore for the Fed?
Related: SPDR Gold Trust (NYSEARCA:GLD), iShares Silver Trust (NYSEARCA:SLV), iShares Gold Trust (NYSEARCA:IAU), ProShares Ultra Silver ETF (NYSEARCA:AGQ), Sprott Physical Gold Trust (NYSEARCA:PHYS).
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