Turd Ferguson: The Highs In Gold Are Ahead Of Us

With the world re-entering a period of greater economic instability, with the central banks painted into a corner, with global stocks looking weaker by the day, the price of gold is starting to shine again.

The yellow metal has recently hit all-time highs priced in a number of world currencies (the dollar not among them…yet).

Is this a short-term result of ‘risk-off’ fever as the markets have stumbled, to be undone during the next rally in stocks? Or are we seeing the beginnings of a more fundamental re-pricing of gold (and silver), as investors wake up to the currency risks created by more than quintupling the world money supply within less than a decade while simultaneously buring the economy under trillions of newly-minted debt?

Craig Hemke, better known by his nom-de-plume, Turd Ferguson, explains why gold looks like it finally has a brighter future ahead:

Gold and silver aren't priced through the Exchange of Physical Metal, but through the Exchange of Derivatives. They really have no link to physical metal.

People are puzzled all the time about how in the world can the ratio of the price of gold to silver be 90 to 1, when historically it has always been anywhere from 10 to 15 to 1 based on the amount of physical silver allegedly in the ground versus physical gold. I will tell you why it is 90 to 1: it’s because you’re not pricing it off of the physical supply anymore. You’re pricing it off the supply of these derivative contracts instead.

If anything demonstrates how perverted the system has become, it’s the gold and silver ratio.

Our expectation – and we continue to wait for it – is a breaking point with all of the leverage, the re-leverage, the re-hypothecated, the unallocated accounts, all the alchemy that has been done by the banks to create all these different exposures and forms of exposure to a market rather than the market itself. Once that finally is forced to unwind, that’s when things are going to get really interesting.

In the meantime, everybody that bought physical gold and silver – myself included – in 2010, 2011, 2012, the conditions that led us to think precious metals were great hedge have not changed. In fact, as you and I have discussed, conditions have only gotten worse. The systemic imbalances have only become more extreme. Yet, because the price has gone sideways for gold for the last six years – admittedly there has been a stinging opportunity cost for the cash you put in gold and silver over the last seven or eight years. But the conditions that led you to buy them have not changed.

Now that we are at the point where we are today, when the tide of confidence in the Central Banks is ebbing, we may see a runup in the dollar price of gold and silver again pretty soon. Look at other currencies around the world like the Australian dollar, Canadian dollar, the Indian rupee, the Turkish lira. The all-time highs for gold priced in those currencies are being made now. It’s just not happening in the dollar. Yet.

But it will be the dollar’s turn soon enough. That is what I keep trying to remind people of. To keep reiterating that nothing has changed macroeconomically, or from a financial system standpoint. The reasons that you bought gold and silver in the first place have not changed.

Click the play button below to listen to Chris’ interview with Craig Hemke (47m:35s).

Other Ways To Listen: iTunes | Google Play | SoundCloud | Stitcher | YouTube | Download |

This is a companion discussion topic for the original entry at https://peakprosperity.com/turd-ferguson-the-highs-in-gold-are-ahead-of-us/

Quick comment before I give advice on how to prosper from the imminent bear market: what kind of fella gives himself a handle with “Turd” in it???? You can’t make this stuff up! LOL.

Anyway, after my last post's superb advice on adding resilience to your marriage, let me give a few pointers on how to shoot the rapids of the coming bear market and make a bucket of dough.

Expect losses around the 60% → 65% mark in the stock markets .... so this sector (along with property) will be poison. To those who ask “Hey Crapper, what's your advice?” I say gold, Bitcoin and 30 year long bond. This is how you play it:

1) Gold: 5% in gold. Real stuff, not the paper crap. Don't trust anything with crap in it (unless it's me of course). You'll add to this with trading profits (see #2)

2) Bitcoin: this is a risk-on asset. Risk-on assets do terribly in a bear market because speculation heads south and people are fearful. But Bitcoin is likely to go through wild gyrations because it's a new asset class and a play on money. So learn technical analysis (not too hard – you get good freebie technical graphs and indicators from despicable Yahoo. Profit from each fear → greed move should be invested into gold, NOT back into Bitcoin.

3) Leveraged 30 Year long bond ETF (eg ticker TMF from Direxion). This is your investment holding for the bear; expect 100% → 150% return. Why crappy gov' long bonds? Because the FED will for the first time lean on the long end of the interest rate curve in the coming market terror as an action to “do whatever it takes”. Bear markets are hugely deflationary and long term gov interest rates sink as everyone flees to safety.

Only at the bottom of the market do you change strategy and dump the ETF and go long crypto. How do you know? There will be terror in the air – men will become deranged, falling on the ground and cursing heaven and earth. Women, forsaking all propriety will run bare-breasted to and fro shrieking in terror. Then, and only then my chubby-cheeked cherubs will you be able to go long in instruments such as (a) Bitcoin and gold for the MMT disaster ahead (b) New Zealand food companies that will focus the mind of the starving hoards from COOLING and lastly (c) companies with energy infrastructure that won't be destroyed by the coming decade's super-storms.

This next decade won't be a happy one. But if you take Crapper's advice you'll be able to crack open a can of beer and enjoy the show.... rather than be a tragic character living it.

To widows and orphans.... find a strong man like Turd or Crapper to carry you through.

“Fresh from his success in trolling PP members in another forum, Mr Crapper returns once again, hoping to reprise his role as goat-getter and pot-stirrer, with the apparent goal of turning the focus of the conversation towards himself. How will our intrepid members react this time around? Stay tuned…”
A Japanese friend of mine related a saying from his country: “if something happens twice, a third time is coming soon.”
[cough NPD cough]

I agree with Bonds and physical Metal …still don’t trust bitcoin. Seems like real estate would be a good spot. We faired well in the 08 decline due to real estate holdings.
Can’t remember who…but someone said that if you are 25% cash/bonds, 25% equities, 25% precious metals, and 25% real estate you will survive just about any financial disaster.
I would add that you should be 100% prepared in you own lifestyle.

For perspective on NPD, see pinecarr’s insightful post on the “Dealing with Disagreement” forum and the embedded link to the 8 indicators.

Crapper said, “Anyway, after my last post’s superb advice on adding resilience to your marriage, let me give a few pointers on how to shoot the rapids of the coming bear market and make a bucket of dough.”
Lol. Crapper, I’ll most humbly pass on your “superb advice”–of course, at peril of “…forsaking all propriety…[to] run bare-breasted to and fro shrieking in terror.”
However, 'good to know that if things get really bad I can always “…find a strong man like Turd or Crapper to carry [me] through.” :wink: Oops, but I’m not a widow or orphan so I won’t qualify. Guess I’ll just have to continue to be a strong, resilient and prepared woman, come what may. Thanks anyway for your “superb advice.” I’m sure we can expect more of that, regardless of topic.

OK Crapper … I’m stocking up on popcorn and a lawn chair to be prepared to watch those running bare breasted women. LOL.
Lower interest rates and a 10,000 point rise in the DOW will solve all of our problems!
Seriously, Chris, this was a great podcast! Thank you for sharing it.

Greetings all, I am new here so please be gentle.
Great post, enjoyed the talk. I’m not a total noob when it comes to stacking precious metals, my question is simply what to do if metals do shoot up in price?
Personally, I own metals as a means of wealth preservation , and my stack is quite small overall but I would surely be tempted to cash in if metals skyrocketed because I could then pay off my mortgage. As a side note, I love where I live and I feel that not having a mortgage eliminates a lot of risk, but I struggle with the idea that if I sold my stack to accomplish this I would be very hard pressed to ever get it back.
If I continue to work, I’ll probably be debt free and have more PM in 10 years, but I am more thinking if metals went way up in the meantime. I love you the idea of physical portable wealth, but that only matters if I’m in a bug out situation.
Is it just me or does anyone else struggle with this?

What to do and when (with “when” probably being the toughest and most important issue) are important to have plans for. I subscribe to Mike Maloney’s philosophy of “wealth cycles.” I think we can expect other asset classes to plunge when precious metals soar. That would be the time to cash in your gold and silver to take advantage of the tables being turned. Paying off debt would be a great exchange. So would investing in stocks, real estate or bonds. I’m keeping my options open for that day instead of locking myself into a specific plan today.

I treat my PMs holding as collapse insurance / monetary hedge. If it the value of my PM rises significantly, I will sell a portion only (ie, rebalance) and use the proceeds to buy some other investment that has been significantly beat up, reduce debt, etc.

Hey Sparky, Back in my day we used to say “yeah, we know a women in technology has to be twice as good as the guys to be though marginally competent; it’s a good thing that’s relatively easy considering the average guy”. Most widows and female orphans do ok. Maybe, it’s only the little boy orphans that need mama to protect them?
And we probably should be honest. We’re might not be above deciding to “run bare-breasted to and fro shrieking in [pretend] terror” in order to divert the attention of idiots that can’t keep their mind on the target while our Amazon friends take advantage of their inability to keep their eye off a bare anything.

Haha, got my popcorn.
We have a saying in Alaska. It’s where the string stumble and the weak die. No bare breasted women up here due to copious amounts of mosquitoes but many women are armed, know how to shoot and can field dress a moose they took down. I can attest to this personally, women get it done!
Welcome Paul. Forget metals acquire skills. My 2 cents.
Great humor!