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Because we are gold
bulls ourselves, we are always on the alert for any mention or
even offhand remark about the ways of our herd. Such was found
in a July 6th Barron’s article by Michael Santoli, entitled
"Conversation Starters for the Holiday." In it, he quotes Dennis
Gartman, who Mr. Santoli refers to as the "straight-shooting
listener to markets at the Gartman Letter," as saying, "We do
find the frenzy with which the gold bulls are pushing various
conspiratorial theories these days interesting."?
It is not further revealed by Mr. Santoli exactly what was so
‘interesting’ about this alleged frenzy. But in today’s usage,
the adjective ‘interesting,’ when placed as an object of the
verb ‘find', actually means "inadvertently?self-revealing,
obviously biased, and/or predictable," which of course is the
opposite of interesting. So we can probably assume that Mr.
Gartman meant his statement as a snide remark.
The very phrase "conspiratorial theories" is itself a loaded
one, meant to suggest that some sort of crackpottery is evident.
This is often the criticism from the Wall Street corner when
hard-money advocates put in their two cents worth. For instance,
in trying to understand our current economic unpleasantness in
the context of the tight relationships, personal familiarity,
and revolving-door title-swapping which constitute a cozy
interplay and mutual back-scratching among the Department of the
Treasury, the Federal Reserve, and various financial
institutions which share, seemingly, only one obvious
characteristic: enormous size.
Really, Mr. Gartman, it’s all in how you phrase it. What from
the outside might look like a ‘conspiracy,’ is simply an example
of coordinated teamwork to those insiders involved and those who
profit therefrom. Maybe in this instance we might find a happy
medium by using the word ‘collusion.’ Call it what you will,
there are some questions floating around that are, in fact,
‘interesting’ in the traditional sense of the word.
For instance, how did Goldman Sachs come to rule the United
States of America? Why are the Treasury and the Fed working
together in throwing money at institutions that ordinary
Americans would be more interested in throwing other things at,
such as tomatoes, or rocks? Why are certain massive financial
and insurance companies deemed too big to fail? Is there no end
to federal efforts to restore these once-profitable firms to
financial health no matter how badly they screwed up?
We could work up a healthy populist anger about all this, and
many in Congress are doing just that – witness their attempts to
micro-manage compensation of bank CEOs and claw back the bonuses
doled out to various genius quants and MBAs who recently took
banking and the insurance dodge to whole new convoluted levels
of financial monkey business.
And certainly there is a time-honored appeal in lumping together
that seemingly non-productive group known as financial workers,
and denouncing them as a criminal class. Today we are even
seeing a revival of the term "banksters," a word formed by the
conflation of bankers and gangsters. "Banksters" was a common
pejorative that blossomed during the first Great Depression
(1929-1940), when bankers and their institutions destroyed many
a working person’s savings in the days before the FDIC was
created to protect depositors.
In a sense, the Federal Deposit Insurance Corporation saved the
reputation of banking as we know it. At least it did until this
recent economic unpleasantness, when the federal policy towards
bankers somehow became very benevolent. Call it ‘private gain,
but public pain.’
But, back to gold: This morning (7/9/09) the Wall Street Journal
delivered the shiny yellow stuff, in the form of a tall stack of
gold bricks on the cover of their Personal Journal section, to
illustrate an article by Larry Light, entitled "Catching the
Gold Bug."
"More and more investors are acquiring physical gold, or
bullion, in the form of small bars the size of iPhones, or coins
like American Eagles and South African Krugerrands," writes Mr.
Light, "Individuals’ bullion purchases almost doubled last year,
amid apocalyptic panic over the financial system, to 862 metric
tons."
The article over all is a pretty fair report on acquisition of
physical gold by ‘regular folks’ who are buying gold to put
away. Gold has not only earned quite a bit of respect as an
investment over the past few years, but also increased
respectability as more and more sophisticated individuals and
money managers have come around to gold’s charms and utility.
One investor stated to Mr. Light, "Owning bullion is buying
insurance against the unknown."
And the good news these days for gold bullion buyers is that
premiums have returned to more ‘normal’ levels, and supply from
the refiners and mints is now meeting demand. Today’s market is
much more consumer-friendly than last fall’s feeding frenzy of
high demand, spot supply shortages, and ramped-up commissions.
The days of ‘allocation’ to dealers by the US Mint are now over,
and the Mint has caught up on demand for both 1-ounce gold and
silver Eagle. With any luck, we could see 2009-dated fractional
gold Eagles by this fall. Whether we see gold Buffaloes or
platinum Eagles this year will depend on the Mint’s continuing
to have sufficient striking capacity (not a problem) and a good
supply of coin blanks (often a problem, as such production is
outsourced).
Lately, we have gotten a lot of inquiries about placing precious
metals in an IRA. This is a very popular business these days,
particularly for salespeople who sell Proof gold Eagles,
certified and graded bullion, and other profitable ‘value-added’
products to unsuspecting IRA owners.
But even if you can avoid getting ‘up-sold’ into expensive
precious metals exotica in your IRA, we still maintain that even
holding basic, no-frills gold bullion in your IRA is not an
optimal strategy.
First, the beauty of physical gold is that it is wealth itself,
in your personal possession and under your control, come what
may - but gold in an IRA is stored in a distant depository.
Secondly, the strategic advantage of an IRA is that it shelters
your gains and interest income against taxation - which gold
doesn’t generate anyway.
You probably won’t find many gold dealers who agree, but in our
opinion, putting gold in an IRA cancels out the advantages both
of gold and of an IRA.
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