GOLD...Its Bigger than US Steel

  Friday's Gold price intraday drop of over a hundred dollars per ounce seems scary to most. However,  In the immortal words of Hyman Roth " its small potatoes". Gold is now trading at a 15% discount to its all time high. Since the bull began in 2001, Gold has not offered many discounts. For those looking at Gold for the first time, 15% off is an excellent entry point. If you want to make money in Bull markets, you buy weakness & sell strength. 15% off is weakness. 

  Could it get cheaper, absolutely it could. In 10 years, Gold has only offered 3 discounts over 20% (summer 2004, summer 2006, fall 2008).  The sharpest discount was 29% off in 2008. If this 15% off sale were to get as bad as 2008, Gold would fall to $1375. While that is possible, its not likely as Gold should find plenty of support at its 200 day moving average (currently just under $1500). Bagholder is of the opinion, the powers that be, can't get it that low as there are simply too many buyers at these levels. Even if they do get the price down there, it won't be for very long. 

 This can be said with certainty, as ALL the fundamentals for Gold are as Bullish as they have ever been. Consider:

- Real interest rates are Negative, That is a dream scenario for Gold, as it  ALWAYS rises in that environment. 

- Even better, Benny has been kind enough to pledge keeping those rates negative indefinitely - woohoo - lets party!!

 - The worldwide supply of Dollars  continues to grow unabated. 

 - Economically, the future is bleak - as the only things certain are more wars, more taxes, more inflation, more unemployment, and more regulation. 

 - The days of dollar hegemony are nearing an end (this is what the wars in both Iraq & Libya are all about)

 - Bankers are buying at these levels, while the public is selling - That can only mean higher prices ahead. 

 - The commodity pendulum is swinging in Golds favor. 

  The MSM, would have us believe Gold was in a bubble & that bubble has now popped. They play this same story over & over again, not because there is a bubble - but rather as a scare tactic. You see, the MSM does the bidding of the people who run this country. Those people are piggish. They want the metals trade for themselves. So, their lap dogs in the media trot out the Gold is a bubble story to scare new money away. Remember, they are trying to get 99% of the masses on the wrong side of the trade. There is a growing number of folks looking at Gold for the first time in their lives. They see 11 straight years of rising prices and think, hey - maybe this is a good investment.  Until the MSM trots out the bubble talk, which exists only to assuage the egos & reinforce the incorrect thinking of those who feel they may have missed the move. 

  Make no mistake, Gold is headed higher - much higher.  Of course it could (and probably will) trade lower first. 15% off is a nice size pullback, and like all pullbacks in a bull market - needs to be bought. Looking big picture, the outlook for Gold is as bright today as it has ever been. There is no fundamental reason for Gold to have changed its trend. The trend is up. The pullbacks are sharp - because thats how they come in Bull markets. Long term, gold will continue to power higher until some of the fundamental issues listed above are properly addressed. 

We here at Mytwocent$ are grateful for this 15% off sale.  We prefer to take the Kevin Bacon approach from Animal house…….THANK YOU SIR!!  MAY I HAVE ANOTHER!!

One of the Greats....

      History was made today as Major league Baseball has a new all time Saves leader.  The title now belongs to Mariano Rivera. As a closer, The guy has been absolutely lights out for a decade and a half.  602 saves is an amazing record, even more so when you consider Mariano has only 38 career blown saves. Thats 94% success rate. He is a surefire first ballot hall of famer. 

   Bagholder has never been much of a Yankee fan. In fact, in my Bookie days - I had several clients who religiously pounded the Yankees. I can't begin to describe the psychological pain of having money against the Yankees, then watching Mariano take the hill with a Yankee lead late in the game. It meant the game was over, before it was over - and everybody involved knew it.  The outs were just a formality.   

    One of the things that separates the good from the great is how they perform when it matters the most. In Playoffs, Mariano has 49 wins & saves against only One loss. Look it up. Bagholder has been a lifelong Cubs/Dbacks fan, which means we don't get post season games where I come from very often.  In my lifetime, the Cubs have not been to a world series while the Diamondbacks have only been to one. As fate would have it, the one was in 2001 against Mariano & the Yankees. 

    Bagholder was blessed to have attended Game 7.  A couple of greats in their own right started that day, Curt Schilling went for the Dbacks, Roger Clemens started for the Yankees. Pitchers duel the whole way until Alfonso Soriano hit a Home run giving the Yankees the lead late in the Game. The silence in the stadium after that home run, was the eeriest moment of my life. 50,000 Dback fans were gutted with one swing. Morale was non-existent as we  all knew Rivera was going to pitch the ninth.  

 In one of lifes little ironies, Bagholder had no financial interest in the game that day. I was however, emotionally invested, as a Dback fan. The pain of watching him take the mound in the ninth was worse than the pain of the Countless times I was on the wrong side of his saves as a bookie. When you are a fan, and your team loses a big one - it takes a little piece of your soul, leaving behind this small empty place, filled with what could have been.  Losing money pales in comparison.

   At that point in his career Mariano had NEVER lost a post season game. In storybook fashion, that Dback team came back in the bottom of the ninth to beat Mariano & the Yankees. It is the only post-season loss of his stellar career and Bagholder is one of only 50,000 people who saw it live.   Hard to believe its been ten years already.  

   Mariano looks the same today as the day he came in the league. Virtually un-hittable. Absolute money, when it counts. Our hats are off To Mariano, to give credit where credit is due. He is the best the game has ever seen. It would be a pleasure to see him deal for many more years. 

I, for one, won't bet against him. 

Other than Ron Paul....

When one gets in bed with government, one must expect the diseases it spreads.
Ron Paul 

Other than Ron Paul, there isn't one candidate in the field who would change the imperialistic ways of the USA. He is the only candidate who has correctly identified the root cause of 9/11 as being our military presence in too many places where it does not belong. It seems anymore, our nations natural state, is to be at war. We are in 3 now, that we know of - all with no end in sight. You don't see terrorists flying planes into Chinese buildings, or Australian buildings, or Canadian buildings. Its because those countries aren't imposing their way of life on others thru military force. Anyone who is intellectually honest would agree. The fact none of the other candidates in the race would dare admit our imperialistic ways are the root cause of 9/11, speaks volumes about how beholden the others are to the military-industrial complex which controls this country today. 

Other than Ron Paul, there isn't one candidate in the field who is a believer in the "Austrian school of economics". The other candidates as well as the people who run this country today are all Keynesians. They all see our economy thru the Keynes model, which means they do not possess the requisite intellectual understanding necessary to grow our economy.  They are simply not free market people. They are all about government control rather than allow the guiding hand of the free market to dictate progress. Its bad enough Government is this nations largest employer, but those government jobs pay on average 40% more than their private sector equivalent. Is it any wonder the economy blows?

Other than Ron Paul, there isn't one candidate in the field who correctly understands the root cause of our economic malaise is the absence of sound money.  The system we have now is completely corrupted. Allowing the FED the power to just create more money as needed, means more will always be needed, and thus more will be created. Its just human nature. Creating more $$ devalues the existing $$. This is why a Mcdonalds cup of coffee which cost 20 cents in the seventies cost $2.00 today. Its the very same reason Gold will continue to outperform every other asset class on the planet for at least the next decade. Ron Paul understands this, and has for years. Look at his portfolio, looks just like Bagholders.  

Other than Ron Paul, there isn't one candidate in the field who would end the drug war (with legalization & regulation). The other candidates all are believers in the current system of throwing billions of $$ at the problem in the form of police, prosecutors, judges, and of course, prisons. There is a large constituency of people who have a stake in growing the drug war.  They all (except Paul) feed at this trough, even though intellectually, morally and philosophically, ending the drug war is the right thing to do. Then again, unless you are Ron Paul, right never enters the equation. The others are all obligated to the powers which got them where they are today. That is why they all take the intellectually disingenuous position of growing the drug war. 

Other than Ron Paul, there isn't one candidate in the field who would significantly shrink the size & scope of Gman. He is intent on dismantling the powers of the federal government and transferring that power to states and individuals. He is a champion of states rights & individual liberty; while the others are all champions of more government. Oh sure, they will all cut in various areas - but on the whole - Paul is the only one who would dare shrink the size of Government like is commensurate with the problem. Government is a natural inhibitor to economic growth. You want widespread poverty, growing unemployment, falling wages, and rising prices - then grow government. Shrink government, and those things go away. Reagan understood it, Paul seems to be the only one in this years crop who gets it. 

Other than Ron Paul, there isn't one candidate in the field who would actually bring change to Washington. The other candidates are all slaves to the current system of expanding government. The idea that there is any significant difference between Democrat &  Republican is absurd. Sure, there is a difference where each side directs the government cash machine; but the bottom line is both sides (R & D) grow government in scope and size.. This is what distinguishes Ron Paul from all the others. Paul is intent on shrinking government on a scale not seen (or dreamt of) in our life.  The powers that be in this country do not want his election. This is why he gets almost no attention in the national media. The attention he does get usually has the MSM labeling him a lunatic. That fact there, is reason enough to learn about the guy. 

Come to think of it, other than Ron Paul, there isn't one candidate in the field worth endorsing. 

By the numbers

Most folks look at the current dollar price of Gold & Silver and think, Wow thats high. We here at mytwocent$ like to let the numbers be the judge.... 

There are roughly 5 billion ounces of Gold above ground at roughly $2000 the ounce means Gold is a 10 trillion dollar market.

There are roughly 1.25 billion ounces of silver above ground at roughly $40 means Silver is a 50 billion dollar market. 

Several things jump out when looking at the above two sentences. First, above ground gold is 4 times as plentiful as silver. So if gold is priced fairly at $1850 - one could argue based on availability silver should be $7400 the ounce. Yes, you read that correctly.

Second, the 10 trillion dollar Gold market is 200x the size of the paltry $50 billion silver market. Considering the two metals are found in the earths crust at a 15-1 ratio AND above ground silver is already rarer than Gold then silver at $650 the ounce would make the silver market 1/15th the size of the current  Gold market.  

 According to Gmans own website in March 1933 there was 20 Billion dollars in circulation, which was justified by Gmans decree making Gold $35/oz. A similar ratio today with 4.4 trillion in circulation (250 fold increase from 1933) gives a Dollar price today of $7700/oz.

 In 1935 a Barrel of oil was 67 cents, today its $90. Thats a 134 fold increase. The same for Gold would put it North of $4700. 

In the 1930's Gold & the dow traded at a 1 for 1 ratio, same thing was true in 1980.  To reach that ratio today - Assuming the Dow is fairly priced, Gold would have to trade over $11,300 the Oz. 

 In terms of percentage of global assets, from 1921 - 1981 Gold & Gold Mining shares averaged 26% of worldwide assets. Even at these "outrageously high gold prices" today, that number today is 1.5% (source: Erste group). So just to return to the historical average valuation for gold would require a 17 fold increase from here… $31,000/oz - for those scoring at home. 

The last 11 years, Gold has returned 20% per year, that pace puts the dollar Gold price at $16,500 sometime around 2020.  To be blunt, Bagholder believes this $16,500 estimate to be too Low. Price appreciation rate is always quicker in the second half of Bull markets. 20% per year will be pedestrian the next decade. 

The Idea that we could discover a new Gold mine tomorrow which would flood the market with new supply of Goldis absurd. All gold mined last year combined, added less than 1% to the existing above ground supply. Even if they discovered a new mine that would produce double what the richest mine produces today; that 1% yearly figure would still not be breached. In math terms, the new mines production is statistically insignificant. Besides, depending on the country where its discovered, the best case is it would be open in 10 years, worst case is it never gets opened. 

The silver price chart for the last 30 years is one giant "cup" of 30 years with a "handle" of 5 months (so far). Edwards & Magee (technical analysts extraordinaire) would say that from the bottom of the cup to the top is a 1600% increase, therefore after the breakout above $50, silver has a green light to $800/oz (that is a 1600% increase which equals the size of the cup). 

The current Gold bull market is ten years old, the two biggest corrections so far are 29% in 2008 and 23% in 2006. By comparison the 1970's bull had corrections of 39% &  52% along the way. This speaks to the tremendous underlying strength of & gargantuan size of,  the current bull specimen. The reason the corrections this time around have been shallow is because it has been under steady accumulation by those of us in the know. Before it gives up the ghost a decade from now - there will be multiple 50% off sales.  Only the staunchest bulls will pass that test.

Bagholder is firmly on the record as stating Silver will trade  with 4 digits to the left of the decimal & gold will trade with 5 - both before 2020. 

Harmless Idolatry

Bagholder can remember the exact moment in childhood when he first realized, that while the world (in a physical sense) may be black & white, the people within - are Gray. Butch Cassidy & the Sundance kid were to blame.  They are such likable guys, yet they are criminals. Therein lies the rub. It is a bit of a psychological epiphany as a child to realize:  not all bad guys wear black, not all good guys wear white, and of course, all people are a mix of both good and bad.  From the moment Butch won a knife fight - without a knife - Bagholder has had a morbid fascination with Bad guys. What follows are my top ten villains with whom I hold a strong personal connection, despite the fact they are all cold blooded murderous psychopaths…….  

- Jack Torrance. The appeal of this character is he is very much an ordinary guy, who slowly descends into insanity. He is no mastermind, he is not an egomaniac, and he is not an arch criminal. In fact, nothing in particular turns him into a cold blooded killer.  His is more of a slide into the abyss which is so gradual - its almost as though it could easily happen to you or I. 

- Lex Luthor. Hackman's version of Lex in the Superman movies was a delightful mix of megalomaniac, egomaniac, and haughtiness. Most of the names on this list have oversized egos - but in that regard this guy is in a class by himself. Egomaniacs are a joy to behold, precisely because they are their own worst enemy. This life requires balance - the Lex Luthor types have none in their world. Its really inevitable that he does himself in. 

- Lord Vader. There was no bigger bad-ass on the planet in the late 70's. He was a supremely gifted, yet lost soul unable to properly harness his talents. Worse yet, he fell under the auspices of someone more capable of harnessing (and utilizing) those natural gifts.  The Black robe & mask helped conceal Lord Vaders  internal struggles, while also magnifying his image as a badass. His direct, concise, efficient means in achieving ends is the stuff of greatness. 

- Michael Corleone. A man of few words, and fewer actions - but those actions spoke volumes.  His cold, calculating, ruthless manner and an razor-sharp insight into human nature Kept him two steps ahead of his enemies. He was not a particularly good soldier, but he was a helluva General. A true "big picture" guy. 

- Omar Lyttle. You just have to love someone who beats the scum of the earth drug dealers at their own game - and doing it with a code. Like Omar said: "Yo, never hurt nobody, wasn't in the game". Unlike the others on this list, he only killed to survive. To some, that makes him morally superior. Its funny, a lot of what he was able to do - was because of his reputation and the fact he understood the threat of violence is always stronger than its use. 

- Paulie Walnuts. A complete moral reprobate, if there ever was one. Mafia Killer with the same intellect, same wisdom, and same hierarchy of needs as the average 8th grade male. His most endearing quality is he sees the world as black and white - much like a kid. He is particularly interesting to watch because he has NO scruples & life is gray.  

- Kahn - There should be a picture of this guy in the dictionary under ambition. Exceptionally intelligent, well educated, genetically superior and yet unable to govern several of the deadlies (primarily pride and wrath). It seems fitting that despite all his genetic gifts, his unchecked ego was his downfall. He was truly, a worthy adversary for someone (Kirk) cruising the cosmos. 

- Tony Montana. There is something to be admired about someone who works their way up the food chain one rung at a time. Unlike Michael Corleone, Tony was a better soldier than a general. His problem was he didn't know any limits - in anything. Still, you have to admire someone who knew what he wanted & went out and got it. 

- The Joker.  His is perhaps the loosest grip on reality - but I'm not one to hold that against a guy.  For all his faults, he did know how to have fun. Like any genius, he had a way with words and was most fluent in sarcasm. To me though, the real draw of the character was his irreverent manner and the fact he thought BIG.  He had a natural gift for forcing people outside their comfort zones - one of Bagholders favorite pastimes. 

- Dexter.  An excellent tactician, who does his homework, and executes with extreme cunning - thats a dangerous combination. He is A true predator. He channels his inner demons towards ridding the world of his fellow predators. It is seemingly a noble goal, executed in a manner that is both righteous and just.   Whats not to like?