Monday, October 3, 2011

Jack Crooks-Why Is Roger's Always Wrong About Gold & Silver?

Taken from somewhere else.......

The so-called Bull of the Commodities trade appears more like a Bull in a china shop. Everytime Jim Roger and Marc Faber open their mouth to speak about Gold and Silver, it seems they have a loaded gun pointed right up their ass. At the the height of the Equities boom in 2008 Rogers was shilling Commodities, a year later the CRB index was down 40 per cent outperforming the Equities on the downside.

Early in 2010, speaking at a conference in Bombay, India, Roger's very dramatically pulled out a few pieces of Gold and Silver from his coat pocket and told Indians not to Sell, even though he himself was neither buying Gold or Silver. Subsequently by Q3 2011 Gold had moved to $1910/oz and Silver to $42/oz. In this 2 year period not once he mentioned buying Gold or Silver. So the Commodity Guru was clueless of the market direction of Gold both at $ 1100 an ounce and also when it was $ 1910 an ounce. He neither bought nor sold at any level. So what was the advise to go long commodities pointed at? Mass TV audiences which could be fooled across the World?

More damaging has been his theory that commodities will outperform equities no matter what. This has been amply proven wrong between 2008 and late 2011. What has also been proven wrong is the thesis that Bernanke belonged to an asylum and the US Dollar is doomed. So why is that early in Q4 2011 the USD has zoomed and the commodities ranging from crude, cotton, sugar, copper, nickel, gold and Silver have lost nearly 40 per cent from 2011 highs? The answer: Roger's is much a charlatan as any other man on Wall Street or any Street and beyond the tricks of a snake charmer has really got no sense whatsoever about the markets except predetermined thoughts that commodities will rise.

Right or Wrong the view now is that Gold may drop to $1100/oz and Silver to $ 20/oz by end December 2011 and many so called sophisticated global commodity funds will liquidate. If this happens, investors would have lost paper gains of 3 years on commodities and will stare at insolvency themselves.

The swift sell-off in gold surprised many, as it seemed a foregone conclusion that this gold game was so easy. "Oh yeah, $2,000 gold and beyond is slam dunk — no brainer — don't you know. The U.S. dollar is going into the tank," seemed the sentiment till last week's reality intervened.

What happened? And will gold continue to slide? Let's just take a little retrospective and see if the odds are the top is in on gold.

 Let me be clear, though, I don't know if a top is in place. But I want to show you a few charts that suggest this selloff is part and parcel due to the need for liquidity and an indication that the currency everyone loves to hate has probably put in a multi-year bottom.

Let's start with the Gold/Silver Ratio vs. Dow Jones Industrial Average (DJIA) Weekly. Now, this isn't a gigantic sample size I grant you. But I think it carries some logic and gives us some insight about the relationship between gold and other risk assets — measured by the DJIA.

As you can see in the chart below, there is a tendency for the gold/silver ratio and DJIA to confirm troughs and peaks:

The correlation of these peaks and troughs in gold and DJIA in the past have represented multi-year moves based on these confirmations. My theory is that silver being more of an industrial metal tends to ebb and flow more closely with risk assets i.e. stocks, thus why this ratio moves in the manner it does.

And what is interesting too, is that the last two peaks in stocks have preceded a break in gold prices by five months. You can see it in the chart below comparing Gold and the Dow Jones Industrial Average Weekly.

When fund managers get margin calls on the bad side of a portfolio, they meet that call by raising cash from the winning side of their portfolio ... in this case that would be gold.
We've heard a lot of talk about hedge fund managers liquidating gold positions. It makes sense given that risk assets, stocks and commodities, have been hammered.

If this is true, and stocks and other risk assets, continue to fall based on the decline in global growth and liquidity, gold should follow stocks lower. And the much vaunted safe-haven appeal of gold could be history.
Was the end of QE2 the bell ringing at the top? The following chart of the Dow Jones Industrial Average Weekly can help answer that.

And the Commodities Index Weekly (CRB) chart looks to be turning over, too.

So if you think global liquidity is in trouble, where is the best place to hide, besides short-term U.S. paper?
I would say the U.S. dollar is looking like it can be a safe haven now. Below is a repeat of the dollar chart I shared last week.

And just like I said then:

"This indicates a real and sustainable move into the dollar. It might be a flight to safety and/or liquidity ... take your pick. And it could eventually turn into something much more this time around."
I have one more question for anyone who believed the dollar was heading into never-never land: Why didn't the U.S. dollar index sink miserably to an all-time-new-low as gold blew off to a new high?

The market will soon share the truth. Stay tuned, but if you own a bunch of gold and are heavily short the U.S. dollar, I think it pays to be careful here.

My Comments:
Well, in past I have always commented against Jim Rogers and Marc Faber.They are dooms dayer for Equities and bullish on commodities.As seen above Jim Rogers has proved wrong and clueless.
Marc Faber and Jim Rogers hass always predicted that Dollar will become junk and it on its way.
Marc Faber , owner of Bloom,gloom and Doom website , never speaked about boom but is always a doomdayer to me.
If the world is going to slow down, if PIIGS countries are going to defalut, if China is slowing down, if India is slowing down, then how the commodities prices will keep rising?
If there will be no demand how will the prices keeps on rising?
With just $3-4 bn outflow the rupee went down and became 50.Lost over 10% and India is getting hurt on import bills.Experts who are berarish on US dollars are trying every means of reason to prove it but dollar becomes stronger and stronger.
China has around $1 tr and more in US treasury and no way China can sell it.China has purposefully kept the yuan under check and not let it appreciate so that they have edge on export.
There is no replacement for dollar.Commodities, crude , are traded in dollars.I am not seeing any other currency take place of dollars in near term nor in distant future and hence I feel that dollar should not become junk.Those views are unfounded for and that is my personal view.
I have written many times that due to speculations the prices goes up.Crude, Gold, Silver , Commodities goes up more on speculations then the actual demand.


  1. Sir these all so called gurus are no means expert in my mind they are tracking the markets since last 30 and 40 years and in my mind they know nothing. they all are bullish on china but i am very sure that the china and commodity will do very bad for a year at least. also sir warren buffet is not a expert his success is only because his patience they all cannot time the market. warren buffet buys billion of dollars of shares of oil companies in the late 2007 when oil is at $150/ barrel, which is peak and they will sell when oil is at $30/barrel. i think that we should not do what they are doing . just listening them and forget don't apply

  2. The U.S. is headed back into recession. That’s the word from the widely respected Economic Cycle Research Institute, which uses economic indicators to put together leading indexes.