Friday, August 19, 2011

Mike Maloney Presents "Debt Collapse"

Let me just start by saying that I'm a Mike Maloney (MM) fan. I do agree with a lot of what he has to say.

To some degree I am riding this precious metals bull market as I believe (cyclically) it's time for the metals to shine (as MM is always keen to point out, he is not a gold bug, but a cycles guy), however I also stack physical metals as I believe there is a strong possibility of monetary changes that may require a transitionary asset which will allow a shift of wealth through to whatever system comes next (perhaps a monetary system in which some way is partially backed or measured with Gold).

I do however have concerns about the way in which Mike presents some of his arguments and the people that he is putting across his arguments to.

If you aren't going to watch the entire presentation then just for my sake, skip to minute 55:00. At this point MM asks the crowd "how many here know what a P/E ratio is?", in a crowd of probably 100-200 people there are barely a few (maybe 5-10) that raise their hand and the next question is "how many do not?" gets a much larger show of hands (probably at least half the audience). It's at this point that I realised that MM is not speaking to a group of seasoned investors...

At minute 5:35 into the clip MM says "My company has a mission to get as much Gold and Silver into the hands of the middle class as quickly as possible". Given the response to the P/E question and the type of event that he is presenting at (Wealth Masters International M2 Conference) it looks very much like he is talking to his targeted audience.

There is nothing wrong with the middle class buying precious metals. I would be considered middle class. However, it will be late comers in this class that will likely drive the mania phase of this bull market and get burned if they don't exit before any collapse that could come following the peak.

Whether MM would like to admit it or not he is probably speaking in front of a crowd, some of which will leave, think about buying metals, but not actively purchase them until they are in a run away move at which point they will chase the price all the way to the top.

MM talks about trying to stop people from being slaughtered because we are about to see a huge transfer of wealth, his famous quote being:
This is the greatest wealth transfer in history. Therefore it is the greatest opportunity in history.
But what he fails to point out on most occasions is that we are already well into and possibly coming near to the end of this wealth transfer.

Those getting into the precious metals ahead of the trend where those buying in 2001-2003, not those that started buying in 2009, not those that started buying in April 2011. I started buying/investing in precious metals through 2008 and while I was ahead of some, I was certainly not early to the bull market.

The investor who was ahead of the trend, who was aware of cycles and moved all their wealth from stocks or real estate into Gold back around US$250-300oz is now sitting on a huge profit. Infact speaking of which those investors (specifically in the US) may want to consider moving some of their assets back into real estate (even if simply to purchase their own home to live in) as the ratio (HOME:GOLD) is currently the lowest it's been since the 1980 peak in Gold (as reported by Zero Hedge):

Those who traded out of the Dow into Gold back in 2001 have multiplied their income by 6-7 times (where someone that stuck with the Dow over the same period is barely break even). Sure there is still the potential for them to make a lot more if we do get the much anticipated 1:1 (Dow:Gold), however it's likely that those early to the Gold trade will also make an early (smart) exit.

Most of the wealth transfer that Mike Maloney talks about has already occurred.

Time wise we are probably at least 3/4 of the way through this bull market with only a few short years left to play out (maybe even less).

Any middle class investors getting on the Gold gravy train at this point should be very wary that they are entering the trade so late. If you are getting on now thinking it's the road to riches based on a 'wealth cycle' you need to understand that we are entering the final stage of the precious metal cycle and it's going to be hard to exit when parabola truly sets in. In the final 24 months of the last Gold cycle/bubble Gold rose a factor of 5 times (from $170 to $850) with most of the gains made in the last few months leading into the January 1980 peak.

Gold has risen roughly $450 over the past 5 months (US$1400 to $1850). A move this large (in dollar terms) in such a short time is unprecedented in the bull market to date. Clearly things are heating up. I am still of the belief that we recently entered the 3rd phase of this bull market (as I originally suggested 8 months ago: Gold/Silver entering the 3rd phase of the bullmarket?) so further fireworks should be expected.

Just keep in mind when watching material like Mike Maloney's presentations that we are well into the bull market. There are still fortunes that will be made, but also potentially fortunes will be lost if you leave your exit too late.


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  1. I agree with premises of Mike Maloney's argument(I am gold and silver bull in the near term and hold physical bullion) but I really dislike the way Mike Maloney presents them.

    There is never any sense of balance. His preferred method is to use emotive language and play on his audience's emotions. He employs a lot of the methods of a con-man salesman.

    Why does he do this? Because he has commercialised his message and I can't help but feel he is being an opportunist. I have no doubt that the tickets to see his lastest show cost a packet.

  2. Agreed hungry_jono, it comes across as if he's marketing/pitching/preaching rather than a genuine attempt to share information. Emotive language galore. He is glossing over what is going to be one hell of a dangerous ride given the late stage we're at.

    That said there is a member on Silver Stackers who met him and said he was very genuine.

    I guess to appeal to the masses there is a particular way you have to present yourself...

  3. I agree BB, it's really dangerous from this point forward for anyone new coming in. Not only because the best price opportunities have gone, but also because they haven't experienced a parabolic collapse and so won't be wary.

    I believe the best opportunities from now are going to be in the miners rather than the metals themselves. And that takes some learning about.

    I gave MM's book to a lot of family and friends to read in 08/09 and encouraged them to look into it. That was the time to get in imo. I would not do so today. Anyone that asks me about it today I would say to them that they do so at their own risk.

  4. You have recently used Jim Sinclairs statementregarding $1764 gold as further proof of the 3rd and final stage of the bull market. I would like to add some points that I wouldn't mind hearing some more of your thoughts on:

    I agree with Jim a lot, and I am unsure if we can really call this gold bull market as a traditional bull market. Still playing it by ear and will have to see what the next year or so shows but I do not think this run will be ended like 1980. The real 'bubble' as I have mentioned on here before is/will be in Fiat currency, not gold. I cannot see gold crashing. I found an article where Jim Sinclair also sees this and I am inclined to agree. I will add one extra clarification, That gold will not become a bubble relative to Fiat currency. Measured in property/other assets undoubtedly it will be.

    [quote]Sinclair captivated the audience. This was his first appearance at a conference in eight years. He blasted bankers for using over-the-counter derivatives totaling more than a quadrillion dollars. He explained that this was profit for the bankers at the expense of everyone. As consumers and citizens, Sinclair said, we are defending ourselves against runaway greed.

    Sinclair also said the Federal Reserve has no choice but to create more paper money. He emphasized that you must maintain your gold hedges as "there is no solution" to the problems of the world financial system. Gold must be your central investment and it "protects you against things you cannot protect yourself against." [b]He believes that the price of gold will not fall, as it did in 1980, and that gold will be a part of a new world reserve currency.[/b]

    He said once gold breaches $1,764, the price could run significantly higher. He discouraged owning leveraged gold. He said that as hedge funds recognize value, they will move into gold mining shares.[/quote]

    With that aside, and say things get sorted and it is a normal bubble scenario for gold. Where do you see that leading for silver? In the 1980 the 2 marched step in step and both had the busts at around the same time. There are numerous commentators, Eric sprott, James turk et al, that see the next decade as silvers bull market. Is it possible that we could have a bubble and a bust in gold while still having a bull market in silver for another few years past that point? would gold be held at higher levels due to silvers performance?

    Sorry about the long post, turned out longer than I had thought.

  5. @Mike, I tried to get colleagues and friends into the metals during 2008/2009 as well. Some showed interest, but none took the plunge. I got the nickname 'Bullion Baron' from talking about the metals so much.

    @euphoria, I would not say I'm a Jim Sinclair fan. I do not think anything of his special 'price points', I was just using as an example of someone who is also now suggesting we are 3rd phase as I have been suggesting for some months.

    I do think there is the possibility that Gold is remonetized (and hence may not get the huge sell off following the peak), but that's not largely why I am positioned in this bull market.

    Unless the industrial demand for Silver continues to increase (rather than decrease as I expect it to in the coming global recession/depression) then I can't see how the Silver bull market would go for another 10 years.

  6. If last decades was gold, surely it was silver's too as the price increased percentage-wise more than gold. Silver is even riskier than Gold at this point. I think anyone just getting into silver now is almost certainly going to end up losing.

    Like BB, I can't see silver lasting the decade. In fact, come 2020 I'm expecting silver to be quite cheap again.

    1. I am not sure if you will see this but why would you consider silver to be cheaper in 2020?

  7. If you believe in what MM is saying, that gold always finds an equilibrium vis-a-vis the amount of currency in circulation, then gold still has a long way to run. Bernacke shows no sign of stpping the printing presses anytime soon.

  8. Anonymous, MM talks about $15,000 Gold as a result of revolving credit being added to normal money supply, but then goes on to talk about a debt collapse which will pay it down... so his targets may change. There are several ways to measure Gold's equilibrium compared to previous peaks, there's no guarantee it will match every one of previous bull markets.

    I agree Gold will be much higher prices, maybe $3000-5000+, but it could happen very quickly (e.g. all over in 12-24 months) if the last bull market is anything to go by.

  9. I think what is difference here is the extent of quantitative easing that is occurring in the US economy today and the past few years. As Mike points out, it was unprecedented in the M1 money supply. In response to this shock to the system, the mania in gold/silver will be so dramatic, we will see gold and silver at prices unseen before.

    Further to that, as Mike states, the number of investors that will participate in the gold rally is far greater than what was witnessed in the 1980s.

    I am guessing $10,000 gold is more of a certainty and I don't think it is too late for ordinary investors to look at buying in.