09 December 2012

The circus moves on

I forgot to post that TF Metals Report responded to my response to Andrew Maguire's article on price suppression mechanics.

Gene Arensberg did a post on my November 30 article. I watched it for a few days but no one commented so I stopped checking it. A day later on the 5th blogger Dave In Denver posted some comments, which I missed.

TF picked up on these comments a day later, turning them into a post titled Cage Match: Bron vs. Denver Dave. Dave's main beef seemed to be that I didn't critique GLD and was thus an apologist for the ETFs. He completely missed the point of my response, which was solely about addressing the suppression mechanics.

You can find my response to Dave here. One important extract is some core views I have:

  • I do not recommend ETFs for anything but short-term trading.
  • If you don’t hold it in your hands, you have counterparty exposure - period.
  • Allocated with bar numbers in a non-bank vault does not have some magical force-field that stops it from being stolen. You are trusting your custodian.
  • If you hold it in your hands, you have theft exposure. All precious metal investment has risks, only you can decide what risks you are comfortable with.
  • Don’t let anyone tell you that you are an idiot for storing it yourself or for storing with a custodian.
  • If you don’t understand a prospectus/agreement, stack physical.
  • If you don’t understand a company’s business model (which includes the Perth Mint’s “use in our business” unallocated), stack physical.

The third last one is one that annoys me whenever I see it - this judgemental attitude that you must hold your metal without any consideration that what is right for you may not be right for someone else.

Interestingly, at the TF blog no one was interested in my response and it didn't gather any further debate. As I commented at TF:

I wasn't expecting much comment one way or the other. TF posts so frequently that the circus moves on and unless you can comment within the day of the post it is too late, which is difficult for me being 12 hours behind.

I do not like getting into this sort of infighting but as everything lives on forever on the internet and if you don't reply the claims stand and become accepted as fact. This whole negative dynamic is not good as I agree with Gene Arensberg's comment (where Dave's comments originally appeared) "In fact they succeed only in one respect - of confusing and turning some people off to the entire sub-sector. It is a pity they do not realize that one cannot poison just part of a well."

My response will also be a handy reference link to give next time I'm accused of being a bankster shill.

I suppose it reflects the fact that the TF Metals Report has a client base who are just buy and hold type stackers. They have made their decision and thus most of them aren't interested in debating or learning, they are primarily there for entertainment. TF's use of "army" imagery and the "cage match" characterisation are indicative of that.

Nothing wrong with that, except that I don't know how they are going to know how to assess when to sell their metal, which is something they will have to work out for themselves because it is doubtful TF or Maguire (or many people selling gold products) will do it as it doesn't help your business model to tell your clients to leave. However, if they haven't spent the bull market thinking critically and trying to understand the market's dynamics, it is likely they will get the exit all wrong.

The true test of who the charlatans are in this business will be those who continue to say buy buy buy all the way through the bubble top as they try and squeeze every last bit of profit out of their clients before they close up shop and move on to the next story.


  1. Hi Bron
    Many people in the World suffer from fixation blindness. They inhabit blogs and you can always spot them because they are completely inflexible. They get confirmation from their group and are fearful of anyone that seeks to offer an alternative view. Age and experience are great companions. They know only too well how many of my past "certainties" have turned to dust. Flexibility and adaptability are two of the best arrows to have in your quiver.
    The Silver blogosphere harbours some of the most "fixated" of characters. I often wonder how many of them will suffer a personal confidence crises when they suddenly find they need to sell their monster boxes of Silver coins and they are standing in line with their hand-carts ladenned-down waiting for their turn at the coin dealers counter.

  2. Agree, and I said so.


  3. The little guy obviously does not have a big picture view of the PM market, but then again who does? These markets aren't exactly transparent and to say that fraud or at least collusion is not present would seem naive to me.
    There has been lot's of discussions on exit plans. If you haven't followed these types of public site/blogs for several years you might not be aware of it. Most don't think we are near a top, so finalization of their exit plans are not being discussed. To bring it up now makes them believe that the person making the comment is just another troll. Of which they have seem dozens.

  4. good points all. I'm a "bank safe deposit box" person myself.

  5. Hi Bron,

    I've just spent the better part of four evenings reading over your blog.

    Thanks for your reasoned and reasonable hype-less commentary.

    The quality of your contributions, and audience (based on their comments) should be a source of tremendous pride.

  6. Hi Bron
    I asked FOFOA a question recently and he kindly took the time to answer. Unfortunately his answer left me still puzzled.

    I tried a follow up but I was unable to post it for some reason or other so here is what I said.

    Dear FOFOA, I have read your suggested articles but confess that I must be as thick as two short planks because I still cannot see what the mechanism is that will be different during the "transition" that is not in operation here and now to steal my "Gold"

    You say:-
    And it is during the punctuation phase or "transition" that I believe we will have a brief period of "peak risk". What risk, you ask? Well, it is the risk that your expected transition gain will be taken (or simply kept) by someone else, and you'll be cashed out at the official, legal price of gold; a price at which no physical can be found at that time."

    I say:-
    I think I can understand why you don't want to discuss the matter at this time.
    As a person who has just gone through the process of opening an Depository account with Perth Mint I am more than curious as to how they might default on their guarantees during the "transition".
    Maybe Bron or one of the FOFOA intelligent regulars can help me see the light. Living in a Socialist country, as I do, is not the best place to have any wealth, no matter how little or how well buried.

    So Bron you see my dilemma. Obviously FOFOA is someone you take notice of and what he says. He obviously doesn't suggest Perth Mint would opperate in this way but I still would like to know how you think the "transitional" phase might be a risk.

  7. Anon - thanks.


    See http://fofoa.blogspot.com/2011/01/who-is-draining-gld.html?showComment=1296531692649#c2684394317993477532 for what FOFOA said:

    "For the shrimps this means buying physical into your possession. For the Giants it means an Allocated account."

    I personally don't think we will get a "transition" to a $50,000 price so the temptation FOFOA speaks of won't be there.

    How much you have and how safe you feel holding it yourself vs how safe you feel storing with someone else is a decision only you can make. It is also not static and your assessment of the risks may change over time. This is why I wrote this many years ago, well before FOFOA did his blog:


    1. While the world environment is benign, they hold unallocated. They do not incur ongoing storage costs and fabrication charges.

    2. When the environment becomes uncertain and risky, they convert to allocated.

    3. When the world is at a crisis point, they take delivery of their physical metal.

    You have to continually monitor the environment to make the decisions above.

    Consider that those who read Another's words in the late 90s and went with personal storage took risk and cost when they could have held unallocated with the Perth Mint at zero risk and zero cost for around 14 years.

  8. Hi Bron

    Thanks for replying.

    I'm still going with "unallocated" as it makes the most sense.

    For the "little" guys like me it's either unallocated or holding physical in hand or maybe both.

  9. Bron wrote:

    I"I personally don't think we will get a "transition" to a $50,000 price ... ".

    Care to expand on the reasoning behind your view?

    Perhaps you could tribute to FOFOA's "Arguments Against Freegold".

  10. Lord Sidcup,

    I think it is a bit rich for FOFOA to ask people to provide an argument against Freegold

    "by presenting a competing premise through principles, expressed in precisely defined, non-contradictory concepts that are grounded in reality, which lead to inevitable conclusions that necessarily exclude those of Freegold even when viewed from a variety of perspectives"

    in the restricted size of a comments section when he cannot do the same and provide a concise exposition of Freegold.

    FOFOA's blog is a sort of work in progress and exploration of the Freegold idea, which is fine. However I and many other do not have 1000 hours like Motley Fool does to read (wade?) through it all and work out the essence of his thoughts and discard the dead ends he went down (which he may have subsequently rejected or moved on from) and duplicated/repeated arguments.

    If FOFOA seriously wants people to spend the time to properly critique his work, then he has to show some respect, so to speak, and spend the time to write up his 384 posts and other comments into a "paper". This gives a fixed target for one to critique in a systematic fashion.

    Just as I can point to a 140+ page paper by Selgin on the idea of Free Banking we need a paper which systematically explains Freegold foundation principles, then combines them together in a string of logical argument.

    Without such a "my idea of Freegold as it stands now" paper, it will never get any serious attention by other thinkers or lay readers and thus never gain widespread dissemination.

  11. PS - I suspect FOFOA will say he's not interested in doing that, which is fine, and that is what blogging is, just free form type of writing, not a structured theoretical paper.

    My comments are probably more directed at those with an evengelical bent about Freegold and "getting it out there". If so then they need to do the work and "write up" Freegold.

    At the momenent the "trail" that the USAGold Archives & FOFOA's blog consitute are a hiking trail through wilderness. As a result only the intectually fit can be bothered hiking it. And just as the percentage of the population who like hiking up a mountain is small, so will be the number following the "trail".

    If people want to help others get on the "trail" and reach the destination (of understanding), then what is needed is for someone to come through with earthmoving machines and plow a nice straight road and lay some concrete down.

  12. PS#2 - so, answering your question, my thoughts on Freegold are not structured enough and are more a mixed set of ideas from many sources on the nature of money, debt and gold which give me a gut feel.

    Accordingly, I don't think it is helpful to put them down as it just means the reader has to work hard to get what I'm on about, and I may change my views as it is thought through.

    Having a Freegold "paper" would help in organising my ideas, hence the comments above.

  13. Hi Bron,

    What about FOFOA's July 2012 interview?

    It was published in a (non-peer reviewed) magazine, it'd short and to the point.


    I like the trail approach to the discussion, but different strokes I guess.

    I remember you did write up a post on freegold around a similar time, I'll search it out.

  14. Hi Bron

    Thanks for your comments.
    I appreciate your perspective on gold - especially as it is hardwon through experience.