It is also prudent to consider other reasons why Sprott may be making such a statement. You could say that now Sprott is fully invested in gold, he is talking up his book. He is still a salesman trying to sell his product (i.e. his fund) ... and for him to make his living requires others pushing the price of his product up (either directly via his fund, or indirectly via buying gold and gold shares) !!! However, I do agree with him about the wonky fraudulent financial system, which could be summarised as ... DO NOT TRUST POLITICIANS AND BANKERS !!!
I agree...don't trust Sprott, trust yourself. That guy is a businessman just like any other. The thing about permabulls is that after a month of listening to what they have to say, you've heard it all. It's like a broken record over and over - "fiat is a ponzi", we get it already. In a day when gold goes up while stocks go down, they are the first to shout "the decoupling has started!" Peter Schiff has been predicting imminent hyperinflation since 2008. Just bear in mind that almost every single one of these bulls didn't see the gold and silver smackdown of late 2011. In other words, not one of the permabulls got it right. So really, while we agree that hard assets are better than the paper, why should we give these people any more credibility than that, given their track record?
I agree. However I will admit, I am grateful they keep harping on like a broken record ... because although we may have "got it", the majority haven't. And everytime Sprott or Schiff or others do talk, someone new does get it ... and we get closer to a critical mass of concerned citizens where change for the better may be possible.
OK - I am not trolling, but just enquiring from an alternative perspective - and I, of course, expect a right flaming. But I am curious. Wikipedia: A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation. The Ponzi scheme usually entices new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent. Perpetuation of the high returns requires an ever-increasing flow of money from new investors to keep the scheme going. Now, given the above definition, it looks to me like having to 'convince' the population or critical mass of the very philosophy you are pushing in order to make investment returns from subsequent investors fits the description of a Ponzi? In the case of silver and PM's this seems very much the case. Given that the current stackers have entered early into this scheme, it is the money poured in from the later 'convinced' critical mass that will create returns for those stackers, and not money flowing from earned profits of an operation. It is also those later investors that may well be left high and dry should this create a PM's bubble. How is this not a ponzi in itself? Just asking.
I agree completely. Bubbles are ponzi schemes by definition. Government's love bubbles because they produce, in the short-term, economic prosperity. They are also one of the best ways for an individual to make a lot of money in a short period of time, which is why most, if not all of us are here, whether we admit it or not. I will rail against govt ponzis all day long, but as long as hardly anyone listens and they continue then I am going to use my knowledge to make some money for myself and I daresay that is how everyone else, if they are being honest, looks at it.
... hey, no flaming from me. I agree with what you are implying. To me the issue is that our current financial system is a fraudulent ponzi scheme. If you deposit $100 into a bank, the bank can then create $900 of new money out of nowhere to lend out to someone else (i.e. the bank hasn't had to work for that $900 itself like you or me, it has just created it out via the tap of a keyboard). For the fiat system to continue, credit growth must be maintained. However, mathematically it is an exponential equation, and when credit growth slows or ceases (like it is currently doing), the system starts breaking down, and can then very rapidly implode (e.g. the GFC). This is how all ponzi schemes eventually end (as the exponential growth required to maintain it cannot be continued). In our situation, you consequently get govts hocking their citizens into debt and austerity to bailout the banks, and central banks printing money to keep the game going for another day. A sound money system puts a leash on the govt and bankers, thereby providing some protection to the citizens from the rabid ruling elite. I currently stack to try and protect myself from what I see as the end result of this monetary fiasco, which appears to be rapidly getting out of control. However I hope that gold doesn't go to $10,000, because that will mean the wheels have fallen off the economy, and life will have become a lot more difficult and tough ... and I quite enjoy my life as it is at present. PM's in a bubble will be caused by a currency/economic crisis due to the fiat money system failing, as people scramble to protect themselves in hard assets. However, the prices of all things will still move up and down based on supply and demand. Take grains at the moment ... they have leapt in price due to a drought in the USA. This is just a normal market signal that occurs even with a sound monetary system. Next year more farmers will plant grain, and the rains will come, and prices will come back down. However the fact that bread has steadily increased over the years is due to the inflation of fiat money, which is an inherently insidious tax on the general population. However most of us are brainwashed by the MSM to think we have instead become richer ... does that make the Zimbabweans the richest people on the planet walking around with trillion dollar notes in their pockets ... I think not !!
Precious metals are a ponzi scheme, absolutely. I'm waiting for the bubble to expand and then I am jumping out. I think the problem with many stackers on this board is that they somehow think that PMs are not a ponzi/bubble. The mistake they make is on ideological grounds - enamoured with the idea of a free market and "honest money", they somehow think gold and silver have an intrinsic value. And then there are the doomsday preppers - don't get me started on that lot. Sustainable farming is fine. Building a bunker? Well... They get emotional and think gold will be part of the cure that will solve the ills of the world. PMs have become more than just a speculative asset or hedge to these people. But the truth is we could be trading sea shells or cow pats and the dynamics would be the same - bubble expands and the latecomers get fleeced. These people will hold on too long and will ride the crash downwards because they couldn't bring themselves to let it go when the time was right to divest.
A few points here. 1 - If you put yourself in the spotlight, people will gauge your 'credibility' on statements you make - statements of specific numbers, times and dates in markets and environments upon which are artificially controlled, have a vested interest in defying common logic and are set up to maintain an irrational status quo. 2 - Based on point 1, markets can and will stay irrational a lot longer than people predict. Peter has been right a hell of a lot of the time, but the moment he doesn't nail specific dates and times, people automatically assume he's a fraud. 3 - Because these people who make said predictions also place their money where their mouth is on the issue, there's an automatic assumption that the information is also bias and rigged to turn a profit. In all things, you have to think for yourself and make your own choices on who you deem credible and who you think are just trying to push another market angle to enrich themselves. Hell, we see that all day, every damn day in the media, abroad and even here on SS. That said, you can either take the rational approach of dealing with people based upon reasonable judgement or accept that everyone is out to rip everyone else off and trust no one. That's the nature of propaganda. Not just to perpetuate the status quo of the irrational market, but to also sow a perpetual seed of doubt among the counter arguement as well. Peter Schiff has been undermined again and again in the MSM, to the point where even similarly minded stackers openly question his credibility - but the fact is, this foundation stems from denouncing someone based on the points above and not being able to predict a 100% accurate event in an irrational market. If you look at Peter in the past though, I think his track record does speak for itself ie [youtube]http://www.youtube.com/watch?v=s_z5dZbgTDM[/youtube] [youtube]http://www.youtube.com/watch?v=fpIL2sWY6CY[/youtube] Is Peter out there to make money for himself? Of course he is, why would anyone assume that personal credibility only be tied to a prediction if the person making said prediction had no vested interest in the outcome? It doesn't mean he's wrong. He's simply making logical, rational, educated guesses in an irrational, hopelessly corrupt and rigged market place. At the end of the day, you make the choice within yourself on who's opinion you trust and believe. If the perma-bull/bear rhetoric bores you because you've heard it a million times before, then you can switch off your youtube and get on with life. I can almost certainly guarantee you that no matter how many times this is stated, the majority out there will never hear it and even if they do, very few will believe it and even few again will actually act upon it. I cannot begin to tell you how much shit I've copped on SS and other forums over the last decade and more warning about debt fuelled largess and have been labelled so many times I lose count. The 'fiscal pygmy' on SS as the latest craze is just one of a plethora I've heard over the years. I've given up (for the most part) trying to warn anyone of anything anymore because there's no point. The people who already get it are bored with hearing the same thing over and over, the rest want to take a dump on you any chance they can get. Whatever. But I personally value the input of Peter Schiff as he's a rational, objective realist and a voice of reason in a world gone completely insane. He tried to change the hearts and minds of others allowing himself to be ridiculed and laughed at time and again in the public eye and even tried to run for office to change things. The massive crap people take on him here and now is proof definitive of my point. I respect Peter and I value what he has to say. Sure he has a vested interest in the outcome, but that doesn't devalue the points he's trying to make.
PMs only fit a ponzi scheme if they offer returns - which they do not. Anyone can speculate on capital gains on any asset, does that make all assets a ponzi scheme? Brickinthewall is right - fiat currencies are the ponzi. PMs are just a function of the devaluation of fiat value. Of course it depends on why you stack PMs, for nominal gains or for wealth preservation. Stacking for nominal gains is speculation, which requires increased demand for gains to be realised. Attempting to increase demand by talking up a market is ponzi-like. Stacking for wealth preservation is not ponzi like at all. We often hear stories about the value of PMs over the decades being fairly consistent. That is definitely not a ponzi as it does not require increasing numbers of new entrants to the market in order to work - unlike the falsified demand model for the speculators. So it depends on perspective. A speculator who missed the nominal bubble top in gold in 1980 would be livid, but someone holding longterm for wealth preservation might not worry (although they'd probably wonder about arbitrage opportunities lost). So I think you can have a speculative bubble sitting atop a solid growth pattern that is based on strong fundamentals. It's up to the holder of the PMs to decide which is important to them. IMO
When a Ponzi scheme collapses "investors" may be left with absolutely nothing for buying into something of no intrinsic worth, whereas the market values of precious metals and commodities fluctuate in response to other economic factors, they have an intrinsic value and never go to zero. Sprott may be talking his book, just like any biased commentator focused on his investments, but he is not running a Ponzi scheme as far as I know. Every sales person on the planet tries to convince other parties of the benefits of what they are selling; they may receive get a benefit from that but it doesn't necessarily make them a fraudster. In fact, they may well be providing a valuable service. Bubbles are transient market aberrations and suppose a reversion to the pervious state of things prior to the value increase. Precious Metals may go into a bubble or mania, but I'm not convinced that the current fraudulent financial system will survive it.
^ good post Gino. That's also what I was getting at in my last sentence - a bubble can form, which is perhaps speculative, but the underlying mean may be solid, and still based on fundamentals. That it's the wealth preservation function, whereas the bubble is the speculative component.
I don't think anyone was implying Sprott was running a Ponzi scheme ... just that he was talking his book, and hence to use your own critical judgement on any decisions you make. The reference to the ponzi scheme was always about the fiat money system. I have a lot of respect for Sprott and Schiff and others for educating and explaining to the public over the years about what is going on behind the scenes in financial cycles. Schiff in particular has been very correct on many things, and has explained very well the intricacies and mechanisms of why he thinks certain things will occur. As for timing, well I'm not sure what time I'll have dinner tonight ... so I can't hold that against him.
