NEW YORK -- They came for fire and brimstone. They got it. They are gold bugs; a 3,000 strong congregation that descended on the Marriot Marquis in Manhattan for the fifteenth annual New York Institutional Gold Conference. Gold's high priests did not disappoint. These money shows are expected to deliver strong harmonies, but this one offered unusual doctrinal purity with this refrain – we're experiencing a secular bull market for gold and a secular bear market for, well, pretty much everything else. Indeed, the secularism required for this religion is so extraordinary that last year's conference was cancelled for lack of interest; that was when gold was only just beginning its ascent and before Alan Greenspan became the devil incarnate.
As if to reinforce the metal's revivalist power, conference coreligionists could marvel at Danté's Inferno raging on the electronic ticker tapes (Dow -114; Nasd -36; S&P5c -12; 10-yr -.095) threading above Times' Square. The photons pulsing billions of vanishing dollars were, however, lost on today's Broadway exhibitionist; very much the heathen secularist – a guitar mauling, Stetson capped crooner with "Naked Cowboy" scrawled across his rear end.
Jim Sinclair, on the other hand, remained fully clothed and guitar free at all times. Latterly chairman of Tan Range Exploration [TNX], but more famous as "Mr Gold" for his four decades of experience with the metal, Sinclair packed the pews and the aisles.
He is literally the Billy Graham of this business, which has more than its share of Al Sharptons and Jesse Jacksons. He had an unadulterated message of portfolio salvation that doesn't require intercession. It's between you and the gold price.
He and Monaco based newsletter publisher Harry Schultz have essentially repackaged the marriage vows – love gold, but don't die with it. They warn that you can have every fundamental in place, but without the right technical props gold is little more than a Roman candle waiting for a match – blindingly bright for a short time before flaming out never to be reused.
Gold's flame out could follow a spectacular lift-off ignited by the confluence of 5 factors. Sinclair sees the dollar going into freefall and precipitating the revival of the "Gold Cover Clause", originally mothballed by Nixon. The cover clause basically stipulates a percentage of gold backing the dollar and is seen as the only hope to prevent an outright dollar implosion with catastrophic economic, political and social consequences.
"If gold goes over $529 without the gold cover clause [being invoked], then sell because it will get below $200 an ounce!" boomed Sinclair. And with that he left the stage to the most rapturous applause of the day.
A rather more sober message than the unalloyed exuberance of the thousands-of-dollars-an-ounce crowd.
What the meek stand to inherit
James Grant of Grant's Interest Rate Observer also attracted a large following. Grant, soft spoken and a master of that American peccadillo, the euphemism (collateral damage, stature deprived, IQ challenged…), made a good G.K. Chesterton or C.S. Lewis. The cerebral style is no less effective at winning converts.
A battle between inflation and deflation rages behind Grant's Narnian spreadsheets. Both evil, to be sure, but the former is vastly more favourable to gold which emerges as a one-dimensional Aslan. Taking his cue from history, Grant said deflation was only likely when "credit creation was stymied." He doesn't see that at all, just an "overinvestment of faith in the dollar, yen and euro" that will be rewarded by "a concerted effort to depreciate currencies through rampant credit creation." Heretics have been burned for less, but Grant seems indifferent to immolation: "When it's over, the Fed will look like the Bank of Japan."
He was especially uncomplimentary of Maestro, aka Greenspan – "a self-exculpating revisionist"; "he's been found out as a federal employee, not a miracle worker"; "he sounded more like a stock broker" (now that is a sin) and "the public sector's Jack Welch" were just some of the reproofs.
Indeed, Maestro is being single-handedly fingered for the tech stock cult, now in its death throes, but which spawned such excess that the funeral pyre of malinvestment will burn long and hot. Judgement is at hand in the form a potential 30% fall in the Dow back to "fair value", thinks Grant.
Grant didn't put any store in the gold conspiracy, simply because the metal is more powerful than any government and any monetary authority; witness the failed London Gold Pool of the 1960s. "All monetary systems come and go; this one doesn't even have a name… One day Alan Greenspan will fix the wrong Federal Funds rate... the world's faith in managed currencies is just amazing."
Get the message
David Tice, of Prudent Bear Fund fame, had an identical message to Grant, but he used some flashy props to drive the points home.
Again, it is all about excessive credit and Greenspan's folly. "You cannot burst the biggest bubble in history with mild results… what-the-hell debt is financing the spending."
Tice warns that unbelievers will be happily seduced by bear market rallies, but the faithful remnant will be holding gold, knowing this is the famed secular bear market; a rapture of sorts for gold bugs. "The magnitude of the bust will be proportional to the excess of the boom," Tice thundered to an enthralled audience, reminding them of the decadence (he actually said, in Grantesque fashion, "sociological defects") of corrupt CEOs and scummy bankers.
"The Fed has no bullets left," he said, rolling out a series of charts with peaks soaring higher than hedonistic 1929 and leaving you with no doubt that the valley that awaits will need more than one Psalm. And with that, many think the devil has been unmasked. And the fellow appears to be a vertically challenged, age enhanced Objectivist.
A cautionary tale
An angel appears to John and tells him that he has 10 minutes to get his life in order because he's about to die. "Okay, I've got 2 suitcases full of Krugerrands in the basement, let me collect them and we can go," John says, unfazed.
"No. I can't allow that," says the angel.
"Please, I worked my whole life for them. I can't leave them now."
"Alright, but I'm not carrying anything."
Accompanied by the angel, John arrives at the pearly gates, overburdened suitcases in hand. St Peter comes out to greet him, but steps short at the sight of the suitcases. "You don't need an overnight bag where you're going," he chortles.
"No, no," fusses John, "look here." With that he snaps open the case, proudly revealing towers of mint Krugers.
"Pavement! You brought pavement to Heaven?" St Peter asks incredulously.
