The smart do not short, they sell to take profits.

Why Goldbugs Get Crushed

Posted Mar 3, 2020 by Martin Armstrong

QUESTION: This is what infuriates those that like gold. All of the shorting. Why? No other sector looks like this. So how is it that gold miners are restricted but no other sector sees shorting to the extent that restrictions are in place??? Gold is $1600 and these stocks traded double this price in 2008 with gold at $800. You ask why “goldbugs” are so angry, this is your answer.

S

ANSWER: For decades, I have watched “The Club” rally the metals and then crash them because the goldbugs treat it as a religion rather than a market. Every rally is touted as, here we go, the world will crash and only gold will survive. The Club uses that sentiment against them all the time for they know it is easy money. When they step back and look at the metals as markets, then they will win. Many other markets have made long-term profits but they are always demonized by the goldbugs. Why? I believe that some of the people promoting gold are the very ones involved in selling it to them. Everything has a cycle. It goes up and goes down. These chants from the goldbugs are not realistic and they cost countless people their life savings as they get sucked in by people who act like used car salesmen.

Short sale restriction is a rule that came out in 2010 and it’s also referred to as the alternate uptick rule, which means that you can only short a stock on an uptick. You will note that there is no such thing as a long buy restriction where you can’t buy a stock as it’s going up.

Inevitably, the goldbugs blame shorts. That is NEVER the case in any crash. The real cause is that you have exhausted the buying. When you run out of buyers, that is when markets become vulnerable. The smart do not short, they sell to take profits. That starts the decline and the hated short-player is blamed but never found.

The short selling rule came in only because of shorting Lehman Brothers. When the shorts turned on Goldman Sachs, they pulled the strings. But those were shorts looking at reality, not speculative. There has NEVER been a discovered mythical short position that causes the entire market to collapse.

I have stated countless times that gold will rally ONLY when the general public perceives there is a crisis with the government. Forget deficits, quantitative easing, and fiat currency. They will never convince the average person to take gold seriously. When you begin to look at the market without emotions and trade them up and down, then you will see the light.

Creating Market Depth: The First Step in Creating an Economy

Posted on April 27, 2015 by Martin Armstrong

Exchange at Amsterdam

Some people have difficulty rationalizing selling something they do not yet have. Of course, nobody complains when they buy contracts in the future’s market, but have no intent of actually taking delivery. This entire line of thinking has been so distorted, particularly by those who claim “paper gold” has suppressed the price of physical gold. Those same “paper gold” contracts are also what pushed the price up in 1980 and into 2011. Nobody complains about buyers. The first step in understanding anything is to be objective, not slanted to one side.

The futures exchange is what provides DEPTH to any market, and makes even the production of the commodity or farming secure KNOWING that they can sell the item into the free market. Aristotle called brokers, “Men who made money from money.” True, they changed the villa economy into a market economy. They approached farms and told them to produce more than they needed for themselves to sell it overseas. They transformed Athens into the financial capital of the western world.

There has to be a common market – a place where things are exchanged. This extended into ancient times and provided the first step in creating a civilization – people coming together for a common cause. It has been this narrow thinking process that lead to authoritarianism, if not communism. We see the same craziness erupt in the stock markets. Governments have often outlawed short selling and the market has fallen even more. Why? It is the short player who has the courage to buy during a panic, for he is taking a profit.

Understanding the vital necessity of allowing two sides to a market is critical. For if we do not understand that aspect, then we will always seek to blame others because we do not understand the existence of the business cycle. Shorts were not dominant in Japan, nor in the U.S. share market collapse during the crash from 1929. Without a two-sided market, producers cannot raise capital to fund their operation be it cultivation or mining. Buyers need liquidity. They need to have confidence that if they buy something, they can raise money when they need it if necessary. With a functioning market, then and only then will there be buyers and sellers in a sufficient quantity to facilitate planting or mining. Without a deep market, it is risky to produce anything if there is no common place to trade. Only those who buy and lose will naturally blame shorts. There are many other factors that come into play.

It was the first exchange place in Amsterdam that enabled Europe to expand its economy. Insurance was developed and many traveled to Amsterdam to buy insurance for a voyage that then facilitated international trade. There must be a central place to trade; without that, there will be no market economy and the Dark Age will prevail.

We absolutely NEED shorts to bring depth to the marketplace. It is only with that depth that production will be stimulated. If you cannot freely sell something, then you cannot have an economy emerging from a civilization, which is the collective capacity of everyone coming together in a common bond.