The Outliers

173
Mon, Feb 24, 2014 - 8:31am

In any naturally occurring population there is some degree of variation between individuals within that group. When the variation is genetic, then the subtle differences between individuals can sometimes equip a few of them to survive better than others- for example, a small number of moths born with slightly more pigmentation of a color which makes them harder to spot by predators. If that difference has enough of an effect on their inclusive fitness to allow them to pass on their genes differentially, then that trait will be slightly more common in the next generation. If this happens for a long enough period of time, the entire nature of the population will change. This is what is familiarly known as natural selection.

This dynamic is not confined only to genetic inheritance, and in some cases can apply to variations in behavior as well. Within any large group of individuals there will be a wide range of differences in behaviors, values, goals, comportment, strategies, etc. Find something that people do, and if you study it closely enough you will quickly realize that there is great variety in how different individuals choose to go about doing that thing. Some may even choose not to “do that thing” at all! What is interesting is that, through the exceptional power of our brains, human beings do not have to wait for thousands of years for these differences to slowly work their way through the genetics of the population- if they can observe that behavior X is beneficial to those who have adopted it, they can also choose to adopt it, often with great rapidity. When large numbers of people suddenly start doing something that only a few had done previously, this is called a preference cascade.

A preference cascade is a uniquely human phenomenon. It happens, in part, because we are NOT purely rational actors, always weighing costs/benefits and choosing based on this analysis. Instead, we are intensely social creatures and tend to be influenced to a great degree by what others around us are doing. In normal times people look around, observe how most others are behaving, and copy that behavior themselves. This usually works fairly well as an adaptive strategy because the totality of individuals can usually be assumed to be doing just fine, so if we do what they do, we assume we will be just fine too. Additionally, activities that are perceived to be outside the mainstream often carry a degree of social or cultural stigma, thus imposing some costs on the people who adopt them – there are significant negatives to being perceived as the “weirdo” because you are behaving differently or deviating from the accepted. So most people just do the “usual” thing and don’t think much about it… right up until they observe their peers suddenly doing something differently. Then they quickly perceive not only that it is “OK” to do that thing but they also will not be acting alone if they do it, and a preference cascade ensues.

University of Tennessee Professor Glenn Reynolds has written about the phenomenon of the preference cascade over the years, and in this article he gives two interesting examples of it in action. Reynolds writes:

(Prior to 911), the people who didn't have flags on their cars weren't necessarily unpatriotic - but displaying a flag on one's car was associated with particular political and social categories that aren't especially popular on campuses. After 9/11,enough people started flying flags to make other people feel safe about doing it too. Now you can see a lot of flags on the cars in that garage. Have people become more patriotic? Maybe. But more likely they've just become more willing to show it. This illustrates, in a mild way, the reason why totalitarian regimes collapse so suddenly. Such regimes have little legitimacy, but they spend a lot of effort making sure that citizens don't realize the extent to which their fellow-citizens dislike the regime. If the secret police and the censors are doing their job, 99% of the populace can hate the regime and be ready to revolt against it - but no revolt will occur because no one realizes that everyone else feels the same way. This works until something breaks the spell, and the discontented realize that their feelings are widely shared, at which point the collapse of the regime may seem very sudden to outside observers - or even to the citizens themselves. Claims after the fact that many people who seemed like loyal apparatchiks really loathed the regime are often self-serving, of course. But they're also often true: Even if one loathes the regime, few people have the force of will to stage one-man revolutions, and when preferences are sufficiently falsified, each dissident may feel that he or she is the only one, or at least part of a minority too small to make any difference.

Understanding the dynamics behind the preference cascade is particularly important for gold and silver. If we think about the behavior that we call investing, we can quickly discern that at present, people who place a portion of their savings into physical gold and silver are “Outliers” in terms of investing behavior among the general public. The vast majority of people who invest do so in equities (through 401k’s, trading accounts, mutual funds, etc), and many own bonds or own funds that invest in bonds, as well. The idea of investing your saved wealth in physical gold and silver outside the system is still a practice that is comparatively rare. This makes all of us at TFMR unusual exceptions to the norm… we are the odd outliers within the larger population of investors.

So far so good… but I think a key insight comes from understanding WHY there are a comparatively small number of gold and silver investors, and more precisely why such an outstanding, traditional investment vehicle is now considered so outside the mainstream. When one considers how precious metals are portrayed and discussed, however, it makes perfect sense, particularly when one thinks about who, precisely, controls that mainstream narrative. You can tell what a power structure fears most by observing the energy and resources they deploy against that thing, and the ‘thing’ the fiat currency regime fears most intensely is a preference cascade to real money.

Consider the vast array of resources deployed today against gold and silver investing. First, we see a regular drumbeat of negative articles, the full weight of the mainstream financial media and legions of writers on financial websites brought to bear to convince people NOT to buy gold and silver. We see variations of the same hackneyed articles year in and year out, regardless of the state of the markets or the price. These constant attempts at shaping opinion and sentiment employ misleading arguments, ignore contrary evidence, and use every rhetorical trick in the book to convince people that gold and silver are “risky” and “speculative” (Anatomy of an MSM Hit Piece on Gold), when the reality is that they the most historically stable stores of value known to man. We also see mainstream brokerage houses issuing sell recommendations year after year, for assets which ironically they never told their clients to buy in the first place (It’s Never a Good Time to Buy Gold). All of these operate within a conventional milieu of financial advisors emphasizing “traditional investments” (i.e. fiat based, fiat supporting) while going out of their way to dismiss gold and silver – think Berkshire Hathaway’s Charlie Munger claiming “Civilized people don’t invest in gold” for a fairly standard example. If you think about the totality of the effort used to try and manage the public perception of gold and silver, you start to get a sense of just how intensely these things are feared by the Fed/Finance/Political regime.

But wait, there’s more! Consider, too, the extraordinary energy and enormous wealth deployed against the price of gold and silver over time. Look at the long history of price suppression, from the known and historically established facts of the London Gold Pool (link) to the extraordinary actions of the last five years (The Golden Ostrich, Chris Powell speech on price suppression). I think people in the general public would be shocked at the sheer amount of effort, the degree of secrecy employed, and the vast amount of wealth expended towards suppressing PM prices over time. This, above virtually everything else, makes it crystal clear what an enormous threat that a large-scale adoption of gold and silver by the investing public would be to the current power structure.

Reality, and particularly mathematical reality, has a way of asserting itself. Inevitably, the truth of the real nature of the present system will become apparent to everyday investors. At some point the broader public will look around and grasp that the current system has been siphoning their productivity and labor for generations, and has been doing so well beyond the publicly acknowledged and democratically chosen practice of taxation. They will realize that the “value” of everything they have earned or saved has been remorselessly diminished by the hidden confiscation tax of currency devaluation over time. They will see that as the politicians spend the produce of their labor without limit and the enabling Fed prints to pay those bills, their paychecks buy less and less and the value of their pensions shrink. With every dollar printed and every TBTF bank bailed-out, in every investment they own they are slowly being bled dry. At some point people will wake up and understand that although they are following the rules (and following the herd when it comes to investing advice) they are swimming against the tide, and the tide is winning.

And when this becomes plain to them, people will look around and see that there is a small group of investors who have managed to protect their saved value through physical gold and silver in their possession, and that this has insulated them, over the long term, from wealth confiscation via inflation. And I firmly believe that when this happens, and when the obvious benefits of the behavior of these investing “outliers” becomes crystal clear to the broader population, we will see a preference cascade to end all preference cascades into the metals. That, I think, will really be something to behold.

Then and only then, when the awareness of these things has become so widespread that my idiot neighbor is talking about ASE’s and everyone and their brother is trying to buy gold and silver, will I start thinking about selling some of mine. I hope to do so at a healthy, and possibly ridiculous, profit.

Until that day comes, protect yourself and your wealth in the present. Keep stacking.

About the Author

  173 Comments

ag1969
Feb 26, 2014 - 7:00am

Nick

That sales tax chart is wrong. I live in NH and there is no sales tax in NH on anything, let alone coins.

erewenguy
Feb 26, 2014 - 7:33am

There are no problems that a little printing can't solve

So is the taper still on? I can't keep up anymore

G20 vows to add $2 trillion to world economy to lift growth

AFP | Updated On: February 23, 2014 19:20

The world's biggest economies vowed Sunday to boost global growth by more than $2 trillion over five years, shifting their focus away from austerity as a fragile recovery takes hold.

...

US Treasury Secretary Jack Lew stressed at a press conference that the G20 had left the austerity debate behind and was fully focused on growth.

"If you look where we were a year ago, debating austerity... This (weekend) was a debate about how can we work together to share best practices and develop an approach where our individual economies can grow and the global economy can hit the objective that is set forth in this text," he said.

https://profit.ndtv.com/news/global-economy/article-g20-vows-to-add-2-tr...

Mr. Fix
Feb 26, 2014 - 8:30am
dgstage
Feb 26, 2014 - 8:37am

More Jim Willie

Video unavailable
Mr. Fix
Feb 26, 2014 - 8:42am
ancientmoney
Feb 26, 2014 - 8:50am

COMEX silver . . .

So far today we are down 26 cents. Not bad at this time of the month, with March being a big delivery month for silver.

As of yesterday, Harvey reported there were still 37,280 silver long contracts (186,400,000 ounces) standing.

Friday is FND for March. I expect they will hammer price for the next week to shake off the silver longs. Even 10,000 contracts standing for delivery would be good to see (50,000,000 ounces).

As the phyzz cupboard is emptied, the paper pushers (shorts) make it look like a full cupboard. This is all legal obfuscation in today's fraudulent financial system.

Bollocks
Feb 26, 2014 - 8:58am

Bitcon

Mt.Gox CEO Will Have You Know He Has Not Run Away With Your Non-Virtual Money

Contrary to public speculation, Bitcoin CEO Mark Karpeles will have you know that after halting virtual transactions on his "Magic: The Gathering Online Exchange" for the second, and likely final time, that he has in fact not run away with any all too real money that may still be found at the now defunct exchange of virtual stuff.

From this guy:

Dear MtGox Customers,

As there is a lot of speculation regarding MtGox and its future, I would like to use this opportunity to reassure everyone that I am still in Japan, and working very hard with the support of different parties to find a solution to our recent issues.

Furthermore I would like to kindly ask that people refrain from asking questions to our staff: they have been instructed not to give any response or information. Please visit this page for further announcements and updates.

Sincerely,

Mark Karpeles

This is happening as the Japan police is finally stepping in:

Japanese authorities are looking into the abrupt closure of Mt. Gox, the top government spokesman said on Wednesday in Tokyo's first official reaction to the turmoil at what was the world's biggest exchange for bitcoin virtual currency.

"At this stage the relevant financial authorities, the police, the Finance Ministry and others are gathering information on the case," Chief Cabinet Secretary Yoshihide Suga told a regular news conference when asked about Tuesday's shutdown of the Tokyo-based exchange.

Speaking shortly after The Wall Street Journal reported that Mt. Gox had received a subpoena from federal prosecutors in New York, Suga declined further comment.

Japan's Financial Services Agency and Finance Ministry told Reuters on Tuesday that they do not have jurisdiction over Mt. Gox after the exchange's website went down and efforts to reach company officials failed. The Bank of Japan said it had nothing to add to a comment by Governor Haruhiko Kuroda that the central bank was "very interested" in bitcoin.

Interested because Kuroda too would love to apply to the Yen the same devaluation that Bitcoin trading on MtGox has experienced.



https://www.zerohedge.com/news/2014-02-26/mtgox-ceo-will-have-you-know-h...

murphy
Feb 26, 2014 - 9:28am

Bollocks re: bitcoin

I like the idea of competitive currencies to fiat. That said, I would prefer a metals based currency. I don't understand how digital currencies can vary in value in so short a period of time and be widely used over a longer period of time. I understand they are cheaper to use for moving money quickly around the globe.

Anyway, I haven't read this yet but Middleton is one of the smartest guys in the room. This article should be interesting.

This is a very educational show put on by Kim Greenhouse of "It's Rainmaking Time". She is one of the very few who eschew the soundbite driven media economy and chooses the long format, deep dive approach. While it may be too long for ADD crowd, it digs deep into a not so simple subject to foster understanding and comprehension. This was a pretty good show with an interesting cast of guests:

  • Reggie Middleton - brash blogger, entrepenurial investor and founder of UltraCoin ZeroTrust financial contracts
  • RootEleven founder, visionary, and Bitcoin programmer Andreas Antonopolous, who will explain why Bitcoin is like "the internet for money".
  • Bitcoin trader and programmer Dave Scotese will provide deep thinking about what makes Bitcoin so important, and why the public should be involved in its development.
  • Sam Guzik, one of the most sophisticated and knowledgeable SEC lawyers regarding crowdfunding and investment, will cut through the hype, misinformation, and wrong perceptions surrounding equity crowdfunding to highlight current SEC conditions and real opportunities in the crowdfunding arena.

This show is over an hour and a half long and I don't want the contet to be avoided simply because of its length, so I have included a hyperlinked menu below to assist in navigating to the topcis of your individual interests.

Bitcoin & Crowdfunding - Booming, Busting, and Birthing

https://boombustblog.com/blog/item/9200-bitcoin-crowdfunding-booming-bus...

stackaloha
Feb 26, 2014 - 9:59am

this isnt a bitcoin site

I wish people wouldn't talk about shitcoins here. I thought this site was about precious metals, is it also about investing in the latest fad investments into bullshit that people are currently being ripped off by? Bitcoin goes against everything PM's stand for. It's a big nothing

Patrancus
Feb 26, 2014 - 10:11am

Ezekiel 7: 18-20

says in the last days that silver and gold is basically worthless, my sediments are that if the pointy-headed climate change geoengineers from progressive so called "higher education" have their ways playing god, they just might be slowly killing the planet. It is possible where the eventual out come of their incessant tinkering with the Almighty's creation a time could come where nothing grows, nothing potable to drink, nothing to eat, nothing to trade your silver and gold for, truly nothing of value, excepting one's own salvation from the evil purveyors of the planet who thought they would be gods.

Nick Elway stackaloha
Feb 26, 2014 - 10:22am

Of course bitcoin discussion is part of this site!

The end of the Great Keynesian Experiment is upon us.

We are here to help each other navigate the coming economic chaos.

(That covers a LOT of territory, including bitcoins!)

murphy
Feb 26, 2014 - 10:42am

Thanks Nick

@ stackaloha-

We are more than just a metals blog. Just because I post an article about bitcoin does not mean I promote it. You might have noticed I directed the post at Bollocks. As I know ( in an internet sense) Bollocks, to hate bitcoins, I thought he may appreciate the information.

If I am going to promote any digital currency it would be dogecoin

Secret Dogecoin Mining Operation on Harvard Computers Results in Ban

By Devin Coldewey

Dogecoin

Someone at Harvard has been misusing the university's powerful computing resources for nefarious purposes: mining the joke "Dogecoin" cryptocurrency. The Crimson reports this individual has been banned from using the systems ever again — but not before he or she made away with quite a few coins.

Dogecoin (named after the incredulous shiba inu meme) is the most popular of the less serious descendants of Bitcoin, jokingly exchanged online among users — but also worth enough money that the community was able to help sponsor two Indian Olympic athletes. Like Bitcoin, Dogecoin ("doge" for short) is produced by "mining" programs that use computing power to solve complex cryptographic problems — awarding the user with coins in proportion to his or her contribution of CPU power.

https://www.nbcnews.com/tech/internet/secret-dogecoin-mining-operation-h...

ButchCassidy
Feb 26, 2014 - 10:43am

Just has to be said: Fuck

Just has to be said: Fuck you, EE.

Bollocks
Feb 26, 2014 - 11:07am

murphy

I listened to the first 45 mins. What did I hear? Exactly what I'd expect to hear from a group of people who make their living from crypto-currencies (one of whom owns one).

What I didn't hear was honest discussion. I stopped listening when I heard "bitcoin is flawless".

They're bitcoin-pumpers. Simple as that.

ancientmoney
Feb 26, 2014 - 11:18am

Bitcoin is dollar denominated . . .

Or fiat currency denominated to be more accurate.

It is not gold denominated. So, if all the fiat currencies go to their intrinsic value of zero, will Bitcoin become infinitely valuable relative to currencies? Gold will, and so will silver.

What if currencies go to 25% of current purchasing power? Will Bitcoin follow currencies, or gold and silver?

It seems to me that Bitcoin is another fiat currency wannabe, and might be useful in "ordinary" times, but not in times of a financial system devolution.

ancientmoney ancientmoney
Feb 26, 2014 - 11:25am

COMEX silver attack . . .

Earlier today, I posted:

"As of yesterday, Harvey reported there were still 37,280 silver long contracts (186,400,000 ounces) standing.

Friday is FND for March. I expect they will hammer price for the next week to shake off the silver longs."

Since then, silver is down another 40 cents. I could see another $1 per ounce, maybe even $2 taken off silver over the next week, to keep the silver longs from asking for phyzz.

After that, I think we finally break away from this manufactured "bottom" or, if you will, the last piece of the "Handle" of the gigantic cup-and-handle formation we are living through.

murphy
Feb 26, 2014 - 12:05pm

Thx Bollocks

You saved me from listening to it. Peace to all

ancientmoney
Feb 26, 2014 - 12:43pm

Tulving has delivery issues . . .

https://www.ocregister.com/articles/coins-601179-tulving-gold.html

150 complaints since June . . .

Just noticed my on-line dealer posted his delivery delay increased from 14 days to 21 days (from date of payment) on ASEs and silver Maples.

ancientmoney
Feb 26, 2014 - 12:53pm

The Matrix, 2014 version . . .

"With this economic, Reverse Beauty Contest, where (by default) the U.S. can be successfully depicted by the propaganda machine to the Sheep as the safest/strongest market; it can again attempt what is mathematically impossible. It claims it is removing (some of) the fuel for its equities market bubbles, its Treasuries market bubble, and its housing market mini-bubble – without all of those bubbles imploding.

Of course what is actually taking place here is that for every dollar of money-printing which the Federal Reserve pretends to “taper”; it is secretly counterfeiting at least as many dollars (if not more). This is why the Federal Reserve hides its books from any/all audits. This is why the Treasury Department suddenly found it necessary to change the auction process for U.S. bonds, so that no one could see who was buying this worthless paper (at the highest prices in history).

Counterfeiting was the only way in which the Federal Reserve could not merely prop-up the Treasuries bubble, but dramatically increase its size the last time that the One Bank crashed the markets/economies of Emerging Markets: the Crash of ’08. At the same time the U.S. government was doubling the supply of Treasuries and jacking-up prices, it was choking-off the economies of the best “customers” for that market – yet the bubble survived. Now, in 2014; we have the One Bank playing a different game of “market crash”.

Proof that this is precisely the Script which the One Bank has fed to its U.S. political puppets is the deafening silence. The U.S. dollar is rising while China’s renminbi is falling – and yet there is not one peep from the U.S. puppets about “currency manipulation” (by China). Instead; the Puppet Master pulls its strings and gets the same puppets to say “strong dollar”.

--Jeff Nielson

https://www.bullionbullscanada.com/us-commentary/26497-the-matrix-2014-version

ancientmoney
Feb 26, 2014 - 1:10pm

The Russian Terminator?

@ancientmoney -- when editing your post, you should see a little toolbar at the top of the window. The second button from the right is an 'Image' editor -- click it, and paste in the URL of the picture you want to embed (when on the source site, right click on the picture and choose 'copy image location' or 'copy image URL'). The post editor can accept and display LINKS to pictures, but not the directly pasted pictures themselves. -- Mod

"Ukraine And The Russian Trump Cards – Here's part of a rather downbeat assessment from George Friedman at Stratfor. The topic was a possible IMF overture to aid the Ukraine.

The Russians have agreed to this, likely chuckling. Either parliament will reject the IMF plan and ask Russia to assume the burden immediately, or it will turn to Russia after experiencing the pain. There is a reason the Russians have been so relaxed about events in Ukraine. They understand that between the debt, natural gas and tariffs on Ukrainian exports to Russia, Ukraine has extremely powerful constraints. Under the worst circumstances Ukraine would move into the Western camp an economic cripple. Under the best, Ukraine would recognize its fate and turn to Russia.

What the Europeans and Americans were doing in Ukraine is less clear. They had the triumphant moment and they have eliminated a corrupt leader. But they certainly are not ready to take on the burden of Ukraine's economic problems. And with those economic problems, the ability to form a government that does not suffer from the ills of Yanukovich is slim. Good intentions notwithstanding, the Ukrainians will not like the IMF deal.

Russia may have too many cards for the Ukraine to escape."

https://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/2/25_Art_Cashin_-_Truth_About_Russia,_Ukraine_%26_The_IMF_Deal.html

ancientmoney
Feb 26, 2014 - 1:35pm

Not sure who Brandon Smith is . . .

he looks pretty young. Anyway, he has an interesting take on the "taper" and that it (the taper) is real.

It is real, he says, because QE is no longer working, the Fed knows it, and the Fed does not want it's QE to be going on during a market crash, which will happen regardless of QE or not. In other words, the Fed does not want the public to recognize its powerlessness.

https://usawatchdog.com/debt-default-will-kill-the-dollar-brandon-smith/

Dyna mo hum Pounds of Money
Feb 26, 2014 - 2:10pm

SMM

I am happy that you enjoyed that thread. That site is also heavily moderated and most of the time leans to the left but I find it interesting none the less.

Bollocks
Feb 26, 2014 - 4:24pm

ancientmoney

Whoever he is that Brandon Smith chap seems to have his head screwed on right. A pretty damn-good interview, in my opinion - thanks for posting up the link.

I'll embed it here

https://www.youtube.com/watch?v=WgX_LvwXCqs

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