In the spirit of not suffering from confirmation bias, in today’s Notes we will try to make the bearish case against gold. So before you storm Notes HQ in Buenos Aires craving blood, hear us out. Many of our staff here love gold and have long term holdings.

This issue is entirely in the contrarian spirit of playing devil’s advocate. So put your pitchforks down. Take a deep breath. There is plenty of space to poke holes in (or rant) about our thesis by writing to info@contrarianprofits.com

So here it goes. The four reasons you shouldn’t buy gold today…

Reason 1: Did you know that the seventh largest holder of gold in the world is not a country, but an exchange traded fund? Yes, gold ETF SPDR Gold Shares (GLD) has amassed the seventh largest gold reserve in the world. This fund holds more gold than China, Switzerland, Japan, the United Kingdom or the

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The rally in US stocks that began on March 9, 2009 has seen a 49.4% gain. And despite our deep suspicions here at Notes, it’s lasted 22 weeks. Does this mean we’re tempted to buy into stocks now?

All we know, dear reader, is that following great crashes we get great bear market rallies. And these euphoric rushes of blood to the head have a nasty habit of suckering overoptimistic investors. As resource investing legend Doug Casey put it in yesterday’s Casey’s Daily Dispatch, there were eight such rallies during the Great Depression. These rallies lasted an average of 11.3 weeks, during which time the average increase was 52.6%.

Simple math will tell you that this rally has lasted almost twice as long as the average bear market rally during the Great Depression.

Doug reckons what he calls the “wonder rally” on Wall Street won’t survive the September. He points out that

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Most investors’ eyes are on stocks right now. And for many stock optimists the credit crunch is ancient history. Not so, says global finance insider Simon Mellon, who heading up our new Bonner and Partners Family Office project.

According to Simon, we may be looking at another serious credit blow-up in a dark corner of the credit markets known as leveraged loans. So if you think the credit crisis is over, think again. The easy part of the clean-up is probably behind us. But the real dirty work hasn’t even begun. This from an email Simon sent through to Notes HQ yesterday.

The leveraged loan market was hugely lucrative during the boom. Similar to junk bonds, leveraged loads are secured loans to high-credit-risk companies – usually leveraged buy-outs by private equity firms.

Existing issues of these leveraged loans are now trading back at “trader’s par” – above 90% of face value. This

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The bulls have their reasons, of course. Manufacturing is recovering, they say. Green shoots are sprouting! What they don’t seem to know/care about is that the reason manufacturing is recovering has little to do with a better economy.

This from Payout Trader editor Charles Delvalle (who, by the way, is bullish on US equities in the medium term):

Truth is the economy is still circling the drain, albeit at a slower pace. The real reason why the Institute of Supply Managements Factory Gauge showed better than expected numbers was because of the 12% increase in government spending due to fiscal ‘stimulus’ programs.

The June report showed up at 48.9 – just shy of the 50 mark. If the ISM rises above 50 it signals growth in manufacturing; less than 50 signals contraction. This 50 mark is extremely important, because most economists look at it to determine whether we are in a recession or

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Another underground investor mowing down the green shoots is Doug Casey of Casey Research. We know Doug well. He owns land in Argentina’s Salta province. And he’s a frequent visitor of Notes HQ. 

Last time he was down, we went out for a big steak dinner in the Palermo district of Buenos Aires, where our offices are. After dinner, Doug regaled us with stories of his near death experiences in Third World countries. Doug has made fortunes in countries that most people couldn’t pronounce!

Doug is very contrarian, and he “lets the bastards have it” like no one else we know. It used to be that even in front of an audience full of anarcho-capitalists Doug would clear out a few seats.

But times they are a changin’. At this year’s Agora Financial Symposium in Vancouver hardly anyone left their seats during Doug’s speech. Like James Dale Davidson, he believes that

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Simon Mellon, who’ll be heading up Bonner & Partners Family Office, our soon-to-be-launched money management and tax optimization service, is keeping in close contact with Notes HQ.  Simon is a global finance insider with a decade’s worth of experience working in capital markets. And right now he’s advising investors to remain cautious until a clearer picture emerges about the market’s direction.

When I was a child I could never sit still on a long road journey. I was always asking, “Are we there yet? Are we there yet? ARE WE THERE YET???” My father would always reply “Nearly, son… Nearly,” even though we were still miles from our destination.

This is exactly how the financial markets seem to me right now. It’s been more than two years since the credit crisis kicked off, and I’m getting itchy in my seat: I want to be back out there playing with the other financial (whizz)

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It’s always a pleasant surprise to find yourself in good company. As loyal readers already know, here at Notes HQ we’re not exactly part of the “in crowd.” Whether we’re writing about the trillion dollar deficits, banks’ phony earnings, government bamboozles or the sucker’s rally in stocks, you’re unlikely to find the official spin in our daily missives.

Generally, we like it like that. It makes us feel special. Instead of pulling up our knee socks and getting out our pompoms along with the mainstream media hacks, we remain ever sceptical about tales of recovery… of so-called “green shoots”… and, above all, of Washington’s empty promises and various boondoggles.

But once in a while, it’s nice to know you have friends… that people far smarter than you share the same opinions as you do.

So it was with much delight that we opened up the latest King Report from honorary underground investor Bill King –

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