Debunking 'Debunking Myths of a U.S. Monetary Collapse' Redux [View article]
You write in a public forum and then get upset when a person who knows you disagrees and points it out? Deal with the economic & financial facts and issues on Seeking Alpha.
You made a mistake and had almost 2 weeks to correct it, before it was pointed out; and then the same mistake was there when you republished it over 6 months latter!
There is the claim that things should have been done privately but this proclamation is done in public.
Debunking 'Debunking Myths of a U.S. Monetary Collapse' Redux [View article]
One can look down below, rebutting the author's example, to answer this claim of data mining.
I heard the same thing in 1998 from brokers, not this author, that stocks were the way to invest. This does not make me right and the author wrong, but it is stated to show readers that other asset classes can outperform the stock asset class for long periods of time. I just computed the alpha of the Rogers Commodity index since July 1998 to July 2011. It was 8.47% a year. Shows that tatical asset allocation should be in the toolbox.
I found the monthly, instead of daily, returns for the rogers commodity index. Indeed over the time frame from the close on Feburary 28, 2009 until the close on April 30, 2011. SPY did have greater absolute returns but not greater risk adjusted.
The annual return of SPY over these dates was 35.3% (used yahoo finance dividends included so this was the total return after fees). The Rogers Commodity index was 33.2%. However the monthly beta of Rogers was .7942 over this time period. I assumed that the risk free rate was zero percent (even 25 bps did not change the outcome). So the equation simplifies down to:
Cost of Rogers ETF is .75% a year which would leave 4.41%. Take off another 1 % for an asset manager fee and you are still left with an Alpha of over 3%.
Debunking 'Debunking Myths of a U.S. Monetary Collapse' Redux [View article]
I wrote, “So far it looks okay for “things” compared to companies, but without a time horizon it is difficult to have a “hard science” comparison. However, for a trader or an investor doing tactical asset allocation, 6 months might be considered a long time. … There are just times a trader wants to be long things and not companies. “
I believe most people would agree that for most traders 6 months is considered a long period of time. What about investors doing tactical asset allocation? (explanation of tactical asset allocation www.investopedia.com/t...) How long have things outperformed companies? Notice in the chart link posted that there are long time periods where commodities seem to outperform other asset classes.
The famed investor Jim Rogers started a commodity index, so that he could invest in it, on July 31, 1998. The index level was 1000. www.rogersrawmaterials...
As of August 29, 2011, the index level was at 3956.95 for an annualized total return of just over 11%. Since the data referenced was the sp500 I looked up the total return of SPY over these 13+ years. SPY adjusted for dividends had a price of $90.39 (from yahoo finance) and on August 29, 2011 the closing price was $121.36 for an annualized total return of 2.29%.
Typically, asset managers charge a 1% fee for stocks investments and most likely between 2-3% for commodities (Rogers etf is .75%). After subtracting fees of 3% from the commodity index it still has an 8% annual return; while if a person just bought and held the SPY they received just over a 2% annual return. By definition the SPY investor did not produce any “Alpha”, and while I don’t have time to make the daily data into returns and run the regression, I would think it very highly probable that the commodity index did produce the “Alpha” that investors are seeking, and this is even for a period of over 10 years!
Gold Vs. European Central Bank Money Supply [View article]
I have replied to your comments about the US while this article was about Europe. I further showed M1 climbing at higher rates in Europe than US M1 or M2 in the 1970's. We can disagree about methodology since that is nothing new in the discussion of ideas.
Gold Vs. European Central Bank Money Supply [View article]
I just checked US M1 growth from Jan 1970 to Jan 1980 and it was 6.36% while US M2 was 9.64% (using NSA). ECB growth at over 10.5% in M1 was much higher.
Gold Vs. European Central Bank Money Supply [View article]
I would suggest using this hypothesis over on the original post of Gold vs Fed Balance Sheet, since this article deals with Europe.
I started with the lowest base money I could find, since I wanted to attempt to be as near to final payment, i.e. money, and not credit instruments. I am expecting to do further research into other countries and higher M's in the future. One step at a time for now.
Gold Vs. European Central Bank Money Supply [View article]
"M1 fell in the 1970's ..." This is empirically incorrect, from January 1970 to January 1980 M1 grew at a 10.53% annual rate. This then refutes the conclusion, "It's not a real shocker that during the high inflationary '70s, M1 would be lower, and hence a gold/M1 ratio would be higher. "
Date ECB M1 in Millions 1980Jan 444852 1979Jan 408528 1978Jan 365881 1977Jan 325151 1976Jan 299355 1975Jan 261605 1974Jan 238431 1973Jan 225173 1972Jan 198807 1971Jan 178489 1970Jan 163416
Gold Vs. European Central Bank Money Supply [View article]
I would point out the price of gold rising in the 1970's despite high nominal interest rates. The "real" interest rate would seem to be much more important factor in determining the price of gold.
Gold Vs. European Central Bank Money Supply [View article]
If we take the premise "no one really knows what is the relevant measure of the stock of money. Is it M1? Is it M2? Is it something else?" and combine with another premise, "money supply is that stock of assets that determine the price and business cycle output fluctuations" then how is the price ever going to be determined of any asset, not just gold, since money supply is presumed to not be known?
You can also look at my reply to H.J. HuneyCutt for more explanation.
Gold Vs. European Central Bank Money Supply [View article]
If there is "no easy and objective way to value gold" then how will one ever know if it is a bubble? At best you are left as an agnostic with respect to the price of gold.
Gold Vs. European Central Bank Money Supply [View article]
The thesis is that investment demand for gold is driven by the perception of how sound the banking system is. If money supply is growing fast then the ratio of gold/ and a certain "M" should be falling. Eventually if the increase in "M" continues long enough; investors will, most likely, become fearful of inflation, or the soundness of credit, and begin to move allocations into gold and the ratio will then stabilize or increase. A reversal of the expectation would have the opposite effect.
Also, if one has the expectation that consumer / industrial consumption of gold will remain stable as a percentage of the economy, then as money circulates and grows, along with the economy; then demand for gold should move with it. Of course one can disagree with this expectation.
Gold Vs. European Central Bank Money Supply [View article]
If you check the original article comparing the Gold to the Fed Balance Sheet I think the process will become more clear. The difficulty with the ECB data is that M1 grew as countries were added, where as the Fed's balance sheet was grown endogenously grown vs the exogenous growth the ECB data experienced. The view of under or overvalued depends on the time frame too. Long term investor or short term trader. Data supported a bearish short term view but looked fine for a long term horizon of 10+ years using June data. Article about the Fed data was more bullish.
The point of ratio analysis is to show if something is higher or lower in relative price compared to the past transactions. "Fair Value" is always subjective in my opinion. Look at CAPM to get the cost of equity for the DDM; one usually gets cost of equity using regression. All statistics have a confidence interval around the point estimate, and so as a bidder I would want the number in the confidence interval that provides the lowest price and as a seller the opposite. A transaction takes place when there is a double inequality of wants. A buyer values a stock more than cash and the seller cash more than the stock, otherwise no transaction would take place.
Debunking 'Debunking Myths of a U.S. Monetary Collapse' Redux [View article]
You made a mistake and had almost 2 weeks to correct it, before it was pointed out; and then the same mistake was there when you republished it over 6 months latter!
There is the claim that things should have been done privately but this proclamation is done in public.
C'Mon' Man!!
Debunking 'Debunking Myths of a U.S. Monetary Collapse' Redux [View article]
I heard the same thing in 1998 from brokers, not this author, that stocks were the way to invest. This does not make me right and the author wrong, but it is stated to show readers that other asset classes can outperform the stock asset class for long periods of time. I just computed the alpha of the Rogers Commodity index since July 1998 to July 2011. It was 8.47% a year. Shows that tatical asset allocation should be in the toolbox.
Debunking 'Debunking Myths of a U.S. Monetary Collapse' Redux [View article]
en.wikipedia.org/wiki/...
Jensen's alpha = Portfolio Return − [Risk Free Rate + Portfolio Beta * (Market Return − Risk Free Rate)]
I found the monthly, instead of daily, returns for the rogers commodity index. Indeed over the time frame from the close on Feburary 28, 2009 until the close on April 30, 2011. SPY did have greater absolute returns but not greater risk adjusted.
The annual return of SPY over these dates was 35.3% (used yahoo finance dividends included so this was the total return after fees). The Rogers Commodity index was 33.2%. However the monthly beta of Rogers was .7942 over this time period. I assumed that the risk free rate was zero percent (even 25 bps did not change the outcome). So the equation simplifies down to:
Jensen's alpha = Portfolio Return − [ Portfolio Beta * Market Return]
Alpha = 33.2% - [.7942 * 35.3%]
Alpha = 33.2% - 28.04%
Alpha = 5.16%
Cost of Rogers ETF is .75% a year which would leave 4.41%.
Take off another 1 % for an asset manager fee and you are still left with an Alpha of over 3%.
Debunking 'Debunking Myths of a U.S. Monetary Collapse' Redux [View article]
I believe most people would agree that for most traders 6 months is considered a long period of time. What about investors doing tactical asset allocation? (explanation of tactical asset allocation www.investopedia.com/t...) How long have things outperformed companies? Notice in the chart link posted that there are long time periods where commodities seem to outperform other asset classes.
The famed investor Jim Rogers started a commodity index, so that he could invest in it, on July 31, 1998. The index level was 1000. www.rogersrawmaterials...
As of August 29, 2011, the index level was at 3956.95 for an annualized total return of just over 11%. Since the data referenced was the sp500 I looked up the total return of SPY over these 13+ years. SPY adjusted for dividends had a price of $90.39 (from yahoo finance) and on August 29, 2011 the closing price was $121.36 for an annualized total return of 2.29%.
Typically, asset managers charge a 1% fee for stocks investments and most likely between 2-3% for commodities (Rogers etf is .75%). After subtracting fees of 3% from the commodity index it still has an 8% annual return; while if a person just bought and held the SPY they received just over a 2% annual return. By definition the SPY investor did not produce any “Alpha”, and while I don’t have time to make the daily data into returns and run the regression, I would think it very highly probable that the commodity index did produce the “Alpha” that investors are seeking, and this is even for a period of over 10 years!
Gold Vs. European Central Bank Money Supply [View article]
Gold Vs. European Central Bank Money Supply [View article]
Gold Vs. European Central Bank Money Supply [View article]
I started with the lowest base money I could find, since I wanted to attempt to be as near to final payment, i.e. money, and not credit instruments. I am expecting to do further research into other countries and higher M's in the future. One step at a time for now.
Making Sense of Sino-Forest [View article]
Making Sense of Sino-Forest [View article]
www.zerohedge.com/news...
Gold Vs. European Central Bank Money Supply [View article]
Date ECB M1 in Millions
1980Jan 444852
1979Jan 408528
1978Jan 365881
1977Jan 325151
1976Jan 299355
1975Jan 261605
1974Jan 238431
1973Jan 225173
1972Jan 198807
1971Jan 178489
1970Jan 163416
Gold Vs. European Central Bank Money Supply [View article]
Gold Vs. European Central Bank Money Supply [View article]
You can also look at my reply to H.J. HuneyCutt for more explanation.
Gold Vs. European Central Bank Money Supply [View article]
Gold Vs. European Central Bank Money Supply [View article]
Also, if one has the expectation that consumer / industrial consumption of gold will remain stable as a percentage of the economy, then as money circulates and grows, along with the economy; then demand for gold should move with it. Of course one can disagree with this expectation.
Gold Vs. European Central Bank Money Supply [View article]
The point of ratio analysis is to show if something is higher or lower in relative price compared to the past transactions. "Fair Value" is always subjective in my opinion. Look at CAPM to get the cost of equity for the DDM; one usually gets cost of equity using regression. All statistics have a confidence interval around the point estimate, and so as a bidder I would want the number in the confidence interval that provides the lowest price and as a seller the opposite. A transaction takes place when there is a double inequality of wants. A buyer values a stock more than cash and the seller cash more than the stock, otherwise no transaction would take place.