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Pater Tenebrarum

 
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  • Gold Market Turns To China For Support [View article]
    Simply eye-balling the chart, it seems there is zero correlation between Chinese gold imports and the gold price. In fact, they almost appear to be a contrary indicator. However, I'm inclined to believe that they simply don't indicate anything. In London alone, some 2500 tons of gold change hands every three to four days if memory serves, and the total size of the investable stock of gold is probably close to 80,000-90,000 tons (depending partly on how one classifies certain types of 'close to bullion' jewelry). Why would imports of 90 tons over a whole month matter? It's a drop in the ocean. In fact, there is a widespread misconception as to how gold prices are formed. Due to the large stock, reservation demand is by far the biggest demand component, and this cannot be measured (one can only make qualitative statements about it based on other factors, such as real interest rates, inflation expectations, money supply growth, etc. etc.).
    Jan 14, 2013. 08:13 PM | 1 Like Like |Link to Comment
  • Don't Believe The Hype In Gold [View article]
    GDP is probably one of the most useless and misleading statistics ever invented. It ignores all intermediate stages of the capital structure, which alone represent investment spending amounting to nearly $11 trillion per year. If one looks at the gross domestic output accounts, it turns out that the biggest sector of the US economy is actually manufacturing, and consumption is far smaller than the 'GDP' insinuates (the consumer is only about 35% of all spending in the economy, not 70%). Otoh, GDP includes government spending as though it contributed to 'growth' - when in reality, the government only consumes and has to take every red cent it spends from someone in the private sector (whether by taxation, borrowing or money printing). Moreover, 'real GDP' is vastly distorted by hedonic indexing, which has e.g. magically transformed all 'real' spending on IT products and software into multiples of nominal spending, an error that is cumulative over time. Anyone who claims that GDP is a sensible statistic has never really looked at it in detail.
    Most economic statistics put out by the government have only one rationale: they are used as a justification for government meddling in the economy.
    Jan 10, 2013. 04:59 PM | 3 Likes Like |Link to Comment
  • Sense And Nonsense About Climate Change. What Do Investors Need To Know? [View article]
    In 1975 the 'scientific consensus' was that global cooling would soon reach catastrophic proportions and that 'something must be done immediately', or we would all starve to death shortly. Among the proposals was nutty stuff like covering the Arctic and Antarctic with black soot so the ice would no longer reflect sunlight.
    Like man scarcity and fear promotions, the AGW theory itself is largely a psychological or social mood phenomenon. There is actually no debate that the world's climate has been in a warming trend for a good while. The debate is over its causes, and whether human activity is to blame. Since warming and cooling cycles have occurred in the past well before there was an industrial civilization, we seem to be witnessing a natural cycle. Moreover, civilization and life itself depend on a warm climate. Woe betide us if the cycle were to turn into a cooling cycle again, as will inevitably happen. Then we will have a real problem. Warming on the other hand should be welcomed.
    Jan 10, 2013. 04:44 PM | 8 Likes Like |Link to Comment
  • Don't Believe The Hype In Gold [View article]
    I would add to the foregoing debate that the so-called 'general price level' actually cannot be measured. The always changing purchasing power of money of course exists, but that does not mean it can be measured. For measurement one needs a constant, and no such constant exists, as the purchasing power of money is influenced by both the supply of and demand for money and the supply of goods and services - all of which fluctuate. This is why it makes more sense to refer to inflation as the increase in the money supply. It has an effect on prices, but an eventual increase in the level of all or most prices is only one of them and not necessarily the most pernicious one. We can however make a number of apodictic qualitative statements:
    1. absent the increase in the money supply, prices would have been lower than they are (we just don't know by how much)
    2. relative prices in the economy will be distorted by increases in the money supply as money is not neutral, but enters the economy at discrete points. This is ultimately the cause for capital malinvestment, as the distorted price structure makes economic activities seemingly profitable that would not be assessed as such had the price revolution not occurred. Thus, an increase in the money supply leads to capital consumption.
    3. the fact that money is not neutral also implies that increases in the money supply redistribute wealth to the early from the later receivers of the newly created money. We do not all benefit from increases in the money supply - only a small minority does.
    Jan 7, 2013. 06:59 PM | 3 Likes Like |Link to Comment
  • You Should Sell Hewlett-Packard [View article]
    Funny, I have the exact opposite experience. My HPQ printers all soon failed, while the Canon I finally bought instead keeps going like the energizer bunny.
    Dec 31, 2012. 04:13 PM | Likes Like |Link to Comment
  • Paul Krugman Is Right [View article]
    Thanks for saving me the effort, I was about to chime in with the same point. :)
    Nov 19, 2012. 06:24 PM | 3 Likes Like |Link to Comment
  • The Stock Market Rebound Is Coming [View article]
    You would, after they have been bearish all the way up? At least Rosenberg has been, don't know about Bernstein. Bob Janjuah, another prominent bear, also recently talked about 'one more leg up'. This is something one often sees. The market turns down, and well-known committed bears suddenly become afraid that it could make a fool of them again. And so their opinion changes at just the wrong moment, when they would finally be proven right. Mind, there is no guarantee that this is the case here. I am merely sharing an observation, as I have seen this happen frequently in the past. It may well prove to be relevant again this time.
    Nov 15, 2012. 04:49 PM | 4 Likes Like |Link to Comment
  • The Stock Market Rebound Is Coming [View article]
    There is always a rebound at some point after a big sell-off. The problem is though that complacency continues to be rife in this market. Positioning indicators are still showing that the bears have failed to jump on the train this time, the very first time this has happened in a big sell-off since the 2009 low. That says to me that this decline is qualitatively different.
    It also started right after the net speculative long position in stock index futures (dollar-weighted, all indexes combined) had reached an all time high - i.e., after futures traders sentiment had become more bullish than at any other top in history since stock index futures began to trade. Meanwhile, the net cash position of mutual funds is only 40 basis points above an all time low. Yes, a rebound will eventually come, but it will probably fail to make a new high and very likely will present an excellent selling opportunity (of course this will have to be appraised as it happens).
    Nov 15, 2012. 04:39 PM | 3 Likes Like |Link to Comment
  • Investors Don't Understand Apple's Math - A Mistake [View article]
    AAPL has one of the lowest short interest ratios in the tech sector. It has risen a bit lately, but still remains extremely low. Prior to the recent price swoon the short position was so minuscule compared to trading volume and the float you had to squint to see it. It is however held by well over 250 hedge funds as a long position - the stock with by far the biggest hedge fund participation.
    The options market is indeed important. In the short term, option positioning can magnify trends in the underlying. That is however not only true for AAPL, but for all stocks with active options. And it is quite natural that a stock that has trended up for a long time and has such a huge following will have an active options market.
    Nov 15, 2012. 03:01 PM | Likes Like |Link to Comment
  • Investors Don't Understand Apple's Math - A Mistake [View article]
    'Apple's complicated math' - try analyzing an earnings report of a big bank then :) By the time you have arrived at footnote 637, you have a beard longer than Methusela's.
    Nov 15, 2012. 02:54 PM | Likes Like |Link to Comment
  • Stocks And Euro-Dollar Futures Positioning [View article]
    Please note,McClellan's article is already over a year old. I have only linked to it to introduce readers to the concept. The chart that is relevant TODAY is the one in this article. And that implies a high in late November (i.e., there should be one more move higher) and a tumble lasting into October 2013.
    Nov 8, 2012. 02:16 PM | Likes Like |Link to Comment
  • 2 Gold Stocks Receiving Initial Coverage Investors Should Consider [View article]
    "Its principal property includes the Ocampo mine covering approximately 15,000 hectares located in Chihuahua State"

    Well, actually this is not so. AUQ has sold this mine. Its 'principal property' is now Young-Davidson.
    Nov 8, 2012. 02:07 PM | 1 Like Like |Link to Comment
  • Apple Vs. Microsoft: The Tide Is Turning [View article]
    Windoze-using musician here. Also no problem w. productivity. I think w.r.t. that PC's and Macs are on the same level these days. Of course, if you use Logic you'll want to have a Mac.
    Nov 5, 2012. 06:25 AM | Likes Like |Link to Comment
  • The Opportune Buying Time For Barrick Is Now [View article]
    However, this is like saying: 'mining is a risky business' - as Barrick's earnings release this morning has shown the company is by no means exceptional in this regard. In fact, investors have had to live with the considerable escalation of development costs in Barrick's major projects such as Pascua-Lama, which is ongoing (they just bumped up the cost estimate again and announced another start-up delay). When considering the investment opportunities in gold mining shares, one must always weigh risk and reward, but one thing is clear: the less risky well diversified senior producers won't produce outstanding reward. For that you have to move out on the risk curve (and you can always mitigate your risk by means of diversification). In the long run, the shares of senior producers are likely to underperform the price of gold, just as they did in the 1970's bull market. If you really want to make a profit in excess of what an investment in the metal itself is likely to produce, you have to look at the junior and exploration sectors - this implies taking more risk, but even if you end up finding only one or two big winners it will be worth it.
    Let us also not forget: sell-side analysis is always colored by recency bias. Over the past two years, gold stocks have woefully lagged the metal. Only after this became obvious have people begun to look for reasons. Now many assume that the problems have become immutable. This is however not the case - gold mining margins are generally anti-cyclical. They tend to be compressed when economic confidence increases and tend to expand when it decreases, which is why the gold mining sector is the only sector in the market that is demonstrably negatively correlated with the broader stock market in the long term.
    Nov 1, 2012. 10:45 AM | Likes Like |Link to Comment
  • Armchair Planners Plotting Monetary Conflagration [View article]
    I fully agree with your assessment. I have written about the problem that modern-day macro-economists have become part of the class of 'planners' before. In an unhampered free market economy, there would be little demand for macro-economists. Their pay scale would be accordingly adjusted. It is only because they are employed as planners for various central planning institutions of the State that they can command the salaries they get. Their intellectual output is largely mediocre, barren and as a rule viciously statist.
    And you are of course quite right that money printing can not possibly overcome the scarcity of resources and capital. It can and does however misdirect resources into uneconomic, and ultimately wealth destroying activities (like e.g. giant housing bubbles, to name a glaring recent example). Today central bankers are proposing that they must do all over again what they already tried after the tech bubble burst - only on an even grander scale. It is simply put insanity.
    Oct 25, 2012. 09:47 PM | 2 Likes Like |Link to Comment
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