I don't think you understand how bad things are, relatively speaking, for Americans deep in debt. There are whole lot of those. I am not one of them, and I bet you aren't either, but I know a whole lot of them, and have read about a whole lot more of them. They are paying a whole heck of a lot to service their credit card debt, and that's not easy with the jobs situation the way it is. The ones with big student loan debt don't even have the option of bankruptcy, and they have no way to pay it back. There's over a trillion dollars of student loan debt out there now, close to that much in credit card debt, and it's only growing, because the uneducated are even worse off nowadays. If creditors really feel the pain of being "stiffed" then maybe they will be a little more cautious with lending in the future, and the next economic cycle will be driven by actual money rather than debt. I think that is a heck of a lot more sustainable than the mad road we've been down the last 20 or 30 years. There is a balance to everything, and the US balance towards debt spending has gotten out of control lately. If people have to work harder to make more money if they want something, that can only help the economy too.
Another way you can know that gold is a bubble is how hard all of these shady ads all over the internet are pumping it. Why do you think that is happening? Gresham's law talks about overvalued money under different circumstances.. but I think that in general, overvalued money will flood into circulation as people engage in arbitrage... that is what is happening with all these cash for gold places. People are even willing to sell their gold far below the market value. Even in crushing economic times like these, people are getting underpaid by the cash for gold dealers and still think they are getting a great deal by selling it. Why do you think that is? The end holders are the gold bugs who get forcefed a constant stream of paranoia all over the internet. Why do there need to be so many shady internet ads pumping gold through the roof if its legitimately a good buy now? The sheep will be shorn in the end, as they always are.
Because gold is already at panic highs. A gallon of milk cost $2.75 to $3.50 in year 2000, now $3.50 to $4.00. Looks like moderate, normal price inflation to me, no big deal. If you look at broader inflation measures, prices are up about 33% since year 2000. Big deal, this is normal.
Gold cost $265 per oz in 2000, now it is at $1730. Looks like panic based price inflation to me. It's a bubble, and it can very easily plunge even as inflation rises when the economy really gets going again. That's right, inflation can go up and gold can plummet at the same time. That's because the fair value of gold now is maybe $300 * 1.33 or maybe $400 an ounce. Possibly somewhat higher due to increasing cultural demand from India. But it's nowhere near $1730. Bubble.
Gold is a rare metal with some utility and aesthetic appeal. That is all it is. Gold prices are already at bubble highs now. I don't think you should expect them to increase by the same percentages from here on out.. if at all. Remember that the people that bought gold at its last peak and held it expecting it to go back up practically lost their shirts.
When a whole country has gotten into crippling debt, they have the choice of being slaves for all eternity to their moneylenders, or inflating their way out of it. The truth is that both the borrowers and the lenders were greedy and irresponsible. Everyone has to pay for that overreaching greed in the end before the cycle of prosperity can begin again. Let us hope that lenders continue to be cautious with their credit risks, and those who can borrow borrow only at real need, not to finance unsustainable consumption.
When a country runs up huge and unpayable debts, of whatever kind, it can accept that its labors and efforts are mortgaged to the holders of the debt for all eternity and it will never ever be able to get out from under it, or it can print a little money to inflate away the debt a little. There's only one sane choice here. The moneylenders are punished for lending too aggressively to default risks, and the people who borrowed more than they could afford to pay back get a little relief. 85Bn till the end of the year and 40Bn printing after that, is a relatively small amount to add to the money supply. Bernanke could be printing a trillion dollars a month, and sending helicopters to make it rain all across the country. But that would punish the moneylenders too much, and make no one want to lend money to the United States again. What the good Chairman is trying to do, is get the wheels moving again with a relatively small adjustment. He can't do it alone. People have to pay down their debts, and in general shun moneylenders as much as possible. The government has to adopt an intelligent fiscal policy. Accepting a high interest rate loan to finance current consumption makes growth look real good for a while, but eventually the bottom falls right out of that, and we are where we are today. We need long term personal and governmental fiscal responsibility. But we need short term grease on the wheels. Bernanke knows this. He's been struggling within the Fed structure to get the support to do this. Now he did.
Paulo, fiat money itself has no meaning outside the bounds of a civilization and a society. Just because you earn X dollars in one year does not mean you are guaranteed Y rate of inflation on those dollars. If Z rate of inflation is required to keep the civilization functional, then Z rate of inflation you will get. That's the Fed's job and the Fed's call. They have good reasons for doing what they've done, and they cannot fix everything on their own, but by damn they are at least trying to help the situation.
I told you that I thought shorting AMZN was risky. And you knew that a short position in general was a bad idea in the face of money printing. With over 70% of economists expecting a QE3, why did you stay short? I think if you want to short a company you should look at one that's got a long trend of losing cash and looks like it is headed for BK. You do have to sort of time it as best you can in that case, but they are out there. We both seem to follow the coal sector... look at how JRCC's stock price is headed up now. That's setting up the opportunity for a nice short in the future if the fundamentals really don't turn around and nothing else changes. Keep your powder dry, man. :)
You can't make more profits if you aren't selling more stuff to people. Globally, workers *have* been doing better. It's just that that improvement has been happening disproportionately in China over the last few decades, while the US worker's standard of living has been propped up by a debt bubble instead. The situation in the US is a local disequilibrium. Manufacturing is starting to move back to the US some, and a weaker dollar will help that process even more. A trend of massive profits that only company owners (that would be stockholders like me and I suspect you) get to keep is not sustainable in the slightest.
I support Chairman Bernanke's bold policy move and here is why. In the 1970s the US had high tax rates that had led to a more even distribution of wealth More evenly distributed wealth meant that the whole population of the country could buy things, which meant that there was a strong demand for the whole population of the country to produce things. This led to a strong economy. In the 1980s and onward, the capital gains tax rate was cut, which ultimately made the overall tax scheme regressive, allowing for wealth to concentrate in the hands of a few. The increased standards of living in the 1970s and 1980s were increasingly financed with personal debt in the 1990s and onward. That was a big part of why the US economy kept growing at a decent rate. Eventually, the personal debt bubble got too big and 2007 happened. I have thought about it considerably, and I believe that the biggest effect of QE3 will be to cause inflation in some manner, which I believe will have the effect of reducing debt by devaluing it. This will give an American public that is maxed out on just maintaining interest payments on existing debt some breathing room to pay down debt principal and do some spending, both of which are bullish for current and future real economic growth. The holders of debt (which in a way includes the USD, as it is legal tender for all debts public and private), must release the death grip they have on the nation if everyone is to enjoy long term prosperity. Lending was too aggressive to make up for an unsustainable tax and spending policy, and so aggressive lenders have to give up some of their gains at some point. Pushing people into stocks and away from debt is a deliberate move, and there is absolutely still no substitute for investing on long term fundamentals, and the bandaid of monetary policy is not a fix for long term tax and spending policy. It is needed first aid to stop the bleeding and give the country some breathing room, but now our leaders need to raise taxes in a progressive fashion and slowly moderate spending. For the economy to be its strongest, taxes and spending policy should go to a level such that American non-debt spending can be maximized. This also has to happen worldwide to an extent, because if some countries allow an unsustainable environment which is inordinately bullish to make large capital gains in (low tax regime and etc) then there will be a capital flight to that country. Stable economic growth requires a more progressive tax policy, which will ultimately have to hit capital gains and bring long term Warren Buffet style investing back into higher favor to defer taxes on cap gains. The system can be gamed to bring influx of capital, but not forever. There is also the very real challenge facing the world economy of technology investment making large swathes of the population have a lot less economic utility. This represents a potential large drag on economic growth regardless of what policy is taken to accommodate it, and is the foremost economic challenge I see moving forward.
There is a tiny tiny tiny chance that JRCC will go to $60 a share. There is a much bigger chance JRCC will go to $0.147 a share, like PCX is today. $60 a share from even say $1.50 at the lows is a 40X gain, and BK is essentially a 100% loss. Do you think JRCC has even a 1 in 40 chance to reach $60 a share? We are talking about a business that has lost money in the net over the past 8 years since it emerged from BK the last time. Natural gas was even pretty high some of those years. In what universe are the shares of JRCC worth $60, making it a 1B+ market cap company? I dunno though, maybe the markets are that dumb. If JRCC posted $2 earnings per share in a year I bet it would trade at $60 again.. even though it still wouldn't have made much if any net income since the BK. Lol.
Some people have been asking what Apple could have done to be innovative here. A list (and some of what I hope for on the iPhone6 - which I will buy if it has enough of these regardless of price, within reason).
Satellite uplink option so that the iPhone will work anywhere in the world, most of the time 4G network can be used for cost efficiency as satellite data is obviously much more expensive.
Greatly improved and more natural and intuitive version of Siri, that is easier to use in some cases than any of the other interface options.
At some point, AAPL runs out of room to grow in its existing business. Sitting on that mountain of cash is a brilliant idea, because it will let them diversify out of hardware once they see something that offers a better return. They haven't even tapped debt financing yet.
CLF obtains less than 10% of their revenues and almost none of their profits from coal. They are an iron ore company with a small coal interest. A bet on CLF is a bet on iron ore, coal will have little to do with their future earnings for quite some time.
Looks Like Iron Ore Is Back In Business [View article]
Swiss Maven -
I predicted iron ore prices to reach between $120 and $150 by the end of the year. I think this will happen by a combination of supply response adjusting and demand increasing due to this and possibly other stimulus measures. We have already seen a bullish development in Indian supply, and possibly even signs of future increased imports to India, since I wrote this article. I am comfortable waiting until mid 2013 to ever see the IO price go back above $150. The thing is, companies like CLF at a P/E of 4 are priced for the strong bear case of iron ore that Paulo Santos has been presenting. The other IO companies are largely in the same boat, but I will use CLF as an example, since I am long them. If this strong bear case turns out to be wrong, and CLF earns about 6 this year, 7 in 2013, and 8 in 2014 (these are just some analyst predictions, from an analyst that is neutral/bearish on CLF now http://bit.ly/OHj27g), I see no reason why CLF should continue to trade at a P/E of 4. I don't even necessarily think that the price of iron ore or CLF's earnings have to be as good as they were over the last Chinese stimulus investment for CLF to do this well.. remember that they posted close to $13 EPS in 2011. If they can get just a little more than half that (say $7 EPS in 2013, which is projected to grow in the future)... why should they not move towards trading at 10-15 trailing P/E then? Is there some reason that China's policies must implode in the next 10 years, that other developing countries won't start to demand iron ore too in this timeframe, and that the iron ore industry must be doomed for any potential investors? This kind of valuation would put them at $70 to $105 a share. When I submitted this article they were trading under $35. That's essentially an analyst projected double or a triple within the next 2 years, from what I can see... from an analyst that isn't even bullish on the stock. Waiting 2 years for a double is over 40% annual return. IF CLF can keep paying their dividend, that would have been about a +7% annual bonus on top of that. That is an incredibly fine opportunity in my book, and I think it is relatively safe too. Opportunities that are loaded down with huge risk have to be truly insane to delivery any alpha. The risk here is that the Chinese government fails to do what it intends, or the Australians or Brazilians are truly stupid and destroy their own profits by oversupplying the market. I am very interested in predicting the long term price dynamics 10 and 20 years down the line as well, but I have a lot more research to do to take a stab at that.
Why would a quality fellow like Carl Icahn be involved so heavily in CHK if the natural gas industry was really going to be subject to a huge blowup like that? His stake in CHK is worth $1.01 billion. Don't you think he has thoroughly researched the industry dynamics before getting into CHK that big?
There's No Longer A Bernanke Put [View article]
There's No Longer A Bernanke Put [View article]
There's No Longer A Bernanke Put [View article]
Gold cost $265 per oz in 2000, now it is at $1730. Looks like panic based price inflation to me. It's a bubble, and it can very easily plunge even as inflation rises when the economy really gets going again. That's right, inflation can go up and gold can plummet at the same time. That's because the fair value of gold now is maybe $300 * 1.33 or maybe $400 an ounce. Possibly somewhat higher due to increasing cultural demand from India. But it's nowhere near $1730. Bubble.
There's No Longer A Bernanke Put [View article]
There's No Longer A Bernanke Put [View article]
There's No Longer A Bernanke Put [View article]
There's No Longer A Bernanke Put [View article]
I told you that I thought shorting AMZN was risky. And you knew that a short position in general was a bad idea in the face of money printing. With over 70% of economists expecting a QE3, why did you stay short? I think if you want to short a company you should look at one that's got a long trend of losing cash and looks like it is headed for BK. You do have to sort of time it as best you can in that case, but they are out there. We both seem to follow the coal sector... look at how JRCC's stock price is headed up now. That's setting up the opportunity for a nice short in the future if the fundamentals really don't turn around and nothing else changes. Keep your powder dry, man. :)
There's No Longer A Bernanke Put [View article]
There's No Longer A Bernanke Put [View article]
Massive Cyclicals Euphoria [View article]
There is a much bigger chance JRCC will go to $0.147 a share, like PCX is today. $60 a share from even say $1.50 at the lows is a 40X gain, and BK is essentially a 100% loss. Do you think JRCC has even a 1 in 40 chance to reach $60 a share? We are talking about a business that has lost money in the net over the past 8 years since it emerged from BK the last time. Natural gas was even pretty high some of those years. In what universe are the shares of JRCC worth $60, making it a 1B+ market cap company? I dunno though, maybe the markets are that dumb. If JRCC posted $2 earnings per share in a year I bet it would trade at $60 again.. even though it still wouldn't have made much if any net income since the BK. Lol.
Apple: One More Thing [View article]
Metallic glass body (http://bit.ly/TMpRK8)
Projection keyboard/Projection touchscreen (http://bit.ly/U8nZas)
Holographic display much larger than the screen size (http://bit.ly/TMpRKa)
Satellite uplink option so that the iPhone will work anywhere in the world, most of the time 4G network can be used for cost efficiency as satellite data is obviously much more expensive.
Greatly improved and more natural and intuitive version of Siri, that is easier to use in some cases than any of the other interface options.
Apple: One More Thing [View article]
Natural Gas Is Between Two Walls [View article]
Looks Like Iron Ore Is Back In Business [View article]
I predicted iron ore prices to reach between $120 and $150 by the end of the year. I think this will happen by a combination of supply response adjusting and demand increasing due to this and possibly other stimulus measures. We have already seen a bullish development in Indian supply, and possibly even signs of future increased imports to India, since I wrote this article. I am comfortable waiting until mid 2013 to ever see the IO price go back above $150. The thing is, companies like CLF at a P/E of 4 are priced for the strong bear case of iron ore that Paulo Santos has been presenting. The other IO companies are largely in the same boat, but I will use CLF as an example, since I am long them. If this strong bear case turns out to be wrong, and CLF earns about 6 this year, 7 in 2013, and 8 in 2014 (these are just some analyst predictions, from an analyst that is neutral/bearish on CLF now http://bit.ly/OHj27g), I see no reason why CLF should continue to trade at a P/E of 4. I don't even necessarily think that the price of iron ore or CLF's earnings have to be as good as they were over the last Chinese stimulus investment for CLF to do this well.. remember that they posted close to $13 EPS in 2011. If they can get just a little more than half that (say $7 EPS in 2013, which is projected to grow in the future)... why should they not move towards trading at 10-15 trailing P/E then? Is there some reason that China's policies must implode in the next 10 years, that other developing countries won't start to demand iron ore too in this timeframe, and that the iron ore industry must be doomed for any potential investors? This kind of valuation would put them at $70 to $105 a share. When I submitted this article they were trading under $35. That's essentially an analyst projected double or a triple within the next 2 years, from what I can see... from an analyst that isn't even bullish on the stock. Waiting 2 years for a double is over 40% annual return. IF CLF can keep paying their dividend, that would have been about a +7% annual bonus on top of that. That is an incredibly fine opportunity in my book, and I think it is relatively safe too. Opportunities that are loaded down with huge risk have to be truly insane to delivery any alpha. The risk here is that the Chinese government fails to do what it intends, or the Australians or Brazilians are truly stupid and destroy their own profits by oversupplying the market. I am very interested in predicting the long term price dynamics 10 and 20 years down the line as well, but I have a lot more research to do to take a stab at that.
Massive Cyclicals Euphoria [View article]