Those two charts are basically measuring the same thing: as the amount of margin available in your brokerage account is a constant fraction of the value of your account, then predictably the two move in locksteps. Kind of like your shadow runs when you run and is at a standstill when you are. So yes, correlation is close to one. Explanatory power is close to zero. I'm afraid it's actually zero.
Everything's Down Today - Where Did All The Money Go? [View article]
Agreed on Gold and silver. Not sure about stocks: what you are describing is one potential outcome, not the most likely if you ask me. I would anticipate at best a flat line for stock prices, all the potential positives being already baked in current prices. I agree on the idea of nominal rates rising being a normalization and not a negative development: real rates remain unchanged when deflationary expectations subside and nominal rates rise accordingly.
Is Lowering The Real Interest Rate The Solution For The U.S. Economy? [View article]
Antonio,
When the market expects deflation, real interest rates are pretty high even if nominal rates are low. If the market expects 2% deflation, 10 year real interest rates are about 4% (2.04% US Treasury yield PLUS 2% DEflation rate). When risk aversion rules, return OF capital invested displaces return ON capital invested, hence negative yields on safe assets and zero risk investment, so GDP contraction and self fulfilling downward spiral. Take a look at Irving Fisher's work on balance sheet deflation.
Silver: Is This The 'Last' Decline? [View article]
Antonio, Behavioral finance explains some of this: investment decisions based on emotions and opinions or beliefs rather than research and due diligence. Check out Mark Dow's website "Behavioral Macro". Also Nassim Taleb's books (Black Swan, Fooled by Randomness). Recency bias (Gold's cheaper than yesterday, let's buy!), Confirmation bias (Faber and Rodgers share my opinions, so they must be right and so am I). These guys will bet their bottom dollar on hyperinflation, no matter what. When Mr.Market tells them otherwise, then it's manipulation by the wicked banksters and the evil monkeys from the Fed.
Silver: Is This The 'Last' Decline? [View article]
Nicely put. And so true. The author threatened me with a "gold rally that would rip my face off" as I mentioned I shorted gold way back in November 2011. I still hold that short gold position, it works nicely thank you very much and I have yet to see that rally...
Falling Commodity Prices Could Burst The U.S. Farmland Bubble [View article]
Why advocate an indirect short-grain through stocks when one can short grain directly on futures? Better liquidity, negligible transactions costs, 15% CGT, low margin requirements. What's not to like in using futures rather than stocks? Besides, difference between gold and grains is that tens of millions of people have been lifted out of poverty and will switch to higher protein diets, therefore a structural shift to a higher demand for grains, unrelated to a misguided inflation play, which I agree created a bubble in gold.
A Hard To Call Bottom In Gold And Miners: Strategy Going Forward [View article]
Right you are! Two positions in the Goldistas's minds: Raving (Gold up) Whining (Gold down). Thinking has been outsourced to the usual "experts" (Schiff, Rodgers, Faber, Sinclair etc.. -all of them eerily quiet now-)
It's Official: Gold Is Now The Most Hated Asset Class [View article]
Best part of the article is "We're not really big fans of conspiracy theories" but all of the article is "they hate my beloved gold" and "they're all out to get us"... lol Why would anybody "hate" an asset class? or "love" it, for that matter? I love or hate nothing in finance. I buy and sell. Emotional investing is an expressway to the poorhouse.
Digging Into The First Quarter Gold Demand Report [View article]
"...central banks are the most informed players on the market and know what they are doing". Good luck with that. You'd be surprised if you knew them from inside. What we publicly know is that they sold at $200 in the late '90s and bought at $1,700 in 2011-2012, so nice track record.
How Quantitative Easing Leads To Cheaper Gold [View article]
McWop, David,
Good discussion indeed! Refreshing change from the constant Austrian/ZeroEdge drivel typical of SA discussions. Agree on QE goal as pushing toward risky investment by snatching low risk assets (T Bonds) away from the public. My 2 cents is different for the rest though: reserves are not money printed that banks can use to lend, reserves are base money expansion that allows lending at constant velocity. Reserves will never make their way in the economy to be lent. They will stay on the Fed's liability until the Fed sells the bonds or the bonds mature. Velocity crashed, hence no inflation while inflationary public sector leveraging (budget deficit) barely matches deflationary private sector deleveraging (mortgage defaults and shadow banking implosion). Once velocity returns, the Fed can sell the bonds and shrink base money as needed to limit excess lending. It took Mr.Market years (literally) to get it. This created a great trade opportunity as macro tourists were bidding up gold prices anticipating von Mises' hyperinflation. As I said elsewhere, deleveraging took von Mises (and his Goldista fan base) to the cleaners...
Gold is down because hyperinflation expectations linked to central banks balance sheet expansion have not materialized due to private debt deflation: public sector balance sheet leveraging (Budget deficit financed by QE) offsets private debt destruction (mortgage defaults and shadow banking implosion). It took Mr.Market years to understand that. Now that he has, he's marking gold prices down nicely, so your "nice buying opportunity" is the best way to make you end up as the proverbial bag holder. Music has stopped music has stopped period. Get on with it and find something else to do.
Couldn't agree more. Here's how I put it recently. http://seekingalpha.co... But the Goldistas will cling to anything to confirm their bias, be it Chinese housewives buying shiny trinkets...
This Picture Is Worth 1,000 Words [View article]
Kind of like your shadow runs when you run and is at a standstill when you are.
So yes, correlation is close to one.
Explanatory power is close to zero.
I'm afraid it's actually zero.
Everything's Down Today - Where Did All The Money Go? [View article]
I agree on the idea of nominal rates rising being a normalization and not a negative development: real rates remain unchanged when deflationary expectations subside and nominal rates rise accordingly.
Is Lowering The Real Interest Rate The Solution For The U.S. Economy? [View article]
When the market expects deflation, real interest rates are pretty high even if nominal rates are low. If the market expects 2% deflation, 10 year real interest rates are about 4% (2.04% US Treasury yield PLUS 2% DEflation rate).
When risk aversion rules, return OF capital invested displaces return ON capital invested, hence negative yields on safe assets and zero risk investment, so GDP contraction and self fulfilling downward spiral.
Take a look at Irving Fisher's work on balance sheet deflation.
Silver: Is This The 'Last' Decline? [View article]
Behavioral finance explains some of this: investment decisions based on emotions and opinions or beliefs rather than research and due diligence.
Check out Mark Dow's website "Behavioral Macro". Also Nassim Taleb's books (Black Swan, Fooled by Randomness).
Recency bias (Gold's cheaper than yesterday, let's buy!), Confirmation bias (Faber and Rodgers share my opinions, so they must be right and so am I).
These guys will bet their bottom dollar on hyperinflation, no matter what.
When Mr.Market tells them otherwise, then it's manipulation by the wicked banksters and the evil monkeys from the Fed.
Silver: Is This The 'Last' Decline? [View article]
The author threatened me with a "gold rally that would rip my face off" as I mentioned I shorted gold way back in November 2011. I still hold that short gold position, it works nicely thank you very much and I have yet to see that rally...
A Hard To Call Bottom In Gold And Miners: Strategy Going Forward [View article]
Never been to KFC.
Not sure I'm "cool" but I'm more like Ruinart Millésimé when it comes to celebrate.
Falling Commodity Prices Could Burst The U.S. Farmland Bubble [View article]
Besides, difference between gold and grains is that tens of millions of people have been lifted out of poverty and will switch to higher protein diets, therefore a structural shift to a higher demand for grains, unrelated to a misguided inflation play, which I agree created a bubble in gold.
A Hard To Call Bottom In Gold And Miners: Strategy Going Forward [View article]
Thinking has been outsourced to the usual "experts" (Schiff, Rodgers, Faber, Sinclair etc.. -all of them eerily quiet now-)
Silver: Is This The 'Last' Decline? [View article]
The True All-In Cost To Mine Gold: Complete 2012 Figures [View article]
It's Official: Gold Is Now The Most Hated Asset Class [View article]
but all of the article is "they hate my beloved gold" and "they're all out to get us"...
lol
Why would anybody "hate" an asset class? or "love" it, for that matter?
I love or hate nothing in finance. I buy and sell. Emotional investing is an expressway to the poorhouse.
Digging Into The First Quarter Gold Demand Report [View article]
You'd be surprised if you knew them from inside.
What we publicly know is that they sold at $200 in the late '90s and bought at $1,700 in 2011-2012, so nice track record.
How Quantitative Easing Leads To Cheaper Gold [View article]
Good discussion indeed! Refreshing change from the constant Austrian/ZeroEdge drivel typical of SA discussions.
Agree on QE goal as pushing toward risky investment by snatching low risk assets (T Bonds) away from the public.
My 2 cents is different for the rest though: reserves are not money printed that banks can use to lend, reserves are base money expansion that allows lending at constant velocity.
Reserves will never make their way in the economy to be lent. They will stay on the Fed's liability until the Fed sells the bonds or the bonds mature.
Velocity crashed, hence no inflation while inflationary public sector leveraging (budget deficit) barely matches deflationary private sector deleveraging (mortgage defaults and shadow banking implosion).
Once velocity returns, the Fed can sell the bonds and shrink base money as needed to limit excess lending.
It took Mr.Market years (literally) to get it. This created a great trade opportunity as macro tourists were bidding up gold prices anticipating von Mises' hyperinflation.
As I said elsewhere, deleveraging took von Mises (and his Goldista fan base) to the cleaners...
Gold And The Yen [View article]
Music has stopped music has stopped period. Get on with it and find something else to do.
Screaming 'Bear Market Rally' [View article]
Here's how I put it recently.
http://seekingalpha.co...
But the Goldistas will cling to anything to confirm their bias, be it Chinese housewives buying shiny trinkets...