Fundamentals Remain Negative This Week [View article]
As regards markets, the issue is not really so much about whether the economy improves or deteriorates. The issue is whether the market has or has not already factored in the likely deterioration. You may remember Keynes' image: It is not about choosing the prettiest lady, it is about picking the lady that the market as a whole views as the prettiest. So we don't care about what you (or I, for that matter) think, we care about what Mr. Market thinks. With the S&P 500 cut in half, dividend yields above bond yields for the first time since 1958, monetary and fiscal policy in full reflation mode, positioning a portfolio for a deflationary outcome means betting heavily against the impact of policymakers on the economy. Could be right, but unlikely. Today's doomsayers are akin to yesterday's real estate or dot com bulls. Remember "they don't make real estate anymore"? "Tech stocks are a safe heaven against interest rates as they're valued differently"? Not calling a bottom here. I think we're in a secular bear market since 2000, probably ending sometime in 2015 or 2020. My bet (that's what it is, just a bet) is that the bulk of the cyclical bear market (S&P down from 1550 to 750 or so) is behind us. So, upside potential far outweighs downside risk today. We may (35% probability?) undershoot, because that's how markets work. It's worth the risk in my best judgment. Isn't it funny that the "smart money" fat cats invested with Bernie Madoff would bail out now, to the point that Bernie's voodoo finance thingy would implode? If they're smart, then you're right. If they're not so smart, then I may have a point.
I don't think this Ben Stein guy is worth writing a column about. To me, he's just another Kool Aid drinker with an axe to grind and as much credibility as the run of the mill bubblehead. I still remember his statements about the wonderful everlasting boom brought upon us by Wall Street ingenuity and deregulation.
I e mailed that article to myself to reflect on it when we get out of this mess. Typical projection of the last 5 days in the coming 5 years. Plus, talking his own book... Remember the key question: are you short because you're bearish, or are you bearish because you're short?
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.
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.
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.
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...
Gold And Silver Don't Have To Meet Earnings Estimates - Miners Do [View article]
Dear Mr.Wilson, First of all, thank you for taking the time to respond, this is much appreciated. I actually found your article somewhat balanced and measured, despite your pro gold bias. I am disappointed that this latest post of yours spoils the party. A few clarifications: 1) The IMF could not care less holding an extra ounce of this: what it holds is the legacy of its foundation in the 1940's. I hope you are aware that they sold (SOLD) part of that stuff back in 2009 (403 tons) See http://bit.ly/IUPujD
2) As to gold as Tier 1, that is the funniest part of the goldbugs' gospel, which refuses to die despite its complete nonsense. Tier 1 is a classification of Capital, as in "shares issued". So Tier 1 is a classification of the LIABILITY side of the balance sheet (internal liability, in that case). Gold is an ASSET, like a claim or a property (building, equipment, car, cash, stocks owned). Tier 1 does not apply to assets: it rates the quality of banks CAPITAL. So that silly legend of gold being part of tier 1 was floated about 18 months ago by a gold shill lacking basic understanding of accounting who misread the FDIC position paper on capital adequacy. It has spread among the believers, as they are anxious to swallow anything confirming their bias, be it a total absurdity such as this one. So if this is what makes you think that the argument is closed, then think again.
3) Regarding the 5000 years, for 5000 years humanity treated TB with herbs and people died until Fleming came up with penicillin. We accepted penicillin even though it departed from a 5000 year old practice.
4) Lastly, I don't have a view on gold, I actually don't have a view on any financial asset. Gold to me is just an asset class, which I find attractive in certain circumstances. Just not when it recorded double digit price gains for 12 years in a row on misguided hyperinflation expectations. Regards,
The Federal Reserve: Banks 'Experienced Stronger Demand' For Loans In April [View article]
Hope your expectations are fulfilled. The problem with those qualitative surveys is that they are a poor indicator of Fed policy adjustments. See Beige book for instance. Re-read old beige books and look at subsequent FOMC minutes and decision: correlation is zero. Totally random.
Trying to Read the Stock, Bond, Commodity Tea Leaves [View article]
Fundamentals Remain Negative This Week [View article]
You may remember Keynes' image: It is not about choosing the prettiest lady, it is about picking the lady that the market as a whole views as the prettiest. So we don't care about what you (or I, for that matter) think, we care about what Mr. Market thinks.
With the S&P 500 cut in half, dividend yields above bond yields for the first time since 1958, monetary and fiscal policy in full reflation mode, positioning a portfolio for a deflationary outcome means betting heavily against the impact of policymakers on the economy. Could be right, but unlikely.
Today's doomsayers are akin to yesterday's real estate or dot com bulls. Remember "they don't make real estate anymore"? "Tech stocks are a safe heaven against interest rates as they're valued differently"?
Not calling a bottom here. I think we're in a secular bear market since 2000, probably ending sometime in 2015 or 2020. My bet (that's what it is, just a bet) is that the bulk of the cyclical bear market (S&P down from 1550 to 750 or so) is behind us.
So, upside potential far outweighs downside risk today. We may (35% probability?) undershoot, because that's how markets work. It's worth the risk in my best judgment.
Isn't it funny that the "smart money" fat cats invested with Bernie Madoff would bail out now, to the point that Bernie's voodoo finance thingy would implode? If they're smart, then you're right. If they're not so smart, then I may have a point.
Ben Stein Watch: November 30, 2008 [View article]
Can You See Apple Under $60? [View article]
Typical projection of the last 5 days in the coming 5 years. Plus, talking his own book... Remember the key question: are you short because you're bearish, or are you bearish because you're short?
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.
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.
The True All-In Cost To Mine Gold: Complete 2012 Figures [View article]
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.
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...
Short Gold For The Long Haul [View article]
Gold ETF Sees Its Biggest And First Inflow In 2 Months [View article]
Gold And Silver Don't Have To Meet Earnings Estimates - Miners Do [View article]
First of all, thank you for taking the time to respond, this is much appreciated.
I actually found your article somewhat balanced and measured, despite your pro gold bias.
I am disappointed that this latest post of yours spoils the party. A few clarifications:
1) The IMF could not care less holding an extra ounce of this: what it holds is the legacy of its foundation in the 1940's. I hope you are aware that they sold (SOLD) part of that stuff back in 2009 (403 tons)
See http://bit.ly/IUPujD
2) As to gold as Tier 1, that is the funniest part of the goldbugs' gospel, which refuses to die despite its complete nonsense. Tier 1 is a classification of Capital, as in "shares issued". So Tier 1 is a classification of the LIABILITY side of the balance sheet (internal liability, in that case).
Gold is an ASSET, like a claim or a property (building, equipment, car, cash, stocks owned).
Tier 1 does not apply to assets: it rates the quality of banks CAPITAL. So that silly legend of gold being part of tier 1 was floated about 18 months ago by a gold shill lacking basic understanding of accounting who misread the FDIC position paper on capital adequacy. It has spread among the believers, as they are anxious to swallow anything confirming their bias, be it a total absurdity such as this one. So if this is what makes you think that the argument is closed, then think again.
3) Regarding the 5000 years, for 5000 years humanity treated TB with herbs and people died until Fleming came up with penicillin. We accepted penicillin even though it departed from a 5000 year old practice.
4) Lastly, I don't have a view on gold, I actually don't have a view on any financial asset. Gold to me is just an asset class, which I find attractive in certain circumstances. Just not when it recorded double digit price gains for 12 years in a row on misguided hyperinflation expectations.
Regards,
The Federal Reserve: Banks 'Experienced Stronger Demand' For Loans In April [View article]
The problem with those qualitative surveys is that they are a poor indicator of Fed policy adjustments. See Beige book for instance. Re-read old beige books and look at subsequent FOMC minutes and decision: correlation is zero. Totally random.