Thomas Noon

Thomas Noon
Contributor since: 2010
Alex --
"Fractures of a percentage point"???
You mean "fractions"?
Give up. You are showing us nothing.
Debt allows leverage on economic activity. No debt means softer economic activity. Debt allows more economic activity to occur -- but only to a limited point where the debt service is a manageable.
Clearly, rational limits on debt were ignored in 2002-2006....trying to spur artificial economic activuty. And nobody should have to learn again and again that artificial economic activity is just that -- not real.
Mr. Wagner --
Nearly every sentence in your article warrants a response. But, it isn't worth that much time.
Just two:
1) "Tail risk" is greatly reduced, a repeat of the global meltdown is highly unlikely.
Announcing that "tail risk" is greatly reduce is like so many other opinion types of pronouncements. Alan Greenspan said in 2005 that "housing prices are not in a bubble, they are warranted by strong economic fundamentals". And BenBernanke said....well, where do I start. If a talking head announces "GDP will be double within 24 months", does that make that occurence any more likely?
2) In spite of QEfinity, inflation is falling rather than going higher. Anemic growth isn't likely to change this anytime soon.
The Roubini states this like it is a good thing. Yeah, that's the ticket; let's print a tirllion dollars per year and control inflation by killing the economy --- and then we can print more dollars to pay for a failing social security system and banking system.
The only "inflation" that is falling is CPI -- a contrivance, not a measure of inflation in basic prices. Has anyone bought gasoline or a Big Mac lately and compared the price against what these daily expenses cost only 5 years ago? No "inflation"??? Please.
Anemic economic activity is exactly what is hiding true inflation. Prices cannot rise when so many people are negative about future prospects, jobs, and America's leaders. It is called low velocity of money.
3) Interest rates are unlikely to go lower, and are much more likely to head higher.
Some more prediction mumbo-jumbo. Things don't happen just because someone with a name or title says it will or won't. Economics is mostly art, not science. There is no magical formula like Bernoulli's equation in economics. Interest rates will not fall further from near-zero? Now, that I'd agree with -- it is "unlikely".
6) Gold is not a currency, and cannot be used as a means of exchange.
I rest my case. This is just pure conjecture and hypothesis. Gold is not a currency? Since when? Yes, you cannot buy a cup of coffee at Starbucks with it --- but try this experiment: walk into any store and talk to the owner and show him a 1/10 gold American Eagle coin and ask if he'd like to take it to settle your account (dry cleaning, pest control, car repair) of $140 and see what he says. (Hint: these coins sell commercially for $175-225 each) Gold is also the only true currency in settling international accounts -- the dollar or yuan or euro being a substitute for it that each change in their exchange rate with gold daily -- even by the minute. How can USDs be called a "currency" and have an "exchange rate" with something that is NOT a currency??? The USD is a currency? Only as long as it is rare and supported by US GDP growth....both of which are becoming less true every day.
Having not read any of the comments that precede me, I risk repating someone, but here goes....
Yes, I am hedged in gold and also own some physical because it scares the hell out of me how precarious the monetary policies and debt accumulation policies have become worldwide --- they call it "the race to the bottom" on the value of paper currencies. If you don't engage in that battle, your exports are destroyed and with it your domestic jobs, then your economy and then the value of your real estate. Once too many nations engage in currency debasement, all must join in to moot these efforts to win the export/import war.
The trends are frightening. Governments the world over are engaged in currency debasement and bribing their citizens to vote for them by raising entitlements to the sky and practicing a form of socialism-by-proxy. If we want to see how that ends, we need only to study Germany 1939 (which led to WWII) or the EU, France, or Italy over the last 30-40 years. Businesses contract to a safe, sane or subsistence level. France has had chronic 17-27% unemployment for decades.
When you get down to the cost of production of gold -- you simply cannot ignore "depreciation" which in mining terms I assume means "depletion of reserves". And you cannot look at periods where the cost of energy doubled or tripled and assume that gold miners are simply spending more to mine because they can (because their CFOs would let them).
It doesn't appear to me that this analysis includes all costs over time. Since gold is meant to be a hedge against inflation, the cost of production must rise as energy and other components of that production must rise with inflation -- in other words, the currency "measuring stick" is shrinking and it takes more dollars/lira/francs/marks to measure the current price (i.e. the exchange rate) of gold.
Gold is not A currency; gold is THE currency. Paper money is fiat currency. Gold is the only currency that cannot be expanded arbitrarily. There is a direct relationship – over longer periods of time, not weekly or even monthly – between the amount of money in circulation and inflation." – Alan Greenspan, Nov, 2010.
Mr. Greenspan spoke Nov, 2010 at a luncheon for investors of Paulson & Co. He was quite candid on his sentiments about monetary expansion, inflation, and gold as a currency. He also acknowledged the recent words of Robert Zoellick: “Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today." Mr. Zoellick expanded those remarks recently: "A new system should…. consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values.”
Mr. Greenspan provided the following background for his thoughts on the lingering recessionary conditions in the United States.
"Investment in illiquid assets is the lowest in this country in 60 years, as long as it has been measured. Few want to invest in buildings or equipment in this environment. Without an uptick in PP&E, our unemployment is going to be chronic. You cannot stimulate your way out of it. Best to do nothing and stop trying to steer the ship this way or that. Just do nothing. Take your hands off the wheel -- and let the system heal."
Here is Greenspan recently in an interview on the subject:
Gold Miners Price/NAV Ratio is lowest it has been in the last decade.
Either they are seriously undervalued or NAVs are over-valued (i.e. gold bullion is overvalued).
Seems like a consensus building here. The author says that gold miners are depleting their own inventory of gold in the ground.
Isn't it the same as saying that JD Rockefeller was a bad investment in oil in 1950 because the company was steadily depleting their oil reserves? Or that a home builder is going out of business depleting his lot inventory?
Most every company that produces a hard product must continuously replace their inventories -- and the low cost producers do that job better than others.
I would.
And, if permitted in your IRA, I might consider leveraging your recovery bet on C by buying some Jan2014 calls and let it ride. There are some pretty credible projections out there for a rise to $48-60 per share within 15 months. for Romney/Ryan.
Holding gold is the last recourse of those who have nowhere else to turn. In times of depression (or quasi-depression marked by high unemployment, negative growth, businesses closing due to lack of customers, banks being held up by gov't, falling asset values), no asset maintains health or value because there are no markets for them.
Is this a recommendation for holding gold? Yes, because there is nowhere else to turn. As more people give up on the diminishing purchasing power of their cash held in T-Bills, they will buy something more tangible. The T-Bill debt is now $40 Trillion and a 1% shift from that to gold would be $400 Billion in gold purchases.....about 5% of the world gold supply.
And, to make matters even worse, there is a chance that BHO could get re-elected and then watch out when he has no re-election concerns to quell his madness.
I did not see the four or the one mentioned in the title.
Are you saying that Apollo and Annaly are buys because they pay a high dividend? Every time I have bought a REIT that paid over a 10% dividend, I soon found out why. The dividend was not high. The price was low, and for good reason.
Go look at Brunham Pacific 1-2 years before they went BK. they were paying 12% dividend because insiders were selling the stock driving down the price.
Thanks, but I just noted your note.
Seeking A doesn't notify writers when they get a message.
You should read all three sections of this report.
It is fascinating the comparisons to today.
"There's a chance that gold will drop whenever interest rates are lowered by the Fed and the market is convinced (rightly or wrongly) of an imminent recovery."
Gold drop if interest rates drop?
That is the opposite relationship that I have read.
Gold prices rise as a multiple of (I-i) where "I" is inflation rate and "i" is 10 year T-Bill interest rates. So long as Fed keeps rates low below actual inflation rate (not CPI, which is a jury-rigged number of political expediency), gold will rise as 6-8 time that spread on an annual rate.
So, the reason that gold may be flat over last 6-12 months is that these two variables are close to one another -- inflation is almost as low as the 10-year T.
But, inflation is muted currently only because the velocity of money is low -- driven by low economic activity and bank account turnover. As recovery kicks in, velocity of money rises, true underlying inflation will reveal itself and, if 10YTB rates are kept low, gold could rise 20% per year or more.
How can major countries ever "cancel" their debt and expect to ever return to the debt markets for 50+ years or more? As it stands, the idiots that are still lending money to governments are being ripped off at 0-1% annual interest rates and they keep buying govt bonds anyway for -- and get this -- "safety". How can someone ever lend more money to entities so awash in debt with no sign of controlling spending -- because "they can always print money to pay me back and my interest payments"????? This is real? This is the logic that we've been hearing. Becaus they can put more ink on plain paper and give it back to me -- plus 1% after those pieces of paper are worth 5-7-9-13% LESS in buying power. It amounts to NEGATIVE interest payments...and yet it continues.
I am blabbergasted that the common saver can be so blind, so naive, so lacking in insight.
Inflation is NOT running at 2.4%. That is a USG manipulated, made-up index for political purposes so that the USG can cheat recipients of social security and other CPI indexed social benefits....and convince some people that inflation is "under control". What is under 5-7% in this economy? Groceries? Only if you manipulate the list of groceries being bought to a list that no real person ever buys -- like bulk rice.
True inflation, based on the USG's own methods of measuring it in 1979 is in the mid teens has averaged about 10% since 2005. Refer to ShadowStats.;t=
I know when GLD prices will peak and fall 10-20%. It is just short of my goal, whatever that may be. I am very good at this and about 90-95% accurate. Things just never reach my goals, falling just short and then falling.
So, I don't have goals anymore. It's a jinx with a thousand knives.
If you have little faith that the printers of paper money will stop, then, over the 3-5 year period for 10-50% of your savings, gold is a good place to be....but just don't have artificial objectives in mind for the next month or year.
Sir -- how can you write so loosely about gold without two basic premises: gold is a currency, and the velocity of money.
Gold is the basis of all other "currencies" and it is improper to say "gold's price is $1650" when $1650 per ounce is merely the exchange rate between currencies.
Also, the real exchange rate cannot be known in times of slow economic conditions -- I.e. A state of low velocity of money. True inflation (rate of change in the exchange rate) is being masked by the low velocity of money and, as the economy recovers, consumer confidence rises and spending increases, this increase in money turnover will reveal the true exchange rate.... Perhaps much higher.
"Legal" tender is not the point. Governments around the world have slowly shifted the prior world of gold and silver currency (and, in some cases, copper, bronze, nickel, etc) to paper currency, first to ease the process of trading across unsafe roads with the PMs, but eventually, a new purpose that governments could create "currency" indiscriminately without regard for mining or buying actual PMs to back the paper currency substitute.
I don't know how many times this conversation must go on. I suppose until the actual day of comeuppance.
When it comes to buying groceries with gold, you will be able to buy groceries ONLY with gold, the gold scales will be at the checkout stands and you won't be able to buy groceries with anything ELSE except possibly in exchange for ammo or guns.
Hopefully, we never get there or we are talking a Mad Max world.
Gold is currency and the only true asset:
It is not surpising at all that gold is high relative to housing.
Housing is down in USD....down to 1991 prices now....a 20 year low in nominal USD while at the same time the buying power of the dollar has plummetted in those 20 years. 20 years ago, you could buy a Fish sandwich, a ten piece McNugget and a small drink at McDonalds for $5.35. In 2001, the price was $7.78. Last month, that same order had risen to $9.96. This order is comprised of a mixture of labor costs, rent, transportation, chicken, fish, Coca Cola, insurance, energy....a mixture of economic components from a across the economic spectrum. That is a compounded erosion of USD buying power of about 3.5% per year....year after year after year. So, this housing low of 1991 means that real housing values have dropped to ONE HALF what they were in 1991.....the bottom of a severe housing recession.
Gold is a CURRENCY. You cannot get lost trying to compare it against the price of oranges or tin. If the exchange rate between the British pound and the USD chnaged by 25% over a year would you call either of them "too high" or "too low"? No, you'd just say that this is the market exchange rate. If you think the British Pound is too strong relative to the USD, then sell the pound short and buy some USD with the proceeds.
But, like the "price" of gold (which is just the world consensus exchaneg rate with the USD), if you short one currency and go long another, you better be deeply informed on the underlying reasons for world currency traders and import/export companies valuing the pound/USD the way they are.
Nobody would call it "speculation" when a changed exchange rate between two world currencies occurs. And, gold is just another currency...the world's oldest.
"Gold and guns"?
You forgot to assail those crazy bible clingers.
Sometimes, a person's politics shines through as opinion.
This article is not uncompelling to me. See my longer comment below.
You can measure relationships between any random things by dividing to calculate a ratio....but this doesn't constitute "analysis".
The DOW components have change over time. The USD as a measuring stick of either gold or the DOW is highly suspect because it is a measuring stick that can be arbitrarily stretched or shrunk by political will.
In 1950, you could buy the median home in the U.S. with 100 ounces of you can buy the median home with about 108 ounces. So, realtive to housing, gold is undervalued at $1565. But, the home has changed in character and quality -- so can we use the price of a home to measure gold?
But, we cannot use the USD to measure the value of gold -- we should be using the price of gold to measure the value of the USD.
Exactly. No, the measuring stick is highly fungible, fluid, and fanciful.
No mention here that the measuring stick, the USD, is not a standard metric with which to measure the DOW, the price of corn, or gold. Gold is the unchangeable constant here and the DOW (including ALL of it's 30 component companies) and the buying power of the USD changes constantly. You might as well be comparing the price of gold to the grains of sand on a beach where it piles up and gets washed away based on storms and erosion. The whole exercise of using the USD to measure gold and the DOW is missing the point. The relationship to measure is the fiat money supply vs GDP vs the "nominal" price of gold (I.e. The exchange rate of gold vs the USD modified for the increase in national wealth). What results is a measure of the value of the USD -- not the "value of gold".
In the last 30 years alone, the average price of a home per SF has risen - measured in USD - 5-7 fold. We then say that the house is too "high" but should be looking at both the measuring stick, the USD. Why isn't the author analyzing the measuring stick -- he assumes it and the DOW are standards or at least that the DOW/USD is a reliable ratio....I.e. Changing along a straight-line based only on "innovation and human progress"....implying that the DOW is the only thing that is going up and that the purchasing power of the USD is not plummeting at times during high "M2/GDP" periods. In Argentina, the devaluation rate of their peso is 20% per year......and is based on the ratio of money supply to other staples and the GDP in Argentina. This devaluation process in the US should be 20-30% per year in the US about 2005-2006. Starting at a 2005-2006 price of $500, that gives a nominal price of gold today of $1200-1850 and, not surprisingly, gold is at $1560 right now, in the midrange.
But, the USD printing and accumulation of US debt both continue. So, 2012 should be another 20% $1450-2200. Average: $1825. Plus or minus $375 depending on about a dozen unpredictable factors worldwide.
Not to be argumentative, but gold IS a currency. It is not a commodity and is not a "store of value". Go into any car dealer and try to exchange 10 Vienna Phils for a $16,000 car and see what happens. The owner will show up and look at your "money" and take it. Try using one of them to buy a $1600 rifle or 20 of them to buy a 2009 Infiniti G37S.
I have done all of these -- the owners of these things that are for sale were only too happy to take my gold Phils.
Gold is currency in all definitions of the term.
Yes, the exchange rate varies more than usual, but you can buy any paper currency with gold Phils or American Eagles in any major city in the world.
So, I guess you don't go for the "peak oil" theory where less new discoveries have been made each year since 1975 or so.
Why would a XOM guy complain that speculators are making his product's price rise too much? Maybe this is like Warren Buffett complaining that he doesn't get to pay enough taxes -- purely political. Maybe Mr XOM wants to blame someone else for the fact that oil has doubled since Feb 2009 when Obama entered the picture?
But, so has gold. Doubled since March 31, 2009 from $900 to $1800. Since most gold is sold and the money goes back into gold, it's not that surprising that oil and gold would rise in tandem.
When a Warren guy or XOM guy are talking like it makes them unhappy to have more money -- and they both have been working like dogs since they were 12 to accumulate it -- me thinks they are saying it just for political purposes.
I am not shorting gold or oil.
So, Phil, you don't go for the "peak oil" theory where each year less new discoveries are being found?
Yes, gasoline has doubled at the pump since January, 2009 (Obama's debut), but so also has gold from $900 to $1800. And, since most oil sells end up being stored as gold, the parallel rise in these two does not surprise.
You've made quite a lot out of one comment from the XOM guy...but why does an oil seller complain (apparently) about the price of his product?
He can always just sell his products for less -- nobody would stop him.
It's like Warren Buffett (Mr, "I don't pay enough taxes"). Warren is free to send $1 Billion each month the the U.S. Treasury. Nobody will stop that either.
When the headlines being preached by an XOM guy or a Warren guy don't fit their actions, they are saying it purely for political purposes. Do you suppose that it is a strategic move to blame high gasoline prices (lowest in the world, by the way at $3.60 per gallon) on someone other than himself???
Not someone who had bought physcial PMs and other gold/silver equities. But, then, if 50-80% were living in cardboard boxes, why didn't the gubemint nationalize all the empty houses and turn them into Section 8 gubemint subsidized units. That would be their approach, if the past is any indication. (Is my total disgust for government by government showing?)
I know that "living in cardboard houses" was just a figure of speech, but, continuing with that thought, anyone not living in cardboard better have some guns &ammo to protect their warm home and gold.....or get a home far, far from major urban centers.
So, your July call of "QE3 inevitable" has cooled somewhat?
Down days like this one?
Yes, sometimes it appears to me that when the market goes down too violently (like DOW down 200+ points), it will take gold with it -- like in fall of 2008. But, that appears to be a liquidation driven by a need to exit margin and/or fear that what goes up must come down. But, soon after, money flows go into gold and it recovers.
One person observations.
Interesting. And possible on to something.
Gold is unique among all substances in that it will not combine with others to form a compound -- why it will not corrode.
What is this asset class? Why is it different from the rest of precious metals or other rare, highly sought things like diamonds, emeralds, etc? If you've found an element that is on the periodic chart but doesn't belong there, what are it's characteristics that qualify it as a "non-element" or rather a non-element not made up
of things on the periodic chart that deserves it's own chart?
Or, alternatively, why will it be split from other "precious metals" and evolve into a world where we talk about "gold and precious metals" and not "gold and other precious metals"?
Comparisons to 1929-1939 seem misplaced -- unless you want to start predicting that WWIII is coming 10 years after 2008. The misery of 1930-39 caused WWII, created a political environment of blame, persecution, unemployment and thuggery that ultimately waterfalled ("waterfell?") into WWII. After that, the value of the Deutsche Mark was as worthless as newsprint, gold coins were sown into pockets, 60 million people died (25 million of those just in Russia) in a world population of about 2 Billion and people fled for their lives. Is this what is being predicted here? You can't pick and choose your effects from a cause saying that history repeats only portions of itself.
OR....the banks would charge higher interest rates to try to measure the value of this currency hedge. The borrowers would be left with trying to figure out if 5% interest on a Hungarian-monetized loan were better or worse than a 7% interest rate on a Swiss -ranc-monetized loan.
"By letting those with mortgages pay back their debts denominated in foreign currencies at a lower exchange rate, Hungary is basically making banks pay for part of the loan -- not just the debtor with the mortgage."
But, unless the govt also required the banks to lend money under these terms, the Hungarian banks would merely not make loans where they take on the exchange rate risk; they would not make these kinds of loans in currencies they don't trust. Of course, of the loan were in a stable currency and the Hungarian currency were devaluing, then the bank is better off....their mortgage payments are rising (as measured in Hungarian currency). Mortgages are made for 30-40 years in many cases and no bank can predict what can happen to exchange rates in that time.
Gold/USD exchange rate will never be stable over hours or days, not even periods of a year many times. The money supply data is not known hourly and is not used by most buyers to make buy or sell decisions. But, my contention is that the national and world currency supply is a fundamental engine behind the exchange rate. Not to say that the rate can get 10-20-50% above or below that fundamental influence - like it did in 1979-82 and 2002-2007. Those are long periods of oversold or overbought which were driven by other forces like fear of coming money supply growth or building of huge hedgebooks by miners. Had Jimmy Carter won over Reagan in 1980, the debt and money-printing pro-inflation pressures may have driven money supply up and fears of future money supply up further and gold may have gone to $1000 in 1980-81-82....but it would have been a false rise if saner heads took over in 1984.
So, hold gold accordingly....for a period of 1-5 years minimum.