Tim Price

Markets Aren't as Benign as They Look

Not sure what "we guys" like to use as valuations - for the purpose of this piece I'm using purely stock / index level prices, let alone derivative metrics. I'm certainly not talking about homebuilder prices, as the piece itself should make clear. I agree that people will continue eating - that seems a reasonable bet. But with the unemployment rate rising fast in the Anglo-Saxon economies, and with many individuals rebuilding their own balance sheets and savings, I doubt whether personal consumption expenditure is exactly going to knock the ball out of the park any time soon.


On Aug 21 03:33 PM Deepv wrote:

> " the rally is taking valuations back toward those that pertained
> when the world was rolling orgiastically in credit"
>
> the rally has yet to take the S&P above the "panic" selling days
> of early October dude. One issue is the only valuations you guys
> like to use are P/E which is stupid because it uses only a "spot"
> in time earnings and not NORMALIZED earnings. If one looks all these
> crazy P/Es are underpinned by stocks still trading near, at, or under
> book value. If you look at SHLD for example, people scream bloody
> murder about its P/E ratio but fail to see it trades well under adjusted
> tangible book. Another way to look at this: Homebuilders share
> prices PEAKED on say 5x "E". That E was a cyclical peak. One had
> to understand that down the line that "E" would not be recurring.
> When the world prints money, asset prices will rise. In the meantime
> people will be eating and buying stuff; not only in the US but overseas
> where standard of living is rising. I really think everyone has
> lost the plot.

Jon Stewart Takes on Goldman Sachs [Video]

I think Goldman Sachs' staff were the single biggest contributors to the Obama campaign so I think your point is essentially crap.


On Jul 18 03:37 AM Wisdom vs. Information wrote:

> GS is not writing the laws and hiring the bureaucrats that are taking
> away your money and rights-- that would be the politicians (that
> jon stewart supported, BTW). stewart is funny, but he is a symptom
> of the problem

Gold Transforming into a Completely Demonetized Wealth Asset

You misinterpret the meaning of the word 'fiat'. Fiat currency is given its apparent legitimacy by government proclamation. Fiat or paper currency is intrinsically worth no more than the politicians' promises that underpin it. Gold has legitimacy as a currency not least because it has been a store of value for thousands of years, but also because it is the ultimate means of exchange. Alan Greenspan has himself admitted that in extremis, people may shun fiat currency but they will always take gold. The value of gold expressed in fiat currencies will fluctuate. Personally, I'm with Shayne McGuire of the Teacher Retirement System of Texas who recently commented, "I don't think the question really is what is gold worth but what are currencies not worth". We are starting to see the answer to that question, and everybody should care. I'm not trying to sell anything, merely to defend gold from those who put undue faith in politicians.


On Nov 07 11:22 AM jacflash wrote:

> Gold's return versus a properly-managed global stock portfolio is
> paltry. It will continue to be paltry indefinitely, as gold is ultimately
> just another fiat currency. (What is the actual intrinsic value of
> a lump of soft metal? Not much. What's it worth? Whatever a bunch
> of folks like this guy say it is. Who cares?)
>
> Anyone who says otherwise is selling something, including, it would
> seem, FOFOA.

Jon Stewart Takes on Goldman Sachs [Video]

They would have survived without the bailout ? I beg to differ: between July and November last year, Goldman's share price fell by over 70%. And then a brokerage company mystifyingly is allowed to convert to a bank holding company and thus qualify for all sorts of state support. And short selling is temporarily imposed. Sometimes, there are none so blind as those who cannot see.


On Jul 19 05:56 PM spqrusa wrote:

> Why bash GS for its excellent management of employee and shareholder
> value? Their doing exactly what any good company would do in these
> times - watch out for their interest.
>
> Is it their fault that Bush, Obama, most Democrats, and a handful
> of Republicans bailed them out? They would have survived the storm
> without the bailout - hell, it would have further weakened competitors
> if there was no bailout.
>
> The Court Jesters always have a twist that makes themselves look
> humble and self-righteous while they lambast the evil doers.

When Will the Music Stop for Government Bonds?

What's so wrong about intellectual respect for someone worthy of it ? Better, surely, than respect - of any kind - for the banksters and politicians who collectively landed us in this unholy mess. And the exquisite irony is that Mises seems to have suffered the fate of the prophet wholly unloved in his own land. As I tried to make clear, there's the world as it would be under the Austrian School - and the world we actually inhabit. But we can at least dream..


On Jul 30 10:36 AM Ferdinand E. Banks wrote:

> There it is again - adoration of von Mises. Hmm. I begain teaching
> economics in the l960s. I held professorships in a dozen universities,
> probably went to hundreds of seminars presided over by persons from
> every country and corner of the political spectrum, some of them
> brilliant and some hopeless, and read I dont know how many hundred
> articles dealing with macro in 'learned' journals. And so on and
> so forth. I don't remember a single mention of von Mises - although
> I'm sure that there must have been one from the windbags holding
> forth at some of these meetings, and also don't remember any of my
> students wasting my time with talk about 'Austrians'.
>
> Now I hear about him all the time. Of course they might have been
> talking about him at the Club Rendezvous in Vienna's Graben when
> I was in the American army and occasionally visited the place, although
> for the most part I wasn't in condition to know..

When Will the Music Stop for Government Bonds?

A nice idea, but the maths doesn't look like it will work. According to Eric Sprott's data, private ownership of Treasuries is entirely dwarfed by intragovernmental holdings (42% of the market) and foreign holders (28%). Mutual funds come in at just 6% and private pension funds at 3%. I doubt if there is any way on earth that private individuals could possibly replace international institutions. I agree that private savings will and should rise, but there will likely be much better places to park those savings than in return free risk assets such as US Treasury bonds.


On Jul 30 04:14 AM Nick36 wrote:

> Perhaps people in USA will increase their saving rate a lot due to
> lack of economic growth. And they will keep buying US government
> bonds for the foreseeable future. Which might mean that the collapse
> of US bond prices might be a very long way away.
>
> Japan is a good example of that. The Japanese government keeps issuing
> even more government bonds relative to their GDP than USA has been
> issuing until now. And their bond prices aren't collapsing because
> Japanese citizens are saving their earnings like crazy and buying
> Japanese government bonds.
>
> When a country relies on foreigners to fund its deficits. Then such
> funding is insecure. But if the country's own citizens begin to
> save more and buy more of their government bonds. Then such funding
> is secure for as long as the people keep saving. This won't last
> forever. But domestic savers will probably keep buying US government
> bonds longer than foreign investors would.

Jon Stewart Takes on Goldman Sachs [Video]

As a Brit I don't claim specialist knowledge of the US contribution scene. I just hate what I see. And what I see looks a lot like special interest groups buying off politicians. And I'm not letting Washington off the hook (not that I have a vote in the US) - but the explicit-seeming link between Goldman as big contributors and Goldman as bigger recipients (of other people's money) looks and smells extremely rank to me. As Matt Taibbi has written elsewhere, what's most galling about the GS results is that they're being widely attributed to trading acumen as opposed to, say, vast political largesse.


On Jul 18 02:36 PM A. Corinne wrote:

> Are politicians forced to take political contributions? YOU'RE point
> is crap. Don't let Washington off the hook for the part they're
> playing in this Goldman scheme.

The Geeks Shall Not Inherit the Earth

What I get from 'The Origin of Wealth' is the unwise adoption of accepted principles of physics into the nascent "science" of economics. So with hindsight it's not going too far, I think, to suggest that there is a causal relationship between Walras and LTCM - what was the latter if not an object lesson in putting too much faith in (flawed) financial modelling ? And LTCM also works as a case study in "too big to fail" - so having got hugely overleveraged and threatening the stability of the financial system, it was bailed out, or at least allowed to wind down in orderly fashion. Sound familiar ? The largest banks are actually still going, but they don't necessarily deserve to be.


On Jun 22 11:23 AM Ferdinand E. Banks wrote:

> Well Tim, I'm a great teacher of math economics and finance, but
> I'll be hanged if I see the relation between Walras and LTCM. Incidentally,
> I've heard people say that Myron Scholes probably should have been
> a lawyer instead of an economist, while his fellow Nobelite Robert
> Merton could have been a Notel laureate in physics if he had gone
> that way.
>
> What about the fall of LTCM sewing the seeds of the present troubles.
> I don't think that I can buy this, but since Greenspan's bailout
> of those NY banks worked fine, maybe someone thought that bailouts
> were something to always keep in mind if the wolf appeared at the
> door.
>
> By the way, before I forget, this is an interesting article.

Dow 10,000: Show Me the (Real) Money

I'm not saying the sky is falling, merely that given the fundamentals, the US dollar and Sterling will be. In time, hugely manipulated western market government bond prices will be falling, too. But how long it takes us to get there is the trillion dollar (and pound) question. In the meantime, there are, I believe, simply better risk / rewards out there.


On Oct 18 09:19 AM JMBishop wrote:

> Goodness gracious Tim: The sky is falling! The sky is falling!
> I'm not a V shape recovery enthusiast, but neither am I a Chicken
> Little. We are headed back exactly to were we should have drawn
> the line a year ago. That is as follows.
> 1) Allow the too big to fail to fail.
> 2) Allow commodity speculators to create virtual supply and demand.
>
> 3) Allow the "free" market to fail along with the too big to fail
> and the commodity speculators.
> Then the following will happen.
> 1) The real free market will kick in.
> 2) China's export economy will shrink.
> 3) Consumer goods manufacturers will make goods for their own people
> in their own countries with their own labor.
> 4) The labor force at all levels in all countries will be back to
> work.
> 5) Technologies will become the United States' main export and not
> jobs.
> 6) More jobs will then be created for both US citizens and for the
> countries that purchase our technologies.
> 7) Real free markets will create a world trade in technologies and
> wealth distribution.
> 8) This new economy will be fair, prosperous, and sustainable.<br/>9)
> Finally, people like Ambrose Evans-Pritchard will be living in caves.

Dow 10,000: Show Me the (Real) Money

Gold is demonstrably higher today than it was in 1980. But my argument is not that it made sense to buy gold 29 years ago; it is that it makes sense to own some gold now. Equities equally made terrific sense in the early 1980s; but they then enjoyed one of the biggest equity bull markets in history. You are looking at the future by way of the rear view mirror. In any event I'm not recommending gold as the entirety of a portfolio, but rather as a holding to hedge against currency devaluation and default risk. And I'm not anti-stocks; but I am anti-western fiat currencies, for reasons that seem eminently straightforward and transparent to me.


On Oct 19 07:27 AM CLH wrote:

> Somehow Tim you see things different then I do. If you bought gold
> in 1980, you have just broke even. Great investment? No way!!! However,
> the Dow in 1980 was 1000 and its now 10000. I'll take the Dow anyday.

For Market Volatility, Blame (or Credit) the Media and the Internet

I respectfully disagree. There is a fascinating interview on Bloomberg between Tom Keene (if memory serves) and David Goldman of Asteri Capital. Mr Goldman suggests that hedge funds that report on a monthly basis (and that offer their investors regular liquidity) are facing a potential catastrophe of serial liquidation. There are too many crowded trades out there and many hedge funds are sufficiently flimsy in orientation and structure that they can get taken out on a malign tide of redemptions. The "little guy" doesn't have to report to external investors and can more easily weather extreme volatility in price variation. Right now, I think the "little guy" is very well positioned in these markets - provided he or she has the emotional discipline not to panic at noisy price action that moves against them.

Don't Just Do Something, Stand There

I should now perhaps add that there are probably few things worse, in my opinion, than a fiat currency in whatever form. The US Dollar lost 98% of its real purchasing power during the last century. This crisis ends poorly, particularly for taxpayers. Happily for owners of gold, they don't pay taxes, to the extent that there is no government of Gold, and no region of Gold. When will people wake up to the broad theft of the commons that bailing out Wall Street & the City represents ?

Don't Just Do Something, Stand There

Unfortunately, Muffy, you have missed the point of my "headline". I am not advocating that investors "just stand there" - rather, that administrators (your Fed, my Bank of England) just let well alone and allow the markets to do their job. Equally unfortunately, I suspect that neither party will be able to. That leaves us, obviously, to manage our capital and portfolios as best we can ourselves.

The Myth of Gold as an Inflation Hedge

The tone of the piece suggests that investors can EITHER invest in gold (an asset whose value is not contingent on anybody else's ability to pay and which even Alan Greenspan has conceded, in extremis, still represents the ultimate form of payment, while fiat money is accepted by nobody) OR in stocks and bonds, but not both. So much for a balanced portfolio. For sure, speculators seem to have been taking profits (and/or paying for other leveraged losses) in recent weeks by selling gold. But some of us are perfectly happy to own an asset that has been a store of value for over 2,000 years. That puts the acknowledged volatility of one month or even two-and-a-bit decades into a somewhat broader perspective. Particularly when most international banks are probably technically insolvent, and their shareholders should be unsurprised when they are diluted out of existence.