Tim Price

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.

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.

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&amp;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.

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.

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.

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.