mkreisel

Commodities Will Lead the Recovery - Matt McCall

Some numbers about Germany before the 1923 hyper inflation:

1913 GDP: 52044 million Reichsmark(backed by gold)

1919 National debt: ~180000 million Reichsmark(paper currency)

1922 Reparation terms: 132000 million Reichsmark backed by gold


Between 1914-1918, only 8.2% of German government's expenditures were covered by tax incomes.

Between 1914-1918, Germany mobilized 13.456 million soldiers for the war, out of a total 1914 population of 67 million. KIA amounted to 1.95 million, and perhaps twice that many were wounded, disabled, and mentally traumatized. Government was faced with demobilization and benefit payments to ~11 million veterans.

The Versaille treaty reduced Germany's population from 67 million prewar to 51 million and its territory by a third. Combining these two factors, Germany's GDP in 1922 would have been much lower in real terms than 1913.


Weimar government was also under constant assaults by internal and external elements:
- In 1920, Wolfgang Kapp led a coup d'etat (Kapp Putsch) which the military refused to put down. The coup attempt failed in the face of a government called general strike .

- In 1922, German foreign minister Walter Rathenau was assassinated by nationalist terrorists. The Reichsmark's collapse began after that day.

- In Jan 1923, France occupied Ruhr region, Germany's industrial heart, to force payments of reparations. This event gave the final push to hyper-inflation.

Commodities Will Lead the Recovery - Matt McCall

Gold should do fine in extreme situations, regardless of deflation or inflation.

But I'm wary of GLD. The prospectus says its gold is supposed to be locked up in vaults at several big banks (JPM and HBC are mentioned). But has the amount of gold ever been independently audited?

After the Maddoff and Stanford episodes, I'm no longer that gullible.

What to Buy and Why: Barron's 2009 Roundtable, Part I

Eli, did you read the score card at all? Some of them made big money last year, contrary to your "let's see - it doesn't look like any of them made money in 2008"!

MARC FABER'S Picks:
Company Ticker 1/4/08 12/31/08 Change
Currency Pair Trades
Short the British pound/Buy the Yen £1=¥211.97 £1=¥131.99
Short the Euro/Buy the Yen €=¥160.09 €1=¥126.70
Buy the U.S. Dollar/Sell the Euro €1=$1.47 €1=$1.40
Investments
Short: Emerging Markets
Buy: ProShares Short MSCI Emerging Mkt. EUM $75.40 $78.60 4.2%
Short: iShares FTSE/Xinhua China 25 Idx FXI 54.54 29.09 -46.7
Buy: ProShares UltraSht FTSE/Xinhua China 25 FXP 82.51 35.35 -57.2
Buy: iShares MSCI Japan Small Cap ! SCJ 49.94 39.95 -9.8
Short: DryShips DRYS 73.17 10.66 -85.4

FRED HICKEY'S Picks
Company Ticker 1/4/08 12/31/08 Change
SPDR Gold Shares GLD $85.13 $86.52 1.6%
Agnico-Eagle Mines AEM 57.93 51.33 -11.4
CURRENCY PAIR TRADE: Long
CurrencyShares Jap Yen Tr FXY $92.11 $110.09 19.5
CURRENCY PAIR TRADE: Short
British Pound £1= $1.97 £1=$1.46
Short (Buy Puts)
Research In Motion RIMM $103.35 $40.58 -60.7
Amazon.com AMZN 88.79 51.28 -42.2

FELIX ZULAUF'S Picks
Company Ticker 1/4/08 12/31/08 Change
Short
Consumer Discretionary SPDR XLY $30.84 $21.57 -30.1%
iShares DJ Stoxx 600 Auto & Parts SXAPEX.Germany €33.27 €19.81 -40.5
British Pound/U.S. Dollar £1= $1.97 £1=$1.46
British Pound/Swiss Franc £1=2.19 CHF £1=1.56 CHF
Long
Gold (per ounce) (spot) $859.60 $882.05 2.6
Sugar (per pound) (Mar '08/Mar '09) 0.11 0.12 9.1
Cotton (per pound) (Mar '08/Mar '09) 0.69 0.49 -29.0

Don't Miss the Coming Gold Bull

Against conventional wisdom, I expect dollar and gold both to go up in a deflation. During this bear market, gold seems to perform the best when there is PANIC going around, not when CPI or PPI are going up.

The gold chart itself is quite bullish, although I'd like to see it holding above the 860 level for several weeks. As for GLD, I don't think you can trust it too much since no independent audit has ever been performed on it. What happens if it turns out to be another scam?