E.D. Hart

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147 Comments

    • Sun Mar 2nd 18:22 PM | Rating: 0 0
      Commented on:
      Portfolio Theory Vindicated
      Goeff,
      Fantastic article that I will share with my clients.
      1) Going forward, do you do a macro forecast and take into account inflation increasing?

      2) What about adding allocations to more pure play commodities such as 5% allocations to GLD, SLV, and DBA?


      3) Have You read "Strategic asset Allocation and Commodites" commissioned by Pimco and conducted by Ibbottson (March 2006)--it makes a case for much higher allocation to commodities than is traditional--greater return and lower risk.
      View article »
    • Sun Mar 2nd 18:05 PM | Rating: 0 0
      Commented on:
      Gold and the Dollar: Value is in the Eye of the Beholder
      User 149022:

      I visited the site, as you suggested, and it corroborated the article above, which I am mostly in agreement with.

      Perhaps you could elaborate what I missed?

      Depending on who you talk to, the US GOV. has $53 trillion dollars of unfunded liabilities. To raise this money, Politicians (and the FED) can raise taxes, or they can borrow against future taxes, or they can INFLATE.

      Guess which one is least painful in the short term (and insidious) and most painful in the long term?

      The dollar has shown remarkable resiliency over the last 35 years because it is a global reserve currency--essentially transacting 85% of global transactions between nations at one point.

      This is unwinding as we speak, and will take another two decades to do so. The result is the silent ravenges of inflation is the transfer of wealth from paper asett holders to those with future liabilities--governmen...
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    • Wed Feb 27th 15:11 PM | Rating: 0 0
      Commented on:
      Too Much Money Chasing Too Few Commodities
      Its worth noting that the president and his administration has been very, very confident about a lot of things.
      View article »
    • Tue Feb 26th 16:30 PM | Rating: 0 0
      Commented on:
      Saut: Pharma, Gold Still Have Plenty of Upside; Financials Don't
      It depends on what you use for your inflation calculations--if your use 6-8% inflation for the last 28 years as is the most likely (not government published data), then we are about one quarter the way to golds eventual 4-5K pricetag.
      View article »
    • Tue Feb 26th 16:22 PM | Rating: 0 0
      Commented on:
      Why I'm Not Worried About the Market
      LT--Good points. I dont pretend to know what the future holds. I try to hedge both ways, with commodities, currencies, and quality stocks.

      The reference to Japan was that NO ONE PREDICTED IT, AND AFTER IT HAPPENED, THE CONSENSUS WAS THAT IT WOULD WORK OUT IN A COUPLE OF MONTHS, THEN A COUPLE OF YEARS, THEN A COUPLE OF DECADES. (and still not recovered).

      Ok so were AMERICANS were smarter, bigger, faster, stronger---it cant happen here--seems to be the view.

      It was a reference to human psychology, and how the improbable is discounted, denied, and gradually accepted. The reference to war was the same--people dancing in the streets and the markets reacting positively at first, no idea of what the true shock that lied in wait.

      The US housing market has wiped out $3 trillion worth of homeowners equity, and reliable sources indicate that we will likely see another $3 trillion in homeowner equity destroyed, just as baby boomers are hitting retirement.

      An article in the WSJ today, tucked away in the back indicated the harmful effects of inflation--that by the end of the 70'S the average PE multiple had fallen to 7. That when iflation increases a percent yoy, the corresponding return in markets is miniscule. Others point ot the corporate margins being at all time highs, and can only fall.

      Falling margins, falling PEs, falling homeowner equity--its a perfect storm. (odwn the road next year--higher taxes, higher interests rates) It spells lower markets for some time to come. My own prediction is (since predicting is free) that the DOW will hit 9000 sometime before the end of 2010, when we start to dig out of this hole.

      Your right--we will survive.

      We will be the largest Economy (until 2035) , but maybe not the best run (See Canada, Singapore) nor the highest return (Brazil), nor the most efficient in the use of resources for education and healthcare (two areas we spend way more than other developed countries on average, with much worse results--Im an educator).

      Im optimistic for the future--we will find a way through this crisis, but the shock is much bigger than what people are positioned for.
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    • Tue Feb 26th 02:06 AM | Rating: 0 0
      Commented on:
      Why I'm Not Worried About the Market
      Read "Black Swan" by Taleb. He pretty much demolishes the argument that "we always manage to make it somehow, so this wont be that bad". A Thanksgiving turkey reason that each day he is fed by the farmer he is safe because he has always been taken care of before. THe turkey has no idea of his fate. Ok, just one of many examples in the book.

      In fact, prior to WW1, people were dancing in the streets in London (AND US) as war was declared, with no concept of what the war would extact from the country in blood and treasure. Same for the US civil war. The markets didnt react harshly at frst.

      Countless examples exist of exogenous shocks that people seem to to deny, then ignore, then dig in to wait out, thinking it can't get any worse, and then finally seeing each year getting worse....for years. (Take a look at Japans recent market history--Nikkei still hasnt recovered from 1989)

      We are witnessing the end of the US Dollar hegemony and the unwinding of 30 years + of profligate monetary policy. To say it is all gonna be dandy because it always works out shows little understanding of monetary history. It may be devastating, or it may simply be awful, but it makes sense to hedge your bets and ask "what if Im wrong?"

      Well what if Im wrong? If Im wrong and the housing, financial, and stock markets rebound in a year or two, and we all go back to happyville, then I didnt really lose out because my insurance policy is GG, SLW, XTO, PAL, XES, and other stocks that are about 50% of my portfolio. The rest is blue chips.

      Buy and insurance policy and hedge your bets, and ask "what if your wrong?"
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    • Tue Feb 26th 01:42 AM | Rating: 0 0
      Commented on:
      Platinum is on Fire, Will Gold Be Hot?
      Yep, you pretty much nailed it. Yet, I disagree with your assertion that over the long haul, gold looks superior to the PGM.

      The world has tons of gold in vaults around the world, that no doubt will increase in value over the next decade. But the palladium supplies of the planet are virtually unknown. Whos to say that a palladium rush wont be similar to the rhodium rush that is simply phenomenal? I dont have the answer, but its possible.
      View article »
    • Sun Feb 24th 02:55 AM | Rating: 0 0
      Commented on:
      Commodity Analysts Believe the Party's Over
      When Apple, Google, RIM and others soar year after year, traders, and even investors believe that they must be good investments.

      When asked why, people usually say something about expectations for future earnings growth and a confidence based on the fact that they have gone up in the past. (look at that chart!)

      People often ignore that technology earnings growth rates are priced for higher and higher expectations, until they are priced for perfection, and then a disapointing earnings report sends the stock back to earth. That, and the fact that technology earnings are very cyclical.

      But, when investing in stocks, its a good thing to see a rising upward line.

      However,when commodities soar, people see a correction looming and look for them to fall. (oh my gawd, gold topping at $800, time to sell!)

      I bought gold in every year from 1997 to present, and early on, people everywhere pointed to golds low price as an indicator that gold was a rotten investment, BECAUSE OF ITS LOW PRICE.

      And because it hadnt kept pace with inflation (never that it was undervalued).

      Fast forward to a decade later and the same magazines newsletters and commentators are saying that gold in a bad investment, BECAUSE OF ITS HIGH PRICE. (never that the trend is intact, and its still undervalued)

      Finally, its true there is no published calculation (that Ive seen) exists that can tell you how to compute a given commodities value (unlike stocks where you can compute intrinsic value)--there is nevertheless a pent up demand and a supply that isnt keeping pace, ergo higher prices.

      Look at palladuim and natural gas as two great examples--I dont need to be able to calculate their present intrinsic value, because I cant.

      Everything I know and read points in the same direction---that the current and forseeable future supply isnt sufficient for current and future demand.

      But, its all very imprecise.
      I would rather be roughly right than precisely wrong.
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    • Sun Feb 24th 02:30 AM | Rating: 0 0
      Commented on:
      1970s Style Stagflation? I Don't Buy It
      Gentlemen,
      Im particularly keen to agree with the statements of strutzma--we may be "entering"--... perhaps this is more like 1968 than it is 1974, and that we have anther, oh, lets say, 15 years of higher inflation ahead of us.

      Why have we had such high rate of growth in the money supply, but such little apparent inflation until recently? Two reasons (1) globalization has absorbed much of those excess dollars in currency reserves and global trade, particularly by the Chinese, and (2) the US government supplies bogus inflation data that is beset with fudge factors to make the number come out right.

      Agree or diagree with Soros' politics, but I'm inclined to believe him when he says we are entering a new era of the decline of the US Dollar hegemony. Already petrodollar nations are looking for ways to diversify out of the US currency, and this is likely to happen incrementally, between nations at first, and in larger market later. When the world no longer needs our dollars to purchase oil, this will accelerate the decline of our currency.

      But it may take a decade, or two.
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    • Sat Feb 23rd 04:30 AM | Rating: 0 0
      Commented on:
      Commodity Analysts Believe the Party's Over
      "Expectations arbitrage" is the way to make money here.

      Furthermore: the fact that markets act to substitute commodities keeps some rising when others drop. (that is some commodities are undervalued with respect to others)

      If oil does drop to $ 80, I would still expect natural gast to rise north of $12 mmbtu based on equivalent heat value. (not drop)

      or look at the substitution of palladium for platinum...if platinum falls 10% (possible) from $2200 to $1980 (roughly), I would expect palladium to increase from its current $510 per ounce or so (havent checked today) to between $700 and $900 per ounce.

      The expectations are just that...expectations..a... a wonderful way to arbitrage what the market expects and is signaling in todays prices, with what is a likely future outcome, based on substitutions and historical patterns, that results in higher prices, given a sufficiently long time horizon.
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    • Thu Feb 21st 19:44 PM | Rating: 0 0
      Commented on:
      GMO: Stocks Will Lag Historical Average for Next 7 Years
      Why don't they include commodities? (other than timber)
      View article »
    • Thu Feb 21st 19:30 PM | Rating: 0 0
      Commented on:
      Thursday Outlook: The Inflation Con Game
      I'll stay away from the political banter and focus on something else the media almost all get wrong.

      For the record: Shadow stats is a legitimate and respectable website that I have much confidence in. In the governments cpi figures:none

      Humor me and estimate something: how much have prices increased--for real--since 1980? Then apply this back of the envelope calculation to gold, oil, silver.

      First: Look at the shadow stats graph of inflation for 1980 through 2008. Look at the SGS alternate line blue) and estimate inflation over that 28 years.

      I get 7% if I'm generous,(give or take, no?)

      That means, roughly, that prices double every 10 years.

      Second, take the high for Gold in 1980 ( chose 850, or 875).

      Third, project, (always dangerous) to the end of 2009. Thats 30 years from 1980 to 2009.

      30 years divided by 10 years to double and you have three doublings which equals--up by a factor of 8. Yikes!

      Fourth, take 8 times 850 and you get $6800 for gold/ounce or if you prefer 8 times 50/ ounce for silver and you get $400.

      I don't pretend to predict what will happen--I'm aware of multiple faults in my methodology--I'm merely stating what is possible, given the current environment. People aren't panicked because theyve been lied to, and the media isn't savvy or courageous enough to report it.

      But the tsunami of dollars that are circulating in the world will eventually hit our shores (as US Dollar loses its reserve status ever so gradually) and we will see much higher inflation for a decade or more. That is a prediction.

      Interesting eh?
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    • Thu Feb 21st 19:02 PM | Rating: 0 0
      Commented on:
      Inflating Our Way into Recession
      Some investors are empirical and skeptical, constantly question themselves, and look at the data daily or weekly , and are constantly on the lookout for changes that may put their investments at risk. Or where they may gain.

      Some investors are more ideological,(or subject to Platonicity, as Taleb would say) and have a theory worked out about how the world should behave, and invest accordingly. In my experience, they are usually quite outspoken, and highly confident.

      Guess which is worse for your portfolio?
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    • Thu Feb 21st 18:49 PM | Rating: 0 0
      Commented on:
      Reviewing John Mauldin's Economic Cycles Chart
      We shouldn't listen to the popular "wisdom" of the crowds: houses never decline in value, and commodities are at a peak....riiiiiiiiiiigg...
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    • Wed Feb 20th 20:14 PM | Rating: 0 0
      Commented on:
      Big Oil's Big Problem: Time is Running Out
      Or how does, "Im just a simple soldier, and I hope a good one" (Indonesian Dictator) resonate with, "Were just an Oil company, meeting Americas energy needs" (XOM).

      I'm a die hard capitalist, with libertarian leanings, to a point...but is it off topic to mention that the US Governments preoccupation with the Iraqi war, the Afgahistan war, the War on Terror, and whatever the next war may be...has extracted an incredible opportunity cost on the American taxpayer. Let me explain: we blew a chance to have a Manhattan Project for Energy--because we are spending 1 or 2 or 3 trillion dollars for decades into the future.

      We've boxed ourselves in a corner...
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