dlaw

The End of Money

Mad Hedge, I think this has very much a "toppy" feel.

If you look at the arguments for gold, there is no reason it should be going down. No reason it should go down in the foreseeable future. That is the stuff bubbles are made of - certainty.

Gold is going down. The federal government is doing all it can to inflate, but gold is going down. Down too much, the logic is destroyed and there may be panic selling. People paying $1000/oz for coins and certainty are not going to be happy at $700/oz.


On Feb 28 10:14 PM The Mad Hedge Fund Trader wrote:

> OP tf Panic buying of gold coins continues to overwhelm coins dealers
> around the world. According to the Financial Times, the US Mint sold
> 193,500 American eagles in the first seven weeks of this year, more
> than it sold in all of 2007 at prices 40% lower. Retail investors
> fleeing paper assets, like plummeting stocks and bonds, are paying
> 5% premiums over face values. The same phenomena is appearing in
> other countries were gold coins are available to the public. Does
> this have a toppy feel to it?

The End of Money

Mad Hedge, I think this has very much a "toppy" feel.

If you look at the arguments for gold, there is no reason it should be going down. No reason it should go down in the foreseeable future. That is the stuff bubbles are made of - certainty.

Gold is going down. The federal government is doing all it can to inflate, but gold is going down. Down too much, the logic is destroyed and there may be panic selling. People paying $1000/oz for coins and certainty are not going to be happy at $700/oz.


On Feb 28 10:14 PM The Mad Hedge Fund Trader wrote:

> OP tf Panic buying of gold coins continues to overwhelm coins dealers
> around the world. According to the Financial Times, the US Mint sold
> 193,500 American eagles in the first seven weeks of this year, more
> than it sold in all of 2007 at prices 40% lower. Retail investors
> fleeing paper assets, like plummeting stocks and bonds, are paying
> 5% premiums over face values. The same phenomena is appearing in
> other countries were gold coins are available to the public. Does
> this have a toppy feel to it?

The End of Money

Thanks for the comment - and all the capital letters.

Too Big to Bail: Lehman Brothers Is the Model for Fixing the Zombie Banks

The author writes:

"The definition of "systemic risk" is when markets are surprised, but these are political distinctions. Repeat after us: "there is no such thing as systemic risk," at least that can be measured scientifically."

I find this to be an absolutely remarkable statement, considering it was made by a person who is obviously so intelligent. To write such a thing, one would have to believe - in essence - that people's behavior never changes or at least that all behavior changes that are economically meaningful exist on a smooth continuum. Unable to deal with reality outside his lovely Gaussian models, he simply calls all that enormous amount of human behavior: "political" and dismisses it. It's no longer part of his world so he doesn't have to deal with it.

The very real, very well-understood *economic* fact is that when the circumstances of people's lives change - when events actually occur in their lives - their behavior changes in a quantized, discontinuoos way - no matter how much they are expecting the change. It's just a fact.

Mr. Whalen may pretend that this doesn't apply to him, but he's living in a fantasy world. So too are the bondholders of our major banks. When that fantasy world cracks, both Mr. Whalen and these bondholders will start to act very differently, very quickly and that will be a bewildering day for them.

What the Treasury Plan Needs: Price Discovery, Writedowns and More

"Price Discovery"???

How about we figure out what the heck these jokers are even trying to sell us first?

Wednesday Outlook: The Credit Addiction

Yeah, let's cut credit card debt by 40%.

Then we can all go live in a cave.

How Did Citigroup End Up in Crisis?

Wait, but didn't Fannie Mae, Freddie Mac and the government do it all?

You're not saying that the nighly-paid management of a private bank is responsible for that bank's fate, are you?

Heresy!

Go for the Gold

This is a FANTASTIC opportunity to short gold.

I wish I had the money to do it.

For obvious reasons, gold will follow oil lower because gold is a commodity. The spike in gold and the euro were excellent opportunities to get short again.

Folks, you have to stop listening to the conventional wisdom on this stuff, because it has been wrong all along.

Roubini Attacks Bailout, But Misses Boat on Regulation

I heard Roubini just two night ago, talking about $120 oil and a falling dollar.

Apparently he doesn't get out much.

Here' is the rule of markets:

There must be a system to audit the traded inventory or the market will collapse from cheating.

That is the most basic truth of markets and anarcho-capitalist fantasies are just that - fantasies.

When people try to create unregulated markets, the results are perfectly predictable: start with the Credit Crunch, next Enron, then keep going back in time to every market crisis there has ever been. You will find unaudited inventory.

The idea that fiat capital is the problem is just silliness.

If it was true, gold wouldn't be headed through $700.

Credit Crisis Review: ARMed for Failure

And not for nothing but Atavist when you call something "trivial," it's best to attach it to a comment which is not itself the most trivial statement on the entire page.

If you don't want to take the evidence from what has happened after Sub-Prime ARMs adjusted after two years and apply it to what may happen when Alt-A Lemon Loans adjust after five years, don't. But all it will mean is that you are ignoring evidence - which may suit you, I don't know.

Credit Crisis Review: ARMed for Failure

I agree with most of what the author's written, except that he makes a fool of himself by continuing this ridiculous "blame the borrowers" story.

The evidence is clear: American banks deliberately and with forethought decided to VASTLY increase the number of poorly-documented mortgages they wrote. To suggest that they were somehow taken advantage of - en masse - is absurd. Borrowers did not hypnotize American bankers. American bankers decided to securitize lots and lots of loans with "broken odometers".

These were not "liar loans," these were "Lemon Loans" - bad product deliberately brought to market with bad information.

Messrs. Akerlof, Spence, and Stiglitz got a Nobel prize in economics for telling us what happens when you fill a market with lemons - and it's not good.