Maximus's Comments

Who Would Buy a Newspaper? Anybody?

Sat, 16 May 2009 17:10:34 -0400

I don't think it is a half bad idea for someone that has an inkling of a decent plan.

You could buy the strategic brands like the NY Times, the Tribune/LA Times, Wash Post. bundle them up as one company and charge for access to a good deal of their web content since these companies provide a great deal of information that the web relies on.

Reverse syndicate content and push APIs to websites outside the umbrella and make money on advertising that doesn't come from your own site.

I have to say I see the end of the "free" internet culture lurking around the corner.

In the context of a protracted economic crisis many private equity firms and owners of digital assets are going to pull the plug on some of these unproductive noncash generating companies.

Goodbye Twitter...

And I also agree with Graham and Dodd. When and if the last newspaper dies, the next day someone will have the great idea of of launching a general, quasi unbiased news and reporting service since nothing like it would exist at that point.

Why This Rally Is Unsustainable

Sun, 03 May 2009 19:11:44 -0400

Your comment about XL Capital is correct. But your overall your comment begs the question posed by the author that the market is rigged, and that it is up on low volume. If your long, have tight stops losses in place. Based on the comment stream, TBT seems like the place to be.

I also find it out of place to insult a very intelligent author by calling him a "basket case" simply because his point of view diverges from your own.

Did you even know what the stock market was when you were 19?
On May 02 02:32 AM InvestBaboo wrote:

> This author is a real basketcase.
>
> XL capital staged a rally to $9.84 from the low digits. To this basketcase
> author this is a 400% unjustfied rally. He would argue "What has
> changed in the fundamentals since March of this year to justify a
> 400% rally?" To those investors who remember seeing XL at 40 dollar
> plus last year it has barely begun to make up for the decline. These
> investors were probably shocked and aghast that a 40 dollar stock
> so quickly ran down to the single low digits in such a short timeframe.
> The same is true with all other equities the author talks about.
> The author forgets that these were behemoths once that were brutally
> punished by the market and have not recovered even to half their
> original value.
>
> "THE MARKET OVER CORRECTED MANY EQUITIES TO THE DOWNSIDE AND NOW
> IS BARELY BEGUN MAKING UP FOR THE OVER CORRECTION." There have been
> significant improvements in the fundamentals that are helping the
> markets now put proper value on these devastated equities. While
> the market will not reward them with their 2008 highs (yet!) the
> market will certainly take them a lot higher than where they are
> today.
>
> It is exactly this "Cup half empty" syndrome that creates suckers
> out of people. People like this author always think they are smarter
> than the market and always try to double guess and/or outsmart the
> market. There is a whole bunch of these sucker authors on Seeking
> Alpha who have caused their readers great disservice by influencing
> them to stay out of this rally. If this author and others like him
> had simply followed charts and then came up with a rationale to justify
> why the markets were rewarding the equities perhaps they would not
> only be wiser but also richer.
>
> As for the author finding faults with the technical parameters of
> this rally there are thousand other analysts who will look at the
> same data and argue otherwise. At the end of the day the markets
> rule and investors are wise to follow the trend till the bend at
> the end.

A Third Way in the Current Inflation / Deflation Debate (But It's Even Scarier)

Sun, 19 Apr 2009 11:01:36 -0400

Great article Cam. You are far and away one of the best, most-insightful writers on SA. Thanks for your contribution.

Goldman Sachs Top Ticks the Market

Wed, 15 Apr 2009 08:19:12 -0400

At least his comments are interesting...

On Apr 14 08:26 PM Jorb wrote:

> Spammer. He cut and pasts the same garbage line for line from a template
>
>
> www.google.com/search?...;hl=en&filter=0
>

The 15 Most Cash Rich Companies

Thu, 19 Mar 2009 14:23:22 -0400

Great article and great comments.

I agree about the technology companies and the downside in a shrinking economy. I looove Apple but just can't buy it. Google is the only safe bet of the bunch due to its near-monopoly status in a growing market.

Given the inflationary course clearly being pursued by the Fed, I think it is time or the time is soon to come when cash is no longer king and we need to get everything out of greenbacks and into investments that will maintain their value in an inflationary context.

My main concern right now is finding companies -- in addition to natural resource ETFs and stocks -- whose market value will rise along with inflation and a declining dollar.

These companies should possess wide-moats (near monopolies or with strong competitive positions), easy-to-understand business models, high ROEs, low business risk and low debt (all Buffet/Morningstar critieria).

I have just begun this exercise using Morningstar data by screening Morningstar's wide moat, low business risk, five-star stocks (stocks with a large margin of safety) but have not yet examined cash, debt, debt-to-equity ratios, ROE, etc.

One extremely interesting company is Landstar System (LSTR).

Here is the list of other wide moat companies that I will examine for ROE, cash and debt levels (note there is some overlap):

Procter & Gamble Company PG
3M MMM
Abbott Laboratories ABT
Alcon, Inc. ACL
Boardwalk Pipeline Partners LP BWP
Buckeye Partners, L.P. BPL
Campbell Soup Company CPB
Coca-Cola Company KO
Colgate-Palmolive Company CL
ExxonMobil Corporation XOM
Fastenal Company FAST
International Business Machine IBM
John Wiley & Sons, Inc. JW.A
Johnson & Johnson JNJ
Kinder Morgan Energy Partners, L.P. KMP
Magellan Midstream Partners, L.P. MMP
Medtronic, Inc. MDT
Microsoft Corporation MSFT
McDonald's Corporation MCD
Novartis AG NVS
PepsiCo, Inc. PEP

Comments about these companies very welcome...

On Mar 15 12:33 PM MDLGTO wrote:

> Good starting point. I agree with other posts that cash flow per
> share would be a helpful measure AND that Net Cash/Debt is more important.
>
>
> With regard to specific stocks:
> AAPL garners a majority of revenue from Laptops and Ipods (macworld
> pie chart www.macworld.com/artic...)
> -IMHO these sales will evaporate along with other consumer disc.
> purchases. I think will crash hard. AND without Jobs, even more so.
>
>
> MSFT, as noted, cash rich for a long time--have really not gotten
> any traction with new products svcs-dependent on win/office. Some
> possible good news is that I THINK that companies will prefer to
> bleed a little w/ new licenses rather than take a large capital investment
> on low cost solutions (linux/google apps)--cap ex is in training/IT
> that can handle these jobs
>
> GOOG is VERY interesting 0 debt. Still a bit overpriced, But will
> continue to innovate (lots of blah blah about innovation in crisis
> type articles are around), advertising continue to shift to web (more
> cost effective and goog owns this arena). GOOG is the microsoft of
> tomorrow.
>
> I think PHARM is much maligned. Think about it people. For all the
> flak that Obama gets (I'm a liberal), He won't be able to change
> the system--look what happened under Clinton--A lot of talk, no change.
> AND Boomers are just now striding into their peak Medication years!!!
>
>
> BRK is, I think, a Buffet/munger vehicle-old guys whose active investing
> longevity won't outrun this downcycle.
>
> XOM etc. Great company, probably overvalued. I'd look at historical
> Oil prices--Even $30/bbl is avg/high in inflation adjusted terms.
>
>
> INTC-Not sure how their other lines stack up, but i'd guess worldwide
> chip demand is going to be neg/flat for a while.
>
> CSCO-Not great equipment, but Corps will need to maintain network
> status quo.
>
> HQP odd chimera of IT. Consumer sales will be neg/flat. I'd think
> their best days are over
>
> IBM as a friend wrote to me "we're outsourcing everything that's
> not bolted down" IBM should be able to capitalize on that
>
> TOM-Think consumer capital expenditures will not be great for some
> time.
>
> So, This is my 2 min Cramer exercise--look at IBM, GOOG, and pharm.
> I'd also be interested in Consumer Staples that have strong balance
> sheets/ low debt/equity ratios--Help me people!! Most consumeer staples
> seem to be too highly leveraged.

Will the Euro Survive?

Sat, 07 Mar 2009 17:50:17 -0500

Agreed.

Of course no weak country (read: PIGS+Ireland, Austria, etc.) wants to leave the euro, but that is beside the point.

The point is that economic reality might force them to leave.

Argentina did not want to breaks it currency board that ensured a 1:1 backing of every peso in circulation with dollars since it overcame its historic inflation problem.

The rigid exchange rate regime though stifled domestic manufacturing as local manufacturing became too expensive. Public sector borrowing crowded out the private sector and interest rates soared as investors demanded higher and higher rates on the country's sovereign debt.

A similar situation is brewing in Spain, whose unemployment rate is skyrocketing and economy has skidded to a halt. Euro membership has made labor quite expensive and Spanish exports are uncompetitive. The country is running an appallingly high trade deficit and the government will have to spend well beyond the 3% budget deficit limit for euro membership. Inflation has been higher than in other European countries and the last decade's low interest rate environment (the result of euro membership) funneled money away from more productive investments and into a housing boom. Spain's complicated macroeconomic picture has caused spreads on Spanish sovereign debt rise with respect to German bonds.

I can conceive a day after years of deflation and no growth when a country like Spain might suspend its membership in the euro when it can no longer tolerate the high price it must pay.

The only way unproductive countries can compete is through currency devaluations.

On Mar 03 01:09 AM tmorris007 wrote:

> No homework required, this is an open book test and the text has
> nothing to do with quantitative analysis and everything to do with
> political and national, self interest. Stop looking for facts and
> figures to explain it's fate. It will be determined by the realities
> of each sovereign's assessment of what is in the best interests
> of their individual economies. A union this divided will ultimately
> unravel..
>
> Mar 02 09:52 AM American in Paris wrote:

How Long Before the Dollar Fails?

Sat, 07 Mar 2009 16:29:02 -0500

If you believe Bernanke, then you know he will drop money from a helicopter in order to combat deflation.

The Fed will monetize the debtin an attempt to keep interest rates low because an even more protracted deflationary spiral will be unacceptable to him and to the Obama admin.

On Mar 07 02:21 PM driftwood2 wrote:

> If Washington can't keep borrowing at it's recent rate, that would
> be deflationary. People seem to forget that the Great Depression
> was a deflationary crisis. If the US can't borrow as much money
> as we did then, that would make the current crisis more deflationary.

Silver Backwardation: Prices About to Soar

Sat, 07 Mar 2009 10:26:28 -0500

I couldn't agree more. Get the heck out of Bolivia for the reasons cited.

I would also stay away from SLW. If I am not mistaken a good percentage of their business depends on silver mined in Latin America.

If one believes that the global economy has entered a severe recession/depression then investments in Latin America could be very risky if there is social unrest, a backlash against "capitalism" and foreign direct investment, and a wave of nationalizations as result. All very real possibilities if things get worse from here.

I think the safest investments for survivalists would be (1) physical possession of bullion or (2) Canadian mining companies.

Given the relatively poor economic fundamentals of the US vis-a-vis Canada, in the context of a run on the dollar, I wouldn't rule out overt government intervention/nationali... in the mining sector/gold market.

On Mar 06 07:19 PM nmelendez wrote:

> Get outta CDE, Bolivia is in league with Hugo Chavez. Brazil has
> a big ongoing conflict with Bolivia due to govt confiscation of Brazilian
> company assets in Bolivia. Beware Bolivia and Venezuela. All other
> plays in SA OK. Personally prefer Brazil in all aspects, second
> Argentina/Peru and then Central American countries.

2009 Depression Will Be Nothing Like 1929

Fri, 06 Mar 2009 10:41:33 -0500

Agreed. The internet phenomenon/Google/Crai... are gutting advertising prices and radically altering the media landscape/business models.

It seems that the internet as a technology is a highly deflationary one.

It will take some time following this period of creative destruction before jobless ad/newspaper/tv, etc. professionals find jobs in other productive endeavors.

On Mar 06 09:54 AM Harry Tuttle wrote:

> 1) The economy was more globalized in 1929 than you think. Indeed,
> the Depression may have started by the England's pursuit of getting
> the Pound back to its pre-war value in Gold.
>
> 2) Instant pricing technology may actually make things worse as it
> destroy pricing power and profits from intermediation.
>
> 3) I see no evidence that "the economic system is better". Many
> assumptions are being challenged right now and I expect that many
> more will be challenged in the future.
>
> 4) The Depression was finally ended by WWII. With current technology,
> that outcome is no longer plausible (not that War is ever a desirable
> solution).

Everything Is Backwards, But We Can Endure

Mon, 02 Mar 2009 16:47:37 -0500

Rolex, go somewhere else.

A Sad Day for Newspapers

Sat, 28 Feb 2009 09:51:25 -0500

Excellent list... and one that I concur with. It shows that media outlets producing quality and relevant journalism will survive in different formats.

Seeking Alpha is a great new format that I have been impressed with. The comments section calls out the truly bad analysis and has also helped me discover great investment and trading ideas.

As far as other formats, the only reason I don't read the WSJ newspaper regularly is that I live in Europe and it is too expensive on a daily basis.

I love the Economist, Wired, Monocle and Foreign Affairs.

If the list is a predictor of what publications will survive, then say goodbye to generalist newspapers.

Sell what's left of the New York Times.

Sadly, coming from someone who thus far has made a living as a newspaper designer.

On Feb 27 07:25 PM bcncv wrote:

> With all of the (deserved) negative comments on print media, I thought
> I would take a second to recognize the news/content sources that
> I find have quality, and are enjoyable to read- in no particular
> order:
>
> The Wall Street Journal
> Stratfor
> Wired!
> Foreign Affairs
> The Economist
> MIT Technology Review
> MSNBC online (least bad of major news IMO)
> SeekingAlpha (mostly good- some bizarre)
>
> Sure this list reflects my personal bias, but it is always worth
> a moment to recognize the companies that are doing things mostly
> right. Feel free to add more of your own.

Rick Santelli: The Best Five Minutes in CNBC History

Sat, 21 Feb 2009 17:49:21 -0500

Right on man.

On Feb 20 11:02 PM The Rebel wrote:

> CO2, just curious.....are you one of those global warming nutjobs?
> By the way, my late father came from a family of nine at a time when
> it wasn't common practice to denigrate having a large family. When
> did times change? Was there a specific year? Oh, I get it. You
> must also be one of those planned parenthood fanatics who has yet
> to see an abortion that you didn't like.
>
>
> On Feb 20 02:08 PM CO2 wrote:

Rick Santelli: The Best Five Minutes in CNBC History

Sat, 21 Feb 2009 17:43:13 -0500

Dude CO2 you are so out of line here.

It is none of your business and the number of children is irrelevant to this parent's argument.

I assume you are an intolerant, dogmatic and self righteous... liberal.

I thought tolerance was a virtue. People are free to have as many or as few children as they like. I thought liberals didn't judge others' lifestyles... whoops except when it is different from one's own. Hmmm.

Ironically, Responsible Parent's children will pay for your social security. If there is no social security in the future, then Responsible Parent will be provided for by his/her children and you by your own savings or lack thereof.

Please dispense with ad hominem attacks and learn some civic virtue.

On Feb 20 02:08 PM CO2 wrote:

> responsible parent, just curious- did you adopt some of your 9 children,
> or did you responsibly decide not to use any available birth control
> methods?
> maybe you can give the latest octuplet mom, Nadya Suleman some lessons
> in responsibility, too.

Inflation: Demand Destruction and Wealth Erosion Trump Money Growth

Sat, 21 Feb 2009 17:06:42 -0500

Alan,

I admire your willingness to continue to express this view in spite of the bashing you repeatedly receive from the gold bugs.

I tend to think the Obama administration and the Fed will do what it takes to win the battle against deflation. Bernake got his PhD in the subject and plans to drop money from a helicopter. It will be hard for them to overcome the deflationary forces you cite, but they will win.

I think what we are seeing now is simply gold as a leading indicator of our inflationary future.

Let's say you are right: inflation does not materialize and deflation persists for some time (say several years), then perhaps gold may decline.

The problem is that the run up is beginning to occur now. The danger of your position is that if you do not have some allocation to gold, you may get wiped out. The ride up may well occur now and you would be left out before the inflation actually kicks in.

You make some great points about the difficulty of overcoming deflation, and I agree wholeheartedly, but there is a greater risk of not getting on a train as it is leaving the station.

I would rather risk losing 30% if gold falls on deflationary concerns than 90% on my cash and T-bills in a hyperinflationary scenario.

Don't Kick Yourself Later for Not Buying Gold and Silver Now

Tue, 17 Feb 2009 17:40:16 -0500

CLH,

I empathize with you and definitely see your point. But I think the inflation issue is a medium-term one. If it doesn't show up in 1-2 years and deflation is pronounced then people might sell in a hurry.

Right now, people are buying gold out of fear (and greed) and this could continue for some time.

In the short run, I agree with the bugs although the one thing that could precipitate an immediate gold price decline is Central Bank selling in concert with other large banks shorting.

I'm an American that lives in Spain and people are getting really worried about the banking system and the euro. I plan on getting my savings out of euros and into bullion very soon.

I don't think Spain is solvent and I don't think the euro is sustainable. And I certainly don't want to hold pesetas.

On Feb 17 03:05 PM CLH wrote:

> CLH back. Sold gold in March of 2008 and rode it down with DZZ until
> Fall. As the double top forms I will ride it down again. Gold is
> now topping again. No inflation and dollar still strong so gold
> makes no sense.

Gold: Now Demonstrating Trust in Obama

Mon, 16 Feb 2009 08:26:37 -0500

Atlasman,

Don't worry, we are all out of our league and no one knows where this is all going.

People who are buying gold are doing so because they think the Obama administration in conjunction with the Bernake-led Fed will "do what it takes" to keep the economy from collapsing (deflation with high unemployment and waves of bankruptcies).

The only way out of this collapse, as the author alludes, is to reinflate the economy through the printing of money. With more money in circulation and fewer goods, inflation will go up. This is the theory that current gold buyers believe in.

There is another theory that says that the government is not currently "doing what it takes." Paul Krugman just published an Op-Ed in the NY Times saying as much. He claims that we need fiscal stimuli in the trillions and not just billions.

If the government doesn't in fact "do enough" (i.e. print money), then deflation will take hold and the economy will continue to grind to a halt. Gold would likely go down in that scenario and the cash would remain king.

One other thing you should be aware of, there are also those who talk about manipulation in the gold market: that governments will begin shorting gold soon (March) in the hopes of causing a fall and later being able to repurchase at a cheaper price.

This later scenario is also possible. Tread into the market carefully. If you buy now, make sure you have stop loss orders in place.

If gold falls significantly in the next few months, I would then ramp up my purchases. I think the author is right, Obama and Bernake have no politically palatable choice other than to create inflation.

How the Crash Will Reshape America

Sun, 15 Feb 2009 10:15:24 -0500

Rolling Wave,

This is a great counterpoint to Florida's view and thank you for sharing it in such detail.

I have to say I find his piece far too simplistic and I agree with you that the US -- in spite of our pro-business culture -- needs to become more business friendly from a fiscal and regulatory standpoint (upcoming regulation on financial innovation notwithstanding).

It is a great weakness that he does not address the way the internet and communications technologies will affect economic output, urban development and migration patterns.

For example, I can't help but wonder if the new Madison Avenue will be the one in downtown Toledo, Ohio once some advertising and media companies realize that they produce content and service more cheaply there than they can from New York with abundant, cheap, fluent English speakers.

I also agree with another commenter -- in spite of all the doom and gloom and perhaps there will be spikes in crime, etc. -- the US is still well positioned in the global economy going forward.

We have a culture that encourages entrepreneurship and innovation, customer service and rule of law/respect of property rights, a combination hard to find in any other parts of the world.

Once one spends time abroad, you realize that one of our key competitive advantages is our culture to begin with.

On Feb 14 08:09 PM Rolling Wave wrote:

> Hmm, a decade long experiment in shifting a larger share of national
> income to the corporate sector from government and workers has not
> worked, as rent seekers from finance to housing got greedy then abusive
> exploiting their market power. The challenge in restoring demand
> and growth is not to let another interest group tilt any new framework
> in their direction. This latest pitch by Florida is very remniscent
> of Faith Popcorn and others from the 90's about how the new economy
> will generate high paying idea jobs - but most of these wonderful
> scenario's seem to include government ensuring these idea jobs are
> publicly supported.
>
> The entire thesis risks turning into a self-interested money grab
> by intellectuals who aspire to live off public money to guide this
> 'new growth'. There is agreement with Florida's conclusions about
> many of the likely losers, particularly in the exurbs, manufacturing
> and services with higher transport inputs. But failing to address
> the very large number of service jobs dependent upon protected markets
> and artificially high input costs that hobble business in North America
> misses the key point about whether any of these new idea jobs will
> be sustainable in a globalized information age.
>
> The reality is higher paid idea or service jobs in both America and
> Canada are now at risk, so long as our economies impose not only
> high priced jobs, but also high priced business inputs on the job-generating
> private sector. A steadily growing protected market of idea jobs
> is not sustainable, whether in health care or mega city development
> - when the latest technologies are globalized and ubiqutous with
> a younger generation from Boston to Beijing to Bangalore, or Toronto
> to Taipei to Mumbai, all capable of providing the needed ideas.
> A software program, a policy paper even a development plan from government
> or academia, all are increasingly competitive when sourced in Bangalore
> or Shanghai rather than Harvard or the University of Toronto.

>
> Without a recommitment to a competitive domestic policy framework
> and system that enables productive growth by business, the long term
> result of the Florida utopia is an ever larger government directed
> sharing of the public pot to maintain mega-cities with high priced
> professionals needing government transfers to maintain their standard
> of living. That experiment has not worked from socialist Sweden
> to communism in Russia and China (having lived and worked in all
> three) - the past century is a clear demonstration that for all its
> faults, markets are the superior vehicle to any bureaucratic or politically
> directed alternative in allocating and adjusting resources to respond
> to opportunity and eliminating bad ideas and misdirected public subsidies.
>
>
> The mega cities, like the craft towns of renaissance Italy, do generate
> innovation, but if that innovation does not go to market, it becomes
> like all those wonderful Chinese inventions which were instead commercialized
> by European and then American companies. The health of new North
> American megacities will be dependent upon sharing in the global
> response to the demands generated by the 2 billion middle class consumers
> emerging in China and India over the next two - three decades. Dr.
> Florida has identified the critical importance of adjustment out
> of uncompetitive sectors and urban or rural areas, but he has omitted
> the even more fundamental requirement for a competitive environment
> for limited liability enterprises to operate and grow by providing
> what the growth markets of the 21 st century demand - not what some
> bureaucrat deems is a wise choice.
>
> Those high priced jobs will survive in competitive growing firms,
> with a smart regulatory framework which ensures special interest
> groups can not extract too large a share of national income to service
> their "perceived needs", but instead shapes competitive input prices
> so our business sector can afford high wage jobs. From North America's
> exorbitant business taxes near the top of the OECD, (in contrast
> to the low business tax Nordics), to among the highest rates in the
> OECD for data transfer, cell telephone, cable, and a range of other
> business inputs, governments have mandated North American cost model
> that is not globally competitive nor sustainable.
>
> Florida's proposals for systemic change need to incorporate clear
> standards based on market outcomes, to ensure our future economy
> can adjust away (i.e. eliminate through competition) from uneconomic
> protected service jobs, as quickly as he proposes to adjust away
> from uneconomic regions into denser mega cities.

12 Reasons to Short Gold

Fri, 13 Feb 2009 22:17:46 -0500

The contarian in me says gold will stay at its current level either way. Sell gold calls and puts...

Thursday's Bond Wrap: Playing Chicken with the Fed

Thu, 29 Jan 2009 18:36:38 -0500

I want to buy TBT too but I am worried that the Fed will do what it takes to keep rates low by buying treasuries and in order to prevent an even higher public sector debt burden -- one that is already surging.

I think the Fed has no choice but to engage in quantitative easing for this reason alone.

Which leads me to the conclusion that the the only real bear market investment would be gold or precious metals.

The Fed has to print money for interest rates not to rise and break the back of the economy. And all that money creation eventually will work its way into prices.

Today's Commodity Prices Forecast Tomorrow's Inflation

Wed, 28 Jan 2009 17:50:54 -0500

I don't purport to be an economist but I have taken the standard MBA curriculum in finance in economics. Therefore I have been pretty on the fence as to my own view on inflation or deflation.

I do lean toward the coming inflation argument. The most interesting refusal of this argument that I have read is even with all the new money pumping and approved bailouts, the public sector debt to GDP ratio of the US will still be below that of other OECD countries.

If this is true, then it does not necessarily portend the end of the dollar and hyperinflation. If Italy can live with 150% debt/GDP ratio then why can't the US?

Anyway, I have no idea if these numbers are correct and am too lazy to do a Google search.

And I was hoping that someone with an understanding of this issue might address it...

Will Bear Market Rally Continue or Stall Out?

Tue, 25 Nov 2008 08:11:06 -0500

So what is the answer to the question posed by the healine?

Ford Celebrates, GM Scratches Its Head

Tue, 04 Nov 2008 09:44:59 -0500

If Ford sold it's European Mondeo in the U.S. I wouldn't hesitate to buy it. It is much more appealing that any other car in their U.S. showrooms.

Is Gold A Sucker's Bet?

Sun, 12 Oct 2008 18:44:02 -0400

wow...

Bill Miller on This Tough Market

Sun, 03 Aug 2008 13:35:51 -0400

To CrowdofCheerleaders I would say that you are actually dead wrong. The macro outlook for the US economy is rather bleak but companies like Google and Apple -- on a micro level -- offer great hope. They are companies that innovate and create new markets, something that the entire world envies.

There is no reason other American companies cannot emulate them. If Ford and GM can overcome the current liquidity crunch, I see no reason why they cannot compete effectively in the North American market, as they do in the rest of the world. I live in Europe and Ford offers one of the most interesting line up of cars here. I am even tempted to buy the new Mondeo.

All is not lost. The future is not predetermined. American can make a comeback. Just after we pay back our loans, bonds, credit cards, etc. either through savings and hard work or through inflation.

Bill Miller on This Tough Market

Sun, 03 Aug 2008 12:32:29 -0400

I think Warren Buffet might say that the problem with financials is that given the uncertainty surrounding future write downs as well as the business model problems of a number of financial institutions, there is no way at this moment to ascertain their future earnings. So now is not necessarily a good time to buy.

Gold's Finest Hour: How to Buy Now

Mon, 21 Jul 2008 07:11:08 -0400

This is much needed article and this issue needs to be addressed more by economists and analysts as it is the key issues for investors at the moment.

I agree that central banks the world over will inflate away the debt-finance spending binge in developed economies. It is too expedient for politicians to inflate economies and economists seem to agree that deflation is worse than inflation.

This is good for gold. Even though one cannot consume gold as critics point out, the yellow metal as historically served as a store of value.

I also believe that the euro is not sustainable and this is good for gold since it means that there is not alternative reserve currency. For example, I live in Spain and believe the country is heading toward a protracted recession that includes deflating asset prices (housing, stocks) and an inflationary consumer prices given rising energy and food prices. The country will be akin to Argentina of the late 1990s: too much spending by the public sector crowding out the private sector, and with a currency tied to a then stronger dollar that dampened export-led growth. Without a depreciating currency, Spain simply will not be able to keep the economic chugging (even if in reality it is only running in place) and I wouldn't be suprised to see a return to 20+ unemployment in the next few years.

I also believe however that the world economy is heading for a long recession and a period of deflation, especially in the aging US and Europe, since peak oil and energy inflation will eventually destroy demand and slow down growth.

I don't think that gold is necessarily an attractive asset in a deflationary environment and would prefer to own zero coupon bonds as well as real estate or land (assuming this is not Armageddon, then all bets are off).

The more I think about it, the less pessimistic I become. The US has survived periods of rampant inflation as during the civil war and the 1970s oil shocks and periods of deflation and high unemployment as during the great depression. On the political side, it defeated both fascism and ultimately communism albeit at a great loss of human life.

The challenges of the future are no different and the US can overcome them as well. There is no reason US-based energy companies cannot lead the transition to the US of alternative energies in the face of peak oil. There is no reason that Silicon Valley cannot continue to be at the forefront of new information technologies. There is no reason, American automobile manufactures cannot make attractive, efficient vehicles that consumers want to buy (they do so in all other parts of the world except North America).

At the moment I am not long the dollar but once the current dust settles I will be because I believe the American political system offers and will continue to offer the best environment for motivated economic agents.

I recently wondered why Warren Buffett traveled to Germany, Spain, and Italy of all places to look for new investments. What happened to Asia? I suspect that he is believes demonstrated democratic states are more friendly to long term investors and maybe yet dubious as to China's commitment to human and property rights.

Historic Financial Collapse Underway?

Sun, 20 Jul 2008 15:10:51 -0400

I agree that we could be heading for deflation, an argument that Stephen Leeb makes, if the price of energy heads rise too high, too quickly (which he says is 80% year over year).

He recommends zero coupon bonds as 50% of a portfolio under that scenario.

He also recommends a 20% weighting in energy stocks (oil services and alternative energy companies mostly) in case that opposite happens -- high inflation.

The more I read, the less I seem to know about the biggest questions out there that will impact our collective future:

1. Inflation or deflation?

2. The US as world economic engine still or decoupling? Can the world economy (Asia, Europe, Latin American, Africa and the Middle East) operate normally with a vastly devalued US dollar and enfeebled US economy? I suspect not but am not sure, the Chinese know how to make a lot of things now...

3. How much can we really expect in additional losses from US financial institutions?

I am natural inclined to be pessimism about the economy but even I am beginning to feel like that pessimism is overshooting.

The most likely scenario for the world economy is that we all muddle through as we adjust to a difficult period of deleveraging and a decline in aggregate demand in developed countries (due to lower birth rates) and an increase in aggregate demand in developing countries (due to higher birth rates and a increase in total factor productivity).

Is There Any Hope for the Big Three Auto Makers?

Wed, 02 Jul 2008 14:37:31 -0400

Gauging the responses to this article, the answer to the question posed by the author appears to be a resounding "no."

Headwinds for Gold?

Sun, 08 Jun 2008 14:50:32 -0400

I like this article and agree that monetary tightening would be bearish for gold.

Apart from the ECB's stance duly noted on Thursday by the press, I have also read that Brazil and several other emerging markets will begin tightening.

A recent article in The Economist noted that emerging markets with dollar pegs will have a hard time tightening however if the US does not. They are averse to allowing exchange rates to rise since this might exacerbate inflation in the short run (from higher capital inflows). The Economist argued that so long as emerging markets failed to raise interest rates or depeg and allow exchange rates to appreciate, they would experience double digit inflation and commodity prices would remain high.

If this is true, does not the case for gold rests less with the European Union's monetary policy and more with the dollar and other currencies pegged to the dollar? As long as real interest rates are negative in the US and emerging markets then gold will go higher.

The key to commodity prices and when to sell seems to be real interest rate levels in the US and emerging markets.

Incidentally, I wouldn't mind being in euros either if the EU lifts rates. However, the ECB is going to have hard time acting alone. The ECB is in a bind: it needs a coordinated policy with other central banks to raise rates and fight inflation, but it also does not want to exacerbate economic conditions in some of its weaker countries, notably Spain, Portugal and Italy. There is already social unrest in Spain with several strikes by fishermen and truckers scheduled this week to protest the high price of oil. Higher interest rates will exacerbate the average Spanish household's ability to meet its monthly mortgage payment.