GadflyOnTheWall

Can Gold Supplant Commodities in Your Portfolio?

Yes, Thomas, I thought the same thing until I asked myself that if these double-wides thought that gold prices would go higher, why would they sell now? A better indicator is to ask the ordinary man-on-the-street how much gold or gold-related investments they have in their portfolio. Today I am finding very few people have gold (or gold-related) investments in their portfolios. Would this change by the time Michael Clark's forecasted top in 2017? We shall see.


On Nov 15 11:00 AM Thomas Smicklas wrote:

> Excellent article. My simplistic thought is that when it seems as
> though everybody is piling into an investment, including those eeking
> out an existence living in double-wides selling their gold via mail
> due to an avalanche of television advertisements, it might not be
> the most appropriate time to gold-up. Then again, I was thinking
> the same when gold at $900.

Wall Street: Dumb as It Ever Was

Being an accounting consultant and a former director of trading and international research, my favorite question when interviewing is "Is accounting an art or a science?" Of course, the correct answer is both. This also applies to investments as well.

Now the lesson in the original article is: the media are reporting news and opinions as provided by "experts". The experts' opinions are based on their own particular agendas. Wall Street has an agenda. It wants to make as much money as possible. So what better way to do that than to have people sell a stock to Wall St. at a cheap price and to have people buy it from Wall St. at a higher price. I have met more people who have lost more money following the "experts" on the telly (as the Brits would say), than if they had done their own research. I have met more people who have lost more money listening to the Wall St. recommendations than those who did research on Valueline.

And as for 9.9% vs. 10.2%, I love listening to these guys. It provides for great entertainment. Living in the San Francisco bay area, I suggest to readers that they tune into San Francisco politics. For example, it was decided that because a man did not intend to stay permanently in a bear lair at the SF zoo, he was not trespassing. So, I ask, if someone where to walk into your house without your permission, but did not intend to stay permanently, does that mean he is not trespassing? See how funny SF politics is.

All I can say is, the world can be a funny place. Laugh a little. And yes, CNBC or MSNBC are like reality shows. They're pretending to be reality shows but in fact they are comedies.


On Nov 06 02:55 PM AndrewBaker wrote:

> Investment is nearly all about predicting the future: only psychological
> aspects have as much an effect as unbiased numbers, which is one
> good reason why it's so hard to get it right even as much as half
> the time.
>
> Nearly all, if not all, of us have a belief about the direction of
> a market or security, and even if we think we trade unemotionally
> on numbers or other criteria, our selection process is derived through
> human thoughts and feelings. Trading blindly on a system can lose
> money through overtrading or undertrading as well as getting it right
> or wrong, and backing hunches is not much different.
>
> In other words, there is no golden panacea or holy grail of investment.
> The most we can do is to beat the average, and by definition, many
> of us will have average performance. This is an art, not a science,
> and you've got to love doing it yourself to keep doing it. I do,
> and I know that if I had left it to others over the years I may have
> done better: but I would not have had nearly as much enjoyment and
> pleasure as I have had and continue to have from handling my own
> investments. Whatever happens and whatever the outcome, I am the
> master of my own destiny. And that is worth a lot.

Why Economists Messed Up

I agree with Alphameister that Perceptions' comments was brilliant. Reminds me of my economics class in college when I asked the professor why we could not have an inflationary recession. I am dating myself because this was right before the oil crisis, which was, of course, an inflationary recession. The professor, sticking to his economic theory, tried to humiliate me in front of the class, saying that my question was a stupid question, that you could never have an inflationary recession. The fact that we did have an inflationary recession forever formed the basis of my economic thinking; that yes, the world of economics is indeed fluid.

Money Supply: The Myth of Hyperinflation

It is interesting that the original article state that since 12/15/08, 4 months after the numbers that JeffDB came up with, the M1 and M2 increases are much less. Could it be that during the months that the original article aludes to, that the banks deposited their stimulus excess cash in the Federal Reserve?

Forgive me if I have this wrong, but the Feds printing money, giving the banks money, then the banks giving back the money to the Feds, thus offsetting the money supply growth numbers, makes me scratch my head. Aren't the banks supposed to be lending out the money to help support the building of our economy?



On Sep 03 12:52 PM JeffDB wrote:

> On the other hand, M1 had increased by 19.9% year over year. According
> to the Fed's numbers research.stlouisfed.or...
>
>
> M1 (billions)
> 8-16-08 1383.3
> 8-17-09 1658.2
> Graph: www.scribd.com/doc/193...
>
> M2 increased less, but still was a little over 8% year over year:
>
>
> M2: research.stlouisfed.or...
>
> 8-17-09 8312.4
> 8-18-08 7691.4
> 621 / 7691.4= .0807
>
> Graph: www.scribd.com/doc/193...

How PHEVs and EVs Will Sabotage America's Drive for Energy Independence

John,

Excellent analysis. I actually like the idea of plug in hybrids and hope to own one in the future; but it will not be at the same cost as the Volt/Leaf.

As for the words for the resource wasters, my words for non-hybrid SUV drivers who ride on my bumper or accelerate and screech to a halt is unprintable. ha ha


On Aug 27 03:19 PM John Petersen wrote:

> Gadfly, but if you inflate gas prices at 17% per year the discounted
> present value of a PHEV turns positive in year 9 or so. Don't be
> so darned tough on our clean and oh so green resource wasters. See:
>
>
> seekingalpha.com/artic...

How PHEVs and EVs Will Sabotage America's Drive for Energy Independence

John, thanks for the discussion. I can see how emotional people can get with this subject. Personally, I would not buy a Volt or a Leaf, because, from a consumer point of view, it does not make economic sense. At today's $3 gas price plus the discounted price for recharging the vehicle during off peak hours, it would take me 15 years to recoup the difference between the Volt/Leaf and the Prius. If the price of gas climbs, which everyone seems to think it will, of course, that price difference recoup would be lower, but probably still in the teens. There are a lot of Priuses in my neighborhood and I chuckle at how some of them drive. This one lady, accelerated right up to my rear bumper, couldn't get pass me, switched lanes, tried to pass me but was blocked by another car, switched lanes, accelerated, only to be stuck at a stop light. She zoomed off the green light only to be stopped at the next stop light. Really wasteful driving I would say.

China: Exactly Where Japan Was in the 1980s?

Interesting comments, doubleshortetf.

My insights from experience:
1) "Have they been to gritty factory towns?" OSHA would have a heart attack if they saw the working conditions in China, and the working hours in Japan.
2) "China has a the Communist Ruling Party." Japan has been a one-ruling party government for years.
3) Japan's Zaibatsu's (read corporations) have had a cozy arrangement with Japan's ruling party since the Empire.
4) "Corruption is rampant in China," and Japan, and the U.S.
5) "No one except pea sized brains would trust statistics that are being manipulated in China," and Japan, and the U.S.
6) "Chinese banks are in big trouble"; Not as bad as our banks.
7) "China has a communist government with an iron grip." The U.S. government is a democratic government with a weak grip. When we exported democracy to Iraq, Afghanistan, the Philippines, or replacing Tito's Yugoslavia, it made things better, right? I'd like to see any one of our presidents try to manage a country like China. Don't get me wrong, I love our democracy; it's just that it may not work in other places as well as it works here. It may not be exportable as McDonald's or KFC.
8) "E&Y got into heaps of trouble." And gee, E&Y is still around. Much more than I can say about Arthur Anderson.

My point is that these negatives existed in Japan and in the U.S., but they did not prevent Japan and the U.S. from becoming the very richest of nations. Japan's mistake is that it became too full of itself; the U.S. can also make the same mistake; and in time, but not today, China will aspire to making the same mistake.

And yes, when everyone is recommending a particular category of stocks, whether China, Japan, U.S., dot.com, gold, run like hell the other way. When I worked for one of the world's largest financial firms, I noticed they would put out a mutual fund representing the hot stories of the day, and it would immediately tank. It was the perfect contrarian indicator. LOL.

And remember, too, that Double short ETFs like FXP, are marked to market on a daily basis. Short term play with risk management stops. Be careful.

China: Exactly Where Japan Was in the 1980s?

Regarding real estate prices in Beijing, high end villas go for about $US 150 per square foot. Not even close to the $93,000 per square foot in the Ginza district reported by William M. And they are saying that Beijing real estate is in a bubble phase (the same goes for Shanghai, with higher prices than Beijing). This is true and it will correct. But the point is, it is not even close to Japan's prices. Japan's real estate prices was supported by an absurd system; that of borrowing against their rising stock market to buy real estate, then to borrow against their rising real estate prices to buy into the stock market. You knew this had to break at some point ... and break it did.

Being plugged into the man on the street in both Beijing and Shanghai, I am able to analyze the situation in the PRC from ground level, and I can tell you that the urban areas are not as robust as the reports would have them. Is the Chinese government manipulating the numbers? Of course they are. Is the U.S. government manipulating the numbers. Absolutely. Does that mean that we will crawl into a hole and curl up in a fetal position because our governments manipulate the numbers? No, it won't.

As one who produced a report in the 1970s on the future economic rise of Japan, I can also point to similarities between China and Japan. But China is not at the peak, as Vitaliy's piece might indicate. Rather, it is at the start. Whether China will succumb to the same temptations as Japan is left to be seen. But culturally, having plugged into a friend who worked both in Tokyo and Shanghai, the Chinese and Japanese are very different. According to him, the Japanese are xenophobic, while the Chinese love us. The Japanese work themselves to death, while the Chinese, who do work hard, balance life and work better. This difference in philosophy of life/work balance is more sustainable than the Japanese mentality.

Of course, all nations succumb to complacency or arrogance when they reach the top. The Chinese dynasties, like the Japanese dynasties, Roman, British, Ottoman, Persian, and American Empires are examples of this. But the current Chinese economic growth is probably more comparable to the U.S. growth in the early 1900s than the Japanese peak in the 80s.

Colonial Bank Failure Highlights the Problem

LOL. As a resident of the San Francisco bay area, where Pelosi, Feinstein, and Boxer came from, I have written to all three. I've received responses from Boxer (probably written by an intern or an aide) and I do see some action on her part with regards to what I've written about; I received a form letter response from Feinstein's office, and see no action on her part; and I have not received any response from Pelosi's office. That's a .333 batting average, which isn't bad. Maybe Congressperson Pelosi thinks that I am "un-American" to provide suggestions or analysis that may be opposite her agenda.


On Aug 23 11:10 PM digalert wrote:

> What can I do? I'm told to address my concerns with my congress person.
> Well I've got Pelosi, Feinstein and Boxer so that's out.

Rethinking the Baltic Dry Index

I agree with Alphameister's take on the BDI. Furthermore, in comparing the S&P 500 to the BDI, you are comparing a domestic index (SP500) against an international index (BDI). It would be more revealing to compare the MSWorld index (with or without the US) to the BDI. Thus you would see the excellent record of key turning points that Alphameister refers to. In my analysis, I use the BDI with two other key commodities to determine the state of the world economy. This analysis combined with technical analysis of each individual market contributes to my decision on whether a market is a go or no go.

Some Graham and Dodd Type Thoughts on Stocks vs. Bonds

My investment history goes back to 1966, so I've been through the 1970s (which was indeed ugly), through 1987 (which was scary), through the dot.coms (being in Silicon Valley, I've had my dotcom successes and failures). I learned from these events, as well as profited from them and their subsequent rebounds.

I believe that when comparing stocks and bonds, it is not that stocks are directly comparable to bonds as investments, but rather, that stocks, because of their secondary standing to bonds, should pay enough premium over the return of bonds to warrant investing in them. If you cannot, after research, justify the possible rate of return on a company's stock vs. let's say, a treasury, then it is time to move onto another company.

That said, my background being international investments, many of you may be missing some excellent opportunities by limiting yourselves to the United States. The US investment market makes up 40% of the world investment market. Look to the rest of the world for your next investment oysters. There are some excellent opportunities out there. I follow Sir John Templeton's mantra: There is always a bull market somewhere. I also follow his lesson: "Buy during times of maximum pessimism", which is similar to the Rothchilds' "Buy when there's blood in the streets."


On Aug 14 10:08 AM Boubou wrote:

> I like this article and tend to believe it. My investment era stretches
> from the year 2000 to my retirement just lately. During that time
> no equity situation managed by the gods of fund management did any
> good. The same applies if you take a 2 decade view also. If you add
> in inflation and currency losses it was more than a disaster.
> Fortunately I decided to sell all the funds and buy my own dividend
> stocks and and more than my share of bonds and preferreds.
> So I no longer have to watch hotshots spending all my profits on
> futile acquisitions ,giant bonuses, and fees, and I can pay the bills.
>
>
>

Unemployment: Historical Chart Sends Scary Message

Please do not do a blanket opinion on people that are collecting unemployment. I personally know people who have sent out hundreds of resumes to positions they are fully qualified for; had resume writers and human resources people tell them that their resumes are great; and yet, companies do not respond to their submitted resumes. These people have told me that they would rather be working than collecting unemployment.


On Aug 12 06:34 PM jstratt wrote:

> The length of Unemployment is affected by more than how hard it is
> to find a job. With Unemployment Compensation extended to nearly
> 2 years many more people will decide to avoid work and take free
> money as long as it lasts.
>
> Dont get me wrong I am not advocating letting people starve. I am
> however suggesting that employment is affected by additional pay
> offered. Perhaps some work of any kind would be preferable to collecting
> money for nothing.
>
> On the other hand maybe we are moving as a society to the autoworker
> layoff model.

Global Markets in Review: Emerging Markets Showing First Signs of Retrenchment?

Suzanne,
Very interesting analysis. Technically, my analysis of the U.S. dollar shows it depreciating against the basket of currencies, though I am sure that China will continue to print RMB to keep it in parity with the USD; and that the British and the European Community will start to print like crazy because they are now at a disadvantage to the USD since their currencies have appreciated against it. The Brazilian Real will continue to appreciate against the US Dollar due to its commodity based economy.

So something has to give here. I believe we are seeing evidence of the ramifications of the overuse of the printing presses in the form of rising commodity prices. Can you imagine what Gutenberg must be thinking today? Though I believe some commodities like copper may be overextended, oil, agricultural products, and precious metals prices will adjust to currency devaluations.

As for the U.S. economy, this month's issue of Trains Magazine features a study of the number of locomotives held in storage by the major, "Class 1" railroads. The number of idled locomotives has increased 57% between March and June. 57% in 3 months!! We are big trouble.

Global markets decoupling? We are decoupled and coupled in various ways. The World ex US is doing better market wise and economically than the US, showing us that there is some decoupling (which I believe will only become more pronounced in the future). However, there is still coupling in that the US is still 40% of the world economy and when we sneeze, it is felt overseas. In the next couple of months, we will see US sneeze (I again refer to the railroads article), and the emerging markets will feel it, thus removing overvaluation from their markets. I can't wait. I have my shopping list ready, both on the downside and the ensuing rebounds.

Restricting Access to Leveraged ETFs - Are Brokerages Outlawing Products or Strategies?

I also agree with all your points. As far as SRS, Ultrashort Real Estate, I have this on my watch list in order to discern if it is a tradeable security. So far, I have been disappointed with its movement, therefore I do not trade it. And this is the key to these leveraged ETFs, indeed, with any security, be it an ETF (1x, 2x, 3x, short, long), stock, option, mutual fund, Closed end funds ... an investor in these should study them and know what they are getting into. Obviously, the brokerage firms that are banning these ETFs have either investors who do not study the investments and/or their brokers are too lazy to educate their clients and/or (as a former stockbroker, I have experienced this), the brokers are too lazy/stupid to learn about these securities themselves. Remember, brokers are not sophisticated financial people, but just salespeople.

GE Capital: Next CIT?

Ah Hammer, in response to your question "How do these losers make it to the top of Corporate America?", there are some secrets.

First, you have to look the look, 6-4, perfect hair, chiseled looks.
Second, you have to graduate from Ivy League schools, in Immelt's case, Dartmouth and Harvard.
Third, you have to have a law degree, which enables you to implement the biggest secret: be a great BSer.

Look at our politicians: 44% have law degrees. But more importantly, the gift of gab ie BSing.



On Jul 29 08:01 AM The Hammer wrote:

> What a mismanaged company? Immelt was rolling over $100 bil in short
> term paper before the credit meltdown to fund this colossal bloated
> debt ball. Does that sound prudent?
> How do these losers make it to the top of corp america?