American in Paris

Choosing the Right Sector ETF: A Seeking Alpha Expert Panel

This is an exceedingly dumb idea. Betting on sectors is clearly less risky than betting on individual companies, but it is still very risky. And the track record of actively managed mutual funds does not encourage to believing us to believe this kind of active management wil be any better.

And let us be frank about the hedge funds. Do the hedge funds really outperform the major stock indices after you adjust for leverage and inside information?

I would be very suprised ...

Is the Dollar Too Big to Fail?

The US serviced much a high debt/GDP ratio during WWII.

Your sentiments smack more of ideology (you probably vote Republican) than a firm understanding of history and the economic landscape.


On Dec 18 02:03 PM The Geoffster wrote:

> The U.S. Dollar will survive only as long as the U.S. can service
> its debt. With the Fed backstopping Wall Street and Congress promising
> more entitlements and taxes, we can only hope for massive inflation.
> Either way, the Dollar is a dead man walking.

Despite Setbacks, The Gold Rally Marches On

That was the right thing to do. Gold is a bubble, just like residential US housing.

All the rationalizations offered by gold investors strike me as very similar in spirit to the rationalizations I heard regarding why US residential properties would continue to rise at 5% to 15% annual rates indefinitely.

Same logic: land is limited, gold is limited in quantity. Same ignorance of the history of bubbles (tulip mania, dot-com, nifty 50, etc.)

Those who do not know history are condemned to repeat it.


On Dec 19 12:27 AM untrusting investor wrote:

> Margin requirements for gold and silver were just increased on Comex.
> This is likely to add to the bearish case for further declines in
> gold and silver prices in the ST.

Keith Schaefer on Oil and Gas in 2010

I wouldn't draw that conclusion. Global oil consumption hovers around 86 million barrels per day or 2.5 billion barrels per month or
30 billion barrels per year.

So even if world consumption does not grow, the next 20 years will consume 600 billion barrels.

And demand will continue to grow.

Most of the major oil fields are in decline - Mexico, American oil fields, North Sea oil, Iran, etc.

And there is real uncertainty around oil reserve estimates. Oil producers have exaggerated their oil reserves to boost their stock price. Shell had a scandal where both the CEO and CFO resigned after the board discovered that reported reserves were 25% above best estimates.

No OPEC country has ever allowed third party verification of their 'proven oil reserves'.

And the Russians have admitted they cannot increase production given a lack of capacity. The Russian government and industry need to spend trillions to maintain production at current levels over the next ten to fifteen years.

That's why the Russian President is pushing to reduce Russia's dependence on exports of natural resources.

So oil prices could hit $100 in 2010 and higher in 2011.

But that is the right thing from the point of economics - higher prices give the consumers an incentive to economize on oil.

And given the fact that man is disrupting the carbon cycle by digging carbon and spewing into the air, higher prices will dampen
CO2 emissions.

All this leads me to believe that oil is a good investment. Prices and profits will skyrocket and substitution away from oil will take twenty to thirty years because the infrastructure today does not exist.

On Dec 18 09:00 AM The Greatest Rip Off of our Time wrote:

> So much oil, so little time, when just the other day we were running
> out of oil.

Inflation Scorecard: CPI and PPI Turn Up

It's obviously misleading to use year/year if the denominator incorporates a one time event (2008 deflation).

:)

It is going to make it appear as if prices are rising rapidly when in fact it really reflects a one time jump downward in 2008.

If you don't adjust for one time events, then you can't draw useful conclusions about where inflation is headed.

The government does provide seasonally adjusted CPI figures.

Hence sequential growth rates are always an option.


On Dec 18 04:39 PM Brad Zigler wrote:

> Think again.
>
> The upper chart reflects year-over-year inflation rates rates for
> all four metrics. How does that mislead?
>
> Yes, prices declined in late 2008. And now they're rising. Wholesale
> prices now are higher than they were last November. How is that NOT
> price inflation?
>
> How would YOU propose to measure price changes over time?
>
> As for your plaint about core inflation, it's on the chart. It's
> the blue, nearly horizontal line.

The Gold 'Bubble' that Goes On and On

Agreed. One can argue that residential housing was in a bubble for at least a decade.

The long term appreciation of US housing is 1% above inflation per annum over the last 100 years.

That means the US residential market was in a bubble for probably twenty years ...


On Dec 18 02:16 PM woollyB wrote:

> Tim, maybe a misstep here: the image you posted currently shows results
> for "stock bubble" not "gold bubble."
>
> Bubbles typically materialize quickly in terms of the parabolic price
> movement and inevitable bust, but the foundations are usually many
> years in the making. For example, the seeds for the US housing bubble
> were sown when we created a dozen federal agencies whose sole purpose
> was to extend and expand credit. 30-year mortgages came around in
> 1971, a sure sign of long-term disaster, but it took another 30 years
> before we stopped requiring down payments or jobs as qualifications
> for those mortgages.
>
> Similarly, the US stock market had an incredible run from 1982-1995
> before it morphed from huge bull market into the financial mania
> of the late 90s.
>
> Astute observers did forecast the inevitability of these bubbles
> as the foundations were put in place, but they tend to be so far
> ahead of the trend that they are largely ignored.
>
> Off the top of my head, I can't think of an example of an asset going
> from "normal" to bubble in a rapid transition.

Inflation Scorecard: CPI and PPI Turn Up

Brad,

Your analysis is extremely misleading. The year/year inflation figures were pumped up by the fact that there deflation in 2008 during the same months.

research.stlouisfed.or...

Look at the graph. CPI fell in 2008.

That means year/year figures are misleading.

And you made no attempt to distinguish between core and total inflation.

Gold Price's Interest Rate Ransom

You will be crying when the gold bubble bursts. I will be there to laugh!


On Dec 17 08:10 AM DeepValueLover wrote:

> Those who believe that the dollar is a "safe haven" are the same
> people who will be crying when the dollar collapses as a result of
> its overprinting.
>
> Ask yourself this:
>
> Why is the dollar temporarily "valuable"?
>
> What solid asset backs the dollar?
>
> Will huge dollar holders (Asian central banks) continue to purchase
> the paper at 1% - 3%?
>
> What if these central banks sell?
>
> Gold now....Gold forever!

The Dollar Situation Is Getting Clearer

Just like in the early 80s. :)

You will be working when you are 85. :)


On Dec 16 10:21 PM garuche wrote:

> You hold on to your dollar, I'll hold on to my gold.

What's Moving the Dollar?

That's a plausible story. However, his correlation analysis is not convincing since we do not know the standard errors of the estimates.

The correlation figures are statistical estimates - not God's revelations about inner workings of the financial markets.

Noise is always a more important than people recognize.

Noise is everywhere and obscures the signal.


On Dec 18 01:01 AM William Legrand wrote:

> The author nailed it in the first sentence. Further accelerating
> USD upward movement is genuine fear that Dubai and Greece could have
> major ripple effects (dominoes falling) throughout Europe and the
> Middle East over coming weeks and months. USD is suddenly a safer
> haven and climbing a wall of worry.

Six Ways to Prepare for Inflation

Because prices were severely depressed last year. I believe inflation was negative in 2008.


On Dec 16 04:13 PM richard_e_newton wrote:

> Why do none of the mainstream economic reporters report that in the
> numbers released by BLS today that year over year CPI-U all-items
> leapt from -0.23% in October to 1.87% in November, a move of 210
> basis points. This indicator went positve for the first time since
> February 2009. There is no mention at all! They were eager to report
> it last month when it was negative, but after a 210 basis point move
> they are silent and instead talk about core inflation. In the world
> I live in I have to buy gas for my car, natural gas to heat my home,
> and food to eat. Core inflation is nothing but partial inflation
> with an excuse! Current, real, CPI-U all items inflation rose from
> 2.73% in October to 2.93% in November (measured from the bottom of
> December, 2008). Its ten year average is 2.90%. This is hardly "tame"
> or "subdued" inflation as the Fed characterizes it and its trend
> is far from anything to celebrate. Month over month inflation was
> reported as .4%, hmm... , multiply by 12 gets you a 4.8% expectation.
> We can expect another monster move in year over year CPI-U inflation
> for December in January's report. I expect it to move at least another
> 100 basis points to a value of 2.93%.

As Good as Gold

The Gold fanatics need to stop the conspiracy theories. Gold is just a commodity like another other - it can go up or down.

Consumer Prices Do the Dipsy Doodle

Equivalent rent is not a proxy for home ownership costs.

GDP does not include purchases of homes because it is a durable asset, not a service.

Instead, the value of the services provided by the home is included. Estimated by using rent for comparable properties.

Adapting Annualized Volatility

Since volatility is not normally distributed, it is a mistake to use standard deviation as the measure.

High-Yield Bond ETFs: What to Do if the Party’s Over

And how do you define the 'smart money'? The 85% of stock mutual funds that do worse than the market each quarter?

:)


On Dec 16 09:06 PM bondstretcher wrote:

> Well said, Analyste de... buy and hold has never and will never work
>
> as long as cycles exist.
> Timing any market is exactly what the "smart" money has always done
> and will continue doing successfully.
> It will serve us all well to realize regardless of being long or
> short
> that trends are our true friends.