Costard's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/277585/comments http://seekingalpha.com/article/113695/comments?source=feed#comment-348883 348883
Larger players like foreign cb's cannot shift their holdings on a dime. For the moment panic is keeping them in dollars, but a secular diversification from USD is only just beginning. A "strong dollar" means nothing if it, and the currencies it is measured against, are all falling in real value. For the moment this is weighed against asset deflation and lower spending, and with no clear winner I would agree that relative currrency stability is the order of 2009; however at some point a move that defies your "here and now" theory will take place, and wealth will resume its transition towards a medium that retains its value. Jury's out on what this will be... my guess is scarcer commodities, gold for its value or oil for its utility. Timeline is uncertain, but too short in any event to be cavalier about.]]> Wed, 07 Jan 2009 14:02:54 -0500
Larger players like foreign cb's cannot shift their holdings on a dime. For the moment panic is keeping them in dollars, but a secular diversification from USD is only just beginning. A "strong dollar" means nothing if it, and the currencies it is measured against, are all falling in real value. For the moment this is weighed against asset deflation and lower spending, and with no clear winner I would agree that relative currrency stability is the order of 2009; however at some point a move that defies your "here and now" theory will take place, and wealth will resume its transition towards a medium that retains its value. Jury's out on what this will be... my guess is scarcer commodities, gold for its value or oil for its utility. Timeline is uncertain, but too short in any event to be cavalier about.]]> http://seekingalpha.com/article/112450/comments?source=feed#comment-342122 342122
The market is entirely too self-conscious for a real display of strength in either direction, I think. Trading with a wide brush - index funds, for instance - will get you nowhere. Broad-based shorting is a losing play in a flat environment. Find companies, sectors, individuals that will do well and invest in them. Or better yet, become such an individual, start such a company.

One caveat... Having disproved Santa, the bearishness is especially poignant right now. I see a good likelihood of a green January. But who knows! It's all mind games at this point.]]> Tue, 30 Dec 2008 23:26:35 -0500
The market is entirely too self-conscious for a real display of strength in either direction, I think. Trading with a wide brush - index funds, for instance - will get you nowhere. Broad-based shorting is a losing play in a flat environment. Find companies, sectors, individuals that will do well and invest in them. Or better yet, become such an individual, start such a company.

One caveat... Having disproved Santa, the bearishness is especially poignant right now. I see a good likelihood of a green January. But who knows! It's all mind games at this point.]]> http://seekingalpha.com/article/110480/comments?source=feed#comment-327876 327876
OK, bonds aside, now I *know* that there's a bubble in deflation expectations. As long as core prices are up over 4% YOY, the threat is neither imminent nor bankable.

Robert: "The Fed was created to stop inflation and now it has us convinced that inflation is the best thing it can do and it is the solution to problems like deflation."

I wouldn't normally respond to something this, but'm worried that a small child might wander past a computer with this page pulled up, read what you just wrote and, as a consequence of our poor public educational system, actually believe it. You're not only wrong, but so incredibly 100% wrong that a bear in Quebec might smell your wrongness, travel 5,000 miles and eat you. For the love of God, go read an encyclopedia entry on the federal reserve act.]]> Fri, 12 Dec 2008 17:26:35 -0500
OK, bonds aside, now I *know* that there's a bubble in deflation expectations. As long as core prices are up over 4% YOY, the threat is neither imminent nor bankable.

Robert: "The Fed was created to stop inflation and now it has us convinced that inflation is the best thing it can do and it is the solution to problems like deflation."

I wouldn't normally respond to something this, but'm worried that a small child might wander past a computer with this page pulled up, read what you just wrote and, as a consequence of our poor public educational system, actually believe it. You're not only wrong, but so incredibly 100% wrong that a bear in Quebec might smell your wrongness, travel 5,000 miles and eat you. For the love of God, go read an encyclopedia entry on the federal reserve act.]]> http://seekingalpha.com/article/110367/comments?source=feed#comment-326843 326843
"The dollar should be faltering" - relative to what? Please defend this statement. Germany is a red herring - one cannot very easily purchase marks these days, and the euro carries a lot of deadweight - along with a risk of not being there in 5 years. What currency would be safer, and why aren't you then invested in it? If gold's gains are dependent upon the dollar's losses, then simply skip the middle man and purchase whatever currency the dollar is losing against.

I do like gold, but your theory is bunk. You cannot argue for a thing simply by arguing against something else, and that poorly. Come up with some reasons to like gold - there are plenty - and then your article may contain more meat.

Also, the charts in this article are a mess... a 3-month would show a head-and-shoulders in the dollar rather than a double-top, and a 12-month or 2-year would better place it in context. The chart on gold is too narrow, and in any event I think the characterization of the last 3 weeks as a potential double-top is laughable considering the time frame and gold's recent history... and what about the "potential double-bottom" - make that actual - sitting immediately before it on your graph?]]> Thu, 11 Dec 2008 20:28:45 -0500
"The dollar should be faltering" - relative to what? Please defend this statement. Germany is a red herring - one cannot very easily purchase marks these days, and the euro carries a lot of deadweight - along with a risk of not being there in 5 years. What currency would be safer, and why aren't you then invested in it? If gold's gains are dependent upon the dollar's losses, then simply skip the middle man and purchase whatever currency the dollar is losing against.

I do like gold, but your theory is bunk. You cannot argue for a thing simply by arguing against something else, and that poorly. Come up with some reasons to like gold - there are plenty - and then your article may contain more meat.

Also, the charts in this article are a mess... a 3-month would show a head-and-shoulders in the dollar rather than a double-top, and a 12-month or 2-year would better place it in context. The chart on gold is too narrow, and in any event I think the characterization of the last 3 weeks as a potential double-top is laughable considering the time frame and gold's recent history... and what about the "potential double-bottom" - make that actual - sitting immediately before it on your graph?]]> http://seekingalpha.com/article/109880/comments?source=feed#comment-324578 324578
Precious metals have every potential of holding strong because they hold no risk of default. I say potential, and I think the gold bugs are generally overconfident and for poor reasons. But it's neither clever nor wise to ignore fundamentals, which are in this case, a world bloated with endemic risk.]]> Tue, 09 Dec 2008 10:05:44 -0500
Precious metals have every potential of holding strong because they hold no risk of default. I say potential, and I think the gold bugs are generally overconfident and for poor reasons. But it's neither clever nor wise to ignore fundamentals, which are in this case, a world bloated with endemic risk.]]> http://seekingalpha.com/article/109393/comments?source=feed#comment-323110 323110
The only question worth asking is, what is a fair price for oil? The fad of the moment is demand destruction... when will we begin talking about supply destruction, as a result of falling capital investment, abandoned oil fields, and nationals like PDVSA being cannibalized by their respective regimes? A year ago it was inevitable that clean energy was on its way in, and even now there is a certainty in the air that an Obama administration will usher in a new paradigm. But does anyone really believe that in the current investment environment, the luxury that is clean tech will escape the downturn, much less merit further investment?]]> Sun, 07 Dec 2008 13:17:03 -0500
The only question worth asking is, what is a fair price for oil? The fad of the moment is demand destruction... when will we begin talking about supply destruction, as a result of falling capital investment, abandoned oil fields, and nationals like PDVSA being cannibalized by their respective regimes? A year ago it was inevitable that clean energy was on its way in, and even now there is a certainty in the air that an Obama administration will usher in a new paradigm. But does anyone really believe that in the current investment environment, the luxury that is clean tech will escape the downturn, much less merit further investment?]]> http://seekingalpha.com/article/109400/comments?source=feed#comment-323097 323097
History, too, says some interesting things about the price of gold during deflationary economic crises.]]> Sun, 07 Dec 2008 13:06:54 -0500
History, too, says some interesting things about the price of gold during deflationary economic crises.]]> http://seekingalpha.com/article/109400/comments?source=feed#comment-323080 323080
The money supply *has* been inflated whether this is yet realized or not, public debt is on its way to doubling (even as gdp and tax revenues face shrinkage), and any basis for confidence in the value and backing of the US dollar - or any other currency - is deteriorating.

Observed deflation is simply the result of other valuations - those of bubbling asset classes - being even more grossly distorted. Home prices aren't just falling against the dollar, they're falling against gold, against eggs, against the price of blenders. Falling prices do not make the dollar, or any other currency, strong. It's true that in a year, a dollar will buy more real estate than it would now - but this is a factor of overvalued real estate, not an undervalued dollar. Necessary items will hold their value; luxuries bought on credit will revert to a truer price range.]]> Sun, 07 Dec 2008 13:00:06 -0500
The money supply *has* been inflated whether this is yet realized or not, public debt is on its way to doubling (even as gdp and tax revenues face shrinkage), and any basis for confidence in the value and backing of the US dollar - or any other currency - is deteriorating.

Observed deflation is simply the result of other valuations - those of bubbling asset classes - being even more grossly distorted. Home prices aren't just falling against the dollar, they're falling against gold, against eggs, against the price of blenders. Falling prices do not make the dollar, or any other currency, strong. It's true that in a year, a dollar will buy more real estate than it would now - but this is a factor of overvalued real estate, not an undervalued dollar. Necessary items will hold their value; luxuries bought on credit will revert to a truer price range.]]> http://seekingalpha.com/article/105061/comments?source=feed#comment-302022 302022
> A true free market would be a scary place - police stations run by
> the highest bidder, schools only for the wealthy, and the disabled
> left on the side of the road. Nothing is scarier than a completely
> free market.

How about schools that wallow in ineffectiveness, police departments that peddle drugs and play to crime, and a health industry so swamped that no one gets served? Familiar, but still scary.

Ultimately, you are not qualified to decide what is just compensation for workers OR chief executives. We have markets for this. The market says that both Big 3 auto workers and muckety-mucks should be making the same wage - $0. These companies are old, uncompetitive, and saddled with debt, even after chronic government bailouts and sizable tariffs; they should have been allowed to die long ago. Their survival now depends upon congressional favors - meaning that the only productive US auto employees at this point are lobbyists.

If you wish to defend the pension bailouts and the tariffs and the huge amount of loan capital that has been extended to this industry, then you have to make the case - who are auto workers to deserve such welfare at the public's - and the car-buyer's - expense?]]> Mon, 10 Nov 2008 12:06:25 -0500
> A true free market would be a scary place - police stations run by
> the highest bidder, schools only for the wealthy, and the disabled
> left on the side of the road. Nothing is scarier than a completely
> free market.

How about schools that wallow in ineffectiveness, police departments that peddle drugs and play to crime, and a health industry so swamped that no one gets served? Familiar, but still scary.

Ultimately, you are not qualified to decide what is just compensation for workers OR chief executives. We have markets for this. The market says that both Big 3 auto workers and muckety-mucks should be making the same wage - $0. These companies are old, uncompetitive, and saddled with debt, even after chronic government bailouts and sizable tariffs; they should have been allowed to die long ago. Their survival now depends upon congressional favors - meaning that the only productive US auto employees at this point are lobbyists.

If you wish to defend the pension bailouts and the tariffs and the huge amount of loan capital that has been extended to this industry, then you have to make the case - who are auto workers to deserve such welfare at the public's - and the car-buyer's - expense?]]> http://seekingalpha.com/article/104978/comments?source=feed#comment-301550 301550 > ZERO percent of the bail outs is coming from printed money. All of
> it is coming from new government debt. Money is simply being transferred
> from those who have the cash now to those in need of cash. Usually
> banks would do that job but they happen to be the ones that need
> the cash now, so the government must do it.

I'm afraid you don't understand the nature of fractional reserve. The government can borrow $1 trillion, feed it to the banks via the fed, and effectively grow money supply by $9 trillion. M1 /= money supply. The only question is whether this reflationary effort will be successful, and when.

>government cutting services is deflationary

I thought you just said that government spending isn't inflationary. Huh?

> A commodity's ONLY value derives from its usefulness in production
> -- not from its scarcity. If the global economy will be depressed
> for the next few years, where will the demand for commodities arise?
> The price of a commodity will always revert to its value. That is
> exactly what is happening today. Arguments about population growth,
> topsoil density, peak oil, debt bubbles, currency implosions are
> irrelevant. If you buy commodities now, you will be left holding
> the bag for quite some time.

Overly simplistic. Commodities are not always capital goods; when currency risk grows, commodities become investment vehicles. All commodities do, however, require production, and this often involves credit and/or minimal prices levels. It is entirely possible that we see, through a combination of bankruptcy and capital spending cuts, a significant decline in commodity production. Here the question is, which side of supply/demand will fall further?

>Currency value is determined by relative cost of inputs to the manufacturing process.

No. **Costs do not determine price**. Supply and demand determine price. With currency, labor costs are only one variable on the demand side. Unless you understand that there are two sides to every transaction - and that current events will effect both sides - then your prognostications are useless.]]> Sun, 09 Nov 2008 22:56:22 -0500 > ZERO percent of the bail outs is coming from printed money. All of
> it is coming from new government debt. Money is simply being transferred
> from those who have the cash now to those in need of cash. Usually
> banks would do that job but they happen to be the ones that need
> the cash now, so the government must do it.

I'm afraid you don't understand the nature of fractional reserve. The government can borrow $1 trillion, feed it to the banks via the fed, and effectively grow money supply by $9 trillion. M1 /= money supply. The only question is whether this reflationary effort will be successful, and when.

>government cutting services is deflationary

I thought you just said that government spending isn't inflationary. Huh?

> A commodity's ONLY value derives from its usefulness in production
> -- not from its scarcity. If the global economy will be depressed
> for the next few years, where will the demand for commodities arise?
> The price of a commodity will always revert to its value. That is
> exactly what is happening today. Arguments about population growth,
> topsoil density, peak oil, debt bubbles, currency implosions are
> irrelevant. If you buy commodities now, you will be left holding
> the bag for quite some time.

Overly simplistic. Commodities are not always capital goods; when currency risk grows, commodities become investment vehicles. All commodities do, however, require production, and this often involves credit and/or minimal prices levels. It is entirely possible that we see, through a combination of bankruptcy and capital spending cuts, a significant decline in commodity production. Here the question is, which side of supply/demand will fall further?

>Currency value is determined by relative cost of inputs to the manufacturing process.

No. **Costs do not determine price**. Supply and demand determine price. With currency, labor costs are only one variable on the demand side. Unless you understand that there are two sides to every transaction - and that current events will effect both sides - then your prognostications are useless.]]> http://seekingalpha.com/article/104792/comments?source=feed#comment-300612 300612
Other factors play in. State medical associations keep a lid on the number of doctors... tight supply results in doctors' salaries that are exorbitant in relation to those in other developed countries. The immense costs involved in drug approval, intellectual property rights, combined with a system in which neither buyer nor seller are concerned about the price paid because it is simply passed on to insurance, results in high premiums for policyholders and large profits for pharmaceuticals (when they can actually gain approval). Also, given 30 years of government support (and even mandate) for private health insurance, it comes as now surprise that the favored players - large insurers - now control the game, while alternatives remain out of "imperial favor".

It is not only possible, it is given that the free market "rations" goods and services. This is precisely what a free market does. But when the government makes something "free", the market can no longer ration; it can only attempt to produce more of the good, driving up costs of production as well as the final bill, which must be paid by somebody. I fail to see how further socialization - making the good "more free" - will address the essential problems of bloated demand and constricted supply.]]> Sat, 08 Nov 2008 03:56:44 -0500
Other factors play in. State medical associations keep a lid on the number of doctors... tight supply results in doctors' salaries that are exorbitant in relation to those in other developed countries. The immense costs involved in drug approval, intellectual property rights, combined with a system in which neither buyer nor seller are concerned about the price paid because it is simply passed on to insurance, results in high premiums for policyholders and large profits for pharmaceuticals (when they can actually gain approval). Also, given 30 years of government support (and even mandate) for private health insurance, it comes as now surprise that the favored players - large insurers - now control the game, while alternatives remain out of "imperial favor".

It is not only possible, it is given that the free market "rations" goods and services. This is precisely what a free market does. But when the government makes something "free", the market can no longer ration; it can only attempt to produce more of the good, driving up costs of production as well as the final bill, which must be paid by somebody. I fail to see how further socialization - making the good "more free" - will address the essential problems of bloated demand and constricted supply.]]> http://seekingalpha.com/article/104124/comments?source=feed#comment-298709 298709 Wed, 05 Nov 2008 11:46:28 -0500 http://seekingalpha.com/article/103901/comments?source=feed#comment-298022 298022
Regarding China, my impression has been the exact opposite of yours; the bursting equity bubble has been marked by a distinct lack of panic and analytical reevaluation. People are only now beginning to consider a future less vertical. However, the equation you present for China's up-and-coming success leaves out a few key variables. It's true that China reports a strong GDP and a flush governmental balance sheet. But how can one put complete faith in the official whispers of a country that has a vested interest in putting the best face on things? And how quickly will things turn if tax revenue falls, given the (potentially) hyper-cyclical nature of their manufacturing/exportin... economic base? And what about corporate accounting? Chinese companies involve an endemic risk for foreign investors, precisely because we don't live in China, we often can't evaluate first-hand these companies' products, and there's no way to perform due diligence on their reported numbers. Enterprises are often run or backed by local government officials, and consequently they, too, have an incentive to value appearance over efficiency. Finally, it's important to remember that Chinese companies are globally competitive **at the current valuation of the Yuan**. If the currency were allowed to reflect its proper valuation, China's manufacturing base - and the nation's jobs, debt market, and what domestic consumption it has - would implode. You can form your own opinion as to whether or not this forms a sound basis for investment. It seems foolish, thought, to ignore the risks altogether.]]> Tue, 04 Nov 2008 10:24:47 -0500
Regarding China, my impression has been the exact opposite of yours; the bursting equity bubble has been marked by a distinct lack of panic and analytical reevaluation. People are only now beginning to consider a future less vertical. However, the equation you present for China's up-and-coming success leaves out a few key variables. It's true that China reports a strong GDP and a flush governmental balance sheet. But how can one put complete faith in the official whispers of a country that has a vested interest in putting the best face on things? And how quickly will things turn if tax revenue falls, given the (potentially) hyper-cyclical nature of their manufacturing/exportin... economic base? And what about corporate accounting? Chinese companies involve an endemic risk for foreign investors, precisely because we don't live in China, we often can't evaluate first-hand these companies' products, and there's no way to perform due diligence on their reported numbers. Enterprises are often run or backed by local government officials, and consequently they, too, have an incentive to value appearance over efficiency. Finally, it's important to remember that Chinese companies are globally competitive **at the current valuation of the Yuan**. If the currency were allowed to reflect its proper valuation, China's manufacturing base - and the nation's jobs, debt market, and what domestic consumption it has - would implode. You can form your own opinion as to whether or not this forms a sound basis for investment. It seems foolish, thought, to ignore the risks altogether.]]> http://seekingalpha.com/article/103446/comments?source=feed#comment-296876 296876
Rhetorically: How do you (or anyone) plan to subsidize unemployment and launch make-work programs of massive scale (and questionable value) without inflating the price of labor? And how will this aid an economy already reeling from debt and expenses? How will leaching private savings in order to pay for these programs - via tax or bond - help solve our central problem, which is, we don't save enough? And how do we do any of this without further destroying the dollar and, with it, our economic future?

Build a new financial system? Ye gads, man, let's learn a little biology before we go building hearts.]]> Mon, 03 Nov 2008 02:37:43 -0500
Rhetorically: How do you (or anyone) plan to subsidize unemployment and launch make-work programs of massive scale (and questionable value) without inflating the price of labor? And how will this aid an economy already reeling from debt and expenses? How will leaching private savings in order to pay for these programs - via tax or bond - help solve our central problem, which is, we don't save enough? And how do we do any of this without further destroying the dollar and, with it, our economic future?

Build a new financial system? Ye gads, man, let's learn a little biology before we go building hearts.]]> http://seekingalpha.com/article/99535/comments?source=feed#comment-280540 280540
There's a lot of cash on the sidelines, and it's not going into gold/treasuries. The VIX can only measure those trading; in this environment, it is a poll of the scared and screaming. Again, watch the volumes. Be mindful that not everyone hyperventilates over the news, and in fact, some people pay mind to fundamentals, desirability being a function of price more than political policy. What you're seeing is not a shift in investor sentiment but a shift in who's playing. We will likely see more of the same next week. As well as more articles like this one: expressions of confusion and bafflement over nature's laws asserting themselves.

These times are not short of spectacles.]]> Sun, 12 Oct 2008 12:01:02 -0400
There's a lot of cash on the sidelines, and it's not going into gold/treasuries. The VIX can only measure those trading; in this environment, it is a poll of the scared and screaming. Again, watch the volumes. Be mindful that not everyone hyperventilates over the news, and in fact, some people pay mind to fundamentals, desirability being a function of price more than political policy. What you're seeing is not a shift in investor sentiment but a shift in who's playing. We will likely see more of the same next week. As well as more articles like this one: expressions of confusion and bafflement over nature's laws asserting themselves.

These times are not short of spectacles.]]>