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First Call of the Crisis: Peter Schiff Could Be Video of the Year

No one can time the exact moves of the market in the short term. But over the longer term, economic sense and logic prevails. US equities, US dollar and most of other developed world will do worse now. Would you invest in a country with negative GDP growth and 11 + trillion debt or the ones with 6-7% growth and surplus?

Flight to safety happened but not towards Gold or foreign assets but towards cash (US dollar) and Treasuries. This is a short term reaction. Watch out for the free fall expected very soon in US dollar, treasuries and equities . I think in equities, it has already started. I am just waiting for Government to announce some more bailouts before the free fall in dollar and Treasuries starts. Foreign equities and Gold will start to do well then.


On Nov 14 09:32 PM raising4daughters wrote:

> I read Peter's book Crash Proof over the summer but didn't act boldly
> enough on his advice. I went to 50% equities (at 43, that's pretty
> conservative). Should've gone to 0%.
>
> However, if you read Crash Proof, Peter's recommended portfolio of
> 70-90% gold and 10-30% foreign equities hasn't done all that well
> either. There hasn't been the flight to safety that Peter predicted.
> Gold is 30% below is target of $1,000/oz., and foreign equities have
> been decimated worse than US equities.
>
> Peter was correct that US equities and homes would get a haircut
> and the US would enter a deep recession, and hat's off to him for
> having the foresight and courage to say so. But, his prescription
> for individuals wasn't all that great.

Citigroup: The End Draws Near

I do not know whether short selling is destroying stocks (including Citi) or not, but one thing is for sure, regulators are really stupid.
One day (after Lehman's failure) regulators decide that short selling is so evil that it must be totally banned. Then after a month, it comes back as if there is nothing wrong with it. Is this the way a system is protected? Is it not prudent to keep some controls and checks until the doubts are totally removed. Why does the decision have to be binary?
I would say that until a clear decision can be made on short selling (if it can ever be made), it should be kept in check and made difficult to abuse by ATLEAST REINSTATING THE UPTICK RULE.
During times of heightened systemic risk such as these, shortselling, even if it was good and helped in price discovery etc, is definitely prone to abuse as every one is bearish.

When MS and GS were falling, there was a debate about Universal banks and Investment banks that diversified model was better as it had depth to cushion the losses. So what now? Citi is perhaps the most diversified.

I totally agree that this article provides no insight as to why is Citi's stock falling? Just zero value gibberish such as "incoherent, unworkable business model", "largely unproven", "company's risk controls are hopelessly inadequate". With all due respect, tell us what do you mean by saying "largely unproven", or why has the business model suddenly become incoherent or why are risk controls adequate? Do not pronounce verdicts after the fact. I bet you would have pronounced "largely proven" and "aqequate risk controls" if the company's shares were going up.

Memories Are Short, Trends Are Strong: Still Bullish on the Dollar

Dollar is rising purely due to the temporary phenomenon of flight to safety and absence of an alternative currency. You would need all the luck possible to bet against the looming economic and fundamental reality.

If you are a short term trader, you might win for some time. But common sense and economics point to a impending severe decline in dollar. Question is what will it decline against? Euro, GBP, yen, Swiss franc? I don't know, but decline, it will. Any asset or commodity that has corrected beyond its fair value e.g. crude may be a good choice.

Is Buy-and-Hold Dead? Hardly

Roowns, Firstly, my comment was for an investor entering market today. Secondly, it seems you mistake buy and hold for 'buy and hold till infinity' or those investors that live off the dividends because they never sell.

An investor who invested in 2007 with strategy of buy and hold has surely lost a lot. So buy and hold was a bad strategy then.
but as I said in the last comment, suitable strategies are better known only in retrospect barring a few times like the present.

For me buy and hold means buy and hold 'medium to long term' (atleast 1-3 years). The extent to which prices are down right now or will be down in 3-6 months time, the strategy is bound to be a winner (even if the prices don't come back to the levels they were in 2007) . So it seems a good strategy for the present times.
You don't need a lot of analysis to know that every recession ends and when it ends equities and all other asset classes generally move up. No arcane anaysis or 'expert' advice is required to guess that odds are most likely to favour a 'buy and hold' investor (I amend may be fresh money or investor).

I agree it is a simple view and things might be different this time as many indicators are pointing to unprecendented level of turmoil. But it does seem a safer and less complicated bet right now.


On Nov 15 06:20 AM Roowns wrote:

> Kaizen, why take the current prices in consideration when buy &
> hold does not imply sell and most of the time you have all value
> in stocks.
> How can it helps me if I have 90% into stocks that crash 50% and
> then I buy 10% at 50% discount ? Is this economic thinking ? I think
> not...
> Buy & Hold is just for a multi-year uptrend, but have all eyes
> on market when times change.

Is Buy-and-Hold Dead? Hardly

I totally agree. Why are some people wrongly using the highs of 2007 as the buying price ? I mean to say, an investor buying today should use today's price that is down at least 25-30% on average. If you consider some emerging markets e.g. India and China that price is down 50-70%.

So for proper historical comparison, check the hypothetical case of a person buying stocks a year after any previous crisis and see how he/she did. He would invariably be a winner. Based on this, a buyer entering market today (better 3-6 months from now when more bankruptcies or bailouts are done) and holding some good stocks has almost nothing to lose. And will definitely do better than day traders in this excessively volatile market over the next 4-5 years. Though I agree some smart traders will do well too but that's more risky.
Buy and hold is among the best strategies for next period of 4-5 years, though stcok selection and country/asset allocation would be important factors.
So different periods have different strategies suitable for them. However, except for obvious cases such as of the present, suitable strategies are known only in retrospect to most people.


On Nov 14 10:27 PM investor88 wrote:

> The strategy must suit the occassion. Buy and Hold, trading, etc
> are all good strategies at certain periods, the strategies must be
> changed to suit the circumstances. There is just no one strategy
> that is superior to all others at ALL times.

Why Oil and Gold Are Headed Much Higher

Consider_this,
"The real story to Oil/Gas has been the decline in DEMAND as the global economy slowed down. Go look at any oil/gas demand chart or the miles driven by car owners. That's your main driver for the price declines. Demand is dropping, like a rock."

I bet you were one of the people who said that the demand of Oil was going up like a missile - courtesy China and India - just 3 months back when it touched $147 per barrel.
The truth is that Chinese economy has been growing around 10% since last 6-7 years or perhaps 10 years. Similar statement can be made for India for last 3-4 years. Then, why this sudden realisation of growth in demand just 6 months ago??
Isn't it a bit more than a coincidence that more money from Institutional investors started flowing into commodities around the same time

And by the same logic, the fall has less to do with 'demand destruction' and more with destruction in money available for speculation / investment. That is why every asset is falling. Nothing to do demand destruction - not that there was any destruction.

Why Oil and Gold Are Headed Much Higher

I totally agree with you SWRichmond,

Some people do deserve a job at the Fed.

I bet Bush and his advisors have similar understnading.

Printing money to increase capital. This comment made my day.

Why Oil and Gold Are Headed Much Higher

A little high?? I personally think that $147 price of oil was result of 80% speculation and 20% fundamental causes. Any market is basically driven by flows of money -- a fact that is most true these days, with every market going down. What good is your highly valuable commodity or stock if no one has the money to buy it. For example, the equity markets in many emerging markets and even US are trading at ridiculous value, historically low PE's, prices below cash levels etc.; the reason being that all money has been pulled off due to deleveraging.
The real price of oil lies somewhere around $80-85 dollars and that should be the centre of oscillation for some time. The price ballooned to $147 when pension funds and other institutional investors - hungry for diversification and higher returns - started pumping money into commodity markets since 2006-07. The price is around $65 now as much of this money has been pulled out. I personally think too much speculation in essential commodites such as oil should not be allowed.
Regarding fundamentals, the price of drilling oil is around $55 and price of exploration is around $65-70. There is no reason for the prices to be significantly higher than these levels. ie why price of $80-85 seems right to me.
All this research by failed banks and brokers is motivated by vested interests. It is high time that we stopped paying attention to these research guys and do some of our own thinking. These guys are a joke - could not even manage their own house and are producing dubious quality research. I would love to see what numbers these guys use to explain $225 per barrel figure.

Having said all of the above, the opinion does not take into account the imminent and drastic fall in dollar which will almost surely happen at some point in the future. So for example if the dollar devalues to half, I would not be surprised at a $150 a barrel price. Even without the fall in Dollar, excessive speculation may again drive the prices up. However, without the support of a weak dollar, that price will be unstable and short lived.