unclej0

Charlie Gasparino: Another Crash 'Has to Happen Again'

There is no great difficulty in directing taxpayer money into more useful channels than the huge bank bonuses. The government has the power to tax incomes - so put a big league tax on the bonuses. It's fair and just to do that.

Caveat: they will fight it with all of their pr and lobbying powers.

Gold Is Not in a Bull Market

If I owned a mine that could turn out gold at $400 and I could sell as much as I could produce at $1,000 I surely would be motivated to produce. And if I were an investor who believed that I could sell it a year or two later for $2,000 I surely would buy as much as I could afford - and then sell it to the greater fool.

It is hard for me to see why this is not a bubble. Then again, I really don't understand the gold market, which is manipulated by elephants. I am neither long nor short on gold.

As a public service, I offer here a limerick which was found in a Wall Street men's room. It may be an encoded prophesy by Ayn Rand (may her name be praised) on the future of gold. It may contain wisdom on gold equivalent to the wisdom of Alan Greenspan on the housing market.

There was a young student at Choate
Who fell in love with a goat.
He gave it an urn but his love it did spurn
And it ate his amorous note.

Where's the Outrage at the Banks?

Corruption is ubiquitous. See my blog.
unclej0.blogspot.com/

Why Gold, If Deflation Is the Threat?

I have studied science, not economics, so I claim no authority in this field. However, I find that my betters are sharply divided over whether to expect dollar deflation, dollar inflation, or both in sequence.

OK, the variables of future policy choices may make the difference. Still, I have a question about the future of gold which some here may be able to answer.

It seems to me that, while there are some commercial uses for gold, the major part of what is mined is then accumulated by banks and investors as a store of future value. This is largely driven by fear. Fear for the dollar drives investors to gold. On the other hand, there may come a time and a gold price such that fear for gold may drive investors either to dollars or else to some alternative commodities that have more immediate and necessary uses. Other than self-serving narrators, is there anyone who can use real data (eg, production cost and volume) to argue for the future value of gold? Nick Guarino has offered such an analysis in his report "Gold is about to crash," but he has an interest in selling his newsletter.

Marc Faber: Equities Safer than Dollars

There are plenty of culprits and you can find one in any direction you care to look. The elephant in the room is corporate money for lobbying and the venal congress that sells our birthright so cheaply. Just this week I was given to understand that the health insurance industry has for some time been legally exempt from the Sherman anti-trust act (along with major league baseball).

It seems that freedom from competition leads to big profits. I am shocked, shocked! As we have seen, the corporations will fight ferociously to avoid competing. Is that free market capitalism?

Oh yes, big agribusiness has its hand in our pockets also and most of our manufacturers have quietly folded their tents and departed for the lure of cheap labor. The treasury will pick up the tab for unemployment benefits and social services, the congressmen will continue to spend for all of their various constituencies, and the fed will create dollars out of thin air.

May I modestly suggest that there is a world of difference between prudent longer term economic stewardship and near term squabbling in unproductive ways: lying, spinning, smoke and mirrors. Obama may not be the messiah and he may have come along too late but he is the best we have had in a long time.


On Sep 30 07:39 PM TeresaE wrote:

> Nancy Pelosi has written and submitted the THREE largest single year
> budgets this country has ever seen.
>
> Clinton may have cut spending, but he still borrowed from social
> security AND raised taxes on everything and everyone (and when Bush's
> tax cuts expire, you will see why they were cut). And the SOB sold
> out our wealth generating base to a declared enemy. Which is a huge
> reason why there are no jobs now.
>
> Bush 1 was just worthless, and Reagan managed to lower taxes AND
> reduce the deficit, during a recession. Clinton couldn't do that
> in our largest ever economy.
>
> Quit picking sides and realize that in order to fix this mess, we
> first have to realize BOTH SIDES ARE AT FAULT.
>
> BOTH sides. Pointing fingers and thinking Obama is your savior is
> a prescription for our demise.

Why Economists Messed Up

"Perceptions" seems to have a good grasp of reality but not any really new insights. He is preaching to the choir.

The main feature of economics that makes it so complicated is that it is a portion of a rapidly evolving socio-economic order. Thus, we can get useful insights from many sources but not a fully usable model. Why is it rapidly evolving? Well, at least three good reasons.

1) We have not yet found any system that works, long term.
2) The facts around us, technology, population, military, political, and the availability of natural resources are changing rapidly.
3) We are a knuckle dragging, stupid, primitive species and many of us are gaming the system in our own stupid ways. Our best hope is that the leadership can hold things together long enough for science to drag us out of the current darkness. After that, perhaps we can create a smarter, better organized species and quietly shuffle off to a well earned rest.

Insulting the NY Times adds nothing to your argument.


On Sep 07 11:49 AM Alphameister wrote:

> The comment by "perceptions" is brilliant, much superior to the article
> that precipitated it. The basic problem that has led to this mess
> is the arrogant, elitist belief that economic sophistication has
> progressed to a point where super-enlightened leaders in Washington
> can eliminate the cycles that are inherent in all of human life.
> Markets are efficient only to the extent that they cycle around levels
> that tend toward rationality in the long run.
>
> Jefferson said that "a government powerful enough to give you anything
> you want is a government powerful enough to take everything you have."
> Perhaps a corollary of that is "a government big enough (and meddlesome
> enough) to moderate economic cycles and seemingly reduce risk is
> a government big and meddlesome enough to give you an eventual cycle
> that will blow your mind away (and your wealth along with it)."
>
>
> So let me add a third underlying assumption to those offered above
> by "perceptions": Markets are not always efficient, but they are
> far superior to meddlesome and incompetent governments for whom the
> long-term is defined by the next election.
>
> Anyone who would look to Paul Krugman and that rag he works for to
> provide valuable economic insights is part of the problem rather
> than part of the solution to our problems.

Global Markets in Review: Despite Cheer, Risky Assets Look Weary

No doubt there are some who will thrive in the turbulent markets that seem to lie ahead. Mostly, these are people who are fairly single minded about trading.

Those who would like to look forward to a stable future while pursuing more productive lives are in jeopardy. This can be largely summed up under the platitude: the mere idea that human beings can manage a productive, humane and stable civilization flies in the face of centuries of harsh experience.

Still, we ought not give up hope. The only socio-economic systems that we can be sure will fail are the ones we have tried. There must be something better. IMHO, some aspects of market economics and some aspects of macro-economic planning will be part of it. Perhaps the macro-stability can be achieved by placing honest machines at the controls. There are too many human minds which have reached their levels of incompetence and there are too many hands just trying to game the system (any system) and politicians who are obsessed by the next election cannot be counted upon for much else.

Will the Efficient Markets Hypothesis Survive This Crisis?

Your number 4 seems to blame government when, in fact, it was reacting to an emergency created in part by believers in EMH. There is no way to argue that, prior to government intervention, the health care industry had much resemblance to an efficient market. In the case of the auto industry, it was rescuing two companies from their own incompetent management. If that market had been rational, this incompetence should have been reflected more fully in the stock prices well prior to 2008.

It seems to me that the inflated earnings of CEOs contradict the EMH. Were they actually worth it?

How about accounting fraud? An unregulated market is a thieves' paradise. Contrary to simplistic opinion, if an approximately efficient market could exist, it would be a very tightly regulated market.


On Aug 12 08:39 AM SW Richmond wrote:

> EMH should probably be viewed as a restatement (in brief, for the
> ADHD modern 'investor') of Mises' famous essay 'Economic Calculation
> in the Socialist Commonwealth'. In that short essay Mises explains
> why Socialist systems cannot work long term; the simple reason being,
> they short-circuit the sending of price signals and cause gross misallocations.
>
>
> EMH simply states that pricing signals, in a market in which information
> flows quickly and freely, will be available to all in a timely manner;
> thus, many market participants will be able simultaneously to take
> advantage of the information.
>
> Of course, EMH relies on information flowing freely in a free marketplace.
> Herein lie the difficulties.
>
> 1. Major market players have gone off-exchange into dark pools,
> seeking to hide their trades. This deprives markets of information,
> and it is one way big players seek advantage.
> 2. Governments and central banks have grossly distorted markets.
> They have entered markets and manipulated them, both overtly and
> covertly, with asset-purchase programs, backstop guarantees, etc.
> ALL THESE PROGRAMS ARE SPECIFICALLY DESIGNED TO PREVENT PRICE SIGNALS
> FROM BEING SENT.
>
> 3. Governments and central banks have further interfered with price
> signals by altering or preventing, in real time, the application
> of accounting standards that would aid investors in evaluating the
> actual financial conditions of companies.
>
> 4. The U.S. government has smashed and taken over large corporations
> on terms favorable to political constituencies, using its own 'judicial'
> system to achieve its ends with Blitzkrieg efficiency, and continue
> to threaten to take over the health care industry in a similar manner,
> fully 17% of GDP.
>
> Price signals don't have a chance. Do not mourn EMH's failure, it
> was shoved aside by government.

Will the Efficient Markets Hypothesis Survive This Crisis?

It is reasonably clear that markets are irrational. Otherwise, how could the well informed, highly educated bankers in our largest investment banks have led our economy to the brink of ruin, where it still seems to be? How could the rating services have given an AAA rating to mountains of toxic assets?

My question at this time is as follows: can the purveyors of gloom and doom among advisory services, currently Weiss and Leeb, be calling the shots as they see them or are they simply creating a self fulfilling prophesy - or both?

Russian Government Set to Renege on ExxonMobil Deal. Big Surprise

That's a very human trait. It is likely to crop up in almost any setting in which you deal with an entity that's "too big to fail' or big enough to buy the Congress.

Does that concept ring a bell?

The Housing Bubble: Greenspan's Wayward Son

It is quite clear that unregulated, or loosely regulated, markets are an invitation to antisocial behavior. The rest is a farrago of detail about who dunnit when the crash inevitably arrives.

The simple fact is that even ordinary human beings (who have the cognitive faculties of hunter gatherers and an inordinate interest in the rear ends of females) are able to game the system when given a chance - aided by a swarm of talented but unscrupulous professionals.

A more basic fact is this: cultural and technological evolution is much faster than biological evolution. Therefore, most human beings do not have the intellect needed to cope with our high tech economy in a constructive and stable manner.

It will be no surprise if the administration, as advised by its distinguished banksters, proposes a not quite adequate lukewarm porridge of reforms. There are any number of distinguished economists and prosecutors who could do better.

Don't Be Fooled by Inflation

On Jun 17 02:52 PM austrian63 wrote:

> Ricard,
>
> One error in your response. Bernanke has not taken unconventional
> steps to "DEFLATE" asset bubbles. He has taken unconventional steps
> to RE-INFLATE asset bubbles and therein lies the rub. There will
> be a very high price to pay.
>
> Each subsequent market deflation is much more horrific than the previous
> one and thus requires a much larger dose of the re-inflation drug
> than the previous one. This is what Hayek decrobes as having "A
> Tiger by the tail." The cure is the disease and more cure only makes
> the disease worse until finally the party is unsustainable and even
> the U.S. Treasury and Federal Reserve with their infinite wisdom
> and money creation abilities will not be able to sustain the booms.
>

You are describing a very unstable system. It seems to be the case that mathematical stability is achievable through mathematical controls, not through political bullcrap - which has been our typical tool.

The macroeconomic controls over government investments and expenditures, monetary policy, and tax infrastructure would be better controlled by a carefully designed computer algorithm than by the fed, the treasury department, and the congress.

Why is that not done? Well, people who possess power, however poorly they exercise it, seldom voluntarily give it up. People who have risen to their levels of incompetence usually remain in denial.

What I have said about myself also applies to the movers and shakers of this world: they have the cognitive equipment of hunter-gatherers and an inordinate interest in the rear ends of females.

Don't Be Fooled by Inflation

I am not a trader and I recognize that markets are formed by highly divergent opinions, as we can see here. We are still at the mercy of the banksters who also run the fed and treasury. That is much like being at the mercy of the fickle ancient Greek gods.

So what is a minnow to do? One tack is to invest in things that people will always need, for example, food, green energy, water purification, etc.

The counter argument is chilling: "the market can remain irrational longer than you can remain solvent." That also applies to governments - most of them.

For the individual, rationality also requires understanding the irrationality of others. My evolutionary history did not prepare me very well for that task. Basically, I have the cognitive equipment to be a hunter-gatherer and to have an inordinate interest in the rear ends of females. At age 84, that is not of much use.

2009 Commodity Fund Performance - Part III

If it is not true that inflation is whatever the government says it is, then how are we to define it for investment purposes?

One problem is that inflation is different for different individuals, depending upon how they spend their money. Relative inflation of the dollar can be quantified by comparing it with some basket of other currencies. There are also things like labor cost inflation and commodities inflation. All of these have an element of arbitrariness.

If we could Cheynify (ie, waterboard) some distinguished economists, would a good answer be obtained?

Why Advanced Lead-Acid Batteries Will Dominate HEV Markets

I have no data to support any choice of battery types. However, I suspect that the author is underestimating the potential of full electric vehicles. Most people drive less than 50 miles on the vast majority of days and can rent a car once or twice a year. This is not a market prediction but it warrants some consideration.