benevolent dictator

Is a Gold Correction Imminent?

When TA takes precedence over fundamentals the action is betting, not investing. Would any of you buy and run a company based on how many people wanted to buy or sell a similar company? If so then you have no business in that business-you are fundamentally flawed as an investor. This is not to say a person can not make money off of TA, I am unable to call the action investing. Gold is insurance against a fiat currency lossing value. The fundamentals show that the world fiat currencies (all of them) are exponentially debasing themselves to maintain exportable parity or pay off unservicable debt. Gold is not going up, it is just being debased at a slower rate. Insurance (gold) will help reduce the loss minus premiums paid-still a net loss of purchasing power. Invest with a Warren Buffetor, or even a Jim Rogers, mind set and your puchasing power will grow and that is very difficult now due to infidelity of the corporate balance sheets and underfunded CDS's.

10 Banks 'Guaranteed' to Survive and Prosper

debt to income ratio-highest I've seen going back 110 years for the nation as a whole. The banks can not lend more until the debt is reduced or incomes are increased. If incomes are increased by the governments efforts of increasing liquidity then thoes debts are paid with cheaper dollars thereby upsetting the banks profits and balance sheets. If debt is reduced without adding liquidity then opportunity costs the banks by the drop of GDP-less business activity. Where is the fundamental reasoning that bank stocks will have good value now or in the 5-year future?

Banning Derivatives and Other Such Foolishness

Good article on discussing the "doctor out of his area of expertise" anecdote and how it applies to some real life applications. I also find worthy the theoretical dynamics of the derivatives with respect to their symptomatic impact on market liquidity and price discovery. I wish you had discussed the actual structure and dynamics of CDS's.

As I understand CDS's they are off balance sheet arraignments and the seller/creator of the CDS does not show the liability to perform to the buyer yet they conveniently show the profits-dispersed as bonuses to the employed traders and the CEO and to dividends for share holders. Because the CDS’s are not called “insurance” they avoid regulation and are not required to have reserves to perform should the buyer have a claim (Bank of America bought CDS’s from Merrill Lynch against failed CDO’s bought from Country Wide). This is why some financial derivatives are fraudulent-specific performance contracts that are unable to perform because not enough of the collected premiums were placed in reserve status so as to pay out for losses. Then we have the leveraging of such instruments, tranching them and selling them as AAA bonds (no assets, just non performable contracts). The systemic failure is now impossible to unwind even if RICO laws were invoked and all the assets of the sellers were seized. Now address the moral hazard issue of To Big To Fail crowd and there is no incentive to change the conduct of the misdeeds. The actual players continue to make money and can fail the business without harm to the personal players as they have drained the monies for their own gratification.
Chase Bank has $14 trillion in protection yet only has assets of less than $3 trillion. They will have a greater benefit from a failure of assets than the assets maintaining solvency, assuming the seller of the protection can perform. This puts Chase in an awkward alliance as a capitalist-we will make more money by failure than by prudence.

But maybe the above can be dismissed as I have ventured out of my area of expertise.
Let’s hope so.

Fundamental S&P 500 Forward Price Projections

In 2002 the basis of earnings reports was changed to "operating earnings" rather than "total company earnings" so that the P/E ratio will be about twice of what it really is-thats unhealthy. Operating earnings omit several items, the main one being interest payments for debt service. From 2002 to 2008 debt of all publicly traded companies almost trippled. This according to the SEC.

Now there are two entities making claim to the same assets; share holders and bond holders and/or lenders. The latter has first claim and that makes share holders owning nothing as an aggregate. How can we trust these accounting methods when the prime directive of most corps is for the CEO's, who appear to be in collusion with BoD members (other corp CEO's), is to max their annual bonuses? Enron on a massive scale. CEO's collateralizing the corps assets (now liabilities) and showing this as profit. But not before the liabilities are set into a shell corp and stuctured as a lease. May be I am wrong-lets make sure.

Banning Derivatives and Other Such Foolishness

Derivatives are a tool just as a hammer. If used properly they perform a benefit to the players.
First abuse of tools: The 1st degree derivative (CDO's) became damaged by congress's finance committees adjusting the debt-to-income ratios to unsafe levels-this collapsed the foundation.
Second abuse of tools: The 2nd degree derivatives (CDS's) were non performable insurance due to no regulation that would require reserve monies. The sellers of protection did not maintain enough money in reserves to pay out to the insured. Too much of the insurance premiums collected went to bonuses and dividends-too much greed, the dark side of capitalism.
Third abuse: The CDS's were tranched into AAA bonds, the 3rd degree derivative, and sold-fraud.
Fourth abuse: CDS's were sold to entities that were aware of the abuses to capitalize on their failures, regardless of the entity having a vested interest in the bad asset-moral hazard to create more bad CDO's, CDS's and 3rd degree derivatives, buy insurance against their failure and make money (Goldman Sachs did this and when AIG could not pay the benefit they hijacked the US Treasury to give AIG money for pay out).

Tools- if the hammer hits the nail, good. If the hammer hits the finger, bad, or if it hits your head, really bad.
Better to outlaw bad judgment, not the tool.


On Nov 17 11:38 AM User 73203 wrote:

> You have got to be kidding me. Derivatives, and the derivatives of
> derivatives, and the devices that were insurance on derivatives,
> were dreamed up by the thieves and charlatans on Wall Street simply
> to make money - and a lot of it - off of everyone else. They should
> be banned, along with naked short selling, and - quite frankly -
> the idiots who dreamed them up should be in jail.

Gold Is Not in a Bull Market

We see what Nadler is doing with his right hand but what is he doing with his left hand?
I think Kitco is a bullion bank and Nadler works for Kitco. Kitco is lent gold by the government that has to be returned. Kitco wants to sell the majority of that gold for a high price then have the price drop lower and buy it back while it is dropping (this is well portrayed in the movie "Trading Places"). Kitco keeps the difference as profit. The government does not want the price to go too high as it creates a hoarding event and slows the velocity of money thereby reducing tax revenues. The government also wants the gold back. Now the government(s) want the price to come down and this will force money back into taxable events and boost the fiat currencies.
The government seems to play this way to punish us who lack faith or are greedy otherwise why would they lend it out in the first place.
Nadler may be correct with his portrayal of the gold dynamics and therefore does not come across as misleading but I still want to know what the left hand is doing.
I am probably just a bit paranoid.

The Arithmetic of Gold: Why Its Price Has No Ceiling

Hi Goldman,
The number of 4.8 million tons of gold held by the world central banks may be wrong by a factor of 100. According to the CIA the world banks posses about 55,000 tonnes (1 tonne=2200 pounds)with the US having about 8,200 tonnes. These numbers are also shown on Wikipedia. A miss calculation of that magnitude by a pilot flying by IFR accross a mountain range at night would be really bad.

Krugman Is Right: The Economist Is Off

I see that the economic forcasting equation has many variables and some are weighted more than others. For the last 30 years 2 variables have been growing in significance that the other variables became moot. The 2 varables I speak of as most significant are the credit account deficit and the total US debt to GDP ratio. Knowing this simplifies the forecasting of our economy and thoes that study the fundamentals can react to the numbers as easily as a pilot of an aircraft can fly by instruments. Failing to rely on the numbers and it is easy to understand how and why JFK Jr crashed his plane.

Bernanke Seems Clueless About the Real State of the Economy

Bernanke was placed into the position of chairperson of the federal reserve because he was willing to do what he is doing. "Seems" Is all it is.
But if fatalism was your prognosis are you to be made aware or should you be told all is right to maintain normalcy as long as possible. The factual numbers say it all yet no person has difinitvley defined the problem: total US debt-to-income ratio way too high, a current account deficit that has built for 30 years, an ever increasing M3-potential consequence builds to disaster as the world will abandon the dollar as the reserve currency and finally the credit default swaps that will need trillions of $ each time there is a $100 billion default of almost any bond that fails.

A solution is only possible when it is clearly and accurately defined to all that are involved.

U.S. Government Debt/Deficit: A Disaster in the Making?

Mr. Templeton,
Could you please sight your sources for the above graphs? According to David Walker, former head of the General Accountability Office (GAO), the future obligations of medicare are 3 times higher for 2020 and current federal debt is at least 90% of GDP ( the Feds contribution is becoming a greater percentage of that GDP thereby nonproductive or socialized GDP) than you have shown.

CIBC Chief Economist: TSX Will Hit 11,000 by Year's End

If the proclamation is not delivered with quantifiable ratios with mutiple corroborating reliable resources then we should classify as gossip(-where is the accountability?)