The Swiss National Bank's Silent Peg [View article]
Surely it is better to lose 42% of one's assets in Swiss francs than 100% in euros.
Response to:
"If 42% of the "safe" asset is backed by the "risky" asset, then how safe can that asset really be?"
Thought:
A better protection but with some short term negative volatility against the possible collapse of the euro would be to hold 20% of euro assets in gold. If the Euro were to go under the price of gold would skyrocket, allowing an investor to transfer the appreciated value into some other safe currency or asset. It is for that reason that it is wise to hold a larger than usual position in gold and other precious metals these days.
Ben Bernanke's 'It's Not My Fault' Inflation Speech [View article]
I agree with you, but there is a problem. Japan has been printing money for years and it has not led to inflation in Japan; further, the Japanese yen is rather strong despite all the money printing that has taken place. Closer analysis of the situation in Japan would be worthy of study.
I suspect the reason why printing the US dollar has led to commodity inflation is because the US holds the world's reserve currency, and that business is transacted between nations largely using dollars. Also, different in Japan is the fact that Japan is an export driven economy, which is not so in America. Our economy is driven largely by consumers.
Gold vs. Treasuries: It's All About Optionality [View article]
Why have treasuries gone up?
1)Emerging market equities have turned negative due to what appears to be a global downturn caused in part by inflation.
2)The carry trade has unhinged and money in being parked in the world's reserve currency, the dollar as opposed to Japan whose yields are horrific, or Europe whose PIIGS crisis could escalate at any moment.
3) Data shows the US economy may be headed for a double dip; so US equities are in a downward trend.
4) By choosing US sovereign debt as a place to park money, investors can enhance their returns while waiting out the uncertainties afflicting equities.
The reasoning involved here is quite graspable and has been the cause why investors repatriated money from foreign markets to the US dollar, and precious metals. The US is absolutely not a place to invest money long term. Investors would be happy if Bernanke announced another printing spree, as then they could move money into US stocks, at least until improvements in more sound economies became apparent.
When things begin to show signs of improvements in exoamerican markets; with the push of a few keys money will be sent to foreign markets and asset classes other than bonds. There is really no complexity in all of this.
US sovereign debt is not safe, but given the US ability to print money it is unlikely America will default on its obligations. And yes, you can hedge against that possibility using precious metals.
No verbal acrobatics here. Just pure transparent stuff.
Wall Street Breakfast: Must-Know News [View article]
Why doesn't the government sell the foreclosed properties directly to the buyers? It is absurd to bring a middle man into the deal. The more homes people buy the more spending they do in renovating it. Offer the people a discount, not some crook trying to make a fortune. Consumer spending drives the US economy.
Stay Focused on Real Economy, Not QE3 Boogeyman [View article]
A few things that QE1 and QE2 achieved was taxation of the people in the form of inflation. Inflation led oil, food prices, and other commodities to shoot up and arrest growth in emerging economies while causing American consumers who drive nearly 70% of GDP to stall. The banks got richer by investing the easy money handed over to them by the Fed in emerging market currencies, commodities, equities, and sovereign debt. They did little to no lending of money to small businesses one of the key sectors in providing employment.
QE was not entirely negative, rising food prizes bred discontent and brought down a few dictators in the Middle East. The upshot of QE has not yet hit us in its entirety. It is likely that civil unrest will escalate around the world, the result of rampant inflation and unemployment. Fortunately, smart investors who purchased silver and gold managed to protect some of their purchasing power as currencies like the US dollar lost over 30% of their purchasing power in the past 3 years.
In passing let me add that Inflation as measured by the US government is a sham, and is closer to 9%, a great deal higher than the meager numbers proudly peddled by Bernanke.
Apple Is Now Worth as Much as Microsoft, HP and Dell... Combined [View article]
"That's funny, I was about to say this proves quality eventually wins out over quantity."
Response:
Apple is a brand employing the same components available to other computers makers, except that it charges a premium for housing the components behind a logo. The claim that Apple's operating system is safe from viruses or more stable is just hype. Where Apple excels is in its ability to jail its fan base into a DRM managed experience, and railroading users into relinquishing connectivity and expandability in exchange for a false sense of security and coolness that is very appealing to those that as a result of not having done their homework are technologically illiterate.
I know of no laptop manufacturer other than Apple that can get away with building a laptop without a user-replaceable battery. Apple's fan are gullible enough that they have no issues with not being able to replace their laptop batteries, or even add more memory. The Apple user is so clueless that he has no compunction with paying a premium for a laptop with only 2 gig or ram, when one having 4 gig and much better components costs 40% less than their Apple cased retro-wear.
This is an ideal situation for turning the US dollar into a carry trade currency along the lines of the yen. We should expect the dollar to fall further and emerging markets currencies to continue their ascent as traders seek to park money in emerging market sovereign debt with significant higher yields to US treasuries.
Will China Ditch U.S. Treasures to Buy Gold? [View article]
China will increase its purchase of gold and other precious metals. What it is most certainly going to do immediately is purchase oil and other commodities trading at unbelievable discounts. The average production cost for a barrel of oil is about 82 dollars using 2008 dollars. The price of oil today is trading near that amount. Now factor in the fact that the dollar has depreciated about 40 % in the past 3 years and you have a bargain.
The Euro May Start a Downward Trend [View article]
The only thing keeping the US dollar from reaching its true value is that it is still the world's reserve currency. Without the ability to print the dollar and being one of the world's biggest debtors nations, US sovereign debt would be trading at near all times lows. I tend to agree with Marc Faber: "the value of the dollar is intrinsically ZERO". The world is smartening up however.
History Shows October Will Be A Rebound Month [View article]
The Swiss National Bank's Silent Peg [View article]
The Swiss National Bank's Silent Peg [View article]
Response to:
"If 42% of the "safe" asset is backed by the "risky" asset, then how safe can that asset really be?"
Thought:
A better protection but with some short term negative volatility against the possible collapse of the euro would be to hold 20% of euro assets in gold. If the Euro were to go under the price of gold would skyrocket, allowing an investor to transfer the appreciated value into some other safe currency or asset. It is for that reason that it is wise to hold a larger than usual position in gold and other precious metals these days.
Ben Bernanke's 'It's Not My Fault' Inflation Speech [View article]
I suspect the reason why printing the US dollar has led to commodity inflation is because the US holds the world's reserve currency, and that business is transacted between nations largely using dollars. Also, different in Japan is the fact that Japan is an export driven economy, which is not so in America. Our economy is driven largely by consumers.
Gold vs. Treasuries: It's All About Optionality [View article]
1)Emerging market equities have turned negative due to what appears to be a global downturn caused in part by inflation.
2)The carry trade has unhinged and money in being parked in the world's reserve currency, the dollar as opposed to Japan whose yields are horrific, or Europe whose PIIGS crisis could escalate at any moment.
3) Data shows the US economy may be headed for a double dip; so US equities are in a downward trend.
4) By choosing US sovereign debt as a place to park money, investors can enhance their returns while waiting out the uncertainties afflicting equities.
The reasoning involved here is quite graspable and has been the cause why investors repatriated money from foreign markets to the US dollar, and precious metals. The US is absolutely not a place to invest money long term. Investors would be happy if Bernanke announced another printing spree, as then they could move money into US stocks, at least until improvements in more sound economies became apparent.
When things begin to show signs of improvements in exoamerican markets; with the push of a few keys money will be sent to foreign markets and asset classes other than bonds. There is really no complexity in all of this.
US sovereign debt is not safe, but given the US ability to print money it is unlikely America will default on its obligations. And yes, you can hedge against that possibility using precious metals.
No verbal acrobatics here. Just pure transparent stuff.
Today in Commodities: They're Back [View article]
Response to: "A bearish engulfing candle and $80 trading range in today’s gold session…can you smell a correction?"
The Real Yield on the 10-Year Note Is -1.39% [View article]
Wall Street Breakfast: Must-Know News [View article]
Wall Street Breakfast: Must-Know News [View article]
Stay Focused on Real Economy, Not QE3 Boogeyman [View article]
QE was not entirely negative, rising food prizes bred discontent and brought down a few dictators in the Middle East. The upshot of QE has not yet hit us in its entirety. It is likely that civil unrest will escalate around the world, the result of rampant inflation and unemployment. Fortunately, smart investors who purchased silver and gold managed to protect some of their purchasing power as currencies like the US dollar lost over 30% of their purchasing power in the past 3 years.
In passing let me add that Inflation as measured by the US government is a sham, and is closer to 9%, a great deal higher than the meager numbers proudly peddled by Bernanke.
Stay Focused on Real Economy, Not QE3 Boogeyman [View article]
Response to quoted text: "Yesterday’s huge market surge was largely attributed to the idea that QE3 is on the table."
Apple Is Now Worth as Much as Microsoft, HP and Dell... Combined [View article]
Response:
Apple is a brand employing the same components available to other computers makers, except that it charges a premium for housing the components behind a logo. The claim that Apple's operating system is safe from viruses or more stable is just hype. Where Apple excels is in its ability to jail its fan base into a DRM managed experience, and railroading users into relinquishing connectivity and expandability in exchange for a false sense of security and coolness that is very appealing to those that as a result of not having done their homework are technologically illiterate.
I know of no laptop manufacturer other than Apple that can get away with building a laptop without a user-replaceable battery.
Apple's fan are gullible enough that they have no issues with not being able to replace their laptop batteries, or even add more memory. The Apple user is so clueless that he has no compunction with paying a premium for a laptop with only 2 gig or ram, when one having 4 gig and much better components costs 40% less than their Apple cased retro-wear.
No Mention of QE3 in Fed Statement [View article]
Will China Ditch U.S. Treasures to Buy Gold? [View article]
The Euro May Start a Downward Trend [View article]