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Michael Clark

Michael Clark
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  • There's No Bubble in China [View article]
    Actually, it's a misconception that all bubbles are debt-related. Price-bubbles are price-related. Debt-bubbles are bubbles in debt that can and do affect prices. But price-bubbles exist without debt-bubbles.

    Let me give an example. My mother-in-law in the 1960's decided to raise quail in Vietnam. She took her savings out of the bank, built a large quail hutch in her backyard, and raised quail. Soon she was making a very health profit as quail became the rage in Saigon. She watched her profit soar.

    She had a reputation for being a shrewd business woman. So when she began raising quail, her neighbors did the same thing. No loans were taken -- this was all based on personal savings, cash, as are most transactions in China.

    The price of quail soared to 10 times or more. Soon everyone and their dog was raising quail. Then, with more quail businesses coming on line, and with competition from hundreds of competitors, the price of quail fell back to nothing.

    My mother-in-law sold all her quail and tore down the quail-hutch and moved on.

    Was the Great Tulip Bubble in the middle ages spurred by credit or simply by price appreciation, connected to fad. Is the current Asian Housing Bubble NOT a bubble because the over-building is occurring largely from saved money, instead of debt -- if, indeed, that is true? The Chinese have loaned a LOT of money, in fact, to developers who are building houses for no one but the speculators who are now hoarding property, imaging a never-ending boom in Asia.

    The price bubble is largely a picture of supply and demand, classical capitalism. Too much supply and the price bubble breaks.

    In China and Vietnam, developers (with some borrowed money but also with cash) are building house after house after house. The houses remain empty. There is some picture of the housing boom going on forever, with foreigners coming to live in Vietnam and tourists...some picture of a never-ending demand. Most of these houses are luxury houses, selling for $100,000 to $500,000. This is a price bubble. A local newspaper is 28 pages long and has 26 pages out of 28 with 'houses for sale' adds. Most of the people in Vietnam are buying houses with cash. It is true that they won't lose their house to the bank...but they will watch the house they paid $200,000 for sink back toward zero, unless the mean salaries for Vietnam go up from their current $2000/year average.

    A credit bubble is a bubble in available credit -- and this always affects prices. The odd thing is that credit is supposed to have a built-in safeguard. There is supposed to be an inverse relationship in supply and demand where credit is concerned. When no one wants to borrow, you make it cheaper to borrow. When everyone wants to borrow, you make it more expensive to borrow. But when the government steps in and destroys this balancing mechanism, then bubbles build that are debt/price bubbles (dot.com, housing, tbond currently, current stock market rally -- i.e., bubbles built with borrowed money).

    Price bubbles are less deadly than debt bubbles because price bubbles only hurt the 'industry' investors when they break -- that is, the don't imperil the banking system, unless the banks themselves have over-invested in the commodity that is out of balance, vis a vis price.

    Debt bubbles are more catastrophic, because they destroy the banking system that loaned the money that is being lost as the bubble pops.

    The Fed's role should be to monitor debt-bubbles, and make sure they don't happen -- they can leave pure price bubbles alone. Debt-bubbles are manipulated bubbles outside the province of the 'natural' greed/fear cycles of supply and demand, that eventually balance themselves. Debt-bubbles lead always to depressions because the damage both the banking system and neutralize the investors who put borrowed money into the bubble industry.

    Margin needs to be reconsidered as a financial tool. Clearly it needs to be limited. Higher minimum bank reserves also need to be instituted. It is really hard to believe that the Fed was monitoring total debt in the system -- and was thinking about how debt was a kind of mass of matter that, when it became dense enough, would implode the universe and send it involuting back to zero. The Fed are bankers. To bankers, more debt is more money for them.

    Also, price-fixing is a crime that makes a price-bubbles appear and last for decades. Price-fixing is one of the worst crimes that can occur in a capitalist country, because it is anti-capitalist...and it is very common. (Why compete, when you can share capital from the duped consumer? No one gets hurt. It's all good.)
    Nov 12, 2009. 10:02 AM | 1 Like Like |Link to Comment
  • The Global Oil Scam: 50 Times Bigger than Madoff [View article]
    One of the best articles I've read on this site, or on any of the new journalism websites. Thank you for publishing it. Is there an oil shortage? My gut says there is an oil shortage just about as much as the global warming being caused on Mars is being caused by the SUV my uncle drives in Oregon.
    Nov 12, 2009. 09:04 AM | 5 Likes Like |Link to Comment
  • The New Normal: A Secular Bear Market [View article]
    Buy dips always makes sense...until the last dip. Then, when you wake up, you are down 40% and it will probably take years to get back to even.

    Buying dips makes sense if you are selling tops -- and you are not committing 100% to each dip and each rally.

    Selling is as important as buying. But many investors forget this side of the equation.
    Nov 12, 2009. 02:24 AM | 1 Like Like |Link to Comment
  • The Dollar: Nothing Else Matters [View article]
    Long Term Trading System:
    CHFJPY=X Short Swiss Franc/Japanese Yen
    EURAUD=X Short Euro/Australian Dollar
    EURGBP=X Short Euro/British Pound
    EURJPY=X Short Euro/Japanese Yen
    GBPJPY=X Short British Pound/Japanese Yen
    JPYCNY=X Short Japanese Yen/Chinese Yuan
    USDCAD=X Short US Dollar/Canadian Dollar
    USDCHF=X Short US Dollar/Swiss Franc
    USDEUR=X Short US Dollar/Euro
    USDGBP=X Short US Dollar/British Pound
    AUDCAD=X Long Australian Dollar/Canadian Dollar
    AUDCNY=X Long Australian Dollar/Chinese Yuan
    AUDJPY=X Long Australian Dollar/Japanese Yen
    AUDNZD=X Long Australian Dollar/New Zealand Dollar
    AUDUSD=X Long Australian Dollar/US Dollar
    CADJPY=X Long Canadian Dollar/Japanese Yen
    EURCAD=X Long Euro/Canadian Dollar
    EURCHF=X Long Euro/Swiss Franc
    EURCNY=X Long Euro/Chinese Yuan
    GBPCHF=X Long British Pound/Swiss Franc
    NZDJPY=X Long New Zealand Dollar/Japanese Yen
    NZDUSD=X Long New Zealand Dollar/US Dollar
    USDJPY=X Long USDollar/Japanese Yen
    Nov 12, 2009. 02:20 AM | Likes Like |Link to Comment
  • The Dollar: Nothing Else Matters [View article]
    Yeah, the 'surgeon'. American taxpayer money is funding global stock rallies and the dollar demise is making Americans poorer. Great. We are making Europeans and Japanese and Chinese and Latvians and Estonians and Africans and Arabs richer. Great surgery. We are funding the restoration of the global economy by sending ourselves to the poorhouse. Great idea. Make your adversaries and/or competitors stronger. Great idea.

    Also, send American taxpayer money to banks in Europe to keep them from collapsing. I'm sure the Europeans appreciate the fact that the American taxpayer is refunding European banks.

    The surgeon is either drunk or blind or loyal to another country or idea...maybe he's loyal to the concept of 'globalism' and he is willing to sacrifice America to the new idol he worships. Maybe he's loyal to the class of international bankers -- afterall, he seems intent on saving the banking class in every country in the world.

    Also, he is helping to further separate America into two classes: SUPERRICH and poor. That's what a great surgeon does. The more he inflates, the more America becomes divided by class and the more a civil war in America becomes more likely.

    Tell the surgeon to keep slicing and inflating, keep cutting, dicing and refunding. He'll get a Nobel Price too, if he keeps cutting and loaning out dollars to anyone who comes along the street.

    Tell the Surgeon to keep his helicopter fueled and ready for take-off. Because, at some point, America is going to have enough of this folly and drive Helicopter Ben to a new home in the sky -- perhaps Wall Street, perhaps an office at Goldman Sachs. If so, at least we'll know where to find him.
    Nov 12, 2009. 02:08 AM | 3 Likes Like |Link to Comment
  • Are ETFs Causing an Emerging Markets Bubble? [View article]
    Actually, it's a misconception that all bubbles are debt-related. Bubbles are price-related. Debt-bubbles are bubbles in debt that can and do affect prices. But price-bubbles exist without debt-bubbles.

    Let me give an example. My mother-in-law in the 1960's decided to raise quail in Vietnam. She took her savings out of the bank, built a large quail hutch in her backyard, and raised quail. Soon she was making a very health profit as quail became the rage in Saigon. She watched her profit soar.

    She had a reputation for being a shrewd business woman. So when she began raising quail, her neighbors did the same thing. No loans were taken -- this was all based on personal savings, cash, as are most transactions in China.

    The price of quail soared to 10 times or more. Soon everyone and their dog was raising quail. Then, with more quail businesses coming on line, and with competition from hundreds of competitors, the price of quail fell back to nothing.

    My mother-in-law sold all her quail and tore down the quail-hutch and moved on.

    Was the Great Tulip Bubble in the middle ages spurred by credit or simply by price appreciation, connected to fad. Is the current Asian Housing Bubble NOT a bubble because the over-building is occurring largely from saved money, instead of debt -- if, indeed, that is true? The Chinese have loaned a LOT of money, in fact, to developers who are building houses for no one but the speculators who are now hoarding property, imaging a never-ending boom in Asia.

    The price bubble is largely a picture of supply and demand, classical capitalism. Too much supply and the price bubble breaks.

    In China and Vietnam, developers (with some borrowed money but also with cash) are building house after house after house. The houses remain empty. There is some picture of the housing boom going on forever, with foreigners coming to live in Vietnam and tourists...some picture of a never-ending demand. Most of these houses are luxury houses, selling for $100,000 to $500,000. This is a price bubble. A local newspaper is 28 pages long and has 26 pages of 'houses for sale' adds. Most of the people in Vietnam are buying houses with cash. It is true that they won't lose their house to the bank...but they will watch the house they paid $200,000 for sink back toward zero, unless the mean salaries for Vietnam go up from their current $2000/year average.

    A credit bubble is a bubble in available credit -- and this always affects prices. The odd thing is that credit is supposed to have a built-in safeguard. When there is high demand for debt, the interest paid is supposed to go up, balancing the demand. But when the government steps in and destroys the balancing mechanism, then bubbles build that are debt/price bubbles (dot.com, housing, tbond currently, current stock market rally -- i.e., bubbles built with borrowed money).

    Price bubbles are less deadly than debt bubbles because price bubbles only hurt the investors when they break -- that is, the don't imperil the banking system unless the banks themselves have been heavy investors in the commodity that is out of balance, vis a vis price.

    Debt bubbles are more catastrophic, because they destroy the banking system that loaned the money that is being lost as the bubble pops.

    The Fed's role should be to monitor debt-bubbles, and make sure they don't happen -- they can leave pure price bubbles alone. Debt-bubbles are manipulated bubbles outside the province of the 'natural' greed/fear cycles of supply and demand, that eventually balance themselves. Debt-bubbles lead always to depressions.

    Margin needs to be reconsidered as a financial tool. Clearly it needs to be limited. Minimum bank reserves also needs to be reconsidered. It is really hard to believe that the Fed was monitoring total debt in the system -- and was thinking about how debt was a kind of mass of matter that, when it became dense enough, would implode the universe and send it involuting back to zero. The Fed are bankers. To bankers, more debt is more money for them.

    Also, price-fixing is a crime that makes a price-bubble appear and last for decades. Price-fixing is one of the worst crimes that can occur in a capitalist country, because it is anti-capitalist...and it is very common. (Why compete, when you can share capital from the duped consumer? No one gets hurt. It's all good.)
    Nov 12, 2009. 01:42 AM | 1 Like Like |Link to Comment
  • Medical Reform in One Word or Less: Switzerland [View instapost]
    I think we often like to put things on Washington -- often these fingers also should be pointed at avarice, which is what brought down the system in 2008 -- and also creates depressions about every 18 years in America. When personal avarice marries political power then you have the deadly combination that destroys societies.

    Why is Greed one of the seven deadly sins? Because Greed is eternal and it is eternally destructive.

    If you and I can be greedy (and we can be), then doctors, lawyers, medical providers, insurance companies (and executives) and drug companies can also be greedy. Where the power is, that's where the greed is thickest.


    On Nov 11 11:19 PM Michael David White wrote:

    > My guess is the problem is one more of political incompetence rather
    > than personal avarice. Thanks for the note. mdw
    Nov 12, 2009. 12:16 AM | Likes Like |Link to Comment
  • On Bubbles, Inflation and Overcapacity [View article]
    correction: "potential BORROWERS' not 'potential lenders'...

    Here's an idea for you: monetary inflation in the 1930's and today WILL NOT trigger inflation because of the debt level (our level of insolvency) which makes it impossible for potential lenders to take on more debt and drive prices higher.
    Nov 11, 2009. 01:03 PM | 1 Like Like |Link to Comment
  • On Bubbles, Inflation and Overcapacity [View article]
    Charles: Nice report.

    Here's an idea for you: monetary inflation in the 1930's and today WILL NOT trigger inflation because of the debt level (our level of insolvency) which makes it impossible for potential lenders to take on more debt and drive prices higher.

    In the 70's Americans were not really insolvent -- even though the economy was in serious recession, with double-digit unemployment. Easy money in the 70's did fuel the anti-gravitational forces of inflation because consumers were solvent and, therefore, able to take on more debt to chase prices higher (PUSH prices higher through competition for products and services).

    If this is true, then massive amounts of cheap money won't trigger a similar 'inflationary cycle' today as it did in the 1970's. I hesitate to say there is no inflation -- because we've had 20+ years of MASSIVE inflation from 1983 to 2007 -- but inflationary policies will not be able to short-circuit the massive gravitational forces of deflation which will rule until about 2019.
    Nov 11, 2009. 12:41 PM | 2 Likes Like |Link to Comment
  • Van Eck's New Junior Gold Miner ETF: A Preliminary Analysis [View article]
    I'm glad you posted this, Jeff. I was quite excited about a real Junior ETF. Sounds like this is NOT a real ETF of junior miners. I read somewhere else that CDE is the largest position in this ETF. Not exactly what I would call a junior, except that it holds a huge part of its company is silver and a smaller part in gold.
    Nov 11, 2009. 11:51 AM | 4 Likes Like |Link to Comment
  • 3 Reasons Not to Believe In Gold's Recent Rally [View article]
    Europeans have an historical fear of inflation and I don't seem them willfully engaging in currency devaluation with the same vigor America is. Germany is an export country, hurting at the moment; but their history with inflation makes them probably more friendly to the idea of deflation that inflation. (Inflation brought them Hitler, remember. We, in America, should also remember that hyperinflation brought Germany Hitler. It could happen in America also.)
    Nov 11, 2009. 11:47 AM | 23 Likes Like |Link to Comment
  • Goldman Sachs' (GS) CEO explains why he pays more: It's because my guys make more money, duh. "What people fail to mention is that net income generated per head is a multiple of our peer average. The people of Goldman Sachs are among the most productive in the world."  [View news story]
    It's also apparently nice to have a computer program that 'beats the market' 96% of the time and to have the government in your pocket so that computer program trading is protected as if it were a copyright, instead of merely a trick of having computers closer to the exchange that most firms have.

    Las Vegas casinos also win 96% of the time, I guess. But I don't think their blackjack dealers are getting millions in bonuses.


    On Nov 11 11:36 AM MarketGuy wrote:

    > Give me billions of taxpayer money, label me as a "bank", and I'll
    > be the most productive SOB too. what a bunch of bs.
    Nov 11, 2009. 11:42 AM | 7 Likes Like |Link to Comment
  • Ambac: Now It Warns of Bankruptcy? [View article]
    That's a pretty dire thought, isn't it? It sort of makes you wonder what kind of leadership we've been getting.


    On Nov 11 10:01 AM a. palmer jr. wrote:

    > I guess we'll eventually get all the inept, inefficient, and corrupt
    > banks out of the picture but I'm afraid that when it happens the
    > taxpayer won't have any money left to put in the bank. The government
    > could tax us all at 100% right now and make us all poor and I still
    > don't think that would take care of all the debts that have occurred.
    Nov 11, 2009. 11:39 AM | Likes Like |Link to Comment
  • Whitney Tilson: 'Pullback of Some Sort Is Likely' [View article]
    Europe has plenty of troubles of its own. Not the least of which is a brewing political cauldron of growing nationalism and the 'problem' of Muslim immigrants who do not want to become Europeans but want Europe to become Muslim. How does this dilemma play out? If the right wing of Europe becomes more powerful, this dilemma might play out in mass deportations of Muslims back to parent companies, a scenario which would be rife with political incorrectness. The Europeans, with the low birth-rates have a choice: 1) turn Europe over to Islam; 2) resist and deport Muslim immigrants. Both are distasteful results clearly.


    On Nov 11 10:29 AM bluesky123 wrote:

    > and meanwhile, Europe is seriously rich according to Newsweek. The
    > American brand of capitalism no longer impresses anybody.
    >
    > "This year, Europe surpassed the United States in wealth, according
    > to the Boston Consulting Group. Next year, Europe's population is
    > expected to hit half a billion and its GDP to nearly match that of
    > the U.S. and China combined"
    >
    > www.newsweek.com/id/22...
    Nov 11, 2009. 11:36 AM | 1 Like Like |Link to Comment
  • According to a survey by Move.com, 12.1% of current homebuyers are investment buyers, up from 5.6% in March. 25.3% of all buyers are buying foreclosed properties, and of those 42% have no plans to live in the home. A total of 23.6% say they're motivated to buy now because prices are as low as they will go.  [View news story]
    Someone is going to get burned. Rents are going down. Rental vacancies are going up. Illegal aliens are leaving the US, going home, because there is no work in America. The birth-rate always declines during a Night Cycle. We have some 20 million unoccupied homes. Jobs are disappearing faster that mosquitoes in October. People are moving back home with their families. Demographics indicate that Baby Boomers are selling homes and buying condos or renting. There is no giant generation coming in to view to buy houses and boost the market back up....

    The mentality of buying on the market dip is being transferred to housing, maybe with reason, maybe as folly.
    Nov 11, 2009. 11:28 AM | 3 Likes Like |Link to Comment
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