The Paradox Of Deflation Facing Global Investors [View article]
I provided January prices for gold and silver because in your comment you mentioned that prices were lower since then, which is obviously incorrect. Gold prices are lower than their all time high but are much higher over time. What you are talking about is just market volatility over the last two months. Look at prices year after year ... same is true about silver. The one thing that has gone down is copper - you are right here. However, look over a longer period of time and you will see how much higher copper prices are. 10 years ago the price of copper was 1500 per ton and now it is 7250 or about 5 times higher. Trust me, I don't need your advice to make money. Since you like cash so much, you can keep your money in cash and see what happens after QE10 or its equivalent. Good luck.
The Paradox Of Deflation Facing Global Investors [View article]
I have one more idea ... today is a good day for ideas. We should invite Zimbabwe as well. They will tell us what to do in case we get hyperinflation. They surely know this stuff, don't they? It will be a nice thing to have them around just in case their expertise is needed.
The Paradox Of Deflation Facing Global Investors [View article]
Well, they may come in helpful as well ... we need a common currency after all, if we are going to get together. Europe is very experienced in managing just such a currency, so perhaps we should send them an invitation?
The Paradox Of Deflation Facing Global Investors [View article]
Ha ha, never thought of that but sounds like a good idea. I suggest that we add china to the party. The 3 together will have the following: - strong consumer spending due to the US. - strong growth due to China. - low inflation and huge savings due to Japan. Surely this is a winner right there, unless we have: - low growth like the US and Japan. - high inflation like China. - 2 lost decades like Japan. But hey, we wouldn't know unless we try, would we?
The Paradox Of Deflation Facing Global Investors [View article]
Not correct, and I know Japan well, the Japanese never needed foreigners to fund their government bond market because it was easy enough to fund it domestically. They don't need this now either as Japan is a country of savers and they mostly invest in their domestic markets. This is likely to change as the population ages and people need their saving to fund their retirement but this is a medium term problem. Deflation is very clearly defined as the price of things going down and we haven't see that due to Helicopter Ben printing money like there is no tomorrow. There will be more of that.
I watched the action during both recent large drops in the price of silver. It was amazing how well timed the margin hikes were. They were timed to perfection to inflict the maximum amount of pain on the leveraged longs on the COMEX. This simply means that whoever does the margin hikes uses all the available data, like who is long, stop loss orders, what is their leverage and if they are short of cash. Once you have this information, you can time the margin calls well and they are really good at it. It is shocking that this is legal. I wonder how long this game can continue and if the COMEX is not going to lose a lot of business due to games like that. I guess the future will tell. I don't think that the entire recent drop in the price of silver is due to that. I think that the market was weak and many things got hit, not just silver. Still, I am convinced that the margin calls played a nice role in moving the market so much in favor of the banks.
The Paradox Of Deflation Facing Global Investors [View article]
Dear Tom, First of all gold is higher and not lower, please check your numbers. In January gold was at 1400 and even lower and now it is 1676 (current price). Silver was around 29 in January and is 32 now and for your information 5 years ago silver was 13. You are not going to find deflation in gold or silver as they have been the best performing assets over the last 10 years. You are really looking at the wrong things here. The stock market is not related to inflation or deflation. You can't eat shares and they are not in the CPI basket - not goods. For example, China's stock market has totally collapsed from its high of 6000 in 2008 to 2350. This is the Shanghai Composite Index and it is down 60% from its highs. However, there is no deflation in China. I guarantee you that. The price of everything that people buy is much higher than before. Official inflation there is 6.5% and people say that inflation is actually higher and maybe 10%. The only point that you have is housing. However, this is not a good point as housing was a bubble that collapsed and is still collapsing. The current economic problems are similar to a depression. We have very high unemployment and poor housing and stock markets. However, the FED has printed trillions of dollars and that killed deflation. Have you been to the supermarket lately? Look at the price of anything that you want to buy over say 5 years. Is there anything that you buy that has gone down in price? Basically, the price of things that you may want to sell, like a house or shares has gone down and the price of anything that you want to buy like food, gas and other goods has gone up. This depression/recession has hit the standards of living and will continue to do that. Check a website called shadowstats.com for some sobering information on inflation and unemployment. Even the FED inflation numbers are positive. Their last inflation reading was 3.8%. It is amazing that people still talk about deflation.
The Paradox Of Deflation Facing Global Investors [View article]
I don't think that the US can do what Japan did. The problem is that the US has a current account deficit and is partly funded from abroad. Japan has a current account surplus and is fully funded by domestic savings. This difference guarantees that the US solutions is going to be inflation especially if the $7 trillion in foreign hands loses confidence in the currency. This can possibly take several years to materialize. Even before that there will be no deflation but it is possible that inflation stays low for some time.
Higher volatility will be the norm. It is obvious that the old way of investing whereby you study a company and understand its financials to price it relative to the broad market is dead. This market is driven by money printing, manipulated rates and government intervention - the USSR finally won the war and Breznev would smile from the grave. Decent and conservative people who would be happy living modestly from their savings are forced to take significant risk due to inflation and 0 rate policies in the developed world and I don't even want to start talking about money printing. In a crisis like that the middle classes always get totally wasted and their standard of living comes down significantly. I can't agree more with you gold position. I don't think that there is a better trade out there than being long gold. Some company (the next Google or Apple) will do better than gold but who knows which one that will be. However, gold is likely to beat the stock market by a decent margin over time and bonds don't have much upside as even the 10 yr has negative real yield - financial repression is working like a Swiss watch.
The Paradox Of Deflation Facing Global Investors [View article]
Free markets are mostly dead and will not be allowed to resolve the crisis. This is a crisis of too much debt, too much spending by governments, private companies and individuals. The result is an overhang of debt that is unlikely to be paid back without CB's money printing in huge size. I think that we are going to see exactly that. There has not been any deflation anywhere (only in the dreams of central bankers). You are correct to point out that the developments are deflationary but ''unconventional'' monetary policies (actually money printing which is very conventional and has been employed by many banana republics and failed empires) are clearly able to beat deflation. Do you honestly think that 10 years from now you will be able to buy more with $100 than you can buy now .... dream on. This type of crisis always ends up being inflationary (unless you have a gold standard) because governments take the easy way out and print money and they will do it again, of that I am sure. This outcome will be supported by currency and trade wars as governments will compete with each other to debase their currencies.
Greece needs to implement "much stricter structural reforms" than seen so far, Poul Thomsen, the head of the IMF mission to the country, was yesterday reported as saying. Thomsen also said he had never seen riots against austerity as intense as in Greece. A red flag perhaps? [View news story]
Greece and Europe can discuss any financial package or austerity measure that the ECB, IMF and Germany desire. This will not change the fact that Greece is totally and hopelessly bankrupt. They will not and also don't plan to pay back a penny of what they have borrowed. The recovery will be 0 or close to 0. In fact, I think it will be negative as Greece will work on getting more money our of the rest of the world in return for promises that they will never keep and also don't plan to keep. What is the fair value of Greek bonds? My view is that say 1 year paper at 300% yield would not be interesting. I think that Greek government bonds maybe interesting at prices below 5 cents on the dollar or 5% of par price and only if you don't pay much accrued interest! Even that price is not clearly a bargain but who knows. You may double your money with luck. Argentina defaulted and the bonds recovered at around 20% or so but Greece has a lot more debt than Argentina and an economy that is a lot worse as well. Germany has itself to blame and can also blame Helmut Kohl. Of course, Kohl is German so the blame is still in Germany but the fact is that he really ignored the interests of Germany in order to get the EUR project done. Good job on screwing your own country Mr. Kohl.
Silver used to be money in many countries but this is history. Still it has monetary value and will be a great wealth preservation asset (and wealth increasing asset) during a currency crisis. I have no doubt that such a crisis will happen in the next few years. It has the added benefit of being one of the most useful industrial metals as a result of which there is hardly any silver left above ground. I like silver and gold and believe that silver will outperform gold but silver is a lot more volatile. If you want to trade silver, avoid the Comex as there you will be playing in the hands of the banks that use information about client positions and margin calls to short silver and effectively make money from the longs on the exchange. This is just my opinion. My target for silver is 150-200 and perhaps higher, most likely by 2015.
Are you aware that Mark Williams published a similar piece in the FT on October 17, 2010. I guess you can say that he doesn't change his mind quickly or ever. I doubt he often talks about another article called Subprime Market Debacle published in Feb 2008 (Forbes). There you can read some interesting things like ''Examples of firms with strong risk-control cultures include Goldman Sachs (nyse: GS - news - people ), Lehman Brothers (nyse: LEH - news - people ) and Credit Suisse (nyse: CS - news - people ). They were able to minimize their financial exposure to this subprime market debacle''. He is just another clueless academic and even his academic credentials are questionable (not that it matters that much). I wonder if he shorted gold in Oct 2010. Given his strong views, you may think that he would do that but I doubt it. He sounds like the kind of guy who just talks. It is amazing how many people talk about the markets without ever having traded a dime in their lives.
Trading the Chinese market will not be easy. The Chinese don't like when foreigners make money and opportunities to invest in China will be few and only if they need you more than you need them. This means that China wants your technology, capital, domestic markets or commodities. I can't imagine that there is any chance for the casual investor. The ''experts'' talk about opportunities but my view is that there is little to trade there except for the occasional, well timed and informed short.
Bank Of America Preferreds: A Great Entry Point For Income Investors [View article]
There are several problems with the idea: 1. BAC trades at a fraction of book value. The problem with this is that book value can be anything. Nobody (and that includes the CFO of BAC) understands what is the real mark to market in their complicated mortgage and derivatives portfolios. Also, they can lose huge amounts due to legal cases. I assume that all that is likely to cost them a chunk of their book value. 2. The instruments discussed here are very complicated. You really need to understand what you are buying. The complications are mostly legal as you need to know where in the capital structure a particular security is and if it is BAC risk or Countrywide or whatever else is out there. Don't invest unless you know exactly what you are doing.
The Paradox Of Deflation Facing Global Investors [View article]
Trust me, I don't need your advice to make money. Since you like cash so much, you can keep your money in cash and see what happens after QE10 or its equivalent. Good luck.
The Paradox Of Deflation Facing Global Investors [View article]
The Paradox Of Deflation Facing Global Investors [View article]
The Paradox Of Deflation Facing Global Investors [View article]
- strong consumer spending due to the US.
- strong growth due to China.
- low inflation and huge savings due to Japan.
Surely this is a winner right there, unless we have:
- low growth like the US and Japan.
- high inflation like China.
- 2 lost decades like Japan.
But hey, we wouldn't know unless we try, would we?
The Paradox Of Deflation Facing Global Investors [View article]
Deflation is very clearly defined as the price of things going down and we haven't see that due to Helicopter Ben printing money like there is no tomorrow. There will be more of that.
Why Silver Belongs At 30 [View article]
I wonder how long this game can continue and if the COMEX is not going to lose a lot of business due to games like that. I guess the future will tell.
I don't think that the entire recent drop in the price of silver is due to that. I think that the market was weak and many things got hit, not just silver. Still, I am convinced that the margin calls played a nice role in moving the market so much in favor of the banks.
The Paradox Of Deflation Facing Global Investors [View article]
First of all gold is higher and not lower, please check your numbers. In January gold was at 1400 and even lower and now it is 1676 (current price). Silver was around 29 in January and is 32 now and for your information 5 years ago silver was 13. You are not going to find deflation in gold or silver as they have been the best performing assets over the last 10 years. You are really looking at the wrong things here.
The stock market is not related to inflation or deflation. You can't eat shares and they are not in the CPI basket - not goods. For example, China's stock market has totally collapsed from its high of 6000 in 2008 to 2350. This is the Shanghai Composite Index and it is down 60% from its highs. However, there is no deflation in China. I guarantee you that. The price of everything that people buy is much higher than before. Official inflation there is 6.5% and people say that inflation is actually higher and maybe 10%.
The only point that you have is housing. However, this is not a good point as housing was a bubble that collapsed and is still collapsing.
The current economic problems are similar to a depression. We have very high unemployment and poor housing and stock markets. However, the FED has printed trillions of dollars and that killed deflation. Have you been to the supermarket lately? Look at the price of anything that you want to buy over say 5 years. Is there anything that you buy that has gone down in price?
Basically, the price of things that you may want to sell, like a house or shares has gone down and the price of anything that you want to buy like food, gas and other goods has gone up. This depression/recession has hit the standards of living and will continue to do that. Check a website called shadowstats.com for some sobering information on inflation and unemployment. Even the FED inflation numbers are positive. Their last inflation reading was 3.8%. It is amazing that people still talk about deflation.
The Paradox Of Deflation Facing Global Investors [View article]
Expect Continued Market Volatility [View article]
Decent and conservative people who would be happy living modestly from their savings are forced to take significant risk due to inflation and 0 rate policies in the developed world and I don't even want to start talking about money printing. In a crisis like that the middle classes always get totally wasted and their standard of living comes down significantly.
I can't agree more with you gold position. I don't think that there is a better trade out there than being long gold. Some company (the next Google or Apple) will do better than gold but who knows which one that will be. However, gold is likely to beat the stock market by a decent margin over time and bonds don't have much upside as even the 10 yr has negative real yield - financial repression is working like a Swiss watch.
The Paradox Of Deflation Facing Global Investors [View article]
Greece needs to implement "much stricter structural reforms" than seen so far, Poul Thomsen, the head of the IMF mission to the country, was yesterday reported as saying. Thomsen also said he had never seen riots against austerity as intense as in Greece. A red flag perhaps? [View news story]
Why Silver Belongs At 30 [View article]
Gold Bugs Beware? [View article]
I doubt he often talks about another article called Subprime Market Debacle published in Feb 2008 (Forbes). There you can read some interesting things like ''Examples of firms with strong risk-control cultures include Goldman Sachs (nyse: GS - news - people ), Lehman Brothers (nyse: LEH - news - people ) and Credit Suisse (nyse: CS - news - people ). They were able to minimize their financial exposure to this subprime market debacle''.
He is just another clueless academic and even his academic credentials are questionable (not that it matters that much). I wonder if he shorted gold in Oct 2010. Given his strong views, you may think that he would do that but I doubt it. He sounds like the kind of guy who just talks. It is amazing how many people talk about the markets without ever having traded a dime in their lives.
Is China's Economy Dead? [View article]
Bank Of America Preferreds: A Great Entry Point For Income Investors [View article]
1. BAC trades at a fraction of book value. The problem with this is that book value can be anything. Nobody (and that includes the CFO of BAC) understands what is the real mark to market in their complicated mortgage and derivatives portfolios. Also, they can lose huge amounts due to legal cases. I assume that all that is likely to cost them a chunk of their book value.
2. The instruments discussed here are very complicated. You really need to understand what you are buying. The complications are mostly legal as you need to know where in the capital structure a particular security is and if it is BAC risk or Countrywide or whatever else is out there. Don't invest unless you know exactly what you are doing.