That's my question. Years ago I went to a Midlands construction company to prospect them for business, and learned that they had a long-term strategy of buying land when the market was depressed and developing it when the upturn came (well, duh, you're saying, doubtless). They'd done this for several business cycles, as (I assume) any well-established firm in their sector would have done.
It was obvious to me ages ago that house prices had gotten silly. How did major building companies get it so wrong this time, when watching the trend is so fundamental to their survival?
Thursday, July 10, 2008
Commodities fall needed to rescue share prices
Special education funding increases clientele
Over at Cafe Hayek, the cheery US econ blog, a report that funding special needs in education turns schools into bounty hunters and expands the market. The increasing value of "Special Ed" brings more marginal land under cultivation, so to speak.
Being in this field myself, I hear rumours that the UK's current approach to individual assessment and funding of special needs will eventually be phased out, to be replaced by some formula for grants to schools, perhaps based on such factors as the proportion of pupils receiving free school meals. Presumably the schools will then have to be more expert in diagnosing and addressing such special needs as may exist among their intake, but I wonder whether the extra funding will be used strictly for that purpose - or pay for more computers, sports equipment, an upgrade to the Head's Lexus, who knows?
On the other hand, you could hardly have a lengthier, more cumbersome and expensive approach to special needs diagnosis, than the one we have now. I get letters from educational psychologists dictated onto their snappy little digital dictaphones, but typed 6 - 8 weeks later and finally received (by second class post) after a further two weeks. Good thing these kids aren't being treated for busted legs.
Being in this field myself, I hear rumours that the UK's current approach to individual assessment and funding of special needs will eventually be phased out, to be replaced by some formula for grants to schools, perhaps based on such factors as the proportion of pupils receiving free school meals. Presumably the schools will then have to be more expert in diagnosing and addressing such special needs as may exist among their intake, but I wonder whether the extra funding will be used strictly for that purpose - or pay for more computers, sports equipment, an upgrade to the Head's Lexus, who knows?
On the other hand, you could hardly have a lengthier, more cumbersome and expensive approach to special needs diagnosis, than the one we have now. I get letters from educational psychologists dictated onto their snappy little digital dictaphones, but typed 6 - 8 weeks later and finally received (by second class post) after a further two weeks. Good thing these kids aren't being treated for busted legs.
Wednesday, July 09, 2008
Education, literacy and discipline
A thread began at Alice's, originally about the decline in manufacturing industry, but moving on to the expense and alleged uselessness of public services, particularly education - bring back the cane, we're turning out kids who can't read, etc. Here's some news from the front:
When it was available, corporal punishment didn't have to be used often. An unexpected consequence of the ban-the-cane soft-handedness is that children are now assaulted by each other much more frequently, and quite often in the classroom in front of the teacher - whom G*d help if she (and it will usually be a she, these days) tries to get involved.
But as to functional illiteracy, in the absence of old-style discipline (and I agree that schools are not nearly brutal enough), maybe we've got almost as far as we can go, because we're swimming against strong tides. In the past, we had a literate culture and media, and parents who reinforced social rules and had aspirations for their children. The children of today are more likely to have complex and dysfunctional homes, their TVs (I often turn off at 9 to avoid the crapshed) and computers are full of violent fantasy and their neighbourhoods are ruled by postcode-based gangs rather than the police.
With the best will in the world, teachers cannot impose marital fidelity, sobriety, male employment, moral self-restraint in public entertainment, and the free run of the Queen's writ throughout her realm. Quite seriously, we in the education system can hear the creaking and groaning from the pit props in the mine.
Teachers will continue to be moderately well-remunerated as long as our rulers maintain the pretence that schools can do the principal work of child-rearing; when the scales fall from our eyes and we start to take responsibility for our offspring and the example we set them, schools will go back to standardised textbooks and employ humble, low-paid functionaries to steer the children through them. The public purse will benefit, and more importantly so will the next generation, for whom the present one has so little regard.
When it was available, corporal punishment didn't have to be used often. An unexpected consequence of the ban-the-cane soft-handedness is that children are now assaulted by each other much more frequently, and quite often in the classroom in front of the teacher - whom G*d help if she (and it will usually be a she, these days) tries to get involved.
But as to functional illiteracy, in the absence of old-style discipline (and I agree that schools are not nearly brutal enough), maybe we've got almost as far as we can go, because we're swimming against strong tides. In the past, we had a literate culture and media, and parents who reinforced social rules and had aspirations for their children. The children of today are more likely to have complex and dysfunctional homes, their TVs (I often turn off at 9 to avoid the crapshed) and computers are full of violent fantasy and their neighbourhoods are ruled by postcode-based gangs rather than the police.
With the best will in the world, teachers cannot impose marital fidelity, sobriety, male employment, moral self-restraint in public entertainment, and the free run of the Queen's writ throughout her realm. Quite seriously, we in the education system can hear the creaking and groaning from the pit props in the mine.
Teachers will continue to be moderately well-remunerated as long as our rulers maintain the pretence that schools can do the principal work of child-rearing; when the scales fall from our eyes and we start to take responsibility for our offspring and the example we set them, schools will go back to standardised textbooks and employ humble, low-paid functionaries to steer the children through them. The public purse will benefit, and more importantly so will the next generation, for whom the present one has so little regard.
Tuesday, July 08, 2008
Dinner at G8
WORLD leaders sat down to an 18-course gastronomic extravaganza at a G8 summit in Japan, which is focusing on the food crisis.
Don't scoff.
I've tried to work up an alternative menu, esp. for Gordon Brown's place (roast turkey?), but so far all I can manage is the wine:
Sweet Cherie (n/a)
Sancerre smiles
Beau jolly
Sham pain
Con yak
Emerging markets inflation could break the current system
... says Nouriel Roubini, and there's already a fund to speculate on consequential revaluation of developing world currencies, according to this.
Inside the news media
A comment from "Ryan" on the previous post is too good not to feature up-front (hope you don't mind, Ryan):
My sister is a journalist, but stays away from the nationals. She points out that the big papers get all their real news from Reuters and the local papers, then work it up into a much bigger story. They don't employ many real reporters or journalists - its too expensive. They prefer talking heads that can offer news-views which add a narrative to a story dug up by someone else and which matches the editorial line of the paper.
My sister also tells me that the papers have dirt on almost every public figure, but they CHOOSE who to turn over. This gives them enormous power over those that they chose to support - they can make you king one day and pauper the next. You can see they do this all the time with celebs, building them up one year and tearing them down the next, but we never imagine that they employ the same tactics with politicians - but they do.
She used to tell me all the tactics that papers would use to tell a story their way with their own spin on it. For instance, how often have you seen a phrase along the lines of "A spokesman said"? No name given. Why? It means the line was made up by the writer and attributed to someone real to give it substance. "A spokesmon", "unnamed sources", "A source within the Labour party" etc etc etc. Yes, they may all refer to a real person - but they could just have been made up by the journo to get his opinion across whilst making it sound like he has his finger on the pulse.
She showed me a story that she sold to the Guardian for £50. It was one column inch. The Guardian worked it up to half a page - all of it made up and based on opinion. She was pissed off: "I should have got £2500 if the story had really been that big!"
Take a story, remove the bits that are attributable to named sources - and what is left is usually made up. The attributable bit has probably come right from Reuters. That's why I don't read papers anymore and rarely watch TV news. Its 90% made up by wet-behind-the- ears kids that know nothing about the world we live in but make up a narrative for the news that suits their editor.
Can anyone else give us any more on the ways of journalists and the news media, please?
My sister is a journalist, but stays away from the nationals. She points out that the big papers get all their real news from Reuters and the local papers, then work it up into a much bigger story. They don't employ many real reporters or journalists - its too expensive. They prefer talking heads that can offer news-views which add a narrative to a story dug up by someone else and which matches the editorial line of the paper.
My sister also tells me that the papers have dirt on almost every public figure, but they CHOOSE who to turn over. This gives them enormous power over those that they chose to support - they can make you king one day and pauper the next. You can see they do this all the time with celebs, building them up one year and tearing them down the next, but we never imagine that they employ the same tactics with politicians - but they do.
She used to tell me all the tactics that papers would use to tell a story their way with their own spin on it. For instance, how often have you seen a phrase along the lines of "A spokesman said"? No name given. Why? It means the line was made up by the writer and attributed to someone real to give it substance. "A spokesmon", "unnamed sources", "A source within the Labour party" etc etc etc. Yes, they may all refer to a real person - but they could just have been made up by the journo to get his opinion across whilst making it sound like he has his finger on the pulse.
She showed me a story that she sold to the Guardian for £50. It was one column inch. The Guardian worked it up to half a page - all of it made up and based on opinion. She was pissed off: "I should have got £2500 if the story had really been that big!"
Take a story, remove the bits that are attributable to named sources - and what is left is usually made up. The attributable bit has probably come right from Reuters. That's why I don't read papers anymore and rarely watch TV news. Its 90% made up by wet-behind-the- ears kids that know nothing about the world we live in but make up a narrative for the news that suits their editor.
Can anyone else give us any more on the ways of journalists and the news media, please?
Here is the news
Lead story on Classic FM news this morning: "It looks like Britain's heading for a recession."
FLASH: Queen Anne's dead.
Where does the news come from? Is it any use? Other than weather forecasts, the last usable information I can remember is from the summer of 1987, when I learned that Sir James Goldsmith had sold all his shares on the Paris Bourse, which confirmed my feelings about the way the market was going - but that item came from Private Eye magazine.
December 1, 1978: publication of the Times and Sunday Times suspended for 11 months. During the journalists' industrial dispute, a spoof paper comes out, called "Not The Times". At that time, a strap line for the Financial Times was ""Don't you wish you were better informed?", so the send-up featured a picture of a steam locomotive that had crashed right through the wall of a railway terminus and down onto the pavement beneath, with the headline "What could you have done, had you been better informed?"
FLASH: Queen Anne's dead.
Where does the news come from? Is it any use? Other than weather forecasts, the last usable information I can remember is from the summer of 1987, when I learned that Sir James Goldsmith had sold all his shares on the Paris Bourse, which confirmed my feelings about the way the market was going - but that item came from Private Eye magazine.
December 1, 1978: publication of the Times and Sunday Times suspended for 11 months. During the journalists' industrial dispute, a spoof paper comes out, called "Not The Times". At that time, a strap line for the Financial Times was ""Don't you wish you were better informed?", so the send-up featured a picture of a steam locomotive that had crashed right through the wall of a railway terminus and down onto the pavement beneath, with the headline "What could you have done, had you been better informed?"
Useless, or trivial. As the Poet Laureate Alfred Austin wrote about the terminally-ill King Edward:
"Along the wire the electric message came,
He is no better, He is much the same."
So, who determines the news agenda? Are journalists much cop any more? Are they allowed to be?
... which brings us back to gold.
A quote from the Economist article cited yesterday:
real returns from American shares were just 0.1% a year from 1966-81; they fell a dismal 1.3% a year from 1973 to 1981.
Although that performance was much better than the painfully negative returns suffered by holders of government bonds, it was a long way short of the 6-7% returns that shares have historically achieved. Gold was a much better inflation hedge, earning an annual 10.9% in real terms between 1966 and 1981.
Which is, I suppose, what Marc Faber means by recommending gold at this point.
real returns from American shares were just 0.1% a year from 1966-81; they fell a dismal 1.3% a year from 1973 to 1981.
Although that performance was much better than the painfully negative returns suffered by holders of government bonds, it was a long way short of the 6-7% returns that shares have historically achieved. Gold was a much better inflation hedge, earning an annual 10.9% in real terms between 1966 and 1981.
Which is, I suppose, what Marc Faber means by recommending gold at this point.
Monday, July 07, 2008
Inflation bad for investors as well as depositors
I wondered recently what was the effect of inflation on shares - are they a hedge? Past history suggests not.
Now there is corroboration from a more distinguished source - the Economist.
And Nicola Horlick says don't buy shares for 2 - 3 years.
Well now, I've been leading the experts for a while. When I call the bottom correctly, it'll be time to start my own hedge fund. Usual terms: 2 and 20.
Now there is corroboration from a more distinguished source - the Economist.
And Nicola Horlick says don't buy shares for 2 - 3 years.
Well now, I've been leading the experts for a while. When I call the bottom correctly, it'll be time to start my own hedge fund. Usual terms: 2 and 20.
Sunday, July 06, 2008
Government and homelessness
The "Pathfinder" project for urban renewal has come in for some criticism, because so far it's meant a net loss of 9,000 homes and many of those whose houses have been demolished have not received sufficient compensation to buy something similar elsewhere (see here and here, with an attempt at more balanced discussion in the Liverpool Daily Post).
I suspect we don't have a housing shortage, but a housing misallocation. There are lots of old people rattling around in houses too large for them, and too expensive for them to maintain properly. And how many million bedrooms have been converted into domestic gyms, games rooms etc? We simply expect far more space than we used to, and so the "shortage" is a function of our choices.
But there is a limit on land space, if we want to retain the capacity to feed ourselves in hard times. Maybe we should review policies on housing, housing benefit, local taxation etc. And the policy of using foreign labour to keep down wage rates, and so create traps for our working and under-classes. And is there a Gramscian plan to undermine the cultural cohesion of the country by means of deliberate negligence in border controls, with the side-effect of worsening the pressure on accommodation?
Governments have a talent for creating problems that will long survive them. After four centuries, Northern Ireland still has its difficulties. And look at Fiji, where a century ago British planters imported Indians for indentured service periods of ten years. By the end of their contractual decade, quite naturally the labourers had married, had children and put down roots in the island. The historical result is festering resentment between ethnic groups, leading to outbursts such as George Speight's rebellion in 2000.
Similarly, covering England's green and pleasant land with concrete, tarmac and brick will also have persistent unpleasant consequences. And is there any way to change it back? Could we put a foot depth of earth along a disused motorway to convert it to arable use? So, new building on agricultural land, flood plains etc is tricky, and now we are seeing some of the problems of brownfield development.
But there's a huge number of houses built in the Thirties that need refurbishment. There may be a boom in plumbers, plasters, electricians and bricklayers; while at the same time we may see growing white-collar unemployment, as a result of outsourced information-processing. Maybe the working class will be victorious, after all, while the chattering classes fill holes in their shoes and jumpers with old copies of the Guardian.
I know it can happen, because it did happen in the Thirties - read Helen Forrester, whose debt-burdened middle-class father made the mistake of leaving London post-Crash, to return to his Liverpool birthplace, where the parish had no statutory obligation to support him. Helen wrote that if the Depression comes again, the things to stock up will be newspapers, razor blades and soap. And in her case, a purse inside her clothes so that her own family couldn't steal her meagre savings.
I suspect we don't have a housing shortage, but a housing misallocation. There are lots of old people rattling around in houses too large for them, and too expensive for them to maintain properly. And how many million bedrooms have been converted into domestic gyms, games rooms etc? We simply expect far more space than we used to, and so the "shortage" is a function of our choices.
But there is a limit on land space, if we want to retain the capacity to feed ourselves in hard times. Maybe we should review policies on housing, housing benefit, local taxation etc. And the policy of using foreign labour to keep down wage rates, and so create traps for our working and under-classes. And is there a Gramscian plan to undermine the cultural cohesion of the country by means of deliberate negligence in border controls, with the side-effect of worsening the pressure on accommodation?
Governments have a talent for creating problems that will long survive them. After four centuries, Northern Ireland still has its difficulties. And look at Fiji, where a century ago British planters imported Indians for indentured service periods of ten years. By the end of their contractual decade, quite naturally the labourers had married, had children and put down roots in the island. The historical result is festering resentment between ethnic groups, leading to outbursts such as George Speight's rebellion in 2000.
Similarly, covering England's green and pleasant land with concrete, tarmac and brick will also have persistent unpleasant consequences. And is there any way to change it back? Could we put a foot depth of earth along a disused motorway to convert it to arable use? So, new building on agricultural land, flood plains etc is tricky, and now we are seeing some of the problems of brownfield development.
But there's a huge number of houses built in the Thirties that need refurbishment. There may be a boom in plumbers, plasters, electricians and bricklayers; while at the same time we may see growing white-collar unemployment, as a result of outsourced information-processing. Maybe the working class will be victorious, after all, while the chattering classes fill holes in their shoes and jumpers with old copies of the Guardian.
I know it can happen, because it did happen in the Thirties - read Helen Forrester, whose debt-burdened middle-class father made the mistake of leaving London post-Crash, to return to his Liverpool birthplace, where the parish had no statutory obligation to support him. Helen wrote that if the Depression comes again, the things to stock up will be newspapers, razor blades and soap. And in her case, a purse inside her clothes so that her own family couldn't steal her meagre savings.
Saturday, July 05, 2008
What are recessions and bear markets?
I'm reading picky definitions, e.g. a bear market is one that drops 20% in two months, and a recession is two quarters of negative GDP.
Says who?
What we're in now waddles and quacks like a duck, and darned if it isn't a duck. I say we're in a recession and a bear market, and have been so since the year 2000. A recession, because our manufacturing industries are in steeper decline and will take the rest of the economy down slowly with them*; a bear market, because the stockmarket is more likely to go down than up, over the course of the next year or two.
I once paid for a repair to a slow leak in one of my tyres, and only when I ran over a nail did I discover that the repair had been effected using an old-fashioned inner tube. It went totally flat in two seconds. Thank goodness I wasn't on the motorway. Now, any problems, I get a new tyre.
Monetary inflation was used as an inner tube to repair the economy from around 2003 on. Subprime was the nail.
* For corroboration see "Alice" on the UK current account deficit and our declining trade.
Says who?
What we're in now waddles and quacks like a duck, and darned if it isn't a duck. I say we're in a recession and a bear market, and have been so since the year 2000. A recession, because our manufacturing industries are in steeper decline and will take the rest of the economy down slowly with them*; a bear market, because the stockmarket is more likely to go down than up, over the course of the next year or two.
I once paid for a repair to a slow leak in one of my tyres, and only when I ran over a nail did I discover that the repair had been effected using an old-fashioned inner tube. It went totally flat in two seconds. Thank goodness I wasn't on the motorway. Now, any problems, I get a new tyre.
Monetary inflation was used as an inner tube to repair the economy from around 2003 on. Subprime was the nail.
* For corroboration see "Alice" on the UK current account deficit and our declining trade.
Friday, July 04, 2008
Make the punishment fit the crime
Blaming the prophets
In this week's Spectator, Christopher Fildes discusses the way short-sellers get blamed for market falls, although they take hair-raising risks in doing so. He paraphrases Fred Schwed on the unfairness of such criticism: "In good times, he said, nobody minded the short sellers except their families, who minded going bankrupt. In bad times they were a receptacle for blame." I'd go back further:
But who wants to be foretold the weather? It is bad enough when it comes, without our having the misery of knowing about it beforehand. The prophet we like is the old man who, on the particularly gloomy-looking morning of some day when we particularly want it to be fine, looks round the horizon with a particularly knowing eye, and says:
"Oh no, sir, I think it will clear up all right. It will break all right enough, sir."
"Ah, he knows", we say, as we wish him good-morning, and start off; "wonderful how these old fellows can tell!"
And we feel an affection for that man which is not at all lessened by the circumstances of its NOT clearing up, but continuing to rain steadily all day.
"Ah, well," we feel, "he did his best."
For the man that prophesies us bad weather, on the contrary, we entertain only bitter and revengeful thoughts.
"Going to clear up, d'ye think?" we shout, cheerily, as we pass.
"Well, no, sir; I'm afraid it's settled down for the day," he replies, shaking his head.
"Stupid old fool!" we mutter, "what's HE know about it?" And, if his portent proves correct, we come back feeling still more angry against him, and with a vague notion that, somehow or other, he has had something to do with it.
Jerome K Jerome: "Three Men In A Boat", Chapter 5
So, don't blame me, please, but I still think investors won't be out of the woods until 2010.
But who wants to be foretold the weather? It is bad enough when it comes, without our having the misery of knowing about it beforehand. The prophet we like is the old man who, on the particularly gloomy-looking morning of some day when we particularly want it to be fine, looks round the horizon with a particularly knowing eye, and says:
"Oh no, sir, I think it will clear up all right. It will break all right enough, sir."
"Ah, he knows", we say, as we wish him good-morning, and start off; "wonderful how these old fellows can tell!"
And we feel an affection for that man which is not at all lessened by the circumstances of its NOT clearing up, but continuing to rain steadily all day.
"Ah, well," we feel, "he did his best."
For the man that prophesies us bad weather, on the contrary, we entertain only bitter and revengeful thoughts.
"Going to clear up, d'ye think?" we shout, cheerily, as we pass.
"Well, no, sir; I'm afraid it's settled down for the day," he replies, shaking his head.
"Stupid old fool!" we mutter, "what's HE know about it?" And, if his portent proves correct, we come back feeling still more angry against him, and with a vague notion that, somehow or other, he has had something to do with it.
Jerome K Jerome: "Three Men In A Boat", Chapter 5
So, don't blame me, please, but I still think investors won't be out of the woods until 2010.
Thursday, July 03, 2008
Credit default insurance and murky dealings
You have to have car insurance, it's a legal requirement. So it occurred to me a long time ago that you could make some money selling very low-cost car insurance that (when you looked at the fine print) promised nothing, thus making a safe profit for the company, fooling the regulators and satisfying the cheapskate customer, all at the same time. Fine, till the regulators find out.
According to Karl Denninger today, this is exactly what's happened in the case of UBS insuring one of its mortgage debt packages against default losses. The insurer, it's alleged, has totally inadequate capital for the insurance it's undertaken, but the insurance suited UBS because it permitted the stinking package to be left off the balance sheet.
Oh, to be a lawyer now.
According to Karl Denninger today, this is exactly what's happened in the case of UBS insuring one of its mortgage debt packages against default losses. The insurer, it's alleged, has totally inadequate capital for the insurance it's undertaken, but the insurance suited UBS because it permitted the stinking package to be left off the balance sheet.
Oh, to be a lawyer now.
Housing: have we reached the "point of maximum pessimism"?
Blanche Evans of Realty Times thinks the most of the bad news in housing has already been built into the market; she was interviewed on iTulip a couple of years ago, predicting a downturn but also saying that housing would be supported by the government, to some extent.
Benjamin Graham said we should “buy from pessimists and sell to optimists”. The smart money has done the second part, maybe it should look out for the first soon.
Benjamin Graham said we should “buy from pessimists and sell to optimists”. The smart money has done the second part, maybe it should look out for the first soon.
Peter Schiff using the word "collapse"
Some hot collars in this discussion. But a question does arise for me, which is this: if the US economy has to be rebased on savings and investments, but the sinking dollar raises prices of food, fuel etc, it's going to be very hard to find the money to improve the savings rate. Especially if those who have serious money are doing what Schiff and others would recommend as their financial advisers, i.e. buying foreign stocks and holding foreign currency.
And the same goes for us in the UK, I would think.
Wednesday, July 02, 2008
Could deflation reduce the price of gold?
Last year, Robert McHugh predicted that the Dow would drop to 9,000, at least in terms of the price of gold. By January 22 this year, that had happened.
But people like Karl Denninger have been saying for a long time that the outcome of the credit crunch will be deflationary, and Mr Denninger is more emphatic than ever about that now. And that's not just the view of a private investor who backs his judgment with his own hard-earned money: the Bank for International Settlements (htp: Michael Panzner) also thinks deflation a serious possibility.
I recently did a little primitive chartism and thought it possible that the Dow might revert to what looks like a longer-term trend line that includes the 9,000 mark.
Turning to the price of gold, it has certainly soared over the past few years, but there's been debate about manipulation. Frank Veneroso thinks central banks have been releasing stocks of gold to keep the price down, yet at the same time it is suspected that speculators have been boosting the price, possibly using leveraging (borrowing extra cash to increase the returns).
So another way for McHugh's prediction to come true (again), would be for both the Dow and the gold price to come down together. The ratio implicit in his prediction (13.51) could imply that the Dow hits 9,000 and gold drops to about $666 per ounce, or about 30% off where it is now.
Not impossible, if leveraged speculators have to disinvest to repay their borrowings in a hurry; and it would still only be a reversion to where gold was two years ago (and even then, nearly double what it had been three years before that).
But people like Karl Denninger have been saying for a long time that the outcome of the credit crunch will be deflationary, and Mr Denninger is more emphatic than ever about that now. And that's not just the view of a private investor who backs his judgment with his own hard-earned money: the Bank for International Settlements (htp: Michael Panzner) also thinks deflation a serious possibility.
I recently did a little primitive chartism and thought it possible that the Dow might revert to what looks like a longer-term trend line that includes the 9,000 mark.
Turning to the price of gold, it has certainly soared over the past few years, but there's been debate about manipulation. Frank Veneroso thinks central banks have been releasing stocks of gold to keep the price down, yet at the same time it is suspected that speculators have been boosting the price, possibly using leveraging (borrowing extra cash to increase the returns).
So another way for McHugh's prediction to come true (again), would be for both the Dow and the gold price to come down together. The ratio implicit in his prediction (13.51) could imply that the Dow hits 9,000 and gold drops to about $666 per ounce, or about 30% off where it is now.
Not impossible, if leveraged speculators have to disinvest to repay their borrowings in a hurry; and it would still only be a reversion to where gold was two years ago (and even then, nearly double what it had been three years before that).
Investment challenges in a bear market
If you don't believe me, believe a sophisticated investor like Karl Denninger:
No, the test is whether you keep your money in a Bear market. Note that I didn't say "make money". I said keep your money.
If you have the same amount of money now in your investment accounts as you did at SPX 1576 in October, you are doing better than 90% of all institutional money managers and 95% of all individual investors. This puts you in the top 5% - and that's just by going to cash in October and sitting on your hands.
If you've actually made money since then, you're in the top 1%.
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