Marc Faber is, it seems, chairman of a company called Indochina Capital and this report of a meeting in Ho Chi Minh City in April quotes him as saying, "Among emerging economies, Vietnam has the most potential for development."
In an edition of his GloomBoomDoom report dated May 2003 he remarked, "Vietnam... is developing rapidly and will, in my opinion, with its 80 million very hard-working and thrifty people, overtake Thailand economically within the next ten years or so." For those who may be considering subscribing to his newletters, it's interesting to see an example of his reporting style.
Monday, August 20, 2007
Marc Faber comments on Fed rate cut
Bloomberg today reports on Friday's 0.5% cut in the discount rate, and quotes Marc Faber saying "...it's an intervention... that is not justified [and will] create an additional set of problems at a later date.''
I'm mildly curious to see he was in Danang, Vietnam. And for Faber-watchers, there's news of a new channel featuring his interviews and predictions, on http://www.barreloworld.com/.
UPDATE:
See here for Marc Faber's interview on MoneyControl.com. He, too, recommends selling-out on the ups and staying in cash.
Sunday, August 19, 2007
Another bearish opinion
"The Contrarian Investor" (on Saturday - see sidebar) says sell, too:
"Anyway, we believe that Friday’s stock market rally (in the US) is a good opportunity to liquidate any existing holdings of stocks."
"Anyway, we believe that Friday’s stock market rally (in the US) is a good opportunity to liquidate any existing holdings of stocks."
Doug Casey goes to Argentina
This is getting very 1920s/1930s - Argentina as the home for the jet set. Here's Doug Casey:
...we're at the end of a 25-year boom. It's gone on more than a full generation now. And I'll tell you how it's going to end: It's going to end with a depression, and not just a depression; not just another Great Depression; it's going to be the Greater Depression...
I think what you ought to have is your citizenship in one country, your bank account in another country, your investments in a third, and live in a fourth. You've got to internationalize yourself...
What am I doing about this? I've been all over the world. I guess I've lived in 12 countries now. And out of 175, I've been to most of them, numerous times actually. What am I doing, where do I want to go, where am I living? Well, in New Zealand.... But... the currency has doubled and the real estate within that currency has doubled at least. So I'm getting out of New Zealand. Where am I going now? I'm going to Argentina...
I wouldn't touch Europe with a ten-foot pole...
...everything in Argentina costs between 10% to 30% of what it costs in North America. That's correct. It's that cheap... So you're getting a massive immigration from rich Europeans that can see the handwriting on the wall and like it down there. And I really like it down there. It's just a great society, great society, great place to hang out, prices are right. I mean this can solve most of your investment problems right there, just by transplanting yourself, if you've got some capital.
This may sound like it's only for the really rich, but I have had perfectly ordinary clients sell up their over-priced ordinary British homes and move permanently to the Far East. For personal reasons, I can't be a globe-trotter, but international relocation is happening on a much bigger scale than London to Provence. For a while, I subscribed to one magazine, "International Living", that looks for bargain locations to spend the rest of your life - Panama appears to be a good one, if you dress conservatively and mind your own business.
So although Mr Casey talks dramatically in a non-Brit sort of way, he is backing his judgement with his considerable money; and ordinary types like ourselves currently have options that we could scarcely have dreamed of before WWII. Whether we will always have such options, is another question.
...we're at the end of a 25-year boom. It's gone on more than a full generation now. And I'll tell you how it's going to end: It's going to end with a depression, and not just a depression; not just another Great Depression; it's going to be the Greater Depression...
I think what you ought to have is your citizenship in one country, your bank account in another country, your investments in a third, and live in a fourth. You've got to internationalize yourself...
What am I doing about this? I've been all over the world. I guess I've lived in 12 countries now. And out of 175, I've been to most of them, numerous times actually. What am I doing, where do I want to go, where am I living? Well, in New Zealand.... But... the currency has doubled and the real estate within that currency has doubled at least. So I'm getting out of New Zealand. Where am I going now? I'm going to Argentina...
I wouldn't touch Europe with a ten-foot pole...
...everything in Argentina costs between 10% to 30% of what it costs in North America. That's correct. It's that cheap... So you're getting a massive immigration from rich Europeans that can see the handwriting on the wall and like it down there. And I really like it down there. It's just a great society, great society, great place to hang out, prices are right. I mean this can solve most of your investment problems right there, just by transplanting yourself, if you've got some capital.
This may sound like it's only for the really rich, but I have had perfectly ordinary clients sell up their over-priced ordinary British homes and move permanently to the Far East. For personal reasons, I can't be a globe-trotter, but international relocation is happening on a much bigger scale than London to Provence. For a while, I subscribed to one magazine, "International Living", that looks for bargain locations to spend the rest of your life - Panama appears to be a good one, if you dress conservatively and mind your own business.
So although Mr Casey talks dramatically in a non-Brit sort of way, he is backing his judgement with his considerable money; and ordinary types like ourselves currently have options that we could scarcely have dreamed of before WWII. Whether we will always have such options, is another question.
More on Marc Faber and the bear market
From Friday's Daily Reckoning:
"Excerpts from CNBC-TV18's exclusive interview with Marc Faber:
Q: How do you read the events as they have unfolded in the past fortnight? How do you think this might shape up?
A: Basically as you know, the US market went up until July 16. The Dow peaked out on July 17 above 14,000 and then it started to slide, mainly driven by financial stocks and by what people call a crisis in the subprime lending sector and the CDO and the BS markets. The question obviously is where do we go from here? Is it like 1998, where we dropped first and then recovered strongly towards the end of the year or is it something more serious? I think it's something more serious.
Q: If you had to predict - since your view is bearish, what percentage fall would you expect in emerging market equities over the next foreseeable period?
A: The S&P has a very good chance to decline by 20-30% and the emerging economy stock markets could drop by 40%. That may not mean that the bull market in emerging markets is over for good, because in 1987 we had drops in Taiwan of 50% and then the market went up another four times, so you can have a big correction and still be in the bull market.
But if someone came to me and said what is the upside on the S&P? We had 1,452 where the high was 1,555. I would say the upside and the big resistance in the market is between 1,520 and 1,530 so the upside is limited. But what about the risk?
What I noticed is investors are far more concerned about missing the next leg in the bull market on the upside, than about the risk of losing a lot of money. And I think, gradually this will change and that would mean lower equity prices and also prices of other assets such as commodities can go down substantially and obviously home prices around the world.
Dear Daily Reckoning readers should be aware...this is a downturn that COULD be extremely long and severe."
"Excerpts from CNBC-TV18's exclusive interview with Marc Faber:
Q: How do you read the events as they have unfolded in the past fortnight? How do you think this might shape up?
A: Basically as you know, the US market went up until July 16. The Dow peaked out on July 17 above 14,000 and then it started to slide, mainly driven by financial stocks and by what people call a crisis in the subprime lending sector and the CDO and the BS markets. The question obviously is where do we go from here? Is it like 1998, where we dropped first and then recovered strongly towards the end of the year or is it something more serious? I think it's something more serious.
Q: If you had to predict - since your view is bearish, what percentage fall would you expect in emerging market equities over the next foreseeable period?
A: The S&P has a very good chance to decline by 20-30% and the emerging economy stock markets could drop by 40%. That may not mean that the bull market in emerging markets is over for good, because in 1987 we had drops in Taiwan of 50% and then the market went up another four times, so you can have a big correction and still be in the bull market.
But if someone came to me and said what is the upside on the S&P? We had 1,452 where the high was 1,555. I would say the upside and the big resistance in the market is between 1,520 and 1,530 so the upside is limited. But what about the risk?
What I noticed is investors are far more concerned about missing the next leg in the bull market on the upside, than about the risk of losing a lot of money. And I think, gradually this will change and that would mean lower equity prices and also prices of other assets such as commodities can go down substantially and obviously home prices around the world.
Dear Daily Reckoning readers should be aware...this is a downturn that COULD be extremely long and severe."
Marc Faber: India rather than the USA
Here is a quote from Marc Faber and a bit of bio info, extracted from INR News:
"If a gun were put to my head and I was asked to choose between two options - putting all my assets into the US or into India - I would choose Indian equities, Indian real estate, and Indian art. The reason behind this choice is partly my strong conviction that US assets will continue to decline relative to assets overseas, and partly because I can see that India may be at the beginning of a lasting economic take-off phase" ...
...From 1978 to February 1990, Marc Faber was the Managing Director of Drexel Burnham Lambert (HK) Ltd. In June 1990, he set up his own business, MARC FABER LIMITED which acts as an investment advisor and fund manager.(Marc Faber - A Simpleton's Guide to Economics and Investment Markets, part II )
By INRnews Correspondent
Dr Faber's comments on Indian urbanisation, the need for new infrastructure, and comparison with China, are also very interesting.
"If a gun were put to my head and I was asked to choose between two options - putting all my assets into the US or into India - I would choose Indian equities, Indian real estate, and Indian art. The reason behind this choice is partly my strong conviction that US assets will continue to decline relative to assets overseas, and partly because I can see that India may be at the beginning of a lasting economic take-off phase" ...
...From 1978 to February 1990, Marc Faber was the Managing Director of Drexel Burnham Lambert (HK) Ltd. In June 1990, he set up his own business, MARC FABER LIMITED which acts as an investment advisor and fund manager.(Marc Faber - A Simpleton's Guide to Economics and Investment Markets, part II )
By INRnews Correspondent
Dr Faber's comments on Indian urbanisation, the need for new infrastructure, and comparison with China, are also very interesting.
Saturday, August 18, 2007
Weathering the storm
The bankers have shown their hand - they fear deflation more than inflation. Pumping-in cash and cutting rates will keep us going through the economic squalls that they created by the same lax monetary policy. If you believe the monetarists, there will be a price to pay, but as long as this crisis management succeeds, the damage will be insidious rather than cataclysmic: money will slowly rot.Now that we know the opposition's strategy, what do we do? My guess is, hold cash, wait for further crises of confidence, and buy tangible assets, or assets backed by tangibles, at bargain prices.
That's why I think Buffett and Soros have been so clever in acquiring more rail stock in recent months. Railways are a natural Benjamin Graham choice: mature, income-producing investments. There are big barriers to entry - think of nineteenth-century land speculation and skulduggery, and add-in eco protests, modern politics and the unavailability of coolie labour. Rail has advantages over road, especially as so much freight now is containerised and port-to-city; but from an investor's perspective it is also solidly thing-based.
Other experts are into tangibles also. For example, Marc Faber likes real estate in emerging economies - and possibly in depressed areas of developed countries, and Bill Bonner has farmland in Argentina (the Chinese love beef). And then there's various types of commodity.I think we'll be back to putting money into things we can understand.
Friday, August 17, 2007
Following the markets today
As I hoped and more than half expected, the major Western markets are recovering from some of their fright. The FTSE has passed 6,000 again and at the time of writing, the Dow is back above 13,000. Those chest pains will eventually be laughed off as a bout of indigestion, and it'll be back to the fags and booze after a while.
The subprime mess was well-telegraphed, if ignored by many, and although we still don't know the full cost, it seems that yet again, the central banks are willing to pump money into the system, rather than reform it. Marc Faber's view that the crisis should be allowed to burn through and eliminate some of the players, is too gritty for the banking establishment.
My take on this is that it's an opportunity for those still in the market to quietly come out without panicking everybody else. The rise of the dollar and the temporary sharp falls in precious metals, are reminders that in a crisis, cash is king; though given Ben Bernanke's statement about dropping dollars from helicopters, maybe king for a day.
Risk avoidance leads to stronger dollar
That's the analysis of Kathy Lien at DailyFX.com yesterday:
These days, cash is a valuable commodity since a liquidity crisis means a lack of cash. The sharpness of recent moves and the lack of liquidity have probably pushed more traders to liquidate positions than to add funds. Flight to safety continues to send the dollar higher against every major currency with the exception of the Japanese Yen as more victims of the subprime and liquidity crisis surface.
There's a possibility of an interest rate reduction:
...the biggest question on everyone’s mind is when the Federal Reserve will cut interest rates. The market is current pricing 75bp of easing by the end of the year. There has also been speculation of an intermeeting rate cut.
But:
Like many central banks around the world, the Fed has been reluctant to lower rates because they feel that the markets need to be punished for their excessive risk appetite. Furthermore, they have said that they need to see market volatility have a “real impact” on the economy.
This, she thinks, is becoming apparent:
With major losses and bankruptcies reported throughout the financial sector, we expect companies to layoff staff left and right. [...] For the people in the “real economy,” their 401ks have taken a harsh beating while their mortgage interest payments are on the rise. It is only a matter of time when we see economics reflect that. The bad news is already pouring in with housing starts hitting a 10 year low and manufacturing activity in the Philadelphia region stagnating. Since the beginning of the year, the weak dollar has provided a big boom to the manufacturing sector. Now that the dollar has strengthened significantly, activity in the manufacturing sector should also begin to slow.
These days, cash is a valuable commodity since a liquidity crisis means a lack of cash. The sharpness of recent moves and the lack of liquidity have probably pushed more traders to liquidate positions than to add funds. Flight to safety continues to send the dollar higher against every major currency with the exception of the Japanese Yen as more victims of the subprime and liquidity crisis surface.
There's a possibility of an interest rate reduction:
...the biggest question on everyone’s mind is when the Federal Reserve will cut interest rates. The market is current pricing 75bp of easing by the end of the year. There has also been speculation of an intermeeting rate cut.
But:
Like many central banks around the world, the Fed has been reluctant to lower rates because they feel that the markets need to be punished for their excessive risk appetite. Furthermore, they have said that they need to see market volatility have a “real impact” on the economy.
This, she thinks, is becoming apparent:
With major losses and bankruptcies reported throughout the financial sector, we expect companies to layoff staff left and right. [...] For the people in the “real economy,” their 401ks have taken a harsh beating while their mortgage interest payments are on the rise. It is only a matter of time when we see economics reflect that. The bad news is already pouring in with housing starts hitting a 10 year low and manufacturing activity in the Philadelphia region stagnating. Since the beginning of the year, the weak dollar has provided a big boom to the manufacturing sector. Now that the dollar has strengthened significantly, activity in the manufacturing sector should also begin to slow.
US economy over-dependent on housing sector
The Daily Reckoning Australia summarises Dr Kurt Richebacher's analysis: the US economy depends on the housing sector to a dangerous degree, so even a stall in housing will have a big effect.
"...property bubbles have historically been the regular main causes of major financial crises. During its bubble years in the late 1980s, Japan had rampant bubbles in both stocks and property. While the focus is always on the more spectacular equity bubble, hindsight leaves no doubt that the following economic disaster was mainly rooted in the property bubble. Both bubbles burst in the end, but the property deflation has continued for 13 years now, with calamitous effects on the banking system."
I suspect we have a similar problem here in the UK.
Thursday, August 16, 2007
Here is tomorrow's news
An online newspaper from the Northern Marianas (south-east from Japan), dated Friday, gives some quotes from Peter Schiff, including this startling (and measurable) one:"People call us the biggest economy in the world but it’s false, we’ll be lucky to be in the top 20 in two years’ time."
According to the World Bank and ranked by 2006 GDP, the 20th country is Switzerland; by purchasing power parity, it's Iran; by Gross National Income (Atlas method) it's Turkey. Doesn't look likely, so far.
But by gross national income per capita, on a purchasing power parity method, the 20th country is Belgium; and by GNP per capita (Atlas method), it's Germany. Maybe we're getting somewhere now.
In this list of countries by external debt, the USA comes top (over $10 trillion), with the UK in second place (over 8 trillion), and I'm sure we'd rather swap places here with Greece in 20th position ($301.9 billion); but that doesn't take into account the relative sizes of our economies. I'm still searching for a list of countries by net external debt, related to GDP. Help would be appreciated!
On a list of public debt to GDP, the USA is in 32nd place (64.7%), and the UK is in 61st place (42.2%). The Lebanon (209%) and Japan (175.5%) are the top two on this sinner's list.
As they say, comparisons are odious.
More on Dow stock valuation
Further to the assertion that stocks are reasonably valued, and Marc Faber's answer that we have an "earnings bubble" that is skewing p/e (share price compared to earnings, i.e. dividends) calculations, here is an essay by David Leonhardt in the International Herald Tribune (14 August) on historical p/e ratios.
A couple of extracts:
...the stocks in the Standard & Poor's 500 have an average P/E ratio of about 16.8, which by historical standards is normal. Since World War II, the average ratio has been 16.1. During the bubbles of the 1920s and the 1990s, the ratio shot above 30...
Graham and Dodd argued that P/E ratios should compare stock prices to "not less than five years, preferably seven or ten years" of profits...
Based on average profits over the past 10 years, the P/E ratio has been hovering around 27 recently. That's higher than it has been at any other point during the past 130 years, except for the great bubbles of the 1920s and the 1990s. The stock run-up of the 1990s was so big, in other words, that the market may still not have fully worked it off...
In the long term, the stock market will almost certainly continue to be a good investment. But the next few years do seem to depend on a more rickety foundation than Wall Street's soothing words suggest.
A drop from a p/e ratio of 27 down to 16.8 would imply a share price drop of 37%.
Thanks to Michael Panzner for spotting this and putting it onto his Financial Armageddon site.
A couple of extracts:
...the stocks in the Standard & Poor's 500 have an average P/E ratio of about 16.8, which by historical standards is normal. Since World War II, the average ratio has been 16.1. During the bubbles of the 1920s and the 1990s, the ratio shot above 30...
Graham and Dodd argued that P/E ratios should compare stock prices to "not less than five years, preferably seven or ten years" of profits...
Based on average profits over the past 10 years, the P/E ratio has been hovering around 27 recently. That's higher than it has been at any other point during the past 130 years, except for the great bubbles of the 1920s and the 1990s. The stock run-up of the 1990s was so big, in other words, that the market may still not have fully worked it off...
In the long term, the stock market will almost certainly continue to be a good investment. But the next few years do seem to depend on a more rickety foundation than Wall Street's soothing words suggest.
A drop from a p/e ratio of 27 down to 16.8 would imply a share price drop of 37%.
Thanks to Michael Panzner for spotting this and putting it onto his Financial Armageddon site.
Weakness of UK M3 relative to gold
Relating total national money and credit to gold holdings, we've seen that the USA would price gold at around $45,000 an ounce, Germany at maybe $14,000 an ounce.
World Gold Council June 2007 figures say the UK has 310.3 tonnes of official gold, and Mike Hewitt's table shows UK M3 at $3,532.1 billion. Using the same gold value per kilo as with the other two countries, if the UK's M3 were entirely gold-related, this would imply a price of about $35,4046 per ounce.
From this perspective, although Britain's economy is much smaller than America's, its currency weakness is much closer to America's than to Germany's.
World Gold Council June 2007 figures say the UK has 310.3 tonnes of official gold, and Mike Hewitt's table shows UK M3 at $3,532.1 billion. Using the same gold value per kilo as with the other two countries, if the UK's M3 were entirely gold-related, this would imply a price of about $35,4046 per ounce.
From this perspective, although Britain's economy is much smaller than America's, its currency weakness is much closer to America's than to Germany's.
Dow and FTSE lows
The Dow had its lowest close yesterday since 19 April 2007; the FTSE is currently below 5,950 - the most recent lower closing figure was on 3 October 2006. Why we're suffering more, I have no idea.
More on gold and the money supply
At last, I've found something to help me see currencies in the context of official gold reserves - a brilliantly useful essay by Mike Hewitt in The Market Oracle (July 31).The above chart (one of several in his exposition) shows that the Euro zone has a better ratio than the USA of gold to currency, and as I tried to demonstrate yesterday, within Europe Germany is particularly strong. And Europe's economy is also of a size to make it a possible reserve-currency contender.
As a footnote, my fellow Brits must be dismayed at the UK's pathetic weakness.
Sprechen Sie Gibberish?
Most days, I read something that reminds me how little I know. And then I read the financial pages.
Let's look at the UK's Daily Mail today, Money Mail section (pages 38-39). The headline is "Storm Warning" - anything from a week to seven years late, depending on your analysis of the underlying trends.
Sub-section: "Will it continue?" Answer: volatility "for the next few months", but "the markets are fundamentally sound in that that they are not over-priced". Yet we've only just heard from Marc Faber, saying that he expects "earnings disappointments" which will show up in the dividends and so alter the p/e ratio for the worse. And on page 66 of the same paper we see disappointments at UBS, Wal-Mart, Home Depot.
The chairman of a large financial advice firm is quoted saying, "You must put this sub-prime mortgage meltdown into perspective. We are talking about £100 billion of losses. [Wait for the punchline.] This sounds like a lot, but it is just one-tenth of the size of the public sector pension liability in this country." Very large, and mostly unfunded, pension liabilities.
Usually, I throw away the money sections of newspapers; I only read them today to see if they'd noticed what was going on. But then I remember that journalists told us for years not to bother with financial advisers, when we could buy our pensions direct from the six-figure wagemen at Equitable Life.
Let's look at the UK's Daily Mail today, Money Mail section (pages 38-39). The headline is "Storm Warning" - anything from a week to seven years late, depending on your analysis of the underlying trends.
Sub-section: "Will it continue?" Answer: volatility "for the next few months", but "the markets are fundamentally sound in that that they are not over-priced". Yet we've only just heard from Marc Faber, saying that he expects "earnings disappointments" which will show up in the dividends and so alter the p/e ratio for the worse. And on page 66 of the same paper we see disappointments at UBS, Wal-Mart, Home Depot.
The chairman of a large financial advice firm is quoted saying, "You must put this sub-prime mortgage meltdown into perspective. We are talking about £100 billion of losses. [Wait for the punchline.] This sounds like a lot, but it is just one-tenth of the size of the public sector pension liability in this country." Very large, and mostly unfunded, pension liabilities.
Usually, I throw away the money sections of newspapers; I only read them today to see if they'd noticed what was going on. But then I remember that journalists told us for years not to bother with financial advisers, when we could buy our pensions direct from the six-figure wagemen at Equitable Life.
Wednesday, August 15, 2007
Could the German DM be stronger than the US dollar?
Another thought experiment. We've seen that if the US stock of gold (if it hasn't been replaced by IOUs) had to back all of its M3 money supply, then this would imply a gold price of something like $45,000 per ounce.
I've tried to find equivalent figures for Germany. The latest I can find is from May 1998, when M3 was then estimated at 3,243.70 billion DM. The Deutschmark is pegged at 0.51129 to the Euro, and the US dollar currently buys around 0.73581 Euros. So in dollar terms, German M3 is/was in the region of $1,559 billion.
The World Gold Council's June 2007 figures show Germany holding 3,442.5 tonnes of gold, and there are 31.1034768 grams to the troy ounce, so that's 110,678,945 ounces. If this gold covered all of Germany's M3 at the latter's 1998 estimate, it would imply a gold price of $14,085 per ounce.
Granted that German M3 must now be greater than in 1998, it still suggests that in terms of the ratio of gold to money supply, Germany's currency is around 3 times stronger than the USA's, or one-third as vulnerable in case of hyperinflation.
I've tried to find equivalent figures for Germany. The latest I can find is from May 1998, when M3 was then estimated at 3,243.70 billion DM. The Deutschmark is pegged at 0.51129 to the Euro, and the US dollar currently buys around 0.73581 Euros. So in dollar terms, German M3 is/was in the region of $1,559 billion.
The World Gold Council's June 2007 figures show Germany holding 3,442.5 tonnes of gold, and there are 31.1034768 grams to the troy ounce, so that's 110,678,945 ounces. If this gold covered all of Germany's M3 at the latter's 1998 estimate, it would imply a gold price of $14,085 per ounce.
Granted that German M3 must now be greater than in 1998, it still suggests that in terms of the ratio of gold to money supply, Germany's currency is around 3 times stronger than the USA's, or one-third as vulnerable in case of hyperinflation.
Silver to ride high?
Jason Hommel, in this 2 August report on SilverSeek.com, points out that, because of its industrial uses, silver is actually more scarce than gold.
He confirms my recent mathematical estimate that gold "ought" to equate to "$45,000/oz. to fully back all the M-3 created money supply", and repeats the market-manipulation theory:
...we have strong evidence of government manipulation in the gold market that has been going on since the 1990s. It is strongly suspected that the world's central banks have sold about one-half of their combined "reported" 33,000 tonnes (1 billion ozs.) of gold into the market to depress prices. Were it not for this selling, the gold price could well be $2,000 to $3,000 now!
He's predicting silver at $8,000 an ounce within 15 years - mostly because of hyperinflation, rather than real appreciation. In the nearer future, he thinks:
I see silver easily at $30 by early next year. Gold should be over $1,000 maybe $1,200.
That's something we'll be able to test more easily.
Gold going cold?
The gold price seems to have pretty much frozen, despite currency worries and stockmarket volatility. Peter Schiff is mystified, too though he expects "an explosive move for gold any day now". Yesterday's IHT article notes that "central banks in Europe have increased sales of reserves this year by 7.3 percent", continuing our theme of market manipulation, and a futures trader called Ron Goodis points out, "In times of a liquidity crunch, people want cash, and that's Treasuries, not speculative stuff like gold."
This is the problem for doomsters: the 'true' value of gold is most likely to be seen, not in moderately inflationary times, but when faith in paper currency has collapsed and hyperinflation is roaring through the system. It's not something one should wish for, even if it is needed to prove one's theory.
However, there's still the question of how much longer the market can be bought off with these gold stock sales. Eventually there will be nothing left to throw off the back of the troika at the pursuing wolves. And how much has been 'loaned' from stock already?
The article says, "Central banks are the biggest holders of gold, controlling about a fifth of all known supplies." So four-fifths is now in private hands, presumably. You may not feel the time is right to buy gold as a speculation or hedge, but if you had some already, would you sell it now?
This is the problem for doomsters: the 'true' value of gold is most likely to be seen, not in moderately inflationary times, but when faith in paper currency has collapsed and hyperinflation is roaring through the system. It's not something one should wish for, even if it is needed to prove one's theory.
However, there's still the question of how much longer the market can be bought off with these gold stock sales. Eventually there will be nothing left to throw off the back of the troika at the pursuing wolves. And how much has been 'loaned' from stock already?
The article says, "Central banks are the biggest holders of gold, controlling about a fifth of all known supplies." So four-fifths is now in private hands, presumably. You may not feel the time is right to buy gold as a speculation or hedge, but if you had some already, would you sell it now?
Subprime update, plus Dow and gold
Here's iTulip's scathing video on the sub-prime lenders and special pleading from Jim Cramer; and according to this, it was $323 billion pumped into the banking system in 48 hours, not $266 billion.
The Dow closed down 207 points yesterday, anyway. Perhaps you can't pump up a burst balloon.
And gold, which one would think should have an inverse relation to the market, has lost $5 an ounce, too.
Things do look a little concerning.
Subscribe to:
Comments (Atom)