Wednesday, November 07, 2007
Musical chairs and funny hats
Michael Panzner looks closer to being vindicated as the weeks roll by. Here he quotes Nouriel Roubini on the continuing musical-chairs-type credit tightening - we're getting well beyond sub-prime territory - and castigates the financial astrologers who failed to foretell the oncoming disasters. I think many of them should be made to wear star-bedecked hats, and wave wands.
Down Jones
Dow 9,000 update: Dow at 13,660.94, gold $833.80/oz. "Gold-priced Dow" has therefore gone down since July 6, from 13,611.69 to (effectively) 10,612.71, a drop of 22% (or 52% p.a. annualised).
To put it another way, the Dow has stood still and gold has risen 29% (or 112% p.a. annualised) over the last 123 days.
To put it another way, the Dow has stood still and gold has risen 29% (or 112% p.a. annualised) over the last 123 days.
Tuesday, November 06, 2007
Lenders should tremble
"Genesis" at Market Ticker explains that US lenders who colluded in fraudulent mortgage applications can be forced to have the properties back at their original valuation.
Gold: forget the charts
Gold is currently nearly $820/oz. and it's natural to look at the historical charts to see where this puts us. We did this yesterday.
But what use are the charts? The wiggly lines on them don't show the full context: the wild monetary inflation and cumulative trade and budget deficits of the past few years, which (if we believe the analysts) are unprecedented.
Instead of drawing conclusions from the graphs, we should be asking questions - especially, why hasn't gold zoomed more and earlier? After all, governments must feel that gold is at least a vestigial or potential measure of the worth of their currency; otherwise, they wouldn't be storing thousands of tons of the unproductive stuff in expensive facilities. So, why hasn't gold acted as the thermometer of this financial fever of the last, oh, seven years?
One answer is that the world gold market is small enough to be deliberately distorted. Frank Veneroso could be right: central banks may have been secretly drip-releasing portions of their bullion reserves. That would be to reassure us - or rather, kid us - that everything's under control. Since the gold price matters, it becomes important for officials to manipulate it, and so (according to this theory) the charts will actually tell us nothing.
Until the reserves get so low that the game can't continue. Central banks will suddenly get vertigo and freeze-cling to what they have left, and the gold market will explode, as confidence in the currency starts to collapse.
And Veneroso cottoned on early, simply because the scam worked too well. The smile was too bright, the walk a little too confident. If he's right - and I more than half suspect he is - we needn't bother with the past price data, or with worries about short-term corrections.
But what use are the charts? The wiggly lines on them don't show the full context: the wild monetary inflation and cumulative trade and budget deficits of the past few years, which (if we believe the analysts) are unprecedented.
Instead of drawing conclusions from the graphs, we should be asking questions - especially, why hasn't gold zoomed more and earlier? After all, governments must feel that gold is at least a vestigial or potential measure of the worth of their currency; otherwise, they wouldn't be storing thousands of tons of the unproductive stuff in expensive facilities. So, why hasn't gold acted as the thermometer of this financial fever of the last, oh, seven years?
One answer is that the world gold market is small enough to be deliberately distorted. Frank Veneroso could be right: central banks may have been secretly drip-releasing portions of their bullion reserves. That would be to reassure us - or rather, kid us - that everything's under control. Since the gold price matters, it becomes important for officials to manipulate it, and so (according to this theory) the charts will actually tell us nothing.
Until the reserves get so low that the game can't continue. Central banks will suddenly get vertigo and freeze-cling to what they have left, and the gold market will explode, as confidence in the currency starts to collapse.
And Veneroso cottoned on early, simply because the scam worked too well. The smile was too bright, the walk a little too confident. If he's right - and I more than half suspect he is - we needn't bother with the past price data, or with worries about short-term corrections.
Monday, November 05, 2007
Start like Buffett to end up like Buffett
Great article in The Motley Fool about how Warren Buffett founded and developed his fortune, and some of us could do the same.
Gold: undervalued, or not?
Boris Sobolev (SafeHaven, today) reckons gold is still well below its inflation-adjusted high of $3,000. But the chart he refers us to from his previous article (Resource Stock Guide, June 8) could be interpreted as showing that gold (in real terms) is now around its long-term trend. In that case, surely only a speculator would hope for a new spike to make a quick killing. 
Warren Buffett and derivatives
John Carney, in DealBreaker.com today, discusses Warren Buffett's recent involvement in derivatives, notwithstanding his previous publicly-announced disenchantment with the product. Does he understand the risks better this time around, or has he simply worded the contracts more carefully?
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