*** FUTURE POSTS WILL ALSO APPEAR AT 'NOW AND NEXT' : https://rolfnorfolk.substack.com
Wednesday, October 31, 2007
There's never just one cockroach in the kitchen
Crazy like a fox?
Uncle Sam and John Bull
Tuesday, October 30, 2007
Merrill in a panic
Charles Merrill, a relation of the Merrill Lynch founder, has become a gold squirrel.
More surprises from Warren Buffett
And he doesn't have an accountant! (How many enemies can you make in one day?)
Money vs The People
In Financial Sense yesterday, Robert McHugh comments:
When the Master Planners devalued the dollar over the past five years, they raised the cost of living for everyone. The Middle Class is getting annihilated from this silent event. Incomes are not keeping up. This was done because this administration “equates stock market success with economic success and has directed their efforts to drive up equities at literally any cost,” to quote one of our subscribers.
...but Tony Allison looks forward to a more energy-efficient future:
Change is seldom welcomed by most humans, but it can often bring about positive results. It is impossible to know what year the effects of peak oil production will barge into our living rooms, but change is on the way. The adjustment period to a permanent supply crunch will likely be very difficult, but some effects may be beneficial. For example, we could see a re-birth in local farming and manufacturing, as food and industrial products become exceedingly expensive to transport. We would see more public transit, more freight train transportation, more bicycles, more energy efficiencies of all kinds working their way into society.
Buffett goes South and East
Abroad elsewhere, he's looking for high-dividend companies - a combination of the standard value investing formula and hedging against the dollar.
Every Picture Tells A Story
Monday, October 29, 2007
Vote early, vote often
Volume - shares and gold
David Yu (Safe Haven, yesterday) comments on the unusually high volume of trade on the NASDAQ recently, and so expects a fallback sometime.
Peter Degraaf (GoldSeek, Friday) thinks gold can't be shorted or held down forever. He reminds us of the extraordinary volumes of bullion traded in 1967-68, and the explosive rise in the price when the containment attempt finally failed. Degraaf believes Frank Veneroso's theory that central banks are surreptitiously dumping gold again today, playing the same game - and expects the same result.
Faber: why the dollar may bounce back
Faber said if bubbles in emerging markets deflated, the dollar may rebound from all-time lows against the euro as fund managers who have invested in emerging markets shift investments to the United States.
China: a positive view - and a challenge to India
Like James Kynge, Gu makes the point that the big profits are made by the multinationals - the cheap labour input from China is only a small factor. (Surely this shows that there is a very strong incentive for China to develop its own marketing and management class.)
Gu explains that although India's labour costs are even lower than China's, India hasn't yet developed its supply chain and infrastructure to the same degree:
... China, over the last 26 years has gotten all of them in one place. For example, in consumer electronics you can set up your shop in Guangdong, then you get more than 10,000 component makers.
So, the gauntlet is thrown at India's feet.
Rapid fire
Duff McDonald in New York Magazine (Saturday) goes through various doomsters' scenarios. How many bullets can we dodge, especially when the system is becoming automated?
By the way, he says CNBC calls Peter Schiff "Dr Doom" - surely that would be Marc Faber?
... and the brakes have been greased
Trouble ahead
Market Ticker reports that a bank has borrowed $75 million at exceptionally high interest rates, suggesting that the collateral they were offering wasn't sound enough to be acceptable. And there are futures contracts being taken out that indicate some traders expect a major financial dislocation.
In other words, this bet is one that the credit markets will go supercritical.
And it wasn't made by just one firm, one speculator, or one guy.
A few months ago I pointed out that every big equity market dump - every last one of them - has started in the credit markets. It always starts there, simply because of the volume of business transacted and the sensitivity to problems. In the equity markets one company can go "boom" and it doesn't mean much. But in the credit markets "systemic risk" - that is, a refusal to trust people as a foundational principle - once it takes hold is very, very difficult to tamp back down.
Read the whole post here. And here's the evidence (source):
Saturday, October 27, 2007
"Dow 9,000", UK loans to US, poll, doom
Hogarth on corrupt electioneering practices
I also suspect that a major theme this century will be the contest between Marxism and Islam. I hope for a bloodless final end to the former, which has caused such suffering to so many millions in the last century; and the ascendancy of the civilised, cultured, intellectual and tolerant traditions within the latter.
Friday, October 26, 2007
Kicking through the slush
Sovereign wealth funds and national prosperity
Without pretending to technical expertise in this area, I can envisage implications for a growing ownership of equities by governments. One effect may be to reduce volatility in large-capitalisation stocks, since national treasuries can take a longer view than the individual investor.
But there must also be concern about the possible use of ownership for political purposes. For example, I wonder at the UK's having allowed foreign enterprises to take over some of our energy and water supply companies.
I began this blog for investors, but increasingly I think the real story is not about how some may make (or protect) their fortunes, but about the implications for ordinary citizens.
Today I drove past the site of the former Rover car plant in Longbridge, Birmingham. The firm was on its way out years ago and a venture capital company called Alchemy offered to take it over, cut its size and specialise in a line of sports cars. The rest of the land could be redeveloped - housing and retail. The surplus workers would have their pension rights and redundancy payouts honoured, and some could still look around for employment in other plants.
But there was an election coming (2000), so the government chose to encourage a management buyout instead. Thousands of jobs were saved, supposedly. Besides, it was said (I seem to recall) that the site was too polluted for residential development, anyhow.
Well, Rover did go bust anyway (after a £6.5 million "bridging loan" to prevent its collapse immediately before the 2005 General Election). The workers didn't get the redundancy payments they'd have had from Alchemy in 2000, and their pensions were hit too. Anyone still interested in car work elsewhere would then be five years older, in an industry that some believe discriminated on the basis of age prior to new legislation in 2006.
A Chinese firm, SAIC, has picked over the carcase, with special attention to any designs and other paperwork that might help with setting up an alternative in the Far East. And now the site is being cleared - for residential and retail development.
There is a big, shiny new building on the Bristol Road in Longbridge - a JobCentre Plus.
Where, in all this, were the working people's long-term interests really considered, even by their political representatives?
Friday, October 19, 2007
Normal service will be resumed as soon as possible
Off for a short break - back soon. But what a time to pick - the Federal Reserve having just granted maybe $100 billion of special exemptions to major banks (see yesterday's post).
Dollars, gold and words
Gary Dorsch (October 18) explains that a falling dollar helps the S&P 500, "which earn roughly 44% of their revenue from overseas, mostly in Euros", and supports house prices in the US; but it also raises the price of oil, gold and agricultural commodities. While the US seems set to cut rates further, the Eurozone may raise theirs to control inflation. In five years, the Brazilian real has doubled against the dollar! Oh, to have been a currency trader.
Meanwhile, Doug Galland at Casey Research explains that gold was dipping together with shares, because institutional investors were scrambling for cash in the unfolding credit crisis. His view is that in the longer term, these sectors will diverge and gold will soar. He supplies an eloquently simple graph:
Speaking of eloquence, financial writers know their business but many need to hone their writing, so I propose a new prize: Sackerson's Prose Trophy. The first winner is Doug Galland, with the following simile:
Though admittedly impatient to see the gold show get on the road, we were largely unconcerned by gold’s behavior. That’s because our eyes remained firmly fixed on the perfect trap set over the years for Bernanke’s Fed.
Like hunters of antiquity watching large prey grazing toward a large covered pit, the bottom of which is decorated with sharpened sticks, we watched the handsomely attired and well-groomed Bernanke and friends shuffle ever closer to the edge, their attention no doubt occupied by pondering the flavor of champagne to be served with the evening’s second course.
One minute pondering bubbly, the very next standing, wide-eyed and hyperventilating, on thin cover with decades of fiscal abuse cracking precariously under their collective Italian leather loafers. We can’t entirely blame Bernanke for the dilemma he now finds himself in; it was more about showing up to work at the wrong place at the wrong time.
The second paragraph is splendid in its anticipation, and the phrasing conveys both the anguished expectation of the hunters and the relaxed, expansive mood of the prey. The denouement is a little disappointing: "pondering" is a repetition and the syntax is too florid; a short sentence would be better, contrasting the suddenness of the fall with the slowness of the approach.
Further nominations for Sackerson's Prose Trophy are welcomed.