Bits Bucket And Craigslist Finds For November 23, 2006
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Happy Thanksgiving!
Nov. 24, 2006 - National Buy Nothing Day. Great idea!
http://www.itulip.com (upper left corner)
I will have to exclude index puts from that but I’m sure the authors would make that exception
There are a couple of other days (weeks) that I would like to see.
…where no one buys or attends a professional sports game, movie, play, etc. or other event until ticket prices and concession prices are brought down.
I know this will never happen, but I think it would be great to see.
Huh? I don’t buy much anyway. I guess it’s all relative. Some of those things may not be affordable to you, but I scrimped and saved up my money and now lots of them are affordable to me. You are free to run your own personal boycott. You will save money that way and eventually stop complaining about prices. Why should you care if others do not boycott high prices? For instance, real estate prices are too high for me. I don’t give a hoot if others are buying a $650,000 house that I think should be priced at $300,000. Why should I? I’m renting cheap and saving a lot of money. Now the FBs are regretting how they looked down at us renters a couple of years ago. We live on the cheap. Look who is laughing now!
Actually, I do run my own personal boycott. I only buy discretionary items that I think are fairly priced and I only do business with those enterprises that I think treat me fairly. My point was, that I think if more people did this, then things would be more fairly priced and service would be better. I realize that I made no mention of service in my prior postm though. I think most people just figure, “hey, it is what it is, so they just pay it”.
I am pretty well off and don’t want for anything. I can more than afford to do or buy pretty much whatever I want. I just feel bad for those that can’t. The typical guy/gal that would like to take the kids to a ball game, but can’t afford to drop $500 on tickets, $50 on parking, $50 on treats…meanwhile the players gripe about being paid only a few million a year, the owners want my tax dollars to build the stadiums, etc.
“I can more than afford to do or buy pretty much whatever I want. I just feel bad for those that can’t.”
I’ve been there - in my 20s where I could not afford a life. But I was starting out after getting a college education - not at an Ivy league, but a cheapo state university (class of 1985). YTD my earnings are $200,000 - so much for the advantage of snooty colleges over state universities. I never took drugs, although I’m from the marijuana-smoking generation. I owe my success to the avoidence of excess and the avoidance of conformity. Self-made and I don’t give a rat’s a$$ about those who squandered their opportunities. Have a good day, however!
I think your comment is very relavent to the housing bubble.
The bubble was enabled in large part by people who did not demand value for their dollar when they bought their house. They paid any price. Part of this was motivated by the greed factor that led them to believe that no matter how much they paid, someone would pay them more, a LOT more, in just a year or two.
I refuse to be ripped off…for anything. I haven’t attended a concert in years, ever since TicketMaster started charging $10 per ticket for the priveledge of talking to me on the telephone for a few minutes and taking my money. Why do people just accept things like this?
I work in the entertainment business. I can say this: most people who actually work behind the scenes have enjoyed only normal wage inflation. Meanwhile, ticket prices have far outstripped inflation (bubble?).
The bulk of the revenue from the increase in ticket prices has gone to the performers and their management.
So I guess you could say my job is not recession proof, but I am trying to make my portolio such.
Sometimes I feel like I’m living in a Twight Zone episode where all the people around me buy whatever they want regardless of how much it costs or whether they afford it or not. When will this hedonism end?
I know exactly what you mean. What’s worse for me is many of these people are my relatives! And they come to me for “loans” on critical life-support items like new cars, or the cell phone bill (which they can’t pay because of the new car), etc. etc. I just can’t stand it. I have worked since age 16 and saved and even thru some bad times (e.g. dot.com bomb) I still was careful. I sold my house in CA when I realized it was way too valuable to hold onto, and I moved to a much less expensive area and I am now renting. But some people that are mooching off of others or the government for food and shelter seem to think that new cars, cell phones, cable tv, etc. are necessities not luxuries!
You want to see that attitude in action, take a look at the bankruptcy schedules and budget for the average Plano or Frisco Chapter 7 filer (of which there are too many to count anymore). You should see what they try to retain while not paying their debts. $700/mo cell phone bills, $200/mo cable TV, etc. Fortunately, the UST doesn’t let them get away with it.
“many of these people are my relatives! And they come to me for “loans” on critical life-support items like new cars, or the cell phone bill”
Here is what you do in those cases (I had the same experience). Become very private of how much income you have and how much you saved. Start buying investments such as CDs that lock up your money over a course of time. When a relative/friend wants something, tell them sorry. You have money locked up in CDs/401k, whatever.
I no longer get asked for money. I have recently started looking for other work and no longer tell my relatives my progress - what hourly rate I’m getting. I don’t tell them about any promotions. You can come up with creative ways to hide your wealth. For instance, if you are a multi millionaire, you may have more than one house, while your relatives think you only live in one house. you have the right idea of downsizing and renting for now. People have a tendency to think of us renters as strapped for cash!
Good idea but too late. Worse I have tried to impress upon my multiple loser nieces and nephews that making minimum wage is their future unless they at least finish high school! I compared their pay at $6/hour to mine (which is lots more) and tried to explain to them that to get from A to B takes lots of hard work, education, getting thru bad times, giving up short term stuff to plan for long term, etc. They just stare at me vacantly. They aren’t bad kids really, just completely, utterly, clueless. I can’t blame the parents really because several of the kids have turned out fantastic. One is a straight A engineering student, never asks for anything, works part-time, a delightful girl. So I’m buying her a laptop computer and am paying for her room and board in college. The others beg for a few hundred bucks to pay their cell phone bills while making babies and taking handouts from the parents and government. I’m sure glad I didn’t have any kids myself if this is the outcome.
I’m renting and they all consider me a complete cheapskate. What they haven’t figured out is that I have money because I don’t squander it. Oh I could go on and on. Most of them don’t have any problem racking up huge credit card debts to buy non-essentials. One particularly addle-brained niece took out one of those pay-day loans against her car. After the fact my brother and I pointed out to her that the interest rate was something like 600%. Well, with a 9th grade education what do you expect.
I better stop now since I’m going to Thanksgiving dinner with all of them. They are nice, loving, generally good people but financially illiterate. What’s worse is they don’t know what they don’t know. You know, the unknown unknowns.
My dad has many similar family members. He calls it a peasant mentality - nobody ever gets ahead because they put loyalty to their family members above common sense. Sad that we all have to either give up family loyalty or choose our families very carefully if we want to live a moderately secure middle class life.
Interestingly, my dad’s family mostly quit bugging him after he left California. In my experience, for what it’s worth, the modern California peasant is more shiftless than the genuine traditional third-world peasant.
“And they come to me for “loans” on critical life-support items like new cars, or the cell phone bill (which they can’t pay because of the new car), etc.”
cut them off now..before they drag you down..
unless they need insulin or some other life sustaining drug, they are on their own…..well, maybe Viagra as an exception…
The problems with the actions of others is that they can affect you whether you like it or not . For instance , the stock market crash of 1929 . Many people never engaged in the margin stock buying yet they were brought down by the mass of speculators in the stock market .
Same problem with the real estate boom putting the financial systems at risk that could affect everyone .
Now ,even when I put money in my checking account I wonder if the money went toward a stupid loan somewhere .
So, my point is that your brothers actions can come back and bite you in a very real way even if you were a renter minding your own business not caught up in the mania .
No tax bailouts ….but it will most likely happen.
Also, I’m getting sick of people I know that want a loan or want me to bail them out ….no more Mr. Nice Guy .
I’m counting on a major stock market crash + major real estate crash to NOT aversely affect my T-bills, money market fund, CDs, savings bonds, and precious metals. Why do you imply that all assets are severely corelated?
Rick Moranis counted things he owns on NY Times, a pretty interesting read. We should probably do the same thing and count everything we have that has never been used.
Luvs_footie,
To use a real-life trademark as an example:
1. Type in Coke(tm), without any spaces between the characters.
2. Insert a space between the “e” and the “(”.
3. This should then appear as Coke ™.
(I’m starting to think Luvs_footie is trolling over this, but will give another Aussie the benefit of the doubt one more time.)
The dollar has fallen below 1.2950 against the euro. We’ll know by late January whether this is due to thin market conditions between here and year-end or to a change in fundamentals.
The ECB is expected to raise at least once in the next quarter, while the next Fed move is fifty-fifty depending on growth and inflation (reported or real?, that is the question). US growth is certainly below potential and with productivity falling flat in Q3, slower growth for the foreseeable future is in the cards, regardless of whether the economy dips into official recession in the coming quarters (again, reported or real?). But European growth is just as likely to disappoint (France flat in Q3, for example).
In short, the problem with predicting a meltdown in the dollar is that other regions have structural problems too.
In any case, 1.36 against the euro, the low point for the dollar reached in December 2004/January 2005, is a resistance point to watch.
But what personal action should we take if the dollar is going to tank?
If you think the dollar will tank, you could invest into other currencies, euro, yen, swiss frank, uk pound.
Sorry to be so ignorant but how exactly do you do this? I have my cash at Schwab and I told them I was worried about the $. They didn’t give me any suggestions that I understood. Thanks.
Ozarkian - You can go to various mutual fund companies that take a bearish view of the market/economy if you want to invest to protect yourself from a falling dollar. One example is the Prudent Bear funds. They have a fund, Global Income, that invests in foreign government bonds, gold stocks, etc.
thanks I will check this out.
You might also check this one out as well.
http://www.merkfund.com/
If you don’t like mutual funds (I don’t), you can call Merrill Lynch, or probably any other full service broker, and ask what is in their foreign govt bond inventory. Merrill (for example) will have choices of several dozen foreign govt issues, many w/ higher nominal interest rates than US Treasury issues; it will then be your problem to figure out which currencies you think will hold up well against USD. A handy tool to see present movements is a website you can reach by googling “FXhistory”
EverBank @ http://www.everbank.com allows you to purchase non-dollar CDs.
Thanks Auger for the link to the Merk fund.
A look at the fund’s expenses, however, reveals that holders pay 1.3% of capital annually to own this fund - which seems rather expensive for what amounts to a mix of foreign bonds and gold.
Does anyone know of a low-cost ETF or Mutual Fund that holds a similar mix of foreign bonds? Getting the Gold exposure is possible through GLD, but I have not been able to find an expense ratio quoted for GLD - does anyone know how that works?
FXE for the euro
You can buy a Euro CD at http://www.everbank.com They are located in St. Louis and Forbes rated them as one of the best.
Sign up for their Dailing Phening newletter. It’s a free email that comes each day about currencies and other financial matters and the writer, Chuck Butler, is excellent. He tells it like it is.
Has anyone any experience with Everbank? I get nervous putting large sums of money into internet banks… They currently have CDs for several different currencies including: british, australian, canadian, euro, hong kong, iceland, indian, japanese, mexico, new zealand, norway, south africa, sweden, switzerland and thailand. The rates for the 3month CDs are all different but the main issue is how the currencies change vs USD…
Any recommendations ??
I can tell you some things about the European currencies:
Norway is an oil-exporter, and a very prudent one. They know that their oil will be gone some day. A country without significant debts.
The Swedish currency is more or less pegged to the Euro. According to the EU treaty Sweden has to introduce the Euro, when the convergence criteria are met.
Iceland is in a bad housing bubble.
Switzerland is an interesting case. The small country is surrounded by Euro countries. Switzerland adopts EU regulations that are good for themselves and forget all the crap that comes from Brussels. Switzerland is a tax paradise in some ways, and the banks are very secretive. The currency has a long history of stability.
‘Has anyone any experience with Everbank?’
I closed my Everbank foreign currency CDs after the dollar unexpectedly rose and I got tired of attempting to use their website. It is horribly designed and has an extra 27 security steps that I didn’t find with brokerage sites or online banks.
I use Everbank due to the fact that I am often paid in GBP. I have had no problems whatsoever. I have USD, GBP, and EUR accounts.
The Falling US Dollar ProFund (FDPIX) is one way to hedge against a fall in the dollar. It’s an inverse fund designed to trade in the opposite direction of the Dollar Index. You should be able to buy it from ProFunds directly or within any brokerage account.
We’ll see. This year, Germany’s economy is growing faster than the forecast, and even though the VAT will raise from 16% to 19% next year, the IFO index is still more and more optimistic. The IFO usually is very accurate to measure GDP growth. Unemployment is down 500.000 YoY now.
So, it is very likely that the ECB will raise the rate indeed. France is a special case in Europe, the only country that has not reformed its labour regulations. They have a rule that workers are only allowed to work 35h per week.
It all depends on what the FED will do, I think.
If you have an iron stomach, open up a futures account with a brokerage (there is also a plethora of online brokerages), starting with 1:10 margin: with $10,000 you can trade up to $100,000 in futures or options contracts on the Chicago or Philly exchanges.
Less risky alternatives are money market or short-term bond funds in euro and other currencies. In that case, you have to wade through the plethora of mutual/ETF fund offerings. Maybe some fellow bloggers have some concrete suggestions in this area.
There are many, many variables, but I agree that relative interest rates are probably the most influential right now.
I’m bullish on the dollar short-term. When the next recession hits (I’m guessing next year sometime) there will be less demand for imports. An improved account balance will mean fewer buyers of USA debt.
I don’t think the FRB will be as quick to lower rates as most people believe because they will need to attract buyers to Treasury auctions. Even if they do lower rates, it is only the short end of the curve that they control. Reduced demand will probably keep long rates up. Besides, despite our problems, the USA is still a relative safe haven for global investors. My opinion is that the dollar will be close to parity with the Euro within a year of two. After that, it will take a major crisis before the politicians really trash the dollar. By doing so, the treatment would be worse than the cure (and I think they know it).
Prediction: Smetime in 2007, expect lots of hearings and meetings in Washington as the political hacks meet (with stern expressions) and question bankers and economists to find out why the dollar is in free fall (lol) and what can be done to help FB’s. Then it’s off to vacation under the pretense of attending some fake seminar, courtesy of a big US corporation.
Footie ™
Actually ajh, somebody on here gave me a code with numbers and symbols but I lost it. Thanks for your help mate. btw…..I’m from the Sunshine Coast Q
You have to use that code if you want to avoid the space between the word and the trademark sign, but I don’t bother.
Same thing with smilies :). They won’t work unless there’s a space in front of them. (Some won’t work at all if you put some right at the front of your comment).
I live and work in Canberra. I’ve only been to the Sunshine Coast a couple of times on holidays, and not since the early 90’s so I suppose it’s changed a lot. At the time I liked it there better than the Gold Coast.
A Vivid Imagination or Just a Big Turkey?
http://wallstreetexaminer.com/blogs/winter/?p=110#more-110
For the “sub-prime debt sucking wind” file…
….”Still, despite the adverse conditions, ‘I guess we are a bit surprised at how fast this has unraveled,’ said Zimmerman [head of ABS research for UBS]. While it’s ‘not a secret that subprime collateral has performed pretty disastrously so far,’ he said, ‘I must say we were a bit surprised by the magnitude with which’ the loans ‘deteriorated this year.’
….’The rate of subprime loan delinquencies of 60 days or more — meaning borrowers are that far behind in their payments — has climbed to about 8 percent, up from about 4.5 percent a year ago.’
8% of sub-prime debtors late with the cash - A 78% increase - while the liquidity of the underlying assets is dry as a bone in many regions. Anybody have insight as to who the main holders of all this sub-prime paper are? What sort of institutions? Leverage, anyone? Or how many billions of dollars we’re talking about? When will the first shoe drop? (Did I miss it?)
Today and everyday I am thankful for Ben and this blog!
As a small gift I will click on his ads and try to stay ON topic.
Chris
I am thankful, I am not an FB on the hook for $750K in housing debt.
“For the first time, BJ’s Wholesale Club Inc. and CompUSA Inc. will open their doors on Thanksgiving, while online retailer Amazon.com is offering special holiday discounts beginning on the big day.”
I am thankful I’m not a retailer right about now.
I am thankful for my wife, who I was originally pissed at, when she wanted to sell our San Diego home in Aug of 2004. That POS is now worth $75,000 below of what we sold it for and dropping faster than Monica at Bill Clinton’s desk.
My wife is looking better each day and I love her!
Yes, thanks to Ben, this blog, and fellow bloggers because of whom I am that much wiser in this past year and a half or so.
For the “sub-prime debt sucking wind” file…
http://tinyurl.com/yest3t
….”Still, despite the adverse conditions, ‘I guess we are a bit surprised at how fast this has unraveled,’ said Zimmerman [head of ABS research for UBS]. While it’s ‘not a secret that subprime collateral has performed pretty disastrously so far,’ he said, ‘I must say we were a bit surprised by the magnitude with which’ the loans ‘deteriorated this year.’
….’The rate of subprime loan delinquencies of 60 days or more — meaning borrowers are that far behind in their payments — has climbed to about 8 percent, up from about 4.5 percent a year ago.’
8% of sub-prime debtors delinquent - A 78% increase - while the liquidity of the underlying assets is dry as a bone in many regions. Anybody have insight as to who the main holders of all this sub-prime paper are? What sort of institutions? Leverage, anyone? Or how many billions of dollars we’re talking about? When will the first really big shoe drop? (Did I miss it?)
Thanks for the post, Opus. A bit surprising that the head of ABS research is “surprised” at the magnitude of the slowdown.
Honestly, do these people just have their head buried up their behinds, or what?
I have to share this with everybody out there. It is stuff like this that makes me give thanks on this day of Thanksgiving that I have been blessed with enough sense to rent.
This is a building being converted to lofts several blocks from my rented piece of paradise.
http://tinyurl.com/ycmsx9
Take a look at the beautiful piece of luxury Wall Street living that you too can own. That is so beautiful. Look at how nice and bright the neighborhood is. You even have some cute little trees outside your door to help brighten your day.
To understand just how silly this is you just have to walk by this actual building. It is an office building on the corner of John St. & William St. It has been stripped inside but it doesn’t appear that a lot of progress inside has been made.
This piece of New York is truly a depressing little slice of earth. There are no trees in that neighborhood. There are no bushes. There are no flowers. The rats grow nice & big but that’s about it. The light airy feel being portrayed in that picture does not exist. This loft building is surrounded by taller buildings. It lives in perpetual darkness. John St. and Williams St. are both over traveled narrow little death traps. It is a horrible intersection to cross, as a speeding cab may kill you at any time.
The good news is that you have the Fulton St. subway station just down the street. The bad news is that you have the Fulton St. subway station just down the street. It is a rather disgusting station, even for New York City subway stations. Human excretions and bums can be seen in the stairwells on frequent occasions. Due to the proximity to Brooklyn the neighborhood gets a daily influx of Brooklyn hoodlums coming to Fulton St. and spending the day just hanging around. At least they go home at night and leave the neighborhood with almost nothing to do. It is still a Financial District dead zone.
The size of the lofts will range from about 900 square feet to 2,500 square feet. For those of you in Minnesota and Texas that is huge by New York City standards. These places will come with price tags from $1.2 million to $4 million, in my opinion. “Hey, you have to pay for all of that luxury.”
It just boggles my mind what is going on in this fairy tale real estate market. The picture on that website is so out of touch with reality. It is like airbrushing a nude picture of Kathy Bates until it looks like Pamela Anderson (from her Home Improvement & Baywatch days). I would love to hear stories of developments in other areas of the country that have broken from reality to the degree that this project in NYC has broken from reality. Pictures are good with details about why the picture is so misleading.
Welcome to the Big Apple real estate market. It is rotten to the core.
Happy Thanksgiving Txchick. Keep up the good posts. They are always entertaining. I appreciate your anger.
The decription of these wondrous lofts boggles the imagination.
“Stunningly reinterpreted by renowned international designer Andrés Escobar, these classic Downtown lofts inspire a boundless exuberance for luxe living. Sprawling new studio, one-, two- and three-bedroom homes boast high ceilings, oversized windows and open-style floorplans. Penthouses have glorious terraces. A 24-hour concierge, lounge and state-of-the-art fitness center enhance the appeal of this stylish sanctuary.”
Yeah, but that nouvelle-looking asparagus dish that came out of the “sleek and streamlined gourmet kitchen with mirrored backsplash” looks pretty tempting. I wonder if the price of the loft includes someone to come over and prepare it?
i still think that the condos going in near skid row in los angeles are the ultimate in this lets put condos in the worst possible places. $600,000 for 1-2 bedroom condos with around 1000 sq. ft. seems pretty awful knowing with what is just down the block or corner. can anyone imagine spending $1million on this stuff???? people are out of their minds. and like i have said before, my work is doing the engr on some of the new downtown LA condos, and i am still curious if they will ever happen.
RE; LA dtwn condos:
One finished condo/loft complex, the Savoy, is at 100 alameda st on corner of 1st(little Tokyo district). behind it there are several more complexes going up. On 3rd and alameda are the LITTLE TOKYO LOFTS. Just east of Alameda along 4th/traction st. are some artsy lofts converted from old redesigned warehouses.
The thinking of the dwtn planners was the proximity of these loft sites to Little Tokyo, Union Station, oliveras st, and the LA civic center. What they cannot engineer or control is the massive concentration of human unwashed debris(Homeless) which congregate along 4th/5th street from alameda all way to los angeles/san pedro sts. It is really too bad because little Tokyo would be a really walkable district if the homeless problem got resolved.
I still resent the Savoy being built because it took out the cheapest parking lot in the area (outside of the 10 hr/$1 meters). That sid, when I would park over there, I would feel a little creeped out walking back to my car in the dark when daylight saving time ended with all the wandering junkies and mentally ill on Alameda and around the toy district. I really can’t imagine paying 500k+ to feel that same way every time I wanted to walk outside my home in the evening.
Talk about Condo engineering in dwtn LA. This is regarding the much-ballyhooed proposed Grand Ave developnent between 1st and second, and between grand and hope st. How do they propose to build 8 high rise towers plus 400 condo units+ adjacent retail mall into that limited space(looks no bigger than a block in area). In addition, the city plans to add a 16-acre adjacent park. Very ambitious project a least several years away, maybe far longer.
Can they really improve LA dwtn livability just by throwing up massive spanking new hi-rise gleaming towers, without dealing with the rotten innor-city ring areas which constrict dwtn LA in an Anaconda death grip?
I think it is just more boondoogle contruction, a massive pork-barrel scheme benefiting a few billionarie developers, fat unions and contractors, and gives the useless LA politician hacks something to crow about, instead of spending their useless time throwing tax-payer dollars away on massive fraudulent settlement payouts to LA city employees on account of bogus claims of Racism.
My sister just moved into a building on Murray Street and is loving it. I’m blown away that she thinks paying $4,200/month in rent is good. Manhattan rents are crazy but that’s crazier than most.
Condos of the Living Dead
“This building boom isn’t a great expression of design and architectural excellence. It’s a massive speculation to relieve bankers of their bonuses, and bankers’ money is sterile. It buys peace and quiet and second-rate ideas. New York is a city that was built out of risk and danger, with much more poverty and failure than riches and success. Fund managers kill the thing they crave. They want to buy their way into excitement and that old promise of the New York vista, but they drive it out and make it extinct. The final, unpalatable, zero-tolerance truth is that hedge-fund managers, bankers, cynical architects, and insecurity-exploiting designers are far more damaging to the unstylized life of a city than all the junkies, prostitutes, panhandlers, urban cowboys, bag ladies, homeless, and graffiti kids they replace.”
That place is awful. It is completely out of character with that neighborhood. At least there is a K-Mart nearby, at the Astor Place 6 train stop. Every time my wife and I see that place we are struck by a combination of revulsion and amusement. Who the heck would pay that much money to live in the center of that street? You really need to see that one to know how terrible it is.
If you think the dollar is going to fall buy gold and silver. The Dow and gold always revert to the 1:1 ratio at some point. Silver demand is way up and its way undervalued compared to any commodity right now. Silver is used in plasma TVs and is now being used on surgical instruments because of its antibacterial properties. China is using it to spray their subways to limit the potential of flu and other harmful virus and bacteria.
So either gold has to go up to meet the dow or the Dow comes down to meet gold. I’d say Gold will go to at least 2k or possibly 3k and the dow coming down eventually to meet that level.
If your going to invest in other currencies as a hedge forget the euro its overvalued and they have similar problems as we do, like a european housing bubble. The swiss franc might be a better choice or possibly the japanese yen but with more risk.
I remember someone mentioning buying new zealand currency a few years ago, but I took a look at their dept to GDP and at the time it was at a rediculous 6% or so, I think it topped out at 7% and then last year it crashed, so it didnt pay in the long run as a hedge.
You have to be careful where you hedge your money, other countries are facing similar situations simply because the dollar is the world reserve currency and it has created a global bubble
In my opinion gold and silver especially silver are the best bets against a currency melt down. Gold is near its 30 year high while silver is less than 1/2 its 30 year high. Eventually supply and demand will catch up.
Good post. My personal view is that the dollar is not going to tank, precisely because of the countervailing force we have been mentioning.
The raging debate now, then, is inflation vs deflation. If one believes in massive inflation going forward, then precious metals are a good bet, but not immune to speculative risk either.
There are passionate arguments on either side of the inflation/deflation debate. I lean towards the side of continued inflation with some pauses now and then (oil right now, even Walmart is lowering some retail prices), but I am not so sure that it will be sudden, massive inflation.
That has been the raging debate since this blog started.
Bob, what is your opinion on silver being more an industrial metal than a precious metal? Your examples of the use of silver seem to be industrial and not a store of wealth. Therefore, when industry slumps, so will the use of silver. Could this be why silver is not anywhere near its all time high?
I think most commodities are overvalued because of speculation, so I’d be careful.
It is also true that other countries face similar risks, but there is no European housing bubble. There is a bubble in Spain, in the UK and some more countries, but not in Germany, the UK is not part of the EMU. What does that mean for the Euro? The ECB is not the FED. The ECB is monitoring the money supply (M3) and will cool down asset price inflation and stop it. The directors of the ECB are independent, they cannot be re-elected, so there is no government that can influence them. We already saw that after the Dot-Com bubble. When the FED started to lower rates quickly, the ECB kept them up.
“The directors of the ECB are independent, they cannot be re-elected, so there is no government that can influence them.”
Yeah, right. And Santa Claus will bring me a Ferrari and a hooker for Christmas. When big money is involved, everybody is in somebody’s pocket. Be careful with how much trust you put into any “independent” body.
Believe it or not, I think the ECB is trustworthy. No-one from the ECB would ever tell us Europeans to get into option-ARMs. Quite the contrary:
Interview with O. Issing, chief economist of the ECB:
Q: Do you see the current high growth of monetary base as a problem? To what extent does the ECB now take this factor into account when setting up its policy?
A: Money growth has been high for quite some time and credit growth has continuously increased, supporting our assessment of the risks to price stability. Liquidity in the euro area is more than ample. A central bank with the mandate to maintain price stability cannot ignore these signals.
Source: http://www.ecb.int/press/key/date/2005/html/sp051219_1.en.html
Europe is in debt up to it’s eyeballs - as bad, if not worse, than the USA. The ECB keeps rates where they are to attract buyers of their debt so governments can keep funding themselves. It’s the same function as any central bank. IMO, once M3 starts reversing in earnest, there will be a deflationary debt collapse. A classic liquidity trap that has been and always will be the way an inflationary cycle ends.
When I last checked, the EU still had a very positive saving rate. Some 10% in Germany. The governments are in debt, but not the people. That’s the difference to the US. And even the governments are getting it: The Netherlands had a surplus last year and will have one this year as well. Finland has had surpluses for years now.
And even Germany: The total debt of the state is at about 1,5 tr Euro. This year’s deficit is 2% of the GDP; it is supposed to be 0 in 2010.
You forgot to mention France, Spain and Italy…last I heard, the ECB represents them.
True. I have no clue what is going on in France. Rigid labor markets, over sized public services, immigration problems almost beyond imagination. The French are not yet ready for major reforms. Spain is in a bubble, no doubt, but Spain is a relatively small economy.
And Italy is in debts, agreed. But there are rules: Deficits above 3% are not allowed, and the states must keep their debts at 60% of the GDP. 0% deficit is the default mid-term policy enforced by the EU. If the countries don’t act according to those rules, the stable countries will form their own currency in the long run. It is not sustainable that the stable countries allow low rates and some other countries live from the low rates and inflate. Countries can only join the Euro if their inflation is not higher than in the three most stable countries. Lithuania could not join because of too much inflation. Greece will likely have to pay a penalty for breaking the Euro rules. These penalties are not cheap.
I see the problems, but there are some measures in the system that should prevent things from getting too ugly.
I have a family member who recently started a business in Germany. It is ironic that you mention how rigid the labor laws are in France. Based on what I’ve heard, Germany is a very difficult place to do business. Sky high taxes, very restrictive labor laws with strong unions, and regulations that control many things about how you run your business (hours of operation, land use laws, etc…).
He’s German so he stays and puts up with it. But when I hear his stories, it just baffles me about how powerful the goverment is there. It’s a wonder anything gets done. No wonder unemployment is such a problem. What business would want to set up operations in such an environment?
At first look, taxes are high in Germany. But nobody pays really high taxes. There are hundreds of ways to reduce them, talk to a tax advisor. Especially rich people pay no taxes at all or very little taxes.
Labor laws are not strict any more. The only problem is that you cannot fire people easily, when you have more than ten employees, which again does not mean that you cannot fire people at all. Unions are no longer strong either. Any employer only needs to tell them he’s moving the plant to Poland or even farther, and the unions will comply. You can run your business 24/6 now, Sunday is the exception. We have strict environmental laws, but those are often European directives. Unemployment still is a huge problem, but it is improving.
Things have recently changed here. In France, everything is still the same, or even worse.
He has 5 or 6 employees so I think that is how he stays under the radar on the regulations. Change is good. I am glad to hear that Germany is moving towards a more free market.
There is still a lot of space for improvements.
There are still all sorts of small regulations. Statistics to fill, how many fire extinguishers, how many toilets, and so on and so on.
The parliaments in Germany + Brussels still pass too many laws, but thanks to globalisation, there is a lot of pressure to reform. Currently, the government is working on a major tax reform. Corporate tax (Körperschaftssteuer) is decreased from 25% to 15% in 2008.
On the other hand, after the Enron scandal, regulations are much tighter in the US than they are here…
Not to mention entry procecess.
“The U.S. entry process is considered the “world’s worst” by travelers.”
http://www.poweroftravel.org/release-11-20-06.aspx
If anybody has a take on the Paris RE bubble, please post it here.
When interest rates are low, commodities in general are overpriced. This includes oil, gold, copper, etc.
I’m amazed at how many people in this blog hold so much faith in gold. I own a little myself, but I look at it as insurance. Physical demand for gold has consistently been declining, and most price movement (in the futures market) is the result of hedging and speculative plays. Plus, the sheer amount of gold in storage that could, at a moment’s notice, be sold to the open market is staggering. Everyone thinks gold will work during times of crisis, but look at the recent conflict between Israel and Lebanon–gold dropped while the dollar rose. Now, of course, if the crisis concerns the USD itself, this wouldn’t happen, granted.
I recently read a book written by an American soldier who was in Hiroshima shortly after the atomic bomb explosion. His recollection, when he went into a pawn store to trade in his gold watch for currency was that the broker was offering far less than spot, because everyone was trading in their gold and no one was buying it. People needed food, soap, and other necessities…not some stupid piece of metal that really has little industrial use period. At least there is some reason to speculate in Silver or Platinum for its uses. I’m just surprised at how many intelligent folks here have so many hopes built on the eventual rise of gold.
>> I’m amazed at how many people in this blog hold so much faith in gold.
I think it’s the argument that a “Gold Bubble” will follow the “RE Bubble”. That argument gets me, but I’m still too chicken.
“I think most commodities are overvalued because of speculation, so I’d be careful.”
This is year 5 in the commodities bubble. Commodities bubbles last usually 20 years. The November 20 issue of Barrons cites Indians and Chinese buying more and more cars. Projecting 44 years from now there will be more cars in China than in the United States. Demand for oil, logically has to increase. People are going to start wondering if more oil is being created under earth, since oil prices have been coming down of late. I think the general stock market will take a hit, while there could be some great oil drilling stock bargains. I also look at coal stocks. When I’m comfortably into my next contract engineering gig, I’m going to continue building up oil drilling and coal stocks, and of course, buy gold bullion and platinum.
Correction… “year 5 in the commodities bull”.
I’m amazed at how many people in this blog hold so much faith in gold.
I’m amazed at how many people in this blog hold so much faith in paper backed by corrupt, bankrupt governments (especially when those same governments are the biggest holders of gold).
I’m amazed at how many people in this blog hold so much faith in paper backed by corrupt, bankrupt governments (especially when those same governments are the biggest holders of gold). ”
Very good observation. One of the gold dealers I buy gold from tells me that whatever the probability you think that all hell breaks loose in the American economy, you should put the same percentage of your net worth into precious metals. For the time being, T-bills have a good long term record. I don’t think the U.S. dollar will die overnight. It will be (and has been) a gradual death. Note the U.S. dollar lost 95% of its value since 1915. 95%!!! However, it is foolish to put all your faith and net worth into PMs, just as in the 1990s it was foolish to put all your investment into stocks and in 2001 it was foolish to put all your money into real estate.
Studies have shown that most investors would have been better served buying Treasuries than stocks, regardless of timing. That said, there are extraordinary events on the horizon and normal investing rules do not apply. You are correct in that one should never place all his eggs in the same basket, though.
Siggi,
What do you know about the housing bubble in France, particularly in Paris? If you have any info please contact me at hikerdadlvp at yahoo dot com.
golds value as a commodity is very limited. however when gold reverts back to it true use (as a currency) its value has NO LIMIT. just buy gold coins and bulk silver. forget about the other paper currencies (they are inherently worthless).
Maybe, but there are examples in history of mismanagement of gold as a currency, rendering it just as worthless as paper currencies may, or may not, become in some near future.
Again, the play on precious metals, whether as a commodity or gold’s return to currency status, is not without risks.
And the value of a soft yellow metal is inherently worthless as well.
I’ll bet on deflation before inflation, and gold is currently in a bubble, that will collapse when people need the money for other things, and will sell their gold holdings. Just my guess.
I agree. Once the debt bubble collapses, debtors will liquidate whatever assets they have to stay solvent. Such a scenario will strengthen the dollar.
Your assumption is the people deeply in debt also own gold. I’m not sure I think gold is owned, for the most part, by that group.
Gold owners by nature are conservative types who always think the sky is about to fall. That life view also keeps one away from excessive debt. I am one of these people, and I expect gold to retain its value. Time will tell who is correct.
Gold has been a store of value for thousands of years. If it was irrelevant then it would not currently be stored by gov’t and central banks. It was selected as a store of value by people way before gov’ts ever used it as a currency. The paper currency you use today was born from gold.
Gold is used because it is relatively rare as it occurs in the earth’s crust at an estimated .03ppm as opposed to Federal reserve notes which have no limit and apparently are not being limited in number.
Gold possesses all the characteristics of money.
Durable (as opposed to wheat or some other consumable)
Convenient (as opposed to lugging around lead)
Divisible (which is why diamonds aren’t used)
Fungible (an ounce of gold from Russia is exactly identical to an ounce from Nevada and is why Real Estate is not used for instance).
Those who discount the utility of gold are guilty of two errors. The first, a short time horizon. Quite frankly there has never been an unbacked currency that has stood the test of time, none. Gold has been considered money for thousands of years. The world went off the gold standard in 1971 and the U.S. FRN has been on borrowed time ever since. I fully expect that this latest experiment with having the world operate on unbacked currencys will end like all the others did, in collapse due to over issuance.
The second error made is being U.S centric in their thinking. The fact remains that a great majority of the world happens to respect gold as a store of value. The muslim religion being just one group that comprises over a billion people. The fact that gold is not consumed but mostly held is a testiment to it’s utility as a store of value. I think this is misunderstood by some.
As a closing thought, the constitution of the U.S. has never been amended to change the definition of the dollar which is 371 1/4 grains of silver (gold was added later at a 15:1 ratio which led to problems when comstock lode was found and gold was hoarded).
My main point is this. Gold is the only “money” which doesn’t have a gov’t “stamp” on it. It can be spent or converted virtually anywhere in the world. I know of no people who fall into the “debt slave” camp which also hold gold. I do know of many guys who are wealthy who hold gold. These latter folks will not be divesting themselves anytime soon and certainly not during a dollar crisis. Anyone without at least a portion of one’s portfolio in gold is being foolish. IMO.
The Muslims seem to be rejecting the gold dinar. The real wealth of a country is its people’s intelligence and ability. As Katrina demonstrated (and the 2008 election will demonstrate if Hillary or Obama get elected) the people in the US nowadays are a net deficit, not an asset.
If you are looking for an inflation hedge then gold can be used as a partial strategy but you should diversify. In terms of inflation hedges, RE is better than gold IMO. Natural resource stocks are another good option. So if you are truly in the hyperinflation camp, maybe you shouldn’t be thinking that RE is in a bubble after all. Personally, I think the root cause of all of this is a debt bubble which, when it ends, will cause deflation, not inflation. In this scenario, RE will be a very bad investment. The jury is out on what might happen to gold.
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I PRESENT YOU, THE ONE, THE ONLY:
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Rev Bill and the Church of Stop Shopping is the more flamboyant version of the Buy Nothing Day that TxChick posted at the top of the thread.
Happy Thanksgiving Ben.
” Your examples of the use of silver seem to be industrial and not a store of wealth”
Its hard to talk about silver in a mear paragraph or to paraphrase why I have such a strong belief in silver in the long run. Suffice it to say both silver and gold as a currency have been used for over 5000 years.
The reason I mention silver as an industrial product is the global supply of silver is diminishing. There has never been a use for silver before the 1900’s other than a currency. Now it is used in electronics because of its so efficient at transimitting electricity. In fact they are not using it to coat the outside of superconductors to limit the “skin effect” which in short creates a much more efficient superconductor.
All the new uses for silver have depleted the above ground supplies over just the last 20 years alone. In the last 5 years silver prices have tripled, and in a good strong bull market you want to see a slow steady increase in price not a hyperbolic move. Its a matter of time before we see silver at 50 or beyond, whether its being accumulated for industrial production or as a currency is of no concern.
“Maybe, but there are examples in history of mismanagement of gold as a currency”
Yes, one of them being 30 years ago when nixon depegged the dollar from gold allowing the fed to create paper money at will allowing the bubble that we are in today.
Let me ask you this, how many of your neighbors are telling you to buy gold and silver? I’ve never had anybody say “bob, you better buy as much silver as you can before your priced out of the market”
When my neighbors start telling me to buy gold, I’ll be selling.
I know a few who say buy gold, less know about silver.
Buying silver is probably a good investment, especially as part of a diversified strategy; if one stocks up on it massively, however, then the position probably needs to be traded aggressively to make up for opportunity costs as the price will fluctuate over time.
My point is that bad policy is bad policy regardless of the structure of the financial system and whether the currency is paper, gold, cigarettes, barrels of oil, sea shells, or cow bones.
I don’t think we’ll go back to a precious metals standard, and if we do, bad policy-makers will find a way to screw that up too, eventually.
Earlier in the year, a lot of the goldbugs on this board were saying that gold would be way over $1000 by the end of this year. Meanwhile, out in the real world, the high price of gold has started to soften consumer demand for bling (wot a surprise). What they don’t seem to understand is that no one will _buy_ gold at those kind of prices.
Yeah, nobody will buy… except that the gold ETF has never suffered net sales. In fact, higher prices have led to even faster accumulation. The ultimate value of gold has nothing to do with “bling”.
i have silver i pais 14.00 dollars an ounce for 25 years ago great investment wasnt it.
Somebody correct me if I’m wrong. Buying gold and silver should not be seen as an investment. It is a hedge against bad things. It should be bought in small quantities and held for the long-term just in case something bad happens. I view having some holding in these metals the same way I would having a store of water, canned goods, duct tape, flashlight and a small radio. Having these things won’t make you rich but they help you sleep at night. And if they are ever needed you will be glad that you were prudent and didn’t neglect the many possibilities that life might present us.
“Somebody correct me if I’m wrong. Buying gold and silver should not be seen as an investment.”
You are right. Gold, silver, platinum, and palladium should be regarded as alternate currencies. I would even go out on a limb and say US T-bills are kind of an alternate currency from passbook savings in the US Dollar. At least you don’t really lose the value of your wealth in T-bills over time.
I agree with you about buying PMs in small quantities. I do exactly that, with cash, of course. There is only one coin store I really like and I am sorry but I cannot publicize this here. It sells coins at low premium prices, is in a large city, and is happy to deal with cash-only customers. They have all the precious metals and everything I want - whenever I get the buy urge - is available. I do, however, buy two or three times as much in government securities as I do in precious metals.
It is a hedge against bad things.
And the future’s so bright, you gotta wear shades, right?
“I think most commodities are overvalued because of speculation, so I’d be careful.”
Everything is subject to speculation including the euro, but you sound more confident in a piece of paper like the euro. I do think the ECB is much more believable than the fed but to say they will stop asset appreciation is laughable. It hasnt stopped the UKs rampant speculation in housing and now its moving into france before long it might be germany.
The fed and ECB are very similar they are suppose to protect the currency at all costs. If they dont you have rampant inflation or deflation depending on the circumstance.
If you look at the amount of paper out in circulation on a global scale the estimated figure comes in over 350 trillion in USD. If you were to take all the gold and silver above ground and combine them into one currency you’ve have about 1 trillion dollars.
At one point there was enough gold and silver to every dollar back in the 70’s. Until Nixon gave the dollar free reign. Now tell me whats overvalued.
Bob, I see your point. The UK, however, still uses UK Pounds, so the UK Housing bubble is not the ECB’s responsibility.
The problem of the ECB is that the member countries are so different. After the hyperinflation in Germany 1923, Germany has hardly seen any inflation, despite the fact that interest rates were much lower in Germany than in other countries. The ECB is trying to maintain that tradition, because low inflation plus low rates is a competitive advantage. But the European countries are still different. When one country is in stagnation, another country can be in a boom. That’s why there is a bubble in Spain and no bubble in Germany. The Spanish currency should devaluate against the German currency. That is no longer possible, so Germany will import some of the Spanish inflation.
The ECB is well aware of the situation:
http://www.ecb.int/press/key/date/2005/html/sp051219_1.en.html
Note the end of the interview:
“Do you see the current high growth of monetary base as a problem? To what extent does the ECB now take this factor into account when setting up its policy?
Money growth has been high for quite some time and credit growth has continuously increased, supporting our assessment of the risks to price stability. Liquidity in the euro area is more than ample. A central bank with the mandate to maintain price stability cannot ignore these signals. ”
And:
http://economistsview.typepad.com/economistsview/2005/08/should_central_.html
“The European Central Bank, Bank of England and central banks in Australia and New Zealand all have narrower mandates than the Fed … All three have defined that mandate to include leaning against asset prices when they begin to cause broad imbalances in lending and spending … Otmar Issing, … chief economist of … the ECB, also challenges the idea it’s better to clean up after bubbles burst than to try to prevent them. ”Do the reservations towards using monetary policy rates for fighting asset price bubbles mean that the central bank is forced to play the role of an inactive bystander in such circumstances?” … ”This may be too extreme a conclusion.” Reserve Bank of New Zealand Governor Alan Bollard has said he considers it both sensible and part of his duty to ”prevent the emergence of large speculative asset-price bubbles.” His comments in a January 2004 speech remain ”the current thinking” of the bank…”
I agree that there is way too much liquidity in the markets chasing for scarce investment opportunities. Now that the boom in the US is over, Blackstone and folks are buying real estate in Germany, because they think it is undervalued. They might be very wrong…
“My point is that bad policy is bad policy regardless of the structure of the financial system and whether the currency is paper, gold, cigarettes, barrels of oil, sea shells, or cow bones.”
Couldn’t agree more. That’s why monetary policy should be independent from governments, industries and so on.
“…monetary policy should be independent from governments, industries and so on.”
****************************************************************************
Isn’t it time to get rid of the central banks? How can anyone have any confidence in the Fed, for instance, making decisions about interest rates? The free markets, IMHO, will always regulate interest rates better then a central bank.
We need NO MONETARY POLICY. Let’s go back to the free market to set interest rates. We will be far better off and the looting done by central bankers will end, at last.
In the U.S., if we followed the Constitution, Congress would exercise the power to coin money. The U.S. Supreme Court has held that Congress can not delegate its powers, so the Federal Reserve is clearly not constitutional. If the government issued currency instead of borrowing it from the Fed, the interest we pay each year on the national debt would not be draining our pockets every year. Incidentally, the annual interest on our national debt is roughly equal to the interest cost each year. Imagine how it would be if we didn’t have to pay all that interest!
“the annual interest on our national debt is roughly equal to the interest cost each year”
Oops, equal to the total income taxes paid in each year is what I meant to say.
Are you sure? A long time ago, the governments controlled the printing presses. So, when they needed money, they made it. That’s a recipe for hyperinflation. See Germany 1923.
The concept of independent central banks is designed to prevent that from happening. The governments now must finance their debts on the free markets.
How long was Mr. Greenspan in office? The term in the ECB is 7 years, no re-election possible. That’s as close to immunity of political pressure as you can get. We have the same concept for our supreme court, by the way.
“The concept of independent central banks is designed to prevent that from happening. The governments now must finance their debts on the free markets.”
Germany did not control its printing presses. The principal shareholders of the Reichsbank were the Rothschilds and the Warburgs.
snip:
“The presses of the Reichsbank could not keep up though they ran through the night.”
http://www.pbs.org/wgbh/commandingheights/shared/minitext/ess_germanhyperinflation.html
Privately owned central banks were formed to allow private bankers the power to print debt money (Federal Reserve Notes of the privately owned Federal Reserve) and attach interest. The bankers (and their cohorts) are then free to loot the country and enslave the people- through debt with compound interest attached. Debt which did not exist until it was borrowed into existence.
snip:
“The German inflation of 1914–1923 had an inconspicuous beginning, a creeping rate of one to two percent. On the first day of the war, the German Reichsbank, like the other central banks of the belligerent powers, suspended redeemability of its notes in order to prevent a run on its gold reserves.
Like all the other banks, it offered assistance to the central government in financing the war effort. Since taxes are always unpopular, the German government preferred to borrow the needed amounts of money rather than raise its taxes substantially. To this end it was readily assisted by the Reichsbank, which discounted most treasury obligations.
A growing percentage of government debt thus found its way into the vaults of the central bank and an equivalent amount of printing press money into people’s cash holdings. In short, the central bank was monetizing the growing government debt.”
http://www.mises.org/story/2347
“My point is that bad policy is bad policy regardless of the structure of the financial system and whether the currency is paper, gold, cigarettes, barrels of oil, sea shells, or cow bones.”
Now your speculating on what will be a future currency, your expecting a global meltdown of currency. I dont believe in that scenario, but I do believe the worlds currency might not be the dollar in the future. It might consist of the yen or yuan and possibly the euro. Theres also a possibility that it might be an almost even playing field. Even if any of these scenarios play out, that means the dollar has to depreciate from its current status. In either event that leaves more appreciation from a proven (5000 year old currency) gold and silver.
If you follow the amount of debt world wide and you believe that at some point it has to be paid back. What are you going to want to be paid in? Would you want a yuan, a yen, when you know the USD is going to lose value. Not me you can hand me a gold or silver coin thank you very much. At least I know there is a limited supply of it and not something that can printed up and an imaginery value placed on it.
No, actually I agree with you. I think that, however imperfect, the current paper currency system will hold up, but that the dollar will not necessarily be the dominant reserve currency going forward and that there will be a more even playing field.
Debt can represent many things, but probably more than anything else it represents lost potential productivity. Now how that plays out in political and social terms is an open question.
Does the US rediscover manufacturing competitiveness even in the middle and lower rungs of the chain? Do the Chinese buy out US firms and real assets abroad or on US territory itself? Do we duke it out on the streets, so to speak?
It’s hard to say, but I think, just as the mix of reserve currencies may become more even, so the mix of the manufacturing structure may become more even geographically across the globe. But this will take time and there are political and social risks meanwhile.
I just think it is unlikely that we’ll return to a precious metals standard, but that does not mean that if you hold onto to silver for a number of years, in future you will not get more yuan or yen or whatever to buy more things than you would have if you held onto dollars, because there is a reasonable probability for such a scenario.
In short, diversify into silver and gold, yes, but don’t bet the entire house; revert to precious metals standard, highly unlikely.
DEBT SERVICE: Federal, State, Local, Private, will require considerable liquidity just to make the interest payments. The debt has to be serviced so the question becomes how to attract the daily fresh green to make all the payments.
The Fed will have to follow the market when it comes to interest rates. America is one big FB.
“I just think it is unlikely that we’ll return to a precious metals standard,”
I dont think I ever said this, and I think the likely hood of it happening in our lifetime is next to 0. For one thing there isnt enough gold and silver to go to every many woman and child in the world.
However but because of the reason that there isnt enough of it to go around is the reason to own it and use it as a hedge against inflation and a deflating currency not necessarily deflation.
One thing is for certain, you can go anywhere on the planet and someone will give you thier currency for gold and silver. So yes it is still a currency and is a store of value.
This might be a good read:
Should Central Banks Respond to Asset Price Inflation?
http://economistsview.typepad.com/economistsview/2005/08/should_central_.html
For those wondering who has been holding up the home builder’s stocks, I found this buried in the back of yesterday’s WSJ.
For those without a WJS subscription, here’s some of the players:
The Bill & Melinda Gates Foundation
Icahn Management L.P.
Fidelity Management & Research
TCW Asset Management Co.
Happy Thanksgiving to all from sm_landlord!
This message was brought to by the PPT. Remember, there is no PPT.
Siggi,
That is a good read but Greenspans idea is seriously flawed. To prove my point there have been more bubbles on his watch than any other chairman before him. Greenspans idea is to be Reactive rather than trying to proactive and prevent them in the first place. Event the data that comes out of washington is not realistic, remember there is no inflation. I’ve been hearing that for 6 years as everything around me has risen drastically.
There has to be recessions to shake out the weak hands and get rid of froth, that way the economy can grow. I fear this new madness of creating dollars out of thin air and despersing them to anyone who wants them for nothing, is a deservice to the hard working people who save and live within their means.
You see, the ECB has a very different idea on bubbles. Their problem is to find the right policy for all the different Euro countries, an open experiment, but at least there is a system in place to make sure that countries don’t make to much debt.
“I fear this new madness of creating dollars out of thin air and despersing them to anyone who wants them for nothing, is a deservice to the hard working people who save and live within their means.”
True, so true. The danger is that too many young people grow up with the idea that they no longer need to work hard.
i suggest that some reading be done on the history of gold as a storehouse of wealth. for 5000 years gold and silver have reigned supreme as true instruments of wealth. name one paper currency that has not reverted to its real value (ZERO). i do have my own opinions but the comments on this board about gold and silver dislpay an incredible ignorance about the subject.
for example:
“Maybe, but there are examples in history of mismanagement of gold as a currency, rendering it just as worthless as paper currencies may, or may not, become in some near future.”
name one historical incidence in 5000 years of recorded history when gold was rendered worthless. WHAT A UNIFORMED IDIOTIC COMMENT.
“may spell trouble for (2006) borrowers who in previous years would have been able to refinance their loans, or possibly sell their homes for a profit, in order to get out of financial difficulty with their mortgages.”
Subprime Loans doing badly
http://biz.yahoo.com/ap/061121/subprime_loans.html?.v=1
Which may spell trouble for 2005 borrowers who expected a GF to buy their p.o.s….which may spell trouble for 2004 borrowers who….etc
“i suggest that some reading be done on the history of gold as a storehouse of wealth. for 5000 years gold and silver have reigned supreme as true instruments of wealth. ”
Its another reason why I love gold and silver so much and think its going much higher than anyone anticipates. Very few people are bullish on gold, the general public have absolutely no use for it. I’ve mentioned gold or silver and public circles and the response i usually get is blank stares and “oh yes, my dad bought some in the 80’s but it never did anything for him”.
In my opinion its not worth owning more paper currencies, the global dollar has done alot of damage to thier economies. When more countries start moving away from the dollar as I’m certain they are right now, they’ll have no choice but to allocate some money to gold and silver. After they’ve been dumping it for the last 25 years, time to buy it back.
A day late and a dollar short with my comments. Most people will agree whatever way the precious market debate works out it will be the market that decides, but that thought brings me to the next one, “Does the market need a commodity that cannot be manipulated by the governments & CB’sfor short time gain.” Fiat currency would fit the bill if money supply did not grow in excess of the growth of goods and services and the market set all interest rates.
There is a finite amount of precious metals on this earth every ounce some one buys means one less for some one else. Even if central banks wanted to unload all their gold it only works out to something like ten ounces per person. There can be an infinite amount of paper or electronic currency. Would you save rainwater in buckets in a rain forest living by a lake? It makes more sense to save something relatively useless and pretty as long as it was scarce. It does not mean that you would have to use it as a currency but as a method of storing long term value.
Well time for an after turkey nap, I can tell by reading my last post that I need it. LOL
Happy T-day.