Bits Bucket for July 6, 2013
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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Name:Ben Jones
Location:Northern Arizona, United States
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Falling bullets strike man, pierce roof on July Fourth in St. Pete
http://www.tampabay.com/news/publicsafety/accidents/falling-bullets-strike-man-pierce-roof-on-july-fourth-in-st-pete/2130200
Free House Alert!
Dude purchased a house in Western Palm Beach County in the mid 1990s for $93k. Refied it up over $200k during the boom. Stopped paying with the victim herd when the bubble burst and could no longer refi. Hired a foreclosure lawyer after not paying for a couple of years. Paid the lawyer $500 a month for a few years. Got the good news early in the week that his foreclosure is being dropped and he will keep the house.
I guess the junes job report yesterday had a milestone. We have the most people working in bars and restaurants then ever before.
We are turning quickly into a service economy based on pyramid schemes and ponzi schemes in asset classes.
“…a milestone.”
Also a millstone … for bond investors.
Also heard on the radio that only 47% of adults have a full time job.
How much more time is wasted trying to commute to several low paying jobs.
It’s good for keeping gasoline consumption and oil prices high = BIGGER PROFITS FOR OIL COMPANIES!
‘Stopped paying with the victim herd ‘
Another American success story.
Does anybody know of a good legal website where the smart people gather to discuss the Zimmerman trail with no name calling, profanity and all that other nonsense found on youtube?
Specifically Im looking for the room where the people with law degrees hang out so I can get qualified perspective and opinion regarding the abilities, personalities… of the officers of the court and maybe the witnesses too?
Thanks to all the technology available today, an average person can conduct their own trial, prosecution or defense… be a virtual judge…
Its amazing.
Also, I’d like to nominate the medical examiner who testified yesterday for “witness of the year” LOL!
I can’t find his name, but he gave both sides hell with a brilliant “inscrutable Asian” routine. If you wonder where that stereotype comes from, watch his testimony. I was howling on the floor with laughter at some of the exchanges because he was not letting any of the attorneys put words in his mouth and/or speak for him (which is kinda what lawyers in these situations are trying to do.)
and they were getting frustrated with him. This guy was not falling for the bum rush, or the banana in the tailpipe routine… at one point he even said:
“I don’t remember anything I did during the autopsy”
He said it more than once, stuck to it, and basically got away with it.
He was like a ninja witness.
LOL!
website where the smart people gather to discuss the Zimmerman trail ?
Hell, who has time for that…I am completely engulfed in the anticipated Royal birth….
Yeah, I can’t get too worked up about what happens to the CEO of the Men’s Warehouse. Here’s one:
http://www.mcgrathpowerblog.com/?p=917
Uh-oh, there’s goes that guarantee!
I have a burning question which I would guess a number of the bright minds who read and post here could address:
With modern voice recognition software, isn’t there a potential to test the null hypothesis that it was George Zimmerman’s voice screaming on the recording against the alternative that it was not?
With modern voice recognition software, isn’t there a potential to test the null hypothesis that it was George Zimmerman’s voice screaming on the recording against the alternative that it was not?
—————————————————————————
I doubt it, given the quality of the 911 recording.
But what they can do (even you can do) is use Zimmerman’s NEN call, his interview with the detectives at the station, and his interview from the reenactment with the detectives… to nail down what he SAYS he did and when he SAYS he did it.
For example, he claims Trayvon jumped him at the “T”; and that he never went down the “T”. I have yet to hear Zimmerman explain how he ended up where Trayvon’s body fell?
which is 20 or 30 ft down the “T”.
Here is an example of what you can do with digital recording software such as Final Cut Pro or Cool Edit Pro
(this guy includes a segment containing audio comparing the “racking” of a Kel Tech 9 semi automatic hand gun from a video, with a background sound from Zimmerman’s NEN call)
http://www.youtube.com/watch?v=fXNbr7WZfUY
The testimony of FBI audio expert, Hirotaka Nakasone, was conclusive enough that the judge ruled any opinion offered in the matter to be conjecture. Croakerqueen123 on youTube has posted the testimony unedited in its entirety if you have the bandwidth.
“I doubt it, given the quality of the 911 recording.”
Are you familiar with filtering technology?
I think the judge ruled that the technology was not proofed sufficiently that it would be admissible as expert testimony..They can submit the audio but cannot use expert witness that would verify that it was one or the others voice…Personally, after hearing the audio, I thought it sounded like a younger man…
Unless there is an existing recording of Trayvon, there is no way to compare the recording to his voice. However, it would be possible to record Zimmerman’s voice and use technology to compare it, along with any number of other similar voice recordings, against the evidential recording. If Zimmerman’s voice turns out to be no more similar to the recording than a “randomly chosen” recording of another voice in a similar pitch range, this would weaken the case that it is Zimmerman’s voice; by contrast, if Zimmerman’s voice were more similar than the vast majority of recordings of voices in a similar range, this would support the case that it was his, not Trayvon’s voice.
I frankly have a hard time imagining the way these two people spoke to be sufficiently similar to make it insurmountably difficult to distinguish them. And I have a hard time with the notion that the guy’s mother would be a scientifically objective judge. (”If the glove don’t fit, you’ve gotta acquit.”)
However, it would be possible to record Zimmerman’s voice and use technology to compare it
I think you would need a recording of him screaming like a little girl in order to compare… Does that exist?
The thought experiment is easily conducted: Play the tape for Zimmerman and 30 other men with similar vocal ranges and ask them all to imitate it. If Zimmerman’s imitation comes closest, it’s a fit (accept H_O: It is Zimmerman’s voice); if he lands in the middle of the pack or lower, it’s not a fit (reject H_0: It is Zimmerman on the tape).
This would seem far more convincing to me than asking Trayvon’s mom whether it sounded like her son.
This would seem far more convincing to me than asking Trayvon’s mom whether it sounded like her son.
————————————————————–
For the record, the defense asked George’s mom AND his uncle whether it sounded like her son/his nephew.
We can’t ask George because he has a bad memory when it comes to the things he said or did during the event(or even the street names in his own 3 street gated community). In contrast, he remembers every detail of what Trayvon Martin said and did that night.
Is his team going to allow him to take the stand?
If he does, he will be producing a 4th narrative regarding the events of that night. The first 3 already contain enough contradictions to each other. Should he try to set the record straight with a 4th attempt?
Or is it too risky? (will he create another contradiction?)
“Or is it too risky? (will he create another contradiction?)”
I realize barristers tend to make a great deal of hay out of contradictory testimony by a key witness, but I personally doubt this has much to do with whether the guy actually was guilty as charged. Maybe the prospect of his @$$ landing in jail as a likely outcome of a racially charged trial is sufficient to cloud his memory of what exactly happened that night.
Actually, Zimmerman has 4 narratives out there:
1. NEN call
2. Interview at station with detectives
3. Interview with detectives at reenactment
4. Hannity interview
So putting him on the stand would make it 5.
“I realize barristers tend to make a great deal of hay out of contradictory testimony by a key witness,”
Key witness?
Zimmerman is the ONLY witness; he made himself this way when he shot and killed the ONLY other witness.
This is why the question of his integrity should be so critical to a jury.
Im not a lawyer, but if he was my client, I would try to keep him out of the box. Why? Because the contrast between the “I don’t know/I can’t remember” and just down right contradictory answers he gives for his own actions; and the DETAILED descriptions of Trayvon’s every word and action will raise questions about his integrity.
The gaps in his story are exactly what prosecutors will focus on; here is one: “How did you get from where Trayvon first punched you, to where you shot him?”
walk? run? crawl, skip? shimmy? roll?
Here is another one: “Did he run from you?” You keep changing your answer George, which is it? Yes or no?
This is not a video game… this court needs to know.
I’ll stop now with one last question:
Would you want Zimmerman to “walk” if YOUR CHILD was substituted for Trayvon Martin?
If the answer is “no”, please tell me the difference between your child and Trayvon Martin?
(Yes, that ticking sound coming from this question)
Legal insurrection is the site.
Despite its implicit leanings and conjecturing, theconservativetreehouse offers a better-considered discussion and generally civil discourse. A lot of thought-provoking stuff if you peruse the original commentary in the threads.
Interesting discussion about the inadmissible C-Murder pin last night and lots of well-researched links to information that’s being excluded from testimony — on both sides of the case.
“…links to information that’s being excluded from testimony — on both sides of the case.”
That’s one thing I hate about the barristers — always appealing to the emotions while excluding relevant evidence that could shed light on what really happened.
(Cue in Polly on 1, 2, 3…)
P.S. We just saw the San Diego Old Globe production of “The Merchant of Venice” a couple of weeks back. There is some great material in there for anyone who is fascinated with the history of indebtedness or with how the courts dealt with such matters back in Elizabethan times.
always appealing to the emotions while excluding relevant evidence that could shed light on what really happened.
——————————————————————–
I suspect the reason they do it is because its too easy for the jury to be buried by facts, facts and more facts; my experts VS your experts…
after a while they’re just blue in the face.
Besides, sometimes emotions are correct.
Seems like they printed their way out of another financial collapse. what will prevent it from happening the same way next time?
North Carolina National Guard Rapid Reaction Force Civil Unrest Training Photos
July 3, 2013
The following photos depict soldiers from the 252nd Combined Arms Battalion training in June for their role as a “rapid reaction force” capable of responding anywhere in the state of North Carolina within “four to eight hours with additional forces arriving within 24 to 36 hours.” The same unit trained in March to respond “to an emergency ahead of federal assets by providing site security, establishing roadblocks or checkpoints, and assisting civilian authorities in controlling civil disturbances.”
The exercises depicted below were held from June 10-14 at an abandoned shopping mall and a water treatment facility in Charlotte. Soldiers trained to suppress protesters who perform a sit-in as part of a fictional group called “The Pink Panthers.” According to the North Carolina National Guard, the exercise at the water treatment facility tests soldiers’ “ability to use nonlethal force to disperse a crowd of aggressors.” Photos of the exercise show soldiers operating from Be On the Look Out (BOLO) notices with the identities of specific individuals in the crowd, listed as “AIN Members,” that are to be targeted for arrest.
Photos via North Carolina National Guard and Grant Baldwin Photography.
http://publicintelligence.net/north-carolina-national-guard-rrf-photos/ - 40k -
So much for the belief that the military grunts won’t turn against their friends and neighbors and that they will instead join forces with the Tea-billy Uprising.
I thought Kent State put an end to that thinking 40 years ago?
“Photos of the exercise show soldiers operating from Be On the Look Out (BOLO) notices with the identities of specific individuals in the crowd, listed as “AIN Members,” that are to be targeted for arrest.”
The (BOLO) photos they are looking at look like the “no more hesitation” targets the DHS contractor had to pull off of their website.
“So much for the belief that the military grunts won’t turn against their friends and neighbors and that they will instead join forces with the Tea-billy Uprising.”
It is amazing how the propoganda machine has been so succesful in demonizing a group of people to the point where it is cool to hate them. It is also amazing to see how many people jumped on the bandwagon. It does however make it easier to understand how easy it was for it to happen in the past.
You may get back to your kind hearted liberal fantasy about entire “Tea-billy” neighborhoods being wiped out now.
a more likely scenario, especially if zimmerman gets acquitted:
http://westernrifleshooters.wordpress.com/2012/09/03/bracken-when-the-music-stops-how-americas-cities-may-explode-in-violence/
They had better keep up the “Rapid Reaction Force Civil Unrest Training” because Snowden could leak even more damaging information that could really put people in jeopardy, like Dianne Feinstein among others.
Feinstein: Snowden could leak even more damaging information
By Alexander Bolton - 06/23/13 11:21 AM ET
Senate Intelligence Committee Chairwoman Dianne Feinstein (D-Calif.) warned Sunday that Edward Snowden could be carrying a trove of classified information as he meets with Russian authorities.
“We need to know exactly what he has. He could have a lot, lot more. It may really put people in jeopardy,” Feinstein said on CBS’s “Face the Nation.”
“The only thing I’ve learned is that he could have over 200 separate items,” she added. “That’s been relayed to me.”
http://thehill.com/video/senate/307237-feinstein-snowden-could-leak-even-more-damaging-information - 64k -
“Feinstein: ‘Snowden could leak even more damaging information.’”
Oh, please. This from the woman who leaked to the press (and thus theworld) during the hunt for the muderous Night Stalker that the police were looking for an individual who wore a certain brand and size of shoe.
Good point. They either have to convict Zimmerman, or else face the prospect of inner-city riots comparable to those which followed the Rodney King trial.
P.S. Riots are one of the indicators I expect as a sign of the echo bubble collapse. Another one is a large California earthquake.
It happened this way in the early 1990s, and I expect it to happen again this time.
So much for the belief that the military grunts won’t turn against their friends and neighbors and that they will instead join forces with the Tea-billy Uprising.
As long as it’s “just a civil disturbance” they’ll do their jobs. But once it’s recognized as “go time” who knows? Probably depends on what they are hearing from the folks back home…
Has the Fed ever previously aimed a bazooka at the bond market with the trigger tethered to labor market recovery?
I have to wonder whether Bill Gross regrets at this point having fought the Fed. Or does Pimco have some kind of hedging strategy in place to enable them to weather the storm of rising long-term rates?
The WSJ indicates 7.0% unemployment is the threshold for the Fed to begin tapering its Treasury purchases and 6.5% is the threshold to “begin the discussion” on raising short-term interest rates. It strikes me as extremely bizarre to discuss currently when to “begin discussion” of something which is already currently under widespread MSM discussion.
ECONOMY
Updated July 5, 2013, 7:38 p.m. ET
Job Gains Show Staying Power
Recovery’s Gathering Momentum Drives Treasury Yields to a Two-Year High
By BRENDA CRONIN And MATT WIRZ
WSJ economic reporters Sudeep Reddy and Spencer Jakab analyze the June employment report and how the numbers compare to what analysts and investors were expecting.
The U.S. job market chalked up solid progress in June, bolstering evidence that the economy might be strong enough to grow with less help from the Federal Reserve and sending bond investors rushing to sell.
American employers added 195,000 jobs in June, the Labor Department said Friday, and tallies for April and May climbed by a combined 70,000. Wages rose, the report said, and many of the jobs added were service ones such as store clerks and restaurant waiters.
The jobless rate, derived from a separate survey, held steady at 7.6%. Employers have now added an average of more than 200,000 jobs a month this year. The gains are respectable but not enough to dramatically shrink the unemployment rate.
Still, Friday’s labor data deepened expectations that the Fed will start to slow its bond-buying stimulus in September. That rattled the bond market, where many investors already have suffered losses since May because of rising interest rates.
…
more part time workers and bartenders.
More people stopped looking for a job.
The Fed has clearly laid out its QE3 taper plan, and it is almost as though the labor market is responding right on schedule.
Real Time Economics
Economic insight and analysis from The Wall Street Journal.
July 5, 2013, 10:40 AM
Economists React: Good Enough for the Fed to Pull Back
By Jeffrey Sparshott
Economists and others weigh in on the June gain of 195,000 jobs. Most economists saw the employment growth as strong enough to lead the Federal Reserve to start pulling back — “tapering” — its $85 billion-a-month bond-buying program this fall.
In one line: Good enough to sustain Fed intentions for fall tapering. – Ian Shepherdson, Pantheon Macroeconomics
Wake up and smell the taper. … Combing through the details of the release, there is not too much to sniff at, and overall, the June report easily gets passing marks. The employment data in the second quarter continue to look stronger than the GDP figures, which is another way of saying productivity looks weak again. Even so, the Fed has made clear that at the end of the day it is employment which will call the tune. – Michael Feroli, J.P. Morgan Chase
For the Fed, this report will be seen in the context of their relatively optimistic economic outlook, and in that light it will likely reinforce their current bias to begin tapering asset purchases later this year. – Millan Mulraine, TD Securities
The bottom line is that payrolls growth could probably even slow a bit from here and the Fed would still start to taper QE3 at the FOMC meeting scheduled for September, safe in the knowledge that payroll gains of 150,000 to 200,000 a month will eventually reduce the unemployment rate. — Paul Dales, Capital Economics
It is clear that payroll growth has picked up and that tells us another important piece of information from within various messages from Fed speakers. Namely, it does not want to be in the game of bond purchases one year from now and as such it will start to reduce the volume of bonds it purchases on a monthly basis. – Andrew Wilkinson, Miller Tabak & Co.
Employment growth continues to look more than strong enough to keep unemployment trending down–even though the rate was only flat in June–and probably more than strong enough to lead to Fed tapering starting in September. – Jim O’Sullivan, High Frequency Economics
Much is going to depend on the data flow over coming months, and we continue to believe that the economy’s momentum will prove to be less than forecast by the Fed and hence that tapering will not occur as soon as the market is anticipating (September seems to be the most popular choice at the moment). — Joshua Shapiro, MFR Inc.
…
HEARD ON THE STREET
July 5, 2013, 4:13 p.m. ET
Jobs Report Works Over Bond Buyers
By JUSTIN LAHART
CONNECT
There was plenty to like about Friday’s employment report—unless, that is, you happened to own bonds.
The economy added 195,000 jobs in June, according to the Labor Department’s latest update, better than the 160,000 economists had expected. With April and May figures revised upward by a total of 70,000, job gains have averaged 196,000 in each of the past three months. Earlier fears that the job market would stall as a result of higher taxes and government spending cuts were clearly misplaced.
…
Every silver lining has a cloud though, and in this case it is that it now looks even more likely that the Federal Reserve will start scaling back its bond purchases in September. That’s one reason the Treasury market sold off Friday.
But it may not be the only reason.
The selloff sent the yield on the 10-year Treasury note to a 23-month high of 2.72%. The two-year note also sold off. But its yield, at 0.40%, was still below the high of 0.43% reached in late June. As a result, the yield curve, as defined by the difference between the two-year and ten-year yields, steepened. Historically, a steeper yield curve has indicated bond investors expect stronger economic growth.
Given the cross currents in the market, including the Fed’s commitment to keeping overnight rates low at least until the unemployment rate falls through 6.5%, investors wouldn’t want to overinterpret what’s happened to the yield curve. But the stock market told a similar story of stronger growth expectations Friday. Shares of economically sensitive companies, like banks, retailers and manufacturers, rallied, while defensive areas, like utility and telecom shares, did poorly.
The market environment that’s lately arisen bears some resemblance to 1994, when the Fed began raising rates after a long hiatus. It was a horrible year for bond investors, with Treasurys falling sharply, but stocks ended the year essentially flat.
…
Markets
How to Invest Amid Rising Bond Rates
The benchmark 10-year Treasury note, which started the year with a yield below 1.9%, is now up to 2.6%. That’s good news for investors with idle cash to put to work. Jack Hough joins MoneyBeat.
6/25/2013 11:27:34 AM2:57
Bad news for those with bonds yielding lower. They will dump those bonds.
As of the market’s close yesterday, the 30-year T-bond yield was up from 2.82% on May 2, 2013 to its 2013 high of 3.68%. At this rate of ascent, the 4% yield bear market threshold* will be passed by August 1.
* At a 4% yield, the value of a 30-year Treasury will be off from its May 2, 2013 level by more than 20%.
Housing purchases
Why are gold bugs mired in gloom? Aren’t ever lower prices supposed to represent a buying opportunity?
How does gold stand a chance, given that it pays no dividends, it is still correcting from an epic bubble, inflation remains low, and Treasury bond yields are more attractive by the day?
If I were a gold investor, I would keep my powder dry until Treasury bond yields stop their period of rapid ascent in anticipation of the end of QE3. Until then, Treasurys will look increasingly attractive to gold, and prices of these two flight-to-quality substitutes will adjust accordingly.
Is gold cheap enough to buy yet?
By John Waggoner, USA TODAY 7:15 p.m. EDT July 4, 2013
You’re cheap. You’re so cheap that your clothes went out of style in the Roosevelt administration. Teddy Roosevelt’s administration. Cheap. When someone asks you for three cheers, you only give two.
So when you look at the price of gold and notice that it’s nearly 35% off its record high, you’re intrigued. Is it cheap enough to buy yet? While there are several ways to answer that question, the answer is probably “not quite yet.”
Gold currently sells for about $1,220 an ounce, down sharply from its 2011 high of $1,895. Whether that’s cheap or not is hard to say, because putting a price on the intrinsic value of gold isn’t easy. Unlike stocks or bonds, gold doesn’t pay any interest or have any earnings, which is how people evaluate many investments.
…
Will large gold mining stocks go so low that their yield will hit 10%? If so, I would back up the truck and load up on a garden variety
“Will large gold mining stocks go so low that their yield will hit 10%?”
Not unless Treasury bond yields spike to levels that utterly crush asset prices.
But I suspect that both you and I would probably buy a house at that point, rather than dabble here and there in various financial asset classes.
You are probably right. I am liking 85048 and 85266.
“How does gold stand a chance …”
If the perception is that gold is “the only true money” then it stands a good chance. If this perception changes then its chances also changes.
If gold is not used as a medium of exchange but instead is traded for something else that is used as a medium of exchange (such as cash) then the value of gold does not determine the value of cash, instead it’s the value of cash that determines the value of gold.
It’s more than the value of cash that determines the value of gold. Close substitutes in portfolio allocation also matter. For example, gold and Treasury bonds are both traditional “flight-to-quality” investments — safe havens for investors in times of great uncertainty or outright panic. Both are considered very conservative and liquid: Gold is safe so long as you can hold on to it and can legally sell it; Treasurys are secure as long as Uncle Sam stays in business, and are implicitly guaranteed against outright default by the Fed’s printing press technology.
However, they differ in a couple of significant respects: For instance, gold pays no dividend and is hence a pure capital appreciation play. By contrast, Treasurys are nothing but a promised future stream of fixed dollar payments (a fixed-term annuity) with return of principle at maturity.
Since it has traditionally held its purchasing power in terms of the real value of consumption goods that can be purchased for a fixed weight, physical gold is an inflation hedge. For instance, a longstanding rule of thumb is that an ounce of gold is sufficient to purchase a decent men’s suit, independent of the dollar price of a suit.
By contrast, Treasury bonds are an excellent deflation hedge, as the real value of a fixed stream of future dollar payments increases with deflation. Conversely, rising inflation quickly reduces the value of the future stream of fixed dollar payments which comprise a Treasury bond.
With a credible commitment by the Fed to maintain the current period of relatively stable inflation, there is no obvious reason to favor Treasurys over gold, UNLESS the return on Treasurys increases. The recent steady rise in Treasury yields makes them an increasingly attractive investment relative to gold, even as their value falls. As rising yields pound the value of long-term Treasurys, the value of gold has to fall by even more to maintain equilibrium.
So again, it’s more than the value of cash that determines the value of gold.
then the value of gold does not determine the value of cash, instead it’s the value of cash that determines the value of gold.
It’s neither—rather, it’s the perception of relative value between the two. Just like a foreign currency exchange rate.
As rising yields pound the value of long-term Treasurys, the value of gold has to fall by even more to maintain equilibrium.
I understand you are making a substitution argument, PB, but there is one thing that bothers me about your conclusions that gold should fall to “maintain equilibrium”…
Couldn’t one also make an argument that for two things that are close substitutes, the fact that one has a _foreseeable_ loss of value coming down the pipeline should cause a shift of assets away from that class, and _into_ the close substitute, thus buoying the value of that close substitute (gold)?
“…the fact that one has a _foreseeable_ loss of value coming down the pipeline should cause a shift of assets away from that class, and _into_ the close substitute, thus buoying the value of that close substitute (gold)?”
Fundamentals for gold, including the lack of a dividend and the absence of inflation, look even worse now than do those for Treasurys, which at least pay a dividend whose value exceeds inflation, even as they lose value in the face of rising interest rates in anticipation of a QE3 exit. The general move at the moment is away from ‘End-of-the-world trade’ investments like gold or Treasurys into “risk on” investments like stocks and real estate. My argument is that as investors pull money from investments in Treasurys and gold, the value of gold is inclined to drop faster due to poorer fundamentals in light of currently evolving market conditions.
‘If the perception is that gold is “the only true money” then it stands a good chance.’
I’m sure with every asset price crash, there are bagholders who happily delude themselves with such tenets of faith as they lose their shirts.
Many mining stocks pay great dividends. Barrick: 5.81%.
I tend put dividend stocks/funds in my IRA and 401k.
Unfortunately, the value of anything that pays dividends tends to dive during periods of rapidly rising Treasury yields.
And if dividends are paid out of earnings and these earnings depend on the price of the procuct the mining company produces then a lower price of the product will sooner or later translate into lower earnings which will translate to lower dividends.
It would pay to watch the shareholders equity ratio on these companies. Whether or not the seal up the mines, they have valuable assets, just like most industries. To think the value of ore will go to zero is as fallacious as thinking the value of oil reserves will go to zero.
The value of the ore needs to be converted to earnings before the dividends can be paid out. This is done by selling the stuff that is taken out of the ore. If the price paid for the stuff taken out of the ore drops then the earning will also drop.
The value of the ore doesn’t have to drop to zero for the company to lose money, it only has to drop below the company’s break-even price.
combo thats why gold companies try to avoid big earning swings…as the price goes up the mine lower grade ore since they have no clue when it might be this high again. this makes aerning go up but not a lot.
Don’t you think they rushed to mine the $1500 per ounce cost when gold was at $1900? save the high grade for later like at $1200.
“To think the value of ore will go to zero is as fallacious as thinking the value of oil reserves will go to zero.”
That seems rather obvious.
However, if a critical mass of others believes otherwise, it would be prudent to step aside as they liquidate their holdings out of fear the value of the ore will drop to zero before snapping up shares at fire-sale prices.
80% haircut not enough?
My savings account pays no interest.
It’s as good as gold, then.
Lol.
LOL… Awesome.
Although the transaction-costs are lower when you want to exchange it for paper bills, goods, or services.
“Although the transaction-costs are lower when you want to exchange it for paper bills, goods, or services.”
Which gets back to the reasons gold is not a currency…
Not if price equals value.
It seldom does when asset prices are in a perpetual state of volatile adjustment.
If asset prices are in a perpetual state of volatile adjustment then this volatile adjustment should create periods where prices move higher and lower RELATIVE TO the value of the assets. All one has to do to profit is to buy below this asset value and sell above this aset value. The trick is determining the value.
Others - total strangers - determine the price, it’s up to you to determine the value. But if there are no fundamentals available to determine the value then that leaves only price as a determinant of the value. And price is something that is determined by strangers.
“…this volatile adjustment should create periods where prices move higher and lower RELATIVE TO the value of the assets.”
Isn’t that the very essence of the Housing Bubble?
I suppose I am not a gold bug. I have no gloom at all. I love lower gold prices.
Then you are going to really love the period from now until the Fed formalizes its taper. I strongly suggest you heed my long response to Combotechie (when it eventually appears) regarding the relative value of gold and Treasurys during a period of rising rates. And keep some powder dry for the fire sale.
‘I suppose I am not a gold bug. I have no gloom at all. I love lower gold prices.’
In essence, I’d love to see prices on PMs go down to ca. 2000 levels. Sure, the cash value goes down on the accrued stack already in possession, but a second chance at bat for the next financial miscreant’s ball is given. Silver at less $10, or even near $5, well, it is a cup of Starbucks or a silver eagle, gee, some decision there. That, and hopefully the heirs will not turn it in to the Cash4Gold shop that will spring up on the next upswing of gold.
Comment: It seems the focus has shifted away from long-term rate suppression to restoring employment to normal levels. Naturally the Treasury and mortgage bond markets are casualties with the stock market soon to follow, once yields reach sufficiently high levels for Wall Street to take note.
Among The Worst Days in Mortgage Rate History
by Matthew Graham
Jul 5 2013, 5:23PM
Historical data has its limitations when it comes to mortgage rates. For instance, the longest-running series are only updated once a week, making it hard to determine exactly where an individual day falls in the record books. Even then, today’s rise in mortgage rates is among the largest ever, and certainly the largest in the past 10 years. Today alone, rates rose more than most entire weeks. Conventional 30yr Fixed best-execution rates moved forcefully into 4.75% territory, with some lenders at 4.875%. That means that any rate quoted on Wednesday would be roughly 0.375% higher today–brutally ironic considering the most mainstream weekly rate survey from Freddie Mac noted that rates “reversed course and ticked down” on Wednesday.
Today’s catastrophic surge higher was a direct effect of a stronger-than-expected Employment Situation Report, which not only showed June job creation to be better than expected, but revised the last two months into stronger territory as well. The more profound indirect consideration is the report’s role as the key barometer for Fed policy. This is the reason the rise in rates of the last two months has been as sharp as it is.
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Conventional 30yr Fixed best-execution rates moved forcefully into 4.75% territory, with some lenders at 4.875%.
I remember when rates were on the way down, thinking that 5% was a ridiculously-low rate…
How can it possibly seem high to so many people now?
“How can it possibly seem high to so many people now?”
+1
stronger-than-expected Employment Situation Report, which not only showed June job creation to be better than expected, but revised the last two months into stronger territory as well.
Does this mean that the Fed has actually succeeded in triggering organic growth via massive liquidity?
One can make a fire flare up if you pour enough gasoline on it. But I had been assuming up until this point that the fire would return to embers rapidly when the flow of gasoline was removed.
Was the Fed right all along?
show me the employment report when the Fed stops buying MBSs.. probably 3/4 of the jobs created (or more) are tied to rising home prices, either directly or indirectly… at some point here shortly that game will end and then we’ll just see about all that “organic growth”..
Are you saying I should hold my short position against the S&P500? I am starting to doubt myself.
The problem with short positions (and many other financial investments, for that matter) is that they only pay off at the point of peak doubt, after many investors have given up the faith or run out of funds to maintain their positions.
I know, as I bought home builder puts which expired years before the Fall 2008 collapse in share prices.
Holding firm for peak doubt.
“Holding firm for peak doubt.”
I’m looking forward to vicariously enjoying your report here after the next stock market crash.
Will there be a major crash if we never hit “peak euphoria”?
I don’t know if you read my recent post on this, but it might be worth your while to review the history of long-term interest rates and stock prices in 1987. Roughly speaking, the bond market experienced an ongoing crash from early January through mid-October, very similar in trajectory and velocity to the crash which has been in progress since early May 2013, and the stock market crashed in October. (30-year yield data can be downloaded here.)
Here are the rough contours of the experience for someone holding a Treasury bond fund at constant 30-year maturity throughout 1987:
Date Yield Value (Loss) Gain
5-Jan-87 7.35 $1,000.00
15-Oct-87 10.24 $731.88 (26.8%)
4-Nov-87 8.92 $836.83 (16.3%) 14.3%
In summary, the bond market crash resulted in a spike in 30-year Treasury yields from 7.35 percent to 10.24 percent over the first 9 1/2 months of 1987, and culminated in the Black Monday (October 19, 1987) stock market crash. By October 15, you could have lost roughly 26.8% of your investment on 30-year Treasurys bought in early January 1987; however, those owning 30-year Treasurys over the two weeks following October 15 would have enjoyed a 14.3% investment gain on the flight-to-quality move from stocks into Treasurys. Anyone short the S&P500 would have cashed in even more on the Black Monday stock market crash. All this said, it is entirely possible that the Fed has put in place market controls to ensure that anything this terrible will never again befall Wall Street investors.
Above all, never forget the timeless advice of Mark Twain’s Pudd’nhead Wilson:
P.S. I started my first full-time job in 1987. I considered buying a home, but decided prices were unreasonably high. Instead I bought 30-year Treasurys after the Black Monday crash. By the time I sold them in 1992 to raise a downpayment on my first home, they had gone up in value ALOT thanks to falling bond yields during the early-1990s recession.
This spike in mortgage rates will likely be the proverbial stake through the heart of the echo bubble. How long from now will the too-clever-by-half fly-by-night all-cash investors in U.S. residential real estate recognize their folly, and race towards the exit doors of the burning theater?
Where would mortgage rates settle if the mid 500-FICO service-sector millionaires suddenly lost all fed/gov backing?
Banks are far more willing to supply loanable funds to the mortgage market with a taxpayer-provided principle guarantee than without. The drop in supply that would follow an end to fed/gov backing would be for rates to spike up. How much is anybody’s guess, but a reasonable place to look would be to compare mortgage rates before and after Treasury Secretary Geithner slapped federal guarantees on to almost everything.
ANALYST: The Bond Crash Is Worse Than 1994
Matthew Boesler 28 June 2013 4:36 AM
Worse than 1994
Remember in January, when all the buzz was about the possibility of a “1994 moment” – a repeat of the bloodbath in the bond market that year when the Federal Reserve unexpectedly tightened monetary policy?
Go figure – the sell-off the Treasury market has seen since early May is actually already worse than what went down 20 years ago, as ISI’s Ed Hyman points out in a note to clients this week.
“Looking ahead in 1994, bond yields surged another +100 [basis points] in the next 3.5 months,” writes Hyman. “Of course, the huge difference is that in 1994 fed funds were hiked +75bp during this period, and another +175bp by the end of the year.”
Needless to say, the situation in 2013 is drastically different from that in 1994.
“In sharp contrast, this year, there is no chance of a fed funds hike, and even with tapering, the Fed’s balance sheet will increase another +$450b, which could be viewed as equivalent to cutting the fed funds rate by roughly -50bp,” says Hyman.
The yield on the 10-year U.S. Treasury note has backed off a little from the high of 2.64% reached on Monday, and is now trading around 2.48%.
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U.S. home price appreciation looks fantastic when viewed through the lens of the rear-view mirror.
WSJ Lunch Break
Home-Price Growth Soars
Wendy Bounds and Nick Timiraos discuss the latest home-price data, and John Jurgensen looks at a new Netflix series. Photo: AP.
7/2/2013 12:00:00 PM23:42
“Wendy Bounds and Nick Timiraos discuss the latest home-price data…”
Chatting up the “fundamentals”, right?
I think in general wage are still going down, despite jobs increasing. The Fed is getting giddy about nothing. So with wages going down for the last dozen years, long term rates going up, shadow inventory getting all moldy and deteriorating, what will happen when the Fed follows its word and tapers? 2008 part two.
“I think in general wage are still going down, despite jobs increasing.”
So do I. The benchmark for wages are now set globally and these globally-set wages are lower than they are here.
the future belongs to lucky ducky.
Was checking some zip codes on MelissaData for AGIs. Unfortunately the data for the last three years does not exist. Tried several zips anyway, from Manhattan Beach to Tucson. Out of the last five years, the first four showed sliding incomes. The final year was up a bit. Would love to see 2010 through 2013. This was happening in almost all zips. I also checked 90254, Hermosa Beach. Also Mission Viejo and 85044 and 85048 in the Phoenix area.
The U.S. economy is sick. The Fed is masking the systemic problem. If the Fed walks the walk, we will all suffer through a much needed market correction to remove the beyond rotten toxic parts of the economy.
I did not mention this yet, but over the last few months some people at the client site where I worked were encouraged to take PTO, and of course this would not cost project money. That was another sign of trouble.
Sequestration affected me, by programs going away. It was not unexpected. I did post before that we have had too much defense spending and we need to stop being world cop and decrease the size and power of government. What bugs me is the Obama bashers who don’t want sequestration. Are they saying they want more government spending?
I am downsizing my own investing and cashing in on my big stock gains and will survive going commercial.
http://www.kitco.com/ind/Hamilton/2013-07-05-Long-Rates-Threaten-Gold.html
Good point. If rising long term rates are bad for gold bugs, how come when the long rates went from 3% to 5% from 2004 to 2007′ gold prices skyrocketed?
Crickets?
Was the Fed similarly taking away the QE3 punch bowl in the 2004-2007 period as they are today?
Crickets
So you are also saying rates don’t matter now?
Nope.
Many other factors besides rising interest rates are different now than in the 2004-2007 period. One of these is that the Fed was not yet pushing on a string over that period; i.e., conventional monetary policy was still a viable policy lever, and the Fed was deliberately driving short-term rates higher, rather than the market. Further, there was no QE3 in place at the time to suppress yields, with market anticipation of QE3 withdrawal driving investor decisions.
This time is different, as the bond vigilantes are driving long-term rates up in anticipation of a QE3 exit. This is quite predictably pounding both Treasurys and gold, though in light of low inflation and no evidence of higher inflation on the horizon, gold is getting pounded harder than Treasurys.
This time it’s different — REALLY! Specifically, we are at the turning point in a cycle with a 50+ year period — longer than almost any investor’s entire investing lifetime. Get ready or get reamed in the New Era of ever-rising long-term interest rates.
By contrast, we were not at a 50+ year turning point over the 2004-2007 period. Got it?
Barron’s MFQ | SATURDAY, JULY 6, 2013
A Crash Course in Risk
By MICHAEL ANEIRO | MORE ARTICLES BY AUTHOR
Unconstrained bond funds get their first real test as interest rates begin their expected ascent. Where are these go-anywhere funds headed?
This definitely isn’t what bond-fund managers are accustomed to.
Three decades of steadily falling bond yields produced three decades of buoyant bond prices. That serendipitous long-term tail wind has been the only operating environment many fund managers have known for their entire careers.
“It was put your money in a bond fund and don’t look at it for 30 years,” says Mike Temple, director of credit research at Pioneer Investments, tracing the advent of the bond bull market to former Federal Reserve Chairman Paul Volcker’s efforts to battle inflation in the early 1980s by hiking interest rates as high as 20%. “Now, you have to move around. You can’t just follow benchmarks anymore.”
Not only does a bounteous era appear to be over, but managers now face a potentially protracted uphill battle against rising rates. And instead of a gentle incline to get things started, rates rose like a sheer cliff in May and June, with the 10-year Treasury yield jumping from 1.62% in early May to 2.65% last month, and then to 2.71% on Friday.
That rise, and accompanying drop in bond prices, induced investors to pull $23.7 billion from taxable bond mutual funds and exchange-traded funds during a four-week period in June, per Lipper data; it was the sharpest such withdrawal since the financial crisis. Muni funds, typically a bastion of stability, saw $9.8 billion of outflows in that time.
Of the 14 categories of taxable bond funds tracked by Morningstar, all but two—junk bonds and bank loans—have now posted negative 2013 returns in the aftermath of this spring’s market rout, as have all categories of municipal bonds.
The key issues ahead are how far and how quickly bond yields might rise from here, and what type of fund strategy is best equipped to capture value amid rising rates. One thing everybody seems to agree on: the need to be flexible and opportunistic, and not just rely on long-term bets on any specific class of bonds.
“I think the mode now is being tactical, trying to make a little bit of money often,” says Rick Rieder, chief investment officer for fixed-income at BlackRock. “We’ve entered a very different period for managing fixed-income assets than the past five years, 10 years, 20 years, where you can’t count on interest rates helping you out.”
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Interestingly the period from 1981 to 2000 long term bond rates drifted lower. Aren’t we supposed to be sai g that should have caused gold to go higher? No it went lower to the year 2001.
Interesting. The article I posted showed the opposite happens to gold that the bears are saying. Has the ten year yield superimposed on gold price from 2000 to 2013.
Irrational fear is what is happening in PMs. Those who are not selling physical but buying periodically will be rewarded.
Beware-
This weekend I heard some really tall tales on the street put out by realtors.
Is this supposed to be news?
The Marmalade - Reflections of My Life - Vietnam Vets - YouTube
http://www.youtube.com/watch?v=iE9TNG8IQNI - 146k -
Just got back from the grocery store with Mrs. saturday. While we were there a young white man who was in what I would guess would be in his late twenties walked up to me and asked…… Are you paying cash for your groceries? I looked at him and said… What?
He said…. Are you paying cash for your groceries, because I can save you some money. I looked at him and said….. What the hell are you talking about? He then said…. I can put your groceries on my card and you can pay me $25 less than they cost. At this point I know what the little sh#t is talking about and my wife said it showed in my face as I said…. No thanks bud, no federal fraud for me. His eyes got real big, he dropped his head like a little kid who just got busted with his hand in the cookie jar and he quickly exited the store.
Nothing new… my wife worked a convenience store in Buffalo during the 90’s… the parking lot was an open market for this.
Cigs, beer, and lotto