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Top 10 at 10: Shocking financial advisers; Gold to US$2,300/oz?; Goat on a rope; Dilbert
November 5th, 2009Here are my Top 10 links from around the Internet at 10am. I welcome your additions and comments below or please email your suggestions for Friday’s Top 10 at 10. We’re just like Red Bull. Interest.co.nz gives you wings!
1. Why so shocked? – Consumer New Zealand has done a survey of 33 financial advisers and says it was shocked by the results.
“This is an industry in serious need of reform,” said Consumer New Zealand chief executive Sue Chetwin, whose organisation did the research. “We, like everyone else, hoped that had improved. The results shocked even us.”
The Government has moved to clamp down on shonky investment advice, but Consumer NZ says it is too little, too late.
Its asked an expert panel to assess the advice of the 33 financial advisers. Of the 17 advisers that provided plans, only three were rated “good”. The other 14 were rated “disappointing” or were “rejected” as containing little analysis, lacking key information, or offering advice against shopper’s best interests.
Consumer NZ found advisers failed to be transparent about their costs and relationships with the funds they were investing in.
2. Cash dribble? – The assumption until now is that China will continue to run big current account surpluses that it will use to buy the flood of US Treasury bonds being issued by a profligate US government. But what if China doesn’t have a big surplus? The World Bank says in its latest update on China that the surpluses may not be so big. So who’s going to buy all the bonds? The US Federal Reserve with printed money? Here’s a few of the report’s highlights.
* China’s external surplus is set to shrink sharply this year, and only rise somewhat in 2010.
* Medium term growth prospects are less favorable than recent experience, but rebalancing could buoy sustained growth.
* Serious asset price bubbles are unlikely to be imminent.
However, risks of misallocation of credit and bad loans are real and it pays to be proactive.
* China’s exposure to asset price risks differs from that of most other countries.
* The authorities have taken several steps recently in an effort to mitigate these risks.
* Eventually, general monetary tightening will be required to dampen these risks.
3. Gold bugs look here – Asiablues has a nice analysis of the outlook for gold at Zerohedge, including a prediction that gold could hit US$2,300/oz and a look at Nouriel Roubini’s claim that gold is overvalued in a world of deflation. HT Troy Barsten via email
The fast ascent to new record highs this year has some of gold proponents worried it might be getting ahead of itself. But on an inflation-adjusted basis, the prices of almost all commodities have reached their 1980’s level, except for gold and sliver. On that note, gold would have to double to $2,291.55 to reach its 1980`s high, which its supporters believe means gold could go much higher.
In addition, many U.S. creditors have fundamentally lost confidence in the US dollar and are incrementally diversifying into hard assets and non-dollar currencies. There are indications that China, for example, could be shifting to a partial gold standard through reserve accumulation.
The Reserve Bank of India (RBI) yesterday said it had bought $6.7 billion worth of gold from the International Monetary Fund (IMF). The purchase RBI made is nearly half the 403.3 tonnes gold that the IMF decided to sell in September to raise resources for lending to low-income countries. Most speculate that China would be the buyer for the remainder of the gold for sale by the IMF.
The deal represented one-eighth of the IMF’s total gold stock. This is the first time since 2000 that the IMF has sold gold to a central bank. India’s affirmation of current gold prices is a big sign that the nation sees the recent surge in gold isn’t likely to abate any time soon. It also signals that the fall in the US dollar seems to be pushing central banks to strengthen their portfolio with gold.
The purchase will lift the share of gold in India’s 285.5-billion foreign exchange reserves from near 4% to about 6%, which is much less than most of the developed world and four times China’s. This lower gold to reserve ratio also suggests the China and India could continue to be the buyer in the gold market.
4. Useful chart – Paul Krugman points out a useful chart on global industrial production that he suggests shows the worst is over. We’ll see. HT Steven via email.
Basically, we started out with a year that matched the Great Depression, but have since pulled back a bit from the edge of the abyss.
5. Inevitable bust – Felix Salmon at Reuters follows up on Nouriel Roubini’s epic ‘Mother of All Carry Trades’ post with a few interesting comments.
Nouriel isn’t saying when the current bubble is going to burst — and if history is any guide, it’s probably going to be a long time before the inevitable happens. Of course, the longer that a bubble continues to inflate, the more painful the subsequent bust.
In that sense, every move upwards in US stocks or gold or the Aussie dollar or junk-bond indices is another step in exactly the wrong direction: it’s a step towards yet another massive crash. And it’s all being turbo-charged by Fed policy. If there’s a painless way out of this situation, I can’t see it.
6. Fitch cuts Ireland – Fitch, which is currently evaluating New Zealand’s AA+ rating for a possible downgrade, has just downgraded Ireland by 2 notches to AA-, Reuters reported. Finance Minister Brian Lenihan put a positive spin on it.
“While this is a somewhat disappointing development it is worth noting that Fitch has given us a stable outlook,” Lenihan said.
Lenihan once again warned that Ireland’s budget deficit could grow to as much as 15 percent of GDP next year without 4 billion euros ($6 billion) in savings that he said were backed by international organisations.
“It is extraordinary that the European Commission, the OECD, the IMF all have said there is a clear way out for Ireland and that is that to resolve our banking crisis, address our public finances and restore our competitiveness,” Lenihan told a news conference.
7. The next Iceland? – Ed Harrison at Naked Capitalism has a nice summary of what the Irish downgrade means and whether Ireland’s bad bank (NAMA) will be enough, or whether full nationalisation is required.
The FT’s Stacy-Marie Ishmael has a piece out doubting the maths used in NAMA, which bolsters the OECD view that the bad bank may not be enough.
So you have a trifecta of bad news coming out of Ireland: a two-notch downgrade by a major ratings agency, a warning from the EU that the economy will be weak for sometime to come and that deficits targets will not be met, and another warning from the OECD that the banking situation in Ireland is still very grave.
Quite frankly, it is not looking good for an Irish recovery at this time without the help of the IMF. This all brings me back to my question one year ago: Is Ireland the next Iceland? They will be if the EU, IMF and Irish government do not take today’s bad news seriously and take drastic action to bolster the Irish banks, economy, and government finances.
Who said the financial crisis was over? It is not.
8. Long term decline - This chart below from Jesse’s Cafe Americain is instructive on the long term decline of the US dollar. Click the chart for a bigger version. Jesse doesn’t pull any punches.
The reasons for this decline are obvious, but so many miss this that we have to wonder what people are thinking. Despite the credit writedowns and even a potential unwinding of the dollar carry trade which we think is a bit overblown, as the demand for dollars in bank lending is slack, most analysts are missing the bigger picture of a huge overhang of eurodollars that are becoming increasingly less useful to foreign holders, especially if the power of the petrodollar declines.
There is a potential double bottom to be made at 71, with a possible target in the higher 80’s based on the charts. The fundamental scenario we would see is a significant equity market dislocation and/or an exogenous geopolitical event that caused another artificial short term demand for dollars and the T bills. Currency dollars are, after all, sovereign debt of zero duration and in any panic there is a rush to the short end of the curve, to the point of accepting some negative rates of return for the safety of capital.
But after that event, the decline of the dollar will gain again in momentum lower unless there is a profound systemic reform and restructuring of the federal budget deficits. Even clever frauds can work only so many times, and there is nothing particularly clever or sophisticated about Wall Street’s latest antics, excepting of course their size and their audacity which the average mind cannot well grasp.
9. The big US mess – Mish at GlobalEconomicAnalysis picks up on rumblings in local America, including a city in Alabama going bankrupt, a strike in Philadelphia, public sector pay cuts in Ohio and a declaration that Houston is bankrupt. This is largely about pension liabilities. America is a time bomb.
Expect to see many plans blow up betting the bottom is in or chasing risk because they need 8%. We are in a major pension crisis and this one is not going to blow over. Meanwhile the unions in Philadelphia are on a wildcat strike asking for more. The mayor needs to show them the door. Unless he does, I can predict the future. The future is Prichard. It’s already too late for Houston and Detroit.
It’s probably too late for Baltimore as well. Please see Time for Baltimore to “Pull a Vallejo” and Declare Bankruptcy for details. Look for more city bankruptcies over wage and pension benefits. They are without a doubt coming.
10. Monkey and Goat on a rope - For absolutely no valid reason I am including this video for your entertainment. The best bit is just after 3minutes. I love how the goat is still chewing its cud while balancing on the vase on the rope while the monkey stands on its horns. Brilliant Russian commentary. Even better than Keith Quinn. HT Rolfe Winkler at Reuters.
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November 5th, 2009 at 12:38 pm
Stumbled across this little gem:
The title of the major bailout program clearly shows just how little Wall Street and Washington understand about the free markets. TARP or “Troubled Asset Relief Program”. Sorry, but there is NO SUCH THING. Everything sells in a free market at a price that somebody is willing to pay, stick the mortgages on Ebay and trust me, they will sell, at what price who knows? that is for the free market to decide.
They are only “troubled assets” because the bankers do not like the valuation that the free market is putting on all this junk. Which is why we have had TARP, which is nothing more than socializing the Bankers losses. It is disgrace.
November 5th, 2009 at 12:41 pm
Financial Planners : Only 17 out of 33 were willing to provide a plan . That’s a sad indictment on the industry in itself . And 3 of that 17 were acceptable plans . Abysmal ! Plonk yer spare cash into a rental property or into a clever goat , folks , the ” experts ” are gonna fleece you , hand over fist . Financial Spammers !
November 5th, 2009 at 12:48 pm
Surely #10 can be seen as some sort of allegory for the wider economic situation? Perhaps with the monkey as the Reserve Bank and the Goat as the wider economy with the vase/tightrope standing in for the housing bubble?
One only hopes that our monkey/goat combination will prove to be as nimble…
November 5th, 2009 at 12:56 pm
Here’s link to the Noriel Roubini story: http://www.ft.com/cms/s/0/9a5b3216-c70b-11de-bb6f-00144feab49a.html?nclick_check=1
Roubini is always quality reading.
Salmon’s comment on the piece, however, is hardly ground-breaking. He’s suggesting that stockmarkets have a boom & bust cycle over the long-term?
Wow. What a genius.
November 5th, 2009 at 1:16 pm
@Martin: I think we’ve been over this….yes, it is a disgrace, but its not going to change until it blows up IMHO and it has to be nuclear…ie something so big lets go that even the US Gov throwing Trillions at it wont stop it….anything else and they will just print more money…Citigroup or GSach scale….oh wait….look at Citigroup….hmmm exposure to commercial mortgage defaults? hmmm…
Of course when that happens the updated chart of Paul Krugman’s 08 will make the 1929 line look good….
November 5th, 2009 at 1:18 pm
Roger – better still, set yourself up as a financial planner, and give yourself a title; Bishop sounds good, should rake it in, and with luck tithes are untaxed.
You could show them your logarithmically-flattened graphs, then get them to invest in loaves and fishes
November 5th, 2009 at 1:21 pm
@powerdown: Dont joke loaves and fishes might be somewhat needed in the future…
November 5th, 2009 at 1:33 pm
@ Conrad. Love it.
Apologies if a repost, but just came across this video of another CNBC shouting match between Rick Santelli and Steve Leisman.
http://www.youtube.com/watch?v=UMMM9GpxjG0&feature=player_embedded
Rather succinctly, if loudly, summarises the monetary policy dilemma and the two sides of the argument. Santelli’s “it all depends which cog you are” comment is the best.
November 5th, 2009 at 1:58 pm
Anyone see this headline?
“12% drop in NZ manufacturing jobs in year to Sept”
No?
Well, there was no such headline yesterday, but there should have been. The figures are in the quarterly employment survey published by Stats on Tuesday.
http://www.stuff.co.nz/business/personal-finance/3028475/44-000-fewer-Kiwis-in-paid-employment
“The number of manufacturing jobs fell from 221,900 in September 2008 to 194,800 in September this year”
That’s 27,100 fewer manufacturing jobs or a 12.2% decline by my calculations, and that won’t include Bridgestone job losses in Chch – and others. John Walley is pessimistic about the market, and he’s right of course.
The productive sector of the economy is taking the biggest hit and it doesn’t bode well for a genuine recovery any time soon.
I can’t remember which, but a bank economist was quoted on Radio NZ this morning as saying that the economy is set to pick up, citing an improvement in the property market as one of the factors. Where on earth does he think real wealth comes from??
November 5th, 2009 at 2:06 pm
@Conrad and @DC: yes ditto…..as the other guy (Steve Leisman) says…he’s hacked off because the tree is falling on him…if it was falling on someone else he’d be shorting that person gleefully….
He (Rick Santelli) does have a point though..if the USD devalues by 50% then oil costs the US twice as much the US consumer sees $4 a gallon at $160US a barrel, while in NZ we see it at $80US a barrel…and $1.60NZ a litre…that’s a huge disadvantage for their economy…$4USD a gallon breaks them, thats 6%+ GDP…have they considered that?
regards
November 5th, 2009 at 2:07 pm
@youngTel: hence why I for one hold such low regard for economists and especially bank ones.
regards
November 5th, 2009 at 2:10 pm
powerdown : Some dude called Tamaki has pinched the title ” Bishop ” for himself . But Reverend Rodge sounds cool . And I can do that evangelist spiel with an American twang . After I’ve fleeced…….Sorry . After I’ve gained funds from parishioners , for the good works of God ( and had a trip to Las Vegas with some swimsuit & lingerie models , to spread the Gospel ) they’ll be lucky to afford loaves and fishes . I can use a logarithmic graph to plot the ” donations ‘ . Won’t look quite so exponential that way . Thankyou man , brilliant suggestion , onto it now !……….Know where I can get a surplus surplice ?
November 5th, 2009 at 2:11 pm
YoungTel, was it Tony Alexander by any chance? Even if it wasn’t they all seem to be seeing (smoking?!?!) green shoots everywhere, so could be any one of them.
November 5th, 2009 at 2:12 pm
In the vestry you just invested in. halleluja
November 5th, 2009 at 2:47 pm
We where bored a while back, so got in a couple handfuls ‘financial planners’
Must say it was good enterainment….
“isn’t that illegal, tax evasion…? ”
“yeah everyone is doing it, IRD will never catch up…”
“But this is what is on the IRD web site”
“Dont worry about that, its just general giudelines…”
“Can you put that in writing?”
At this point it was quite amazing how the dig around that….
Forget the hidden costs, mis representations on their part, what was disgusting was promotion of tax breaks by illegal means
Every one of them was a plonker to say the least….just some person off the street selling a product and a std question answer sheet memorised…they called it study.
The best part was when they get ready to leave, and actually tell them exactly how full of SH.. they are.
Bottom line the issue of activities of the financial isn’t advises doest go anywhere near far enough..they where careful enough not to leave any evidence advising of illegal activity behind…
November 5th, 2009 at 2:56 pm
Steps : I read Gareth Morgan’s book . He names folk . He shows the track record . It isn’t that financial planners and fund managers are doing anything illegal . The matter is that they aren’t doing anything constructive for the client . Not listening . Using unsuitable products ( finance companies , anyone ! ) . They are just stupid . Taking fees for no real service . Most investors could do a better job personally , than can so called ” experts ” in the industry . Financial planning is an industry with a greater proportion of dunder-heads than any other . Quasimodo and his idiot brother-in-iaw would get a better return on your money than 90 % of financial planners in New Zealand .
November 5th, 2009 at 2:56 pm
Steps what was the ‘tax evasion’ scheme they were touting? I’m pretty incredulous they would be stupid enough to do that. In fact it would be beyond stupid.
November 5th, 2009 at 3:11 pm
This today from moneymorning.com.au re the Great Depression
A better way to look at it is to realize that the Great Depression wasn’t actually the problem. The real problem stems back to the creation of the US Federal Reserve and policies during the Roaring Twenties.
The Great Depression which followed was merely the opposite effect of the previous boom. In other words, where there’s a boom there’s always a bust.
However, where things turned from just a Depression into a Great Depression was down to the interference of government and central bankers. Their desire to ’stimulate’ the economy by borrowing and spending made things worse.
Sound familiar?
It’s no coincidence that the policies followed by governments and central bankers back then are the same – exactly the same – as the policies being followed today.
And back then they appeared to be working too – at least to start with.
But from what we can see, there was another reason for the global Great Depression in the 1930s. And it’s a reason that doesn’t get much airtime.
You see, back in the 1920s and 1930s there was a once great superpower that by that time was in terminal decline. It had spent its way towards bankruptcy following a crippling war and it was quickly losing ground as a major producing nation.
It was consuming more than it was able to give back. It had reached the tipping point and there was no turning back. All it could try to do was minimize the damage to its own economy.
Unfortunately for other nations, that would result in a lasting damage to other economies.
Of course, I’m referring to Great Britain.
Without going into all the details, one of the major direct causes of the Great Depression was the behavior of the not-so-great Britain and its attempts to prop up its own ailing economy.
What should have been a British Great Depression – and probably just a recession elsewhere – became a global Great Depression as attempts were made to stop Britain going down the toilet.
November 5th, 2009 at 3:12 pm
@Reverend Rodge: Im with you dude…can you make me a saint?
;]
regards
November 5th, 2009 at 3:20 pm
@Martin: There is certainly a strong case from what Ive read that the 1920s boom / bubble and the Fed’s policies have a great bearing on the start of the bubble and the start of the G. Depression. It seems we are destined to repeat history even though we have read it…So its clearly the wrong ppl in charge yet again (dont forget Gorden Brown) who have the arrogance to think their intelligence (1st class honours etc) and experience are enough to avoid this happening again…. So based on this it seems inevitable that we get the double dip
….ouch!
regards
November 5th, 2009 at 3:22 pm
Forgotten how it went exactly.. If one owns a home over a certain length of time, then buys or builds a new home, financed on the old home rents out the old home, one ends up righting of the the expenses of the new home….
Stuff like that….
yeah we moved for nearly a yr down country for a while, and that exactly what the owner of the house we rented was doing…
By not taking any advice of any financial advisers , now we a sitting comfortable and secure, not rich.. modest, sleep well at night and not stressed.
I will qualify, there are some very good advisers, usually been around for a few decades…often now semi retired simply because of the volume of plonkers sucking so many of potentially good customers into get rich quick schemes.
Its a shame these guys are tarred with the same brush now.
Thats what boom yrs does to different sectors, attracts the cowboys.
Not doing anything for Sunday afternoon….pick on a Mobile banker ‘manager’, interview a few insurance brokers, go to one of those shared holiday home schemes (they have a free gift lol)
And wear an old pair of jeans and T shirt and roll up in your $60K + car… they think u are dumb but have a lot of money floating around lol.
Its an eye opener… and fun.
The best part is when ppl come up after ” Im glad u guys where there, we didnt know to ask those questions…..we where ready to open your cheque book…”
Maybe I just have a sick sence of humour lol
November 5th, 2009 at 3:26 pm
Interesting opinion in the FT about China heading for a Japanese style bubble and bust
http://www.ft.com/cms/s/0/78e2eae4-c7af-11de-8ba8-00144feab49a.html?nclick_check=1
Also, those interested in algorithmic trading and its effect on the markets may find this FED paper “Rise of the Machines” interesting…
http://www.federalreserve.gov/pubs/ifdp/2009/980/ifdp980.pdf
“We find that, despite the apparent correlation of algorithmic trades, there is no evident causal relationship between algorithmic trading and increased exchange rate volatility. If anything, the presence of more algorithmic trading is associated with lower volatility.”
November 5th, 2009 at 3:33 pm
How about a martyr?
Martin – you’re right about GB. The point is, we are now running the experiment on a global scale. She only got GREAT by sucking the resources from half the planet, and subsided when that process went into decline.
Actually, when the exponential graph went vertical, and supply couldn’t keep up.
Nobody will take over for long, this time. Not the double-lot of resources anywhere.
What scares us energy types (I was at the Centre for Energy Research symposium yesterday) is that this civilisation only got going on the back of plentiful stored energy.
Next time around, that won’t be there, and anyone trying to claw their way up-and-away will find the rungs of the ladder missing.
It may be, then, that this is a one-shot, and if we crash it, there will be no chance of a re-boot. Which would go for any inhabited planet, when you think about it.
There will always emerge a dominant species, and they will always overshoot the carrying capacity of their planet through their very success. At some point, they will either realise their predicament and establish an equilibrium, or they will crash as all unaware overshoot species do.
Are we clever enough, Rev? Have you some simple commandments? Should ECan part the waters? MaF cast their nets on the other side? Who gets the fatted calf?
Pray tell….
November 5th, 2009 at 3:46 pm
And what was the bridge too far for Great Brittain? WHat was to hard for the USSR? Afganistan!
Heck it even chewed up and spat out Alexander the Great.
November 5th, 2009 at 4:04 pm
steven : Sorry , but St. Steven is taken . Serbians beatcha to it . …………. . But for a fee , I will re-write history for you . Helen Clark did it for Harry Duynhoven and for party political donations : ” Retrospective Law ” , if memory serves .
Bless you , my son .
November 5th, 2009 at 4:12 pm
Yeah – you get to the Khyber, then pass….
November 5th, 2009 at 4:20 pm
Bloody Serbians…typical….
November 5th, 2009 at 5:08 pm
http://www.walletpop.com/blog/2009/11/03/nicolas-cage-owes-irs-6-million/
Must be no tax benefits and deductions there…to the tune of 6 mill, nor any honest have I got a deal for you …management.
Now if only the POOR fellow had lived in New Zealand, he would had better ADVI-sores.
Or is that…AD-VICE-SORES… now where is that Magic spell checker..
I know…that was the Christchurch Wizzard…even he skipped to OZ…didn’t he.
Magic.
All is well with the World of Finance…
November 5th, 2009 at 5:18 pm
Had some fine ants myself, but they scarpered when the milk and honey ran out
November 5th, 2009 at 5:50 pm
9. Houston, Detroit, Baltimore – seriously not places to be when the city infrastructure collapses. I have visions of marshall law, soldiers on street corners in full combat fatigues and tanks in the streets. Lots of nights like New Orleans when the police force locked themselves in….
November 5th, 2009 at 6:01 pm
What, on the way to $7,000, or $10,000 or maybe $15,000 ?
Come on, $2,300 is the 1982 post-bubble price when you adjust properly for inflation.
I’ve got numerous methods for estimating the price of gold TODAY, given what has already happened, and not one of them is anywhere that low. And that excludes any mania bubble phase at the top.
Take your pick:
http://www.neuralnetwriter.cylo42.com/node/200
November 5th, 2009 at 6:40 pm
Earth to Steve Netwriter : Touch of delusional thinking there . You are assuming that the 1982 top for gold was the correct figure , when in fact it was a boom , a bubble , that subsequently burst . ……….. . By the same spurious reasoning I could claim that the Dow Jones Index , which first reached 10000 in 1999 , ought to be inflation adjusted to 2009 figures . So 11000 today is a rip roaring bargain…You buy that ?
I expect that gold will go higher , and overshoot reasonable value , but to inflation adjust from a previous peak is wrong .
November 5th, 2009 at 7:09 pm
@ Roger
especially when it was at the peak for only a few days
That being said, history is on the side of the yellow metal. No fiat currency has ever ended well. I can’t see this global experiment being the first success story.
I have a chunk of PM’s, and I hope they never reach significant highs because the social upheval that will result will make owning them a phiric victory.
November 5th, 2009 at 8:11 pm
a chunk of PMs,hope they didnt include jim bolger and jenny shipley,or geoffrey palmer and helen clark.too mean to die.found out they cant take it with them so they aint going.better than coming back though like roger douglas.return of the zombies.
November 5th, 2009 at 8:26 pm
Paul Krugman’s chart purporting to show an incipient economic recovery based on an improvement in global industrial production is chart junk at best (HT to Tufte) and charlatanism at worst.
Has he factored in short-term stimulus effects – Cash for Clunker/Abwrackprämie? Is this production to restock inventories that have been purposely run down? Has the seasonal effect – 30% of all US consumer purchases are made in the pre-Xmas run-up – been taken into account?
We need to see the development of reliable global trade indicators – international freight traffic, for instance – returning to stable growth patterns before we can talk about a sustained recovery
November 5th, 2009 at 8:41 pm
Martin : Have you studied the history of gold ? It ain’t as pretty as the yellow stuff is . When the ” faecal material impacts upon the wind oscillating device ” , people , & governments get weird , and do amazing things . It is not unprecedented that the prudent hoarders of gold have been reviled , stripped of their wealth by enraged yokels , or thieved by government decree . Indeed a pyrrhic victory , that you were right , but mugged by the unbelievers and indolent . A warm fuzzy feeling as you lie in the mud , bloodied , beaten , and newly impoverished ……… . Dis-believe me ? It has happened . Do some digging , and ye shall find the truth !
November 5th, 2009 at 8:45 pm
It has the ‘ring’ of truth. All that glitters has been sold.
November 5th, 2009 at 9:34 pm
But I just finsihed digging to hide the stuff… no wait …. shhhh its a secret!
November 5th, 2009 at 10:14 pm
@John B I think Krugman commented on this (and I dont think its his data, he’s just reporting / charting it)…I can agree it isnt a real recovery based on a solid foundation so indeed it maybe a bubble…but I dont think PK says it is good recovery either. Also the cash for clunkers etc is a US thing and not a global thing, you seem to be mixing things up…
If you read more of his posts, I think his concerns come through, ie context that may not be clear from just one piece.
regards
November 5th, 2009 at 10:19 pm
@RT: Indeed and the biggest heist of all seemed to be during the GDepression by the US Govn on its own ppl. The only other comparible pillaging I can think of is the Spanish in South America and that wasnt pretty…
November 6th, 2009 at 12:00 am
Roger Thompson,
No delusion here Roger, just cold hard analysis & lots of research.
1982 was not the top for gold. That was 1980. If you had read my post carefully, you would have seen that I wrote “1982 post-bubble price”.
Please refer to this chart of mine:
http://smg.photobucket.com/albums/v207/neuralnetwriter/financial/Gold/?action=view¤t=GoldUS_CPIRealCPI_090309.gif
You will see that I reference two gold prices in 1980. $350 & $678 (not the peak $850 price).
The blue lines show those prices inflation adjusted to 2009, giving $1106 & $2142, using the official US CPI numbers.
Using that method, we are at the equivalent of the $350 point on the 1970s part of the chart.
However, as many realise, the official US CPI numbers have been massaged since 1983. On my chart, the red lines repeat the process using better CPI numbers.
The results are $3154 & $6108.
That means we are currently 1/3 of the 1980 $350 price. Right in the foot-hills of the 1970s chart.
But that is one method of many. Some give higher numbers.
It is not a method I recommend.
Another method is to use global M0 versus the value of all gold mined. That suggests the gold price would go to about 3x the current price to reach the 1982-$350 level, and almost 4.5x the current price for the bubble peak.
I’m not sure that method is correct either, as I think just considering M0 misses something rather significant.
If GoldUS$ only gets to $3000 the world will be very very lucky. My current research leads me to believe that it is more likely that GoldUS$ will go to a much higher number, and the resultant worldwide mess will be nothing anyone in their right mind would wish for.
November 6th, 2009 at 8:07 am
I’m not convinced about gold myself.
I do believe in herd behaviour.
Which is why the following article makes me wonder about Gold at the moment
http://www.smh.com.au/business/india-shows-hedgefund-savvy-with-gold-grab-20091105-hznp.html
November 6th, 2009 at 8:16 am
Earth to Roger : You owe Steve Netwriter a gummy bear………..Bugger !
November 6th, 2009 at 8:32 am
Gibber
Have you read martin Armstrong’s article. Its on scribd which is a pain. He talks about subjective thinking and herd behaviour.
Objective v Subjective
http://economicedge.blogspot.com/2009/11/martin-armstrong-objective-v-subjective.html
November 6th, 2009 at 2:34 pm
Thanks Roger, very tasty
November 6th, 2009 at 9:41 pm
For those interested I’ve just found someone that had a go at figuring out the rate of underemployment here:
http://themarketanarchist.blogspot.com/2009/11/unemployment-continues-to-grow.html