Wednesday, November 25, 2009
I Am Thankful That I Bought a Bunch of Gold Last Year
I have in-laws arriving in town as I type, so I won't be blogging much over the next few days. I just wanted to drop a note alerting my more Ivory Tower readers that gold smashed into new territory (again) today. Right now it's $1,186.10 / oz.
Also let me link to this great EPJ deconstruction of the jobless numbers. As Free Advice readers are well aware, I have spent surely a ridiculous amount of time harping on the seasonal adjustments and other tricks that I think government officials (and the press) use to paint a false picture of falling prices. Wenzel shows that they may be doing something similar to paint a false picture of a recovering job market.
This is partly why I think there could be an absolute crash in the next few months, and that this stuff isn't going to just sloooowly deteriorate. As obvious as it is to me that we are getting hyperdepression (stagflation squared), I think the average guy on Wall Street thinks, "Yeah they're spending a lot, but things are turning around and we just have to rein in the deficits in a few years. And Bernanke will eventually have to suck out the liquidity once real estate rebounds. Fortunately with unemployment this high, we don't have to worry about inflation anytime soon."
Riiiiight.
Also let me link to this great EPJ deconstruction of the jobless numbers. As Free Advice readers are well aware, I have spent surely a ridiculous amount of time harping on the seasonal adjustments and other tricks that I think government officials (and the press) use to paint a false picture of falling prices. Wenzel shows that they may be doing something similar to paint a false picture of a recovering job market.
This is partly why I think there could be an absolute crash in the next few months, and that this stuff isn't going to just sloooowly deteriorate. As obvious as it is to me that we are getting hyperdepression (stagflation squared), I think the average guy on Wall Street thinks, "Yeah they're spending a lot, but things are turning around and we just have to rein in the deficits in a few years. And Bernanke will eventually have to suck out the liquidity once real estate rebounds. Fortunately with unemployment this high, we don't have to worry about inflation anytime soon."
Riiiiight.
Comments:
Wow!? You predict a crash in the next few months? And without the Fed raising interest rates.
I'm curious though as to what your opinion (or just intelligent guess) as to what will happen to Gold? Will it go down somewhat along with the stock market, or will it remain high or even go higher?
I'm curious though as to what your opinion (or just intelligent guess) as to what will happen to Gold? Will it go down somewhat along with the stock market, or will it remain high or even go higher?
# posted by 
: November 25, 2009 at 3:28 PM
: November 25, 2009 at 3:28 PM
Wow!? You predict a crash in the next few months? And without the Fed raising interest rates.
I'm curious though as to what your opinion (or just intelligent guess) as to what will happen to Gold? Will it go down somewhat along with the stock market, or will it remain high or even go higher?
I'm curious though as to what your opinion (or just intelligent guess) as to what will happen to Gold? Will it go down somewhat along with the stock market, or will it remain high or even go higher?
# posted by : November 25, 2009 at 3:29 PM
: November 25, 2009 at 3:29 PM
The current machinations remind me of a story from one of the " Market Wizards" books.
A savvy trader --a 'wizard' -- was working for a large bank, and the CEO ordered them to take a huge position in something or another. I recall it was a leveraged commodity position. The position happened to pay off, and the CEO believed, after one trade, he had a new fountain of wealth to drive bank profits.
The savvy trader left the bank's employment immediately since it was apparent the CEO had deluded himself in assuming his own knowledge and skills were greater than his luck and the harsh realities of the market. The bank imploded, of course.
It wasn't a 'black swan' that undid things, it was hubris.
A savvy trader --a 'wizard' -- was working for a large bank, and the CEO ordered them to take a huge position in something or another. I recall it was a leveraged commodity position. The position happened to pay off, and the CEO believed, after one trade, he had a new fountain of wealth to drive bank profits.
The savvy trader left the bank's employment immediately since it was apparent the CEO had deluded himself in assuming his own knowledge and skills were greater than his luck and the harsh realities of the market. The bank imploded, of course.
It wasn't a 'black swan' that undid things, it was hubris.
# posted by : November 25, 2009 at 3:53 PM
: November 25, 2009 at 3:53 PM
Since the beginning of this year, the price of gold has increased by around 36%. But that is in USD. In Aussie dollars, however, it has increased by only 2.4%.
# posted by : November 25, 2009 at 5:55 PM
: November 25, 2009 at 5:55 PM
Wow, downunder is right!
Gold in USD vs CAD
http://www.24hgold.com/english/Gold_silver_prices_charts.aspx?money=Loonie
Gold in USD vs AUD
http://www.24hgold.com/english/Gold_silver_prices_charts.aspx?money=AUSD
Gold in USD vs CAD
http://www.24hgold.com/english/Gold_silver_prices_charts.aspx?money=Loonie
Gold in USD vs AUD
http://www.24hgold.com/english/Gold_silver_prices_charts.aspx?money=AUSD
# posted by : November 25, 2009 at 6:17 PM
: November 25, 2009 at 6:17 PM
I see the minute rise in gold and silver in AUD$. Can anyone interpret what it means? Does it reflect strength/weakness of the AUD$?
# posted by : November 25, 2009 at 7:31 PM
: November 25, 2009 at 7:31 PM
Could you give us some more details on what you mean by an "absolute crash in the next few months"? That seems to be a wee bit too important to be mentioned in an "oh by the way" fashion. Thanks.
# posted by : November 25, 2009 at 8:39 PM
: November 25, 2009 at 8:39 PM
Mike asks:
"I see the minute rise in gold and silver in AUD$. Can anyone interpret what it means? Does it reflect strength/weakness of the AUD$?"
It firstly reflects weakness in the USD, obviously. But the AUD has gained against most other currencies also. The AUD Trade Weighted Index (weighting of the AUD against a basket of currencies on the basis of size of trade with Australia) grew by 35% since January. Growth of AUD against various currencies:
USD 46.5%
Euro 24.3%
JPY 44.3%
GBP 26.8%
CHF 26.7%
NZD 1.1%
CAD 25.4%
HKD 46.4%
CNY 46.1%
SDR 36.4%
The strength of the AUD is also due to the carry trade. Thanks to our central bank (RBA) we probably have the highest interest rates in the developed world. The RBA was the first central bank among the G-20 to lift rates, and in fact has done it twice. Currently the cash rate is 3.5% and the market expects rates to be lifted by a further 0.25pp before the end of the year. The Governor of the bank has strongly hinted that the cash rate may be up to 5% by the middle of next year.
Interestingly, NZ is in the same situation and because of the enormous problems the high NZD is causing exporters, there is growing political pressure to abandon the policy of inflation-targetting.
"I see the minute rise in gold and silver in AUD$. Can anyone interpret what it means? Does it reflect strength/weakness of the AUD$?"
It firstly reflects weakness in the USD, obviously. But the AUD has gained against most other currencies also. The AUD Trade Weighted Index (weighting of the AUD against a basket of currencies on the basis of size of trade with Australia) grew by 35% since January. Growth of AUD against various currencies:
USD 46.5%
Euro 24.3%
JPY 44.3%
GBP 26.8%
CHF 26.7%
NZD 1.1%
CAD 25.4%
HKD 46.4%
CNY 46.1%
SDR 36.4%
The strength of the AUD is also due to the carry trade. Thanks to our central bank (RBA) we probably have the highest interest rates in the developed world. The RBA was the first central bank among the G-20 to lift rates, and in fact has done it twice. Currently the cash rate is 3.5% and the market expects rates to be lifted by a further 0.25pp before the end of the year. The Governor of the bank has strongly hinted that the cash rate may be up to 5% by the middle of next year.
Interestingly, NZ is in the same situation and because of the enormous problems the high NZD is causing exporters, there is growing political pressure to abandon the policy of inflation-targetting.
# posted by : November 25, 2009 at 9:08 PM
: November 25, 2009 at 9:08 PM
Mike - another way to look at this is that the AUSD has depreciated less against gold than has, for instance, the USD.
It then follows that the AUSD is stroger over the past year than currencies such as the USD. Stats provided by downunder show how much stronger it has been, relative to the list of currencies.
It then follows that the AUSD is stroger over the past year than currencies such as the USD. Stats provided by downunder show how much stronger it has been, relative to the list of currencies.
# posted by : November 25, 2009 at 9:19 PM
: November 25, 2009 at 9:19 PM
Downunder, Expat,
If you lived in Australia and had no contact with the outside world you wouldn't understand what all the fuss was about with the price of gold, no?
I look at this data you put forth and then look at the USD?AUD currency chart (a high of around $1.57 early this year to $1.07 now) and wonder if it is telling me something more, especially of near term future events. This seems ominous for someone, but I don't know why.
Am I being paranoid from the shell-shock of the past 2 years?
If you lived in Australia and had no contact with the outside world you wouldn't understand what all the fuss was about with the price of gold, no?
I look at this data you put forth and then look at the USD?AUD currency chart (a high of around $1.57 early this year to $1.07 now) and wonder if it is telling me something more, especially of near term future events. This seems ominous for someone, but I don't know why.
Am I being paranoid from the shell-shock of the past 2 years?
# posted by : November 25, 2009 at 10:51 PM
: November 25, 2009 at 10:51 PM
Mike - if one lived in Australia and had no contact with the outside world over the past year then there would in fact be no fuss since one would have no knowledge of anything beyond their borders, and from their perspective things would be quite placid.
One thing the numbers are telling us that is something one can observe on their own. That is, one's greenbacks do not go as far as they once did. Also, government proclamations notwithstanding, the numbers imply markets do not believe this will be turned around any time soon. It's probably most ominous for traditional savers using the USD - the value of the asset disappears over time, yet the 'total balance' faithfully increases with each statement.
Paranoid is bad, prepared and informed is good.
One thing the numbers are telling us that is something one can observe on their own. That is, one's greenbacks do not go as far as they once did. Also, government proclamations notwithstanding, the numbers imply markets do not believe this will be turned around any time soon. It's probably most ominous for traditional savers using the USD - the value of the asset disappears over time, yet the 'total balance' faithfully increases with each statement.
Paranoid is bad, prepared and informed is good.
# posted by : November 26, 2009 at 9:19 AM
: November 26, 2009 at 9:19 AM
Expat,
Interestingly, some friends and I were contemplating driving 13 hours from Alaska to Whitehorse, Yukon to open up Canadian dollar accounts, in addition to stashing our gold and silver in a safety deposit box there. The same people that thought I was overreacting last year in buying up gold and silver are now thinking the same on this road trip proposal.
Furthermore, I bailed out on the stock market last month in my retirement account (where I have the least ability to move out quickly). That got me more of the same look. Its amazing on how many people still have faith on the things that have failed them time and again.
I just hope the Canadians aren't stupid in managing their economy and currency like the jokers running things in Washington are.
Interestingly, some friends and I were contemplating driving 13 hours from Alaska to Whitehorse, Yukon to open up Canadian dollar accounts, in addition to stashing our gold and silver in a safety deposit box there. The same people that thought I was overreacting last year in buying up gold and silver are now thinking the same on this road trip proposal.
Furthermore, I bailed out on the stock market last month in my retirement account (where I have the least ability to move out quickly). That got me more of the same look. Its amazing on how many people still have faith on the things that have failed them time and again.
I just hope the Canadians aren't stupid in managing their economy and currency like the jokers running things in Washington are.
# posted by : November 26, 2009 at 12:08 PM
: November 26, 2009 at 12:08 PM
About my talk of a "crash": I have thought the recent "recovery" is nonsense, and that within the next few months people are going to realize just how screwed we are. Specifically, when it's obvious that the real economy is still in serious trouble, and that inflation is picking up steam, then people will freak out.
E.g. the administration is floating more and more trial balloons about how many different taxes they are planning on raising. Investors need to realize that we are in for a seriously awful decade, economically speaking.
E.g. the administration is floating more and more trial balloons about how many different taxes they are planning on raising. Investors need to realize that we are in for a seriously awful decade, economically speaking.
Nike all star shoes
NBA all star shoes
Adidas basketball shoes
NBA basketball shoes
Nike Basketball shoes
Nike Outlet
Adidas Outlet
LeBron James Shoes
Kobe Bryant Shoes
Allen Iverson Shoes
Kevin Garnett shoes
Paul Pierce Shoes
Penny Hardaway Shoes
Nike Flightposite
Nike Basketball shoes
Nike Outlet
LeBron James Shoes
Post a Comment
NBA all star shoes
Adidas basketball shoes
NBA basketball shoes
Nike Basketball shoes
Nike Outlet
Adidas Outlet
LeBron James Shoes
Kobe Bryant Shoes
Allen Iverson Shoes
Kevin Garnett shoes
Paul Pierce Shoes
Penny Hardaway Shoes
Nike Flightposite
Nike Basketball shoes
Nike Outlet
LeBron James Shoes
Subscribe to Post Comments [Atom]
<< Home
Subscribe to Posts [Atom]