Financial topics

[aedens]

reviresco » Sat May 22, 2010 5:39 pm
"I think it of note that President Obama has said that everything is on the table regarding the nation’s budget. Don’t forget that the bulk of the population whose votes were swayed for decades by the promises of Social Security and Medicare have left or are leaving this Earth. Time for new carrots for the new electorate."
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“Insanity in individuals is something rare - but in groups, parties, nations and epochs, it is the rule." -- Friedrich Nietzsche

Pólya's Urn doesn't predict what's going to happen in sixty years, but it does provide a model that helps you understand it, and what you can do about it.

IMO not going to happen any time soon with Obama. Do not get me wrong I have nothing against the man but as said he will forget why he came to drain the swamp.

http://www.opensecrets.org/

[OLD1953]

The issue I have with all this is simply that whoever is President won't have a choice. When the first soverign default hits, the US will be forced to cut budgets and increase taxes. Both will happen.

As soon as any country defaults, bond ratings for every small to mid size country on Earth will be lowered, and the "big boys", including the USA, will be put on notice. And the spending will stop, because we can't beat an interest rate hike. And any bond rating decline is a hike.

Already we are seeing some tax increases sneak by, and you'll see more and more of them. And we are seeing some cuts as well, not much publicized, but cuts nontheless. The fertilizer is about to hit the ventilator (as the immortal Flint said) and the splatter is going to be enormous.

[John]

> John, maybe it is more funny for those of us invested in precious
> metals. We expect governments to foolishly print money which will
> result in currency devaluation and inflation. If you are planning
> for deflation this might not be so funny. But then Mish is
> expecting devaluation and deflation and he finds it funny. I don't
> even see how devaluation and deflation is possible. If you devalue
> the dollar, then oil and everything else will go up in price,
> which is the result of inflation. How can Mish expect devaluation
> and deflation?

Every person who's been in this forum for a while has done something
to prepare for what's coming, and I hope that your metals investment
works out for you. But the crisis will be a catastrophe for everyone,
even people who are prepared.

John

[vincecate]

Every person who's been in this forum for a while has done something to prepare for what's coming, and I hope that your metals investment works out for you. But the crisis will be a catastrophe for everyone, even people who are prepared.

I agree. But I think how best to prepare depends on the answer to the "Inflation vs Deflation" debate. I don't feel there is a "meeting of the minds" on this forum yet on this issue and so would like to look at it more. Could someone give me some feedback on:

http://pair.offshore.ai/38yearcycle/#deflation

Thanks,

- Vince

[gerald]

Every person who's been in this forum for a while has done something to prepare for what's coming, and I hope that your metals investment works out for you. But the crisis will be a catastrophe for everyone, even people who are prepared.

I agree. But I think how best to prepare depends on the answer to the "Inflation vs Deflation" debate. I don't feel there is a "meeting of the minds" on this forum yet on this issue and so would like to look at it more. Could someone give me some feedback on:

http://pair.offshore.ai/38yearcycle/#deflation

Thanks,

- Vince

Vincecate:

Your section on "Inflation & Taxes" is right on, I have thought this way since the 70's when I began my real estate investing/development activities. Governments have for thousands of years debased their money. Yes, in your example, you may sell a real estate investment years later for a "profit" and be taxed on it, even though its value may not have changed vs other hard assets. However, you can make a "profit" by obtaining a mortgage with dear money and paying off the mortgage with base money. One of the major problems governments have with this debasement processes is that it eventually leads to unpleasantness. The individuals that create this process feel they get the rewards and later someone else deals with the problems. The people that support the leaders in this debasement are ether uninformed, are being bribed with benefits, or don't care about the ramifications, since all they care about is themselves first now, and maybe about society later, if at all. "Bread and Circuses for all". The problem in society, is that ALL/MOST individuals ( during their lifetime ) MUST produce more then they consume ( real productivity, not just measured in money ), due to the natural effects of spoilage, loss, etc. otherwise society consumes itself ,- unless,- it confiscates the productivity of others.


John:

An unscientific observation, I spend some time reading several financial sites and find the readers comments very interesting. ( After all, comments provide a window into the minds of people.) Some of whom appear sophisticated and well connected regarding financial matters. My observation,--- during the last few weeks comments about the global financial/debt situation has prompted and increasing number to ask the question.-- How do we get out of this mess?-- and the answer they give -- war. Looks like you are calling this one, I hope you are wrong, I think we all do.

But, a few decades down the road, there is hope.

http://isebindia.com/01_04/03-01-2.html

"Around Chernobyl itself large areas remain as an effectively permanent exclusion zone, representing a vast radioactive nature reserve, where human influence has been removed. This now teams with wildlife, including rare species, enjoying the absence of interference by humans."

[browner55]

Check out this live (at the time) coverage of the trading action on the S&P 500 futures during the "Flash Crash." It seems very apparent to me that it was very real (as opposed to some sort of "glitch"). Also, the fact that we traded very close to the lows of that day on Friday reconfirms the validity of the trading action on that day.

http://www.youtube.com/watch?v=1mC4tu1NhUA

There truly seems to be some very large players doing some very serious selling.

[OLD1953]

If you want another way to look at it, try this.

Governments have generally taken about 20 to 25% of total production average over the long term. If they get less than that in actual taxes, they simply inflate the difference by borrowing. When borrowing runs out, taxes go up.

Inflation is taxation in lieu of actual taxation. It's also very costly in the long run, not because of "damaging the currency", but because the governments in question can get themselves so deeply into interest payments that nothing else is left of that 20%.

As for production measured on such a micro economic scale as to individuals, you'll need a new definition for productive first. Is it really "productive" to push paper from one desk to the next? Does the financial industry really provide value added, or are they just vampires on the productive body? Who is more productive, the guy who invented the VCR, the people who built millions of them, or the people who sold them?

How many VCR's equal a ton of carrots? How much "production" does a total welfare basket case represent, given that by this persons existance they support a double dozen workers of various sorts taking care of them. (And note that at least half those workers are not government workers.)

What value do we put on volunteer work?

That's all too deep for me!

[Oakwood]

A billionaire goes all-in on gold

By Liam Pleven and Carolyn Cui
The Wall Street Journal
Saturday, May 22, 2010

http://online.wsj.com/article/SB1000142 ... 8370287577...

Gold is setting records again, boosting the holdings of central banks, Armageddon worrywarts, and ordinary people who own gold bars, coins, and jewelry.

But few individuals stand to benefit as much as low-profile billionaire Thomas Kaplan. A New York-born commodities magnate who earned a doctorate in British colonial history at Oxford, Mr. Kaplan oversees an empire devoted largely to gold.

Many fund managers and high-rollers have allocated small percentages of their portfolios to gold as a hedge against inflation. But Mr. Kaplan is the bull of bullion. He has gone further than perhaps any other major investor, betting the majority of his wealth on gold and other precious metals. And it reflects his deeply held conviction that global economic instability could bring rising demand for gold.

Through his firm, Tigris Financial Group, and affiliates, Mr. Kaplan has loaded up on bullion and bought up properties in 17 countries on five continents, where geologists are exploring for more. Tigris subsidiaries have taken stakes in mining companies, including tiny firms that have yet to produce an ounce.

Though he won't disclose how much physical gold he owns, Mr. Kaplan, who is 47 years old, controls up to 30% of the shares in some so-called junior miners. Together, his holdings amount to a nearly $2 billion bet on gold, more than the Brazilian central bank's bullion is currently worth.

"I've reached a point where I feel the only asset I have confidence in is gold," Mr. Kaplan said in an interview at Tigris's midtown Manhattan headquarters.

Mr. Kaplan's views are shaped by a concern, shared by many investors, that heavy government spending hasn't contained the woes facing the financial system. Gold hit an exchange record of $1,242.70 a troy ounce at the Comex division of the New York Mercantile Exchange on May 12, days after euro-zone leaders announced a nearly $1 trillion bailout for ailing member states.

He has experience with how supply and demand can drive the price of raw materials. His doctoral thesis studied Britain's involvement after World War II in Malaya, home to prized rubber and tin. That taught him how far people and governments will go to secure natural resources.

Wanting to apply his insights, he went to Israel to advise hedge funds. His nose for finding valuable resources was developed at firms he started that explored for silver and natural gas, which helped him make his fortune.

Gold miners are struggling to make major discoveries and it takes years to bring new finds into production. If people want to stock up on gold in a hurry, it will be hard to ramp up production enough to satisfy them, Mr. Kaplan believes.

"You've got a perfect storm with no apparent solution," he said. "If the world does well, gold will be fine. If the world doesn't do well, gold will also do fine ... but a lot of other things could collapse."

Mr. Kaplan is known in the mining industry for his all-in approach. "When he likes something, he dives in with both feet," Egizio Bianchini, a banker at BMO Capital Markets in Toronto, said of Mr. Kaplan, whom he has worked with in the past.

In his charitable endeavors, Mr. Kaplan works similarly. In 2006 he co-founded Panthera Corp., whose "single-minded pursuit" is preserving the world's endangered wild cats, he wrote in an open letter on the group's site in which he cited inspirational quotes by Winston Churchill, Edward R. Murrow, and Marcus Aurelius.

Mr. Kaplan is also president of the board of directors at New York's 92nd Street Y, a prominent cultural organization that is a magnet for New York's elite. And he is a benefactor of Eternal Jewish Family, a group dedicated to uniform rules governing conversions to Judaism whose leader resigned last year amid an alleged sex scandal.

In some cases, Mr. Kaplan has invested in gold miners that have also attracted the attention of fellow billionaires, such as George Soros and John Paulson.

Mr. Kaplan put money into one firm, Gabriel Resources Ltd., in late 2007 after Mr. Paulson, who made billions of dollars betting against housing markets, mentioned how low the stock had fallen while they attended "The Nutcracker" at the New York City Ballet.

"I'm there," Mr. Kaplan recalls was his response.

In early March, Mr. Paulson's firm, Paulson & Co., and Quantum Partners, Ltd., an investment fund run by Soros Fund Management, invested $100 million and $75 million, respectively, in NovaGold Resources Inc., a Canadian miner, paying $5.50 a share. Their move came a year after Mr. Kaplan, who has $69 million invested in the company, acquired 30% of the firm for $1.30 a share.

Gold prices are up 7.4% this year, after rising 24% last year, which was the ninth straight up year for bullion. Mr. Kaplan thinks that greater gains are coming. "I wouldn't even say we're in a bull market yet," he said.

But Mr. Kaplan has concentrated risk in a volatile sector, and he knows the potential pitfalls better than most.

In 2008, for instance, a company that Mr. Kaplan founded, Apex Silver Mines Ltd., went bankrupt, felled by the terms of a loan made after Mr. Kaplan left the company in 2004. The company emerged from bankruptcy last year and now operates as Golden Minerals Co.

In January 2009, Mr. Kaplan received a so-called Wells notice from the Securities and Exchange Commission related to what the company said were "impermissible payments" of $125,000 to government officials by executives at a South American subsidiary.

The SEC delivers Wells notices to inform recipients that it may bring an enforcement action, providing an opportunity for the recipient to persuade the agency not to pursue charges. No charges have been filed against Mr. Kaplan. An SEC spokesman declined to comment.

Mr. Kaplan's current investments also carry risk. Gabriel Resources owns Europe's biggest undeveloped gold deposit, in Romania, but has been waiting for government approval for years. He has $100 million at stake in the company.

Mr. Kaplan acknowledges the dangers involved in investing in small mining companies. "It's not the kind of thing I would suggest for widows and orphans," he said.

And, he added, he isn't in a rush to cash in on his gold investments. "If I am right about the big picture," he said, "I will be rewarded for my patience."

[vincecate]

Your section on "Inflation & Taxes" is right on,[...]

Thanks!
It is really the Inflation vs Deflation part where the debate and confusion seems to be. Trying to get it all sorted out. Anyone else have any comments?

http://pair.offshore.ai/38yearcycle/#deflation

-- Vince

[aedens]

Your section on "Inflation & Taxes" is right on,[...]

Thanks!
It is really the Inflation vs Deflation part where the debate and confusion seems to be. Trying to get it all sorted out. Anyone else have any comments?

http://pair.offshore.ai/38yearcycle/#deflation

-- Vince

Given the complex nature of the question. http://mises.org/daily/3366
The relationship is all around you. A $160,000.00 house went for $40,000
Another was $110,000 went for 10,000 as the monetized process continues.
They feel thsy can kick the can far enough they can make to filter out
regional weakness zones to keep the ship floating. I guess your question conveys as to
what are you willing pay. This Utility "what puts you at ease" is as far as the left is from the right.
What we have found true:
http://mises.org/books/mises_money.pdf

What is necessary is to prevent government from destroying
the monetary system by inflating. therefore the quantity of money
shouldn’t be manipulated by the government, according to the wishes of
those people who want to enjoy a few minutes, a few hours, a few days, or
a few weeks of good life from increased government spending, for a very
long disastrous state of affairs.

We must say that what creates the inflation is the famous “remedy”
for the government’s problems, the “remedy” which people believed was
discovered some few years ago, but which was really discovered by the
Roman emperors—deficit spending. Deficit spending made it possible
for the government to spend more money than it had and that it collected
from the people. As everybody knows, deficit spending, that is spending
more than one’s income, is very bad for the individual. The great error is
that people believe that what is bad for the individual is not necessarily
also bad for all the individuals together. This is the great mistake.