Financial topics

[richard5za]

Sadly, I agree with aedens Sep 23 views. The problem is moving from the present to creating the new productive future. Once again it will be forged out of considerable hardship.
Richard

[Higgenbotham]

Predicting the medium term gold price is very difficult

In response to aedens Sep 23, I simply don’t have the skills to predict the medium term gold price.

Richard

I've been tracking the Dow Gold Ratio for a few years. It reached a high of around 40 in 2000 and has been falling ever since. Near the bottom of the past 2 bear markets this ratio was in the 1-2 range. It seems likely it could get into that range again. I can see the possibility for higher gold prices unless the Dow rolls over and follows a similar path to 1930-2. "Solving" one problem temporarily has perhaps opened the door to a more serious problem. Deflation seems to be the only sensible outcome.

[freddyv]

No change in as reported p/e ratio for the last quarter.
http://www.comstockfunds.com/files/NLPP00000/026c.pdf

Joe

Good data.

At this point I think we are perfectly setup to continue on with the stock market correction. Enough suckers have been enticed back into this market, though another couple of months to the upside would really bring in a lot more wealth to be destroyed.

I try to balance the two major means of predicting the market and those two have now come together in a way that is undeniable. On pure data it is easy to make a case for this market dropping to 25% of where it is now. Just a slight drop in earnings from the predicted $30-$40 (S&P) earnings would allow for a bottom of 100 on the S&P 500, given the historic pattern of P/E ratios bottoming around 6.

$10 x .6 = $60 on the S&P 500.
$20 x .6 = 120
$30 x .6 = 180
$40 x .6 = 240

On the other side of the coin is the psychology of investors and Americans in general. The psychology of the general public has obviously shifted from that of the last 3 decades towards frugality and caution while day traders and a small segment of the population still believe they can outwit the markets - there are no underlying reasons for stocks to be valued above historic norms but a small handful of greedy people have convinced themselves there are and have also convinced themselves that even though they lost over 50% in 2008 they are smart enough to keep that from happening again.

My guess is that the stock market will not crash and burn but will slowly turn south and continue to entice the greed-heads in with rallies of 20% and declines of 30%, slowly eating away attheir wealth while playing on their egos.

All the elements are now in place. Everyone has been wrong at some point, including those who saw this calamity coming and so everyone has doubts. The VIX is low, though higher than historic norms; gold is up, just enough to make us wonder...; stocks are up 40-50%, though still 35% below the highs of 2007; the economy is recovering, though still very sluggish; Alt-A and Options ARMS are poised to wreak havoc on banks and homeowners; unemployment is still rising; the dollar is slowly losing its status as the world's reserve currency; the geniuses in the federal government believe they actually made things better and so will be unable to think outside that box; the demographic problem is slowly putting more pressure on the American economy; Americans will no longer allow their government to shovel money to their cronies in the private sector, thus putting the kibosh on any further bailouts; we have a HUGE public deficit that overshadows our future for decades to come; we have no policy to renew our industrial base and so drive the economy forward.

I could go on but my point is that this is where too many finally decide to stop fighting the trend and go with it...and get burned. Yes, the market might go to 11,000 and IMO, should, in order to close that gap left from a year ago, but the majority of the data and trends suggest this bear market is far from over.

--Fred
http://www.acclaiminvesting.com/

[aedens]

No change in as reported p/e ratio for the last quarter.
http://www.comstockfunds.com/files/NLPP00000/026c.pdf

Joe

Good data.

At this point I think we are perfectly setup to continue on with the stock market correction. Enough suckers have been enticed back into this market, though another couple of months to the upside would really bring in a lot more wealth to be destroyed.

I try to balance the two major means of predicting the market and those two have now come together in a way that is undeniable. On pure data it is easy to make a case for this market dropping to 25% of where it is now. Just a slight drop in earnings from the predicted $30-$40 (S&P) earnings would allow for a bottom of 100 on the S&P 500, given the historic pattern of P/E ratios bottoming around 6.

On the other side of the coin is the psychology of investors and Americans in general. The psychology of the general public has obviously shifted from that of the last 3 decades towards frugality and caution while day traders and a small segment of the population still believe they can outwit the markets - there are no underlying reasons for stocks to be valued above historic norms but a small handful of greedy people have convinced themselves there are and have also convinced themselves that even though they lost over 50% in 2008 they are smart enough to keep that from happening again.

My guess is that the stock market will not crash and burn but will slowly turn south and continue to entice the greed-heads in with rallies of 20% and declines of 30%, slowly eating away attheir wealth while playing on their egos.

All the elements are now in place. Everyone has been wrong at some point, including those who saw this calamity coming and so everyone has doubts.
--Fred
http://www.acclaiminvesting.com/

Pressure points http://www.bloomberg.com/apps/news?pid= ... z_dvlB17cI

Also, they did not care or do anyway till this day and forward. There arrogance, and continuance of this fatal deciet was this event, and was a minor exercise in there so called playbook in there debased mind's. Whenever debt abatement is resorted to it's authors protest that the measures will never be repeated. They decieve only. Lending is stopped. The stipulation of deferred payment depends on the expectation that no such nullification will be decreed is still case in point. The TBTF is to big to exist and regional banks will implode at a exponentional rate now. Already talk is straight up further fiat debasement to treasury notes to CDO exchanges as a swap rate but this really is old news to many since law and contract is dead as is the letter. Instead of clearing the deadwood in assets, to properly discharge them the paper mache FED now may indeed finally destroy the fiat we utilize as the inflation question will be in the prop asset prices as we already have seen. The main point is the current market misses is that they want to destoy the investor in the name of social cooperation. If you cannot discern the syndicalism and corporativism in the market condition there is no hope to convince you anyway. Economic history is a long road of government policies that failed because they were designed with a disregards for the laws of economics. No appeal to any historical or empirical considerations can discover any fault that men aim at certain ends. Either unmask the logical errors in the chain which produced it, or acknowledge there validity. Really if they were concerned about anything they would let the common man choose and act. All I see prevailing is naive advocates interfering with consumption thus forging and unwittingly speeding up the process of freedoms demise. The Senate and special interests in there charge have done what no army could.

http://www.bis.org/publ/work288.pdf?noframes=1

This paper assesses the market response to bank rescue packages announced in October 2008 in six countries. We measure the market reaction of bank CDS spreads and stock prices for 52 banks using an event study methodology, which provides a measure of the wealth transfer between shareholders and creditors. The event study methodology has clear limitations; it is a statistical exercise based on a number of qualifying assumptions. With these caveats in mind, we examine both the average response across banks headquartered in a given country and the reaction of banks targeted by specific actions. The rescue packages were designed to avoid the default of systemically important banks while restoring confidence in the financial system and ultimately restarting the flow of credit to support the real economy.

http://financialsense.com/fsu/editorial ... /0923.html <---------------------------- Emptor

No return to normalcy will come, despite the hopes and dreams of US leaders, unfortunately trapped inside the USDome, where perceptions are flawed. The US financial structure is permanently broken. In reaction to today’s FOMC decision to leave interest rates alone, the USDollar has resumed its decline. It will soon amplify its downward direction. While they spoke with optimistic words, the truth is that they are stuck without an Exit Strategy, which will become painfully clear over the passage of time.

[aedens]

The Libertarian, March 1, 1969
The way "private" enterprise works in our era of the neo-fascist corporate state is well shown in an article in the Wall St. Journal (Feb. 5) on the National Corporation for Housing Partnerships. The NCHP, created by President Johnson, but supposedly run along the Nixonian lines of rewing up the "engine of private enterprise", wants to raise $50 million from private industry to invest in lowrent housing projects which would eventually mount up to $2 billion of capital.
Praiseworthy? But wait. In order for the corporation to get started, there must be a substantial flow of Federal funds to subsidize rentals in the new projects. The NCHP wants $150 million from the Federal government for this year and next before it sets up business as a corporation. With this huge subsidy, "private enterprise" in the form of the NCHP would be willing to build 10,000 low-rent units in the first year, and hopefully move up to 60,000 units annually,
A particularly desired form of federal subsidy would be to pay a subsidy that would keep mortgage interest costs down to a near-zero sum of l%per year. With this kind of subsidy, a whole roster of the nation's largest corporations stand eager to do their great humanitarian work. This includes Kaiser Industries Corp, whose head, Edgar Kaiser, is the president of the NCHP, Westinghouse, Metropolitan Life, Deere and Co., and Ling-Temco-Vought. Many of the biggest
banks, such as Chase Manhattan, First National City, Bank of America, Mellon National, would be willing to lend the corporation money to launch its operations. Also, not surprisingly, a host of local realty firms would be happy to join in the bonanza. The big attraction, apart from humanitarianism, is a huge, guaranteed profit, or, as the Journal puts it, "a guaranteed, Government-supported market to attract profit-motivated private industry and investors." The estimated annual rate of profit for these investors would begin at over 24% and end at 17%. Pretty good returns for "helping the poor"

And you think we have problems now? Imagine more Washington help? Taxes make you property of the State no more no less.
There only true function is gatekeeper. Are there problems in the system, yes and Government cannot turn stones to bread either.

SEPTEMBER 25, 2009 Wall St. Journal
House Speaker Nancy Pelosi stepped up her push for a publicly run health plan that has divided congressional Democrats, saying it could "save enormous amounts of money." Costs are at the center of the health-overhaul debate. House versions of a broad health bill would cost more than $1 trillion over 10 years, while a version being debated in the Senate Finance Committee this week falls slightly under President Barack Obama's proposed cap of $900 billion and doesn't include a public option.

Congressional aides said including a government-run plan for people under 65 in the health overhaul could save as much as $100 billion, if such a plan were to pay health-care providers the low rates used by Medicare, the federal health program for the elderly. The resulting savings would allow Democrats to keep robust subsidies and other provisions intended to help lower-income people buy health insurance.

The U.S. is expected to hit its $12.1 trillion debt ceiling later this fall. Mr. Geithner has asked lawmakers to raise that limit so the government can continue borrowing money to fund its obligations. The debate has been complicated by the independent overseers of the bailout, who have questioned both the success of the program and whether taxpayers will ever recover their investments. At a hearing Thursday, the special inspector general for TARP said the program has improved market stability but fallen short on broad goals, such as spurring lending. "It is extremely unlikely that the taxpayer will see a full return on its TARP investment," Neil Barofsky told the Senate Banking Committee.


They are incompetent to handle my money.

Christian economist William Anderson has exposed Wallis for what he is: an apologist for raw Federal power, a man who "decided that an expanded, violent state was just fine, provided it was aimed at people who actually produced something." He put it this way in 2004
I have never read an issue of Sojourners without finding at least one (and usually many more than one) demand to increase the power and scope of the state. Yes, for all of your claims that you take a jaundiced view of state power, there is no one in the world of organized Christianity who has championed Leviathan more than you. I have come to believe that you oppose U.S. conflicts not so much because they are immoral, but rather because they take resources away from the government's being able to wage war on productive people at home.

[Higgenbotham]

http://financialsense.com/fsu/editorial ... /0923.html <---------------------------- Emptor

No return to normalcy will come, despite the hopes and dreams of US leaders, unfortunately trapped inside the USDome, where perceptions are flawed. The US financial structure is permanently broken. In reaction to today’s FOMC decision to leave interest rates alone, the USDollar has resumed its decline. It will soon amplify its downward direction. While they spoke with optimistic words, the truth is that they are stuck without an Exit Strategy, which will become painfully clear over the passage of time.

With "loss of normalcy" Washington attempts for "Business as usual to resume" as Moscow did in the mid to late 1980's. The result will be similar to the collapse of the Soviet Union. My guess is the window of opportunity to reverse course has passed and a US collapse is unavoidable.

Also from the article (we've both made these points using different words):

The phenomenon will be much like a flesh eating bacteria. What is eaten during unbridled USFed money creation and USGovt debt issuance is the USEconomic capital, both industial capital and household capital. The most misunderstood aspect of the profound accommodation with near 0% rate of interest (ZIRP) and enormous mountains of printed money (QE) is the destruction of USEconomic capital. Not only is new capital formation NOT possible, but capital is liquidated and banks are hesitant to lend even to good customers. Zero Interest Rate Policy and Quantitative Easing serve as the most severe and formidable Weapons of Mass Destruction to capital that the modern world has ever seen.

The book Speculative Capital the invisible hand of global finance by Nasser Saber makes similar points.

Testimony in Support of HR 1207, The Federal Reserve Transparency Act of 2009, House Financial Services Committee, September 25, 2009:

http://news.goldseek.com/LewRockwell/1253887320.php

[aedens]

Its over and has been. It is a Political Economy only. Technicals and fundamental plays I feel are basically finished unless you have current Senate graft buy report. Trading in this market is pure suicide now as we all forwarded here and else where it is 1932 all over again. The CDS never abated, and has sown the total demise of the market and given the QE puts it just played to the VTM that the BIS stated as plain fact. They said we will not bail out any more is a lie and the problem is more pronounced as it has ever been and the currency is debased if not destroyed. Also if you believe the trillions in dollars to the Chinese you are a wrong. Game over America and is reaping what it voted. I have one equity position to close and i am finished in this market.
http://www.caseyresearch.com/displayCdd.php?id=232

Fact: Reported HIV incidence in the United States is higher than was previously known. Overall, the new analysis reinforces the severity of the epidemic in gay and bisexual men of all races and ethnicities, as well as African American and Hispanic and Latino men and women. The new analysis also provides data for subgroups within those specific populations. The differences among and between those populations will enable CDC to better target its resources.

result: We knew in circa 1980 it would bankrupt the nation in addition to basic poplation growth. I assumed 2000 or so back then. Given the in our face health care cram down your voters throat, and politically correct brainwashing it now just a fomality that they are flat busted and now more tax mean's the state owns you since morality is in effect a card to assert there sick Left agenda on your dime. People need help since Cain slew his brother so what is there point? We live in a fallen world so ration health care? These people in power will throw any dissent under the bus in a second and it is about agenda, and not America where you used to be held acountable. Those days are over and Amerika, the new Amerika will do whatever it takes to affirm there new way. This is not the beginning but a flagrant burning of the constitution and soon our bill of rights. Violence from the majority, they have no regard just the product of the means as they pour out the Kool Aid in epic amount to the voter who deserves what they voted. Give it 2 years max until the wheels totally fall off to this sick parade.

[aedens]

[quote="Higgenbotham"][quote="aedens"]
http://financialsense.com/fsu/editorial ... /0923.html <---------------------------- Emptor

[aedens]

http://financialsense.com/fsu/editorial ... /0923.html <---------------------------- Emptor

No return to normalcy will come, despite the hopes and dreams of US leaders, unfortunately trapped inside the USDome, where perceptions are flawed. The US financial structure is permanently broken. In reaction to today’s FOMC decision to leave interest rates alone, the USDollar has resumed its decline. It will soon amplify its downward direction. While they spoke with optimistic words, the truth is that they are stuck without an Exit Strategy, which will become painfully clear over the passage of time.

With "loss of normalcy" Washington attempts for "Business as usual to resume" as Moscow did in the mid to late 1980's. The result will be similar to the collapse of the Soviet Union. My guess is the window of opportunity to reverse course has passed and a US collapse is unavoidable.

Also from the article (we've both made these points using different words):

The phenomenon will be much like a flesh eating bacteria. What is eaten during unbridled USFed money creation and USGovt debt issuance is the USEconomic capital, both industial capital and household capital. The most misunderstood aspect of the profound accommodation with near 0% rate of interest (ZIRP) and enormous mountains of printed money (QE) is the destruction of USEconomic capital. Not only is new capital formation NOT possible, but capital is liquidated and banks are hesitant to lend even to good customers. Zero Interest Rate Policy and Quantitative Easing serve as the most severe and formidable Weapons of Mass Destruction to capital that the modern world has ever seen.

The book Speculative Capital the invisible hand of global finance by Nasser Saber makes similar points.

Testimony in Support of HR 1207, The Federal Reserve Transparency Act of 2009, House Financial Services Committee, September 25, 2009:

http://news.goldseek.com/LewRockwell/1253887320.php

This started to my casual observation in capital markets in 1981 for me in various capacity's. Complicated topic that it is groups of people did group things. For me it was a study of futility and many elements are in the code of federal regulations and promugulated as PSM for indeed many sins where recorded and capital did flee, or was reorganized as regional breakup given the acrimony of all vested interests observed in goepolitcal realities. What capital considered there rights and labor's grip, since many sectors it was cheaper to reinsurance workers than shut down for repair in many sectors of the petrochemical realms until the wall came down was indeed fact. The number's posted looked good over the years but ideological variances fragmented reason locally. Captial did what it does best, fire wall internal dissent and labor insisted on diminishing returns. Later we can blame Gatt, Nafta and the left's tree huggers but the fundamantal issue was moral compass, to individual responsibility's but this was hindsite to many as it always is. Capital got there cost analysis return on labor and in the eletronic industry for instance in the early eightys it did embitter a whole regional generation, as there workers suffered health consequences on the sub contract's. In Micronesia is was labled worker agitation by outside organizations but flowered into dissent we see in the Islamic cornerstones in there leveraged view to resist but really capital found a better nest since regional avarice played itself to conclusion there. Many facets can be discerned from many area's but the fact remains that vested interests are ignored to regional realities and Capital always and must find a way to be less predicated than other areas as we know over thousands of years. As formentioned observation's are footprints to innovation and basic rinse and repeat realities. It seems for me in duration every 5 to 7 years I have to put up with the same old bullshit but in different zones on the planet right or left. To skip a few years before the ISP bubble you would relay as tech I had a instance where the growth markets understood the austrian business cycle, and how the west manipulated the marshall - keynanisan contruct to our obvious postion in time. It took me many a long time to resist the thought but I know better than that anyways so I move on.
Given the myopic conditions carefully regulated and cultured what really was sown will be harvested by cold calculation. I guess after over three decades of watching capital and government do there walk you just have to understand which direction they are walking and know when they are walking away to invest in directional realities or sow there own demise since innovation never started with a gun pointed at you.

http://www.independent.co.uk/news/world ... 93509.html

http://www.independent.co.uk/news/world ... 93503.html

[mannfm11]

If gold moves from bull to bear, I will instantly stop all gold speculation, because one of my rules is never to short – only long

Hard to believe you are a speculator and never short. That is where the fast money in commodities is made. The unlimited loss on the short side that everyone talks about is only in the bull sides imagination that prices grow to the sky. Usually if you can find out which side the fewest entities are playing, you can find out which side is the right side. The complaint on gold has been for years that big entities are selling it down, but the longs merely need to go to delivery and put them out on the street, which means the longs are also playing with empty baskets. The current climate is one where it appears money is easy and cheap, but once it comes time to get it back, one is going to find themselves lacking in collateral to exchange in payment of their debts. I would be short gold at this point with a stop at the recent high. The stock market appears to me to have topped, as it is in the proper range for a top and the recovery is nothing more than wishful jawboning. There is going to be a buying opportunity in gold for a longer term hold coming up next year for those that still have cash. About $500 relates to CPI 1929 prices, so short of deflation in consumer prices, something near that should maintain purchasing power. I'm guessing on a technical basis that $500 should form a strong floor and a dip below $700 should induce some legging in. The power of $500 is it is $500, it is 1/2 way on the chart and it is roughly a 2/3 retrace from the last cycle low. It is also double the last low. The next dip in stocks is going to expose a lot of corpses in a lot of areas, namely the corporate raider business and later, bad debts in banks. The housing market is about to resume its downward march. All of this will put a lot of physicals on the market in search of cash.