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PlanMaestro

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    Gold Chart Gone Hyperbolic

    in General Discussion

    Posted

    What Are Gold Prices Saying?

     

    Basically, gold pays no dividends or interest. It is thus expensive to hold in your portfolio when REAL interest rates are high, and cheap to hold it in your portfolio when REAL interest rates are low. When REAL interest rates are high, you have to be pretty confident that gold is going to rise in price in order to hold it in your portfolio.– DeLong

     

    So the late 70s were a time of high rates but very high inflation expectations, so that REAL rates were arguably zero or negative, just as they are today. And this also suggests that many people misread that 70s experience; because high gold prices then were associated with high inflation, gold has come to be taken as an inflation indicator, whereas it’s actually a low REAL rates indicator. Last time those low real rates had a lot to do with inflation, but this time they’re taking place in a deflationary or at least disinflationary environment. – Krugman

     

     

    In that view, Gold might make a little sense, but no more than that, when central banks look foolish in the face of high unemployment or inflationary episodes.  When monetary and fiscal policy is going wrong to solve the main issue (unemployment today, inflation in the 70s). So one hypothesis is that some may be thinking that central banks and governments across the developed world are finally looking less foolish.

     

    And if that's the case, and consider that it might just be only an attack of Paulson's fund (RR: or maybe not http://goo.gl/nStzh) or this http://goo.gl/hWXzv, it plays against Prem's hedges.

    TARP Warrants

    in General Discussion

    Auto Manufacturers

    in General Discussion

    Posted

    Is that data from a skewed population or include things like SS and Medicare because it is hard to believe the average 55 to 73 year old has a $1 million net worth. 

     

    Packer

     

    There is a power law, the median is much lower than the mean. The 6 ft man that drowns in the pond that is 5 ft deep on average.

     

    Source: http://blog.governmentwedeserve.org/2013/03/15/lost-generations-wealth-building-among-the-young/

     

    Another source telling similar story and numbers: http://en.wikipedia.org/wiki/Wealth_in_the_United_States#Distribution_of_wealth

     

    Auto Manufacturers

    in General Discussion

    Posted

    This was good, thanks.  I missed one the links between housing and autos.  Obviously they are correlated because they are both tied to the economy, but as housing and construction increase people will buy more pickups which are higher margin products.

     

    Yes sir, though this is being a problem on both consumer dimensions.

     

    http://farm9.staticflickr.com/8232/8564010564_5f683f74c3.jpg

    WSJ: Keynes One Mean Money Manager

    in General Discussion

    Posted

    The beginnings. Keynes’s Investment Activities while in the Treasury during World War I.

     

    http://www.hetsa.org.au/hetsa2011/conference_papers/hetsa%202011%20-%20paperpdf%20-%20kent%20-%20Keyness%20Investment%20Activities%20WWI.pdf

     

    Keynes’s own financial records are the sources of the data for this paper. In January 1903 Keynes started keeping an account book in which he kept both a cash account and a record of the status of his bank account. In the cash account, he used double entry bookkeeping, recording the sources of cash on the left side of the account book and the uses of cash on right side. It appears that he recorded every single source and every single use. Every few pages he updated the status of his bank account. Again using double entry booking he recorded the sources of payments into his bank account on the left side and his expenditures out of his bank account on the right side. He stopped keeping the last of these records in 1916.

     

    He kept records of his holdings of individual stocks. In a ledger, in which he kept records for individual stocks, he listed on the right page the number of shares bought or sold of a stock, the purchase or sale price, and the total value, and on the left page the dividends received. In the Keynes Papers there also are what appears to be his bank books from Barclay and Company; they are not in his handwriting. These bank books have on the left side a listing of the payments he made and on the right side a record of deposits into his account. The bank books start in October 1903 and continue through the period of his service in the Treasury in World War I and beyond.

     

    …

     

    It appears though that Keynes was a very ethical person. Mini states, “A reading of all Keynes’s works – books, pamphlets, essays, letters and memos – shows his appreciation of standards other than the economic: ethical standards, standards of justice, of health, of duty are also important” (Mini 1996, p. 109). During his life there are times when, in his financial dealings, Keynes behaved ethically, not taking advantage of opportunities that could have been profitable.

    The last time the Dow was here

    in General Discussion

    Posted

    I don't know where this market is going but I am having trouble choosing among all the bargains out there. Even if you restrict me to large caps.

     

    Well, here is another chart for those that think that inflation is just around the corner and rates are about to spike. Velocity is still crashing … sorry Milton, it's not that stable.

     

    http://farm9.staticflickr.com/8093/8543150720_2722bbbc35.jpg

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