Sounds like you folks ought to move to where you get a better deal on your quality of life vs. how much it costs vs what kind of job you can get there.
Tom, Actually this is exactly right, “The enemies to this country have not been foreigners. It's been and is the politicians and ignorance.”
The problem is we know in the case of illegals we can’t trust the politicians not to use our tax dollars to educate their children, to take care of their every medical need, and to provide a plethora of services to all these millions of folks. Like it or not American citizens, via fate, have a birth rite to this country, and certainly have the first rights on the services they pay for all their lives.
I guess you did not like my idea about putting the convicts in our prisons to doing the manual labor jobs at minimum wage either? I thought that was a great idea. How about this, take all the prisoners and eliminate the very dangerous ones from the program. Teach the remainder how to pick grapes, lay rock etc. and for every day they spend doing a good days labor they get one day off their sentence plus minimum wage to build up a savings for when they are released. They will of course have certain deductions for food, clothing, S.C. Medicare, etc.
Baley,
C’mon now give us a break, not many Americans would mind paying for the items on your list if that’s all there was, but what about the other 5,000 items?
How about this, there are approximately 300 million people in this country. About 100 million are minors and about 120 million pay NO Federal taxes, leaving the 80 million to pay for everything. So lets have a National sales tax where everyone pays according to what they buy. Poor people would not pay much because they don’t buy much. Rich people pay a lot because they buy a lot. Corporations don’t pay much because they have slick lawyers, that would stop.
<< <i>Sounds like you folks ought to move to where you get a better deal on your quality of life vs. how much it costs vs what kind of job you can get there. >>
Sounds like you really like socialism huh? That's would be fine with me if what you liked and wanted didn't interfere with my life.
Goldsaint, I try as much as I can to follow in the "principles" of the founders and that's quickly summarized as live and let live. That means that I really don't care what you do with your life as long as it doesn't interfere with mine. You know, life, liberty, and all that stuff?
Now as far as criminals are concerned, I guess I can be categorized as one of those "evil types" who believes again that crimes against my life, liberty, happines and pursuit of property should be punished to the full extent of the law. However that would mean that MOST if not all politicians would be in jail, or hung. Far as specifically what punishment there should be I think leaving that up to the jury is infinitely better than asking me what I would do.
That answer your question?
Seems like I'm right though that LOTS of Americans really do love socialism.
<< <i>I pay 4% of the value of my home in property and school taxes. Anybody else pay that much? The school district has gone from 1300 students 15 years ago to 1100. And they just approved a $15 million addition. Its crazy here. And the value of my home has not increased in value. It is 2700 sq ft with a huge oversized 3 car garage with a pole barn on 3.7 acres. If I sold it I would be able to get a townhouse in New Jersey. Taxes where I live are rediculous. Did I mention the 8.25% sales tax? >>
Close -- we pay about 3% in property and school taxes. And we also have an 8.25% sales tax.
Of course, I won't get much sympathy because we have no state income tax, but there you go.
<< <i>I pay 4% of the value of my home in property and school taxes. Anybody else pay that much? >>
Yep, sure do, a little more than that actually. Also, those taxes go up 10% per year with no end in sight. I've already lost one set of long time neighbors who couldn't keep their house that they've owned for over 10 years because of the taxes and this is starting to happen all over the city. You can pay off your mortgage, but you can never pay off the taxman. One more little tidbit, instead of raising more taxes, our new Mayor has raised water rates over 800% in just the last few months. Last month my water bill was very close to my electric bill. I use the minimum amount of water also, less than the 3,000 gallon cut off figure.
In my county alone(Harris County, Texas) we have paid out 3 billion dollars, that's with a "B" billion in the last four years just for medical treatment for illegal aliens alone. Those figures are kept separate from the regular deadbeats who are US citizens. BTW, the US citizens who have gotten free care over that time is just a drop in the bucket in comparison. Far less than even one tenth of 1%. That money comes from the county property taxes, nowhere else. It's an unfunded mandate courtesy of Bill Clinton and we on the border have to pay it. We are forced to pay additonal energy fees on our electric bill to subsidize the Northeast, thanks to Jimmy Carter, but I don't see any subsidy coming from anywhere else to support the illegal aliens medical bills.
Yes, we also have an 8.25% sales tax that is being raised in September to between 9.25 and 10%, the politicos are still hashing that one out.
A tax revolt is only a few years away. At least in Texas that is, I can't speak for other states.
I don't know where all this is going to lead, but it's certainly changed the way I look at my long term future and planned early retirement.
"Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society(destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose." John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
One more little tidbit, instead of raising more taxes, our new Mayor has raised water rates over 800% in just the last few months. Last month my water bill was very close to my electric bill. I use the minimum amount of water also, less than the 3,000 gallon cut off figure.
Wow, but don't you know it's for your own good? ( I am being very sarcastic)
<< <i>One more little tidbit, instead of raising more taxes, our new Mayor has raised water rates over 800% in just the last few months. Last month my water bill was very close to my electric bill. I use the minimum amount of water also, less than the 3,000 gallon cut off figure.
Wow, but don't you know it's for your own good? ( I am being very sarcastic)
What the heck is a "cut off figure"?????
Tom >>
The cut off figure is the minimum amount you will be billed for. Doesn't matter if you are in Europe on vacation, you will still be billed for 3,000 gallons regardless, as long as you are hooked up to the city water system. I often use quite a bit less than that anyway. It's rare I go over except in the summer when watering the lawn and garden.
"Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society(destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose." John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
3,000 gals a month is 100 a day. What do you do with all that water? >>
Yeh but what the heck is a "cut off" point????
We used 21,000 gallons last month if I'm reading this right. Are y'all on a well and use a bit of city water on the side??
Cost me $35.00 to fill up my Jeep Cherokee off of I-75 in Naples today. Regular gas. Cost me 20 bucks when I first got it I think, maybe a little less.
Hey, remember there is NO INFLATION according to the government. Isn't big government great?
Deadhorse and the cut off or minimum cost you almost as much as your electric bill????
Jeeez, my electric bill at my last house was more than 1400/month. Now that we're in a smaller place it's a fraction of that and I'm looking at what it's going to cost us in North Carolina and it looks like even less still ( Just north of Asheville,where we won't be using A/C anywhere near what we use it for here )
“Of course, I won't get much sympathy because we have no state income tax, but there you go.”
This is pathetic, you don’t think you will get any sympathy because you are not paying every tax these politicians have thought of?
“A tax revolt is only a few years away. At least in Texas that is, I can't speak for other states.”
Deadhorse, I am in Burnet County in the middle of the State, and I keep getting these emails from a group in Austin that says there is a move under foot to take away all the AG and Wildlife exemptions in rural areas. Land own mostly by farmers, cattlemen, etc. If that happens Texas may be the State that starts the dominoes falling in the Real-Estate market bubble as millions of acres will come on the market for sale!
To give one example, I own a hundred acres of vacant land, leased to a cattleman in Burnet County. This property is in the middle of nowhere 60 miles from any city of any size. I currently pay $2,150 per year in property taxes. The appraisal board here tried to take my AG exemption away this year but failed because I had a 3 year 12 page lease. When I ask what the property taxes would go to if I lost the exemption they told me $21,500 per year. I can tell you that if I loss this exemption this property is on the market for the best offer I can get!
<< <i> Deadhorse, I am in Burnet County in the middle of the State, and I keep getting these emails from a group in Austin that says there is a move under foot to take away all the AG and Wildlife exemptions in rural areas. Land own mostly by farmers, cattlemen, etc. If that happens Texas may be the State that starts the dominoes falling in the Real-Estate market bubble as millions of acres will come on the market for sale!
To give one example, I own a hundred acres of vacant land, leased to a cattleman in Burnet County. This property is in the middle of nowhere 60 miles from any city of any size. I currently pay $2,150 per year in property taxes. The appraisal board here tried to take my AG exemption away this year but failed because I had a 3 year 12 page lease. When I ask what the property taxes would go to if I lost the exemption they told me $21,500 per year. I can tell you that if I loss this exemption this property is on the market for the best offer I can get! >>
Man, I don't need to hear that!! I've been looking at small ranches in south central Texas for the last few months. Mostly just window shopping and getting a feel for the price ranges. I do want to live out in the middle of nowhere. That's my plan for early retirement in a few more years and the AG exemption is a major part of the attraction. I do intend to raise a few head of cattle, some hogs and lots of free range chickens. I probably don't need more than 40 to 50 acres plus I intend to build a new modern home out there. If they take away the AG exemption, values will drop to nothing, All the small ranchers will be out of business and only large corporatins will be able to operate. Figure a huge increase in the cost of food will accompany such a move. These people in Austin are out of their minds.
"Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society(destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose." John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
Yes deadhorse...similar situation here. Have ag land near san antonio and wondering if I should sell it or not. Seems like now is the best time to sell so you may be able to find some deals.
<< <i>Yes deadhorse...similar situation here. Have ag land near san antonio and wondering if I should sell it or not. Seems like now is the best time to sell so you may be able to find some deals. >>
That might just explain why I've been seeing what I thought were some extremely reasonable(read cheap)prices lately on a few small farm/ranches.
For example, I saw a place 18 miles north of Kerrville(middle of nowhere), land was undeveloped but it had a 3 bedroom typical natural stone facade style ranch house, built in '91, 3100 square feet, sitting on a nice little hill with 46 acres for only $186K. It had been available for around 6 months with virtually no interest. This was back in January. I thought it was an exceptionally reasonable price.
Without the AG exemption, it would be like paying a mortage forever even after you bought the place outright.
That's a sobering thought................
"Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society(destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose." John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
<< <i>I pay 4% of the value of my home in property and school taxes. Anybody else pay that much? >>
Yep, sure do, a little more than that actually. Also, those taxes go up 10% per year with no end in sight. I've already lost one set of long time neighbors who couldn't keep their house that they've owned for over 10 years because of the taxes and this is starting to happen all over the city. You can pay off your mortgage, but you can never pay off the taxman. One more little tidbit, instead of raising more taxes, our new Mayor has raised water rates over 800% in just the last few months. Last month my water bill was very close to my electric bill. I use the minimum amount of water also, less than the 3,000 gallon cut off figure.
In my county alone(Harris County, Texas) we have paid out 3 billion dollars, that's with a "B" billion in the last four years just for medical treatment for illegal aliens alone. Those figures are kept separate from the regular deadbeats who are US citizens. BTW, the US citizens who have gotten free care over that time is just a drop in the bucket in comparison. Far less than even one tenth of 1%. That money comes from the county property taxes, nowhere else. It's an unfunded mandate courtesy of Bill Clinton and we on the border have to pay it. We are forced to pay additonal energy fees on our electric bill to subsidize the Northeast, thanks to Jimmy Carter, but I don't see any subsidy coming from anywhere else to support the illegal aliens medical bills.
Yes, we also have an 8.25% sales tax that is being raised in September to between 9.25 and 10%, the politicos are still hashing that one out.
A tax revolt is only a few years away. At least in Texas that is, I can't speak for other states.
I don't know where all this is going to lead, but it's certainly changed the way I look at my long term future and planned early retirement. >>
Sounds like you have it just as bad. I love where I live, next to one of the greatest fisheries in the world--a true sportsman's pardise. But, when i moved here 3 years ago my taxes were $3800, now they are $6200. 20% of my taxes go to the welfare program. Thats insane. We pay for all the deadbeats in NYC 300 miles away. I wouldnt be suprised if I start the revolt in my area And property values have not risen in my area. It is actually better to rent than to own. And yes, I will not be a New York state resident forever
I figured that to just break even on paying property taxes (not to mention upkeep on the house/property) I need 2% appreciation per year. If the house price falls, then it's a constant drain. The exemptions on the IRS1040 that allow you to itemize are great, but that's only if the house is appreciating each year. You lose money each year if the house depreciates....at least in my area.
The exemptions on the IRS1040 that allow you to itemize are great, but that's only if the house is appreciating each year.
For most married/joint filers, the itemized property taxes are nowhere near the Standard Deduction. For many - not all - the *realized* tax break is minimal. But most people aren't smart enough to figure that out. I hear people all the time saying "Man! My house went up 8% last year!"
They can't comprehend that they probably lost money, despite that.
Could have predicted this on monday when I bought a bunch of 10oz gold bars at 429.
Happens almost every damn time.
Tom
COMEX gold falls on strong US payrolls, rising dollar Fri May 6, 2005 08:44 AM ET
NEW YORK, May 6 (Reuters) - Gold futures in New York fell sharply in early trading Friday as a surprisingly strong U.S. April nonfarm payrolls report boosted the dollar and dulled the allure of bullion for investors. By 8:35 a.m. EDT (1235 GMT), gold for June delivery (GCM5: Quote, Profile, Research) on the New York Mercantile Exchange's COMEX division dropped $2.70 or 0.63 percent to $428 an ounce, trading between $432 and $427.50.
The dollar rallied after the U.S. Labor Department said employers created 274,000 new jobs in April, which far outstripped Wall Street economists' expectations for 170,000 new jobs.
<< <i>Hmmm, has anyone ever thought that the real estate taxes plus the sales taxes alone might be enough to cause the real estate implosion? >>
Our property taxes have almost doubled since last year. Hurricane Charley you know if the cause and not dirtbag politicians.( Right and would YOU be interested in a lincoln cent for 50+ G's? ) And we can't wait to get the new home owners bill next month. It's almost like betting on a lottery, "will it double? Triple? Quadruple?
I guess all our kids should get good GOVERNMENT jobs.
When we started threads like this a couple of years ago and mentioned the country might be bankrupt since we had an estimated 43 trillion dollars in total assets, and at that time we thought the liabilities were 44 trillion, we all just shook our heads. What is really scary is that now the U.S. Treasury Sec. says all the liabilities are 80 TRILLION!!!
You might notice that 80 Trillion is more money than has been earned by every American or foreigner since the Mayflower landed here 500 years ago, according to this article taken off a business site today.
So what will it be inflation or deflation?
“Government Headed Toward 50% Control of Our Economy
May 6, 2005
Last week the House and Senate agreed on a $2.6-trillion budget for fiscal year 2006. There was much chest-thumping about the fiscal restraint imbedded in this budget blueprint.
Here are the depressing numbers in brief: Today, we spend about 20% of our total economic output on the federal government. That percentage will rise to a record 25% of output in 2025 and then to 34% in 2040.
These numbers do not include what state and local governments spend. Today states and cities swallow up roughly another 12% of our paychecks.
Even if we assume unrealistically that the state and local component of national output remains constant, what the new CBO numbers tell us is that America is on a path toward government's taking 46% of all output. America will be half private ownership and control and half government ownership.
The latest budget forecasts have hardly caused a peep of concern from our political class. Some budget hawks--such as Rep. Jeff Flake (R.-Ariz.) and Sen. Tom Coburn (R.-Okla.)--have taken up pitch forks and are raising Cain. But they're about as popular with their colleagues as the bartender at a bachelor's party who announces last call.
Treasury Secretary John Snow recently announced that the total unfunded liabilities of the United States government total $80 trillion! That's a debt load equivalent to about six times our current GDP. It is almost twice as much as the value of all goods and services produced everywhere in the world last year. And it is more money than has been earned by every American cumulatively since the Mayflower landed here 500 years ago.”
I noted your reference to the strong jobs report. Not really though. If you take out the +257,000 jobs added by the Birth Death Model black box, the number of jobs that were created & counted was only +17,000. Imo that isn't so rosy. Next month the BD Model will add another +200,000 or more jobs so expect everyone to once again be "surprised" by the "strong" payroll numbers. Sheesh.
Well here in Port Charlotte, they raised our property taxes quite significantly and you know they are actually having "sidewalks" put in off Quesada road" which is quickly becoming the local laugh as you drive down that street. Half the sidewalks run LESS THAN A FOOT AWAY FROM THE ROAD, so when they're done it's just a matter of time before people get killed, sue and then they make changes to this typical government make work program and probably do it again.
When really nobody wants these things to begin with EXCEPT the dirtbag politicians and the people who are on the "getting" end of the money they are stealing from us.
Sign of a Pop: Housing is Everywhere. The Great Transition, Part III
May 6, 2005
Introduction
Owning a home was once the foundation of the American Dream. Recently, it seems to have become a desperate national obsession, with prospective buyers frantically bidding up prices as though it were the end of the world. The whole thing is eerily reminiscent of the stock market boom that started in earnest 10 years ago, and culminated in the desperate rush to own shares - any shares - with the complete confidence that stock prices moved in only one direction. In spite of the recent denials by Fed Chairman Greenspan and US Treasury Secretary Snow that there is no housing bubble, the comparison of housing to stocks should be taken quite seriously.
If there is anything that we've learned from the political and financial roller coaster of the last decade, it is that the words of our leaders must always be scrutinized with the fishy eye of skepticism. In early April, Greenspan dismissed the notion that there could possibly be a national housing bubble. This from the man, mind you, who repeatedly stated prior to the Nasdaq crack-up that bubbles can only be seen in retrospect and that the best the Fed can hope to do is mitigate the fallout after a collapse. His recent statement was followed shortly thereafter by Snow, who also went on record stating that he did not believe American housing prices were overly inflated or in the throes of a "bubble."
The problem with these denials from our so-called leaders is that their positions of power effectively prohibit them from speaking bluntly about certain issues, namely the economy. Their job is to soothe and reassure the public that everything is just fine. If you understand this, then you understand that by simply addressing the issue, they have tipped their hand and revealed that we have a problem on our hands - a problem that they aren't quite sure what to do about. The fact that they deny the problems means that you can pretty much bet on its existence and its seriousness.
Just think about the lies that government leaders have been caught telling over the past decade, and think again if you want to trust the current denials about the housing market. You may think that to accuse the government of lying is rather impolite. On the contrary, it is impolite to tell lies in the first place. At the very best, they're trying to ignore the issue, obfuscate the truth, whistle their way through the dark and get everyone else to do the same. But if you want the truth about the issue, you're going to have to tune out their rhetoric, look at the facts, use your brain and think for yourself.
All of this - the government lies, the asset bubbles and the ensuing destruction of wealth - is part of the Great Transition we've been discussing in this five part series. This Transition is silently affecting everything in the world today. Painful as it is, an old order is crumbling away and we must adopt new rules to deal with that reality. To understand how housing fits in to this puzzle, first a little background on the current bubble.
Housing is Everywhere
Look around you. Housing is everywhere. It is not only the late night airwaves that have been taken over by baby-faced millionaires who made their fortune in real estate and are now pushing the idea onto insomniacs nationwide that "you can, too!"
Walk into any large bookstore and you will find that the investment section that was dominated by books on easy stock market profits five years ago has become a treasure trove for step-by-step how-to guides on easy real estate profits. Titles such as The Weekend Millionaire's Secrets to Investing in Real Estate, Are You Dumb Enough to Be Rich? The Amazingly Simple Way to Make Millions in Real Estate and dozens more like them make it sound so easy. And it seems that everyone knows someone who knows someone who's made a killing in the market and has three more deals in the works. Articles on housing, individual investors, and the state of the market are all over the popular press. All of the articles document the recent, rapid-fire escalation of home prices that is reminiscent of the "new economy stocks" that seemed capable only of unidirectional price increases just five years ago.
But all of this attention is fueled by a simple, undeniable fact. Nationwide, housing prices are rising, and they are rising fast. The market is partying once again like its 1999, and people think it's their last chance to buy a house, or make money on an investment, or secure their retirement, or they don't even know what they think, they are just caught up in the grips of the mania and they need to buy a house. There is no way that I can better demonstrate the folly of these ideas than to look back in time to show you a glimpse of the future.
Richard Daughty on 321gold.com posted the following:
Mr. Angell is also infamous around here for forcefully stating, just a few months ago, that anybody who thought that we would have any inflation was "out to lunch."
- According to the Bureau of Labor Statistics, $5.89 in 2004 dollars equals the purchasing power of $1.00 in 1966. So since 1966, the purchasing power of the dollar has fallen to, in 1966 purchasing power, 17 cents. Mark G.'s opinion? "We have experienced a long drawn out inflationary depression; a depression so subtle that we don't even realize that has happened."
An interesting detail about what has happened since 1966 was provided by Philip Spicer, who notes that the Dow Jones Industrial Average "closed at 10,549 on 17 Nov '04, equaling 1,791 in 1966 dollars."
The bottom line is that the stock market effectively doubled in 39 years. Not exactly the rip-roaring results that are commonly posted. And this is the insidious inflation effect that is robbing us all of our wealth and our country. It only makes gold seem more undervalued asset than ever.
Hey man we are not picking on you, and in fact I think most here are enjoying life and things are rocking along. I used your name as a call to those that seem to believe that everything is just fine, and as the guys in Washington are saying, “sure we have some small problems but not to worry these problems are decades away”
What else can they say since they refuse to see that these problems are, only decades away as long as everything remains the same, but as RR and others have pointed out there are so many triggers out there that can fire this gun, and it is foolish not to be prepared.
Here is a good example:
Standard and Poor’s, on Thursday cut the corporate credit ratings of General Motors Corp., General Motors Acceptance Corp., and all related entities to junk status. This was done because GM is upside down on its unfunded liabilities.
So just when will U.S. Treasuries get the same junk status? Not even the accountants at Enron could make the U.S. treasury numbers crunch. Exactly where will interest rates on these Junk U.S. Treasuries have to go to keep even foreigners buying them.
Just this week the House of Representatives increased the US Government’s debt ceiling by $781 billion to almost $9 trillion. US interest rates have remained low to a large extent because China, Japan, South Korea, and others, have been buying US Treasuries with their trade dollars, but will they continue to do so as these I.O.U.’s are seen as high risk junk?
The point here is that we all know we are leaving a mess for our children and grandchildren, but what the hell we will all be dead, right? On the other hand, and just from the selfish point of view, will it really take that long for the folks buying our junk debt to just say SORRY NO MORE !
Most of the major governments in the world as well as most of the major banks in the world have in their portfolios U.S. treasuries as the foundation for the security of their institution. What would you think if you had all of your money in a bank that gave you their financials and the foundation of their guarantee was GM bonds?
As far as your comment below, there are millions of folks every day educating themselves on sites just like this one. NO body wants to move, but there are certainly things that individuals can do to protect their families. I see these discussions as a rare opportunity to learn and discuss solutions, and I think we are all very fortunate to be able to finally see and discuss the ideas and information from people all across this country.
“I'm not so naive as to think that bitcning on some hobby message board is going to make a difference. And If I knew of a better country than the USA, I'd move there.”
This is a very interesting thread. It is nice that it has run for so long and that we can go back to see how the trends put forth here are playing out. This thread should even be better at the end of the year as the people on Wall street and Washington try to figure out parts to our complicated financial puzzle.
Just to add my two cents worth I have been very disappointed in the overall stock market the last few years. I generally try to watch a few of the financial shows on Saturday mornings and I think one of the guest speakers on this mornings show, Wayne Rodgers, hit the nail on the head when he said, “We no longer have a stock market we have a market full of stock” I have notice a big change in most of the financial T.V. shows over the last 18 months. Most all of these shows are no longer for investors they are for day traders or professional speculators. The worst of these is the Jim Kramer show on every afternoon. There is no possible way that any investor could keep up with this mans advice. Mr. Kramer claims to be an ex-hedge fund manager who bought and sold the same stocks twice each week. Two weeks ago he wanted his listeners to take their savings and go short GM, and last week he said whoa go long, some billionaire wants to buy the company. I am very happy not to be following any of the advice put out by the T.V. experts, and I have pity for those that are.
I recommend Bob Brinker on the weekends. Some real wisdom that is seldom heard over the airwaves. Unfortunately--he hates silver and gold. But the guy is uncanny simplistic in his analysis and I have observed him hitting the nail square on the head several times in the last 15 years. He developed his own model that is very accurate. Very easy to listen to, when he isn't playing golf in FLA. and there is a dufus fill in host. I once heard someone call in and ask for ideas what to do with their first $100--Brinker said take your girl friend out to dinner and take good care of her. Was that good advice? I don't know but I sure laughed.
The stock and equities market have been solidly rigged or primed for the past 23 years. So I get a little scared when someone's track record is only in the past 10-15 years. They have no concept of what a down market can do. They also have little awareness of gold and silver or other tangibles. Those things in their mind are old relics of the 1970's that will never have a bearing on today's financial issues. Like I said, experts with 15 years of "experience" scare me.
Brink has his moments. He's also been known to completely miss the nail's head, and then pretend he never swung the hammer. Approach his show as entertainment ONLY, and you'll be fine.
The Dow doubling in 39 years is a little less than 2% annualized. Of course you know that calculation ignores dividends. Throw in the 4% average dividend yield, and you've got exacly what stocks should return - the proverbial 6% above inflation.
I'm not going to mention any names here but you gold and silver bugs (and columnists) just crack me up.
You are so "certain" that gold, silver, the HUI and the XAU are heading to the sky, you refuse to be objective or to use a reasoned approach in your analysis. You seem incapable of being able to step back.
As soon as gold and silver prices drop, as they continue to do as we speak, the conspiracy theories begin. Enter the court jesters, the jugglers, the monkey grinders and the clowns with the pants that fall down. You fellows really should take a step back and read your own stuff. It's downright vaudevillian.
IF "they" (the "They Brothers?") are so hell-bent on controlling the price of gold and silver; IF, as you allege, the They Brothers are willing to use all of these underhanded and illegal market means to shoot your precious metals investments in the foot; IF these markets are so easily manipulated by the Darth Vaderian forces that exist in the shadows, furtively obsessed with the price of these particular commodities, working at all times and in all places to KEEP THE METALS DOWN, WHY ON EARTH WOULD YOU SIT HERE TELLING US DAY AFTER DAY THAT WE SHOULD PUT OUR HARD-EARNED MONEY INTO THESE INVESTMENTS?
You have got to be kidding!
Your camp is making the strongest case of all to sell and to sell now! I certainly wouldn't want to risk my money if it could be so easily lost for reasons that have nothing to do with the purity of the marketplace and which even you metals bugs flat-out admit would be beyond my control.
If this is the way these markets actually work, as you constantly suggest, let me just say what I think about pushing my valuable chips over to that part of the gaming table.
Uhhhh, no thanks.
If the conspiracy theorists would take a valium and relax for a minute, they might learn that Robert Prechter, Jr., Steve Hochberg, Pete Kendall and everyone else at Elliott Wave International have been quietly, steadily tracking the price action of the metals during the recent, lovely metals run. Fact is, they've pretty much nailed it thus far. They are calling for a significant downturn, and they've made no mention of conspiracies or of secret central bank meetings or of men in dark trenchcoats lurking in the shadows of a Washington, D.C. parking garage. And despite the rally that got everybody's hopes of $3000 gold back on the front burner (and pushed Anna Kournikova fantasies over to the side for a while) the Elliott boys have been calling for the metals to take the same hit other assets will in the coming credit contraction and liquidity crisis (gold to just over $200, silver to $3.50 or below), which type of credit crunch/liquidity crisis deflation is consistent with what has occurred post-investment-mania each and every time over the past, oh, 500 years or so.
Like clockwork.
The sluggishness in the world economy is representative of a coming, slow-moving deflationary elephant, not hyperinflation. Money supply contraction points to deflation. The flattening of the bond yield curve points to recession and deflation. The Alan Greenspan "Conundrum," as to why interest rates are not following the Fed's 200 basis point-raised lead, points to deflation. Lack of pricing power for producers, squeezed by a rise in commodity prices, is a symptom of deflation. The breakdowns in the HUI and XAU anticipate metals price drops, which would be indicative of deflation. Even rising oil and gas prices point to deflation, as producers and consumers get squeezed and the economy bears the brunt of it. (Interestingly enough, however, now even the energy markets are taking their hits as deflationary forces show even broader signs of taking hold).
The handwriting isn't just on the wall. It's a virtual graffiti-fest.
If deflation is soon to be upon us, which I certainly believe it is, there is little to no chance the metals will avoid taking the same hit all other asset classes will. That's what a post-bubble shakeout does, my friends.
So sell your metals. Sell your metals stocks. Put those chips in your pocket for the time being, then whip them out in a few years when few others have much cash to buy much of anything. The good news is, when the time comes, those same Elliott boys are calling for gold and silver to go through the roof.
This is a little confusing for my brain this morning but I think RR or some of the others here can explain just what this means. If I have not done this hot link correctly maybe someone can put it on.
I'm not going to mention any names here but you gold and silver bugs (and columnists) just crack me up.
That fact that his guy considers no other options cracks me up too. He is 100% sure that deflation is around the corner. Well let's all pack our bags because he said so.
You are so "certain" that gold, silver, the HUI and the XAU are heading to the sky, you refuse to be objective or to use a reasoned approach in your analysis. You seem incapable of being able to step back.
Au contraire, I am very concerned that a recession or massive deflation is lurking around the corner once stagflation hits the skids. Now it's just a matter of when. The deflation follows the inflationary excesses which by the way has been going on for decades. We are probably now in the twilight of the inflationary expansion and heading towards deflation. It's one of the major reasons I have curtailed my coin buying as of late and am pondering other ideas.
As soon as gold and silver prices drop, as they continue to do as we speak, the conspiracy theories begin. Enter the court jesters, the jugglers, the monkey grinders and the clowns with the pants that fall down. You fellows really should take a step back and read your own stuff. It's downright vaudevillian.
If this guy is so sure why doesn't he just take the short bet against gold? I'm sure he will find any number of takers that will bet him $50,000 or more per bet that gold has not yet peaked.
IF "they" (the "They Brothers?") are so hell-bent on controlling the price of gold and silver; IF, as you allege, the They Brothers are willing to use all of these underhanded and illegal market means to shoot your precious metals investments in the foot; IF these markets are so easily manipulated by the Darth Vaderian forces that exist in the shadows, furtively obsessed with the price of these particular commodities, working at all times and in all places to KEEP THE METALS DOWN, WHY ON EARTH WOULD YOU SIT HERE TELLING US DAY AFTER DAY THAT WE SHOULD PUT OUR HARD-EARNED MONEY INTO THESE INVESTMENTS? You have got to be kidding!
No kidding here buster. The manipulation you laugh about is in every major financial market. And it gets worse each year. The monkeys and vaudvillians are in fact the FED and Treasury trying to juggle the various asset bubbles they have created. The same Greenspam who faulted our FED monetary system in 1966 and supported gold back then as the only true money has jumped ship. He mortgaged his soul for the paper chase. The govt has their hands in stocks, bonds, gold, etc. every day of the year! We sell our gold to other countries but still record the fact that we "own" it. There is probably a "good" reason our gold supply has not been audited in 45 years. Central Banks and major financial houses are doing the same. They win while 90% of investors lose. That's the game. And it is a poor one for you and I. The stock market is heavily manipulated by program trading and false swings initiated by the big players. Right now the FED is doing everything it can to keep stocks bolstered so the deflation you warn about stays put. I would suggest you leave stocks and bonds immediately if you want to avoid rigged and manipulated markets where the vast majority lose in the long run. Why would you do risk your money in such rigged markets? And believe me, over the next 10 years, there will many losers who will scream murder when you mention stocks to them.
Your camp is making the strongest case of all to sell and to sell now! I certainly wouldn't want to risk my money if it could be so easily lost for reasons that have nothing to do with the purity of the marketplace and which even you metals bugs flat-out admit would be beyond my control.
With all the manipulation and schemes going on the only real money left will be hard money (gold, silver, and other tangible property). It can be manipulated all you want, but in the end, gold will hold your value for you....unlike housing....stocks....bonds....etc. Housing fell 80% during the great depression. Not a good place to be in a great deflation.
this is the way these markets actually work, as you constantly suggest, let me just say what I think about pushing my valuable chips over to that part of the gaming table.
Unfortunately yes! This is how all markets today (except maybe your local flea market) do work. They are rigged against all of us. I'm amazed how easily we all have been sucked into the 401k scheme. Now GW wants to push us into Soc Sec stock funds....as if Wall Street hasn't done enough damage yet. The end result of this is coming soon where all gains will be lost and possibly much orig capital. Why would anyone want to gamble in this rigged game? ..............Uhhhhh no thanks!
If the conspiracy theorists would take a valium and relax for a minute, they might learn that Robert Prechter, Jr., Steve Hochberg, Pete Kendall and everyone else at Elliott Wave International have been quietly, steadily tracking the price action of the metals during the recent, lovely metals run. Fact is, they've pretty much nailed it thus far.
Come again? Prechter figured $200 gold by now. He never saw it breaking out above $400. And I'll bet that has ticked those guys off too! If anything Sinclair has been dead nuts on on the overall move since gold came from $260/oz. Sure, he's missed minor moves all along the way but so far has been 100% on the big picture long before others even hinted at $330 gold! In fact from other articles I've read recently the EW's are figuring a major wave 3 move imminent....which I suspect is to the UPSIDE...by I don't want to buy a subscription to find out what I already now. $200 gold will eventually come. But not before we see gold far higher than today and all other assets pummelled to the ground...such as 1000 or 500 Dow. In that scenario, $200 gold will be mighty good. It will have done its job and held the fort just like Homestake Mining (now Newmont) did in the 1930's by increasing by 6X in the throes of the depression.
They are calling for a significant downturn
Are you sure? Does this guy actually subscribe to the EW?
and they've made no mention of conspiracies or of secret central bank meetings or of men in dark trenchcoats lurking in the shadows of a Washington, D.C. parking garage. And despite the rally that got everybody's hopes of $3000 gold back on the front burner (and pushed Anna Kournikova fantasies over to the side for a while) the Elliott boys have been calling for the metals to take the same hit other assets will in the coming credit contraction and liquidity crisis (gold to just over $200, silver to $3.50 or below), which type of credit crunch/liquidity crisis deflation is consistent with what has occurred post-investment-mania each and every time over the past, oh, 500 years or so.
There is no need for lurking in parking garages in trenchcoats. This stuff is done right in the open. These good old boys and old money who originally backed the FED in 1913 are right in front of you. This is business today. Nothing clandestine about it, except you won't read about it in the papers. Sure, stocks and bonds will take the exact same deflationary hit, only worse. We can all live in caves together patting each other on the back that Prechter was right in the end. The Elliot boys have been calling for $200 gold for years. Eventually, they will get it right if we all live long enough. But I'm more interested in today. A deflation is coming but few will profit. There are just too many assets and people to pass through that tiny opening and get out in one piece. The goal is coming out with as much of your assets intact as possible. Some will lose it all. Others will maintain and come out ready to buy assets on the cheap. And in this environment cash and gold are supreme. Gold does hold its value in a deflation, much more so that paper equities. It does even better in an inflationary environment too, especially where central bank rigging does not occur....like today. The CB's have shot most of their loads as have many of the gold producers who have unwound massive shorts. It leaves gold in a much better position to slingshot than every before.
The sluggishness in the world economy is representative of a coming, slow-moving deflationary elephant, not hyperinflation.
Maybe and maybe not. I'd prepare for either scenario as there is no guarantee what's coming. There is still so much liquidity in the market that has to be cleansed that another year or two of commodity inflation could be in the cards. Look at the 1970's as we came off the gold standard. Gold boomed from $34 to $200 in a few years. Then crashed to $100. A 50% correction. I'm sure many claimed it was all over. It wasn't though as gold headed back to $850 from $100. This gold move is likely NOT over. There will be killer corrections along the way that will devastate those not prepared for them. And each time the EW's will proclaim the death of gold. Then they can relish in their deflation.
If deflation is soon to be upon us, which I certainly believe it is, there is little to no chance the metals will avoid taking the same hit all other asset classes will. That's what a post-bubble shakeout does, my friends.
I would agree with everything but the gold part. In fact gold will hold its value as will cash in a deflation. That's what you want to be in when things hit the fan....liquid cash and PM's. So what's this guy gonna buy at that point? GM bonds?
So sell your metals. Sell your metals stocks. Put those chips in your pocket for the time being, then whip them out in a few years when few others have much cash to buy much of anything. The good news is, when the time comes, those same Elliott boys are calling for gold and silver to go through the roof.
Yes, and by inference mining stocks will be on the roof with them! But in the meantime your cash is being devalued by 5-15% per year. If you can accept that then by all means hold cash.
Yep. Moyer's the latest gold boogeyman. Read that when it came out. He has some points. Gold has performed abominably lately.
I too see deflation and a HARD one. Time to clear out all the folks who have BORROWED to "own" things. Universally and perpetually true. And predictable. And historic.
But...afterwards..... CARPETBAGGIN TIME!
The kicker this time is that China is about to start walking and leave the crib. And an ENORMOUS consumer base is just WAITING to get its ......FIRST........ TV set.
The US and Europe are going down for the count. Inevitable short of blowing Asia off the map.
But the article ...really.... should be read as a call to DIVERSIFY. "All gold" WILL be the way to go in the future at the point when UNIVERSAL stores of wealth become necessary. DURING the stress about to hit the real estate market and ensuing bank asset devaluation. WHEN the US will NOT want to let ANY citizen have an asset that can actually make him free to choose his location.
Deflation is not coming...it's HERE. And please don't join the "STUPID CLUB" that thinks "cost" increases are inflationary. When the costs can't be "passed on" it's DEE-flationary.
Gold is insurance against your government.....wherever.... you live.
"Government" as a definition of restrictions. Not as a nebulous and fallible "protector" of interest.
That link you posted talks a lot about derivatives. Something we have hundreds of Trillions of dollars worth of but no one really knows what the potential downside is because a derivatives Tsunami has yet to occur. The "tiny' blips that occurred for Long Term Capital Management and Fannie were just a few billion. And the LTCM fiasco almost set in motion a crippling domino effect in the financial markets. Now mulitply that by 10,000 times or more and you have the potential effects that could be applied today. Only this time the govt couldn't print $10 TRILLION to bail someone out. This is all leveraged risk passed on to someone. When things hit the fan, the holders of those derivatives are in for an unpleasant surprise. And the dominoes will start to fall one by one.
I'm tempted to offer a wager to Mr. Moyer that gold will exceed it's current $457 high sometime in the next 12 months. However I would bet that he is not the wagering kind. While commodities may be on their down leg now, I don't think gold has run its course yet. Same with oil for that matter.
If you want some of the upsides and downsides to the derivatives question please checkout www.jsmineset.com (link below). GE is currently going through the restatement of some interest rate derivatives.
Thanks for all your comments on Moyer’s letter; I thought it would be good to look at the other side. I think I fall in RR’s camp on this. Moyer does not really say when or what your alternatives should be, and I also agree that having $200 Gold is not that bad when bread is 5 cents a loaf and cars are back to $2,500.
My feeling is that liquidity is everything in a deflation. Cash would be just great but where shall we keep the cash? I think we have to be very concerned here about the Banks since we already know that the FDIC is another one of those trust funds that has been raided by the Congress.
I have a friend that has 2 million spread out in jumbo C.D.’S in various banks in the hopes that the FDIC will cover him, but I am not sure with electronics being what they are, that the government would not just say they were only covering one or two of these.
With all of the derivatives (options) who knows what bond funds might even be safe. There are so many of these guys playing so many games with these hedges even the most conservative, secure fund could go belly up if hedged in the wrong direction.
One other thing that makes me really uncomfortable is the fact that almost any asset you buy these days is verified by an electronic entry. It seems very hard for you to get the asset in your hands even in the case of U.S. treasury certificates.
So I would be very interested in what others here are doing to secure their cash investments?
I won’t bore you with the details but one very long theory I read over the weekend was also to the deflationary side. This guy was very logical and had great answers as to what to do when certain events went down.
He says that in the next couple of years were are going to have an interest rate spike and that will be the time to get into cash and bonds before the major deflation comes. It looks to me that his interest spike is on the way.
Interestingly he also has some interesting things to say about China. A close friend in Shanghai tells me that if we think we have real estate bubbles here the Chinese bubbles make the ones in Japan a decade ago look like Childs play.
“While it has not made the news in the United States, there is a rise in the number, intensity and size of demonstrations in China. China has 20 million people, moving from the country to the cities every year. They must build the equivalent of a Dallas, Texas every month and a half. They have to find jobs, housing, services and infrastructure in a staggeringly short time. To fail to meet those expectations will create problems and more tensions.”
“Chinese banks are worse than bankrupt. The government banks have been making massive loans to insolvent and unprofitable state businesses for decades. They continue to do so because to allow them to fail would create massive unemployment. Massive unemployment would create unrest in the cities and surrounding areas. Above all it would disappoint the rising expectations of a growing Chinese middle class.”
"One other thing that makes me really uncomfortable is the fact that almost any asset you buy these days is verified by an electronic entry. It seems very hard for you to get the asset in your hands even in the case of U.S. treasury certificates.
So I would be very interested in what others here are doing to secure their cash investments?"
Yes, just thinking about that this weekend, in two parts! First part...say there is a run on the banks, or a gas cloud starts drifting towards Philly or Dallas or some populated place or there is a 9-11 near...well how are you going to get your stash out of the bank? Not a chance of that so there you are with your stash locked up away from you and your well laid plans for an emergency are up in smoke. The only response to this is keep the collectibles in the bank and an "emergency fund" some where that you can get to it. Preferably $10 libs in au common dates and US Dollars.
Part b of the problem is that everything is tied back to the purchaser...the govt knows what stocks you have bought and sold last year, what your bank account number is, your average daily balance, any thing you buy is somehow recorded so that if they want to know they can. This comes into play when say...you get audited and have your assets confiscated...bummer, or it could happen in any variety of other situations where the govt needs to get your assets or verify your holdings. Of course if the government knows then certainly some other third party people know, like the credit reporting agencies or those agencies that keep track of individual accounts. Once again it comes up as $10 libs and US Dollars kept somewhere where you can get to them if you need them NOW.
Hays Morning Market Comments Putting It All Together: Wiggles, Cyclical & Secular May 09, 2005 One Step at a Time, Inching Up to the Launching Pad
by Don R. Hays
Summary: Let’s put it all together in three short paragraphs.
We expect the market to experience a series of up and down moves for the next 5 months, with the final trough being coincident with the 3rd quarter earnings-release season. It is my best guess that the S&P 500 has made its lowest low of the year already, but expect in these next two troughs, coincident with the quarter ending earnings-releases and speculation about the future, that some indices, most probably the NASDAQ and small-cap indices, will experience some lower lows. We expect larger-cap, more defensive stocks to out-perform during this year of transition.
We are expecting that this year of transition and frustration will be much like last year, when all of a sudden many of today’s concerns will brighten and find some definite resolution by year end, and when it happens the pent-up energy will start shifting rapidly from defense to offense, and propel a spirited high-volume rally. This will be the kick-off of the second half of this 8.6 year cyclical rally that will see huge gains in the 2006-2008 period, and technology and small-cap growth stocks will quickly jump back into leadership.
Democracy and “good” Deflation will finally be accepted as THE trend of the future, promoting a massive race by individuals, corporations and countries to be the lowest-cost, highest-quality producer of products to feed the huge new sponge of consumption coming from the millions of new emerging global workers. We believe this will dramatically out-weigh the concerns some have about the retirement of the baby-boomers in the U.S. The success of how each country gets rid of productivity-destroyers like bureaucracy, socialism, crime, terrorism, etc. and adds productivity-enhancers like Democracy, Capitalism, leading-edge education, health-care enhancers, alternative energy, nano-technology innovation, telecommunication exposure, etc. will be tomorrow’s Super-Power. Our Constitution and Legal System gives us a strong up-leg in this race, but it has to come from the bottom up. The people have to see the wisdom. It will become a Supply-Side World.
We expect decades of stable interest rates, stable commodity prices, and stable currencies. The CURRENCY ENFORCER will become tomorrow’s Federal Reserves of every Democratic Country.
What’s left to talk about? Not a lot, but maybe I can put a few pictures with the summary. Let’s start with the wiggles, or what is our best guess about the next 6 months. You have to understand that the way we treat “wiggles” is rooted in the message from our cyclical based asset allocation matrix. You can see this very quickly by looking at our three gauges in this visual depiction. As you can see, as of today, we have psychology rated in its second strongest category on a scale of 1 to 6. Monetary is not quite as strong as psychology, with money supply growth rate buffering the still powerful yield curve slightly but is definitely on the positive side of the neutral category. Of course, with the earnings yield of stocks based on forward earnings at its highest level since 1995—at 6.61%, while the 10-year T-Note yield is remaining very dormant at 4.26% yield, stocks are giving a 35.5% better return.
Since that first trough of that final decline in the ending consolidation of the bear market in July 2002, we have been waking up every morning knowing that there was this strong shock absorber called relative valuation that would furnish massive resistance against decline—no matter what negative news might surface.
So with this security blanket warming our vision, we have made a few mid-course adjustments in our cash allocation, raising cash in January 2004, and having three different great buying junctures last year to get that small cash buffer back totally into stocks. As a result of those little mid-course adjustments, we were loaded and ready for the great lift-off from that final August 12, 2004 low. This year has so far followed a similar pattern, although we raised a little more cash at the end of last year, we have just seen the first of what we expect to be at least two, and maybe three buying junctures this year before the final HUGE high-volume lift-off later this year.
That is our guess, but in the final analysis, it makes no difference in our investment process whether we are right or wrong about the exact number of “wiggles.” Unless psychology or monetary makes some very historic changes that we totally don’t expect, we will be only bobbing and weaving with a little bit of cash this year from time to time. Today, we are in a ZERO cash position and expecting these next 8 weeks to produce some very favorable market action.
Our best guess (we do a lot of guessing about what kind of “skin” to put on the evolving asset allocation “skeleton.”) of the evolution of this year tells us that every month will start to exhibit a string of commodity prices, bond yields, and currency exchange rates settling into their assigned level. I don’t really mean “assigned,” but it will be almost like an air-traffic controller taking huge multiple planes and putting each one on its assigned glide-path to reach their destination with all planes safely co-existing in the same air-space.
It is already starting to happen. You know my story about the massive explosion that occurred in 1997, when the currencies of every country in the world EXCEPT the U.S. got caught in what looked like a death spiral. I think that history will discover that this catastrophe was a fantastic event that woke up the world. It also put the entire world at the mercy of the U.S. consumer that was being seduced by the Federal Reserve and U.S. Government to once again act as the consumer of last resort.
That massive infusion of monetary liquidity by the U.S. Fed, and the infusion of “bail-out” life supporting loans to the world by the U.S. supported World Bank, did its part. But crooked Dictators either caught religion or were over-thrown.
It has been a tumultuous 8 years, but a period with massive improvements in the discipline of the world’s politicians and monetary bodies. It hasn’t come easy, and is not totally over, but the currency distortions and tough times have forced changes. Japan and Europe’s flexibility is still in question, but it will happen. It will happen or their currency will absolute squeeze them until they have no choice.
I have been a huge fan of one important analyst to tell us the progress of this transition. That analyst is named GOLD. Each day the price of gold takes into consideration all those variables, inflation, productivity, interest rates, geo-political concerns and priorities, economic initiatives, and its price becomes a barometer of the overall progress. That is my strong belief. So each day, we plot for you on this website the price of gold in dollars, in yen, and in euros. Here are today’s updated plots.
You can see that in the last few years we have seen all kinds of cross-currents, with gold going in different directions based on which currency it is being priced in. But as of last week, in each case the price of gold came down. That might not (and probably won’t) happen on an on-going-always basis, but in this unique time when conditions have just reached a fulcrum point in my opinion, the price of gold is about to go WHERE it should be, or at least the range where it will reside for a while.
It is somewhat instructive to look at the long-term of all these factors, gold, currencies, interest rates and commodity prices, to keep everything in perspective. Here’s the long-term (20 year) chart of the price of gold priced in dollars.
Admittedly, I’m way over my head trying to guess where the “right” price of gold is, when priced in dollars, but I’m not too shy about trying. The BEST economic years of the last several decades occurred in 1995-96 in my opinion. The Fed had reached stability, and they were able to keep money supply and the yield curve in that “perfect” range (according to Don Hays, ha!.) But even visually, I have put a box around what I believe is the most consistent average price of gold. In that debacle of 1997 to 1999, the price of gold plummeted because no-body wanted to hold a tangible inflation hedge when the Fed was guaranteeing everybody against loss. So investors chased massive growth and that “ain’t” gold. Then as the new Treasury came in and those sinking countries began to tread water again, the dollar (and the price of gold) returned to that D.H. “perfect” zone. It slightly exceeded it last year, and then in November of last year it exploded upward out of my “perfect” zone once again. It was telling the Fed that it was time for interest rates to be returned to normal. If you go back and read our comments, we were saying that the Fed needed to hike rates up more dramatically.
But they chose to adopt that policy of gradualism, raising it in monthly ¼ % jumps. If I am right, they price of gold is now reversing and telling the Fed the same thing I’ve been saying for over a month—It’s time to STOP, and let the increases now settle in. Let the barometers settle out. Of course, the Fed always goes too far in both directions, but Greenspan has a long history of watching the price of gold, so I’m hoping that the message is creeping in.
Even so, I expect the second quarter to be weaker than the first, the third quarter to be weaker than the second, and that will have a continuing moderating influence on the price of oil, and all industrial commodities. But continue to watch this price of gold each day for clues.
I don’t want to put too “cute” a spin on this, but the price is now closing in on its 200-day moving average of $423.39, and that is coincident with that trend line I’ve drawn in. If it should do that, and also make a lower low under that $411 low made in February, I would be massively surprised if the Fed hadn’t found the “normal” non-inflationary fed funds rate.
If you revert back to the long-term chart, my “perfect” zone is in the range of $370 to $410 an oz., any downward penetration to a lower-low would be my confirmation that we are ushering in that decade of stability.
Our strong wiggle story is to be fully invested, with the intention of only doing a little pruning as the condition of your stocks in your portfolio’s warrant if/when the McClellan and 21-day oscillators reach overbought conditions. Here’s today’s chart of that.
Obviously, the McClellan oscillator has already done so, but with the 21-day oscillator still at -1281, we are not close to achieving a really important or short-term vulnerable overbought condition. So steady as you go.
Trying to guess the evolution of the asset allocation matrix, I am guessing that the psychology will remain fairly somber (and healthy,) even despite the rally we expect in the weeks ahead. This nervousness will probably come from some economic concerns. I know, Friday experienced that jump in employment, but that is very, very distorted and old news that the unemployment insurance claims have been telling us for many months.
But now there are all kinds of evidence of a moderating economy. Look at these important economically sensitive industrial commodity prices—lumber and aluminum.
Their price is certainly showing a distinct moderation in the last 6 weeks. We are seeing all kinds of evidence like a falling Baltic freight rate that the international economy is also cooling.
And the Fed definitely needs to see this….and I expect they will. But let me add a couple of tables that the Fed produces each week that measures the growth rate of MZM and M2 money supply over many different time spans.
If you are not familiar with this type of table, you can pick any two time periods and see what the “annualized” growth rate has been between those two date. What is scary is that you can see in the last 8 weeks (between 2/28 and 4/25/2005 the growth of MZM has been negative. It hopefully is the first good sign that even this terrible growth rate of economic fuel is slightly better than what it was one month ago.
Economic activity has its best correlation to the year over year growth of money supply, and even that is down to 2.0 percent in MZM, and 4.3% in M2. Both are too low. And the Fed has a long way until they can even start that year over year rate increasing back to the acceptable 5-7% range.
So I’m hoping they are already beginning to smell the roses, and I expect the next few weeks to finally show some measurable growth of new fuel to help regulate this slowing economic vehicle back to a good safe cruising speed.
I’ve talked about the wiggles, and the cyclical and time is running out. But suffice it to say that I STRONGLY believe this secular bull market is alive and well, and will be fed by a massive surge in global consumption fueled NOT by the U.S. consumer, but by the emerging new workers all over a new Democratic capitalistic world.
So I keep watching this secular trend that I certainly expect to go back AT LEAST to its mean level by 2008.
That projects a move by the S&P 500 AT LEAST to 2600 by 2008.
That’s enough for one day from me. I’ll see you again on Wednesday morning, my friends.
I'm no stock market analyst, but one thing I can say with certainty is that over the long haul, precious metals will only increase in value unless a massive stockpile of the metal is found. It's not like they can just keep making new bars of gold/silver/platinum. Whatever is there on earth is what's there. That's why I think no matter what the economy is, over the long haul (and I mean 20-30 years time), precious metal investment will result in a net gain. However, one has to make sure that they aren't purchasing their initial supply during a 'rush', so to speak, like palladium went through just a short time ago. It's in those cases that purchasing precious metals can result in a net loss in the long run, simply because the initial purchase was at an artificially inflated price.
I myself am kind of upset for not picking up some gold and platinum a few years ago when it was much more affordable. (Then again, a few years ago I couldn't afford them at that prices. They seem to always be just out of my "comfortable" price range. I.E. I can afford to buy an ounce here and there, but I would suffer some pretty heavy buyer's remorse. Then again, that remorse would go away every time I hold my ounce of gold and/or platinum). Personally, I would actually like to see the prices of gold, silver and platinum level off at an affordable level. I have my own personal reasons for this, but one of them is because I like the intrinsic beauty of the metals themselves. Their high density, beautiful luster, and resistance to corrosion are all wonderful traits. Having an ounce of each of the PGM is definitely a nice thing. (Though I'm a bit short on Osmium, Rhodium, and Platinum though the Os and Pt will reach one-ounce quantities within the next few years. Rhodium might take me a while).
I collect the elements on the periodic table, and some coins. I have a complete Roosevelt set, and am putting together a set of coins from 1880.
I'm no stock market analyst, but one thing I can say with certainty is that over the long haul, precious metals will only increase in value unless a massive stockpile of the metal is found. It's not like they can just keep making new bars of gold/silver/platinum. Whatever is there on earth is what's there. That's why I think no matter what the economy is, over the long haul (and I mean 20-30 years time), precious metal investment will result in a net gain
Unfortunately history is not on your side. I remember in grade school that everyone was predicting we would run out of oil by 2000. Well that obviously hasnt happened.
Some people are still down 50% on the gold and 85% on silver that they bought 25 years ago.
The stock market has outperformed every asset class over time and it has gone through 2 world wars, scores of conflicts, a depression, hyper-inflation, stagflation, political termoil, communism and the list goes on. The concerns expressed today are the same as they were 100 years ago, just the numbers are bigger, but they are the same in relative terms.
Comments
Liberty: Parent of Science & Industry
Actually this is exactly right,
“The enemies to this country have not been foreigners. It's been and is the politicians and ignorance.”
The problem is we know in the case of illegals we can’t trust the politicians not to use our tax dollars to educate their children, to take care of their every medical need, and to provide a plethora of services to all these millions of folks. Like it or not American citizens, via fate, have a birth rite to this country, and certainly have the first rights on the services they pay for all their lives.
I guess you did not like my idea about putting the convicts in our prisons to doing the manual labor jobs at minimum wage either? I thought that was a great idea. How about this, take all the prisoners and eliminate the very dangerous ones from the program. Teach the remainder how to pick grapes, lay rock etc. and for every day they spend doing a good days labor they get one day off their sentence plus minimum wage to build up a savings for when they are released. They will of course have certain deductions for food, clothing, S.C. Medicare, etc.
Baley,
C’mon now give us a break, not many Americans would mind paying for the items on your list if that’s all there was, but what about the other 5,000 items?
How about this, there are approximately 300 million people in this country. About 100 million are minors and about 120 million pay NO Federal taxes, leaving the 80 million to pay for everything. So lets have a National sales tax where everyone pays according to what they buy. Poor people would not pay much because they don’t buy much. Rich people pay a lot because they buy a lot. Corporations don’t pay much because they have slick lawyers, that would stop.
<< <i>Sounds like you folks ought to move to where you get a better deal on your quality of life vs. how much it costs vs what kind of job you can get there.
Sounds like you really like socialism huh? That's would be fine with me if what you liked and wanted didn't interfere with my life.
Not funny
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Now as far as criminals are concerned, I guess I can be categorized as one of those "evil types" who believes again that crimes against my life, liberty, happines and pursuit of property should be punished to the full extent of the law. However that would mean that MOST if not all politicians would be in jail, or hung. Far as specifically what punishment there should be I think leaving that up to the jury is infinitely better than asking me what I would do.
That answer your question?
Seems like I'm right though that LOTS of Americans really do love socialism.
A wee bit off topic but there ya go.
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
<< <i>I pay 4% of the value of my home in property and school taxes. Anybody else pay that much? The school district has gone from 1300 students 15 years ago to 1100. And they just approved a $15 million addition. Its crazy here. And the value of my home has not increased in value. It is 2700 sq ft with a huge oversized 3 car garage with a pole barn on 3.7 acres. If I sold it I would be able to get a townhouse in New Jersey. Taxes where I live are rediculous. Did I mention the 8.25% sales tax? >>
Close -- we pay about 3% in property and school taxes. And we also have an 8.25% sales tax.
Of course, I won't get much sympathy because we have no state income tax, but there you go.
<< <i>I pay 4% of the value of my home in property and school taxes. Anybody else pay that much? >>
Yep, sure do, a little more than that actually. Also, those taxes go up 10% per year with no end in sight. I've already lost one set of long time neighbors who couldn't keep their house that they've owned for over 10 years because of the taxes and this is starting to happen all over the city. You can pay off your mortgage, but you can never pay off the taxman. One more little tidbit, instead of raising more taxes, our new Mayor has raised water rates over 800% in just the last few months. Last month my water bill was very close to my electric bill. I use the minimum amount of water also, less than the 3,000 gallon cut off figure.
In my county alone(Harris County, Texas) we have paid out 3 billion dollars, that's with a "B" billion in the last four years just for medical treatment for illegal aliens alone. Those figures are kept separate from the regular deadbeats who are US citizens. BTW, the US citizens who have gotten free care over that time is just a drop in the bucket in comparison. Far less than even one tenth of 1%. That money comes from the county property taxes, nowhere else. It's an unfunded mandate courtesy of Bill Clinton and we on the border have to pay it. We are forced to pay additonal energy fees on our electric bill to subsidize the Northeast, thanks to Jimmy Carter, but I don't see any subsidy coming from anywhere else to support the illegal aliens medical bills.
Yes, we also have an 8.25% sales tax that is being raised in September to between 9.25 and 10%, the politicos are still hashing that one out.
A tax revolt is only a few years away. At least in Texas that is, I can't speak for other states.
I don't know where all this is going to lead, but it's certainly changed the way I look at my long term future and planned early retirement.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
Wow, but don't you know it's for your own good? ( I am being very sarcastic)
What the heck is a "cut off figure"?????
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
3,000 gals a month is 100 a day. What do you do with all that water?
<< <i>One more little tidbit, instead of raising more taxes, our new Mayor has raised water rates over 800% in just the last few months. Last month my water bill was very close to my electric bill. I use the minimum amount of water also, less than the 3,000 gallon cut off figure.
Wow, but don't you know it's for your own good? ( I am being very sarcastic)
What the heck is a "cut off figure"?????
Tom >>
The cut off figure is the minimum amount you will be billed for. Doesn't matter if you are in Europe on vacation, you will still be billed for 3,000 gallons regardless, as long as you are hooked up to the city water system. I often use quite a bit less than that anyway. It's rare I go over except in the summer when watering the lawn and garden.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
<< <i>Tom P.
3,000 gals a month is 100 a day. What do you do with all that water?
Yeh but what the heck is a "cut off" point????
We used 21,000 gallons last month if I'm reading this right. Are y'all on a well and use a bit of city water on the side??
Cost me $35.00 to fill up my Jeep Cherokee off of I-75 in Naples today. Regular gas. Cost me 20 bucks when I first got it I think, maybe a little less.
Hey, remember there is NO INFLATION according to the government. Isn't big government great?
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Jeeez, my electric bill at my last house was more than 1400/month. Now that we're in a smaller place it's a fraction of that and I'm looking at what it's going to cost us in North Carolina and it looks like even less still ( Just north of Asheville,where we won't be using A/C anywhere near what we use it for here )
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
“Of course, I won't get much sympathy because we have no state income tax, but there you go.”
This is pathetic, you don’t think you will get any sympathy because you are not paying every tax these politicians have thought of?
“A tax revolt is only a few years away. At least in Texas that is, I can't speak for other states.”
Deadhorse,
I am in Burnet County in the middle of the State, and I keep getting these emails from a group in Austin that says there is a move under foot to take away all the AG and Wildlife exemptions in rural areas. Land own mostly by farmers, cattlemen, etc. If that happens Texas may be the State that starts the dominoes falling in the Real-Estate market bubble as millions of acres will come on the market for sale!
To give one example, I own a hundred acres of vacant land, leased to a cattleman in Burnet County. This property is in the middle of nowhere 60 miles from any city of any size. I currently pay $2,150 per year in property taxes. The appraisal board here tried to take my AG exemption away this year but failed because I had a 3 year 12 page lease. When I ask what the property taxes would go to if I lost the exemption they told me $21,500 per year. I can tell you that if I loss this exemption this property is on the market for the best offer I can get!
21,000 GALS
What are you doing? Filling 6 swimming pools?
If anybody did that around here....you'd be making collect calls. What are you really doing Tom, irrigating the Everglades?
<< <i>
Deadhorse,
I am in Burnet County in the middle of the State, and I keep getting these emails from a group in Austin that says there is a move under foot to take away all the AG and Wildlife exemptions in rural areas. Land own mostly by farmers, cattlemen, etc. If that happens Texas may be the State that starts the dominoes falling in the Real-Estate market bubble as millions of acres will come on the market for sale!
To give one example, I own a hundred acres of vacant land, leased to a cattleman in Burnet County. This property is in the middle of nowhere 60 miles from any city of any size. I currently pay $2,150 per year in property taxes. The appraisal board here tried to take my AG exemption away this year but failed because I had a 3 year 12 page lease. When I ask what the property taxes would go to if I lost the exemption they told me $21,500 per year. I can tell you that if I loss this exemption this property is on the market for the best offer I can get! >>
Man, I don't need to hear that!! I've been looking at small ranches in south central Texas for the last few months. Mostly just window shopping and getting a feel for the price ranges. I do want to live out in the middle of nowhere. That's my plan for early retirement in a few more years and the AG exemption is a major part of the attraction. I do intend to raise a few head of cattle, some hogs and lots of free range chickens. I probably don't need more than 40 to 50 acres plus I intend to build a new modern home out there. If they take away the AG exemption, values will drop to nothing, All the small ranchers will be out of business and only large corporatins will be able to operate. Figure a huge increase in the cost of food will accompany such a move. These people in Austin are out of their minds.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
<< <i>21,000 GALS
What are you doing? Filling 6 swimming pools?
If anybody did that around here....you'd be making collect calls. What are you really doing Tom, irrigating the Everglades? >>
Hahaha no, just normal stuff. Maybe I'm reading it wrong but I know it's been between 16,000 and 20 or so.
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
<< <i>Yes deadhorse...similar situation here. Have ag land near san antonio and wondering if I should sell it or not. Seems like now is the best time to sell so you may be able to find some deals. >>
That might just explain why I've been seeing what I thought were some extremely reasonable(read cheap)prices lately on a few small farm/ranches.
For example, I saw a place 18 miles north of Kerrville(middle of nowhere), land was undeveloped but it had a 3 bedroom typical natural stone facade style ranch house, built in '91, 3100 square feet, sitting on a nice little hill with 46 acres for only $186K. It had been available for around 6 months with virtually no interest. This was back in January. I thought it was an exceptionally reasonable price.
Without the AG exemption, it would be like paying a mortage forever even after you bought the place outright.
That's a sobering thought................
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
<< <i>
<< <i>I pay 4% of the value of my home in property and school taxes. Anybody else pay that much? >>
Yep, sure do, a little more than that actually. Also, those taxes go up 10% per year with no end in sight. I've already lost one set of long time neighbors who couldn't keep their house that they've owned for over 10 years because of the taxes and this is starting to happen all over the city. You can pay off your mortgage, but you can never pay off the taxman. One more little tidbit, instead of raising more taxes, our new Mayor has raised water rates over 800% in just the last few months. Last month my water bill was very close to my electric bill. I use the minimum amount of water also, less than the 3,000 gallon cut off figure.
In my county alone(Harris County, Texas) we have paid out 3 billion dollars, that's with a "B" billion in the last four years just for medical treatment for illegal aliens alone. Those figures are kept separate from the regular deadbeats who are US citizens. BTW, the US citizens who have gotten free care over that time is just a drop in the bucket in comparison. Far less than even one tenth of 1%. That money comes from the county property taxes, nowhere else. It's an unfunded mandate courtesy of Bill Clinton and we on the border have to pay it. We are forced to pay additonal energy fees on our electric bill to subsidize the Northeast, thanks to Jimmy Carter, but I don't see any subsidy coming from anywhere else to support the illegal aliens medical bills.
Yes, we also have an 8.25% sales tax that is being raised in September to between 9.25 and 10%, the politicos are still hashing that one out.
A tax revolt is only a few years away. At least in Texas that is, I can't speak for other states.
I don't know where all this is going to lead, but it's certainly changed the way I look at my long term future and planned early retirement. >>
Sounds like you have it just as bad. I love where I live, next to one of the greatest fisheries in the world--a true sportsman's pardise. But, when i moved here 3 years ago my taxes were $3800, now they are $6200. 20% of my taxes go to the welfare program. Thats insane. We pay for all the deadbeats in NYC 300 miles away. I wouldnt be suprised if I start the revolt in my area
Knowledge is the enemy of fear
roadrunner
For most married/joint filers, the itemized property taxes are nowhere near the Standard Deduction. For many - not all - the *realized* tax break is minimal. But most people aren't smart enough to figure that out. I hear people all the time saying "Man! My house went up 8% last year!"
They can't comprehend that they probably lost money, despite that.
Happens almost every damn time.
Tom
COMEX gold falls on strong US payrolls, rising dollar
Fri May 6, 2005 08:44 AM ET
NEW YORK, May 6 (Reuters) - Gold futures in New York fell sharply in early trading Friday as a surprisingly strong U.S. April nonfarm payrolls report boosted the dollar and dulled the allure of bullion for investors.
By 8:35 a.m. EDT (1235 GMT), gold for June delivery (GCM5: Quote, Profile, Research) on the New York Mercantile Exchange's COMEX division dropped $2.70 or 0.63 percent to $428 an ounce, trading between $432 and $427.50.
The dollar rallied after the U.S. Labor Department said employers created 274,000 new jobs in April, which far outstripped Wall Street economists' expectations for 170,000 new jobs.
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
<< <i>Hmmm, has anyone ever thought that the real estate taxes plus the sales taxes alone might be enough to cause the real estate implosion? >>
Our property taxes have almost doubled since last year. Hurricane Charley you know if the cause and not dirtbag politicians.( Right and would YOU be interested in a lincoln cent for 50+ G's?
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
I guess all our kids should get good GOVERNMENT jobs.
When we started threads like this a couple of years ago and mentioned the country might be bankrupt since we had an estimated 43 trillion dollars in total assets, and at that time we thought the liabilities were 44 trillion, we all just shook our heads.
What is really scary is that now the U.S. Treasury Sec. says all the liabilities are 80 TRILLION!!!
You might notice that 80 Trillion is more money than has been earned by every American or foreigner since the Mayflower landed here 500 years ago, according to this article taken off a business site today.
So what will it be inflation or deflation?
“Government Headed Toward 50% Control of Our Economy
May 6, 2005
Last week the House and Senate agreed on a $2.6-trillion budget for fiscal year 2006. There was much chest-thumping about the fiscal restraint imbedded in this budget blueprint.
Here are the depressing numbers in brief: Today, we spend about 20% of our total economic output on the federal government. That percentage will rise to a record 25% of output in 2025 and then to 34% in 2040.
These numbers do not include what state and local governments spend. Today states and cities swallow up roughly another 12% of our paychecks.
Even if we assume unrealistically that the state and local component of national output remains constant, what the new CBO numbers tell us is that America is on a path toward government's taking 46% of all output. America will be half private ownership and control and half government ownership.
The latest budget forecasts have hardly caused a peep of concern from our political class. Some budget hawks--such as Rep. Jeff Flake (R.-Ariz.) and Sen. Tom Coburn (R.-Okla.)--have taken up pitch forks and are raising Cain. But they're about as popular with their colleagues as the bartender at a bachelor's party who announces last call.
Treasury Secretary John Snow recently announced that the total unfunded liabilities of the United States government total $80 trillion! That's a debt load equivalent to about six times our current GDP. It is almost twice as much as the value of all goods and services produced everywhere in the world last year. And it is more money than has been earned by every American cumulatively since the Mayflower landed here 500 years ago.”
And Baley proud
Tom
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Tom Pilitowski
US Rare Coin Investments
800-624-1870
however, I'm not so naive as to think that bitcning on some hobby message board is going to make a difference.
And If I knew of a better country than the USA, I'd move there
My job and family and life are in southern CA, so that's where I live, and life is good
I earn money, I spend money, that's how it is, that's realism.
I've got myself diversified investments, and if one goes up, another goes down, but I'm doing well..
like I say, life is good. Is it perfect?
what is?
Liberty: Parent of Science & Industry
I noted your reference to the strong jobs report. Not really though.
If you take out the +257,000 jobs added by the Birth Death Model
black box, the number of jobs that were created & counted was only +17,000. Imo that isn't so rosy. Next month the BD Model will add another +200,000 or more jobs so expect everyone to once again be
"surprised" by the "strong" payroll numbers. Sheesh.
roadrunner
Well here in Port Charlotte, they raised our property taxes quite significantly and you know they are actually having "sidewalks" put in off Quesada road" which is quickly becoming the local laugh as you drive down that street. Half the sidewalks run LESS THAN A FOOT AWAY FROM THE ROAD, so when they're done it's just a matter of time before people get killed, sue and then they make changes to this typical government make work program and probably do it again.
When really nobody wants these things to begin with EXCEPT the dirtbag politicians and the people who are on the "getting" end of the money they are stealing from us.
So I agree with you
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Sign of a Pop: Housing is Everywhere. The Great Transition, Part III
May 6, 2005
Introduction
Owning a home was once the foundation of the American Dream. Recently, it seems to have become a desperate national obsession, with prospective buyers frantically bidding up prices as though it were the end of the world. The whole thing is eerily reminiscent of the stock market boom that started in earnest 10 years ago, and culminated in the desperate rush to own shares - any shares - with the complete confidence that stock prices moved in only one direction. In spite of the recent denials by Fed Chairman Greenspan and US Treasury Secretary Snow that there is no housing bubble, the comparison of housing to stocks should be taken quite seriously.
If there is anything that we've learned from the political and financial roller coaster of the last decade, it is that the words of our leaders must always be scrutinized with the fishy eye of skepticism. In early April, Greenspan dismissed the notion that there could possibly be a national housing bubble. This from the man, mind you, who repeatedly stated prior to the Nasdaq crack-up that bubbles can only be seen in retrospect and that the best the Fed can hope to do is mitigate the fallout after a collapse. His recent statement was followed shortly thereafter by Snow, who also went on record stating that he did not believe American housing prices were overly inflated or in the throes of a "bubble."
The problem with these denials from our so-called leaders is that their positions of power effectively prohibit them from speaking bluntly about certain issues, namely the economy. Their job is to soothe and reassure the public that everything is just fine. If you understand this, then you understand that by simply addressing the issue, they have tipped their hand and revealed that we have a problem on our hands - a problem that they aren't quite sure what to do about. The fact that they deny the problems means that you can pretty much bet on its existence and its seriousness.
Just think about the lies that government leaders have been caught telling over the past decade, and think again if you want to trust the current denials about the housing market. You may think that to accuse the government of lying is rather impolite. On the contrary, it is impolite to tell lies in the first place. At the very best, they're trying to ignore the issue, obfuscate the truth, whistle their way through the dark and get everyone else to do the same. But if you want the truth about the issue, you're going to have to tune out their rhetoric, look at the facts, use your brain and think for yourself.
All of this - the government lies, the asset bubbles and the ensuing destruction of wealth - is part of the Great Transition we've been discussing in this five part series. This Transition is silently affecting everything in the world today. Painful as it is, an old order is crumbling away and we must adopt new rules to deal with that reality. To understand how housing fits in to this puzzle, first a little background on the current bubble.
Housing is Everywhere
Look around you. Housing is everywhere. It is not only the late night airwaves that have been taken over by baby-faced millionaires who made their fortune in real estate and are now pushing the idea onto insomniacs nationwide that "you can, too!"
Walk into any large bookstore and you will find that the investment section that was dominated by books on easy stock market profits five years ago has become a treasure trove for step-by-step how-to guides on easy real estate profits. Titles such as The Weekend Millionaire's Secrets to Investing in Real Estate, Are You Dumb Enough to Be Rich? The Amazingly Simple Way to Make Millions in Real Estate and dozens more like them make it sound so easy. And it seems that everyone knows someone who knows someone who's made a killing in the market and has three more deals in the works. Articles on housing, individual investors, and the state of the market are all over the popular press. All of the articles document the recent, rapid-fire escalation of home prices that is reminiscent of the "new economy stocks" that seemed capable only of unidirectional price increases just five years ago.
But all of this attention is fueled by a simple, undeniable fact. Nationwide, housing prices are rising, and they are rising fast. The market is partying once again like its 1999, and people think it's their last chance to buy a house, or make money on an investment, or secure their retirement, or they don't even know what they think, they are just caught up in the grips of the mania and they need to buy a house. There is no way that I can better demonstrate the folly of these ideas than to look back in time to show you a glimpse of the future.
Back to the Future
The rest of it here on Free Market News
Sign of a Pop!
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Tom Pilitowski
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800-624-1870
Mr. Angell is also infamous around here for forcefully stating, just a few months ago, that anybody who thought that we would have any inflation was "out to lunch."
- According to the Bureau of Labor Statistics, $5.89 in 2004 dollars equals the purchasing power of $1.00 in 1966. So since 1966, the purchasing power of the dollar has fallen to, in 1966 purchasing power, 17 cents. Mark G.'s opinion? "We have experienced a long drawn out inflationary depression; a depression so subtle that we don't even realize that has happened."
An interesting detail about what has happened since 1966 was provided by Philip Spicer, who notes that the Dow Jones Industrial Average "closed at 10,549 on 17 Nov '04, equaling 1,791 in 1966 dollars."
The bottom line is that the stock market effectively doubled in 39 years. Not exactly the rip-roaring results that are commonly posted.
And this is the insidious inflation effect that is robbing us all of our wealth and our country. It only makes gold seem more undervalued asset than ever.
roadrunner
Hey man we are not picking on you, and in fact I think most here are enjoying life and things are rocking along. I used your name as a call to those that seem to believe that everything is just fine, and as the guys in Washington are saying, “sure we have some small problems but not to worry these problems are decades away”
What else can they say since they refuse to see that these problems are, only decades away as long as everything remains the same, but as RR and others have pointed out there are so many triggers out there that can fire this gun, and it is foolish not to be prepared.
Here is a good example:
Standard and Poor’s, on Thursday cut the corporate credit ratings of General Motors Corp., General Motors Acceptance Corp., and all related entities to junk status. This was done because GM is upside down on its unfunded liabilities.
So just when will U.S. Treasuries get the same junk status? Not even the accountants at Enron could make the U.S. treasury numbers crunch. Exactly where will interest rates on these Junk U.S. Treasuries have to go to keep even foreigners buying them.
Just this week the House of Representatives increased the US Government’s debt ceiling by $781 billion to almost $9 trillion. US interest rates have remained low to a large extent because China, Japan, South Korea, and others, have been buying US Treasuries with their trade dollars, but will they continue to do so as these I.O.U.’s are seen as high risk junk?
The point here is that we all know we are leaving a mess for our children and grandchildren, but what the hell we will all be dead, right? On the other hand, and just from the selfish point of view, will it really take that long for the folks buying our junk debt to just say SORRY NO MORE !
Most of the major governments in the world as well as most of the major banks in the world have in their portfolios U.S. treasuries as the foundation for the security of their institution. What would you think if you had all of your money in a bank that gave you their financials and the foundation of their guarantee was GM bonds?
As far as your comment below, there are millions of folks every day educating themselves on sites just like this one. NO body wants to move, but there are certainly things that individuals can do to protect their families. I see these discussions as a rare opportunity to learn and discuss solutions, and I think we are all very fortunate to be able to finally see and discuss the ideas and information from people all across this country.
“I'm not so naive as to think that bitcning on some hobby message board is going to make a difference.
And If I knew of a better country than the USA, I'd move there.”
Just to add my two cents worth I have been very disappointed in the overall stock market the last few years. I generally try to watch a few of the financial shows on Saturday mornings and I think one of the guest speakers on this mornings show, Wayne Rodgers, hit the nail on the head when he said, “We no longer have a stock market we have a market full of stock” I have notice a big change in most of the financial T.V. shows over the last 18 months. Most all of these shows are no longer for investors they are for day traders or professional speculators. The worst of these is the Jim Kramer show on every afternoon. There is no possible way that any investor could keep up with this mans advice. Mr. Kramer claims to be an ex-hedge fund manager who bought and sold the same stocks twice each week. Two weeks ago he wanted his listeners to take their savings and go short GM, and last week he said whoa go long, some billionaire wants to buy the company. I am very happy not to be following any of the advice put out by the T.V. experts, and I have pity for those that are.
I recommend Bob Brinker on the weekends. Some real wisdom that is seldom heard over the airwaves. Unfortunately--he hates silver and gold. But the guy is uncanny simplistic in his analysis and I have observed him hitting the nail square on the head several times in the last 15 years. He developed his own model that is very accurate. Very easy to listen to, when he isn't playing golf in FLA. and there is a dufus fill in host.
I once heard someone call in and ask for ideas what to do with their first $100--Brinker said take your girl friend out to dinner and take good care of her. Was that good advice? I don't know but I sure laughed.
roadrunner
Brink has his moments. He's also been known to completely miss the nail's head, and then pretend he never swung the hammer. Approach his show as entertainment ONLY, and you'll be fine.
The Dow doubling in 39 years is a little less than 2% annualized. Of course you know that calculation ignores dividends. Throw in the 4% average dividend yield, and you've got exacly what stocks should return - the proverbial 6% above inflation.
I guess this fellow is in the deflation camp????
May 08, 2005
Gold to $200, Silver $3.50
by Steve Moyer
I'm not going to mention any names here but you gold and silver bugs (and columnists) just crack me up.
You are so "certain" that gold, silver, the HUI and the XAU are heading to the sky, you refuse to be objective or to use a reasoned approach in your analysis. You seem incapable of being able to step back.
As soon as gold and silver prices drop, as they continue to do as we speak, the conspiracy theories begin. Enter the court jesters, the jugglers, the monkey grinders and the clowns with the pants that fall down. You fellows really should take a step back and read your own stuff. It's downright vaudevillian.
IF "they" (the "They Brothers?") are so hell-bent on controlling the price of gold and silver; IF, as you allege, the They Brothers are willing to use all of these underhanded and illegal market means to shoot your precious metals investments in the foot; IF these markets are so easily manipulated by the Darth Vaderian forces that exist in the shadows, furtively obsessed with the price of these particular commodities, working at all times and in all places to KEEP THE METALS DOWN, WHY ON EARTH WOULD YOU SIT HERE TELLING US DAY AFTER DAY THAT WE SHOULD PUT OUR HARD-EARNED MONEY INTO THESE INVESTMENTS?
You have got to be kidding!
Your camp is making the strongest case of all to sell and to sell now! I certainly wouldn't want to risk my money if it could be so easily lost for reasons that have nothing to do with the purity of the marketplace and which even you metals bugs flat-out admit would be beyond my control.
If this is the way these markets actually work, as you constantly suggest, let me just say what I think about pushing my valuable chips over to that part of the gaming table.
Uhhhh, no thanks.
If the conspiracy theorists would take a valium and relax for a minute, they might learn that Robert Prechter, Jr., Steve Hochberg, Pete Kendall and everyone else at Elliott Wave International have been quietly, steadily tracking the price action of the metals during the recent, lovely metals run. Fact is, they've pretty much nailed it thus far. They are calling for a significant downturn, and they've made no mention of conspiracies or of secret central bank meetings or of men in dark trenchcoats lurking in the shadows of a Washington, D.C. parking garage. And despite the rally that got everybody's hopes of $3000 gold back on the front burner (and pushed Anna Kournikova fantasies over to the side for a while) the Elliott boys have been calling for the metals to take the same hit other assets will in the coming credit contraction and liquidity crisis (gold to just over $200, silver to $3.50 or below), which type of credit crunch/liquidity crisis deflation is consistent with what has occurred post-investment-mania each and every time over the past, oh, 500 years or so.
Like clockwork.
The sluggishness in the world economy is representative of a coming, slow-moving deflationary elephant, not hyperinflation. Money supply contraction points to deflation. The flattening of the bond yield curve points to recession and deflation. The Alan Greenspan "Conundrum," as to why interest rates are not following the Fed's 200 basis point-raised lead, points to deflation. Lack of pricing power for producers, squeezed by a rise in commodity prices, is a symptom of deflation. The breakdowns in the HUI and XAU anticipate metals price drops, which would be indicative of deflation. Even rising oil and gas prices point to deflation, as producers and consumers get squeezed and the economy bears the brunt of it. (Interestingly enough, however, now even the energy markets are taking their hits as deflationary forces show even broader signs of taking hold).
The handwriting isn't just on the wall. It's a virtual graffiti-fest.
If deflation is soon to be upon us, which I certainly believe it is, there is little to no chance the metals will avoid taking the same hit all other asset classes will. That's what a post-bubble shakeout does, my friends.
So sell your metals. Sell your metals stocks. Put those chips in your pocket for the time being, then whip them out in a few years when few others have much cash to buy much of anything. The good news is, when the time comes, those same Elliott boys are calling for gold and silver to go through the roof.
I'm looking forward to it.
Steve Moyer,
Ponder-This.net
If I have not done this hot link correctly maybe someone can put it on.
Debt and the Delusionals
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That fact that his guy considers no other options cracks me up too.
He is 100% sure that deflation is around the corner. Well let's all pack our bags because he said so.
You are so "certain" that gold, silver, the HUI and the XAU are heading to the sky, you refuse to be objective or to use a reasoned approach in your analysis. You seem incapable of being able to step back.
Au contraire, I am very concerned that a recession or massive deflation is lurking around the corner once stagflation hits the skids.
Now it's just a matter of when. The deflation follows the inflationary excesses which by the way has been going on for decades. We are probably now in the twilight of the inflationary expansion and heading towards deflation. It's one of the major reasons I have curtailed my coin buying as of late and am pondering other ideas.
As soon as gold and silver prices drop, as they continue to do as we speak, the conspiracy theories begin. Enter the court jesters, the jugglers, the monkey grinders and the clowns with the pants that fall down. You fellows really should take a step back and read your own stuff. It's downright vaudevillian.
If this guy is so sure why doesn't he just take the short bet against gold? I'm sure he will find any number of takers that will bet him $50,000 or more per bet that gold has not yet peaked.
IF "they" (the "They Brothers?") are so hell-bent on controlling the price of gold and silver; IF, as you allege, the They Brothers are willing to use all of these underhanded and illegal market means to shoot your precious metals investments in the foot; IF these markets are so easily manipulated by the Darth Vaderian forces that exist in the shadows, furtively obsessed with the price of these particular commodities, working at all times and in all places to KEEP THE METALS DOWN, WHY ON EARTH WOULD YOU SIT HERE TELLING US DAY AFTER DAY THAT WE SHOULD PUT OUR HARD-EARNED MONEY INTO THESE INVESTMENTS? You have got to be kidding!
No kidding here buster. The manipulation you laugh about is in every major financial market. And it gets worse each year. The monkeys and vaudvillians are in fact the FED and Treasury trying to juggle the various asset bubbles they have created. The same Greenspam who faulted our FED monetary system in 1966 and supported gold back then as the only true money has jumped ship. He mortgaged his soul for the paper chase. The govt has their hands in stocks, bonds, gold, etc. every day of the year! We sell our gold to other countries but still record the fact that we "own" it.
There is probably a "good" reason our gold supply has not been audited in 45 years. Central Banks and major financial houses are doing the same. They win while 90% of investors lose. That's the game. And it is a poor one for you and I. The stock market is heavily manipulated by program trading and false swings initiated by the big players. Right now the FED is doing everything it can to keep stocks bolstered so the deflation you warn about stays put. I would suggest you leave stocks and bonds immediately if you want to avoid rigged and manipulated markets where the vast majority lose in the long run. Why would you do risk your money in such rigged markets? And believe me, over the next 10 years, there will many losers who will scream murder when you mention stocks to them.
Your camp is making the strongest case of all to sell and to sell now! I certainly wouldn't want to risk my money if it could be so easily lost for reasons that have nothing to do with the purity of the marketplace and which even you metals bugs flat-out admit would be beyond my control.
With all the manipulation and schemes going on the only real money left will be hard money (gold, silver, and other tangible property).
It can be manipulated all you want, but in the end, gold will hold your value for you....unlike housing....stocks....bonds....etc. Housing
fell 80% during the great depression. Not a good place to be in a great deflation.
this is the way these markets actually work, as you constantly suggest, let me just say what I think about pushing my valuable chips over to that part of the gaming table.
Unfortunately yes! This is how all markets today (except maybe your local flea market) do work. They are rigged against all of us.
I'm amazed how easily we all have been sucked into the 401k scheme. Now GW wants to push us into Soc Sec stock funds....as if Wall Street hasn't done enough damage yet. The end result of this is coming soon where all gains will be lost and possibly much orig capital. Why would anyone want to gamble in this rigged game? ..............Uhhhhh no thanks!
If the conspiracy theorists would take a valium and relax for a minute, they might learn that Robert Prechter, Jr., Steve Hochberg, Pete Kendall and everyone else at Elliott Wave International have been quietly, steadily tracking the price action of the metals during the recent, lovely metals run. Fact is, they've pretty much nailed it thus far.
Come again? Prechter figured $200 gold by now. He never saw it breaking out above $400. And I'll bet that has ticked those guys off too! If anything Sinclair has been dead nuts on on the overall move since gold came from $260/oz. Sure, he's missed minor moves all along the way but so far has been 100% on the big picture long before others even hinted at $330 gold! In fact from other articles I've read recently the EW's are figuring a major wave 3 move imminent....which I suspect is to the UPSIDE...by I don't want to buy a subscription to find out what I already now. $200 gold will eventually come. But not before we see gold far higher than today and all other assets pummelled to the ground...such as 1000 or 500 Dow. In that scenario, $200 gold will be mighty good. It will have done its job and held the fort just like Homestake Mining (now Newmont) did in the 1930's by increasing by 6X in the throes of the depression.
They are calling for a significant downturn
Are you sure? Does this guy actually subscribe to the EW?
and they've made no mention of conspiracies or of secret central bank meetings or of men in dark trenchcoats lurking in the shadows of a Washington, D.C. parking garage. And despite the rally that got everybody's hopes of $3000 gold back on the front burner (and pushed Anna Kournikova fantasies over to the side for a while) the Elliott boys have been calling for the metals to take the same hit other assets will in the coming credit contraction and liquidity crisis (gold to just over $200, silver to $3.50 or below), which type of credit crunch/liquidity crisis deflation is consistent with what has occurred post-investment-mania each and every time over the past, oh, 500 years or so.
There is no need for lurking in parking garages in trenchcoats. This stuff is done right in the open. These good old boys and old money who originally backed the FED in 1913 are right in front of you. This is business today. Nothing clandestine about it, except you won't read about it in the papers. Sure, stocks and bonds will take the exact same deflationary hit, only worse. We can all live in caves together patting each other on the back that Prechter was right in the end. The Elliot boys have been calling for $200 gold for years. Eventually, they will get it right if we all live long enough. But I'm more interested in today. A deflation is coming but few will profit.
There are just too many assets and people to pass through that tiny opening and get out in one piece. The goal is coming out with as much of your assets intact as possible. Some will lose it all. Others will maintain and come out ready to buy assets on the cheap. And in this environment cash and gold are supreme. Gold does hold its value in a deflation, much more so that paper equities. It does even better in an inflationary environment too, especially where central bank rigging does not occur....like today. The CB's have shot most of their loads as have many of the gold producers who have unwound massive shorts.
It leaves gold in a much better position to slingshot than every before.
The sluggishness in the world economy is representative of a coming, slow-moving deflationary elephant, not hyperinflation.
Maybe and maybe not. I'd prepare for either scenario as there is no guarantee what's coming. There is still so much liquidity in the market that has to be cleansed that another year or two of commodity inflation could be in the cards. Look at the 1970's as we came off the gold standard. Gold boomed from $34 to $200 in a few years. Then crashed to $100. A 50% correction. I'm sure many claimed it was all over. It wasn't though as gold headed back to $850 from $100. This gold move is likely NOT over. There will be killer corrections along the way that will devastate those not prepared for them. And each time the EW's will proclaim the death of gold. Then they can relish in their deflation.
If deflation is soon to be upon us, which I certainly believe it is, there is little to no chance the metals will avoid taking the same hit all other asset classes will. That's what a post-bubble shakeout does, my friends.
I would agree with everything but the gold part. In fact gold will hold its value as will cash in a deflation. That's what you want to be in when things hit the fan....liquid cash and PM's. So what's this guy gonna buy at that point? GM bonds?
So sell your metals. Sell your metals stocks. Put those chips in your pocket for the time being, then whip them out in a few years when few others have much cash to buy much of anything. The good news is, when the time comes, those same Elliott boys are calling for gold and silver to go through the roof.
Yes, and by inference mining stocks will be on the roof with them!
But in the meantime your cash is being devalued by 5-15% per year.
If you can accept that then by all means hold cash.
roadrunner
I too see deflation and a HARD one. Time to clear out all the folks who have BORROWED to "own" things. Universally and perpetually true. And predictable. And historic.
But...afterwards..... CARPETBAGGIN TIME!
The kicker this time is that China is about to start walking and leave the crib. And an ENORMOUS consumer base is just WAITING to get its ......FIRST........ TV set.
The US and Europe are going down for the count. Inevitable short of blowing Asia off the map.
But the article ...really.... should be read as a call to DIVERSIFY. "All gold" WILL be the way to go in the future at the point when UNIVERSAL stores of wealth become necessary. DURING the stress about to hit the real estate market and ensuing bank asset devaluation. WHEN the US will NOT want to let ANY citizen have an asset that can actually make him free to choose his location.
Deflation is not coming...it's HERE. And please don't join the "STUPID CLUB" that thinks "cost" increases are inflationary. When the costs can't be "passed on" it's DEE-flationary.
Gold is insurance against your government.....wherever.... you live.
"Government" as a definition of restrictions. Not as a nebulous and fallible "protector" of interest.
That link you posted talks a lot about derivatives. Something we have hundreds of Trillions of dollars worth of but no one really knows what the potential downside is because a derivatives Tsunami has yet to occur. The "tiny' blips that occurred for Long Term Capital Management and Fannie were just a few billion. And the LTCM fiasco almost set in motion a crippling domino effect in the financial markets. Now mulitply that by 10,000 times or more and you have the potential effects that could be applied today. Only this time the govt couldn't print $10 TRILLION to bail someone out. This is all leveraged risk passed on to someone. When things hit the fan, the holders of those derivatives are in for an unpleasant surprise. And the dominoes will start to fall one by one.
roadrunner
5 year gold chart (very very depressing)
I'm tempted to offer a wager to Mr. Moyer that gold will exceed it's current $457 high sometime in the next 12 months. However I would bet that he is not the wagering kind. While commodities may be on their down leg now, I don't think gold has run its course yet.
Same with oil for that matter.
If you want some of the upsides and downsides to the derivatives question please checkout www.jsmineset.com (link below). GE is currently going through the restatement of some interest rate derivatives.
roadrunner
Yes but unfortunately it would appear that the majority ( here) feels the latter and so we are where we are and headed where we're headed.
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
My feeling is that liquidity is everything in a deflation. Cash would be just great but where shall we keep the cash? I think we have to be very concerned here about the Banks since we already know that the FDIC is another one of those trust funds that has been raided by the Congress.
I have a friend that has 2 million spread out in jumbo C.D.’S in various banks in the hopes that the FDIC will cover him, but I am not sure with electronics being what they are, that the government would not just say they were only covering one or two of these.
With all of the derivatives (options) who knows what bond funds might even be safe. There are so many of these guys playing so many games with these hedges even the most conservative, secure fund could go belly up if hedged in the wrong direction.
One other thing that makes me really uncomfortable is the fact that almost any asset you buy these days is verified by an electronic entry. It seems very hard for you to get the asset in your hands even in the case of U.S. treasury certificates.
So I would be very interested in what others here are doing to secure their cash investments?
I won’t bore you with the details but one very long theory I read over the weekend was also to the deflationary side. This guy was very logical and had great answers as to what to do when certain events went down.
He says that in the next couple of years were are going to have an interest rate spike and that will be the time to get into cash and bonds before the major deflation comes. It looks to me that his interest spike is on the way.
Interestingly he also has some interesting things to say about China. A close friend in Shanghai tells me that if we think we have real estate bubbles here the Chinese bubbles make the ones in Japan a decade ago look like Childs play.
“While it has not made the news in the United States, there is a rise in the number, intensity and size of demonstrations in China. China has 20 million people, moving from the country to the cities every year. They must build the equivalent of a Dallas, Texas every month and a half. They have to find jobs, housing, services and infrastructure in a staggeringly short time. To fail to meet those expectations will create problems and more tensions.”
“Chinese banks are worse than bankrupt. The government banks have been making massive loans to insolvent and unprofitable state businesses for decades. They continue to do so because to allow them to fail would create massive unemployment. Massive unemployment would create unrest in the cities and surrounding areas. Above all it would disappoint the rising expectations of a growing Chinese middle class.”
"One other thing that makes me really uncomfortable is the fact that almost any asset you buy these days is verified by an electronic entry. It seems very hard for you to get the asset in your hands even in the case of U.S. treasury certificates.
So I would be very interested in what others here are doing to secure their cash investments?"
Yes, just thinking about that this weekend, in two parts! First part...say there is a run on the banks, or a gas cloud starts drifting towards Philly or Dallas or some populated place or there is a 9-11 near...well how are you going to get your stash out of the bank? Not a chance of that so there you are with your stash locked up away from you and your well laid plans for an emergency are up in smoke. The only response to this is keep the collectibles in the bank and an "emergency fund" some where that you can get to it. Preferably $10 libs in au common dates and US Dollars.
Part b of the problem is that everything is tied back to the purchaser...the govt knows what stocks you have bought and sold last year, what your bank account number is, your average daily balance, any thing you buy is somehow recorded so that if they want to know they can. This comes into play when say...you get audited and have your assets confiscated...bummer, or it could happen in any variety of other situations where the govt needs to get your assets or verify your holdings. Of course if the government knows then certainly some other third party people know, like the credit reporting agencies or those agencies that keep track of individual accounts. Once again it comes up as $10 libs and US Dollars kept somewhere where you can get to them if you need them NOW.
It's all kinda like a no-brainer.
Putting It All Together: Wiggles, Cyclical & Secular
May 09, 2005
One Step at a Time, Inching Up to the Launching Pad
by Don R. Hays
Summary: Let’s put it all together in three short paragraphs.
We expect the market to experience a series of up and down moves for the next 5 months, with the final trough being coincident with the 3rd quarter earnings-release season. It is my best guess that the S&P 500 has made its lowest low of the year already, but expect in these next two troughs, coincident with the quarter ending earnings-releases and speculation about the future, that some indices, most probably the NASDAQ and small-cap indices, will experience some lower lows. We expect larger-cap, more defensive stocks to out-perform during this year of transition.
We are expecting that this year of transition and frustration will be much like last year, when all of a sudden many of today’s concerns will brighten and find some definite resolution by year end, and when it happens the pent-up energy will start shifting rapidly from defense to offense, and propel a spirited high-volume rally. This will be the kick-off of the second half of this 8.6 year cyclical rally that will see huge gains in the 2006-2008 period, and technology and small-cap growth stocks will quickly jump back into leadership.
Democracy and “good” Deflation will finally be accepted as THE trend of the future, promoting a massive race by individuals, corporations and countries to be the lowest-cost, highest-quality producer of products to feed the huge new sponge of consumption coming from the millions of new emerging global workers. We believe this will dramatically out-weigh the concerns some have about the retirement of the baby-boomers in the U.S. The success of how each country gets rid of productivity-destroyers like bureaucracy, socialism, crime, terrorism, etc. and adds productivity-enhancers like Democracy, Capitalism, leading-edge education, health-care enhancers, alternative energy, nano-technology innovation, telecommunication exposure, etc. will be tomorrow’s Super-Power. Our Constitution and Legal System gives us a strong up-leg in this race, but it has to come from the bottom up. The people have to see the wisdom. It will become a Supply-Side World.
We expect decades of stable interest rates, stable commodity prices, and stable currencies. The CURRENCY ENFORCER will become tomorrow’s Federal Reserves of every Democratic Country.
What’s left to talk about? Not a lot, but maybe I can put a few pictures with the summary. Let’s start with the wiggles, or what is our best guess about the next 6 months. You have to understand that the way we treat “wiggles” is rooted in the message from our cyclical based asset allocation matrix.
You can see this very quickly by looking at our three gauges in this visual depiction.
As you can see, as of today, we have psychology rated in its second strongest category on a scale of 1 to 6. Monetary is not quite as strong as psychology, with money supply growth rate buffering the still powerful yield curve slightly but is definitely on the positive side of the neutral category. Of course, with the earnings yield of stocks based on forward earnings at its highest level since 1995—at 6.61%, while the 10-year T-Note yield is remaining very dormant at 4.26% yield, stocks are giving a 35.5% better return.
Since that first trough of that final decline in the ending consolidation of the bear market in July 2002, we have been waking up every morning knowing that there was this strong shock absorber called relative valuation that would furnish massive resistance against decline—no matter what negative news might surface.
So with this security blanket warming our vision, we have made a few mid-course adjustments in our cash allocation, raising cash in January 2004, and having three different great buying junctures last year to get that small cash buffer back totally into stocks. As a result of those little mid-course adjustments, we were loaded and ready for the great lift-off from that final August 12, 2004 low. This year has so far followed a similar pattern, although we raised a little more cash at the end of last year, we have just seen the first of what we expect to be at least two, and maybe three buying junctures this year before the final HUGE high-volume lift-off later this year.
That is our guess, but in the final analysis, it makes no difference in our investment process whether we are right or wrong about the exact number of “wiggles.” Unless psychology or monetary makes some very historic changes that we totally don’t expect, we will be only bobbing and weaving with a little bit of cash this year from time to time. Today, we are in a ZERO cash position and expecting these next 8 weeks to produce some very favorable market action.
Our best guess (we do a lot of guessing about what kind of “skin” to put on the evolving asset allocation “skeleton.”) of the evolution of this year tells us that every month will start to exhibit a string of commodity prices, bond yields, and currency exchange rates settling into their assigned level. I don’t really mean “assigned,” but it will be almost like an air-traffic controller taking huge multiple planes and putting each one on its assigned glide-path to reach their destination with all planes safely co-existing in the same air-space.
It is already starting to happen. You know my story about the massive explosion that occurred in 1997, when the currencies of every country in the world EXCEPT the U.S. got caught in what looked like a death spiral. I think that history will discover that this catastrophe was a fantastic event that woke up the world. It also put the entire world at the mercy of the U.S. consumer that was being seduced by the Federal Reserve and U.S. Government to once again act as the consumer of last resort.
That massive infusion of monetary liquidity by the U.S. Fed, and the infusion of “bail-out” life supporting loans to the world by the U.S. supported World Bank, did its part. But crooked Dictators either caught religion or were over-thrown.
It has been a tumultuous 8 years, but a period with massive improvements in the discipline of the world’s politicians and monetary bodies. It hasn’t come easy, and is not totally over, but the currency distortions and tough times have forced changes. Japan and Europe’s flexibility is still in question, but it will happen. It will happen or their currency will absolute squeeze them until they have no choice.
I have been a huge fan of one important analyst to tell us the progress of this transition. That analyst is named GOLD. Each day the price of gold takes into consideration all those variables, inflation, productivity, interest rates, geo-political concerns and priorities, economic initiatives, and its price becomes a barometer of the overall progress. That is my strong belief. So each day, we plot for you on this website the price of gold in dollars, in yen, and in euros. Here are today’s updated plots.
You can see that in the last few years we have seen all kinds of cross-currents, with gold going in different directions based on which currency it is being priced in. But as of last week, in each case the price of gold came down. That might not (and probably won’t) happen on an on-going-always basis, but in this unique time when conditions have just reached a fulcrum point in my opinion, the price of gold is about to go WHERE it should be, or at least the range where it will reside for a while.
It is somewhat instructive to look at the long-term of all these factors, gold, currencies, interest rates and commodity prices, to keep everything in perspective. Here’s the long-term (20 year) chart of the price of gold priced in dollars.
Admittedly, I’m way over my head trying to guess where the “right” price of gold is, when priced in dollars, but I’m not too shy about trying. The BEST economic years of the last several decades occurred in 1995-96 in my opinion. The Fed had reached stability, and they were able to keep money supply and the yield curve in that “perfect” range (according to Don Hays, ha!.) But even visually, I have put a box around what I believe is the most consistent average price of gold. In that debacle of 1997 to 1999, the price of gold plummeted because no-body wanted to hold a tangible inflation hedge when the Fed was guaranteeing everybody against loss. So investors chased massive growth and that “ain’t” gold. Then as the new Treasury came in and those sinking countries began to tread water again, the dollar (and the price of gold) returned to that D.H. “perfect” zone. It slightly exceeded it last year, and then in November of last year it exploded upward out of my “perfect” zone once again. It was telling the Fed that it was time for interest rates to be returned to normal. If you go back and read our comments, we were saying that the Fed needed to hike rates up more dramatically.
But they chose to adopt that policy of gradualism, raising it in monthly ¼ % jumps. If I am right, they price of gold is now reversing and telling the Fed the same thing I’ve been saying for over a month—It’s time to STOP, and let the increases now settle in. Let the barometers settle out. Of course, the Fed always goes too far in both directions, but Greenspan has a long history of watching the price of gold, so I’m hoping that the message is creeping in.
Even so, I expect the second quarter to be weaker than the first, the third quarter to be weaker than the second, and that will have a continuing moderating influence on the price of oil, and all industrial commodities. But continue to watch this price of gold each day for clues.
I don’t want to put too “cute” a spin on this, but the price is now closing in on its 200-day moving average of $423.39, and that is coincident with that trend line I’ve drawn in. If it should do that, and also make a lower low under that $411 low made in February, I would be massively surprised if the Fed hadn’t found the “normal” non-inflationary fed funds rate.
If you revert back to the long-term chart, my “perfect” zone is in the range of $370 to $410 an oz., any downward penetration to a lower-low would be my confirmation that we are ushering in that decade of stability.
Our strong wiggle story is to be fully invested, with the intention of only doing a little pruning as the condition of your stocks in your portfolio’s warrant if/when the McClellan and 21-day oscillators reach overbought conditions. Here’s today’s chart of that.
Obviously, the McClellan oscillator has already done so, but with the 21-day oscillator still at -1281, we are not close to achieving a really important or short-term vulnerable overbought condition. So steady as you go.
Trying to guess the evolution of the asset allocation matrix, I am guessing that the psychology will remain fairly somber (and healthy,) even despite the rally we expect in the weeks ahead. This nervousness will probably come from some economic concerns. I know, Friday experienced that jump in employment, but that is very, very distorted and old news that the unemployment insurance claims have been telling us for many months.
But now there are all kinds of evidence of a moderating economy. Look at these important economically sensitive industrial commodity prices—lumber and aluminum.
Their price is certainly showing a distinct moderation in the last 6 weeks. We are seeing all kinds of evidence like a falling Baltic freight rate that the international economy is also cooling.
And the Fed definitely needs to see this….and I expect they will. But let me add a couple of tables that the Fed produces each week that measures the growth rate of MZM and M2 money supply over many different time spans.
If you are not familiar with this type of table, you can pick any two time periods and see what the “annualized” growth rate has been between those two date. What is scary is that you can see in the last 8 weeks (between 2/28 and 4/25/2005 the growth of MZM has been negative. It hopefully is the first good sign that even this terrible growth rate of economic fuel is slightly better than what it was one month ago.
Economic activity has its best correlation to the year over year growth of money supply, and even that is down to 2.0 percent in MZM, and 4.3% in M2. Both are too low. And the Fed has a long way until they can even start that year over year rate increasing back to the acceptable 5-7% range.
So I’m hoping they are already beginning to smell the roses, and I expect the next few weeks to finally show some measurable growth of new fuel to help regulate this slowing economic vehicle back to a good safe cruising speed.
I’ve talked about the wiggles, and the cyclical and time is running out. But suffice it to say that I STRONGLY believe this secular bull market is alive and well, and will be fed by a massive surge in global consumption fueled NOT by the U.S. consumer, but by the emerging new workers all over a new Democratic capitalistic world.
So I keep watching this secular trend that I certainly expect to go back AT LEAST to its mean level by 2008.
That projects a move by the S&P 500 AT LEAST to 2600 by 2008.
That’s enough for one day from me. I’ll see you again on Wednesday morning, my friends.
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I myself am kind of upset for not picking up some gold and platinum a few years ago when it was much more affordable. (Then again, a few years ago I couldn't afford them at that prices. They seem to always be just out of my "comfortable" price range. I.E. I can afford to buy an ounce here and there, but I would suffer some pretty heavy buyer's remorse. Then again, that remorse would go away every time I hold my ounce of gold and/or platinum). Personally, I would actually like to see the prices of gold, silver and platinum level off at an affordable level. I have my own personal reasons for this, but one of them is because I like the intrinsic beauty of the metals themselves. Their high density, beautiful luster, and resistance to corrosion are all wonderful traits. Having an ounce of each of the PGM is definitely a nice thing. (Though I'm a bit short on Osmium, Rhodium, and Platinum though the Os and Pt will reach one-ounce quantities within the next few years. Rhodium might take me a while).
Unfortunately history is not on your side. I remember in grade school that everyone was predicting we would run out of oil by 2000. Well that obviously hasnt happened.
Some people are still down 50% on the gold and 85% on silver that they bought 25 years ago.
The stock market has outperformed every asset class over time and it has gone through 2 world wars, scores of conflicts, a depression, hyper-inflation, stagflation, political termoil, communism and the list goes on. The concerns expressed today are the same as they were 100 years ago, just the numbers are bigger, but they are the same in relative terms.
Knowledge is the enemy of fear
So I keep watching this secular trend that I certainly expect to go back AT LEAST to its mean level by 2008
I would be very interested in seeing a chart that projects the mean of the SP500 to be at 2600 by 2008. Is there something you can post?
I think Hayes is way off base, but would love to see them market move 150% in the next 3 years. I'll be rich!!!!
Knowledge is the enemy of fear
<< <i>From Hayes
So I keep watching this secular trend that I certainly expect to go back AT LEAST to its mean level by 2008
I would be very interested in seeing a chart that projects the mean of the SP500 to be at 2600 by 2008. Is there something you can post?
I think Hayes is way off base, but would love to see them market move 150% in the next 3 years. I'll be rich!!!! >>
Knowledge is the enemy of fear