"Should the silver price advance significantly and stay above US$ 8 – 10 per fine ounce, then one may expect existing silver miners and silver exploration juniors to significantly expand their exploration activities throughout the Rocky Mountain and Andes chain from Alaska to Chile.
Well maybe NOT, In 1990 I bought an old silver property in New Mexico that once belong to the Hunts. I bought the property not for silver, but because it had another mineral on it that we were interested in, Zeolite.
The company I bought the property from told me that in 1979 the Hunts were mining sliver on the property and when I ask at what price silver had to be again to make any money I was told $7.65 per ounce to break even. The mining business is a terrible business, full of regulators, taxes, lawsuits, personnel problems, insurance costs, etc.etc. Please keep in mind this is mining silver for silvers sake.
Just using the governments own inflation numbers, all products across the board averaged are up 2.54 times since 1980. So the price of sliver would need to be $15.30 to break even, and the cost of environmental issues, lawsuits, and labor are much higher today than 25 years ago.
All of that being said you might get some cheap silver from Mexico, or China, but how much?
270,000 x 2204.5 x 14.583 = 8,678,628,360 troy ounces, not 9.5 billion. Your error was in conversion from regular pounds to troy ounces. There are 16 regular ounces in a regular pound, 12 troy ounces in a troy pound, but 14.583 troy ounces in a regular pound.
I heard they were making a French version of Medal of Honor. I wonder how many hotkeys it'll have for "surrender."
270,000 metric tons is the estimated atomic silver on planet earth according to the USGS website. The number I was looking for was the current world stockpile of silver metal for industrial purposes and that number is around 300 million ounces. My original purpose was going to be a discussion of the rarity of silver as compared to other industrial metals such as copper. I think the USGS estimate of copper reserves was around 300,000,000 metric tons or close to 1000 times more.
"...reality has a well-known liberal bias." -- Stephen Colbert
I'm very tired of seeing 5 page articles down loaded en masse. I don't even read them anymore. Ibid..... Why not do us all a favor and summarize the key points in a few paragraphs? That's far more readible. I also learn more myself when I am forced to state a position and back it up. And of course credit the author with the original idea. If you want to reference an article then place a link in for those who want to dive in further. Copying a page or less is ok. 5-10 pages? Get real. End of rant.
... but if it is profitable then there are hundreds of mining companies that could convert and be up and running in much less time than you think.
Hundreds? Very unlikely. I read an article on silver in the last week that stated that the 13th largest silver producer right now comes from a mine that is mining for other ores. As I said earlier, the mining infrastructure has not been kept up in the 1990's due to the easy money that was available to the industry by hedging and the carry trade. All that money normally used to support future mining was shifted to hedges or gold derivatives....sure things at that time. Why spend money fixing up mines or planning future growth when you can get 5% or more via the carry trade? The miners have lost years in the 1990's. It will take much longer to resurrect the mining industries. And don't forget that those countries with strong currencies have been shouldering losses (South Africa for ex.) and if anything have been CLOSING mines to reduce costs. The South African miners have been bleeding profusely since the Rand got strong as the US dollar fell.
And on the brighter note of govt stats. I read yesterday where the old CRB is going to be modified rather shortly. Since this govt stat had not yet been subject to massaging, it was overdue. Normally the CRB was adjusted once per year to accomodate trends. Now the govt wants to do it monthly. And in those adjustments they can adjust the weighting factors of any commodities they like. Next month if silver is up 10% they can decide to shift the weighting of silver from say 5% to 2% in the CRB....because they know better. Knowing that the CRB is a prime indicator of inflationary trends, the govt wants to keep the game going a little longer that commodity prices are not escalating as fast as we think, and that there is no inflation. Let's now add the CRB to the CPI, PPI, GDP, and the B(L)S jobs report. "Look ma...no 'flation!"
<< <i>I'm very tired of seeing 5 page articles down loaded en masse. I don't even read them anymore. Ibid..... Why not do us all a favor and summarize the key points in a few paragraphs? That's far more readible. I also learn more myself when I am forced to state a position and back it up. And of course credit the author with the original idea. If you want to reference an article then place a link in for those who want to dive in futther. Copying a page or less is ok. 5-10 pages? Get real. End of rant.
>>
I skim most of them but this last one was excellent.
Dont shoot the messanger I am just posting todays economic numbers.
Nonfarm Payrolls 78K vs 175K consensus
Unemployment Rate 5.1% vs 5.2% consensus
Average Workweek 33.8 vs 33.8 consensus
Hourly Earnings +0.2% vs +0.2% consensus
Bottom line---Nonfarm payrolls checked in at 78K, well below forecasts of 175K, while the unemployment rate fell to 5.1% (from 5.2%) and hourly earnings matched an expected 0.2% rise versus a prior 0.3% increase... Bonds, which were relatively unchanged before the release, have surged as the 10-yr note is up 20 ticks to yield 3.82%
I listen to your voice like it was music, [ y o u ' r e ] the song I want to know.
I'd give you the world, just because...
Speak to me of loved ones, favorite places and things, loves lost and gained, tears shed for joy and sorrow, of when I see the sparkle in your eye ... and the blackness when the dream dies, of lovers, fools, adventurers and kings while I sip my wine and contemplate the Chi.
So does anyone think the EURO is going to go away. Just because they French can't even get along with thier fellow Europeans shouldn't be anything new. They never agree with anyone.
The fall in the EURO seems more like manipulation opportunity due to the vote than a real economic reality. The EURO has no reason to be dropping compared the the US $$.
European economies are not as strong as the US. France has near double digit unemployment and Germany is in and out of recession every 6 months. They are still dealing with cultural and socio-economic differences. Last year they added the Eastern Bloc countries and are trying to integrate them.
The economics of Poland are much different than in Germany. A months salary in Poland is less than $300 while in Germany it is 10x that. The EU has a long way to go before then can syncronize and really give the US a run for its money.
The US has been and is headed into a further take over of the individual and is becoming a collective. As evidenced by the younger generations who by and large can't seem to do anywhere near on an individual level what previous generations have done and its not getting better. End of my opinion and here's another fellows daily story:
Tom
It is interesting to observe how far removed are the political leaders of countries such as France, the Netherlands, and Great Britain from the people they claim to represent. The chief executives of these countries had campaigned on behalf of the EU, even as public opinion in each opposed the constitution. So much for the myth of "representative government." Were I the Prime Minister of Holland, I would resign in disgrace for having supported a system rejected by over three-fifths of the electorate. But the attraction of power over one’s fellows easily seduces even the best-intentioned of men and women.
While it took many decades for the American political system to evolve to the point of micromanaging the daily lives of people, the EU eurocrats were intent on beginning at such a top-down level of organization. British grocers were criminally prosecuted for selling vegetables by the pound rather than by grams; window-washers were prohibited from using ladders in their trade; only straight bananas were allowed to be sold; even the size and content of meatballs were strictly defined by the new EU authorities!
<< <i>Furthermore, the "take off" of the digital camera market is restricted, in large part, to the young and relatively affluent (professional and young) market segments in developed economies. To make full use of digital photography, one requires a computer and/or printer infrastructure, plus expensive printer cartridges, re chargeable batteries, and photographic papers, that are, collectively, generally beyond the pocket of the mass market. Therefore, it seems unlikely that digital photography will become a substitute for mass-market traditional photography in the near future. Given the growth in general affluence of the Asian markets, the mass market for conventional photography is likely to expand at a faster rate than the growth of digital photography, offsetting any decline in developed countries. Therefore, to analyze the silver market one has to see outside the photographic market segment. >>
And you need very expensive dark room/photo processing equipment, chemicals, and paper to develop and print film. Of course very few people own those things. We rely on commercial photo processors, who also print digital photos. I find it hard to give much credence to anyone whose financial analysis is this thin. In fact, it sounds like someone grasping at straws to support his case.
CG >>
Actually this analysis is not thin at all. In fact, it is proving to be a fact. Conventional photography is outpacing digital photography today.The growing area in photography today is in disposable cameras in poorer countries, and not the digital camera. You see, there is a massive market growing in third world developing countries where people are quite anxious to put their lives on film and can do so with a $8-$10 disposable camera. They don't have access to digital cameras and all of the acoutraments (sp?) that go along with them. As a result, conventional photography IS expanding faster. Furthermore, there are 2 other interesting things taking place as well. First, the digital market is in a slump--sales have slown down significantly. Olympus says it is taking a $166 milion operating loss, as a result. Japanese markets have dropped 1%, which, on a value basis is 11% in adjustment for the sharp drop in prices. They attribute it to an oversaturated market. Exports to Europe dropped 10.7%. Sanyo, the largest in the market said they were taking hard loses and had to drop their production estimate from 18 million units, down to 11 million units--that is a 40% drop in production!! If that isn't dropping a bomb on the market, I don't know what is.. Second, more people are taking their digital pics and bringing them in to have them printed on conventional, silver rich photo paper, simply because it is superior. As a result, the digital age has not yet made a signifant, permanent dent in conventional photography. The CEO of Kodak says that he sees them living side by side for a long time, and they are not making any adjustments yet for the demise of conventional photography. On the contrary, as I said, they are on the increase.
Peace,
coinfool "You broke the bonds and you loosed the chains; carried the cross of my shame, of my shame--you know I believe it..."
Seriously though, such levels are very unlikely under any realistic conditions. ($125/ounce)
Since we are on a 15-20 year, 150-200 million ounce deficit per year, and most of the silver that is being used up is used up for good, And the majority of silver is used for industry--do you seriously think that industry would come to a grinding halt becasue they would be unwilling to pay too much for silver. If it isn't there (which is eventual in adequate amounts), and the demand is great, (which it is), then the sky would be the limit. $100 silver would not only be imaginable, but even expected.
Peace,
coinfool "You broke the bonds and you loosed the chains; carried the cross of my shame, of my shame--you know I believe it..."
I like the 175K consensus considering that the BLS "black box" birth death model already padded in 207,000 jobs months ago. If you consider that 207,000 jobs were "created" in the black box (rather than the economy), then the 78,000 jobs "created" this past month, represent a net LOSS of around 129,000 jobs! No jobs were created, but 129K were lost. This is very similar to last month where the black box padded in 257,000 jobs and the final tally was listed as 274,000....for a net "gain" of 17,000 jobs...mostly created at McFood Corps and govt agencies. The BLS black box was created when the economy was expanding in the 1990's. No one knows what the Birth Death model should be for a flat or struggling economy. The BLS statisticians would never make such an assumption now since the numbers would not be as cherry. Let's just continue adding the 900,000 each year any ways. Without the supposed 900,000 jobs the black box creates EVERY year, how many real jobs can the current administration really lay claim to?
Oil is back to $55. This and the payroll numbers gave gold a boost to $423. The Euro weakness is temporary as is the gold weakness. The US dollar may have run it's course again on a short upleg. If not, it could rally for a few months more, but inevitably will give way to another fall back towards the .80 dollar index level.
I'm watching this economy unfold with facination. People who have been trading bonds for decades say that the latest interest rate behavior is from the twilight zone and all the numbers seem to be wrong. The federal reserve rate increases have been totally ignored by the bond market, but the economy is slowing anyway even when money remains cheap. Inflation and interest rates are down, yet commodities keep going higher. The stock market refuses to go up but also refuses to go down. (The dow was at 10,500 on January 1st, 2004)
If you answered a college level economics test with the actual numbers from this economy, you'd fail the test. Greenspan calls it a conundrum.
What gives?
"...reality has a well-known liberal bias." -- Stephen Colbert
Here is my latest for you to ponder. Everyone including the Fed is very confused about how the bond, mortgage, and other financial markets are acting these days. Even though the Fed has raised rates eight times the ten-year bond, and therefore the mortgage, interest rates have declined frustrating the Feds effort to slow down the housing market in the U.S.
Unlike asset markets the financial instrument markets react the opposite to supply and demand. In an asset market the more buyers there are the higher the price. In the bond market if there are a great deal of buyers there is no need to raise interest rates even though the bonds may be fully priced, so the rates say the same or even decline.
Now for the theory: For thousands of years this country and that have tried to increase their power by taking their neighbors properties, and wealth, to increase their own power. This of course was generally done via war. In today’s world it is not possible for any country or even a group of countries to challenge the U.S.military complex, and doing so could easily mean total destruction for any attacker.
However the U.S. does have one very important weakness, and that is its free financial system. Since the option of war is out of the question in the eyes of all foreign powers looking with greedy eyes to the U.S., what about just buying it?
If you try to go to Arab lands and buy their oil properties, or reserves, the answer would be sorry no dice. If you tried to go to China and buy their mineral reserves, or huge parts of their industries the answer would be the same, but in the U.S. everything is for sale.
Over the last couple of years I have ask myself why would the Asian central banks and the Arabs continue to accept these low interest rates, on treasuries, mortgage backed securities (MBS), etc. knowing what bad condition the dollar was in and how close to default many of the borrowers were?
The answer is simple they know default is coming and they intend to own the assets backed by the debt.
The reason why the 10-year bond rate has not increased, and therefore mortgage rates have not increased is simple; foreigners just keep flooding those markets as buyers.
As I pointed out in an earlier thread in the case of China they are simple printing money to give to Chinese manufactures Yuan’s to cover trade deficits with the U.S., and using the dollars they receive to buy treasuries and MBS.
Here are a few quotes and stats to back up the theory:
“ The People's Bank of China. The PBOC has shifted from buying treasuries to buying mortgage backed securities.
Net foreign purchases of MBS were $242 billion in mid-2004, up $19 billion from year-end 2003 and $35 billion more than 2002, according to Inside MBS & ABS, a publication of Inside Mortgage Finance. While data is not available yet for the second half of 2004, most analysts believe foreign investment in MBS gained even more momentum during that period.
The strong performance of the $4.5 trillion MBS market in 2004 can partly be attributed to buying from Asian portfolios and China's central bank in particular.”
The Chinese central bank's demand for mortgages is partly due to the climbing balance of dollars it has for investment. China's reserves for the year ending in August grew by $131 billion, second only to Japan's $272 billion increase, according to the International Monetary Fund. China's reserves now stand at around $501 billion, while Japan's are at $827 billion."
Richard Duncan is the best-selling author of The Dollar Crisis,
“There is a widespread misconception that the United States relies on the savings or other countries to finance its current account deficit. This is incorrect. During recent years, at least, the US current account deficit is financed primarily by money newly created by the central banks of other countries. Newly issued paper money is not the same thing as a county's savings.
The companies that earned money by exporting to the US keep their savings. It is only that they keep them in their domestic currencies after having sold the dollars they earned from exporting to their central bank.
And, for their part, Asian central banks, in particular, have consistently demonstrated their ability and willingness to create money in order to finance the US current account deficit. Given that nothing has occurred to call into question their determination to continue doing so, there is no reason to expect that behavior to change any time in the near future.
The Fed is losing control over interest rates, and, therefore, over the broader economy. The Fed began raising the Federal Funds rate in June 2004. Since then it has increased rates by 25 basis points on eight occasions, by a total of 200 basis points, to 3%.
Despite that, the market-determined rate on 10-year government bonds has actually fallen over that period by 50bp to just above 4%. That cannot be what the Fed had hoped for when it began raising rates.
Many countries around the world accumulate large stockpiles of dollars as a result of their trade surpluses with the United States. The central banks of most of those countries print their own currency and buy those dollars in order to prevent their currencies from appreciating when the private sector companies that earned the dollars exchange them for the domestic currency on the foreign exchange markets.
The central banks then invest the dollars they have acquired into US dollar-denominated debt instruments, preferably US treasury bonds or agency debt, in order to earn a return. If the amount of dollars accumulated by foreign central banks exceeds the amount of new debt being issued by the US government and the US agencies during any particular period, then the central banks will buy existing government and agency debt instead of newly issued debt.
Mortgage rates are determined by the yield on 10-year treasury bonds in the United States. Therefore, if foreign central bank buying drives down the yield on treasury bonds, it will also push down mortgage rates, which in turn will cause the rate of increase in US property prices, already the fastest in 25 years during 2004 (and the fastest ever in real, inflation-adjusted terms), to accelerate still further.
Higher property prices will allow yet more equity extraction which, in turn, will stimulate US consumption further. Additional consumption will pull in more imports and exacerbate the US current account deficit. And, a larger current account deficit will put yet more dollars in the hands of foreign central banks, who, then, will look for still more dollar-denominated assets in which to invest them.
At present, foreign investors own approximately 50% of the $4 trillion in US government debt that is held by the public. Under the circumstances just described, within four years, foreign investors could end up owing all outstanding US government debt.”
Part of Greenspan's conundrum is that you have a number of transparent sources trying to keep humpty dumpty on top of the wall. Nothing is as it seems and the numbers don't make sense.
1. For one, the economic numbers published these days are nearly worthless. Sorry but one can't make sense out of garbage.
2. The US consumer is consuming for the "world" to keep things afloat. And there are still banks/countries willing to lend us the money to keep consuming like maniacs. As China and Japan are bowing out, the "Carribean" sources have picked up the pace. You wouldn't think that the Carribean was one of the world's great financial powers. As long as credit is still being pumped into the US housing market, consumers can continue to binge. This makes no sense of course, so why shouldn't the net outcome from this make any sense?
3. Heavy market manipulations by too many sources, including the US govt. Until a major world/economic event occurs that cannot be manipulated out of (like a Fannie or derivatives blow up for example), the game will continue.
The Caribean sources, are the American Corporations which moved from the United States to the Carribean to avoid taxes back a few years ago...they claimed bankruptcy and headed for the Carribean...remember VIATEL, build it and they will come...remember the yellow submarine...yeah!!! Was this all planned or what...
Interestingly enough there is a large amount of unknown funds coming from the carribean to offset the slowdown in Treasury buying from Asia. The source of those funds is not totally known.
My hypothesis on the reason for the lower rates is supply and demand. There is simply too many dollars and not enough Treasuries for sale, hence low rates and inevitable inflation.
<< <i>The Caribean sources, are the American Corporations which moved from the United States to the Carribean to avoid taxes back a few years ago...they claimed bankruptcy and headed for the Carribean...remember VIATEL, build it and they will come...remember the yellow submarine...yeah!!! Was this all planned or what... >>
I wasn't watching so I missed it. Sounds like a smart move though to keep the thieves away from the stash.
No, they took many a shareholder for a ride off the end of the pier...and left them holding an empty bag all the while telling them things were good....no they did not save anyone from anything...they are a bunch of thieves...
As it seems I am the only one saying rates are going LOWER not higher, here is what I believe maybe happening.
Most of us agree that there is a housing bubble. Also that the banks have been somewhat loose in their lending parctices.
The bond market is smarter than any one person and all of us collectively. It sees the housing bubble and knows that when it pops it will create a severe banking problem. To keep the economy from being completely destroyed, the FED will pump massive amounts of liquidity into the market. This will push rates even lower and compounds the situation.
Dont forget that rates went well under 1% in Japan, so a precident has been set. Dont think it cant happen here. This could cause massive selling in the dollar and perhaps precious metals could do quite well.
Of course this is nearly a doomsday scenerio, so it probably wont happen, but it is food for thought that I have not heard expressed anywhere before.
cohodk, I can see it happening here...like it did in the state of Texas back in the 80's...million dollar homes bulldozed...bank after bank claimed bankruptcy....and that was Texas...now multiply that by 50 states and what do you have....these could be trying times ahead...How has the population grown in 25 years...what happens when more jobs are cut and people have a $1,500 dollar a month morgage...will the banks bulldoze them and take the lose...we shall see...
The game in Japan was borrowing ( not not individuals) from the central bank there and buying treasuries here, all the while the real estate went down down down. In some cases losing 90% of it's value ( imagine that one!)
A friend of mine didn't fare quite that bad as she owned a place in Hong Kong which she bought for 750K USD. She walked away from it when it appraised at 450K and the bank was calling the note. She moved back to mainland China and is apparently doing better than ever nowadays.
When we came back from NC last week, there were notes stuffed in my front door asking if my house was for sale and I've already had offers which are considerably more than I would have listed it for with a realtor. I mentioned looking in NC to a neighbor and that's what my wife and I came back to. Pretty amazing.
But South Florida is a unique piece of real estate so.........
Point is if a person makes $7.75 an hour and over extends hisself...his wife makes another $7.40 an hour and one loses their job....they needed both incomes to come up with the morgage...they get a couple of months behind...the bank calls and says they need some money, that they are two months behind on the morgage...who is at falt...the poor guy and his wife or the bank for loaning him money in the first place...in the end both the bank and the poor family man will pay the price....many banks will go bankrupt just from loaning money to people in this class alone...and these loans are being made everyday....
I do agree with you guys on one thing. The massive foreign trade deficit and subsequent buying of our debt has contributed to our very low long term interest rates and very high housing prices. In the long run the real term value of our housing may sink when foreign markets figure out our currency is sick and redeploy the assets or demand higher interest rates.
I noticed that I did not receive many comments on my new conspiracy theory, but if this is correct then this will change they way all of us look at our investments. Here is the really important part,
“There is a wide-spread misconception that the United States relies on the savings or other countries to finance its current account deficit. This is incorrect. During recent years, at least, the US current account deficit is financed primarily by money newly created by the central banks of other countries. Newly issued paper money is not the same thing as a county's savings.”
“Foreign central banks (although not foreign private sector investors) appear to have an unlimited appetite to buy dollars to prevent their currencies from appreciating so as to protect their countries' trade surpluses. Will they stop acquiring dollars and watch their economies be thrown into recession as their currencies rapidly appreciate just because the Net International Investment Position of the United States has reached a deficit equivalent to 25% of US GDP? Why would 25% be the threshold that would trigger a change in their behavior? Why not 75% of US GDP? Or 150%?”
What all this really means is that because of the international deals the U.S. has made to except cheap products into our markets from foreigners, with the agreement that they will buy our debt, there has been created an entirely new system of world finance.
So again here is the situation. An Asian businessperson sells 100 million dollars worth of goods to Wal-mart. He gets paid in dollars. He needs his own currency to pay his bills. His central bank PRINTS the money and exchanges it for the 100 million U.S. They take the 100 million and buy U.S. debt i.e. treasuries, mortgage backed securities (MBS) etc.
From their side of the transaction they need two things to continue, they need to keep selling their cheap goods here, and they need to have available debt to buy. Do they care what the interest rate is? NO not really, since they printed the money and it’s FREE. If they allow the rates to go to high then there will be less debt to buy. If the government cuts back, or folks stop buying houses because the rates are to high there is less debt to buy, and we can reshape our agreements with tariffs, which slows their economy, and cuts down on FREE asset purchases.
In recent years many countries have moved from strictly Treasuries to MBS, are they also buying shares in our banks, and large companies?
In the case of Gold why buy that, it has no earnings and minimal uses, but silver, copper, ptatinum, etc. all seem still very strong.
If the housing bubble in many areas bursts, so what, the mortgages are owned by foreigners that printed the money to finance them anyway. They can either hold the properties or sell them at a loss, but is it really a loss when you created the money out of thin air to buy them anyway?
So will bond rates and mortgage rates go up? They should not, since the buyers of these debts are not only not demanding they go up, but need for them to stay low to continue borrowing by the American public.
<< <i>Who is that lucky. Here in So Cal the average is twice that. >>
Our note was $800/mo in Kansas City; 1400 sq. ft. house we bought at $105,000; sold for $130k when we moved last year. Here in Shreveport, LA, in this market, a nice 1200 or so sq. ft. house runs for $165,000 or so. $300k would buy an incredibly HUGE house. Of course, for the people that a) live in other parts of the country, or b) wish to have an enormous home, this doesn't matter too much I suppose. There's no way I'd live in a part of the country where a starter house cost 500k. That's simply unreal.
I heard they were making a French version of Medal of Honor. I wonder how many hotkeys it'll have for "surrender."
Mr. Early, the Carribean sources are "off-shore" US accounts, typically hedge funds or major banks. In any case, they've nearly doubled their buying of the US dollar in the past 6 months. They have picked up the slack for Japan and China and have been the largest buyers of US dollars since. The UK has also stepped up their buying via similar type off-shore accounts as mentioned in Denning's article. I doubt that central banks overseas are picking up the buying. We know that Japan has decreased it's buying for one so have a number of other European nations. US banks currently only carry 1% or less of cash reserves on average. A striking change from years ago when 10% was the standard. Banks have to do something with that 100:1 leverage and I'm sure they spread it out among US bonds, mortagages, and stocks. If only we had the luxury to lend out our money at $100:1. And when the banks fail? They can just walk away from it having profited handsomely on the run-up. With the new bankruptcy law the US govt wants to be sure someone is left holding the bag for this malfeasance, and it will be the US consumer held accountable, not those responsible for giving out the easy credit nor those who "invented" the low interest rates.
From Dan Denning's article on www.financialsense.com:
The mainstays of the US bond market, China and Japan, aren’t buying. Hedge funds are. But their support for the dollar, which has the effect of keeping interest rates down, is merely a trade, not a policy. When the hedge funds sell, or quit buying, who will pick up the slack? No one.
Interest rates will go up. Puff goes the American housing market. Down goes the dollar.
All of which is to say that there is a lot less support to the dollar than meets the eye. The dollar is simply GM in waiting. US bonds are distressed debt owned increasingly by fund managers desperate to eke out a few basis points here and there. This is not the bedrock of a strong rally in a currency.
The dollar is a long-term sell. But if not the euro, what will it fall against next? Well, while the dollar rally story is shallow, the commodity bull story is still deep and rich.
A twenty-five year period of under-investment in productive capacity in commodities is not simply erased by an eighteen-month bull market in commodity stocks. The world still needs new refineries and more liquid natural gas terminals. There are still lots of global bellies to feed and cars to be fuelled. The drivers of commodity demand—large, industrializing populations in Asia competing with Westerners accustomed to high wages and high standards of living—are still going strong, even if commodity stocks are not at the moment.
And here's a link to a good article showing that the gold stocks commodity bull is still alive based on trends. The charts once again tell the tale. And as long as gold is hanging in there, gold coins and the numismatic market will too.
There's no way I'd live in a part of the country where a starter house cost 500k.
I live in a part of the country where a starter house costs $500k.
It's also a beautiful part of the country with great weather year round, good jobs with high pay in growing industries, and stock options still making millionaires on a regular basis.
I'd never live in a part of the country with less desireable real estate.
Roadrunner, so these "carribean" accounts are US ? Now why do I think this is suspect to begin with. Kind of like "gee, I want to park some dough in an offshore account so where should I go, hmmmm, howz about the caymans?"
I've met a lot of people like that, primarily "wannabe's" and when asked the question I render my opinion that the caribean is TOO CLOSE to play that game.
Forgive me for rambling. So now it's US companies who fled to the carribean to avoid whatever, and now they've decided to BUY into the falling dollar?? And the Japanese and Chinese are backing off? Again I don't mean to sound like a non believer but re-patriating already ex patriated money? Unless I'm missing something.......
Prior to a major downturn in real estate prices in "desireable" places (such as the northeast where I live), I would most assuredly rather live in a more "depressed" or "up and coming" area where the housing mania hasn't been in effect. Like in all cycles, housing prices will fall considerably here in the northeast at some point in time. It is inevitable. I'd much rather see my investment secure by being in an area where the chance of a housing price drop is far less likely, or at least the % drop will be far less. Once the dust settles, then move back to your old area. Another option is to sell that "hot house" in and consider a rental. As prices eventually cool off, the rentals will be the better deals. The downturn this time around will make 1989-1995 housing correction look tame by comparison. The closest comparison can be made to housing bubble prices in the 1920's which rose considerably fueled by loose credit. Home prices fell by 80% after 1929. I'll bet that hurt.
A coin dealer for example can make good use of this by living in states far from the major cities where prices are far less and taxes much less. This makes sense to those who do much of their business at large shows and the travel costs the same.
Mr early, I didn't say it was US corporations per se, but hedge funds, foreign entities, banks, accounts for US brokerages, etc. Just call it the financial slop of the world all mixed together. Honestly, no one but the people doing business there knows what the deal is. I've read in several sources that US govt (through other entities and brokerages) run funds through here to help "move" the markets when they need to (Plunge Protection Team and Exchange Stabilization Fund). And why not? It gets the job done and it keeps them from being transparent. They can't run all their money through just one brokerage in New York City. You have to spread it around too. Hedge Funds now control over $1 TRILLION in assets. Picking up a $50-100 BILLION to help support the US dollar is a small amount....unless they lose it. HUD "lost" $59 BILLION in 1999 and no one cared about that. Financially the Carribean Funds amount to one of the world's strongest financial powers. And most think it's only a place to vacation.
I'm sure if you google on "carribean hedge fund" or "carribean funds" or similar things you'll find more sources to review.
Roadrunner, while you and I are pretty much on the same page on the real estate issue, using the northeast in my opinion is not a good benchmark to use is it? There's been a net LOSS of population in parts of the northeast whereas in the case of S Fla which sasw stangnating prices for decades, and has only in the last 5 years saw this doubling and tripling of prices, ( it seems like the entire northeast is trying to populate here) . The population of Fla now stands at a tad over 17 million and many experts think we'll parallel Ca in the next 15 years "easily".
Now Baley is ok with that ( your in Southern Ca aren't you Baley?). I'm not. Hence we're looking at western N Carolina, Lake of the Ozarks, and other places around the country to LIVE. Keep and investment ( maybe) in S Fla, but it's certainly getting californicated now and it's not fun anymore.
Further, what Fla DOES have which Ca does not is no state income tax. Thats certainly important as it will cost me thousands per year to live elsewhere.........ain't freedom something?
On the carribean thing again, what kind of money are we talking?
Tom, here's 2 articles that might help. One of those suggests that the US govt is playing with the numbers associated with the current account (up to $100 Billion changed in Jan 2005.) Seems the govt couldn't figure out who they really gave $100 Billion to. Some pretty odd accounting here. Definitely not GAAP.
Kirby's gist is that he feels the US govt is the only one capable of creating so much money so quickly in this area.....rather than hedge funds per se. They may be called "hedge" funds but whose behind them? But whoever the "Carribean" comprises, they have been swallowing more of our debt since Dec 2004 than any country in the world. His suggestion is that if a hedge fund were really doing this, they'd be billions in the hole and it would be out in the open by now. The tables are put out by the govt. Interesting to check out the actual buying by UK, China, Japan, and the Carribean boys.
The northeast may be losing population but the bubble buying of homes is no different. The prices will fall. As far as Calif and So. Florida, I don't know. Nothing is a sure thing. Didn't Calif have a population expansion in the 1970's and still get whacked hard when housing prices sunk?
<< <i>The bond market is smarter than any one person and all of us collectively >>
The market ****IS**** all of us collectively. A market is not some organism with its own brain. >>
Actually it is. When it moves the individuals who make it must move. I contend that it moves first before individuals do. Kind of like a giant centipede. One leg moves and that gets the whole body moving which in turn makes all the other legs move.
I have my bets placed on large insurance companies backing this nation...in 1929 when the market crashed...I have heard if it had not been for the Insurance companies this country would not have survived...It was also the Insurance companies that had the money to give to start the manufacturing of the amunitions and equipment we needed to enter WW 2.
Actually insurance companies don't do business the way they used to. Interestingly enough, it was Warren Buffet who had the brilliant idea of taking the huge cash reserves and investing them back into other corporations instead of putting them in cash vehicles such as bonds. What this means of course is that if we do enter another depression, the insurance companies will be just as screwed as all other businesses.
While I trust Buffet to keep Geico and his other insurance holdings solvent (he owns 1/3 the world's silver supply) I wouldn't bet any money on the other ones.
"...reality has a well-known liberal bias." -- Stephen Colbert
Insurance companies hold a powerful stick...and the laws that govern them are quite strict...I believe when all else fails they will still be around to pick up the pieces.
Comments
Well maybe NOT, In 1990 I bought an old silver property in New Mexico that once belong to the Hunts. I bought the property not for silver, but because it had another mineral on it that we were interested in, Zeolite.
The company I bought the property from told me that in 1979 the Hunts were mining sliver on the property and when I ask at what price silver had to be again to make any money I was told $7.65 per ounce to break even. The mining business is a terrible business, full of regulators, taxes, lawsuits, personnel problems, insurance costs, etc.etc. Please keep in mind this is mining silver for silvers sake.
Just using the governments own inflation numbers, all products across the board averaged are up 2.54 times since 1980. So the price of sliver would need to be $15.30 to break even, and the cost of environmental issues, lawsuits, and labor are much higher today than 25 years ago.
All of that being said you might get some cheap silver from Mexico, or China, but how much?
270,000 metric tons x 35,200 oz = 9.5 billion oz.
9.5 billion oz / 280 million US residents = 34 oz per person.
I doubt everyone in the US would want silver but if 10% do, then that would be about 20 pounds each.>>
///////
Small correction:
1 metric ton equals 2204.5 pounds. 1 pound equals 14.583 troy ounces.
270,000 x 2204.5 x 14.583 = 8,678,628,360 troy ounces, not 9.5 billion. Your error was in conversion from regular pounds to troy ounces. There are 16 regular ounces in a regular pound, 12 troy ounces in a troy pound, but 14.583 troy ounces in a regular pound.
... but if it is profitable then there are hundreds of mining companies that could convert and be up and running in much less time than you think.
Hundreds? Very unlikely. I read an article on silver in the last week that stated that the 13th largest silver producer right now comes from a mine that is mining for other ores. As I said earlier, the mining infrastructure has not been kept up in the 1990's due to the easy money that was available to the industry by hedging and the carry trade. All that money normally used to support future mining was shifted to hedges or gold derivatives....sure things at that time. Why spend money fixing up mines or planning future growth when you can get 5% or more via the carry trade? The miners have lost years in the 1990's. It will take much longer to resurrect the mining industries. And don't forget that those countries with strong currencies have been shouldering losses (South Africa for ex.) and if anything have been CLOSING mines to reduce costs. The South African miners have been bleeding profusely since the Rand got strong as the US dollar fell.
And on the brighter note of govt stats. I read yesterday where the old CRB is going to be modified rather shortly. Since this govt stat had not yet been subject to massaging, it was overdue. Normally the CRB was adjusted once per year to accomodate trends. Now the govt wants to do it monthly. And in those adjustments they can adjust the weighting factors of any commodities they like. Next month if silver is up 10% they can decide to shift the weighting of silver from say 5% to 2% in the CRB....because they know better.
Knowing that the CRB is a prime indicator of inflationary trends, the govt wants to keep the game going a little longer that commodity prices are not escalating as fast as we think, and that there is no inflation. Let's now add the CRB to the CPI, PPI, GDP, and the B(L)S jobs report. "Look ma...no 'flation!"
roadrunner
<< <i>I'm very tired of seeing 5 page articles down loaded en masse. I don't even read them anymore. Ibid..... Why not do us all a favor and summarize the key points in a few paragraphs? That's far more readible. I also learn more myself when I am forced to state a position and back it up. And of course credit the author with the original idea. If you want to reference an article then place a link in for those who want to dive in futther. Copying a page or less is ok. 5-10 pages? Get real. End of rant.
>>
I skim most of them but this last one was excellent.
Nonfarm Payrolls 78K vs 175K consensus
Unemployment Rate 5.1% vs 5.2% consensus
Average Workweek 33.8 vs 33.8 consensus
Hourly Earnings +0.2% vs +0.2% consensus
Bottom line---Nonfarm payrolls checked in at 78K, well below forecasts of 175K, while the unemployment rate fell to 5.1% (from 5.2%) and hourly earnings matched an expected 0.2% rise versus a prior 0.3% increase... Bonds, which were relatively unchanged before the release, have surged as the 10-yr note is up 20 ticks to yield 3.82%
Knowledge is the enemy of fear
<< <i>...
Average Workweek 33.8 vs 33.8 consensus
... >>
Average workweek: ~5 hrs
Time spent on CU: 30 hrs
-g
I'd give you the world, just because...
Speak to me of loved ones, favorite places and things, loves lost and gained, tears shed for joy and sorrow, of when I see the sparkle in your eye ...
and the blackness when the dream dies, of lovers, fools, adventurers and kings while I sip my wine and contemplate the Chi.
The fall in the EURO seems more like manipulation opportunity due to the vote than a real economic reality. The EURO has no reason to be dropping compared the the US $$.
Or is the $$ becoming stronger?
The economics of Poland are much different than in Germany. A months salary in Poland is less than $300 while in Germany it is 10x that. The EU has a long way to go before then can syncronize and really give the US a run for its money.
Knowledge is the enemy of fear
Tom
It is interesting to observe how far removed are the political leaders of countries such as France, the Netherlands, and Great Britain from the people they claim to represent. The chief executives of these countries had campaigned on behalf of the EU, even as public opinion in each opposed the constitution. So much for the myth of "representative government." Were I the Prime Minister of Holland, I would resign in disgrace for having supported a system rejected by over three-fifths of the electorate. But the attraction of power over one’s fellows easily seduces even the best-intentioned of men and women.
While it took many decades for the American political system to evolve to the point of micromanaging the daily lives of people, the EU eurocrats were intent on beginning at such a top-down level of organization. British grocers were criminally prosecuted for selling vegetables by the pound rather than by grams; window-washers were prohibited from using ladders in their trade; only straight bananas were allowed to be sold; even the size and content of meatballs were strictly defined by the new EU authorities!
History Matters
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Knowledge is the enemy of fear
<< <i>
<< <i>Furthermore, the "take off" of the digital camera market is restricted, in large part, to the young and relatively affluent (professional and young) market segments in developed economies. To make full use of digital photography, one requires a computer and/or printer infrastructure, plus expensive printer cartridges, re chargeable batteries, and photographic papers, that are, collectively, generally beyond the pocket of the mass market. Therefore, it seems unlikely that digital photography will become a substitute for mass-market traditional photography in the near future. Given the growth in general affluence of the Asian markets, the mass market for conventional photography is likely to expand at a faster rate than the growth of digital photography, offsetting any decline in developed countries. Therefore, to analyze the silver market one has to see outside the photographic market segment. >>
And you need very expensive dark room/photo processing equipment, chemicals, and paper to develop and print film. Of course very few people own those things. We rely on commercial photo processors, who also print digital photos. I find it hard to give much credence to anyone whose financial analysis is this thin. In fact, it sounds like someone grasping at straws to support his case.
CG >>
Actually this analysis is not thin at all. In fact, it is proving to be a fact. Conventional photography is outpacing digital photography today.The growing area in photography today is in disposable cameras in poorer countries, and not the digital camera. You see, there is a massive market growing in third world developing countries where people are quite anxious to put their lives on film and can do so with a $8-$10 disposable camera. They don't have access to digital cameras and all of the acoutraments (sp?) that go along with them. As a result, conventional photography IS expanding faster. Furthermore, there are 2 other interesting things taking place as well. First, the digital market is in a slump--sales have slown down significantly. Olympus says it is taking a $166 milion operating loss, as a result. Japanese markets have dropped 1%, which, on a value basis is 11% in adjustment for the sharp drop in prices. They attribute it to an oversaturated market. Exports to Europe dropped 10.7%. Sanyo, the largest in the market said they were taking hard loses and had to drop their production estimate from 18 million units, down to 11 million units--that is a 40% drop in production!! If that isn't dropping a bomb on the market, I don't know what is.. Second, more people are taking their digital pics and bringing them in to have them printed on conventional, silver rich photo paper, simply because it is superior. As a result, the digital age has not yet made a signifant, permanent dent in conventional photography. The CEO of Kodak says that he sees them living side by side for a long time, and they are not making any adjustments yet for the demise of conventional photography. On the contrary, as I said, they are on the increase.
coinfool
"You broke the bonds and you loosed the chains; carried the cross of my shame, of my shame--you know I believe it..."
Since we are on a 15-20 year, 150-200 million ounce deficit per year, and most of the silver that is being used up is used up for good, And the majority of silver is used for industry--do you seriously think that industry would come to a grinding halt becasue they would be unwilling to pay too much for silver. If it isn't there (which is eventual in adequate amounts), and the demand is great, (which it is), then the sky would be the limit. $100 silver would not only be imaginable, but even expected.
coinfool
"You broke the bonds and you loosed the chains; carried the cross of my shame, of my shame--you know I believe it..."
<< <i>and is becoming a collective. >>
Kum-bah-yah YEAH YEAH Kum-bah-yah!
<< <i>
<< <i>and is becoming a collective. >>
Kum-bah-yah YEAH YEAH Kum-bah-yah!
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
I like the 175K consensus considering that the BLS "black box" birth death model already padded in 207,000 jobs months ago.
If you consider that 207,000 jobs were "created" in the black box
(rather than the economy), then the 78,000 jobs "created" this past month, represent a net LOSS of around 129,000 jobs! No jobs were created, but 129K were lost. This is very similar to last month where the black box padded in 257,000 jobs and the final tally was listed as 274,000....for a net "gain" of 17,000 jobs...mostly created at McFood Corps and govt agencies. The BLS black box was created when the economy was expanding in the 1990's. No one knows what the Birth Death model should be for a flat or struggling economy. The BLS statisticians would never make such an assumption now since the numbers would not be as cherry.
Let's just continue adding the 900,000 each year any ways.
Without the supposed 900,000 jobs the black box creates EVERY year, how many real jobs can the current administration really lay claim to?
Oil is back to $55. This and the payroll numbers gave gold a boost to
$423. The Euro weakness is temporary as is the gold weakness.
The US dollar may have run it's course again on a short upleg. If not, it could rally for a few months more, but inevitably will give way to another fall back towards the .80 dollar index level.
Black Box link to BLS - birth death model
roadrunner
If you answered a college level economics test with the actual numbers from this economy, you'd fail the test. Greenspan calls it a conundrum.
What gives?
Here is my latest for you to ponder.
Everyone including the Fed is very confused about how the bond, mortgage, and other financial markets are acting these days. Even though the Fed has raised rates eight times the ten-year bond, and therefore the mortgage, interest rates have declined frustrating the Feds effort to slow down the housing market in the U.S.
Unlike asset markets the financial instrument markets react the opposite to supply and demand. In an asset market the more buyers there are the higher the price. In the bond market if there are a great deal of buyers there is no need to raise interest rates even though the bonds may be fully priced, so the rates say the same or even decline.
Now for the theory:
For thousands of years this country and that have tried to increase their power by taking their neighbors properties, and wealth, to increase their own power. This of course was generally done via war.
In today’s world it is not possible for any country or even a group of countries to challenge the U.S.military complex, and doing so could easily mean total destruction for any attacker.
However the U.S. does have one very important weakness, and that is its free financial system. Since the option of war is out of the question in the eyes of all foreign powers looking with greedy eyes to the U.S., what about just buying it?
If you try to go to Arab lands and buy their oil properties, or reserves, the answer would be sorry no dice. If you tried to go to China and buy their mineral reserves, or huge parts of their industries the answer would be the same, but in the U.S. everything is for sale.
Over the last couple of years I have ask myself why would the Asian central banks and the Arabs continue to accept these low interest rates, on treasuries, mortgage backed securities (MBS), etc. knowing what bad condition the dollar was in and how close to default many of the borrowers were?
The answer is simple they know default is coming and they intend to own the assets backed by the debt.
The reason why the 10-year bond rate has not increased, and therefore mortgage rates have not increased is simple; foreigners just keep flooding those markets as buyers.
As I pointed out in an earlier thread in the case of China they are simple printing money to give to Chinese manufactures Yuan’s to cover trade deficits with the U.S., and using the dollars they receive to buy treasuries and MBS.
Here are a few quotes and stats to back up the theory:
“ The People's Bank of China. The PBOC has shifted from buying treasuries to buying mortgage backed securities.
Net foreign purchases of MBS were $242 billion in mid-2004, up $19 billion from year-end 2003 and $35 billion more than 2002, according to Inside MBS & ABS, a publication of Inside Mortgage Finance. While data is not available yet for the second half of 2004, most analysts believe foreign investment in MBS gained even more momentum during that period.
The strong performance of the $4.5 trillion MBS market in 2004 can partly be attributed to buying from Asian portfolios and China's central bank in particular.”
The Chinese central bank's demand for mortgages is partly due to the climbing balance of dollars it has for investment. China's reserves for the year ending in August grew by $131 billion, second only to Japan's $272 billion increase, according to the International Monetary Fund. China's reserves now stand at around $501 billion, while Japan's are at $827 billion."
Richard Duncan is the best-selling author of The Dollar Crisis,
“There is a widespread misconception that the United States relies on the savings or other countries to finance its current account deficit. This is incorrect.
During recent years, at least, the US current account deficit is financed primarily by money newly created by the central banks of other countries. Newly issued paper money is not the same thing as a county's savings.
The companies that earned money by exporting to the US keep their savings. It is only that they keep them in their domestic currencies after having sold the dollars they earned from exporting to their central bank.
And, for their part, Asian central banks, in particular, have consistently demonstrated their ability and willingness to create money in order to finance the US current account deficit. Given that nothing has occurred to call into question their determination to continue doing so, there is no reason to expect that behavior to change any time in the near future.
The Fed is losing control over interest rates, and, therefore, over the broader economy. The Fed began raising the Federal Funds rate in June 2004. Since then it has increased rates by 25 basis points on eight occasions, by a total of 200 basis points, to 3%.
Despite that, the market-determined rate on 10-year government bonds has actually fallen over that period by 50bp to just above 4%. That cannot be what the Fed had hoped for when it began raising rates.
Many countries around the world accumulate large stockpiles of dollars as a result of their trade surpluses with the United States. The central banks of most of those countries print their own currency and buy those dollars in order to prevent their currencies from appreciating when the private sector companies that earned the dollars exchange them for the domestic currency on the foreign exchange markets.
The central banks then invest the dollars they have acquired into US dollar-denominated debt instruments, preferably US treasury bonds or agency debt, in order to earn a return. If the amount of dollars accumulated by foreign central banks exceeds the amount of new debt being issued by the US government and the US agencies during any particular period, then the central banks will buy existing government and agency debt instead of newly issued debt.
Mortgage rates are determined by the yield on 10-year treasury bonds in the United States. Therefore, if foreign central bank buying drives down the yield on treasury bonds, it will also push down mortgage rates, which in turn will cause the rate of increase in US property prices, already the fastest in 25 years during 2004 (and the fastest ever in real, inflation-adjusted terms), to accelerate still further.
Higher property prices will allow yet more equity extraction which, in turn, will stimulate US consumption further. Additional consumption will pull in more imports and exacerbate the US current account deficit. And, a larger current account deficit will put yet more dollars in the hands of foreign central banks, who, then, will look for still more dollar-denominated assets in which to invest them.
At present, foreign investors own approximately 50% of the $4 trillion in US government debt that is held by the public. Under the circumstances just described, within four years, foreign investors could end up owing all outstanding US government debt.”
1. For one, the economic numbers published these days are
nearly worthless. Sorry but one can't make sense out of garbage.
2. The US consumer is consuming for the "world" to keep things
afloat. And there are still banks/countries willing to lend us the
money to keep consuming like maniacs. As China and
Japan are bowing out, the "Carribean" sources have picked up
the pace. You wouldn't think that the Carribean was one of the
world's great financial powers. As long as credit is still being
pumped into the US housing market, consumers can continue to
binge. This makes no sense of course, so why shouldn't the net
outcome from this make any sense?
3. Heavy market manipulations by too many sources, including
the US govt. Until a major world/economic event occurs that
cannot be manipulated out of (like a Fannie or derivatives blow up for example), the game will continue.
roadrunner
What are they? Drugs? What?
Please illuminate that one for me.
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
My hypothesis on the reason for the lower rates is supply and demand. There is simply too many dollars and not enough Treasuries for sale, hence low rates and inevitable inflation.
<< <i>The Caribean sources, are the American Corporations which moved from the United States to the Carribean to avoid taxes back a few years ago...they claimed bankruptcy and headed for the Carribean...remember VIATEL, build it and they will come...remember the yellow submarine...yeah!!! Was this all planned or what... >>
I wasn't watching so I missed it. Sounds like a smart move though to keep the thieves away from the stash.
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Most of us agree that there is a housing bubble. Also that the banks have been somewhat loose in their lending parctices.
The bond market is smarter than any one person and all of us collectively. It sees the housing bubble and knows that when it pops it will create a severe banking problem. To keep the economy from being completely destroyed, the FED will pump massive amounts of liquidity into the market. This will push rates even lower and compounds the situation.
Dont forget that rates went well under 1% in Japan, so a precident has been set. Dont think it cant happen here. This could cause massive selling in the dollar and perhaps precious metals could do quite well.
Of course this is nearly a doomsday scenerio, so it probably wont happen, but it is food for thought that I have not heard expressed anywhere before.
Knowledge is the enemy of fear
<< <i>The bond market is smarter than any one person and all of us collectively >>
The market ****IS**** all of us collectively. A market is not some organism with its own brain.
A friend of mine didn't fare quite that bad as she owned a place in Hong Kong which she bought for 750K USD. She walked away from it when it appraised at 450K and the bank was calling the note. She moved back to mainland China and is apparently doing better than ever nowadays.
When we came back from NC last week, there were notes stuffed in my front door asking if my house was for sale and I've already had offers which are considerably more than I would have listed it for with a realtor. I mentioned looking in NC to a neighbor and that's what my wife and I came back to. Pretty amazing.
But South Florida is a unique piece of real estate so.........
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
<< <i>a $1,500 dollar a month morgage >>
Who is that lucky. Here in So Cal the average is twice that.
Eric
“There is a wide-spread misconception that the United States relies on the savings or other countries to finance its current account deficit. This is incorrect.
During recent years, at least, the US current account deficit is financed primarily by money newly created by the central banks of other countries. Newly issued paper money is not the same thing as a county's savings.”
“Foreign central banks (although not foreign private sector investors) appear to have an unlimited appetite to buy dollars to prevent their currencies from appreciating so as to protect their countries' trade surpluses. Will they stop acquiring dollars and watch their economies be thrown into recession as their currencies rapidly appreciate just because the Net International Investment Position of the United States has reached a deficit equivalent to 25% of US GDP?
Why would 25% be the threshold that would trigger a change in their behavior? Why not 75% of US GDP? Or 150%?”
What all this really means is that because of the international deals the U.S. has made to except cheap products into our markets from foreigners, with the agreement that they will buy our debt, there has been created an entirely new system of world finance.
So again here is the situation. An Asian businessperson sells 100 million dollars worth of goods to Wal-mart. He gets paid in dollars. He needs his own currency to pay his bills. His central bank PRINTS the money and exchanges it for the 100 million U.S. They take the 100 million and buy U.S. debt i.e. treasuries, mortgage backed securities (MBS) etc.
From their side of the transaction they need two things to continue, they need to keep selling their cheap goods here, and they need to have available debt to buy. Do they care what the interest rate is? NO not really, since they printed the money and it’s FREE. If they allow the rates to go to high then there will be less debt to buy. If the government cuts back, or folks stop buying houses because the rates are to high there is less debt to buy, and we can reshape our agreements with tariffs, which slows their economy, and cuts down on FREE asset purchases.
In recent years many countries have moved from strictly Treasuries to MBS, are they also buying shares in our banks, and large companies?
In the case of Gold why buy that, it has no earnings and minimal uses, but silver, copper, ptatinum, etc. all seem still very strong.
If the housing bubble in many areas bursts, so what, the mortgages are owned by foreigners that printed the money to finance them anyway. They can either hold the properties or sell them at a loss, but is it really a loss when you created the money out of thin air to buy them anyway?
So will bond rates and mortgage rates go up? They should not, since the buyers of these debts are not only not demanding they go up, but need for them to stay low to continue borrowing by the American public.
<< <i>Who is that lucky. Here in So Cal the average is twice that. >>
Our note was $800/mo in Kansas City; 1400 sq. ft. house we bought at $105,000; sold for $130k when we moved last year. Here in Shreveport, LA, in this market, a nice 1200 or so sq. ft. house runs for $165,000 or so. $300k would buy an incredibly HUGE house. Of course, for the people that a) live in other parts of the country, or b) wish to have an enormous home, this doesn't matter too much I suppose. There's no way I'd live in a part of the country where a starter house cost 500k. That's simply unreal.
article. I doubt that central banks overseas are picking up the buying. We know that Japan has decreased it's buying for one so have a number of other European nations. US banks currently only carry 1% or less of cash reserves on average. A striking change from years ago when 10% was the standard. Banks have to do something with that 100:1 leverage and I'm sure they spread it out among US bonds, mortagages, and stocks. If only we had the luxury to lend out our money at $100:1. And when the banks fail?
They can just walk away from it having profited handsomely on the run-up. With the new bankruptcy law the US govt wants to be sure someone is left holding the bag for this malfeasance, and it will be the US consumer held accountable, not those responsible for giving out the easy credit nor those who "invented" the low interest rates.
From Dan Denning's article on www.financialsense.com:
The mainstays of the US bond market, China and Japan, aren’t buying. Hedge funds are. But their support for the dollar, which has the effect of keeping interest rates down, is merely a trade, not a policy. When the hedge funds sell, or quit buying, who will pick up the slack? No one.
Interest rates will go up. Puff goes the American housing market. Down goes the dollar.
All of which is to say that there is a lot less support to the dollar than meets the eye. The dollar is simply GM in waiting. US bonds are distressed debt owned increasingly by fund managers desperate to eke out a few basis points here and there. This is not the bedrock of a strong rally in a currency.
The dollar is a long-term sell. But if not the euro, what will it fall against next? Well, while the dollar rally story is shallow, the commodity bull story is still deep and rich.
A twenty-five year period of under-investment in productive capacity in commodities is not simply erased by an eighteen-month bull market in commodity stocks. The world still needs new refineries and more liquid natural gas terminals. There are still lots of global bellies to feed and cars to be fuelled. The drivers of commodity demand—large, industrializing populations in Asia competing with Westerners accustomed to high wages and high standards of living—are still going strong, even if commodity stocks are not at the moment.
And here's a link to a good article showing that the gold stocks commodity bull is still alive based on trends. The charts once again tell the tale. And as long as gold is hanging in there, gold coins and the numismatic market will too.
Gold Market Defense - Frank Barbera
roadrunner
I live in a part of the country where a starter house costs $500k.
It's also a beautiful part of the country with great weather year round, good jobs with high pay in growing industries, and stock options still making millionaires on a regular basis.
I'd never live in a part of the country with less desireable real estate.
Liberty: Parent of Science & Industry
I've met a lot of people like that, primarily "wannabe's" and when asked the question I render my opinion that the caribean is TOO CLOSE to play that game.
Forgive me for rambling. So now it's US companies who fled to the carribean to avoid whatever, and now they've decided to BUY into the falling dollar?? And the Japanese and Chinese are backing off? Again I don't mean to sound like a non believer but re-patriating already ex patriated money? Unless I'm missing something.......
I'm not buying that.
There has to be more to that. Has to be.
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
(such as the northeast where I live), I would most assuredly rather live in a more "depressed" or "up and coming" area where the housing mania hasn't been in effect. Like in all cycles, housing prices will fall considerably here in the northeast at some point in time. It is inevitable. I'd much rather see my investment secure by being in an area where the chance of a housing price drop is far less likely, or at least the % drop will be far less. Once the dust settles, then move back to your old area. Another option is to sell that "hot house" in and consider a rental. As prices eventually cool off, the rentals will be the better deals. The downturn this time around will make 1989-1995 housing correction look tame by comparison. The closest comparison can be made to housing bubble prices in the 1920's which rose considerably fueled by loose credit. Home prices fell by 80% after 1929. I'll bet that hurt.
A coin dealer for example can make good use of this by living in states far from the major cities where prices are far less and taxes much less. This makes sense to those who do much of their business at large shows and the travel costs the same.
roadrunner
foreign entities, banks, accounts for US brokerages, etc. Just call it the financial slop of the world all mixed together. Honestly, no one but the people doing business there knows what the deal is. I've read in several sources that US govt (through other entities and brokerages) run funds through here to help "move" the markets when they need to (Plunge Protection Team and Exchange Stabilization Fund). And why not? It gets the job done and it keeps them from being transparent. They can't run all their money through just one brokerage in New York City. You have to spread it around too. Hedge Funds now control over $1 TRILLION in assets. Picking up a $50-100 BILLION to help support the US dollar is a small amount....unless they lose it. HUD "lost" $59 BILLION in 1999 and no one cared about that. Financially the Carribean Funds amount to one of the world's strongest financial powers. And most think it's only a place to vacation.
I'm sure if you google on "carribean hedge fund" or "carribean funds" or similar things you'll find more sources to review.
roadrunner
Now Baley is ok with that ( your in Southern Ca aren't you Baley?). I'm not. Hence we're looking at western N Carolina, Lake of the Ozarks, and other places around the country to LIVE. Keep and investment ( maybe) in S Fla, but it's certainly getting californicated now and it's not fun anymore.
Further, what Fla DOES have which Ca does not is no state income tax. Thats certainly important as it will cost me thousands per year to live elsewhere.........ain't freedom something?
On the carribean thing again, what kind of money are we talking?
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Now I believe.
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Pirates of the Carribean - Rob Kirby
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http://www.financialsense.com/fsu/editorials/kirby/2005/0518.html">Pirates Reprise - Rob Kirby
Kirby's gist is that he feels the US govt is the only one capable of creating so much money so quickly in this area.....rather than hedge funds per se. They may be called "hedge" funds but whose behind them? But whoever the "Carribean" comprises, they have been swallowing more of our debt since Dec 2004 than any country in the world. His suggestion is that if a hedge fund were really doing this, they'd be billions in the hole and it would be out in the open by now. The tables are put out by the govt. Interesting to check out the actual buying by UK, China, Japan, and the Carribean boys.
The northeast may be losing population but the bubble buying of homes is no different. The prices will fall. As far as Calif and So. Florida, I don't know. Nothing is a sure thing. Didn't Calif have a population expansion in the 1970's and still get whacked hard when housing prices sunk?
roadrunner
Paris
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
<< <i>
<< <i>The bond market is smarter than any one person and all of us collectively >>
The market ****IS**** all of us collectively. A market is not some organism with its own brain. >>
Actually it is. When it moves the individuals who make it must move. I contend that it moves first before individuals do. Kind of like a giant centipede. One leg moves and that gets the whole body moving which in turn makes all the other legs move.
Knowledge is the enemy of fear
The average house in my county sold for $83,000 last month. Thats up from $75,000 two years ago. At least I wont feel that bubble burst.
Knowledge is the enemy of fear
While I trust Buffet to keep Geico and his other insurance holdings solvent (he owns 1/3 the world's silver supply) I wouldn't bet any money on the other ones.