If there were major reservers in Canada and Mexico why would we be pushing so hard for a multibillion dollar pipeline to the Caspian Sea, probably the few places where there is a major oil source left.
We should have had 10 times the nuclear plants by now and our autos should be Metros and not Suburbans.
We are in trouble and our refineries are at thier limits, it doesn't matter how much is pumped. Another game will play out when the oil companies use the refinery slowdown game to raise prices more. Shut some down for repair and scream "shortage"
Really it's not necessary to know much about oil to know that we are bumping up against supply constraints. The simple fact that prices are spiking and supply isn't increasing is enough information. Add in the fact that most producers are at or near record levels and the others have been in decline for years says much also. Known reserves peaked years ago and now it's admitted that many of these reserve numbers were extremely optimistic and much also requires not yet invented technology to capitalize. The simple fact is that however much exists will be depleted by geometrically increasing consumption. It may be a couple years or longer before it's obvious production is peaking but then watch for a rapid decline as existing reserves are pumped more quickly and run dry.
Which is why Warren Buffett continues to be a genius. Power generating utility companies will be providing the necessary energy to make up the difference when oil supplies start to fall. I'm sure this is why he's buying Pacificorp, and says he intends to make additional purchases.
"...reality has a well-known liberal bias." -- Stephen Colbert
Concerning GMAC and "autos": A quote from the James Sinclair website states;
Most folks do not know that GMAC owns DiTech, the easy home loan, second mortgage, equity out, company that blasts on everyone's TV all the time. GMAC is thus levered to the max on car loans and house finance at what has to be within arms reach of the top of both markets.
Interesting. So GMAC has twice the risk with both auto and mortgage financing. If the slowdown in autos doesn't finish them off, then bad housing loans probably will.
<< <i>Concerning GMAC and "autos": A quote from the James Sinclair website states;
Most folks do not know that GMAC owns DiTech, the easy home loan, second mortgage, equity out, company that blasts on everyone's TV all the time. GMAC is thus levered to the max on car loans and house finance at what has to be within arms reach of the top of both markets.
Interesting. So GMAC has twice the risk with both auto and mortgage financing. If the slowdown in autos doesn't finish them off, then bad housing loans probably will.
Gesh fish, aren't all the wells connected to one large whole in the ground....gesh if they suck all the oil out of that one hole the earth could implode!!!! They better leave a few barrels in there for safety sake, don't ya think....and its time for the world to FREAK out...were almost out of the worlds oil supply...don't that take the cake! I am going out right now and buy a bicycle...got to be prepared there could be a run on the market.
You can read Puplava's other articles routinely on www.financialsense.com (see below for link)
The above is a superb and easy reading primer on the adjustments installed to the CPI in the mid-1990's. I strongly recommend the first few pages (5 minutes) to anyone who has been tired about reading dry statistical information. Puplava describes hedonics, substitutinos, seasonal adjustments, qualilty factor adjustments, geometric weighting and other misunderstood topics is simple terms. The real example of a TV set dropping in "pleasure" pricing by nearly 30% because of an improved screen is hilarious. Yet we still pay the original full price at the store. Amazing.
The Boskin Commission concluded in the 1990's that the following "repairs" needed to be made to the CPI because it was overstating inflation in the early 1990's (can you believe that!). The commission apparently found what it was told to find.
The Boskin Commission recommended several changes to the CPI index which included:
1. develop and publish two indexes (core or low fat vs. regular)
2. abandon the fixed-weight formula for CPI goods
3. change the weight of items in the index from arithmetic weighting to geometric weighting
4. introduce substitutions in the index
5. seasonal adjustments to account for price increases that occur on a seasonal basis, which would smooth out the fluctuations
6. reduce prices by quality improvements
Bottom line of a lower CPI is that it saves the govt and corporations over $100 BILL per year per Mr. Puplava. You'll also never find increasing taxes represented in your CPI either.
By MARTIN CRUTSINGER, AP Economics Writer 13 minutes ago
WASHINGTON - Sales of new homes in May climbed to the second highest level in history, but the median sales price fell sharply, the government reported Friday.
The Commerce Department said that sales of new single-family homes rose by 2.1 percent last month to a seasonally adjusted annual rate of 1.3 million homes. But the median sales price dropped 6.5 percent to a median $217,000, the point at which half the homes sold for more and half for less.
The housing market has been red-hot this year with demand being driven by mortgage rates that have hovered near historic lows. However, the surge in demand has raised concerns that a speculative fever is creating a housing bubble similar to the stock market bubble that burst in early 2000.
The strong new home sales followed a report Thursday that sales of previously owned homes totaled 7.13 million units at an annual rate in May, a slight decline from the record April pace, but still the second fastest sales rate on record for existing homes. The median sales price of existing homes continued rising in April to hit a record of $207,000.
The increase in sales of new homes was led by a 22.9 percent jump in sales in the Midwest, which rose to an annual rate of 268,000 units. Sales were also up in the West, rising by 1.7 percent to an annual rate of 361,000 units. However, sales fell by a sharp 24.5 percent in the Northeast to an annual rate of 74,000 units. Sales were also down in the South by 0.8 percent, to an annual rate of 595,000 units.
In other economic news Friday, the Commerce Department said orders to U.S. factories for big-ticket manufactured goods shot up at the fastest pace in 14 months in May, reflecting a huge jump in demand for commercial aircraft.
Orders for durable goods rose by 5.5 percent last month to total $210.7 billion. The gain far exceeded the 1.9 percent increase that economists had been expecting, but the strength was concentrated in demand for commercial aircraft, where orders more than doubled from their April level.
Excluding the volatile transportation sector, new orders for durable goods fell by 0.2 percent last month, marking the third decline in the past four months for orders outside of transportation.
Some of the statements in that article seem conflicting. But I had read other articles and this one part has been consistent:
The strong new home sales followed a report Thursday that sales of previously owned homes totaled 7.13 million units at an annual rate in May, a slight decline from the record April pace, but still the second fastest sales rate on record for existing homes. The median sales price of existing homes continued rising in April to hit a record of $207,000.
This tells me that prices went up slightly but total housing unit sales dropped. That was my take on it. The overall $$ sales figure is probably lower.
Stock market crashes happen with huge volume, I assume the real estate market is no different. "Investors" start to panic when the prices drop so they try to unload their real estate before the market goes lower. At least in the beginning, there are a few suckers.....err I mean buyers willing to buy at what they perceive as bargain prices.
A 6% drop should be big news. Gonna be an interesting summer leading into the October stock market crash season.
"...reality has a well-known liberal bias." -- Stephen Colbert
RR, Thanks for your post, lots of good info. in that report. One of the things I thought was interesting was what I talked about a several days ago. The Asians in particular do not care if the rates on the 10 year go up or not. They want the debt to them to keep coming!
It quite naturally is their intent to spend the money on our assets eventually, and how can we refuse to take all of these PROMISE TO PAY in return. I think that the Unocal deal should be most interesting to watch. The congress is all up in arms, but are they really, or just making a show for the sheep. I cannot imagine that they will tell the Chinese NO. If they do what will foreign investors do then? As noted by your author, the foreign devils now own a NET US of $5.089 trillion. How many U.S. companies can you buy with that?
As I said last week the PROMISES TO PAY are coming out of the woodwork. Look at this statement below, almost all of this has been created out of thin air.
“On the surface, the decision of Americans not to save is perfectly rational. The appreciation of their houses and stock portfolios has been doing all the work for them, powering a $9,400bn increase in net household wealth over the past two years to $48,800bn. Net wealth is now 550 per cent of annual disposable income, comfortably above its average of 478 per cent since 1952.
It seems that consumers have lost sight of the fact that past capital gains could easily turn into future capital losses," says Paul Ashworth, an analyst at Capital Economics. "With house prices more overvalued this time than in the housing booms of the 1970s and 1980s we might expect outright falls at some point."
Of course my generally feeling about this is that Americans really have no choice, by the time they pay their taxes, and buy the necessities of life, there is very little left to save. Folks therefore scramble to do what they can in speculative bubbles hoping for capital gains.
by Jim Puplava Storm Watch Update June 24, 2005
· In addition to the huge proportion of foreign Treasury acquisitions last year, the Federal Reserve added $51.2 billion to its own Treasury portfolio. This means that during 2004, the Fed and foreign investors absorbed $408.4 billion or about 112.7% of the total issuance of $362.5 billion. Obviously, this had a highly favorable influence, on balance, on Treasury yields during 2004, although an influence hugely lacking in traditional open-market characteristics. [Author's note—this explains the Greenspan conundrum as to why long-term yields fell, while the Fed raised short-term rates]
· As of 3/31/05, foreign investors held a total of $9.723 trillion of US financial assets, up almost $400 billion from revised holdings of $9.326 trillion as of 12/31/04. From 3/31/04, the increase was approximately $1.11 trillion.
· As of 3/31/05, foreign financial liabilities totaled $4.634 trillion, resulting in a net foreign claim against the US of $5.089 trillion.
One of the biggest mistakes we could make at the present is to have the Yuan decoupled from our dollar or institute tarrifs on Chinese imports. Either one of these would only serve to crush further our delicate economy. Our own congress doesn't get "it." Though I'm sure this posturing wins thems votes from clueless voters and favored manufacturers. The decoupling will come soon enough and it will hit us very hard. To force this action now is sheer folly.
Gold for now, also appears to be moving independently of the US dollar index and moving against the Euro and other currencies. If this trend persists it will signal a new wave in the upward price of gold.
Here is something we can all watch for. If the Chinese, the Japanese, or the Arabs make a move to buy a major world class Gold mining company, look out brother the price is going to really move. It is only a matter of time before that happens. All of this noise coming out of China wanting to spend its dollars is just the start. As I said this week the Japanese as well as other foreign devils are going to start looking to by hard assets with their PTP.
As per the below statements I think that foreign investors now realize that the Euro will never replace the dollar, so it won’t be long before they turn to Gold. Regardless of the agreements to manipulate the gold price between central banks in Europe, and the U.S. I don’t think the Asians, or the Arabs, will have any scruples in that area. In fact once we hit full world capacity with Opec, if we are not there already, all bets are off.
I also think that the Arabs are tired of being blackmailed into buying our debt. With China and India as new buyers they do not have to be pressured by us any longer. I think that this can also be added to our list of potential things that might break the U.S. debt cycles back.
By David Vaughn June 24, 2005
“During the past several years, gold's price only rose relative to the weakening dollar. However, it did not rise against most other currencies. That is because money fleeing the risky dollar sought safety in the euro. As a result, gold never actually rallied, even though from a U.S. dollar perspective it appeared as if it had.” “HOWEVER, NOW THAT FEARS HAVE EMERGED WITH REGARD TO THE EURO, SAFE HAVEN MONEY IS GOING INTO GOLD.
“One of the Federal Reserve’s nightmares may begin to unfold in 2005 or 2006, when it appears international buyers will have a choice of buying a barrel of oil for $50 dollars on the NYMEX and IPE - OR PURCHASE A BARREL OF OIL FOR €37 - €40 EUROS VIA THE IRANIAN BOURSE.”
“Iran's proposal to receive payments for crude oil sales to Europe in euros instead of U.S. dollars is based primarily on economics, Iranian and industry sources said. But politics are still likely to be a factor in any decision, they said, as Iran uses the opportunity to hit back at the U.S. government, which recently labeled it part of an "axis of evil."
"Some observers mistakenly believe that a marked increase in the (yuan's) value relative to the U.S. dollar would significantly increase manufacturing activity and jobs in the United States," said Greenspan. "I'm aware of no credible evidence that supports such a conclusion."
US Land Rig count is up 17% over last year, so somebody is drilling something. However, I must say I have seen some really goofy speculative projects lately. I'm sure they'll end up as stories about how Uncle Lenny lost the family fortune on an oil well.
Offshore rig count continues to support the assertion that the Gulf of Mexico Shelf is gone from an Exploration standpoint.
Here's another fine article. See link below. There have been a number this week. From Jim Willie. What I found the most interesting was his GDP deflator charter early in the article.
Now it's bad enough that we have rigged numbers for CPI, core CPI, jobs report, unemployment, and now the CRB index (that changes this month to a floating grab bag mentality believe it or not). But now you can add the GDP deflator too. Willie shows how the GDP deflator actually has run under the published numbers for CPI for the past 9 quarters. We all know CPI understates inflation to some degree and common sense would have said that the CPI index would be somehow applied to the GDP deflator. But apparently not. The govt statisticians use a different model that runs well under the CPI rate. Really strange stuff. And of course the less inflation you remove the GDP #'s the more "apparent" growth is shown.
Maybe what's next is a floating DOW or S&P index that can "at will" remove or add any company at the end of each month based on real results. That would certainly help boost returns for analysts and increase business. That's essentially what is going to happen with the CRB index since it is not behaving properly but continuing to go up.
Interesting article. I'm not sure I buy the assertion that foreign demand for bonds is low. SOMEONE is buying them because bond rates are a function of pure supply and demand, and the numbers cannot be manipulated by the government without arbitrage correcting the price almost instantly.
The comments on inflation and GDP are right on the mark however. The government has been screwing with these numbers since Reagan first put millions of Americans to work by counting the military in the unemployment rate. Both parties do it, it's absolute dishonesty, and it will cause the coming depression to be far worse because no one will see it coming.
Finally with regards to oil, I'm convinced the party is over. I think the biggest (and perhaps smartest) fish in the pond, Buffett and Gates, are on 100% disaster alert and investing every dollar towards capital preservation. Even if you believe the most optimistic figures, we only have a few decades of oil left, and there are PLENTY of industry experts that have predicted the top of the curve is either this year or in the next few years. The consequences CANNOT be overstated here. This is the twilight of an economy that can never exist again.
Truth doesn't sell anymore anyway. We're in a society that will spin every fact to a positive or a negative depending on which side is represented. Iraq is either a new vietnam slaughterhouse that's going to bankrupt our country, continue to kill thousands, and degrade into civil war. OR it's a new democracy full of vigor that will stand as a beacon of freedom to the entire middle east and pay all its debts with oil. As for the insurgency, is on it's last gasp.
See what I mean? The government is no longer on our side be you Republican or Democrat. It's evolved into a third party that survives on national divisions and self-serving lies. You want a law against flag burning or you want your children to be able to eat in a world that can no longer produce fertilizer out of oil?? As a culture, we better damn well get our priorities straight.
"...reality has a well-known liberal bias." -- Stephen Colbert
Yields on U.S. Treasury securities fell as some economists marked down their estimates for second-quarter growth following the durable goods report. The yield on the 10-year Treasury note fell 2 basis points, or 0.02 percentage point, to 3.93 percent as of 10:54 a.m. in New York, according to bond broker Cantor Fitzgerald LP. U.S. central bankers will raise their overnight bank lending rate to 3.25 percent on June 30, marking the ninth consecutive quarter-point increase, according to a Bloomberg News survey.
The point that several writers have made (including Willie) is that the buying buy the Japanese and Chinese has all but stopped in the past few months. The next 2 dozen major countries in the world have not been buying much if any either. The slack has been taken up by Carribean Banks and Financial Houses as well as in the UK. Both locations are well known off shore accounts with no transparency. The FED and US Treasury could be doing the actual buying. It is likely that some major country is buying in secret via the Carribean or UK sources? Seems far-fetched.
Certainly the Treasuries are being bought but by who? There is no proof of strong foreign buying now which a year ago was quite pronounced. Why would they go into hiding to buy?
Well if you believe Greenspan, he wants the long bond to fall so I don't see the motivation in the government propping it up.
I guess if you're REALLY cynical you can make the argument that our government is trying to suck the last few pennies out of the world economy before devaluing our currency and stealing the world's wealth once and for all. Although George Bush might be that evil, I doubt he's that smart.
"...reality has a well-known liberal bias." -- Stephen Colbert
My guess would be who has the most to gain from buying the dollar at its low...eventually the dollar has to rise...could take years but it will eventually rise again...Just like Warren Buffet...he buys when it is out of favor and no one wants it....he sits and waits...I think it might just be the US buying back the dollar...why not...who would gain more!!!! Those Carribean Corporations did not move out the US for nothing!!!! Manipulation at it finest!
All that High Tech money ran out of the stockmarket into foreign banks while the dollar was still high...converted into foreign currency....Foreign currency has now risen and the dollar fallen...For every Yen or whatever currency it was converted to at the time, now buys 5 US Dollars for every Yen.
I quote Iwog -- "I'm not sure I buy the assertion that foreign demand for bonds is low. SOMEONE is buying them because bond rates are a function of pure supply and demand, and the numbers cannot be manipulated by the government without arbitrage correcting the price almost instantly."
Yes, this is exactly correct. The conclusion drawn in the section on central bank purchases of US securities is incorrect. The Bank of Japan is a big buyer of US treasuries when there is inadequate demand in the private sector. They take up the slack, especially when they what to support the dollar. Recently, I believe there has been adequate demand in the Japanese private sector (banks, insurance companies, pension funds) for US treasury securities, so purchases by the BOJ have declined.
The metal's recent jump worldwide and high oil prices signal serious inflation pressures ahead. June 24, 2005: 3:19 PM EDT By Katie Benner, CNN/Money staff writer
Special Report full coverage
Oil reaches $60, hits milestone
Chinese oil giant bids $18.5B for Unocal
Debate raging over oil
EW YORK (CNN/Money) - Gold rising along with the dollar -- and with oil jumping to record highs near $60 a barrel -- may signal serious inflation woes ahead.
It's enough to give a gold bull deja vu.
A handful of precious metals insiders at the recent New York Institutional Gold Conference predicted that the price of spot gold will hit $850 an ounce in the next few years from its current level near $440.
The last time it got anywhere near that high was in the late 1970s when out-of-control inflation, unrest in the Middle East and an oil crisis pushed the precious metal from $150 to $810 a troy ounce.
Gold is currently trading 30 percent above its 10-year moving average on the New York Commodities Exchange, and gained five percent this month to stand less than $10 away from March's peak at $446.70, even while the greenback gained against the euro.
During the recent dollar rally, the American Stock Exchange's index of gold-mining stocks, or BUGS, also moved toward three-month highs, and individual gold and mining stocks including Placer Dome (up $0.05 to $15.47, Research), Newmont Mining (up $0.03 to $39.54, Research) and Barrick Gold (up $0.24 to $24.99, Research) have moved in tandem with indexes.
This, some economists contend, points to a troubling inflation problem, greater than currently perceived.
"Despite all the rate hikes, the (Federal Reserve's) overnight lending rate is still less than inflation," said James Turk, co-author of the book The Coming Collapse of the Dollar and How to Profit From It.
Black gold It is oil prices that are really making the gold market look like 1970s redux, with crude prices hovering near $60 a barrel.
While economists debate whether high oil prices will spark inflation or will slow economic growth by acting as a tax on consumers and businesses, the gold and bond markets have come down on the side of inflation.
"The recent run in gold has moved in conjunction with rising crude prices," David Meger, senior metals analyst at Alaron Trading, said in a recent note.
Gold prices began to jump higher in the third quarter of last year, concurrent with the latest oil price surge.
"Middle East nations are getting more petrol dollars as (oil) prices rise, and they're not putting it back into paper assets," said Charles de Vaulx, manager of the First Eagle Gold Fund. "They're trying to protect the value of their profits -- just like in the 1970s -- so they're buying gold," he said.
With oil prices so high, some traders believe there's still a considerable upside to gold, despite the fact that some market analysts, like MKM Partners' chief market technician Katie Townshend, say the metal has become overbought in the short term.
"Based on historic ratios between gold and oil, gold should now be over $500 an ounce," said Frank Holmes, chairman and chief investment officer as U.S. Global Funds. "Or the price of oil needs to come down to $40 to $42 a barrel." (Will oil prices hit $100? Click here.)
Forget a stronger dollar When inflation grips a market, the value of dollar-denominated assets is eroded. So a shift to gold represents, among other things, a broader shunning of financial assets in favor of hard assets as a hedge against perceived currency risks.
"Even Warren Buffett is buying gold because he sees the dollar as weak," claimed Turk.
At the moment, however, gold and the dollar are both rising. But metals traders argue that the price of gold is still an accurate indicator of inflation risks, because the dollar's rise doesn't reflect true strength, only relative value compared to an equally troubled currency.
"Confidence in the euro as an alternative to the dollar has fallen apart," said Frank Holmes, chairman and chief investment officer as U.S. Global Funds.
Michael Darda, chief economist at MKM Partners, said that currency weakness across the board has helped to keep the dollar from falling as gold rises.
"Gold prices are rising against almost every major currency," said Darda, noting that it's unusual for gold and the dollar to be rising at the same time. "So the run up in gold prices here has not affected the dollar to the benefit of other currencies."
Darda said spot gold would have to hit over $1,000 an ounce to signal a currency market collapse like the one that hit at the end of the 1970s.
Few analysts believe the metal will trade between $600 and $800 over the next few years, mostly because they assume rising oil prices will slow demand for fuel and eventually bring crude prices down.
But consulting firms like Alaron Trading are still bullish on gold, particularly because they see weakness in a variety of paper assets.
"Four to five years ago when the equity bubble burst we were hopeful that gold demand would surface. But people went to other asset classes like real estate or hedge funds," said de Vaulx.
"We're seeing both real estate and hedge fund become more uncertain now, and if it's going to happen, we'll see the investment demand for gold," de Vaulx said.
"Even Warren Buffett is buying gold because he sees the dollar as weak," claimed Turk.
What the hey?? A quick search of Yahoo news "Warren Buffett gold" reveals no such transactions. I wouldn't be suprised, however I can't find any reference to it.
Oil price is going to soft land when the depression hits. I don't buy any of the "dark age" senarios that seem to be so popular on the net these days. I think what we'll see is a series of economic adjustments that will decrease oil demand over the next few decades. Another worldwide depression is bad enough, but it's hardly the return to the stone age like some predict.
"...reality has a well-known liberal bias." -- Stephen Colbert
With oil prices so high, some traders believe there's still a considerable upside to gold, despite the fact that some market analysts, like MKM Partners' chief market technician Katie Townshend, say the metal has become overbought in the short term.
A major point not discussed by various writers is that in 1980 valued dollars (the last time gold and oil peaked) gold and oil are far off their record highs. And isn't this what the discussion is all about: gold's value compared to equal adjusted weights of other assets (real estate, stocks, oil, etc.)? Oil has come further to recovering it's inflation adjusted high ($90 oil) than gold. Gold would need to be over $1700/oz to reach it's inflation adjusted peak. That is how far equities and paper assets have grown. There is still lots of catch up that can be done by the PM's.
There have been some interesting articles written about the "possible" gold manipulation on the Comex vs the London market. Here's one by Rob Kirby of www.financialsense.com This pretty much speaks for itself. One chart tends to support a theory of heavy NY selling after 11 am each day (once London has closed). Table 1 showing blue spikes indicates the % of days in each month where the Comex falls 300% or more than the London Exchange. Lots of pig-piling going on here from 1993 to 2002 when the gold market starts to turn.
Ok this stinks I had to put a space in Market watch before it would allow me to post. You'll have to cut and paste the link after deleting the space between Market and Watch. It may not like tw*t but I do
Oil price is going to soft land when the depression hits. I don't buy any of the "dark age" senarios that seem to be so popular on the net these days. I think what we'll see is a series of economic adjustments that will decrease oil demand over the next few decades. Another worldwide depression is bad enough, but it's hardly the return to the stone age like some predict.
An insightful comment, and one I agree with.. However, I will amplify and clarify that "doomsday" or "apocalypse" scenarios have ALWAYS been popular to speculate about..not just "these days"
"Survivalists" like to predict the complete collapse of society into anarchy and mass chaos...
The fact that such an outcome is unlikely doesn't make it any less wise to have a cache of PMs, Guns and Ammo, etc. However, beyond general preparedness for "whatever", to obsess about it seems unrealistic.
the much much more likely course of the future is for the "markets" to continue to price and allocate resources and labor according to the laws of Supply and Demand on an ongoing basis
Let's hope that our politicians don't get what they are asking for as far as restraints on China's trade:
Lead in paragraphs from Peter Schiff article:
Last week, with Alan Greenspan and John Snow testifying before Congress, irate lawmakers bombarded them with questions as to when and how the Administration plans to "get tough" with China for its unfair trade practices. The scene is straight out of Alice in Wonderland. It is hard to fathom how these Congressmen could be so clueless as to the extent that China subsidizes the U.S. economy, and directly finances the very budget deficits these spendthrifts so irresponsibly vote to produce.
Exactly what is it that they want to punish China for doing? Providing Americans with high quality, low cost consumer goods? Artificially enhancing our standard of living? Keeping a lid on our inflation rate? Suppressing our interest rates, and propping up our housing prices? If they actually succeeded in convincing China to stop selling us all these inexpensive products and lending us back their earnings at low interest rates, what do they think the consequences would be for Americans, to say nothing of their own re-election prospects? In fact, short of a formal declaration of war, the single most damaging thing that China could do to America is exactly what our politicians are demanding. What is even more ironic is that giving in to these demands is also the best thing China could do to improve the lives of its own citizens.
You're gonna get all that stuff anyways. By imposing tarrifs and restricting trade, etc. we'll just get it that much faster. Inflating ad infinitum only delays the inevitable and makes the end result that much worse. The govt inflated away in 1930 but to no avail. The banks had the money but the people wouldn't take the loans.
I didn't say either of those 2 things, merely agreed with said article that China is a primary support mechanism of the US credit float at the current time. Removing it instantly would have few, if any beneficial effects to our economy...in the short term.
As far as those 2 questions you posed our own govt's unemployment numbers state (I love this) that we have the lowest unemployment in years, or decades. So obviously we are in a better position now than ever to support pensions and soc security....that is if you rely on the govt stats. And the majority opinion on the forum continues to be that the stats as published (unemployment, jobs, CPI, CRB, GDP, etc) are indeed accurate reflections of the economy.
In reality, regardless of outsourcing jobs and products overseas, our baby boom generation alone would have brought about the end of the pension funds. This was a ponzi-type scheme much similar to soc security and it just takes enough generational growth to eventually destroy it. Since the govt spends all the excess soc sec funds each year to reduce the deficit, it wouldn't matter if you have more contributors. The excess will still all get spent and eventually even the amount for basic entitlements will reach a deficit.
If the US or world is going into a recession.....then what would you do to profit from it?
Same thing as always: short the stock market. Growth stocks in particular. Go long bonds. One bet I like early on is government I-bonds. Lock in a decent rate and risk is near 0. It's important to only take risks that bring compensation for it.
For the risk-taking money, ProFunds UltraShort OTC which is -2x the Nasdaq 100 and ProFunds UltraShort Small-Cap which is -2x the Russell 2000 index. Be ready for quick, stout shakeout rallies - no different the "corrections" during a bull market.
Watch without prejudice and listen to the ol' account balance and things will be fine.
RR -- Shiff's brief article is to the point. I actually liked this paragraph best "In other words, to finance just one year's purchases of consumer electronics, granite counter-tops, vacations, automobiles, furniture, appliances, clothing, toys, and net interest and dividend payments, Americans will basically give away the equivalent of half of the companies that comprise the Dow Jones Industrial Average"
It probably won't happen as he describes, but it is interesting to contemplate what would arise if the Chinese were to try an massive debt to equity swap! On the one hand, debt prices would drop driving interest rates up -- this should hurt the economy and the stock market -- but in trying to move money to equities, there would be tremendous upward pressure on equities. It is very hard to guess where equilibrium would be reached!
I suspect that things will work themselves out in the global more-or-less free market -- in the very long run, we would be much better off if we did not enhance our short-term material standard of living with foreign subsidies -- but it is certainly hard to guess the path from here to there.
Not at all mysterious how the Chinese will accomplish their debt to equity switch. Now, it is in their interests to keep us borrowing. So we can continue to feed and build them. The Unocal bid should tell us all we need to know about their debt/equity intentions. When they begin divesting debt, as you say interest rates will rise. Thus REAL ESTATE will crumble. Chinese debt will find a home in our depressed real estate equity. In essence, we will have instigated our own demise in the interest of cheaper prices because 99.9% of Americans think it's THEIR fault that they have nothing and owe so much. We will sell to them at any price to get some cash (or debt relief) and then be free to rent from them.
..............forever.................
Inscrutable, huh?
This is quite a ways out, though. There is no reason for them to go "all in" til we have depleted some more of our chips. In the meantime our OWN deficit spending and insane strangulation of ...."inflation" ... will stagnate our own growth and lead to even LOWER interest rates so we can pump even MORE effort into building China.
in the very long run, we would be much better off if we did not enhance our short-term material standard of living with foreign subsidies
Hey, if illegals will mow my lawn for 1/2 of what non-unionized American's will, I'm gonna hire the illegals and boost both of our standards of living. It is not the consumer's fault that American workers are uncompetitive.
<< <i>in the very long run, we would be much better off if we did not enhance our short-term material standard of living with foreign subsidies
Hey, if illegals will mow my lawn for 1/2 of what non-unionized American's will, I'm gonna hire the illegals and boost both of our standards of living. It is not the consumer's fault that American workers are uncompetitive. >>
Exactly. American business is operated with a get rich yesterday mentality. Everything is sacrifised for profit even if it's the health and welfare of those who generate the pro- fit. Indeed most companies consider their employees to be no more than replaceable widgets which are consumed and discarded. Employees except in top management are considered incapable of having any affect on the bottom line. It doesn't matter how morale is because employees have no input into the company or even how they do their own jobs.
There are many causes of this but the effect is that American companies with the best mac- hinery, infrastructure, and proximity to markets can't even compete with backward com- panies in other countries who often do things hopelessly out of date. Then they have to ship their products half way around the world after paying huge shipping charges on their own raw materials.
It is a disgrace that some of these companies can compete with us at all. It is often highly suspect that we can't perform many of the more tedious jobs without needing illegals and that the government even allows the illegals to be here. It is sinful that crops are left to rot on the trees or in the fields because the wholesale price drops below the cost to pick them, while the retail price in the store is unaffected. Indeed, this is probably criminal too, but one never hears of such things being investigated anymore.
So long as there's money to be made there are plenty of people to tap into it whether it is good for the long term health of people and the economy or not. Government is far more concerned with protecting those making the money than in seeing exactly how it's being done.
Comments
Egads! An oil field declining at 6% per annum? What will the world come to? Chevron should definitely only drill wells that produce oil indefinitely.
I'm selling my shares!
We should have had 10 times the nuclear plants by now and our autos should be Metros and not Suburbans.
We are in trouble and our refineries are at thier limits, it doesn't matter how much is pumped. Another game will play out when the oil companies use the refinery slowdown game to raise prices more. Shut some down for repair and scream "shortage"
That was Enron's game for California and it worked quite well. Made them millions.
constraints. The simple fact that prices are spiking and supply isn't increasing is enough information.
Add in the fact that most producers are at or near record levels and the others have been in decline
for years says much also. Known reserves peaked years ago and now it's admitted that many of these
reserve numbers were extremely optimistic and much also requires not yet invented technology to
capitalize. The simple fact is that however much exists will be depleted by geometrically increasing
consumption. It may be a couple years or longer before it's obvious production is peaking but then
watch for a rapid decline as existing reserves are pumped more quickly and run dry.
changed "has peaked" to "is peaking".
Most folks do not know that GMAC owns DiTech, the easy home loan, second mortgage, equity out, company that blasts on everyone's TV all the time. GMAC is thus levered to the max on car loans and house finance at what has to be within arms reach of the top of both markets.
Interesting. So GMAC has twice the risk with both auto and mortgage financing. If the slowdown in autos doesn't finish them off, then bad housing loans probably will.
roadrunner
<< <i>Concerning GMAC and "autos": A quote from the James Sinclair website states;
Most folks do not know that GMAC owns DiTech, the easy home loan, second mortgage, equity out, company that blasts on everyone's TV all the time. GMAC is thus levered to the max on car loans and house finance at what has to be within arms reach of the top of both markets.
Interesting. So GMAC has twice the risk with both auto and mortgage financing. If the slowdown in autos doesn't finish them off, then bad housing loans probably will.
roadrunner >>
Good!
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
You can read Puplava's other articles routinely on www.financialsense.com (see below for link)
The above is a superb and easy reading primer on the adjustments installed to the CPI in the mid-1990's. I strongly recommend the first few pages (5 minutes) to anyone who has been tired about reading dry statistical information. Puplava describes hedonics,
substitutinos, seasonal adjustments, qualilty factor adjustments, geometric weighting and other misunderstood topics is simple terms. The real example of a TV set dropping in "pleasure" pricing by nearly 30% because of an improved screen is hilarious. Yet we still pay the original full price at the store. Amazing.
The Boskin Commission concluded in the 1990's that the following "repairs" needed to be made to the CPI because it was overstating inflation in the early 1990's (can you believe that!). The commission apparently found what it was told to find.
The Boskin Commission recommended several changes to the CPI index which included:
1. develop and publish two indexes (core or low fat vs. regular)
2. abandon the fixed-weight formula for CPI goods
3. change the weight of items in the index from arithmetic weighting to geometric weighting
4. introduce substitutions in the index
5. seasonal adjustments to account for price increases that occur on
a seasonal basis, which would smooth out the fluctuations
6. reduce prices by quality improvements
Bottom line of a lower CPI is that it saves the govt and corporations over $100 BILL per year per Mr. Puplava. You'll also never find increasing taxes represented in your CPI either.
roadrunner
Tom
New Home Sales Up, but Home Prices Dip
By MARTIN CRUTSINGER, AP Economics Writer
13 minutes ago
WASHINGTON - Sales of new homes in May climbed to the second highest level in history, but the median sales price fell sharply, the government reported Friday.
The Commerce Department said that sales of new single-family homes rose by 2.1 percent last month to a seasonally adjusted annual rate of 1.3 million homes. But the median sales price dropped 6.5 percent to a median $217,000, the point at which half the homes sold for more and half for less.
The housing market has been red-hot this year with demand being driven by mortgage rates that have hovered near historic lows. However, the surge in demand has raised concerns that a speculative fever is creating a housing bubble similar to the stock market bubble that burst in early 2000.
The strong new home sales followed a report Thursday that sales of previously owned homes totaled 7.13 million units at an annual rate in May, a slight decline from the record April pace, but still the second fastest sales rate on record for existing homes. The median sales price of existing homes continued rising in April to hit a record of $207,000.
The increase in sales of new homes was led by a 22.9 percent jump in sales in the Midwest, which rose to an annual rate of 268,000 units. Sales were also up in the West, rising by 1.7 percent to an annual rate of 361,000 units. However, sales fell by a sharp 24.5 percent in the Northeast to an annual rate of 74,000 units. Sales were also down in the South by 0.8 percent, to an annual rate of 595,000 units.
In other economic news Friday, the Commerce Department said orders to U.S. factories for big-ticket manufactured goods shot up at the fastest pace in 14 months in May, reflecting a huge jump in demand for commercial aircraft.
Orders for durable goods rose by 5.5 percent last month to total $210.7 billion. The gain far exceeded the 1.9 percent increase that economists had been expecting, but the strength was concentrated in demand for commercial aircraft, where orders more than doubled from their April level.
Excluding the volatile transportation sector, new orders for durable goods fell by 0.2 percent last month, marking the third decline in the past four months for orders outside of transportation.
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
The strong new home sales followed a report Thursday that sales of previously owned homes totaled 7.13 million units at an annual rate in May, a slight decline from the record April pace, but still the second fastest sales rate on record for existing homes. The median sales price of existing homes continued rising in April to hit a record of $207,000.
This tells me that prices went up slightly but total housing unit sales dropped. That was my take on it. The overall $$ sales figure is probably lower.
roadrunner
More sales at the low end. Perhaps the high end is slowing. Personally I think this started about 2-3 months ago.
Knowledge is the enemy of fear
A 6% drop should be big news. Gonna be an interesting summer leading into the October stock market crash season.
RR,
Thanks for your post, lots of good info. in that report. One of the things I thought was interesting was what I talked about a several days ago. The Asians in particular do not care if the rates on the 10 year go up or not. They want the debt to them to keep coming!
It quite naturally is their intent to spend the money on our assets eventually, and how can we refuse to take all of these PROMISE TO PAY in return. I think that the Unocal deal should be most interesting to watch. The congress is all up in arms, but are they really, or just making a show for the sheep. I cannot imagine that they will tell the Chinese NO. If they do what will foreign investors do then? As noted by your author, the foreign devils now own a NET US of $5.089 trillion. How many U.S. companies can you buy with that?
As I said last week the PROMISES TO PAY are coming out of the woodwork. Look at this statement below, almost all of this has been created out of thin air.
“On the surface, the decision of Americans not to save is perfectly rational.
The appreciation of their houses and stock portfolios has been doing all the
work for them, powering a $9,400bn increase in net household wealth over the
past two years to $48,800bn. Net wealth is now 550 per cent of annual
disposable income, comfortably above its average of 478 per cent since 1952.
It seems that consumers have lost sight of
the fact that past capital gains could easily turn into future capital
losses," says Paul Ashworth, an analyst at Capital Economics. "With house
prices more overvalued this time than in the housing booms of the 1970s and
1980s we might expect outright falls at some point."
Of course my generally feeling about this is that Americans really have no choice, by the time they pay their taxes, and buy the necessities of life, there is very little left to save. Folks therefore scramble to do what they can in speculative bubbles hoping for capital gains.
by Jim Puplava
Storm Watch Update
June 24, 2005
· In addition to the huge proportion of foreign Treasury acquisitions last year, the Federal Reserve added $51.2 billion to its own Treasury portfolio. This means that during 2004, the Fed and foreign investors absorbed $408.4 billion or about 112.7% of the total issuance of $362.5 billion. Obviously, this had a highly favorable influence, on balance, on Treasury yields during 2004, although an influence hugely lacking in traditional open-market characteristics. [Author's note—this explains the Greenspan conundrum as to why long-term yields fell, while the Fed raised short-term rates]
· As of 3/31/05, foreign investors held a total of $9.723 trillion of US financial assets, up almost $400 billion from revised holdings of $9.326 trillion as of 12/31/04. From 3/31/04, the increase was approximately $1.11 trillion.
· As of 3/31/05, foreign financial liabilities totaled $4.634 trillion, resulting in a net foreign claim against the US of $5.089 trillion.
Though I'm sure this posturing wins thems votes from clueless voters and favored manufacturers. The decoupling will come soon enough and it will hit us very hard. To force this action now is sheer folly.
Gold for now, also appears to be moving independently of the US dollar index and moving against the Euro and other currencies. If this trend persists it will signal a new wave in the upward price of gold.
roadrunner
Here is something we can all watch for. If the Chinese, the Japanese, or the Arabs make a move to buy a major world class Gold mining company, look out brother the price is going to really move. It is only a matter of time before that happens. All of this noise coming out of China wanting to spend its dollars is just the start. As I said this week the Japanese as well as other foreign devils are going to start looking to by hard assets with their PTP.
As per the below statements I think that foreign investors now realize that the Euro will never replace the dollar, so it won’t be long before they turn to Gold. Regardless of the agreements to manipulate the gold price between central banks in Europe, and the U.S. I don’t think the Asians, or the Arabs, will have any scruples in that area. In fact once we hit full world capacity with Opec, if we are not there already, all bets are off.
I also think that the Arabs are tired of being blackmailed into buying our debt. With China and India as new buyers they do not have to be pressured by us any longer. I think that this can also be added to our list of potential things that might break the U.S. debt cycles back.
By David Vaughn
June 24, 2005
“During the past several years, gold's price only rose relative to the weakening dollar. However, it did not rise against most other currencies. That is because money fleeing the risky dollar sought safety in the euro. As a result, gold never actually rallied, even though from a U.S. dollar perspective it appeared as if it had.” “HOWEVER, NOW THAT FEARS HAVE EMERGED WITH REGARD TO THE EURO, SAFE HAVEN MONEY IS GOING INTO GOLD.
“One of the Federal Reserve’s nightmares may begin to unfold in 2005 or 2006, when it appears international buyers will have a choice of buying a barrel of oil for $50 dollars on the NYMEX and IPE - OR PURCHASE A BARREL OF OIL FOR €37 - €40 EUROS VIA THE IRANIAN BOURSE.”
“Iran's proposal to receive payments for crude oil sales to Europe in euros instead of U.S. dollars is based primarily on economics, Iranian and industry sources said. But politics are still likely to be a factor in any decision, they said, as Iran uses the opportunity to hit back at the U.S. government, which recently labeled it part of an "axis of evil."
"Some observers mistakenly believe that a marked increase in the (yuan's) value relative to the U.S. dollar would significantly increase manufacturing activity and jobs in the United States," said Greenspan. "I'm aware of no credible evidence that supports such a conclusion."
US Land Rig count is up 17% over last year, so somebody is drilling something. However, I must say I have seen some really goofy speculative projects lately. I'm sure they'll end up as stories about how Uncle Lenny lost the family fortune on an oil well.
Offshore rig count continues to support the assertion that the Gulf of Mexico Shelf is gone from an Exploration standpoint.
hammer - China loves to buy our stuff! The problem is the tend to only buy one of each item...
Well, how can they possibly copy and make knock-offs of our stuff if they don't have one to work with.
Now it's bad enough that we have rigged numbers for CPI, core CPI, jobs report, unemployment, and now the CRB index (that changes this month to a floating grab bag mentality believe it or not). But now you can add the GDP deflator too. Willie shows how the GDP deflator actually has run under the published numbers for CPI for the past 9 quarters. We all know CPI understates inflation to some degree and common sense would have said that the CPI index would be somehow applied to the GDP deflator. But apparently not. The govt statisticians use a different model that runs well under the CPI rate. Really strange stuff. And of course the less inflation you remove the GDP #'s the more "apparent" growth is shown.
Maybe what's next is a floating DOW or S&P index that can "at will" remove or add any company at the end of each month based on real results. That would certainly help boost returns for analysts and increase business. That's essentially what is going to happen with the CRB index since it is not behaving properly but continuing to go up.
3 big lies Govt and Wall Street tell Joe Six-Pack.
Enjoy!
roadrunner
The comments on inflation and GDP are right on the mark however. The government has been screwing with these numbers since Reagan first put millions of Americans to work by counting the military in the unemployment rate. Both parties do it, it's absolute dishonesty, and it will cause the coming depression to be far worse because no one will see it coming.
Finally with regards to oil, I'm convinced the party is over. I think the biggest (and perhaps smartest) fish in the pond, Buffett and Gates, are on 100% disaster alert and investing every dollar towards capital preservation. Even if you believe the most optimistic figures, we only have a few decades of oil left, and there are PLENTY of industry experts that have predicted the top of the curve is either this year or in the next few years. The consequences CANNOT be overstated here. This is the twilight of an economy that can never exist again.
Truth doesn't sell anymore anyway. We're in a society that will spin every fact to a positive or a negative depending on which side is represented. Iraq is either a new vietnam slaughterhouse that's going to bankrupt our country, continue to kill thousands, and degrade into civil war. OR it's a new democracy full of vigor that will stand as a beacon of freedom to the entire middle east and pay all its debts with oil. As for the insurgency, is on it's last gasp.
See what I mean? The government is no longer on our side be you Republican or Democrat. It's evolved into a third party that survives on national divisions and self-serving lies. You want a law against flag burning or you want your children to be able to eat in a world that can no longer produce fertilizer out of oil?? As a culture, we better damn well get our priorities straight.
Yields on U.S. Treasury securities fell as some economists marked down their estimates for second-quarter growth following the durable goods report. The yield on the 10-year Treasury note fell 2 basis points, or 0.02 percentage point, to 3.93 percent as of 10:54 a.m. in New York, according to bond broker Cantor Fitzgerald LP. U.S. central bankers will raise their overnight bank lending rate to 3.25 percent on June 30, marking the ninth consecutive quarter-point increase, according to a Bloomberg News survey.
Tresury yields as of 5:00pm today
2 year: 3.58
3 year: 3.60
5 year: 3.69
10 year: 3.92
We may be just weeks away from a full blown yield curve inversion.
Both locations are well known off shore accounts with no transparency. The FED and US Treasury could be doing the actual buying. It is likely that some major country is buying in secret via the Carribean or UK sources? Seems far-fetched.
Certainly the Treasuries are being bought but by who? There is no proof of strong foreign buying now which a year ago was quite pronounced. Why would they go into hiding to buy?
roadrunner
I guess if you're REALLY cynical you can make the argument that our government is trying to suck the last few pennies out of the world economy before devaluing our currency and stealing the world's wealth once and for all. Although George Bush might be that evil, I doubt he's that smart.
Camelot
Yes, this is exactly correct. The conclusion drawn in the section on central bank purchases of US securities is incorrect. The Bank of Japan is a big buyer of US treasuries when there is inadequate demand in the private sector. They take up the slack, especially when they what to support the dollar. Recently, I believe there has been adequate demand in the Japanese private sector (banks, insurance companies, pension funds) for US treasury securities, so purchases by the BOJ have declined.
Gold rush may mean inflation bust
The metal's recent jump worldwide and high oil prices signal serious inflation pressures ahead.
June 24, 2005: 3:19 PM EDT
By Katie Benner, CNN/Money staff writer
Special Report full coverage
Oil reaches $60, hits milestone
Chinese oil giant bids $18.5B for Unocal
Debate raging over oil
EW YORK (CNN/Money) - Gold rising along with the dollar -- and with oil jumping to record highs near $60 a barrel -- may signal serious inflation woes ahead.
It's enough to give a gold bull deja vu.
A handful of precious metals insiders at the recent New York Institutional Gold Conference predicted that the price of spot gold will hit $850 an ounce in the next few years from its current level near $440.
The last time it got anywhere near that high was in the late 1970s when out-of-control inflation, unrest in the Middle East and an oil crisis pushed the precious metal from $150 to $810 a troy ounce.
Gold is currently trading 30 percent above its 10-year moving average on the New York Commodities Exchange, and gained five percent this month to stand less than $10 away from March's peak at $446.70, even while the greenback gained against the euro.
During the recent dollar rally, the American Stock Exchange's index of gold-mining stocks, or BUGS, also moved toward three-month highs, and individual gold and mining stocks including Placer Dome (up $0.05 to $15.47, Research), Newmont Mining (up $0.03 to $39.54, Research) and Barrick Gold (up $0.24 to $24.99, Research) have moved in tandem with indexes.
This, some economists contend, points to a troubling inflation problem, greater than currently perceived.
"Despite all the rate hikes, the (Federal Reserve's) overnight lending rate is still less than inflation," said James Turk, co-author of the book The Coming Collapse of the Dollar and How to Profit From It.
Black gold
It is oil prices that are really making the gold market look like 1970s redux, with crude prices hovering near $60 a barrel.
While economists debate whether high oil prices will spark inflation or will slow economic growth by acting as a tax on consumers and businesses, the gold and bond markets have come down on the side of inflation.
"The recent run in gold has moved in conjunction with rising crude prices," David Meger, senior metals analyst at Alaron Trading, said in a recent note.
Gold prices began to jump higher in the third quarter of last year, concurrent with the latest oil price surge.
"Middle East nations are getting more petrol dollars as (oil) prices rise, and they're not putting it back into paper assets," said Charles de Vaulx, manager of the First Eagle Gold Fund. "They're trying to protect the value of their profits -- just like in the 1970s -- so they're buying gold," he said.
With oil prices so high, some traders believe there's still a considerable upside to gold, despite the fact that some market analysts, like MKM Partners' chief market technician Katie Townshend, say the metal has become overbought in the short term.
"Based on historic ratios between gold and oil, gold should now be over $500 an ounce," said Frank Holmes, chairman and chief investment officer as U.S. Global Funds. "Or the price of oil needs to come down to $40 to $42 a barrel." (Will oil prices hit $100? Click here.)
Forget a stronger dollar
When inflation grips a market, the value of dollar-denominated assets is eroded. So a shift to gold represents, among other things, a broader shunning of financial assets in favor of hard assets as a hedge against perceived currency risks.
"Even Warren Buffett is buying gold because he sees the dollar as weak," claimed Turk.
At the moment, however, gold and the dollar are both rising. But metals traders argue that the price of gold is still an accurate indicator of inflation risks, because the dollar's rise doesn't reflect true strength, only relative value compared to an equally troubled currency.
"Confidence in the euro as an alternative to the dollar has fallen apart," said Frank Holmes, chairman and chief investment officer as U.S. Global Funds.
Michael Darda, chief economist at MKM Partners, said that currency weakness across the board has helped to keep the dollar from falling as gold rises.
"Gold prices are rising against almost every major currency," said Darda, noting that it's unusual for gold and the dollar to be rising at the same time. "So the run up in gold prices here has not affected the dollar to the benefit of other currencies."
Darda said spot gold would have to hit over $1,000 an ounce to signal a currency market collapse like the one that hit at the end of the 1970s.
Few analysts believe the metal will trade between $600 and $800 over the next few years, mostly because they assume rising oil prices will slow demand for fuel and eventually bring crude prices down.
But consulting firms like Alaron Trading are still bullish on gold, particularly because they see weakness in a variety of paper assets.
"Four to five years ago when the equity bubble burst we were hopeful that gold demand would surface. But people went to other asset classes like real estate or hedge funds," said de Vaulx.
"We're seeing both real estate and hedge fund become more uncertain now, and if it's going to happen, we'll see the investment demand for gold," de Vaulx said.
What the hey?? A quick search of Yahoo news "Warren Buffett gold" reveals no such transactions. I wouldn't be suprised, however I can't find any reference to it.
Oil price is going to soft land when the depression hits. I don't buy any of the "dark age" senarios that seem to be so popular on the net these days. I think what we'll see is a series of economic adjustments that will decrease oil demand over the next few decades. Another worldwide depression is bad enough, but it's hardly the return to the stone age like some predict.
A major point not discussed by various writers is that in 1980 valued dollars (the last time gold and oil peaked) gold and oil are far off their record highs. And isn't this what the discussion is all about:
gold's value compared to equal adjusted weights of other assets (real estate, stocks, oil, etc.)? Oil has come further to recovering it's inflation adjusted high ($90 oil) than gold. Gold would need to be over $1700/oz to reach it's inflation adjusted peak. That is how far equities and paper assets have grown. There is still lots of catch up that can be done by the PM's.
There have been some interesting articles written about the "possible" gold manipulation on the Comex vs the London market. Here's one by Rob Kirby of www.financialsense.com
This pretty much speaks for itself. One chart tends to support a theory of heavy NY selling after 11 am each day (once London has closed). Table 1 showing blue spikes indicates the % of days in each month where the Comex falls 300% or more than the London Exchange. Lots of pig-piling going on here from 1993 to 2002 when the gold market starts to turn.
Rob Kirby on the Comex
roadrunner
I already have my opinion of the current economic situation but am looking for ideas. Thanks
Knowledge is the enemy of fear
Global megabubble? You decide.
http://www.market watch.com/news/story.asp?guid=%7B96AA9068%2D43FC%2D4FEC%2DBE52%2D7011528EA798%7D&siteid=yhoo&dist=[/L]
Ok this stinks I had to put a space in Market watch before it would allow me to post. You'll have to cut and paste the link after deleting the space between Market and Watch. It may not like tw*t but I do
An insightful comment, and one I agree with.. However, I will amplify and clarify that "doomsday" or "apocalypse" scenarios have ALWAYS been popular to speculate about..not just "these days"
"Survivalists" like to predict the complete collapse of society into anarchy and mass chaos...
The fact that such an outcome is unlikely doesn't make it any less wise to have a cache of PMs, Guns and Ammo, etc.
However, beyond general preparedness for "whatever", to obsess about it seems unrealistic.
the much much more likely course of the future is for the "markets" to continue to price and allocate resources and labor according to the laws of Supply and Demand on an ongoing basis
Liberty: Parent of Science & Industry
Lead in paragraphs from Peter Schiff article:
Last week, with Alan Greenspan and John Snow testifying before Congress, irate lawmakers bombarded them with questions as to when and how the Administration plans to "get tough" with China for its unfair trade practices. The scene is straight out of Alice in Wonderland. It is hard to fathom how these Congressmen could be so clueless as to the extent that China subsidizes the U.S. economy, and directly finances the very budget deficits these spendthrifts so irresponsibly vote to produce.
Exactly what is it that they want to punish China for doing? Providing Americans with high quality, low cost consumer goods? Artificially enhancing our standard of living? Keeping a lid on our inflation rate? Suppressing our interest rates, and propping up our housing prices? If they actually succeeded in convincing China to stop selling us all these inexpensive products and lending us back their earnings at low interest rates, what do they think the consequences would be for Americans, to say nothing of their own re-election prospects? In fact, short of a formal declaration of war, the single most damaging thing that China could do to America is exactly what our politicians are demanding. What is even more ironic is that giving in to these demands is also the best thing China could do to improve the lives of its own citizens.
Full article by Schiff
roadrunner
roadrunner
As far as those 2 questions you posed our own govt's unemployment numbers state (I love this) that we have the lowest unemployment in years, or decades. So obviously we are in a better position now than ever to support pensions and soc security....that is if you rely on the govt stats. And the majority opinion on the forum continues to be that the stats as published (unemployment, jobs, CPI, CRB, GDP, etc) are indeed accurate reflections of the economy.
In reality, regardless of outsourcing jobs and products overseas, our baby boom generation alone would have brought about the end of the pension funds. This was a ponzi-type scheme much similar to soc security and it just takes enough generational growth to eventually destroy it. Since the govt spends all the excess soc sec funds each year to reduce the deficit, it wouldn't matter if you have more contributors. The excess will still all get spent and eventually even the amount for basic entitlements will reach a deficit.
roadrunner
Same thing as always: short the stock market. Growth stocks in particular. Go long bonds. One bet I like early on is government I-bonds. Lock in a decent rate and risk is near 0. It's important to only take risks that bring compensation for it.
For the risk-taking money, ProFunds UltraShort OTC which is -2x the Nasdaq 100 and ProFunds UltraShort Small-Cap which is -2x the Russell 2000 index. Be ready for quick, stout shakeout rallies - no different the "corrections" during a bull market.
Watch without prejudice and listen to the ol' account balance and things will be fine.
It probably won't happen as he describes, but it is interesting to contemplate what would arise if the Chinese were to try an massive debt to equity swap! On the one hand, debt prices would drop driving interest rates up -- this should hurt the economy and the stock market -- but in trying to move money to equities, there would be tremendous upward pressure on equities. It is very hard to guess where equilibrium would be reached!
I suspect that things will work themselves out in the global more-or-less free market -- in the very long run, we would be much better off if we did not enhance our short-term material standard of living with foreign subsidies -- but it is certainly hard to guess the path from here to there.
Now, it is in their interests to keep us borrowing. So we can continue to feed and build them.
The Unocal bid should tell us all we need to know about their debt/equity intentions.
When they begin divesting debt, as you say interest rates will rise.
Thus REAL ESTATE will crumble.
Chinese debt will find a home in our depressed real estate equity.
In essence, we will have instigated our own demise in the interest of cheaper prices because 99.9% of Americans think it's THEIR fault that they have nothing and owe so much.
We will sell to them at any price to get some cash (or debt relief) and then be free to rent from them.
..............forever.................
Inscrutable, huh?
This is quite a ways out, though. There is no reason for them to go "all in" til we have depleted some more of our chips. In the meantime our OWN deficit spending and insane strangulation of ...."inflation" ...
Got gold?
So soon?
I feel guilty using the "laughing" emoticon. Oh well, nobody gets it anyhow.
Hey, if illegals will mow my lawn for 1/2 of what non-unionized American's will, I'm gonna hire the illegals and boost both of our standards of living. It is not the consumer's fault that American workers are uncompetitive.
<< <i>in the very long run, we would be much better off if we did not enhance our short-term material standard of living with foreign subsidies
Hey, if illegals will mow my lawn for 1/2 of what non-unionized American's will, I'm gonna hire the illegals and boost both of our standards of living. It is not the consumer's fault that American workers are uncompetitive. >>
Exactly. American business is operated with a get rich yesterday mentality. Everything
is sacrifised for profit even if it's the health and welfare of those who generate the pro-
fit. Indeed most companies consider their employees to be no more than replaceable
widgets which are consumed and discarded. Employees except in top management are
considered incapable of having any affect on the bottom line. It doesn't matter how morale
is because employees have no input into the company or even how they do their own jobs.
There are many causes of this but the effect is that American companies with the best mac-
hinery, infrastructure, and proximity to markets can't even compete with backward com-
panies in other countries who often do things hopelessly out of date. Then they have to ship
their products half way around the world after paying huge shipping charges on their own
raw materials.
It is a disgrace that some of these companies can compete with us at all. It is often highly
suspect that we can't perform many of the more tedious jobs without needing illegals and
that the government even allows the illegals to be here. It is sinful that crops are left to rot
on the trees or in the fields because the wholesale price drops below the cost to pick them,
while the retail price in the store is unaffected. Indeed, this is probably criminal too, but one
never hears of such things being investigated anymore.
So long as there's money to be made there are plenty of people to tap into it whether it is
good for the long term health of people and the economy or not. Government is far more
concerned with protecting those making the money than in seeing exactly how it's being done.
I'll mow for $45 per hour, with a 15 minute paid break every two hours.