I humbly agree to keep the thread alive. IMO, it is nice to come to one thread that has existed long before I joined. I don’t have to run a search for twelve different threads and hope I find what I am looking for. There are some very smart tools in this shed and I am proud and honored to be a part of it. From this, I have found advice, web sites, opinions, and knowledge. I wish to say think you to all.
O.K. Gentlemen it appears that most of the consistent posters on our thread want to keep this one going, so be it!
I will add my personal conclusions to this thread at the bottom, as well as my 2006 predictions.
Those that want to add their comments from the 2006 thread please do so.
One additional comment I might have on the 2005 year is that for all the turmoil, with Hurricanes, Wars, huge tidal waves, major earthquakes, money and debt printing press running like mad, disasters of all types in major U.S. corporations, to say nothing of jail terms for many CEO’S, and U.S. savings rate dropping like a rock, none of the markets in the end changed very much?
Here are a few stats of how our topics on the Gold market, Silver market, stock market etc. went this past 12 months.
The Dow started at about 10,900 one year ago and closed yesterday at 10,912
The S&P was setting at about 1210 the first part of Dec. 2004 and today is 1264
The Gold market was at $455 per ounce in early Dec. 2004 and today is $504
The Silver market was $7.95 and now is $8.50
I think our discussion on I Bonds was a good one any those should have done well for the year, earning a combined amount of 6% this year.
It looks as if some of the bubble real estate areas are cooling somewhat now, but the remainder of the market still looks stable and the market as a whole increased 10% this past year with new homes increasing 17% across the board.
Interest rates are way up for the year and C.D.’S might finally be keeping up with Government reported inflation.
Most of us seem convinced that the government is lying about the REAL inflation rate, and the Republicans are blowing their once in a lifetime chance to cut the size of government, and overhaul the tax system. It appears without term limits on Congress nothing will now stop the spending train.
The coin market as a whole seemed to do very well, and the rarer material did very very well.
For my predictions for 2006 I will go with these,
Gold will see $550
Silver will see $12
More stagflation, as wages remain steady to down, savings remains low, and the printing press runs.
The Dow will stay in its current trading range or drop as pension funds, and regular folks, move to the safety of bonds or C.D.S
The combined trade, and Federal, deficit will again hit one trillion plus in 2006.
The pension crises will accelerate as more companies try to unload these plans before the boomers head out to pasture.
Interest rates will continue to move up, as foreigners demand higher rates to buy our paper, and the Fed will have to increase the money supply, as some of the debt will not rollover, causing more inflation.
The debate on inflation or deflation continues, and even though we will no doubt see more inflation, deflation might be right around the corner if foreign investors stop buying our debt.
Americans will begin to see globalization as a disaster, and begin to call for tariffs, and a return to isolationism.
The coin market will be stable to up for many rarer coins. One of my multi-millionaire friends says there are now 10 Billionaires in the high-end coin market, so expect to see some additional moon money on big time coins. However the biggest percentage gains for average collectors will come from the more common date high end silver coins that move up with silver, Franklins, Walkers, Morgan’s, etc. The overall market for more common rarer coins in MS 60 to 63 will not move up much, as much of the money for this market will find a home in Jumbo C.D.S or bonds at 4.5% plus.
My vote is to keep this watershead thread going. It's a great primer, and doesn't deserve to be archived.
.....GOD
"Ask, and it shall be given you; seek, and ye shall find; knock, and it shall be opened unto you." -Luke 11:9
"Hear, O Israel: The LORD our God is one LORD: And thou shalt love the LORD thy God with all thine heart, and with all thy soul, and with all thy might." -Deut. 6:4-5
"For the LORD is our judge, the LORD is our lawgiver, the LORD is our king; He will save us." -Isaiah 33:22
I must say we will have the 1970's all over again. Can you say STAGFLATION. If you factor out Taxes, Health, College, Food, and Energy costs, sure we have no inflation. After all, computers and most electronics have been going down in price over the last several years. Can you eat a computer and will it pay for your child to go to college? IMHO opinion we will see $1,000+ per ounce Gold (probably more like $2,000) and $50+ per ounce Silver. Do your own due diligence.
In case anyone is looking for an interesting book to read, here are some I've read over the last year, as inspired by many comments on this thread. I cut and pasted comments about them from Amazon as I could not hope to summarize as well. I didn't manage to get my bolds and italics done right, so please forgive the formatting.
1. The History of Money (Jack Weatherford)
From Amazon…"Weatherford brings a cultural anthropologist's wide-angled perspective to this illuminating investigation of money's role in shaping human affairs."
A very interesting book, I quite enjoyed it. John Law and the Aztecs included. Well, not in the same chapter. Definitely on of my favorites on the list.
2. What Has the Government Done To Our Money? (Murray Rothbard)
From Amazon…"After presenting the basics of money and banking theory, he traces the decline of the dollar from the 18th century to the present, and provides lucid critiques of central banking, New Deal monetary policy, Nixonian fiat money, and fixed exchange rates."
(For anyone who doesn't know, Murray Rothbard is a bit of a Libertarian).
One of the Amazon reviewers wrote "The late Murray Rothbard's short volume is the best single introduction available to monetary theory -- and to the sort of fiscal jiggery-pokery that becomes possible to the State which takes control of the currency. Here the reader will find a short introduction to what money is in the first place (and how it arises on a free market); how fiat currency makes inflation possible and allows the State to steal funds without anybody noticing; and what sound monetary policy would look like in the unlikely event that the State can ever be persuaded to take its fingers out of the pie. As is typical of Rothbard, the whole is presented with clarity, rigor, and wit."
3. The Oil Factor (Stephen Leeb, Donna Leeb)
From one Amazon reviewer: "… argue rather convincingly that oil has been and will continue to be the big moose that moves the financial markets one way or the other. They show how sharp jumps in the price of oil in the past have triggered market downturns, and how falling, moderate or stable prices have led to bull markets. With oil at or near its so-called Hubbert's peak (one trillion barrels used; one trillion still left in the ground), and with rising demand from an increasingly industrialized world, especially from a voracious China, the authors see oil ratcheting up to record highs in the near future and more or less staying there. They see this as leading to inflation and negative real interest rates--although in some scenarios (hedging their bets, as all wise prognosticators do), the authors warn about periods of deflation. Consequently, investors need to pick investments that protect them against the erosion of their dollars, while hedging against intermittent economic slowdowns."
This one is really quite specific about investment ideas. Names of actual investments included!
4. Financial Reckoning Day (William Bonner and Addison Wiggins)
"This worthwhile, well-organized book presents insights into the current U.S. economy by comparing contemporary economic events with historical ones, especially such systems as Japan's in the 1990s and the United States in the 1930s. Find out why high-spending, high-borrowing consumerism leveraged the U.S. economy and also what the "soft depression" means for investors". (Best Business Books 2003, Library Journal, March 15, 2004)
And my personal favorite quote from a reviewer… "...The authors...come up with some disturbing conclusions..." (The Journal, Newcastle, 5 February 2004)
5. The Coming Collapse of the Dollar and How to Profit from it. (James Turk and John Rubino)
Okay, a lot of copied comments here, it's fun looking at who is making them.
“Turk and Rubino are right: There is a crisis coming, and it will cause a collapse in the mountain of credit fostered by the monopoly central banks of the world. Read this book and find out how you can protect yourself while there's still time.” —Robert R. Prechter, author of the bestseller Conquer the Crash
”Should be read by everyone who is interested in both their own investments and this nation's future. I recommend this book highly.” —Richard L. Russell, Editor, Dow Theory Letters
“[Turk and Rubino] lay out a road map for avoiding the ‘Perfect Financial Storm.’ By reading this book you will be able to keep you and your loved ones safe, and . . . build real wealth in the process.” —Jim Puplava, Puplava Securities, Financial Sense Online
“A home run here for investors who want to profit from the dollar collapse.” —Bill Murphy, Chairman, Gold Anti-Trust Action Committee and founder, LeMetropoleCafe.com
“Fast moving, compelling, and extremely relevant for all investors.” —Rob McEwen, CEO, Goldcorp
“Every American investor and every foreign investor in dollar denominated investments ought to read this book.” —Franklin Saunders, Editor, The Moneychanger “As Turk and Rubino note, hard times are hard only for the unprepared. Read this book and you will not only be prepared, you will profit greatly from what lies ahead.” —Robert Bishop, Editor, Gold Mining Stock Report
Amazon Book Description: "The dollar is in trouble. It has fallen against other currencies for the past three years, and now its orderly retreat could well become a rout. This spells potential disaster for the American economy—and potential riches for a few smart investors. In The Coming Collapse of the Dollar and How to Profit from It, financial gurus James Turk and John Rubino show how the dollar arrived at this precipice, why it will plunge, and how you can profit from the resulting financial crisis.
The U.S. today is the world’s biggest debtor nation, printing money with abandon to sustain the illusion of prosperity. The federal government owes $7 trillion and its debt is soaring. As a society, we owe more than $37 trillion, or about $500,000 per family of four. Our trade deficit with other countries is staggering, and to finance this mountain of debt we’re flooding the world with dollars. The inevitable result: The dollar will decline until it is displaced as the world’s dominant currency. Precious metals will soar in value, and gold will reclaim its monetary role at the center of the global financial system.
Traditionally a haven during times of uncertainty, gold has risen dramatically since 2001. By the fall of 2004 it was up by nearly 50%, at over $400 an ounce. But this is just the beginning.
James Turk, a leading gold authority and the founder of GoldMoney.com, and veteran financial writer John Rubino, show readers how to capitalize on gold’s dramatic climb. In The Coming Collapse of the Dollar, Turk and Rubino reveal which stocks and bonds will falter as the dollar declines and why that decline is virtually inevitable. They offer strategies for using gold coins, gold stocks, gold-based digital currencies, and other hard assets to create a profitable portfolio. And they explain how to make the most of your gold and other precious metal holdings, identifying the opportunities and pitfalls of buying gold mining stocks and the mutual funds that invest in them.
America’s debt binge has put its economy at grave risk. The value of the dollar is falling; many stocks are once again wildly overvalued; and bonds, tied to an ever-diminishing dollar, are a disaster waiting to happen. By investing in gold and other hard assets, Turk and Rubino explain how you can protect yourself from these dangers.
The Coming Collapse of the Dollar and How to Profit from It is a must read for every investor, whatever the size of his or her portfolio".
6. Conquer the Crash (updated version) (Robert Prechter)
"In Conquer the Crash, Robert Prechter explains why he thinks the boom times are behind us. Based on his interpretation of the Elliott Wave principle (an idea premised on the notion that mass investor psychology is what really drives markets), Prechter believes that the U.S. economy is about to enter into a deflationary depression that few investors are prepared to deal with. In making his case, Prechter assembles an impressive array of data that in essence suggests that the bill for the last 10 years of market excess is about to come due. The second half of the book shows how to avoid becoming "a zombie-eyed victim of the depression" and offers advice on protecting one's assets in a deflationary environment (cash is king)".
From one of the reviewers… "His advice is basically to pay off your bills, put your money in rock solid banks. Don't rely on the government to protect you, buy some precious metals, and get ready to profit once we are at the rock bottom by way of investment strategies that take advantage of the subsequent inflation post a "Deflationary Depression."
7. The ABCs of Gold Investing (Michael Kosares)
There was a bit of advertising going on in this one as I recall…but still of interest.
"Beginning investors will find thorough guidelines for making good decisions in this guide to private gold ownership. Emphasis is placed on the asset-preservation qualities of gold at a time when investor uncertainty about the economy and recent investment scandals have led many to seek asset diversification. The economic and political trends driving gold marketing are detailed, as are the reasons why gold plays an important role in millions of investment portfolios worldwide—as both a hedge and an investment for capital gain. Topics examined include understanding gold's role in combating inflation and deflation, how to select a gold firm, the history of gold since 1971, storing gold, and government debt."
8. The Great Bust Ahead (Daniel Arnold)
The Great Bust Ahead is a concise, straight to the point book laying out in stark terms the case for a coming depression of historically unprecedented magnitude… beginning perhaps as early as 2009-2010, and last up to thirteen years.
His stuff is based on demographics basically. It's nice and short.
Reading now:
1. Empire of Debt (William Bonner again). I started reading this one at the gym. Good so far…I'm only about 40 pages into it though.
On tap to read…
1. Secrets of the Temple, How the Federal Reserve Runs the Country (William Greider)
2. The Federal Reserve System (Donald Wells)
3. Beyond Greed (Stephen Fay)—I've been trying to read this one awhile. A dry book that describes the Hunt Brothers and Silver
4. The Citizen's Handbook (T.J.Stiles) A compilation of the content of important documents, speeches etc.
I respect your opinions and believe that the time will come when we must pay the piper. It may be tomorrow, in 10 years or 100. We really have no idea.
I didnt want you to pull stats. We both know each of us could massage them to prove a point. I just ask you to look around. Remember what your area looked like 10 years ago or 5 years ago. It has grown tremendously. Look at the help wanted signs in the storefronts are in your local paper. Finally, look at your coin business. A weak economy will not beget strong coin sales/prices.
I believe evidence is all around that more and more goods and services are being demanded and consumed. That, IMO, is a sign of a strong economy.
Gold has historically been a decent store of value, but just like other asset classes it has both failed miserably and greatly outperformed.
If there is a major crash, I believe the well prepared will be the first to be milked. In a trully democratic system where the vast majority of people are endebted, the government will not be allowed to "let" millions (tens of millions?) of people to suffer the way of the Great Depression. For a good primer, look at what's happening in New Orleans. The government is being extremely generous with our money - it would rather do that than risk, god forbid, bad PR.
When inflation becomes impossible to hide, they will start by adopting super-protectionist measures, allowing individuals to default generously, prop up "social safety nets", print dollars, tax the top 25% - 35% of the population way beyond what's done now, as well as the capital markets and the most performing firm. In short, they will kill what is left of productive America rather than loose the votes of such a large segment of the population. Republicans and Democrats will trip over each-others to adopt the most inanely demagogic policies. There will be a call to default on our bonds (think Argentina), which will be adopted once the principled officials are voted out of office.
If there is a major crash, it's going to get really, really bad.
"The greatest productive force is human selfishness." Robert A. Heinlein
I do look around CT and see no "help wanted" signs. I see a faltering New England economy that is dying....esp Connecticut. We have still not recovered from the recession of 1990-1993.
I don't foresee deflation until massive inflation has occurred. The FED will authorize new money to the point of absurdity before they allow a deflation to occur. A recession could be in the cards, but not if they keep on printing money at the current rate.
The "growth" you allude has been borne of massive credit by selling debt overseas. That is not growth but only delayed self-immolation. That debt is our birthright being sold to Asia. I just do not buy the "real" growth. Sure, many have made a killing playing these markets, and they will keep their wealth as long as they get out of stocks (in general) at the right time. Some stocks are great. The indices as a group will falter greatly eventually. But in 1-100 years as you said. I think more like 1-10 years.
Ricky Henderson: note that the price of the computer going down some lowers the CPI. But that is not enough for the BLS. They "adjust" the price even lower based on "quality" factors as well. These QF's are useless for me and you buying a new computer. But the BLS feels that if a computer's memory has doubled and it saves us time at work, then not only has the price dropped at the store, but they will drop it another 50% to compensate for the QF. As absurd as this sounds, it is what they do for computers, cars, washers and dryers, hospital procedures, and a host of other products. Our tax dollars at work. Hedonic adjustments is another way you'll here this talked about.
Imagine that your hospital bill is double what is was 2 years ago for the same surgery. But the QF cuts the cost in half because a new procedure got you out of the hospital in half the time. Your bill has doubled but the input to the CPI is unchanged. The CPI should have risen if it were indicative of our personal costs. But it drops due to the QF adjustment. Mindnumbing.
I will have to make a drive east sometime then. Here in Central New York--historically one of the most depressed areas in the country- I see new buildings popping up everywhere. Fields that were once for cattle are now for children. I cant imagine people would rather live in Syracuse than in CT.
I enjoy this thread and there are enough contributors so that usually it is never very far from the 1st page.
I am in a business that relies quite heavily on consumer spending. While I complain that it is never enough and has dropped quite a bit in the last 12 months.....I really am quite suprised at how it has remained basically strong the last 5 years.
Just a note...on the Los Angeles AM radio the other day -I heard for the first time an ad for HARD MONEY loans on RE. Haven't heard one in over 10 years. The beginning of the sharks circling.
The new bankruptcy law is certainly one item of proof where the large cc & mortgage companies and govt think we are going.
They are so scared of all the defaulting from leverage loans that they wrote a law to keep everyone in servitude for decades. This is the sign of a great economy where big lenders fear they will not be paid back from handing out frivolous loans? So they seek out govt help to protect them? The sheeple have been sheared.
<< <i>The new bankruptcy law is certainly one item of proof where the large cc & mortgage companies and govt think we are going.
They are so scared of all the defaulting from leverage loans that they wrote a law to keep everyone in servitude for decades. This is the sign of a great economy where big lenders fear they will not be paid back from handing out frivolous loans? So they seek out govt help to protect them? The sheeple have been sheared.
roadrunner >>
I recently found out that three employees of one of our main contractors declared bankruptcy just under the wire. The new law was what pushed them into it.
These are young guys, late 20s, married, a few children among them. All are a two income family. They all drive new cars, etc. They didn't seem to be concerned in the least at what this would do to them in the future and there wasn't a shred of remorse or embarassment. I don't know all the details but one guy said he and his wife were 20K in the hole. His wife is a school teacher, so I'd guess their combined income to be around 70K a year. They keep their house, 2 cars and pretty much the only change is that they aren't in debt anymore. That's just sad.
I kept my mouth shut. I'm sure I would have said a few "unkind" things.
She has 3 months a year off and I guess nobody these days ever heard of a second job. I'd say it's probably a good thing that the laws were changed.
"Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society(destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose." John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
I concur that bankruptcy laws stunk. But the reason and timing for the new change is not about fixing an old problem. Rather this is about keeping cc and mortgage companies in business after they have made horrendous decisions in their loan making. Only the connected seem to get spared. Congress does the same thing. They are ultimately resonsible for our inflation (money supply increase and debt) yet turn around and blame oil companies for profiteering from their poorly thought out policies. Ironic huh?
I concur that bankruptcy laws stunk. But the reason and timing for the new change is not about fixing an old problem. Rather this is about keeping cc and mortgage companies in business after they have made horrendous decisions in their loan making.
roadrunner >>
Oh I agree. These people I'm talking about are a prime example of those horrendous decisions. I should add that the guy I knew the most about also has a collection of several dozen expensive guitars. Purchased, no doubt, with credit cards over the last few years. Of course, he gets to keep them as well.
I mentioned that he might have considered selling a few of them and he acted like a child protecting his Tootsie Roll Pop.
That's when I knew I had to stop talking.
"Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society(destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose." John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
An interesting read on something I had not considered. The repatriated funds exemption ends on Dec 31st. To date, $200 billion has come back ashore supposedly to go to capital investment, jobs, and R&D. Willie says the money was used by corps. to buy back stocks. $200 billion so far a nice boost to the stock market this year and to the US dollar index. What occurs when this boost disappears in 30 days? Could be more gold positive.
I've been reading about a number of corporations, in an effort to get a 7% return on their money, have invested assets in hedge funds. If I understand them correctly, hedge funds are kind of like betting on the future position of some index or stock issue at some point in time, sort of like "betting on the come". There was an article in the paper today about the fragility of the hedge funds in that there are so many dollars invested in them that if one fails then that could begin a financial dominoe effect that would shock the investors/investments and may have a devestating effect on our economy.
Could someone post a short description of what hedge funds are and what our vulnerabilities and advantages may be with the high level of investment in this type of fund. I'm assuming that the hedge fund managers (is it kind of like a short term mutual fund?) know what they are doing and are not just shooting bullets into the future, hoping that they hit something. Please give us the short course on these hedge funds.
Often, you can create a financial product A with a combination of other products, B. Because B is basically a synthetic A, their gain profile is exactly the same. Obviously, they should be worse exactly the same amount. Otherwise, say if B costs less to put together than A is priced in the market, then you could create a series of B products and sell them as A and make a profit with no risk.
This is - simplified - what hedge funds do. They identify tiny, tiny variations, and make money on them. Typically, they specialize in specific areas - currencies, etc.
"The greatest productive force is human selfishness." Robert A. Heinlein
Hedge funds are not regulated by Fed Law like ordinary mutual funds are. They can make wild and crazy investment trades, and it's OK. I think they have minimum initial investments of something like $1 million, so that successfully rules out normal people.
The news is absolutely nothing new. Long Term Capital Management (LTCM) went bankrupt in the late 1990's because they invested something like 10:1 in the dollar exchange rate, and it went against them. The Fed stepped in and erased the losses to prevent investors from losing money.
Pretty neat, huh? I've written the Feds several times, but they have never stepped in and erased my losses....
The LTCM story is an excellent study for the investor moving beyond "beginner" status.
<< <i>Retailers Post Disappointing Nov. Sales 1 hour, 15 minutes ago Business - AP
By ANNE D'INNOCENZIO, AP Business Writer
NEW YORK - The nation's retailers had a disappointing start to the holiday season, reporting sluggish sales for November as a much hoped-for surge in Thanksgiving weekend business failed to materialize. >>
Perhaps more people are finally deciding for themselves whether or not they need the latest useless POS that ad-men are trying to convince us we need and finally realizing that they can live just fine without it.
This would be a good trend...people actually making their own decisions based upon how they actually feel.
Nah...people are too stupid. They'll follow the trend wherever it takes them.
Hedge Funds are an adjunct to the Derivatives trade where bankers and other major financial brokers have $100-$300 TRILLION in assets bet on 100:1 leverage (or #'s in that range). LTCM went bust on derivatives bets. REFCO, who just went kaboom, probably went out the same way. The FED is keeping it hushed up. Remember that in Sept they had a secret meeting with major bankers. One web site felt this was a meeting on the state of derivatives and how to protect the market from REFCO faltering.
JP Morgan has close to $100 TRILLION on their own in Derivatives bets. It's leveraged against only a few billion in real assets. This unregulated financial sewage has the potential to bring down the world's economys at any time. But the PhD analysts and Bankers who swear by them, say the system is safer than ever. I don't feel as so confident.
Hedge funds are making bets. Bankers are making bets. Mortgage houses are making bets....all with Derivatives that are unsupported, non-transparent, and unregulated. No one even knows who is the end-owner of the "bet" because there are so many interconnections. It's a potential H-bomb nightmare.
The hegde fund question is much to large to answer in this forum.
Suffice to say it is a pool of money that is run by money managers. They invest in all asset classes. Some are heavily leveraged, some are not. Most do not outperform their benchmarks. Some do extremely well.
Just like anything else there are a few bad apples that give the whole group a bad name.
Most people that invest in hedge funds have incomes greater than $250,000 and liquid assets if at least $1 million.
There is about $1 trillion invested in hedge funds globally.
I believe the run-up in oil prices was exaccerbated by hedge funds.
That $1 TRILLION in hedge funds pales in comparison to what the derivatives risk among major financial houses, bankers, and lenders. I think it is beyond the comprehension of every one but the almighty.
20 years ago derivatives may have totalled a hundred billion or possibly a trillion. Now hundreds of times greater! Potential Risk? Certainly. It would be like having large homes all of a sudden going from $350K each to $35 MILL each. Would that be a problem??
<< <i>The hegde fund question is much to large to answer in this forum.
Suffice to say it is a pool of money that is run by money managers. They invest in all asset classes. Some are heavily leveraged, some are not. Most do not outperform their benchmarks. Some do extremely well. >>
I believe you are mistaking mutual funds for hedge funds.
"The greatest productive force is human selfishness." Robert A. Heinlein
Regarding -- "Suffice to say it is a pool of money that is run by money managers. They invest in all asset classes. Some are heavily leveraged, some are not. Most do not outperform their benchmarks. Some do extremely well"
I think this is an accurate statement. A hedge fund is a mutual fund, with a very limited investor group. A primary objective of limiting the investor group is to avoid SEC regulation. This increases the flexibility with which fund assets can be invested. It also greatly increases the due diligence required before investing. Although the name arose from the use of hedging technique to, in theory, increase yields while managing risks, many hedge funds today do not make extensive (or any) use of derivatives.
Want to watch the Dow and the S&P drop ten percent or more? If all the large companies in the U.S. are forced to tell the truth about their REAL financial condition, LOOK OUT!
S&P 500 May Drop If Full Pension Debts Disclosed: John Wasik
Dec. 5 (Bloomberg) -- Let's assume that the U.S. Congress cuts through a political briar patch and passes a law that forces full disclosure of pension debts. The consequences might be stunning.
Companies with poorly funded pension plans might have to contribute billions of dollars more to their retirement plans and touch off worker demands that employers pony up even more money for their retirement security.
Just as surely, investors would punish companies with the highest retirement debt, according to a study by David Zion and Bill Carcache, analysts for New York-based investment bank Credit Suisse First Boston. They examined the effect of fully disclosing and accounting for the pension liabilities of the 374 companies in the Standard & Poor's 500 Index with defined- benefit plans.
``We estimate that would cause the total shareholder's equity for the companies in the S&P 500 to drop by $255 billion, or 7 percent,'' they wrote in their Nov. 10 report. The 18 most underfunded companies would fare worse, suffering a 25 percent reduction in shareholder's equity.
Equity Wiped Out Zion and Carcache figure that shareholder equity -- a company's total assets minus total liabilities (which should include what it owes its pension program) -- would be wiped out at the seven S&P 500 companies with the biggest funding gaps in their pension plans.
Speaking of Goldbuggery (nice term by the way)...metal is on a frantic run, might just have legs enough to get into the new year. The 6 month moving average might not show much but the recent daily charts look like a rocket going to the moon.
<< <i>U.S. debt is 3.5x its GDP... How can you write that off? >>
Simple. Like any other deadbeat. Tellem we ain't payin. Lettem turn us over ta "collections." Buncha bill collectors all callin everyone at night to badger us ta pay. Hang up on em. Make em "renegotiate" the debt. Coors, Walmart's shelfs mite get a bit empty. Awwwwwwwww.
<< <i>U.S. debt is 3.5x its GDP... How can you write that off? >>
Simple. Like any other deadbeat. Tellem we ain't payin. Lettem turn us over ta "collections." Buncha bill collectors all callin everyone at night to badger us ta pay. Hang up on em. Make em "renegotiate" the debt. Coors, Walmart's shelfs mite get a bit empty. Awwwwwwwww. >>
Yeah, I suppose. But then they stop buying FRNs, and that's all she wrote.
When mainstream media sensationalizes gold, that means a (big?) correction is near.
Remember when Newsweek had the "shrinking dollar" on their cover last year? The week after that the current dollar rally began, and is still ongoing.
Also, remember when Time had the "everybody loves real estate" cover this past summer? Ever since then the real estate market has been contracting and long term interest rates have gone up. I believe the Time cover essentially called the top for real estate.
Simple. Like any other deadbeat. Tellem we ain't payin. Lettem turn us over ta "collections." Buncha bill collectors all callin everyone at night to badger us ta pay. Hang up on em. Make em "renegotiate" the debt.
I am a debt collector! I would love to get my hands on those kinds of numbers!
The most common answer I hear is : THE CHECKS ARE IN THE MAIL!
Why can't we tell all of our creditors that the money is in the mail? Let them wait.....and wait.....
As far as the statement that stories in the mass media like Time magazine or CNN signal a market top and a big correction coming... that could be true, but I'm not sure I would agree. I get the feeling that John Q. Public is just beginning to get interested in gold, and the mass media are beginning to catch on.
The climb in gold has been pretty orderly so far. Like when a rainstorm comes and the rain starts gradually, it can keep raining for quite a while. The deficit problems that are spurring investors to flee to gold are long-term problems that won't be fixed overnight.
Of course there can be big corrections along the way. That would be the time I would try to accumulate a little more.
<< <i>The deficit problems that are spurring investors to flee to gold are long-term problems that won't be fixed overnight. >>
That's the thing though, not really sure if this move is based on a "flight to safety" bet. Could be just speculative liquidity jumping from one hot thing to the next.
I am appaled to read so many recommendations to default on our debt. This is both immoral and stupid. Hopefully I don't have to explain the immoral part. The stupid part is that this would result in a major financial crisis for the US, with interest rates, unemployment, and the cost of living shooting up. US companies would loose most of their cash (generally held in US bonds), and financial institutions would suffer the double whammy of loosing part of their cash reserves and individuals and companies defaulting on their own debt. It has really no end, and would bring the US to its knees.
The debt can easily be repaid if we (actually, you, the voters - I'm a foreigner here, I just pay taxes) make that a priority, over things like social security, Medicare (incl. the new drug coverage) & Medicaid, or / and the war in Iraq, depending on your affiliation.
"The greatest productive force is human selfishness." Robert A. Heinlein
Now there's some funny craziness!!! Sort of reminds me of one of our own illustrious posters....
.....GOD
"Ask, and it shall be given you; seek, and ye shall find; knock, and it shall be opened unto you." -Luke 11:9
"Hear, O Israel: The LORD our God is one LORD: And thou shalt love the LORD thy God with all thine heart, and with all thy soul, and with all thy might." -Deut. 6:4-5
"For the LORD is our judge, the LORD is our lawgiver, the LORD is our king; He will save us." -Isaiah 33:22
<< <i>The debt can easily be repaid if we (actually, you, the voters - I'm a foreigner here, I just pay taxes) make that a priority, over things like social security, Medicare (incl. the new drug coverage) & Medicaid, or / and the war in Iraq, depending on your affiliation. >>
LOL , you must be from somewhere else. To suggest a cut in Social Security benefits is political suicide. The bottom line is that Americans don't care about repaying the debt, they would rather die still owing it. They have National Debts, State debts, Municipal debt, Corporate debt, Home Equity debt and Personal Debt. The mojority are only interested in "who" can they borrow from next.
They only way out is to make curreny worth less or worthless, however you look at it. Thats the only possible resolution.
I said resolution not solution. The difference being that a solution is one that is executed with the intent of correcting the problem with a favorable outcome.
The resolution on the other hand is how it will turn out when a solution is not implemented but rather it is the result of a series of poor attempts to avoid or ignore the problem and minimize or delay the damage.
And yes,
<< <i>that would bring the US to its knees. >>
so we just need to prepare for it on an individual basis.
It is true it is the ONLY resolution as taxes cannot be raised enough, you cannot default and certainly they can only cut so much from the entitlement programs.....Inflating is the ONLY way out.....
There is a lot of discussion about a slowdown next year......That is the dilemma....slowdown or inflate......I wonder which one "helicopter Bernanke" is going to choose.....????
Comments
Coinlearner, Ahrensdad, Nolawyer, RG, coinlieutenant, Yorkshireman, lordmarcovan, Soldi, masscrew, JimTyler, Relaxn, jclovescoins
Now listen boy, I'm tryin' to teach you sumthin' . . . . that ain't an optical illusion, it only looks like an optical illusion.
My mind reader refuses to charge me....
Tom
I will add my personal conclusions to this thread at the bottom, as well as my 2006 predictions.
Those that want to add their comments from the 2006 thread please do so.
One additional comment I might have on the 2005 year is that for all the turmoil, with Hurricanes, Wars, huge tidal waves, major earthquakes, money and debt printing press running like mad, disasters of all types in major U.S. corporations, to say nothing of jail terms for many CEO’S, and U.S. savings rate dropping like a rock, none of the markets in the end changed very much?
Here are a few stats of how our topics on the Gold market, Silver market, stock market etc. went this past 12 months.
The Dow started at about 10,900 one year ago and closed yesterday at 10,912
The S&P was setting at about 1210 the first part of Dec. 2004 and today is 1264
The Gold market was at $455 per ounce in early Dec. 2004 and today is $504
The Silver market was $7.95 and now is $8.50
I think our discussion on I Bonds was a good one any those should have done well for the year, earning a combined amount of 6% this year.
It looks as if some of the bubble real estate areas are cooling somewhat now, but the remainder of the market still looks stable and the market as a whole increased 10% this past year with new homes increasing 17% across the board.
Interest rates are way up for the year and C.D.’S might finally be keeping up with Government reported inflation.
Most of us seem convinced that the government is lying about the REAL inflation rate, and the Republicans are blowing their once in a lifetime chance to cut the size of government, and overhaul the tax system. It appears without term limits on Congress nothing will now stop the spending train.
The coin market as a whole seemed to do very well, and the rarer material did very very well.
For my predictions for 2006 I will go with these,
Gold will see $550
Silver will see $12
More stagflation, as wages remain steady to down, savings remains low, and the printing press runs.
The Dow will stay in its current trading range or drop as pension funds, and regular folks, move to the safety of bonds or C.D.S
The combined trade, and Federal, deficit will again hit one trillion plus in 2006.
The pension crises will accelerate as more companies try to unload these plans before the boomers head out to pasture.
Interest rates will continue to move up, as foreigners demand higher rates to buy our paper, and the Fed will have to increase the money supply, as some of the debt will not rollover, causing more inflation.
The debate on inflation or deflation continues, and even though we will no doubt see more inflation, deflation might be right around the corner if foreign investors stop buying our debt.
Americans will begin to see globalization as a disaster, and begin to call for tariffs, and a return to isolationism.
The coin market will be stable to up for many rarer coins. One of my multi-millionaire friends says there are now 10 Billionaires in the high-end coin market, so expect to see some additional moon money on big time coins. However the biggest percentage gains for average collectors will come from the more common date high end silver coins that move up with silver, Franklins, Walkers, Morgan’s, etc.
The overall market for more common rarer coins in MS 60 to 63 will not move up much, as much of the money for this market will find a home in Jumbo C.D.S or bonds at 4.5% plus.
"Ask, and it shall be given you; seek, and ye shall find; knock, and it shall be opened unto you." -Luke 11:9
"Hear, O Israel: The LORD our God is one LORD: And thou shalt love the LORD thy God with all thine heart, and with all thy soul, and with all thy might." -Deut. 6:4-5
"For the LORD is our judge, the LORD is our lawgiver, the LORD is our king; He will save us." -Isaiah 33:22
1. The History of Money (Jack Weatherford)
From Amazon…"Weatherford brings a cultural anthropologist's wide-angled perspective to this illuminating investigation of money's role in shaping human affairs."
A very interesting book, I quite enjoyed it. John Law and the Aztecs included. Well, not in the same chapter. Definitely on of my favorites on the list.
2. What Has the Government Done To Our Money? (Murray Rothbard)
From Amazon…"After presenting the basics of money and banking theory, he traces the decline of the dollar from the 18th century to the present, and provides lucid critiques of central banking, New Deal monetary policy, Nixonian fiat money, and fixed exchange rates."
(For anyone who doesn't know, Murray Rothbard is a bit of a Libertarian).
One of the Amazon reviewers wrote "The late Murray Rothbard's short volume is the best single introduction available to monetary theory -- and to the sort of fiscal jiggery-pokery that becomes possible to the State which takes control of the currency. Here the reader will find a short introduction to what money is in the first place (and how it arises on a free market); how fiat currency makes inflation possible and allows the State to steal funds without anybody noticing; and what sound monetary policy would look like in the unlikely event that the State can ever be persuaded to take its fingers out of the pie. As is typical of Rothbard, the whole is presented with clarity, rigor, and wit."
3. The Oil Factor (Stephen Leeb, Donna Leeb)
From one Amazon reviewer: "… argue rather convincingly that oil has been and will continue to be the big moose that moves the financial markets one way or the other. They show how sharp jumps in the price of oil in the past have triggered market downturns, and how falling, moderate or stable prices have led to bull markets. With oil at or near its so-called Hubbert's peak (one trillion barrels used; one trillion still left in the ground), and with rising demand from an increasingly industrialized world, especially from a voracious China, the authors see oil ratcheting up to record highs in the near future and more or less staying there. They see this as leading to inflation and negative real interest rates--although in some scenarios (hedging their bets, as all wise prognosticators do), the authors warn about periods of deflation. Consequently, investors need to pick investments that protect them against the erosion of their dollars, while hedging against intermittent economic slowdowns."
This one is really quite specific about investment ideas. Names of actual investments included!
4. Financial Reckoning Day (William Bonner and Addison Wiggins)
"This worthwhile, well-organized book presents insights into the current U.S. economy by comparing contemporary economic events with historical ones, especially such systems as Japan's in the 1990s and the United States in the 1930s. Find out why high-spending, high-borrowing consumerism leveraged the U.S. economy and also what the "soft depression" means for investors". (Best Business Books 2003, Library Journal, March 15, 2004)
And my personal favorite quote from a reviewer… "...The authors...come up with some disturbing conclusions..." (The Journal, Newcastle, 5 February 2004)
5. The Coming Collapse of the Dollar and How to Profit from it. (James Turk and John Rubino)
Okay, a lot of copied comments here, it's fun looking at who is making them.
“Turk and Rubino are right: There is a crisis coming, and it will cause a collapse in the mountain of credit fostered by the monopoly central banks of the world. Read this book and find out how you can protect yourself while there's still time.” —Robert R. Prechter, author of the bestseller Conquer the Crash
”Should be read by everyone who is interested in both their own investments and this nation's future. I recommend this book highly.” —Richard L. Russell, Editor, Dow Theory Letters
“[Turk and Rubino] lay out a road map for avoiding the ‘Perfect Financial Storm.’ By reading this book you will be able to keep you and your loved ones safe, and . . . build real wealth in the process.” —Jim Puplava, Puplava Securities, Financial Sense Online
“A home run here for investors who want to profit from the dollar collapse.” —Bill Murphy, Chairman, Gold Anti-Trust Action Committee and founder, LeMetropoleCafe.com
“Fast moving, compelling, and extremely relevant for all investors.” —Rob McEwen, CEO, Goldcorp
“Every American investor and every foreign investor in dollar denominated investments ought to read this book.” —Franklin Saunders, Editor, The Moneychanger
“As Turk and Rubino note, hard times are hard only for the unprepared. Read this book and you will not only be prepared, you will profit greatly from what lies ahead.” —Robert Bishop, Editor, Gold Mining Stock Report
Amazon Book Description:
"The dollar is in trouble. It has fallen against other currencies for the past three years, and now its orderly retreat could well become a rout. This spells potential disaster for the American economy—and potential riches for a few smart investors. In The Coming Collapse of the Dollar and How to Profit from It, financial gurus James Turk and John Rubino show how the dollar arrived at this precipice, why it will plunge, and how you can profit from the resulting financial crisis.
The U.S. today is the world’s biggest debtor nation, printing money with abandon to sustain the illusion of prosperity. The federal government owes $7 trillion and its debt is soaring. As a society, we owe more than $37 trillion, or about $500,000 per family of four. Our trade deficit with other countries is staggering, and to finance this mountain of debt we’re flooding the world with dollars. The inevitable result: The dollar will decline until it is displaced as the world’s dominant currency. Precious metals will soar in value, and gold will reclaim its monetary role at the center of the global financial system.
Traditionally a haven during times of uncertainty, gold has risen dramatically since 2001. By the fall of 2004 it was up by nearly 50%, at over $400 an ounce. But this is just the beginning.
James Turk, a leading gold authority and the founder of GoldMoney.com, and veteran financial writer John Rubino, show readers how to capitalize on gold’s dramatic climb. In The Coming Collapse of the Dollar, Turk and Rubino reveal which stocks and bonds will falter as the dollar declines and why that decline is virtually inevitable. They offer strategies for using gold coins, gold stocks, gold-based digital currencies, and other hard assets to create a profitable portfolio. And they explain how to make the most of your gold and other precious metal holdings, identifying the opportunities and pitfalls of buying gold mining stocks and the mutual funds that invest in them.
America’s debt binge has put its economy at grave risk. The value of the dollar is falling; many stocks are once again wildly overvalued; and bonds, tied to an ever-diminishing dollar, are a disaster waiting to happen. By investing in gold and other hard assets, Turk and Rubino explain how you can protect yourself from these dangers.
The Coming Collapse of the Dollar and How to Profit from It is a must read for every investor, whatever the size of his or her portfolio".
6. Conquer the Crash (updated version) (Robert Prechter)
"In Conquer the Crash, Robert Prechter explains why he thinks the boom times are behind us. Based on his interpretation of the Elliott Wave principle (an idea premised on the notion that mass investor psychology is what really drives markets), Prechter believes that the U.S. economy is about to enter into a deflationary depression that few investors are prepared to deal with. In making his case, Prechter assembles an impressive array of data that in essence suggests that the bill for the last 10 years of market excess is about to come due. The second half of the book shows how to avoid becoming "a zombie-eyed victim of the depression" and offers advice on protecting one's assets in a deflationary environment (cash is king)".
From one of the reviewers… "His advice is basically to pay off your bills, put your money in rock solid banks. Don't rely on the government to protect you, buy some precious metals, and get ready to profit once we are at the rock bottom by way of investment strategies that take advantage of the subsequent inflation post a "Deflationary Depression."
7. The ABCs of Gold Investing (Michael Kosares)
There was a bit of advertising going on in this one as I recall…but still of interest.
"Beginning investors will find thorough guidelines for making good decisions in this guide to private gold ownership. Emphasis is placed on the asset-preservation qualities of gold at a time when investor uncertainty about the economy and recent investment scandals have led many to seek asset diversification. The economic and political trends driving gold marketing are detailed, as are the reasons why gold plays an important role in millions of investment portfolios worldwide—as both a hedge and an investment for capital gain. Topics examined include understanding gold's role in combating inflation and deflation, how to select a gold firm, the history of gold since 1971, storing gold, and government debt."
8. The Great Bust Ahead (Daniel Arnold)
The Great Bust Ahead is a concise, straight to the point book laying out in stark terms the case for a coming depression of historically unprecedented magnitude… beginning perhaps as early as 2009-2010, and last up to thirteen years.
His stuff is based on demographics basically. It's nice and short.
Reading now:
1. Empire of Debt (William Bonner again). I started reading this one at the gym. Good so far…I'm only about 40 pages into it though.
On tap to read…
1. Secrets of the Temple, How the Federal Reserve Runs the Country (William Greider)
2. The Federal Reserve System (Donald Wells)
3. Beyond Greed (Stephen Fay)—I've been trying to read this one awhile. A dry book that describes the Hunt Brothers and Silver
4. The Citizen's Handbook (T.J.Stiles) A compilation of the content of important documents, speeches etc.
In case anyone has read this far...
I respect your opinions and believe that the time will come when we must pay the piper. It may be tomorrow, in 10 years or 100. We really have no idea.
I didnt want you to pull stats. We both know each of us could massage them to prove a point. I just ask you to look around. Remember what your area looked like 10 years ago or 5 years ago. It has grown tremendously. Look at the help wanted signs in the storefronts are in your local paper. Finally, look at your coin business. A weak economy will not beget strong coin sales/prices.
I believe evidence is all around that more and more goods and services are being demanded and consumed. That, IMO, is a sign of a strong economy.
Gold has historically been a decent store of value, but just like other asset classes it has both failed miserably and greatly outperformed.
Knowledge is the enemy of fear
When inflation becomes impossible to hide, they will start by adopting super-protectionist measures, allowing individuals to default generously, prop up "social safety nets", print dollars, tax the top 25% - 35% of the population way beyond what's done now, as well as the capital markets and the most performing firm. In short, they will kill what is left of productive America rather than loose the votes of such a large segment of the population. Republicans and Democrats will trip over each-others to adopt the most inanely demagogic policies. There will be a call to default on our bonds (think Argentina), which will be adopted once the principled officials are voted out of office.
If there is a major crash, it's going to get really, really bad.
Robert A. Heinlein
I do look around CT and see no "help wanted" signs. I see a faltering New England economy that is dying....esp Connecticut.
We have still not recovered from the recession of 1990-1993.
I don't foresee deflation until massive inflation has occurred. The FED will authorize new money to the point of absurdity before they allow a deflation to occur. A recession could be in the cards, but not if they keep on printing money at the current rate.
The "growth" you allude has been borne of massive credit by selling debt overseas. That is not growth but only delayed self-immolation.
That debt is our birthright being sold to Asia. I just do not buy the "real" growth. Sure, many have made a killing playing these markets, and they will keep their wealth as long as they get out of stocks (in general) at the right time. Some stocks are great. The indices as a group will falter greatly eventually. But in 1-100 years as you said. I think more like 1-10 years.
Ricky Henderson: note that the price of the computer going down some lowers the CPI. But that is not enough for the BLS. They "adjust" the price even lower based on "quality" factors as well. These QF's are useless for me and you buying a new computer. But the BLS feels that if a computer's memory has doubled and it saves us time at work, then not only has the price dropped at the store, but they will drop it another 50% to compensate for the QF. As absurd as this sounds, it is what they do for computers, cars, washers and dryers, hospital procedures, and a host of other products. Our tax dollars at work. Hedonic adjustments is another way you'll here this talked about.
Imagine that your hospital bill is double what is was 2 years ago for the same surgery. But the QF cuts the cost in half because a new procedure got you out of the hospital in half the time. Your bill has doubled but the input to the CPI is unchanged. The CPI should have risen if it were indicative of our personal costs. But it drops due to the QF adjustment. Mindnumbing.
roadrunner
Knowledge is the enemy of fear
I am in a business that relies quite heavily on consumer spending. While I complain that it is never enough and has dropped quite a bit in the last 12 months.....I really am quite suprised at how it has remained basically strong the last 5 years.
Just a note...on the Los Angeles AM radio the other day -I heard for the first time an ad for HARD MONEY loans on RE. Haven't heard one in over 10 years. The beginning of the sharks circling.
They are so scared of all the defaulting from leverage loans that they wrote a law to keep everyone in servitude for decades.
This is the sign of a great economy where big lenders fear they will not be paid back from handing out frivolous loans? So they seek out govt help to protect them? The sheeple have been sheared.
roadrunner
<< <i>The new bankruptcy law is certainly one item of proof where the large cc & mortgage companies and govt think we are going.
They are so scared of all the defaulting from leverage loans that they wrote a law to keep everyone in servitude for decades.
This is the sign of a great economy where big lenders fear they will not be paid back from handing out frivolous loans? So they seek out govt help to protect them? The sheeple have been sheared.
roadrunner >>
I recently found out that three employees of one of our main contractors declared bankruptcy just under the wire. The new law was what pushed them into it.
These are young guys, late 20s, married, a few children among them. All are a two income family. They all drive new cars, etc. They didn't seem to be concerned in the least at what this would do to them in the future and there wasn't a shred of remorse or embarassment. I don't know all the details but one guy said he and his wife were 20K in the hole. His wife is a school teacher, so I'd guess their combined income to be around 70K a year. They keep their house, 2 cars and pretty much the only change is that they aren't in debt anymore. That's just sad.
I kept my mouth shut. I'm sure I would have said a few "unkind" things.
She has 3 months a year off and I guess nobody these days ever heard of a second job. I'd say it's probably a good thing that the laws were changed.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
I concur that bankruptcy laws stunk. But the reason and timing for the new change is not about fixing an old problem. Rather this is about keeping cc and mortgage companies in business after they have made horrendous decisions in their loan making. Only the connected seem to get spared. Congress does the same thing. They are ultimately resonsible for our inflation (money supply increase and debt) yet turn around and blame oil companies for profiteering from their poorly thought out policies. Ironic huh?
roadrunner
<< <i>Deadhorse,
I concur that bankruptcy laws stunk. But the reason and timing for the new change is not about fixing an old problem. Rather this is about keeping cc and mortgage companies in business after they have made horrendous decisions in their loan making.
roadrunner >>
Oh I agree. These people I'm talking about are a prime example of those horrendous decisions. I should add that the guy I knew the most about also has a collection of several dozen expensive guitars. Purchased, no doubt, with credit cards over the last few years. Of course, he gets to keep them as well.
I mentioned that he might have considered selling a few of them and he acted like a child protecting his Tootsie Roll Pop.
That's when I knew I had to stop talking.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
An interesting read on something I had not considered. The repatriated funds exemption ends on Dec 31st. To date, $200 billion has come back ashore supposedly to go to capital investment, jobs, and R&D. Willie says the money was used by corps. to buy back stocks. $200 billion so far a nice boost to the stock market this year and to the US dollar index. What occurs when this boost disappears in 30 days? Could be more gold positive.
roadrunner
I've been reading about a number of corporations, in an effort to get a 7% return on their money, have invested assets in hedge funds. If I understand them correctly, hedge funds are kind of like betting on the future position of some index or stock issue at some point in time, sort of like "betting on the come". There was an article in the paper today about the fragility of the hedge funds in that there are so many dollars invested in them that if one fails then that could begin a financial dominoe effect that would shock the investors/investments and may have a devestating effect on our economy.
Could someone post a short description of what hedge funds are and what our vulnerabilities and advantages may be with the high level of investment in this type of fund. I'm assuming that the hedge fund managers (is it kind of like a short term mutual fund?) know what they are doing and are not just shooting bullets into the future, hoping that they hit something. Please give us the short course on these hedge funds.
Often, you can create a financial product A with a combination of other products, B. Because B is basically a synthetic A, their gain profile is exactly the same. Obviously, they should be worse exactly the same amount. Otherwise, say if B costs less to put together than A is priced in the market, then you could create a series of B products and sell them as A and make a profit with no risk.
This is - simplified - what hedge funds do. They identify tiny, tiny variations, and make money on them. Typically, they specialize in specific areas - currencies, etc.
Robert A. Heinlein
Hedge funds are not regulated by Fed Law like ordinary mutual funds are. They can make wild and crazy investment trades, and it's OK. I think they have minimum initial investments of something like $1 million, so that successfully rules out normal people.
The news is absolutely nothing new. Long Term Capital Management (LTCM) went bankrupt in the late 1990's because they invested something like 10:1 in the dollar exchange rate, and it went against them. The Fed stepped in and erased the losses to prevent investors from losing money.
Pretty neat, huh? I've written the Feds several times, but they have never stepped in and erased my losses....
The LTCM story is an excellent study for the investor moving beyond "beginner" status.
<< <i>Retailers Post Disappointing Nov. Sales
1 hour, 15 minutes ago Business - AP
By ANNE D'INNOCENZIO, AP Business Writer
NEW YORK - The nation's retailers had a disappointing start to the holiday season, reporting sluggish sales for November as a much hoped-for surge in Thanksgiving weekend business failed to materialize. >>
Perhaps more people are finally deciding for themselves whether or not they need the latest useless POS that ad-men are trying to convince us we need and finally realizing that they can live just fine without it.
This would be a good trend...people actually making their own decisions based upon how they actually feel.
Nah...people are too stupid. They'll follow the trend wherever it takes them.
JP Morgan has close to $100 TRILLION on their own in Derivatives bets. It's leveraged against only a few billion in real assets. This unregulated financial sewage has the potential to bring down the world's economys at any time. But the PhD analysts and Bankers who swear by them, say the system is safer than ever. I don't feel as so confident.
Hedge funds are making bets. Bankers are making bets. Mortgage houses are making bets....all with Derivatives that are unsupported, non-transparent, and unregulated. No one even knows who is the end-owner of the "bet" because there are so many interconnections.
It's a potential H-bomb nightmare.
roadrunner
Suffice to say it is a pool of money that is run by money managers. They invest in all asset classes. Some are heavily leveraged, some are not. Most do not outperform their benchmarks. Some do extremely well.
Just like anything else there are a few bad apples that give the whole group a bad name.
Most people that invest in hedge funds have incomes greater than $250,000 and liquid assets if at least $1 million.
There is about $1 trillion invested in hedge funds globally.
I believe the run-up in oil prices was exaccerbated by hedge funds.
Knowledge is the enemy of fear
That $1 TRILLION in hedge funds pales in comparison to what the derivatives risk among major financial houses, bankers, and lenders.
I think it is beyond the comprehension of every one but the almighty.
20 years ago derivatives may have totalled a hundred billion or possibly a trillion. Now hundreds of times greater! Potential Risk? Certainly. It would be like having large homes all of a sudden going from $350K each to $35 MILL each. Would that be a problem??
roadrunner
Here is a fairly detailed-(read incomprehensible)- paper on hedge funds. For our discussion here only the first few pages need to be read.
hedge funds
Knowledge is the enemy of fear
<< <i>The hegde fund question is much to large to answer in this forum.
Suffice to say it is a pool of money that is run by money managers. They invest in all asset classes. Some are heavily leveraged, some are not. Most do not outperform their benchmarks. Some do extremely well. >>
I believe you are mistaking mutual funds for hedge funds.
Robert A. Heinlein
I think this is an accurate statement. A hedge fund is a mutual fund, with a very limited investor group. A primary objective of limiting the investor group is to avoid SEC regulation. This increases the flexibility with which fund assets can be invested. It also greatly increases the due diligence required before investing. Although the name arose from the use of hedging technique to, in theory, increase yields while managing risks, many hedge funds today do not make extensive (or any) use of derivatives.
If all the large companies in the U.S. are forced to tell the truth about their
REAL financial condition, LOOK OUT!
S&P 500 May Drop If Full Pension Debts Disclosed: John Wasik
Dec. 5 (Bloomberg) -- Let's assume that the U.S. Congress cuts through a political briar patch and passes a law that forces full disclosure of pension debts. The consequences might be stunning.
Companies with poorly funded pension plans might have to contribute billions of dollars more to their retirement plans and touch off worker demands that employers pony up even more money for their retirement security.
Just as surely, investors would punish companies with the highest retirement debt, according to a study by David Zion and Bill Carcache, analysts for New York-based investment bank Credit Suisse First Boston. They examined the effect of fully disclosing and accounting for the pension liabilities of the 374 companies in the Standard & Poor's 500 Index with defined- benefit plans.
``We estimate that would cause the total shareholder's equity for the companies in the S&P 500 to drop by $255 billion, or 7 percent,'' they wrote in their Nov. 10 report. The 18 most underfunded companies would fare worse, suffering a 25 percent reduction in shareholder's equity.
Equity Wiped Out
Zion and Carcache figure that shareholder equity -- a company's total assets minus total liabilities (which should include what it owes its pension program) -- would be wiped out at the seven S&P 500 companies with the biggest funding gaps in their pension plans.
LINK
Run Forest...run!
No?
Knowledge is the enemy of fear
<< <i>All these countries will just write off our debt just like we do for them
No? >>
U.S. debt is 3.5x its GDP... How can you write that off?
<< <i>U.S. debt is 3.5x its GDP... How can you write that off? >>
Simple. Like any other deadbeat. Tellem we ain't payin. Lettem turn us over ta "collections." Buncha bill collectors all callin everyone at night to badger us ta pay. Hang up on em. Make em "renegotiate" the debt. Coors, Walmart's shelfs mite get a bit empty. Awwwwwwwww.
<< <i>
<< <i>U.S. debt is 3.5x its GDP... How can you write that off? >>
Simple. Like any other deadbeat. Tellem we ain't payin. Lettem turn us over ta "collections." Buncha bill collectors all callin everyone at night to badger us ta pay. Hang up on em. Make em "renegotiate" the debt. Coors, Walmart's shelfs mite get a bit empty. Awwwwwwwww.
Yeah, I suppose. But then they stop buying FRNs, and that's all she wrote.
Gold $ US 515.50
Silver $ US 8.84
Platinum $ US 1005.00
Palladium $ US 277.00
I hate it when mainstream media prints these. It kind of makes gold lose its mysticism.
CNN: 1000 dollar an ounce ?
<< <i>I hate it when mainstream media prints these. It kind of makes gold lose its mysticism.
CNN: 1000 dollar an ounce ? >>
When mainstream media sensationalizes gold, that means a (big?) correction is near.
Remember when Newsweek had the "shrinking dollar" on their cover last year?
The week after that the current dollar rally began, and is still ongoing.
Also, remember when Time had the "everybody loves real estate" cover
this past summer? Ever since then the real estate market has been contracting
and long term interest rates have gone up. I believe the Time cover essentially
called the top for real estate.
Never heard of Fibonacci referred to in economic terms, only as a mathmatical term as in the Fibonacci sequece.
1+1=2
2+1=3
3+2=5
5+3=8
8+5=13
13+8=21
etc...
When you graph it on an xy axis, you get an ever expaning chambered nautalus type line. How does this sequence possibly fit into an economic analysis?
<< <i> you get an ever expaning chambered nautalus type line. How does this sequence possibly fit into an economic analysis? >>
Mayby like a graph of our National Debt since the last election???
I am a debt collector! I would love to get my hands on those kinds of numbers!
The most common answer I hear is : THE CHECKS ARE IN THE MAIL!
Why can't we tell all of our creditors that the money is in the mail? Let them wait.....and wait.....
$20 Saint Gaudens Registry Set
The climb in gold has been pretty orderly so far. Like when a rainstorm comes and the rain starts gradually, it can keep raining for quite a while. The deficit problems that are spurring investors to flee to gold are long-term problems that won't be fixed overnight.
Of course there can be big corrections along the way. That would be the time I would try to accumulate a little more.
<< <i>The deficit problems that are spurring investors to flee to gold are long-term problems that won't be fixed overnight. >>
That's the thing though, not really sure if this move is based on a "flight to safety" bet.
Could be just speculative liquidity jumping from one hot thing to the next.
The debt can easily be repaid if we (actually, you, the voters - I'm a foreigner here, I just pay taxes) make that a priority, over things like social security, Medicare (incl. the new drug coverage) & Medicaid, or / and the war in Iraq, depending on your affiliation.
Robert A. Heinlein
<< <i>Anyone looking for a ....."lighter side" ..... gold site, check here. Gets kinda fun if you want humor with your goldbuggery.
LINK
Now there's some funny craziness!!! Sort of reminds me of one of our own illustrious posters....
"Ask, and it shall be given you; seek, and ye shall find; knock, and it shall be opened unto you." -Luke 11:9
"Hear, O Israel: The LORD our God is one LORD: And thou shalt love the LORD thy God with all thine heart, and with all thy soul, and with all thy might." -Deut. 6:4-5
"For the LORD is our judge, the LORD is our lawgiver, the LORD is our king; He will save us." -Isaiah 33:22
<< <i>The debt can easily be repaid if we (actually, you, the voters - I'm a foreigner here, I just pay taxes) make that a priority, over things like social security, Medicare (incl. the new drug coverage) & Medicaid, or / and the war in Iraq, depending on your affiliation. >>
LOL , you must be from somewhere else. To suggest a cut in Social Security benefits is political suicide. The bottom line is that Americans don't care about repaying the debt, they would rather die still owing it. They have National Debts, State debts, Municipal debt, Corporate debt, Home Equity debt and Personal Debt. The mojority are only interested in "who" can they borrow from next.
They only way out is to make curreny worth less or worthless, however you look at it. Thats the only possible resolution.
<< <i>They only way out is to make curreny worth less or worthless, however you look at it. Thats the only possible resolution. >>
That is not a solution. Again, that would bring the US to its knees.
Robert A. Heinlein
The resolution on the other hand is how it will turn out when a solution is not implemented but rather it is the result of a series of poor attempts to avoid or ignore the problem and minimize or delay the damage.
And yes,
<< <i>that would bring the US to its knees. >>
so we just need to prepare for it on an individual basis.
<< <i>I said resolution not solution. >>
Ah, you're correct - I understand.
Robert A. Heinlein
There is a lot of discussion about a slowdown next year......That is the dilemma....slowdown or inflate......I wonder which one "helicopter Bernanke" is going to choose.....????
$20 Saint Gaudens Registry Set