Sometimes you just have to go with your gut instinct.
Thus far, it has served me well. Even in the face of the gold naysayers.
I happen to think both silver and gold are bargains at current prices. Trouble is, it's not very easy to find locally. Not near as easy when prices were even lower than today just a year or so ago.
Still, I'll keep shopping. I have my stop buying numbers of course, but we aren't there by any means.
"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
Again, long term bond yields are low and continue to lower because of many of the other major powerhouse countries have similar long term bonds yielding much less. There is no inflation risk right now. Gold will have a spike up ONLY if the stock market in the short term has a good 15% or more correction. No signals that this will happen any time soon, and inflation risk???
I will sound like an economist/stock analyst on this wishy/washy statement but: I also do not have the guts to short gold, but I think it will go down from here. I will predict under 400 before 450 hits.
TDN.....It would have been fine if the re-fi's were just to lower rates. But most of the refi bizz went to INCREASE the debt on the house. See, they were very astute and figgered out that they could have a bunch more gizmos an still have the same house payment. Oh sure, it will be harder to pay off because they also added new TIME to the loan, but heck the recovery is imminent so that'll take care of that.
My take on bonds, and other INCOME stocks is that we are about to enter a WILD ride of lower returns and it will coincide with a huge demand for ....annuities..... from people who are about to get the shock of their lives when they see how little they will have for "retirement."
Passive income should become king. I've been betting on it for 2 years now and happy I did.
As mentioned earlier in the thread, you can put the newly minted credit into 1. stocks/bonds. 2. CPI consumable related things 3. towards the trade deficit (buy cheaper things from overseas) 4. commodities / tangibles. or 5. houses/real estate
Much more of 1, 3, 4, and 5 is happening rather than 2. I believe most people are asleep at the switch and will not recognize inflation unless it is presented within a CPI framework. But isn't dumping newly made money and debt into the other 4 items also "inflation?" Does it HAVE to show up in the CPI (#2) to REALLY be inflationary? I don't think so.
The bond market must be clueless about inflation. I think most markets today are clueless. They are mostly manipulated through various means as well as mass psychology. Real value plays a much smaller role today than it did 20 years. People buy pigs in the pokes all the time because they are hot. And they go up until the smart money gets out. One game of asset bubble musical chairs after another.
Dr. Kurt Richebacher sums it up the best when he quotes the FED as saying they have licked inflation. Not really he says. All they have succeeded in doing is moving all the excess from behind door #2 and made it show up behind doors #1,3,4,5. Problem solved!
Money has to go somewhere. If the money thinks stocks are high then they need to get some return. Foreign investors, mutual and pension funds would rather get 4.5% than nothing. Too much money can bring the rates down if theres more available to borrow than qualified borrowers to take it. Look at the qualifications for a home loan. Fog a mirror. Inflation, huge deficits and low rates go together until the fed decides to raise the rates. Now why would they do that any sooner than they absolutely have to when the biggest borrower is the US govnt.
I usually agree with most of your comments but the bond market is almost NEVER wrong.
There are global forces that are much larger and have a greater influence on our bond market than domestic inflation. I agree that for the things I buy and consume, prices are higher, i.e Restaurant food, energy, taxes(sales and RE), labor. Building materials costs have also risen at a 5-10% clip over the past few years.
Bond yields are low because people are buying bonds. You must analyze the reason for this. Until those reasons change, bond yields will continue to be RELATIVELY low. Remember in Japan, the long bond yield fell to under 1%.
<< <i>Bond yields are low because people are buying bonds. You must analyze the reason for this. Until those reasons change, bond yields will continue to be RELATIVELY low. Remember in Japan, the long bond yield fell to under 1%. >>
True. This had been true for a long time; the difference now is that the dollar is coming back.
When the dollar was falling, even though there may be 1% yields in Japan, there's no point in chasing 5% yield in dollar-denominated securities while the dollar was in free-fall; the currency loss would more than offset the extra yield.
But with a rising to stabilizing dollar, U.S. Treasuries start looking more attractive again compared to other things. Long term, though, the energy situation, increasing competition for resources and nearly $8 trillion in debt and growing make me wonder how much the dollar can rise from here. A sucker's rally in the dollar, maybe?
I had said in previous threads that the dollar was nearing a major support area and was likely to bounce. I also stated that this was likely to be short-lived. The most optomistic scenerio is that the dollar is stabilizing.
As you can see in this chart the dollar has suffered very badly and is now in a support area. The trend is clearly down until it changes. At this point I certainly would not want to be short the dollar unless it breaks support. My thought is a rally back to the 95-100 level or about a 20% rally off the lows. What happens after that will tell alot.
Of course, based on Bushes BS tough talk on the budget. In the end, the IRAQ fiasco and other forces will push the budget way higher than his joke budget, not to mention all the "off budget" items. Then the rally will fade fast.
Comments
The 30 year bond yields are below 4.5%. I can't believe that market is uneducated, and it isn't clueless about inflation.
Only logical answer is that the theory of inflation/gold is off the mark.
Hey don't get me wrong, I like the story, but money talks.
Thus far, it has served me well. Even in the face of the gold naysayers.
I happen to think both silver and gold are bargains at current prices. Trouble is, it's not very easy to find locally. Not near as easy when prices were even lower than today just a year or so ago.
Still, I'll keep shopping. I have my stop buying numbers of course, but we aren't there by any means.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
Exactly. The market is never wrong. I cant wait to see if the yield curve inverts.
Knowledge is the enemy of fear
Exactly. The market is never wrong. I cant wait to see if the yield curve inverts.
Hoo weee, I'm not brave enough to short gold here.
I will sound like an economist/stock analyst on this wishy/washy statement but:
I also do not have the guts to short gold, but I think it will go down from here.
---Lloyd
Dont take any offense, but I love to hear comments like that. Must be the contrarian in me
Knowledge is the enemy of fear
But most of the refi bizz went to INCREASE the debt on the house. See, they were very astute and figgered out that they could have a bunch more gizmos an still have the same house payment. Oh sure, it will be harder to pay off because they also added new TIME to the loan, but heck the recovery is imminent so that'll take care of that.
My take on bonds, and other INCOME stocks is that we are about to enter a WILD ride of lower returns and it will coincide with a huge demand for ....annuities..... from people who are about to get the shock of their lives when they see how little they will have for "retirement."
Passive income should become king. I've been betting on it for 2 years now and happy I did.
But....also....have a fair position in metals.
Just in case.
4. commodities / tangibles. or 5. houses/real estate
Much more of 1, 3, 4, and 5 is happening rather than 2. I believe most people are asleep at the switch and will not recognize inflation unless it is presented within a CPI framework. But isn't dumping newly made money and debt into the other 4 items also "inflation?"
Does it HAVE to show up in the CPI (#2) to REALLY be inflationary?
I don't think so.
The bond market must be clueless about inflation. I think most markets today are clueless. They are mostly manipulated through various means as well as mass psychology. Real value plays a much smaller role today than it did 20 years. People buy pigs in the pokes all the time because they are hot. And they go up until the smart money gets out. One game of asset bubble musical chairs after another.
Dr. Kurt Richebacher sums it up the best when he quotes the FED as saying they have licked inflation. Not really he says. All they have succeeded in doing is moving all the excess from behind door #2 and made it show up behind doors #1,3,4,5. Problem solved!
roadrunner
<< <i>People buy pigs in the pokes all the time because they are hot. >>
Yeah, but PCGS, NGC, or ANACS pokes????
Then again, during 2002 and 2003 it doubled, so in that case it *wasn't* such a good thing it was less than 4% of my portfolio.
RR,
I usually agree with most of your comments but the bond market is almost NEVER wrong.
There are global forces that are much larger and have a greater influence on our bond market than domestic inflation. I agree that for the things I buy and consume, prices are higher, i.e Restaurant food, energy, taxes(sales and RE), labor. Building materials costs have also risen at a 5-10% clip over the past few years.
Bond yields are low because people are buying bonds. You must analyze the reason for this. Until those reasons change, bond yields will continue to be RELATIVELY low. Remember in Japan, the long bond yield fell to under 1%.
Knowledge is the enemy of fear
<< <i>Bond yields are low because people are buying bonds. You must analyze the reason for this. Until those reasons change, bond yields will continue to be RELATIVELY low. Remember in Japan, the long bond yield fell to under 1%. >>
True. This had been true for a long time; the difference now is that the dollar is coming back.
When the dollar was falling, even though there may be 1% yields in Japan, there's no point in chasing 5% yield in dollar-denominated securities while the dollar was in free-fall; the currency loss would more than offset the extra yield.
But with a rising to stabilizing dollar, U.S. Treasuries start looking more attractive again compared to other things. Long term, though, the energy situation, increasing competition for resources and nearly $8 trillion in debt and growing make me wonder how much the dollar can rise from here. A sucker's rally in the dollar, maybe?
I had said in previous threads that the dollar was nearing a major support area and was likely to bounce. I also stated that this was likely to be short-lived. The most optomistic scenerio is that the dollar is stabilizing.
Graph of us dollar
As you can see in this chart the dollar has suffered very badly and is now in a support area. The trend is clearly down until it changes. At this point I certainly would not want to be short the dollar unless it breaks support. My thought is a rally back to the 95-100 level or about a 20% rally off the lows. What happens after that will tell alot.
Knowledge is the enemy of fear
trying to make sense of the mess of this economy is a real challenge.
I may consider buying some generic gold if it gets low enough.
<< <i>A sucker's rally in the dollar, maybe >>
Of course, based on Bushes BS tough talk on the budget. In the end, the IRAQ fiasco and other forces will push the budget way higher than his joke budget, not to mention all the "off budget" items. Then the rally will fade fast.