Fresh link to those wishing to check current status of their bank's financial health as well as derivatives held. Pages 4-5 have derivative and off balance sheet summaries.
I feel like im always playing devils advocate on these things and it is very easy to manipulate things to suit a purpose. Just for giggles, I hope the dollar loses another 98.3% of its value over the next 100 years as the prior 100 have been pretty darn good for this country and I want it to continue.
<< <i>I feel like im always playing devils advocate on these things and it is very easy to manipulate things to suit a purpose. Just for giggles, I hope the dollar loses another 98.3% of its value over the next 100 years as the prior 100 have been pretty darn good for this country and I want it to continue.
Its all relative. >>
It has and it hasn't. Yes, the country as a whole has prospered. But the quality of life has declined if you consider that a typical family used to be supported by one income. Now, two incomes are necessary to support a typical household. And the future is not looking good as far as wage growth vs. cost of living.
Just for giggles, I hope the dollar loses another 98.3% of its value over the next 100 years as the prior 100 have been pretty darn good for this country and I want it to continue.
Its all relative. >>
Then just imagine how good it could have been for us if these criminal acts hadn't occurred.
.....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 hope the dollar loses another 98.3% of its value over the next 100 years as the prior 100 have been pretty darn good for this country and I want it to continue.
You assume that things would have been worse without inflation. On the contrary, without inflation things might have been a whole lot better!
Who knows? I tend to believe that without the politicians working with the central banks to rake off the cream for doing essentially nothing, and preying on the middle class all these years, the US might be a whole lot better off, and the rest of the world as well.
It's all conjecture, ya think?
Q: Are You Printing Money? Bernanke: Not Literally
You're looking at the post-1944 Bretton Woods period as something that will likely continue to occur/reoccur in the future. And the last 60 yrs is the period that is fresh in people's minds. The USA got itself to 1971 by using a semi-gold backed currency (ie the world's reserve currency). The fiat boom period of 1971-2007 was as a result of exporting our inflation overseas on cheap foreign labor and trinkets. Such a period will never come again at the expense of the developing world. Other means besides a banking Ponzi scheme will have to be utilized going forward to create true wealth and economic strength. And first, there are years/decades of work to do to unwind those 40 years of over-leveraged "assets." Yeah, it was a great period while it lasted for politicians, bankers, lawyers, insurers, realtors and their entourages.....where real average wages have declined since 1973 and 2 bread-winners are required for most families who are now in debt up to their teeth. It's not all bad though. We could have been on the receiving end of another nation's Ponzi-scheme and had 40 years of muddlin' through.
I am of the belief that a household earning the average income today lives a better life than one earning the average in 1900.
In 1900 the breadwinner probably worked 60-70 hours a week, that isnt so much different today, its just split among 2 people. People now have indoor plumbing and electricity. Ever use an outhouse in January at night in the Northeast? Brrrr!!!
When one is faced with the constant threat of deflation as was the case in the 1800's there is no incentive for long term investing.
I don't think the average American is ready to go back to 1900 and accept that as good enough. What happened to the 1950's? 60's? 70's? 80's? 90?s, etc.
What's worse for J6P the constant "threat" of deflation when your money buys more goods or where inflation rules and your money buys less? Which scenario has benefited the bankers most? The biggest industrial boom in our nation's history occured during the times when "deflation" was feared. We've already discussed how J6P has had to become a gambler with his assets to keep up. The average Joe in the 50's and 60's got by just fine with a savings bank account and/or a CD. Only 1 bread winner was needed. Those were simpler times. Today, you can't even figure out what the economy is doing to best speculate with your shrinking dollars because most of the published indicators and stats are worthless.
A few days back Japan's constant deflationary bouts were brought up with the inference that we're stuck in the same deflationary boat. I disagree. Japan was several years late in applying any significant stimulus once their economy tanked in 1990. In fact it wasn't really until 12 years later that they started to put some real stimulus to work. And at that point things started to turn around for them. The US didn't wait more than a few weeks before applying TRILLIONs in stimulus in 2008. The base money supply (M0) was more than doubled in a couple of months. The US vs. Japan have no similarities here because of the huge time delays before Japan did anything. Also Japan was trying to do things in a restrained and measured manner which accounted for almost nothing. They also didn't have the FED, GS, and JPM in their dugout urging complete fiscal unrestraint. Having the world's reserve currency to trash has its advantages....everyone shares part of the burden.
The problem is we don't seem to have a real foundation for future prosperity. We have huge deficits in trade and government expenditures; low rates of savings; and declining competitiveness in many industries as evidenced by all of the manufacturing that has been wiped out.
The period of the gold standard until 1933 built America as the world's largest economy. Now that we're so far away from a stable currency, as RR noted in an earlier post, there is no real incentive to save. There's only the incentive to keep "investing"/speculating in different asset classes to try to ride the wave up. Dot com stocks, real estate, you name it.
Under a system of stable currency backed by gold we would have never run these huge deficits and therefore never the financial bubble we are suffering from today. Imbalances would have been corrected much earlier. In the 1950s, under Bretton Woods, the US ran a tiny trade deficit - compared with what we have today - but immediately took steps to correct it:
As world trade increased rapidly through the 1950s, the size of the gold base increased by only a few percent. In 1950, the U.S. balance of payments swung negative. The first U.S. response to the crisis was in the late 1950s when the Eisenhower administration placed import quotas on oil and other restrictions on trade outflows. More drastic measures were proposed....Link.
And so we would've never gotten to the point where the Chinese accrued trillions of US dollars, loaned it back to us, and helped create the housing bubble we are now suffering from.
This is just one example of how having a fiat currency not backed by anything has made us worse off.
"Men who had never shown any ability to make or increase fortunes for themselves abounded in brilliant plans for creating and increasing wealth for the country at large." Fiat Money Inflation in France, Andrew Dickson White (1912)
I am of the belief that a household earning the average income today lives a better life than one earning the average in 1900.
You can thank the likes of James Watt, Thomas Edison, Henry Ford, Marie Curie, Louis Pasteur, Jonas Salk et al for those advances. The central bankers and politicians had nothing to do with it. Of course, that was before science & medicine were politicized to the degree that they are these days.
You can bet that if Al Gore was around in 1880, some of the real discoveries would have been deep-sixed in order to further his portfolio.
Q: Are You Printing Money? Bernanke: Not Literally
I am of the belief that a household earning the average income today lives a better life than one earning the average in 1900.
Oh really. So tell me how many of these 2 income families earning average incomes live on them. Answer: close to zero, In fact now that they've closed the bankruptcy loopholes you can just send in those payments the rest of your life and rent your house from the goverment too. All the while throwing your kids under the bus with hopes of a future.
The man in 1900 had a future with little to no debt.
The men of today have no future having sold their souls to the Global "One World Order" crowd without even knowing they were drinking the posin. It sure tasted good while going down. Welcome SLAVES here's what we've decided for the minions.
Let's not confuse technological advancement with economic prosperity.
Even the poorest poor in our country have cell phones, televisions (color even), microwaves, refrigerators and freezers and many other appliances, plumbing, and electricity. It's not prosperity that has allowed the poor to have these things, it is simply advancement of technology which has made these basics cheap enough for even the poorest to afford.
In the "Leave it to Beaver" days, the father worked his 40 hour work week and the mother stayed home and raised the children. Very difficult for most to do nowadays.
Now the American jobs/company's are in foreign country's. They exploit under paid labor in unsafe working conditions.
American factory workers are expected to compete. Bring our jobs home. We can't pay taxes if we are not working!
A Catch 22 of sorts. The shifting of many of the nation's key industries overseas to be more competitive is driven by the same need for investors (401K's, IRA's, etc.) to see gains as they gamble on their stock portfolios. It's their only way of "keeping" up....by cutting off their own noses to spite their face. They haven't realized that those amazing 25 yr gains in stocks have a deep price....ultimately their own job security and quality of life. While shareholders were pleased when they saw their stock prices rise for 2 decades....it's been at their own expense in the long run. Now they are finally putting it all together, 10 years too late. Professional traders, investors, bankers, brokers, etc were able to navigate this system successfully, Joe6Pack was not.
<< I feel like im always playing devils advocate on these things and it is very easy to manipulate things to suit a purpose. Just for giggles, I hope the dollar loses another 98.3% of its value over the next 100 years as the prior 100 have been pretty darn good for this country and I want it to continue.
Yeah, I told the wife not to worry, that we have lived pretty well these last couple of years. Then she reminded me that the house was in foreclosure, the credit cards were maxed out and a couple of guys with crooked noses and nicknames were at the door looking for me.
I think Cohodk is just keeping the debate honest, I think that if you were to actually ask him his personal views on many issues he would most likely agree with this post and the "2004- previous economic views" post as well.
Great poster and one i make sure to read always.
After all, he says he has a core position of physical gold, thinks higher taxes are a bad idea and hurt more than they help ( see comments about California and New York), he also dislikes the bailouts and likes hunting
without him the board could turn way too bullish ...
"Women should be obscene and not heard. " Groucho Marx
Speaking of being bullish (as gold falls under $1110) here's a link to Jason Hommel. He had 112 of his readers poll approx 10 friends/relatives each to find out their thoughts on PM's. The answers are not surprising and indicates Joe and Jane Six Pack are still way out of the loop. Of course the standard replies from you can't eat gold, gold is volatile, gold is expensive, gold is illiquid, who would buy it, if it's so good why do people sell it, to gold is a barbarous relic, are all included. Enjoy!
Fwiw I don't buy from JH. Every so often I find his articles interesting, entertaining or both.
WHOA ! I thought they were going to sell 131 Billion this week?
Dec. 11 (Bloomberg) -- Treasuries fell, with 10-year note yields touching the highest levels since August, as reports showed U.S. retail sales and consumer confidence rose more than forecast.
Ten-year notes headed for a second week of declines after the U.S. yesterday completed the last of this week’s three note and bond auctions totaling $74 billion. The difference in yield between 2-and 30-year securities widened yesterday to the most since at least 1980 as investors bet the Federal Reserve will keep interest rates lower for longer while the government sells more longer-maturity debt.
RR Isn't this absurd? The Chinese are building shops on the streets of their major cites to sell Gold, and more particular silver, and most Americans have no idea what is going on.
Jim Rogers said this week that two weeks ago he gave a speech to 100 of the top Hedge funds and pension funds in the country. After that speech he ask them how many had owned Gold. 76% said they had never owned any!
I guess what I heard from CNBC's Santelli was correct....the 30 yr bond auction was an "F." The FED can keep the low end of the yield curve near zero but have little control of where long term rates are going. That's no surprise as long term rate deals are being repackaged into more attractive shorter and shorter term deals. Rising longer term rates usually drag gold along for the ride though if you surveyed people nearly all would say that higher rates would drive commodity (ie gold) prices down. Correct me if I'm wrong but wouldn't most of the action in the dollar carry trade be at short term rates where there is much less risk of the rates being changed in the near term? Rising long term rates shouldn't by itself cause the dollar carry trade to unwind.
GS, America is goldphobic while the action in buying gold and silver is very robust in the far east. For every ad on TV or in the newspapers selling gold there are probably 4X as many buy ads. J6P is being fleeced of whatever gold he happened to acquire over the past few decades. J6P has been weened on stocks and bonds since day one and that's all he knows. They are infallible for the longer term or so he has been told. And frankly there is no substitute so he is told to stick it out.
The idea that India and China combined could own the majority of the world's gold supplies would put them in an enviable position. The next best thing to your central bank owning gold is having your people own it (it's one step closer to the CB).....the only exception is if you happen to live in the nation of the world's reserve currency. Then, having the people own gold is very counterproductive to the financial/monetary goals of the PTB. If they fell $57 BILL short on last week's auctions they can always make that up at the next one. Can you imagine a major corporation doing a stock dilution offering every 2 weeks for a year straight? Wouldn't that wreak havoc on the stock price? Shouldn't it wreak havoc on the true value of the nation's stock (ie the dollar)?
RR, the way the stock market has been ingrained in people's heads could be a case study in marketing. People really believe that they're going to get an average 8% or 10% annual return forever. But when you run the numbers, it's impossible. If the Dow rose at 10% a year for 50 years it would end up over 1,000,000 -- more than a 100x increase. Even if it only rose 8% it would be almost a half million. In the meantime, if the real economy grew at 3% annually (which is actually higher than its long-term trend) it would increase about 4x over fifty years. Something doesn't add up.
The reality is that stock prices increased tremendously in the 1980s and 1990s due to a combination of factors we may never see again, including (1) a huge, slowly growing credit bubble, (2) the increase in participation in the stock market by more and more investors due to the 401(k) plan, which was created by Congress in 1978 and really took off in the 1980s, and (3) the further increase in stock market participation due to online trading in the 1990s and early part of this decade.
These historical events explain much (though of course not all) of the increase in the stock market in the 1980s and 1990s. We won't see (2) and (3) again, given the saturation level we're at in this country in terms of people being in the markets.
When the history of this period is written someday I think the conclusion will be that the stock market boom largely benefited those in the financial industry (Wall Street, etc.) at the expense of the average investor. The huge bonuses in the financial industry that were paid over all those years didn't come out of thin air; they came as "winnings" from the pool of money invested by others (i.e., from the losers in this game, mainly J6P).
"Men who had never shown any ability to make or increase fortunes for themselves abounded in brilliant plans for creating and increasing wealth for the country at large." Fiat Money Inflation in France, Andrew Dickson White (1912)
“Dividends must also be taken into account for the past annualized gain in the stock market, albeit however small of a factor they contribute.”
Investing in anything these days is such a ball of worms it is nearly impossible to calculate any ROI.
Yes you can take into account dividends, but then you have to subtract inflation, devaluation of the currency you are investing in, taxes on those dividends, etc.
The only way to find out what you have made on a paper investment is to wait for the “Long Term”, or be a day trader, which precludes dividends in most cases. We all now know that investing for the long term in the U.S. market is a fools game that over the past decade has ended up in nothing but loses.
Mostly J6P can forget about dividends, because after the Taxman finished with him, and the slick Wall Street guys got done, he not only has no return on his capital he did not get his capital returned.
It wasn't that long ago that people believed they'd get 15% long term. Those who were sub-par investors and did the indexes would only get 12%.... and *some* haven't even figured it out to this day!
<< <i>RR, the way the stock market has been ingrained in people's heads could be a case study in marketing. People really believe that they're going to get an average 8% or 10% annual return forever. But when you run the numbers, it's impossible. If the Dow rose at 10% a year for 50 years it would end up over 1,000,000 -- more than a 100x increase. Even if it only rose 8% it would be almost a half million. In the meantime, if the real economy grew at 3% annually (which is actually higher than its long-term trend) it would increase about 4x over fifty years. Something doesn't add up.
The reality is that stock prices increased tremendously in the 1980s and 1990s due to a combination of factors we may never see again, including (1) a huge, slowly growing credit bubble, (2) the increase in participation in the stock market by more and more investors due to the 401(k) plan, which was created by Congress in 1978 and really took off in the 1980s, and (3) the further increase in stock market participation due to online trading in the 1990s and early part of this decade.
These historical events explain much (though of course not all) of the increase in the stock market in the 1980s and 1990s. We won't see (2) and (3) again, given the saturation level we're at in this country in terms of people being in the markets.
When the history of this period is written someday I think the conclusion will be that the stock market boom largely benefited those in the financial industry (Wall Street, etc.) at the expense of the average investor. The huge bonuses in the financial industry that were paid over all those years didn't come out of thin air; they came as "winnings" from the pool of money invested by others (i.e., from the losers in this game, mainly J6P). >>
From 1933 to 2007 the DOW rose 475x, so a 100x increase wouldnt be out of the question. Or to even out some of the extremes, the period from 1949 to 1999, 50 years which do not represent the bottoms and tops, still a 67 fold rise in the DOW.
Remember, the stock market is also a function of inflation, had we not have enjoyed the inflation we have over the past 75 years, we would not have the benefits of a rising DOW.
I also believe the rising stock market was more a function of a massive demographic bulge rather than legislation, although that may have helped. Had we not had a huge increase in the number of people of age to buy equities, we would not have had a rising market. Every economic development over the past 60 years can be directly attributed to the baby boomers and their demands.
Dont get wrapped up in the value of the numbers--DOW 500k may sound extreme, but wouldnt a Brazilian market at 67K seem ridiculous. Compute those 50 yr numbers at 10% growth!! The average house in 1946 was something like $3000, now its 175,000, woulda thunk? The average wage was 25c an hour, now $25, woulda thunk?
I also think without Wall Street, we never would have had an Intel, Microsoft, or Cisco or Amgen and Biogen. How many jobs have they created? How have they changed our lives?
I agree that Wall Street managers are overpaid, but how about the traders? If someone gave you $1 billion to trade and you turned it into $1.5 billion, do you think your bonus should be a ham or a pat on the back? Just a 1% cut of the profits would be $5 million. How is that extreme?
I have a brother in law that is a CPA and works for a large construction company in San Antonio Texas. He has worked there for 26 years. For many many years he has had a 401k that he and the company both contributed to. He and his company have deposited hundreds of thousands of dollar to that retirement account.
He did pretty well thought the late eighties and early nineties and then the dot com. bubble took his account back to about what principle they put in. Then for a few years after that he made up some of the loss, then came 9/11 and a new crash. Back to where he was.
Then it built up again, and then this last crash, and he is back I hope to at least what he put in.
I ask him one day, “why in the world do you stay invested in the stock market?” his reply was that he was not in the stock market he was invested in MUTUAL FUNDS.
“From 1933 to 2007 the DOW rose 475x, so a 100x increase wouldn’t be out of the question. Or to even out some of the extremes, the period from 1949 to 1999, 50 years which do not represent the bottoms and tops, still a 67 fold rise in the DOW.”
O.K. Dave lets goes through this one more time. There is no DOW there is no S&P these are illusions, mind games for the Wall Street guys to use on the public.
How can one use a statistic where the parts of the statistic are changed each year?
Almost all of the companies in the Dow and the S&P have been changed over the last 80 years. There were changes this past week.
An ounce of gold is always an ounce of gold that DOES NOT change.
If we had a basket of commodities to measure against the Dow in the period from 1933 perhaps that would include asbestos, and NOT uranium.
If by 1960 we decided that we want uranium in and asbestos out, you would say whoa, you couldn’t take out the losers!
Well what has happened to the losers in the DOW and the S&P? They are gone exchanged for winners.
Lets go back and add Lehman, Enron, Bear Sterns, and the dozens of others.
The DOW and S&P numbers are like a card game where one of the players has access to the deck and gets to pick his cards after he sees everyone else’s.
What is truly amazing is that we do not have DOW 20,000 right now. I guess we would, if there were enough great companies out there to exchange.
Why do you think the central banks care about gold? >>
There's no question central banks do care about gold. Otherwise they wouldn't hold so much of it in their vaults. Clearly, they have some attachment to it.
Why they care about it... many reasons. Two stand out for me. First, gold is on some level an innate store of value. So it makes sense as a reserve. Second, they care about the price of gold because it's a barometer for measuring the value of their currencies (and change/lack of confidence in currencies) over time.
"Men who had never shown any ability to make or increase fortunes for themselves abounded in brilliant plans for creating and increasing wealth for the country at large." Fiat Money Inflation in France, Andrew Dickson White (1912)
Allied Can Allied Chemical American Smelting & Refining American Tobacco B Bethlehem Steel Borden Chrysler Coca Cola Corn Products Refining Company Eastman Kodak General Electric General Foods General Motors Goodyear International Business Machines International Harvester International Nickel International Shoe Johns-Manville Loew's Nash Motors Procter & Gamble Sears Roebuck Standard Oil (N.J.) Standard Oil of California Texas Company U.S. Steel Union Carbide Westinghouse Electric Woolworth
Here just a few losers going out as the WINNERS come in. Pretty cute HuH?
1959 June 01 American Can replaces Allied Can Anaconda replaces American Smelting Swift & Co. replaces Corn Products Aluminum Co. of America replaces National Steel Owens-Illinois Glass replaces National Distillers
1976 August 9 Minnesota Mining & Manufacturing replaces Anaconda
1979 June 29 International Business Machines replaces Chrysler Merck replaces Esmark
1985 October 30 Philip Morris Cos. replaces General Foods Corp. McDonald's Corp. replaces American Brands Inc.
1987 March 12 Coca-Cola Co. replaces Owens-Illinois Inc. Boeing Co. replaces Inco Ltd.
1991 May 6 Caterpillar Inc. replaces Navistar International Corp. Disney Company replaces USX Corp. J.P. Morgan & Co. replaces Primerica Corp. (formerly American Can)
1997 March 17 Travelers Group Inc. (now Citigroup Inc.) replaces Westinghouse Electric Corp. Hewlett-Packard Co. replaces Texaco Inc. Johnson & Johnson replaces Bethlehem Steel Corp. Wal-Mart replaces Woolworth
1999 November 1 Intel, Microsoft, Home Depot, and SBC Communications replace Chevron, Goodyear, Sears Roebuck, and Union Carbide
2004 April 8 Pfizer, Verizon, and American International Group (AIG) replace International Paper, AT&T, and Eastman Kodak
2008 February 19 Bank of America and Chevron replace Altria and Honeywell
2008 September 22 Kraft Foods replaces American International Group, GOOD OLD AIG. HA HA HA
I would wait for another stock market correction before putting too much money in it now. It was a great opportunity to invest in big blue chip companies like I was reccomending several months ago. I said John Deere had no risk at $24, now over $50. I bought MMM at $52 and change, now over $80. I made great money on Bank of America stock when roadrunner was telling everyone and their mother that every bank in the US was going to fail. ADM was another. I bought Verizon last year and I'm getting stock appreciation plus a 7% dividend yield. Just because I have sometimes lost money in the past in the stock market didn't keep me from seeing a great opportunity for profit. Forget about the past when it comes to the stock market or the PM market. Think about today's prices and whether you can make money from here.
<< <i> I also believe the rising stock market was more a function of a massive demographic bulge rather than legislation, although that may have helped....
I also think without Wall Street, we never would have had an Intel, Microsoft, or Cisco or Amgen and Biogen. How many jobs have they created? How have they changed our lives?
I agree that Wall Street managers are overpaid, but how about the traders? If someone gave you $1 billion to trade and you turned it into $1.5 billion, do you think your bonus should be a ham or a pat on the back? Just a 1% cut of the profits would be $5 million. How is that extreme? >>
The demographic bulge of the baby boomers definitely played a role in the post-1980 boom. That increased stock market participation and therefore the amount of money flowing in. But how will it play out when the boomers retire and sell their holdings? Probably as a negative factor.
I don't credit Wall Street with creating Intel, Microsoft, and the others you mentioned. To take just one example, Microsoft was founded in 1975 but didn't list its shares on the stock market until 1986. The stock market obviously didn't create that company or its products. I credit their management and innovation more than the stock market.
Still, at the margin, Wall Street does play a role in financing new companies. The lure of selling shares in a big IPO is certainly a big motivator for people starting companies. But there's plenty of innovation and success among private companies as well:
Bechtel, Cargill... PricewaterhouseCoopers... Ernst & Young, Publix, Deloitte Touche Tohmatsu and Mars are among the largest privately held companies in the United States. IKEA, Victorinox, and Bosch are examples of Europe's largest privately held companies.Link.
I don't have any problem with traders making big profits or bonuses. That's capitalism. But let's not pretend that somehow everyone benefits from it. You can't have winners without losers. And the market, for the average person, is a loser's game. What bothers me is the myth that somehow if we all invest in the stock market everyone will end up with a fat portfolio. Experience and common sense suggest the opposite. The financial industry clearly does well in the current system, but largely at the expense of J6P.
"Men who had never shown any ability to make or increase fortunes for themselves abounded in brilliant plans for creating and increasing wealth for the country at large." Fiat Money Inflation in France, Andrew Dickson White (1912)
<< <i> Forget about the past when it comes to the stock market or the PM market. Think about today's prices and whether you can make money from here. >>
I can't figure out whether a stock or PM is overvalued without considering in large part its historical price trends.
"Men who had never shown any ability to make or increase fortunes for themselves abounded in brilliant plans for creating and increasing wealth for the country at large." Fiat Money Inflation in France, Andrew Dickson White (1912)
I think most people are OK with traders making 5 million in your example ...the problem is when they actually lose money and still get their 5 million.
"Women should be obscene and not heard. " Groucho Marx
<< <i>I think most people are OK with traders making 5 million in your example ...the problem is when they actually lose money and still get their 5 million. >>
If they dont make money they rarely get a bonus, in fact, they usually lose their job. Wall Street trading is VERY cutthroat. You dont get many opportunities to screw-up.
edited to add....The trader in my example wouldnt be paid a bonus of $5 million. It would be more like $100 million. Would you think differently now?
The gold being held by the central banks implicitly acts as support for the currencies out there.....even if technically they are no longer linked on paper. They are still linked in banker's and many investor's minds. The fact that they didn't get rid of all of it in the 1980-2001 crash would imply they felt it was well worth keeping. This is esp. true of the US which at least on paper has claimed to have sold/leased none of their 8100 tons for many, many years. CB's keep their gold records very secret. They appear to value those records far more than gold and fiat.
I made great money on Bank of America stock when roadrunner was telling everyone and their mother that every bank in the US was going to fail.
No, I said every major bank in the US was effectively insolvent and would fail if not for support by the govt and/or FASB relaxation on marking derivatives to market. JPM, BoA, Citi, WF, and GS for starters plus around 2000 smaller US banks would be dead tomorrow if all assets were fairly valued. The fact that accounting tricks are being used to over value paper assets does not change the fact that the banks were and still are bankrupt. The guys remaining have balance sheets no better than BSC or Lehman. All those guys were bankrupt in 2007 and are just as dead today. A tiny failure rate in $203 TRILLION in derivative liabilities will tend to do that to you. If a trader is interested in trading tulips or bank stocks that is their choice. Either asset could go up or down and one can make trading money regardless of the current fundamentals. Why did those banks share prices fall immensely in 2008?.....because it was feared they would have to honestly value their assets. What's changed since then? Those banks still don't want the other guy's assets and don't want to lend to each other knowing what they know about each other's balance sheets.
Money can be made trading tulips or bank stocks....that was proven by GS and others from March to November. It doesn't mean those bank stocks can't drop to zero essentially overnight. That will not happen to gold....at least barring an asteroid extinction event or Mr. Peabody inventing a seawater to gold converter.
Most big bank stocks are currently worth more than tulips. I don't know how many more months or years that will go on for....for now...at least as long as FASB takes the low road. If J6P kept his books like the bank's or govt's, he would be bankrupt and would be tossed in jail on fraud, not given 0% loans or hefty bonuses for making a few measly billion in trading profits while otc $$ TRILLIONs were being lost off their visible balance sheets.
I will agree that equities have been marketed as a long term, cant lose proposition, but has not the same been said of real estate and now of gold? I've said 100x that there is no investment that is good for long term--other than the education of our children. In 1988 people were disappointed that they held gold for 10 years and havent made any money, just as people are complaining today about stocks. And in 2016 they will complain about real estate.
If you havent made money in stocks in the last decade, I would place the blame on you, especially if you follow these threads. Even I got very bearish on stocks in March 2008. I believe Ttown even questioned my change of heart. In Aug 2008 I --and Roadrunner--both said stocks could drop to 7500. I believe the DOW was about 11,000 at that time. Had you sold then, and bought back in March 09, you most likely would be singing a different tune about the stock market today. It goes back to my complacency comment, people are afraid to sell. Investors need to learn when things look great that its time to get out, and when it is the darkest, its time to get back in. The view is always the best at the top of the mountain, but when you are at the top, the next step forward--or backward--takes you lower. The most successful investors sell when everyone is buying and buy when everyone is selling. The signs are usually very obvious. Train yourself to see them.
GS, I am very aware of the changes made to the indices. Im not really sure that makes any difference to investment returns though. Just as a car in 1933 is different than today, and the leading employment sectors are different than 70 years ago.
“I will agree that equities have been marketed as a long term, cant lose proposition, but has not the same been said of real estate and now of gold?”
This is true and back in the day when all investments looked very risky one could just put ones money in the bank, draw a few percent interest, and sleep good at night.
Well this socialist government has ended that option. With the bankers paying 1.5%, inflation running at 3%, and the dollar devaluing, one must do something, right?
The Government wants the public back in the stock and bond markets, that way they can keep track of everything you own.
I got an email from a couple last night I have known for 30 years. This couple is retired. They are the most Christian conservative folks you have ever met. A little to the left politically, one of them voted for Obama.
The email I got said they bought $150,000 worth of gold yesterday and are going to burry it under their house.
How many thousands of folks out there are so afraid of what is happening that they are doing this?
Perhaps if we had some stronger laws here in the U.S. governing fraud and abuse of the publics money?
China executes corrupt securities trader Former manager of financial company never told where he hid millions updated 1:35 p.m. PT, Tues., Dec . 8, 2009
BEIJING – China executed Tuesday the former manager of a securities company who embezzled millions of dollars.
Some wanted Yang Yanming kept alive so he would explain where the 65 million yuan ($9.5 million) went, news reports said. Yang refused to tell.
China has also executed government officials in its long-running fight against corruption, which is a major source of anger among the country’s citizens.
On April 3rd, John Mauldin sent out an analysis in his weekly letter that looked at the results of holding the 30 Dow stocks in 1928 versus tracking the DJIA index, and it turns out you would do better to have stuck with the original companies, despite the bankruptcies and restructurings. The committee that determines the index makeup tends to buy high and sell low, the opposite of the optimal behavior.
He references a graph in this quote. You can read the article for more details.
<< <i>So, looking at the lines from the bottom and going up. First, let's see how you would have done on an inflation-adjusted basis with just the actual Dow 30. It's not pretty. The price-only inflation-adjusted index returns for the last 80 years are only a mediocre 1.4%! The price level of the Dow 30 is currently less than twice that of its August 1929 peak, net of inflation. Sadly, we last saw the 1929 peak level as recently as October of 1992. That means that an investor in the Dow 30, in August 1929, would have pocketed only the dividends, with no real price appreciation, for some 63 years.
Rob [Arnott] couldn't resist writing Jeremy [Siegel], "Net of taxes on the dividends and cap gains taxation on the inflation "gains," the real after-tax return would have been awfully skinny. Jeremy, I hope you'll forgive me for saying so, but that's a 'Long Run' indeed!"
The next line is the Dow 30 price-only index (without dividends). That gives us a 4.6% annual average return. The next line up is the Dow 30 total returns, including dividends, which is 8.9%; this shows how important dividends are to the total return of the Dow. And with dividends now fairly skinny and being cut almost monthly by some component or other, we are left to wonder what total return will be over the next few years.
Next, we find that the S&P 500 cap-weighted index outperforms the Dow by about 0.2% annually, for a total return of 9.1%. Not much difference there.
Now we come to the interesting part. The next-to-the-top line is the original Dow 30, using a price-weighted index, just like the current Dow 30 uses. The only changes in the next 80 years are companies getting bought or dying. That "Original 30" gives us an annual return of 9.6%. Just 0.7% a year, so you might think, not much difference. But if you start with $100 and compound it for 80 years, that 0.7% becomes a quite large differential. With the Dow 30, your $100 would have grown to $96,993 as of December 2008, but the Original 30 would have grown to $161,603.
And there is an even bigger differential if you simply equal-weight the components rather than use a price-weighting methodology. Your $100 grows at a 10.4% clip and becomes $272,554, or almost three times the actual Dow 30. This is probably due to the fact that, whenever a change was necessary, it would be natural to add one of the more popular and respected large-cap growth stocks that wasn't already on the list. It's hard to earn a "risk premium" on assets that are not seen as having much risk! >>
So there are periods when investing in the stock market can be very profitable, like in March when the market was undervalued, but the low-hanging fruit seems to have been picked and we are now overvalued again. I was overly bearish this year and missed most of this rally, so take what I wrote there with a grain of salt.
I have some elderly friends who put $600k into physical gold at $500. Estate planning, assuming those who get it distribute it fairly... which is a big major assumption.
Comments
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
IMO Egon von Greyerz article does not over complicate like some writers do.
I would love to see articles like this reach the uninformed. It's clear, concise, and to the point.
It's written simplistically enough that someone who has not been exposed to these concepts
before, would be able to clearly understand them.
required reading...
Fresh link to those wishing to check current status of their bank's financial health as well as derivatives held. Pages 4-5 have derivative and off balance sheet summaries.
roadrunner
<< <i>GOLD IS NOT GOING UP – PAPER MONEY IS GOING DOWN >>
I feel like im always playing devils advocate
Its all relative.
Knowledge is the enemy of fear
<< <i>I feel like im always playing devils advocate
Its all relative. >>
It has and it hasn't. Yes, the country as a whole has prospered. But the quality of life has declined if you consider that a typical family used to be supported by one income. Now, two incomes are necessary to support a typical household. And the future is not looking good as far as wage growth vs. cost of living.
<< <i>
<< <i>GOLD IS NOT GOING UP – PAPER MONEY IS GOING DOWN >>
Just for giggles, I hope the dollar loses another 98.3% of its value over the next 100 years as the prior 100 have been pretty darn good for this country and I want it to continue.
Its all relative. >>
Then just imagine how good it could have been for us if these criminal acts hadn't occurred.
"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
You assume that things would have been worse without inflation. On the contrary, without inflation things might have been a whole lot better!
Who knows? I tend to believe that without the politicians working with the central banks to rake off the cream for doing essentially nothing, and preying on the middle class all these years, the US might be a whole lot better off, and the rest of the world as well.
It's all conjecture, ya think?
I knew it would happen.
roadrunner
In 1900 the breadwinner probably worked 60-70 hours a week, that isnt so much different today, its just split among 2 people. People now have indoor plumbing and electricity. Ever use an outhouse in January at night in the Northeast? Brrrr!!!
When one is faced with the constant threat of deflation as was the case in the 1800's there is no incentive for long term investing.
Knowledge is the enemy of fear
What's worse for J6P the constant "threat" of deflation when your money buys more goods or where inflation rules and your money buys less? Which scenario has benefited the bankers most? The biggest industrial boom in our nation's history occured during the times when "deflation" was feared. We've already discussed how J6P has had to become a gambler with his assets to keep up. The average Joe in the 50's and 60's got by just fine with a savings bank account and/or a CD. Only 1 bread winner was needed. Those were simpler times. Today, you can't even figure out what the economy is doing to best speculate with your shrinking dollars because most of the published indicators and stats are worthless.
A few days back Japan's constant deflationary bouts were brought up with the inference that we're stuck in the same deflationary boat. I disagree. Japan was several years late in applying any significant stimulus once their economy tanked in 1990. In fact it wasn't really until 12 years later that they started to put some real stimulus to work. And at that point things started to turn around for them. The US didn't wait more than a few weeks before applying TRILLIONs in stimulus in 2008. The base money supply (M0) was more than doubled in a couple of months. The US vs. Japan have no similarities here because of the huge time delays before Japan did anything. Also Japan was trying to do things in a restrained and measured manner which accounted for almost nothing. They also didn't have the FED, GS, and JPM in their dugout urging complete fiscal unrestraint. Having the world's reserve currency to trash has its advantages....everyone shares part of the burden.
roadrunner
The period of the gold standard until 1933 built America as the world's largest economy. Now that we're so far away from a stable currency, as RR noted in an earlier post, there is no real incentive to save. There's only the incentive to keep "investing"/speculating in different asset classes to try to ride the wave up. Dot com stocks, real estate, you name it.
Under a system of stable currency backed by gold we would have never run these huge deficits and therefore never the financial bubble we are suffering from today. Imbalances would have been corrected much earlier. In the 1950s, under Bretton Woods, the US ran a tiny trade deficit - compared with what we have today - but immediately took steps to correct it:
As world trade increased rapidly through the 1950s, the size of the gold base increased by only a few percent. In 1950, the U.S. balance of payments swung negative. The first U.S. response to the crisis was in the late 1950s when the Eisenhower administration placed import quotas on oil and other restrictions on trade outflows. More drastic measures were proposed.... Link.
And so we would've never gotten to the point where the Chinese accrued trillions of US dollars, loaned it back to us, and helped create the housing bubble we are now suffering from.
This is just one example of how having a fiat currency not backed by anything has made us worse off.
You can thank the likes of James Watt, Thomas Edison, Henry Ford, Marie Curie, Louis Pasteur, Jonas Salk et al for those advances. The central bankers and politicians had nothing to do with it. Of course, that was before science & medicine were politicized to the degree that they are these days.
You can bet that if Al Gore was around in 1880, some of the real discoveries would have been deep-sixed in order to further his portfolio.
I knew it would happen.
Oh really. So tell me how many of these 2 income families earning average incomes live on them. Answer: close to zero, In fact now that they've closed the bankruptcy loopholes you can just send in those payments the rest of your life and rent your house from the goverment too. All the while throwing your kids under the bus with hopes of a future.
The man in 1900 had a future with little to no debt.
The men of today have no future having sold their souls to the Global "One World Order" crowd without even knowing they were drinking the posin. It sure tasted good while going down. Welcome SLAVES here's what we've decided for the minions.
Even the poorest poor in our country have cell phones, televisions (color even), microwaves, refrigerators and freezers and many other appliances, plumbing, and electricity. It's not prosperity that has allowed the poor to have these things, it is simply advancement of technology which has made these basics cheap enough for even the poorest to afford.
In the "Leave it to Beaver" days, the father worked his 40 hour work week and the mother stayed home and raised the children. Very difficult for most to do nowadays.
Now the American jobs/company's are in foreign country's. They exploit under paid labor in unsafe working conditions.
American factory workers are expected to compete. Bring our jobs home. We can't pay taxes if we are not working!
Invest in education not failed banks. Rebuild OUR country not other nations.
Until this starts happening buy Gold, Pray a lot, & keep your guns locked-n-loaded. JMO~Peace, Tim
American factory workers are expected to compete. Bring our jobs home. We can't pay taxes if we are not working!
A Catch 22 of sorts. The shifting of many of the nation's key industries overseas to be more competitive is driven by the same need for investors (401K's, IRA's, etc.) to see gains as they gamble on their stock portfolios. It's their only way of "keeping" up....by cutting off their own noses to spite their face. They haven't realized that those amazing 25 yr gains in stocks have a deep price....ultimately their own job security and quality of life. While shareholders were pleased when they saw their stock prices rise for 2 decades....it's been at their own expense in the long run. Now they are finally putting it all together, 10 years too late. Professional traders, investors, bankers, brokers, etc were able to navigate this system successfully, Joe6Pack was not.
roadrunner
Yeah, I told the wife not to worry, that we have lived pretty well these last couple of years. Then she reminded me that the house was in foreclosure, the credit cards were maxed out and a couple of guys with crooked noses and nicknames were at the door looking for me.
Great poster and one i make sure to read always.
After all, he says he has a core position of physical gold, thinks higher taxes are a bad idea and hurt more than they help ( see comments about California and New York), he also dislikes the bailouts and likes hunting
without him the board could turn way too bullish ...
Groucho Marx
Fwiw I don't buy from JH. Every so often I find his articles interesting, entertaining or both.
PM's public survey...112 reasons not to buy PM's
roadrunner
Dec. 11 (Bloomberg) -- Treasuries fell, with 10-year note yields touching the highest levels since August, as reports showed U.S. retail sales and consumer confidence rose more than forecast.
Ten-year notes headed for a second week of declines after the U.S. yesterday completed the last of this week’s three note and bond auctions totaling $74 billion. The difference in yield between 2-and 30-year securities widened yesterday to the most since at least 1980 as investors bet the Federal Reserve will keep interest rates lower for longer while the government sells more longer-maturity debt.
RR Isn't this absurd? The Chinese are building shops on the streets of their major cites to sell Gold, and more particular silver, and most Americans have no idea what is going on.
Jim Rogers said this week that two weeks ago he gave a speech to 100 of the top Hedge funds and pension funds in the country. After that speech he ask them how many had owned Gold. 76% said they had never owned any!
GS, America is goldphobic while the action in buying gold and silver is very robust in the far east. For every ad on TV or in the newspapers selling gold there are probably 4X as many buy ads. J6P is being fleeced of whatever gold he happened to acquire over the past few decades. J6P has been weened on stocks and bonds since day one and that's all he knows. They are infallible for the longer term or so he has been told. And frankly there is no substitute so he is told to stick it out.
The idea that India and China combined could own the majority of the world's gold supplies would put them in an enviable position. The next best thing to your central bank owning gold is having your people own it (it's one step closer to the CB).....the only exception is if you happen to live in the nation of the world's reserve currency. Then, having the people own gold is very counterproductive to the financial/monetary goals of the PTB. If they fell $57 BILL short on last week's auctions they can always make that up at the next one. Can you imagine a major corporation doing a stock dilution offering every 2 weeks for a year straight? Wouldn't that wreak havoc on the stock price? Shouldn't it wreak havoc on the true value of the nation's stock (ie the dollar)?
roadrunner
The reality is that stock prices increased tremendously in the 1980s and 1990s due to a combination of factors we may never see again, including (1) a huge, slowly growing credit bubble, (2) the increase in participation in the stock market by more and more investors due to the 401(k) plan, which was created by Congress in 1978 and really took off in the 1980s, and (3) the further increase in stock market participation due to online trading in the 1990s and early part of this decade.
These historical events explain much (though of course not all) of the increase in the stock market in the 1980s and 1990s. We won't see (2) and (3) again, given the saturation level we're at in this country in terms of people being in the markets.
When the history of this period is written someday I think the conclusion will be that the stock market boom largely benefited those in the financial industry (Wall Street, etc.) at the expense of the average investor. The huge bonuses in the financial industry that were paid over all those years didn't come out of thin air; they came as "winnings" from the pool of money invested by others (i.e., from the losers in this game, mainly J6P).
<< <i>People really believe that they're going to get an average 8% or 10% annual... >>
------------------------------------------
Good points. The equity markets 8% lifetime ROI is heavily skewed by the tech and housing bubbles. Subtract those out and the return is around 5%.
Factoring in inflation, the equity market returns fall to 5% even WITH the tech/housing bubbles included.
Factor in inflation AND subtract the bubbles = 2% ROI. Not great........
Investing in anything these days is such a ball of worms it is nearly impossible to calculate any ROI.
Yes you can take into account dividends, but then you have to subtract inflation, devaluation of the currency you are investing in, taxes on those dividends, etc.
The only way to find out what you have made on a paper investment is to wait for the “Long Term”, or be a day trader, which precludes dividends in most cases. We all now know that investing for the long term in the U.S. market is a fools game that over the past decade has ended up in nothing but loses.
Mostly J6P can forget about dividends, because after the Taxman finished with him, and the slick Wall Street guys got done, he not only has no return on his capital he did not get his capital returned.
It wasn't that long ago that people believed they'd get 15% long term. Those who were sub-par investors and did the indexes would only get 12%.... and *some* haven't even figured it out to this day!
<< <i>RR, the way the stock market has been ingrained in people's heads could be a case study in marketing. People really believe that they're going to get an average 8% or 10% annual return forever. But when you run the numbers, it's impossible. If the Dow rose at 10% a year for 50 years it would end up over 1,000,000 -- more than a 100x increase. Even if it only rose 8% it would be almost a half million. In the meantime, if the real economy grew at 3% annually (which is actually higher than its long-term trend) it would increase about 4x over fifty years. Something doesn't add up.
The reality is that stock prices increased tremendously in the 1980s and 1990s due to a combination of factors we may never see again, including (1) a huge, slowly growing credit bubble, (2) the increase in participation in the stock market by more and more investors due to the 401(k) plan, which was created by Congress in 1978 and really took off in the 1980s, and (3) the further increase in stock market participation due to online trading in the 1990s and early part of this decade.
These historical events explain much (though of course not all) of the increase in the stock market in the 1980s and 1990s. We won't see (2) and (3) again, given the saturation level we're at in this country in terms of people being in the markets.
When the history of this period is written someday I think the conclusion will be that the stock market boom largely benefited those in the financial industry (Wall Street, etc.) at the expense of the average investor. The huge bonuses in the financial industry that were paid over all those years didn't come out of thin air; they came as "winnings" from the pool of money invested by others (i.e., from the losers in this game, mainly J6P). >>
From 1933 to 2007 the DOW rose 475x, so a 100x increase wouldnt be out of the question. Or to even out some of the extremes, the period from 1949 to 1999, 50 years which do not represent the bottoms and tops, still a 67 fold rise in the DOW.
Remember, the stock market is also a function of inflation, had we not have enjoyed the inflation we have over the past 75 years, we would not have the benefits of a rising DOW.
I also believe the rising stock market was more a function of a massive demographic bulge rather than legislation, although that may have helped. Had we not had a huge increase in the number of people of age to buy equities, we would not have had a rising market. Every economic development over the past 60 years can be directly attributed to the baby boomers and their demands.
Dont get wrapped up in the value of the numbers--DOW 500k may sound extreme, but wouldnt a Brazilian market at 67K seem ridiculous. Compute those 50 yr numbers at 10% growth!! The average house in 1946 was something like $3000, now its 175,000, woulda thunk? The average wage was 25c an hour, now $25, woulda thunk?
I also think without Wall Street, we never would have had an Intel, Microsoft, or Cisco or Amgen and Biogen. How many jobs have they created? How have they changed our lives?
I agree that Wall Street managers are overpaid, but how about the traders? If someone gave you $1 billion to trade and you turned it into $1.5 billion, do you think your bonus should be a ham or a pat on the back? Just a 1% cut of the profits would be $5 million. How is that extreme?
Knowledge is the enemy of fear
He did pretty well thought the late eighties and early nineties and then the dot com. bubble took his account back to about what principle they put in. Then for a few years after that he made up some of the loss, then came 9/11 and a new crash. Back to where he was.
Then it built up again, and then this last crash, and he is back I hope to at least what he put in.
I ask him one day, “why in the world do you stay invested in the stock market?” his reply was that he was not in the stock market he was invested in MUTUAL FUNDS.
No kidding Sherlock these people are BRAINWASHED.
Why do you think the central banks care about gold?
Knowledge is the enemy of fear
gold = universal money. Has never defaulted.
I knew it would happen.
I just watched Meet the Press. They predicted 10%+ unemployment for a long while.
How can 401K's grow with no new investors? How many J6P's like me have had to withdraw their money?
O.K. Dave lets goes through this one more time. There is no DOW there is no S&P these are illusions, mind games for the Wall Street guys to use on the public.
How can one use a statistic where the parts of the statistic are changed each year?
Almost all of the companies in the Dow and the S&P have been changed over the last 80 years. There were changes this past week.
An ounce of gold is always an ounce of gold that DOES NOT change.
If we had a basket of commodities to measure against the Dow in the period from 1933 perhaps that would include asbestos, and NOT uranium.
If by 1960 we decided that we want uranium in and asbestos out, you would say whoa, you couldn’t take out the losers!
Well what has happened to the losers in the DOW and the S&P? They are gone exchanged for winners.
Lets go back and add Lehman, Enron, Bear Sterns, and the dozens of others.
The DOW and S&P numbers are like a card game where one of the players has access to the deck and gets to pick his cards after he sees everyone else’s.
What is truly amazing is that we do not have DOW 20,000 right now. I guess we would, if there were enough great companies out there to exchange.
<< <i>Question for the forum,
Why do you think the central banks care about gold? >>
There's no question central banks do care about gold. Otherwise they wouldn't hold so much of it in their vaults. Clearly, they have some attachment to it.
Why they care about it... many reasons. Two stand out for me. First, gold is on some level an innate store of value. So it makes sense as a reserve. Second, they care about the price of gold because it's a barometer for measuring the value of their currencies (and change/lack of confidence in currencies) over time.
Allied Can
Allied Chemical
American Smelting & Refining
American Tobacco B
Bethlehem Steel
Borden
Chrysler
Coca Cola
Corn Products Refining Company
Eastman Kodak
General Electric
General Foods
General Motors
Goodyear
International Business Machines
International Harvester
International Nickel
International Shoe
Johns-Manville
Loew's
Nash Motors
Procter & Gamble
Sears Roebuck
Standard Oil (N.J.)
Standard Oil of California
Texas Company
U.S. Steel
Union Carbide
Westinghouse Electric
Woolworth
Here just a few losers going out as the WINNERS come in. Pretty cute HuH?
1959 June 01
American Can replaces Allied Can
Anaconda replaces American Smelting
Swift & Co. replaces Corn Products
Aluminum Co. of America replaces National Steel
Owens-Illinois Glass replaces National Distillers
1976 August 9
Minnesota Mining & Manufacturing replaces Anaconda
1979 June 29
International Business Machines replaces Chrysler
Merck replaces Esmark
1985 October 30
Philip Morris Cos. replaces General Foods Corp.
McDonald's Corp. replaces American Brands Inc.
1987 March 12
Coca-Cola Co. replaces Owens-Illinois Inc.
Boeing Co. replaces Inco Ltd.
1991 May 6
Caterpillar Inc. replaces Navistar International Corp.
Disney Company replaces USX Corp.
J.P. Morgan & Co. replaces Primerica Corp. (formerly American Can)
1997 March 17
Travelers Group Inc. (now Citigroup Inc.) replaces Westinghouse Electric Corp.
Hewlett-Packard Co. replaces Texaco Inc.
Johnson & Johnson replaces Bethlehem Steel Corp.
Wal-Mart replaces Woolworth
1999 November 1
Intel, Microsoft, Home Depot, and SBC Communications
replace Chevron, Goodyear, Sears Roebuck, and Union Carbide
2004 April 8
Pfizer, Verizon, and American International Group (AIG)
replace International Paper, AT&T, and Eastman Kodak
2008 February 19
Bank of America and Chevron
replace Altria and Honeywell
2008 September 22
Kraft Foods
replaces American International Group, GOOD OLD AIG. HA HA HA
Just because I have sometimes lost money in the past in the stock market didn't keep me from seeing a great opportunity for profit.
Forget about the past when it comes to the stock market or the PM market. Think about today's prices and whether you can make money from here.
<< <i> I also believe the rising stock market was more a function of a massive demographic bulge rather than legislation, although that may have helped....
I also think without Wall Street, we never would have had an Intel, Microsoft, or Cisco or Amgen and Biogen. How many jobs have they created? How have they changed our lives?
I agree that Wall Street managers are overpaid, but how about the traders? If someone gave you $1 billion to trade and you turned it into $1.5 billion, do you think your bonus should be a ham or a pat on the back? Just a 1% cut of the profits would be $5 million. How is that extreme? >>
The demographic bulge of the baby boomers definitely played a role in the post-1980 boom. That increased stock market participation and therefore the amount of money flowing in. But how will it play out when the boomers retire and sell their holdings? Probably as a negative factor.
I don't credit Wall Street with creating Intel, Microsoft, and the others you mentioned. To take just one example, Microsoft was founded in 1975 but didn't list its shares on the stock market until 1986. The stock market obviously didn't create that company or its products. I credit their management and innovation more than the stock market.
Still, at the margin, Wall Street does play a role in financing new companies. The lure of selling shares in a big IPO is certainly a big motivator for people starting companies. But there's plenty of innovation and success among private companies as well:
Bechtel, Cargill... PricewaterhouseCoopers... Ernst & Young, Publix, Deloitte Touche Tohmatsu and Mars are among the largest privately held companies in the United States. IKEA, Victorinox, and Bosch are examples of Europe's largest privately held companies.Link.
I don't have any problem with traders making big profits or bonuses. That's capitalism. But let's not pretend that somehow everyone benefits from it. You can't have winners without losers. And the market, for the average person, is a loser's game. What bothers me is the myth that somehow if we all invest in the stock market everyone will end up with a fat portfolio. Experience and common sense suggest the opposite. The financial industry clearly does well in the current system, but largely at the expense of J6P.
<< <i> Forget about the past when it comes to the stock market or the PM market. Think about today's prices and whether you can make money from here. >>
I can't figure out whether a stock or PM is overvalued without considering in large part its historical price trends.
Groucho Marx
<< <i>I think most people are OK with traders making 5 million in your example ...the problem is when they actually lose money and still get their 5 million. >>
If they dont make money they rarely get a bonus, in fact, they usually lose their job. Wall Street trading is VERY cutthroat. You dont get many opportunities to screw-up.
edited to add....The trader in my example wouldnt be paid a bonus of $5 million. It would be more like $100 million. Would you think differently now?
Christmas cancelled!!! In Spain.
Greece and Spain are EU members. How long can the Euro maintain its outperformance of the dollar?
Knowledge is the enemy of fear
I made great money on Bank of America stock when roadrunner was telling everyone and their mother that every bank in the US was going to fail.
No, I said every major bank in the US was effectively insolvent and would fail if not for support by the govt and/or FASB relaxation on marking derivatives to market. JPM, BoA, Citi, WF, and GS for starters plus around 2000 smaller US banks would be dead tomorrow if all assets were fairly valued. The fact that accounting tricks are being used to over value paper assets does not change the fact that the banks were and still are bankrupt. The guys remaining have balance sheets no better than BSC or Lehman. All those guys were bankrupt in 2007 and are just as dead today. A tiny failure rate in $203 TRILLION in derivative liabilities will tend to do that to you. If a trader is interested in trading tulips or bank stocks that is their choice. Either asset could go up or down and one can make trading money regardless of the current fundamentals. Why did those banks share prices fall immensely in 2008?.....because it was feared they would have to honestly value their assets. What's changed since then? Those banks still don't want the other guy's assets and don't want to lend to each other knowing what they know about each other's balance sheets.
Money can be made trading tulips or bank stocks....that was proven by GS and others from March to November. It doesn't mean those bank stocks can't drop to zero essentially overnight. That will not happen to gold....at least barring an asteroid extinction event or Mr. Peabody inventing a seawater to gold converter.
Most big bank stocks are currently worth more than tulips. I don't know how many more months or years that will go on for....for now...at least as long as FASB takes the low road. If J6P kept his books like the bank's or govt's, he would be bankrupt and would be tossed in jail on fraud, not given 0% loans or hefty bonuses for making a few measly billion in trading profits while otc $$ TRILLIONs were being lost off their visible balance sheets.
roadrunner
If you havent made money in stocks in the last decade, I would place the blame on you, especially if you follow these threads. Even I got very bearish on stocks in March 2008. I believe Ttown even questioned my change of heart. In Aug 2008 I --and Roadrunner--both said stocks could drop to 7500. I believe the DOW was about 11,000 at that time. Had you sold then, and bought back in March 09, you most likely would be singing a different tune about the stock market today. It goes back to my complacency comment, people are afraid to sell. Investors need to learn when things look great that its time to get out, and when it is the darkest, its time to get back in. The view is always the best at the top of the mountain, but when you are at the top, the next step forward--or backward--takes you lower. The most successful investors sell when everyone is buying and buy when everyone is selling. The signs are usually very obvious. Train yourself to see them.
GS, I am very aware of the changes made to the indices. Im not really sure that makes any difference to investment returns though. Just as a car in 1933 is different than today, and the leading employment sectors are different than 70 years ago.
Knowledge is the enemy of fear
Russian Central Bank to buy 30 tonnes of gold from Gokhran
They were planning on selling it on the open markert last week, now it is staying in Russia.
Question: If the fear of having 10 tons come on the markert is now lifted, will the decline in the gold price reverse?
<< <i>I Think this explains the drop in gold over the last week. (From Kitco)
Russian Central Bank to buy 30 tonnes of gold from Gokhran
They were planning on selling it on the open markert last week, now it is staying in Russia.
Question: If the fear of having 10 tons come on the markert is now lifted, will the decline in the gold price reverse? >>
Here's the reason gold took it in the neck last week:
<< <i>Greece and Spain are EU members. How long can the Euro maintain its outperformance of the dollar? >>
This is true and back in the day when all investments looked very risky one could just put ones money in the bank, draw a few percent interest, and sleep good at night.
Well this socialist government has ended that option. With the bankers paying 1.5%, inflation running at 3%, and the dollar devaluing, one must do something, right?
The Government wants the public back in the stock and bond markets, that way they can keep track of everything you own.
I got an email from a couple last night I have known for 30 years. This couple is retired. They are the most Christian conservative folks you have ever met. A little to the left politically, one of them voted for Obama.
The email I got said they bought $150,000 worth of gold yesterday and are going to burry it under their house.
How many thousands of folks out there are so afraid of what is happening that they are doing this?
China executes corrupt securities trader
Former manager of financial company never told where he hid millions
updated 1:35 p.m. PT, Tues., Dec . 8, 2009
BEIJING – China executed Tuesday the former manager of a securities company who embezzled millions of dollars.
Some wanted Yang Yanming kept alive so he would explain where the 65 million yuan ($9.5 million) went, news reports said. Yang refused to tell.
China has also executed government officials in its long-running fight against corruption, which is a major source of anger among the country’s citizens.
On April 3rd, John Mauldin sent out an analysis in his weekly letter that looked at the results of holding the 30 Dow stocks in 1928 versus tracking the DJIA index, and it turns out you would do better to have stuck with the original companies, despite the bankruptcies and restructurings. The committee that determines the index makeup tends to buy high and sell low, the opposite of the optimal behavior.
He references a graph in this quote. You can read the article for more details.
<< <i>So, looking at the lines from the bottom and going up. First, let's see how you would have done on an inflation-adjusted basis with just the actual Dow 30. It's not pretty. The price-only inflation-adjusted index returns for the last 80 years are only a mediocre 1.4%! The price level of the Dow 30 is currently less than twice that of its August 1929 peak, net of inflation. Sadly, we last saw the 1929 peak level as recently as October of 1992. That means that an investor in the Dow 30, in August 1929, would have pocketed only the dividends, with no real price appreciation, for some 63 years.
Rob [Arnott] couldn't resist writing Jeremy [Siegel], "Net of taxes on the dividends and cap gains taxation on the inflation "gains," the real after-tax return would have been awfully skinny. Jeremy, I hope you'll forgive me for saying so, but that's a 'Long Run' indeed!"
The next line is the Dow 30 price-only index (without dividends). That gives us a 4.6% annual average return. The next line up is the Dow 30 total returns, including dividends, which is 8.9%; this shows how important dividends are to the total return of the Dow. And with dividends now fairly skinny and being cut almost monthly by some component or other, we are left to wonder what total return will be over the next few years.
Next, we find that the S&P 500 cap-weighted index outperforms the Dow by about 0.2% annually, for a total return of 9.1%. Not much difference there.
Now we come to the interesting part. The next-to-the-top line is the original Dow 30, using a price-weighted index, just like the current Dow 30 uses. The only changes in the next 80 years are companies getting bought or dying. That "Original 30" gives us an annual return of 9.6%. Just 0.7% a year, so you might think, not much difference. But if you start with $100 and compound it for 80 years, that 0.7% becomes a quite large differential. With the Dow 30, your $100 would have grown to $96,993 as of December 2008, but the Original 30 would have grown to $161,603.
And there is an even bigger differential if you simply equal-weight the components rather than use a price-weighting methodology. Your $100 grows at a 10.4% clip and becomes $272,554, or almost three times the actual Dow 30. This is probably due to the fact that, whenever a change was necessary, it would be natural to add one of the more popular and respected large-cap growth stocks that wasn't already on the list. It's hard to earn a "risk premium" on assets that are not seen as having much risk! >>
So there are periods when investing in the stock market can be very profitable, like in March when the market was undervalued, but the low-hanging fruit seems to have been picked and we are now overvalued again. I was overly bearish this year and missed most of this rally, so take what I wrote there with a grain of salt.