Gold is down because Greenspan says the US trade deficit should improve. Currency traders are betting the dollar will slow or stop its decent against other currencies. So people are unwinding their bets gold will increase.
It's not cheap yet. Just wait. Too many indicators agains inflation and hard assets, FOR NOW. Dollar being "saved", and whoa!!! - stocks on the MOVE!!!! Banks, investors, etc., etc., always reposition for the returns. Bonds and Stocks have been enjoying good gains recently. 30-year bond, can you believe it is at 4.47%???!!!!!!!!!
Nah, roadrunner has kept his core position as it is a long term hedge. We've not seen the last for gold in 2005, nor another down trend for the US dollar index in 2005.
The long term trend is still totally intact. There would have to be lots more damage from here to break the market. Just remember that in the bull market of the 70's gold made a 50% correction in the middle of it's up leg to $850/oz. We will see similar or GREATER volatility as time goes on in this PM's market. The FED boys can play their games and speak kind words about the economy, but the facts are the facts.
<< <i>what goes down will go back up even higher >>
Back in the old days when people were standing in lines outside my store in NJ, ( the crazy era), one doctor bought IN to silver in the $30's, and told me in no uncertain terms, "Tommy it's going to 100.00, buy all you can!". Well I was buying a lot then from all the jewelry stores, small coin shops etc etc ( I remember some days buying many thousands of oz's), and was driving 1800 miles a week scrapping out.
Far as my own personal stuff, I kept some of the cooler things and I sold my positions ( futures) at 32.00. Boy was I happy.
The doctor had apparently mortgaged his real estate and more to buy IN at the 30 buck level. I never saw him again.
After those times a lot of people who were buried ( still are) would concoct these stories of how it's all going to happen again, blah blah blah.
There is profit taking going on, and some major reserves have hit the market. Support at $405-410? Forget it, it's going back down under $400. If I had been a gambling man, I would own a lot of free Saints right now.
Gold has always been a contrarian's position to the U.S. economy in general and the U.S. dollar in particular. For this reason, I've never believed in gold.
"Vou invadir o Nordeste, "Seu cabra da peste, "Sou Mangueira......."
For all the profit taking going on, I can't seem to find any for sale from the usual dealers locally. I'd be buying if I could.
Sure there's the internet dealers with the huge over spot mark ups, but in the trenches, there aren't any to be found.
That tells me that regular people aren't selling the hard asset and this is just paper turning for short term profit taking.
"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
Real interest rates are still soundly negative so anyone invested in dollars or paper related assets are still losing money. The FED claims that we have low inflation but it is anything but. Remember that the CPI is juiced to hold a basket of "goods" that tend to be CPI resistant. That's a govt success story since the early 1980's. The major items that are getting inflated: commodities, real estate, stocks, energy (oil, gas, water), etc. are not reflected in the CPI. This is classic stagflation. The FED can always point to the massaged CPI and say, "look ma, no inflation." But tell that to the rest of the world.
Of the FED/Treasury created credit over the past 4 years, most of that has been put by you and I, into those major asset bubbles, and not into things reflected in the CPI basket. Hence it does look like there is controlled inflation. But at some point, the average Joe will start to realize that the FED's words hold no weight. Also realize that the US dollar index has lost 40% of its value in relation to other world currencies in the past 5 years. Just to have broken even since then, you would have needed a similar gain in whatever assets you are in, or you have a net losing position. You have to adjust the stock market "gains" down for inflation too. Gold will eventually respond back.
Support at $405-410? Forget it, it's going back down under $400. If I had been a gambling man, I would own a lot of free Saints right now.
Most people don't act on their thoughts. And buying when things are low and selling when they are high, is the toughest thing to do.
In checking over ebay today I'm very surprised at the number of buyers bidding $720-775 for MS64 saints. And these haven't been hammered down yet. Some are newer buyers of course. But it appears that either ebay buyers are "idiots" for paying $100 above CDN for generic saints, or that Mr. Early has a point. That is that the coins are just not being offered. There also appears to be a new flux of buyers at the moment. Noted an MS65 Saint at Duvall gold already in the mid-1200's, very strong compared to "sheet." This activity is far different than what occurred in earlier "routs" on the gold price. Duvall tends to get solid prices because of their great feedback.
Seems that with each successive rout, that the ability to spring upwards or downwards on Saints gets tougher (less elastic). Means to me that sellers are more leery about accepting prices based sheet bids, and buyers are gun shy to jump back in as they keep seeing volatility, and potential losses if they time it wrong. But when they both eventually get back together, it's back to the races. So what if gold dropped $40. Should I sell my saints for $100 less now because of currency market gyrations? AS the buyer, you are the judge.
Greenspan is doing his job talking down inflation and the trade deficit. Warren Buffet (on CNBC) is doing his job too, doesn't believe we've turned the Trade Deficit corner, retains and increases his allocation to offshore denomination/assests. I presume he also has maintained his bullion (gold/silver) hedge at or above his former levels, for same reasons. I tend to believe he who has the most money at risk-- and best record long term.
If interest rates remain low, gold will probably remain a viable choice. However, if rates are hiked upwards to support the sagging Dollar, then the gold rally will be problematic...
Experience the World through Numismatics...it's more than you can imagine.
<< <i>The FED claims that we have low inflation but it is anything but. Remember that the CPI is juiced to hold a basket of "goods" that tend to be CPI resistant. That's a govt success story since the early 1980's. The major items that are getting inflated: commodities, real estate, stocks, energy (oil, gas, water), etc. are not reflected in the CPI. >>
I've been saying this, to anyone that would listen, for years......It's nice to see I'm not alone....
We've had some heated discussions here on the forum concerning the CPI and other "govt stats" (oxymoron?). If you do a word search for CPI you'll uncover a bunch of them. I learned a lot about diving into the BLS website to see what things really made up the CPI and was sort of surprised to see "imputed rent" to be 30% or more of the makeup. Toss in hedonic adjustments, geometric mean averaging, and all the other "improvements," and you no longer have an index that accurately tracks price (or also asset) inflation due to monetary policy excess. Even if they've succeeding in shaving a point off the index for the past 15 years, it adds up over time. That's one less point the govt has to pay to military retirees, pension funds, soc security payouts, medicare, and many other programs. It has been suggested that it saves the govt $50-100 BILLION per year. That's money that leaves our pockets for good.
Personally I think it will take many more rate hikes to even touch the real rate of inflation and restore the dollar's strength. We've scriewed the pooch to a far greater level than what occurred in 1979-1981 and it took a FED rate of around 12% back them to turn the battle. Actual interest rates were 18-20%. A measly 3, 4, 5 or even 6% won't do much of anything here imo. It will take a decade or so to shake out all the excesses from the 80's and 90's.
I know you to be very astute at all these govt numbers. I waonder how we could include real estate in the CPI numbers??? I agree, it has gone up drastically, especially Florida, CA, and East Coast. But the BUYING power of RE has gone up, because of low interest rates. How do you calculate that? I know from friends that plastic resin for packaging, and building materials (all considered commodities, I guess), have gone up quite a bit, past 2 years. This to me should be considered (like you said it is NOT) in the CPI.
But I look at other goods and services, and it seems some major items are inexpensive: Technology like computers, DVD's, TV's, - clothing, and seems to me, food is stable. It is interesting that you say water. I know in FL water bills, and the other utilities are going up quite a bit, but I was informed, mainly because of TAXES, and other charges (over usage, for example), NOT THE OVERALL COST OF the utilities. Heard this is to make up for storm damages over the past 3 years.
Anyway, an increase in interest rates/falling dollar/increased inflation are signs for tangible asset gains. And supply and demand for tangible assets ways in...
My opionion: Interest rates are going to stay low for sometime. OR GO EVEN LOWER. WORLD BONDS STILL YIELDING MORE THAN INTERMEDIATE/LONG U.S. BONDS AND NO REAL THREAT OF INFLATION. I think DEflation a threat if anything. High level prices of commodities: Will not last. Falling dollar: Really low (vs. the past) vs. other currencies....U.S. will not allow this to continue - won't last.
Gold. HUGE supply, and not enough demand. ASIAN consumers USED to be the big buyers of gold....jewelry, etc. Banks also for reserves. Banks have been getting rid of Gold, and consumers (were) not purchasing it. Mining is still strong. To me, supply is plentiful, and demand still low. I think gold will be lower a year from now, than were it is.
Back in the old days when people were standing in lines outside my store in NJ, ( the crazy era), one doctor bought IN to silver in the $30's, and told me in no uncertain terms, "Tommy it's going to 100.00, buy all you can!".
Most docs are suckers and good contrary indicators.
I always read whatever RR posts becuase I always learn something.
I know you to be very astute at all these govt numbers. I waonder how we could include real estate in the CPI numbers??? I agree, it has gone up drastically, especially Florida, CA, and East Coast. But the BUYING power of RE has gone up, becasue of low interest rates. How do you calculate that? I know from firends that plastic resin for packaging, and building materials (all considered commodities, I guess), have gone up quite a bit, past 2 years. This to me should be considered (like you said it is NOT) in the CPI.
BUt I look at other goods and services, and it seems some major items are inexpensive: Technology like computers, DVD's, TV's, - clothing, and seems to me, food is stable. It is interesting that you say water. I know in FL water bills, and the other utilities are going up quite a bit, but I was informed, mainly becasue of TAXES, and other charges (over usage, for example), NOT THE OVERALL COST OF the utilities. Heard this is to make up for storm damages over the past 3 years.
-----Lloyd >>
Lloyd, we just got our property tax bill here in Port Charlotte. Mine are up nearly 80%. ( ! ). Can't wait to see what the renewal is going to be for homeowners insurance.
FPL is lobbying for a new disaster "fund". Something like that.
I just sold a couple of building lots here in PC. I paid 5,000 each for them a little less than 15 months ago. They are sold for 27K and 29K respectively. I'm happy! Wish I bought 100 of them.
I don't think we'll see prices go down in South Fla anytime soon. We still have what most people want and the baby boomers are just getting started.
I don't have the same warm and fuzzy feeling about gold. But I do about Numismatics and other "things".
I think I can concurr that real estate prices are skyrocketing. I'm 24 years old and looking to find my own place whether it's a small house or a condo. I only make 33 grand a year, and in the state of CT that means you can't afford a house. I've actually been laughed at by real estate agents when I tell them how much money I have to pay each month in terms of bills and how much I take in. The only way people can afford housing now is to be married. That's simply it. A single person cannot live on their own here in CT. It's incredibly depressing knowing that you'll be living at home for a good long while because there is nothing around you that's affordable. Every day I look at houses with 'for sale' signs for prices that are simply through the roof. Tiny little shacks with asking prices of 250,000+ dollars with nothing spectacular about the home or the land. If the economy is doing poorly, it's certainly not for the real estate people. I think the upper echelon of the tax bracket isn't feeling anywhere near the financial crunch that those of us on the low end feel.
I collect the elements on the periodic table, and some coins. I have a complete Roosevelt set, and am putting together a set of coins from 1880.
Yes, inflation tends to suck the lifeblood out of the lower half of the economy. Those same people's real wages have been falling for years.
Interest rates are going to stay low for sometime. OR GO EVEN LOWER. WORLD BONDS STILL YIELDING MORE THAN INTERMEDIATE/LONG U.S. BONDS AND NO REAL THREAT OF INFLATION. I think DEflation a threat if anything. High level prices of commodities: Will not last. Falling dollar: Really low (vs. the past) vs. other currencies....U.S. will not allow this to continue - won't last.
We do have NO inflation on durable goods (cars, appliances, computers, TV's, real worker's wages, etc.). In fact we might even have deflation here. But most certainly we have significant inflation of at least 5% per year on the important things we consume (food, energy, health care services, insurance costs, prescriptions, home building supplies etc.)
There is also massive inflation on commodities and real estate (asset bubbles). But you won't find any of these items represented proportionally in the CPI. In fact they are hardly represented other than for basic food. The CPI overcorrects for the slight increases or stationary pricing on durable goods (cars, computers, etc.) by adjusting their prices downward due to quality (hedonic) factors. It's incredibly boneheaded, but that's what the BLS statisticians do. If a computer gets 20% more efficient, that's registered as a 20% drop in "net" cost because you received more "benefit" for you dollar (whether you use it or not). Hence these kind of things help to keep the CPI well in check. And those % point savings in the CPI help to make the GDP look better, and hence further from recession.
Gold. HUGE supply, and not enough demand. ASIAN consumers USED to be the big buyers of gold....jewelry, etc. Banks also for reserves. Banks have been getting rid of Gold, and consumers (were) not purchasing it. Mining is still stong. To me, supply is plentiful, and demand still low. I think gold will be lower a year from now, than were it is.
I'm not a gold miner. But from the articles I've read over the past few years the gold supply is not adequate to keep up with demand. That's why Central Banks have sold some 15,000 tons of gold over the past 10-15 years to help keep the gold price from escalating out of control. And it takes 5-7 to bring a new gold mine on line. Yearly supply is not going to change very much either.
Asians are buying huge amounts of gold. The Chinese people are now allowed to buy gold for the first time. Whatever is offered up has been bought up. The demand is insatiable at the moment. There are gold ETF's popping up. The Central Banks will not be selling any more gold anytime soon because they now know they got screwed by selling it so cheap. The only reason they sold it was to keep the paper chase going. Now that the paper game is over, it's time to return to hard assets. Gold is one of things central banks now need in a stagflationary economy to keep things in check. They will not sell any more significant quantities. They will continue to say they will, but they will not. Many gold mines got shut down in the 1990's from the control on gold and lack of profits. The gold miners played the carry game too, even if it meant cutting their own throats in the long run. Central Bank gold made up the difference that the gold miners didn't produce. Now that those mines are needed once again to keep up with the growing demand, they are not available. Gold will continue to advance long term until the triple deficits are under control and the fiat money game is somehow brought under control. Expect much higher gold prices into 2006.
We do have deflation. But only in durable goods and in out of demand services. Inflation is the rule in key goods, commodities, energy, agricultural products, and tangible assets. The commodity's bull following 15-30 year runs in stocks has typically lasted a decade or more. Don't buy the fact that in 4 years we have run out all the excesses of paper assets from 1982-2002. This just doesn't jive with recorded market trends of the past 200 years. Never has a 20 year run in stocks been corrected in a short period of 3-5 years. And never has a correction been just 20%. We have a another 30% or more to go still.
Gold for now, is 3 steps forward and 2 steps backward. The US FED cannot control the price of gold nor the US dollar market, anymore than they can control interest rates. For those that think gold is a dumb place to be, at least consider stocks of energy/oil/gas/water companies or those that are well diverisified into timber, land, food products (soy, sugar, coffee, etc.), strategic metals, steel, etc. as this is where the action will be in the coming decade.......ESSENTIAL THINGS....not paper things.
Gold will reach $500 by the end of 2006...regardless of what prices come before it. K6AZ, I'll give you a 2nd chance at the "free" Saint based on gold breaking it's $456 high in 2005. Don't miss out a 2nd time.
Here's an offbeat article by Jim Willie at Financialsense.com that implies that inflation actually helps to lower the CPI. A remarkable thought if you think about it. In the same vein, you could say that the more stressed and out of kilter our economy becomes, that even gold moves opposite to what would be expected.
<< <i>But most certainly we have significant inflation of at least 5% per year on the important things we consume (food, energy, health care services, insurance costs, prescriptions, home building supplies etc.)
There is also massive inflation on commodities and real estate (asset bubbles). But you won't find any of these items represented proportionally in the CPI. >>
Absolutely !! As for food.....Why don't they measure what everybody buys? Milk was recently on the moon here, at almost 4.00 per. Look at a box of 'Life' cereal, beer, smokes. There's no end to it....A friend has a restaurant. The prices he has had to pay for produce, because of Floridas' latest weather trouble would make me sick. I've heard of places here that don't give you a salad with your dinner anymore. As you say Roadrunner, TAXES !! If they're not inflationary, what are they? Our county here is struggling about adding another penny to the sales tax. We're already at 8 1/4%. The legislators say, "It's just a penny." No it's not !! It's 12 % !! We're in trouble allright.....And yes, it'll take years to shake it out.....
Paul, I drudged up the basic components of the urban CPI from my post of last June. Some interesting points. The bottom line is that from 50-60% of the index is locked up into things that just don't change...by design I might add. Hence, you could say that the index could be understated by at least several %. If 50% of the index doesn't change, but the other 50% goes up 10% in price, the net effect is only a 5% change...but in reality it's much closer to 10%.
Having "equivalent rent" as the foundation for CPI is sort of silly since 68% of American families own homes. And the fact that Willie shows examples of how inflation literally drives down the prices of the CPI adds fuel to the fire.
Funny that you mentioned food. The BLS makes an adjustment for foods that become too expensive and buyers start substituting for them. Honest to goodness! If for instance, beef starts to become way too high and consumers start to substitute dog food in its place, the BLS stats will show a net decline for your choice since you have saved money, and your "price" of living has dropped. What they don't seem to realize is that your quality of living has dropped accordingly too. This example would be tend to lower the CPI when it fact common sense says it should be just the opposite.
Gold makes sense and it's certainly not in free-fall...maybe free ascent.
Having "equivalent rent" as the foundation for CPI is sort of silly since 68% of American families own homes
By this logic, severe reductions in the CPI should have occurred the past few years as all the homeowners reduced their payments by refinancing their homes to lower interest rates.
[Not disagreeing with the general thrust, just this one assertion]
I went to my local McDonalds the other day and ordered my usual. Normally $3.67. Now the same cost $4.19. I asked why and the reply was because minimum wage increased.
Now I cut one item out of my usual and save $1.43 and lower my cholesterol
TDN, yes, if the CPI input from home ownership was represented in the CPI by an interest rate or monthly payment index, we may have indeed seen a nice drop in the CPI. While one could present such an argument to place mortgage rates into the CPI (30% weighted as rents are now) I think that would raise other issues. Many of which I'm not qualified to discuss, but would love to learn. Mortgages tend to be long term unlike rents or home prices. I'd want the CPI to be a yearly or monthly trending index. If mortgage rates where in the CPI, eventually the govt might be looking at 12% interest rates again and having to explain why the CPI is 8-10%. Can't have that again! They made the leap from home prices to equivalent rents back in 1983-1985 when interest rates were still pretty high. That system would not have worked then. No, I think they like it the way it is where the CPI seems well regulated in a 2-4% range that most of us now accept as comfortable, even though it systematically erodes our wealth away (US dollar value reduced by 95% since 1913). Everyone things that 3% inflation is "good" and "normal" and the way things should be. Huhh??
While the ultimate cost of low interest rate mortgage "deals" is passed along by our debt to future generations (or stock owners of Freddie and Fannie...lol), it does make one's current cost of living seem lower. How about all those ARM's sold to lower income families to induce them into home ownership? Right now their cost of living IS low. But when those rates balloon upwards and they can no longer afford their home, that will have a huge effect on their cost of living. And when those houese are defaulted on and show up as a glut on the market, then the whole pyramid starts to get squeezed. And none of this is represented by lower or higher CPI's.
But this may also flow right into the assertion that Jim Willie makes in his article listed above. That with all this credit induced by the lower FED fund rates, consumers have not used it to compete in raising the price of SUV's and other durable goods. Rather, they used it to expand the price of commodities, collectables, stocks, land, real estate, etc. ("things") Hence the CPI stays low and shows no "general inflation" per se, even though what consumers really spend much of their money on is going up significantly in price. And what durable goods they do buy, can be purchased at 0-2% interest rates with no money down, leaving more money for those asset bubbles that are expanding (and not fully measured by CPI).
(1) I happen to be a landlord and the rents we charge to our holdover tenants have not increased much more than 4-5% a year despite our real estate taxes increasing close to 10% a year. The apartments that have turned over have increased in rent by close to 100% in the last 10 years, of which 50% of the increase has been in the last 3-4 years alone. Those rents do not even include utilities other than water and hot water. I understand and observe that the utilities for heat have increased more than 100% in the last 10 years.
(2) The CPI component that factors in the cost of rents makes me laugh!!! I understand that over 33% of the rents represented in the New York Metro CPI is represented by rent controlled or rent stabilized apartments. Those apartments rents cannot increase by more than the CPI inflation rate plus specific improvements by landlords. But they in turn affect the CPI formula and determintion of CPI % increase.
A sham of a calculation if I ever saw one. If Federal Government officials responsible for these calculations were in private practice subject to SEC rules, well they would get to live in places that charge free room and board!!!!!!
I'm glad I'm not long GLD. This could sure throw some cold water on the market.
KJ >>
government will sell our children for a buck, given the chance to do so. While I can understand "other" governments doing it, not only do I resent ours doing it, I wish them all the worst that can happen in life for being traitors to the American idea.
This is pure hype about either IMF or Central Bank gold sales in the future. Sure, first Germany's central bank came out in late 2004 stating they'd sell 500 tons of gold on the market soon enough. Well now soon enough is probably never. Who wants to be the first bank to step forward and sell away their countries gold? Great Britain sold most or all of their gold for $260/oz not too long ago. A real wise decision in retrospect (lol). But for that time, it helped keep gold depressed while fiat's reign could be extended.
The IMF's words are no different. The FED does the same "fedspeak" at times to keep the market leery of gold. They want the dollar to fall, but not to cave in. To incite gold rallies is not in their plans.
Words mean one thing....it's actions that count. Will the next Central Bank looking to sell away it's future please step forward.....right!
Being into gold bullion is playing ball with the central banks of the world. The cards are stacked against us. In the current environment, first central bank to sell gets the most bang for their buck. That's an enticement right there and something all traders should consider.
If we see further significant drops in gold, this week, I'll start considering putting on another trade in GLD shares. I caught the falling knife and closed my previous position in GLD at 42.75 on January 21.
It has been noted here that gold should stay near $400/oz w/a little spike and resettling now and then. There are some pretty astute folks in this mix and the first thing they will say (no, I'm not speaking for them, just reiterating previous talks) is don't speculate on gold right now. The IMF gold sale is just a good example that right now gold is a very volitile commodity. If people are shocked when it settles to $400 then they are beyond any reasonable attempt to help them get a clue. If they are going to get a second mortgage when gold hits $440 and buy bullion then the same holds true.
For us folks that collect gold coins we have seen the spike in our series recently, pure gouging or in more acceptable lingo, "all that the market will bear" is the market for right now. I visited a gold coin site last week because it was a recommended place for gold coin purchases and I was astounded. Pure hype, "...gold at 500 by years end, buy now!" was one of the screaming headlines, unfortunately, it was a 2004 ad. Blatant B.S. with multicolor come-ons and of course some coin picutres with very optimistic prices...unbelievable. Reminded me of 1989. Keep your wits about you and get good value for your money. Solid investment strategies in gold coins will out perform rabid speculation. Do your homework and tread lightly into troubled waters.
Oh yes, I forgot to mention this one...From Today's Financial Times
"The International Monetary Fund is preparing a report on the potential sale of a portion of its gold reserves in a move that would help fund debt relief for poor countries but could unsettle the markets by threatening a drop in the price of gold.
Finance ministers from the Group of Seven countries, meeting in London at the weekend, asked Rodrigo Rato, IMF managing director, to make proposals to the fund's shareholders at its April meeting. "
Not necessarily.....Perhaps they simply believe in the CPI, which we have theorized is computed incorrectly. There is a lot of money out there. It has to go somewhere.....
<< <i>Why are bond yields falling like a rock, if we theorize inflation is high? >>
I think it's because most people are sufficiently unsettled about longer-term prospects for investing that any time long-term interest rates rise, investors buy it up and bid the yield back down.
I wouldn't be surprised to see the yield curve invert before too long.
tradedollarnut
Posts: 20,162 ✭✭✭✭✭
Comments
I'm not willing to give up on it this year yet !!
Paul
Isdown ... it wassup ... now Isdown
That is my amateur take on things.
Knowledge is the enemy of fear
That said, I just read this : Dollar to drop, deficits to grow : CNN
<< <i>$414?? Wassup with that? >>
Cool. I was just thinking about buying some gold. Nice to get a cheaper price.
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
I hear roadrunner has been secretly unloading.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
Greg Hansen, Melbourne, FL Click here for any current EBAY auctions Multiple "Circle of Trust" transactions over 14 years on forum
The long term trend is still totally intact. There would have to be lots more damage from here to break the market. Just remember that in the bull market of the 70's gold made a 50% correction in the middle of it's up leg to $850/oz. We will see similar or GREATER volatility as time goes on in this PM's market. The FED boys can play their games and speak kind words about the economy, but the facts are the facts.
roadrunner
the direction of the trade deficit changes and, likely, long after.
<< <i>what goes down will go back up even higher >>
Back in the old days when people were standing in lines outside my store in NJ, ( the crazy era), one doctor bought IN to silver in the $30's, and told me in no uncertain terms, "Tommy it's going to 100.00, buy all you can!". Well I was buying a lot then from all the jewelry stores, small coin shops etc etc ( I remember some days buying many thousands of oz's), and was driving 1800 miles a week scrapping out.
Far as my own personal stuff, I kept some of the cooler things and I sold my positions ( futures) at 32.00. Boy was I happy.
The doctor had apparently mortgaged his real estate and more to buy IN at the 30 buck level. I never saw him again.
After those times a lot of people who were buried ( still are) would concoct these stories of how it's all going to happen again, blah blah blah.
Sorry, I don't think so.
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
"Seu cabra da peste,
"Sou Mangueira......."
Sure there's the internet dealers with the huge over spot mark ups, but in the trenches, there aren't any to be found.
That tells me that regular people aren't selling the hard asset and this is just paper turning for short term profit taking.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
stocks, energy (oil, gas, water), etc. are not reflected in the CPI. This is classic stagflation. The FED can always point to the massaged CPI and say, "look ma, no inflation." But tell that to the rest of the world.
Of the FED/Treasury created credit over the past 4 years, most of that has been put by you and I, into those major asset bubbles, and not into things reflected in the CPI basket. Hence it does look like there is controlled inflation. But at some point, the average Joe will start to realize that the FED's words hold no weight. Also realize that the US dollar index has lost 40% of its value in relation to other world currencies in the past 5 years. Just to have broken even since then, you would have needed a similar gain in whatever assets you are in, or you have a net losing position. You have to adjust the stock market "gains" down for inflation too. Gold will eventually respond back.
Support at $405-410? Forget it, it's going back down under $400. If I had been a gambling man, I would own a lot of free Saints right now.
Most people don't act on their thoughts. And buying when things are low and selling when they are high, is the toughest thing to do.
roadrunner
Seems that with each successive rout, that the ability to spring upwards or downwards on Saints gets tougher (less elastic). Means to me that sellers are more leery about accepting prices based sheet bids, and buyers are gun shy to jump back in as they keep seeing volatility, and potential losses if they time it wrong. But when they both eventually get back together, it's back to the races. So what if gold dropped $40. Should I sell my saints for $100 less now because of currency market gyrations? AS the buyer, you are the judge.
roadrunner
Experience the World through Numismatics...it's more than you can imagine.
<< <i>The FED claims that we have low inflation but it is anything but. Remember that the CPI is juiced to hold a basket of "goods" that tend to be CPI resistant. That's a govt success story since the early 1980's. The major items that are getting inflated: commodities, real estate,
stocks, energy (oil, gas, water), etc. are not reflected in the CPI. >>
I've been saying this, to anyone that would listen, for years......It's nice to see I'm not alone....
Paul
We've had some heated discussions here on the forum concerning the CPI and other "govt stats" (oxymoron?). If you do a word search for CPI you'll uncover a bunch of them. I learned a lot about diving into the BLS website to see what things really made up the CPI and was sort of surprised to see "imputed rent" to be 30% or more of the makeup. Toss in hedonic adjustments, geometric mean averaging, and all the other "improvements," and you no longer have an index that accurately tracks price (or also asset) inflation due to monetary policy excess. Even if they've succeeding in shaving a point off the index for the past 15 years, it adds up over time. That's one less point the govt has to pay to military retirees, pension funds, soc security payouts, medicare, and many other programs. It has been suggested that it saves the govt $50-100 BILLION per year. That's money that leaves our pockets for good.
Personally I think it will take many more rate hikes to even touch the real rate of inflation and restore the dollar's strength. We've scriewed the pooch to a far greater level than what occurred in 1979-1981 and it took a FED rate of around 12% back them to turn the battle. Actual interest rates were 18-20%. A measly 3, 4, 5 or even 6% won't do much of anything here imo. It will take a decade or so to shake out all the excesses from the 80's and 90's.
roadrunner
I know you to be very astute at all these govt numbers. I waonder how we could include real estate in the CPI numbers??? I agree, it has gone up drastically, especially Florida, CA, and East Coast. But the BUYING power of RE has gone up, because of low interest rates. How do you calculate that? I know from friends that plastic resin for packaging, and building materials (all considered commodities, I guess), have gone up quite a bit, past 2 years. This to me should be considered (like you said it is NOT) in the CPI.
But I look at other goods and services, and it seems some major items are inexpensive: Technology like computers, DVD's, TV's, - clothing, and seems to me, food is stable. It is interesting that you say water. I know in FL water bills, and the other utilities are going up quite a bit, but I was informed, mainly because of TAXES, and other charges (over usage, for example), NOT THE OVERALL COST OF the utilities. Heard this is to make up for storm damages over the past 3 years.
Anyway, an increase in interest rates/falling dollar/increased inflation are signs for tangible asset gains. And supply and demand for tangible assets ways in...
My opionion: Interest rates are going to stay low for sometime. OR GO EVEN LOWER. WORLD BONDS STILL YIELDING MORE THAN INTERMEDIATE/LONG U.S. BONDS AND NO REAL THREAT OF INFLATION. I think DEflation a threat if anything. High level prices of commodities: Will not last. Falling dollar: Really low (vs. the past) vs. other currencies....U.S. will not allow this to continue - won't last.
Gold. HUGE supply, and not enough demand. ASIAN consumers USED to be the big buyers of gold....jewelry, etc. Banks also for reserves. Banks have been getting rid of Gold, and consumers (were) not purchasing it. Mining is still strong. To me, supply is plentiful, and demand still low. I think gold will be lower a year from now, than were it is.
-----Lloyd
Most docs are suckers and good contrary indicators.
I always read whatever RR posts becuase I always learn something.
<< <i>RoadRunner:
I know you to be very astute at all these govt numbers. I waonder how we could include real estate in the CPI numbers??? I agree, it has gone up drastically, especially Florida, CA, and East Coast. But the BUYING power of RE has gone up, becasue of low interest rates. How do you calculate that? I know from firends that plastic resin for packaging, and building materials (all considered commodities, I guess), have gone up quite a bit, past 2 years. This to me should be considered (like you said it is NOT) in the CPI.
BUt I look at other goods and services, and it seems some major items are inexpensive: Technology like computers, DVD's, TV's, - clothing, and seems to me, food is stable. It is interesting that you say water. I know in FL water bills, and the other utilities are going up quite a bit, but I was informed, mainly becasue of TAXES, and other charges (over usage, for example), NOT THE OVERALL COST OF the utilities. Heard this is to make up for storm damages over the past 3 years.
-----Lloyd >>
Lloyd, we just got our property tax bill here in Port Charlotte. Mine are up nearly 80%. ( ! ). Can't wait to see what the renewal is going to be for homeowners insurance.
FPL is lobbying for a new disaster "fund". Something like that.
I just sold a couple of building lots here in PC. I paid 5,000 each for them a little less than 15 months ago. They are sold for 27K and 29K respectively. I'm happy! Wish I bought 100 of them.
I don't think we'll see prices go down in South Fla anytime soon. We still have what most people want and the baby boomers are just getting started.
I don't have the same warm and fuzzy feeling about gold. But I do about Numismatics and other "things".
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Interest rates are going to stay low for sometime. OR GO EVEN LOWER. WORLD BONDS STILL YIELDING MORE THAN INTERMEDIATE/LONG U.S. BONDS AND NO REAL THREAT OF INFLATION. I think DEflation a threat if anything. High level prices of commodities: Will not last. Falling dollar: Really low (vs. the past) vs. other currencies....U.S. will not allow this to continue - won't last.
We do have NO inflation on durable goods (cars, appliances, computers, TV's, real worker's wages, etc.). In fact we might even have deflation here. But most certainly we have significant inflation of at least 5% per year on the important things we consume (food, energy, health care services, insurance costs, prescriptions, home building supplies etc.)
There is also massive inflation on commodities and real estate (asset bubbles). But you won't find any of these items represented proportionally in the CPI. In fact they are hardly represented other than for basic food. The CPI overcorrects for the slight increases or stationary pricing on durable goods (cars, computers, etc.) by adjusting their prices downward due to quality (hedonic) factors. It's incredibly boneheaded, but that's what the BLS statisticians do.
If a computer gets 20% more efficient, that's registered as a 20% drop in "net" cost because you received more "benefit" for you dollar (whether you use it or not). Hence these kind of things help to keep the CPI well in check. And those % point savings in the CPI help to make the GDP look better, and hence further from recession.
Gold. HUGE supply, and not enough demand. ASIAN consumers USED to be the big buyers of gold....jewelry, etc. Banks also for reserves. Banks have been getting rid of Gold, and consumers (were) not purchasing it. Mining is still stong. To me, supply is plentiful, and demand still low. I think gold will be lower a year from now, than were it is.
I'm not a gold miner. But from the articles I've read over the past few years the gold supply is not adequate to keep up with demand.
That's why Central Banks have sold some 15,000 tons of gold over the past 10-15 years to help keep the gold price from escalating out of control. And it takes 5-7 to bring a new gold mine on line. Yearly supply is not going to change very much either.
Asians are buying huge amounts of gold. The Chinese people are now allowed to buy gold for the first time. Whatever is offered up has been bought up. The demand is insatiable at the moment. There are gold ETF's popping up. The Central Banks will not be selling any more gold anytime soon because they now know they got screwed by selling it so cheap. The only reason they sold it was to keep the paper chase going. Now that the paper game is over, it's time to return to hard assets. Gold is one of things central banks now need in a stagflationary economy to keep things in check. They will not sell any more significant quantities. They will continue to say they will, but they will not. Many gold mines got shut down in the 1990's from the control on gold and lack of profits. The gold miners played the carry game too, even if it meant cutting their own throats in the long run. Central Bank gold made up the difference that the gold miners didn't produce. Now that those mines are needed once again to keep up with the growing demand, they are not available. Gold will continue to advance long term until the triple deficits are under control and the fiat money game is somehow brought under control. Expect much higher gold prices into 2006.
We do have deflation. But only in durable goods and in out of demand services. Inflation is the rule in key goods, commodities, energy, agricultural products, and tangible assets. The commodity's bull following 15-30 year runs in stocks has typically lasted a decade or more. Don't buy the fact that in 4 years we have run out all the excesses of paper assets from 1982-2002. This just doesn't jive with recorded market trends of the past 200 years. Never has a 20 year run in stocks been corrected in a short period of 3-5 years. And never has a correction been just 20%. We have a another 30% or more to go still.
Gold for now, is 3 steps forward and 2 steps backward. The US FED cannot control the price of gold nor the US dollar market, anymore than they can control interest rates. For those that think gold is a dumb place to be, at least consider stocks of energy/oil/gas/water
companies or those that are well diverisified into timber, land, food products (soy, sugar, coffee, etc.), strategic metals, steel, etc. as this is where the action will be in the coming decade.......ESSENTIAL THINGS....not paper things.
Gold will reach $500 by the end of 2006...regardless of what prices come before it. K6AZ, I'll give you a 2nd chance at the "free" Saint
based on gold breaking it's $456 high in 2005.
roadrunner
CPI index lowered by inflation???
roadrunner
If the dollar falls, it's pretty tough for commodity prices to fall also. I'll just sell my crude oil overseas, instead
<< <i>But most certainly we have significant inflation of at least 5% per year on the important things we consume (food, energy, health care services, insurance costs, prescriptions, home building supplies etc.)
There is also massive inflation on commodities and real estate (asset bubbles). But you won't find any of these items represented proportionally in the CPI. >>
Absolutely !!
As for food.....Why don't they measure what everybody buys? Milk was recently on the moon here, at almost 4.00 per. Look at a box of 'Life' cereal, beer, smokes. There's no end to it....A friend has a restaurant. The prices he has had to pay for produce, because of Floridas' latest weather trouble would make me sick. I've heard of places here that don't give you a salad with your dinner anymore.
As you say Roadrunner, TAXES !! If they're not inflationary, what are they? Our county here is struggling about adding another penny to the sales tax. We're already at 8 1/4%. The legislators say, "It's just a penny." No it's not !! It's 12 % !!
We're in trouble allright.....And yes, it'll take years to shake it out.....
Paul
Having "equivalent rent" as the foundation for CPI is sort of silly since 68% of American families own homes. And the fact that Willie shows examples of how inflation literally drives down the prices of the CPI adds fuel to the fire.
Funny that you mentioned food. The BLS makes an adjustment for foods that become too expensive and buyers start substituting for them. Honest to goodness! If for instance, beef starts to become way too high and consumers start to substitute dog food in its place, the BLS stats will show a net decline for your choice since you have saved money, and your "price" of living has dropped. What they don't seem to realize is that your quality of living has dropped accordingly too. This example would be tend to lower the CPI when it fact common sense says it should be just the opposite.
Gold makes sense and it's certainly not in free-fall...maybe free ascent.
CPI breakdown - Northeast Urban Consumers
roadrunner
By this logic, severe reductions in the CPI should have occurred the past few years as all the homeowners reduced their payments by refinancing their homes to lower interest rates.
[Not disagreeing with the general thrust, just this one assertion]
Now I cut one item out of my usual and save $1.43 and lower my cholesterol
Knowledge is the enemy of fear
While the ultimate cost of low interest rate mortgage "deals" is passed along by our debt to future generations (or stock owners of Freddie and Fannie...lol), it does make one's current cost of living seem lower. How about all those ARM's sold to lower income families to induce them into home ownership? Right now their cost of living IS low. But when those rates balloon upwards and they can no longer afford their home, that will have a huge effect on their cost of living. And when those houese are defaulted on and show up as a glut on the market, then the whole pyramid starts to get squeezed.
And none of this is represented by lower or higher CPI's.
But this may also flow right into the assertion that Jim Willie makes in his article listed above. That with all this credit induced by the lower FED fund rates, consumers have not used it to compete in raising the price of SUV's and other durable goods. Rather, they used it to expand the price of commodities, collectables, stocks, land, real estate, etc. ("things") Hence the CPI stays low and shows no "general inflation" per se, even though what consumers really spend much of their money on is going up significantly in price.
And what durable goods they do buy, can be purchased at 0-2% interest rates with no money down, leaving more money for those asset bubbles that are expanding (and not fully measured by CPI).
roadrunner
(1) I happen to be a landlord and the rents we charge to our holdover tenants have not increased much more than 4-5% a year despite our real estate taxes increasing close to 10% a year. The apartments that have turned over have increased in rent by close to 100% in the last 10 years, of which 50% of the increase has been in the last 3-4 years alone. Those rents do not even include utilities other than water and hot water. I understand and observe that the utilities for heat have increased more than 100% in the last 10 years.
(2) The CPI component that factors in the cost of rents makes me laugh!!! I understand that over 33% of the rents represented in the New York Metro CPI is represented by rent controlled or rent stabilized apartments. Those apartments rents cannot increase by more than the CPI inflation rate plus specific improvements by landlords. But they in turn affect the CPI formula and determintion of CPI % increase.
A sham of a calculation if I ever saw one. If Federal Government officials responsible for these calculations were in private practice subject to SEC rules, well they would get to live in places that charge free room and board!!!!!!
IMF looks at gold sale options for debt relief
I'm glad I'm not long GLD. This could sure throw some cold water on the market.
KJ
<< <i>IMF looks at gold sale options for debt relief
I'm glad I'm not long GLD. This could sure throw some cold water on the market.
KJ >>
government will sell our children for a buck, given the chance to do so. While I can understand "other" governments doing it, not only do I resent ours doing it, I wish them all the worst that can happen in life for being traitors to the American idea.
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
The IMF's words are no different. The FED does the same "fedspeak" at times to keep the market leery of gold. They want the dollar to fall, but not to cave in. To incite gold rallies is not in their plans.
Words mean one thing....it's actions that count. Will the next Central Bank looking to sell away it's future please step forward.....right!
roadrunner
Being into gold bullion is playing ball with the central banks of the world. The cards are stacked against us. In the current environment, first central bank to sell gets the most bang for their buck. That's an enticement right there and something all traders should consider.
If we see further significant drops in gold, this week, I'll start considering putting on another trade in GLD shares. I caught the falling knife and closed my previous position in GLD at 42.75 on January 21.
KJ
For us folks that collect gold coins we have seen the spike in our series recently, pure gouging or in more acceptable lingo, "all that the market will bear" is the market for right now. I visited a gold coin site last week because it was a recommended place for gold coin purchases and I was astounded. Pure hype, "...gold at 500 by years end, buy now!" was one of the screaming headlines, unfortunately, it was a 2004 ad. Blatant B.S. with multicolor come-ons and of course some coin picutres with very optimistic prices...unbelievable. Reminded me of 1989. Keep your wits about you and get good value for your money. Solid investment strategies in gold coins will out perform rabid speculation. Do your homework and tread lightly into troubled waters.
"The International Monetary Fund is preparing a report on the potential sale of a portion of its gold reserves in a move that would help fund debt relief for poor countries but could unsettle the markets by threatening a drop in the price of gold.
Finance ministers from the Group of Seven countries, meeting in London at the weekend, asked Rodrigo Rato, IMF managing director, to make proposals to the fund's shareholders at its April meeting. "
Why are bond yields falling like a rock, if we theorize inflation is high?
Is every bond investor stupid?
<< <i>
Is every bond investor stupid? >>
Not necessarily.....Perhaps they simply believe in the CPI, which we have theorized is computed incorrectly.
There is a lot of money out there. It has to go somewhere.....
Paul
<< <i>Why are bond yields falling like a rock, if we theorize inflation is high? >>
I think it's because most people are sufficiently unsettled about longer-term prospects for investing that any time long-term interest rates rise, investors buy it up and bid the yield back down.
I wouldn't be surprised to see the yield curve invert before too long.
<< <i>Why are bond yields falling like a rock, if we theorize inflation is high?
Is every bond investor stupid? >>
I cant wait until the Fed Funds rate and 10 yr bond yield are the same. Then we will have some fun
Knowledge is the enemy of fear