Investment/Trends

The Democrats Finally Embrace Money Printing

"Even though Quantitative Easing started in 2008, it seems as if Democrats didn’t really 'get it'. They viewed it as a way to save the banksters’ collective bacon—they didn’t see it as the way by which the Federal government could go into limitless debt. But with Thursday’s testimony, it’s clear like a bomb blast that the Democrats finally understand what QE really means: The Federal government can go into as much deficit spending as it wishes, because the Federal Reserve will be buying the bonds that finance this deficit spending by way of QE. And now that they understand this, they are all in favor of more of it." Continue reading →

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UK Telegraph: ‘We No Longer Have Free Markets’

"If Bernanke really shakes the tree, half the world may fall out ... We no longer have a free market. The world's financial asset prices have become a plaything of central banks and the sovereign wealth funds of a few emerging powers. Julian Callow from Barclays says they are buying $1.8 trillion worth of AAA or safe-haven bonds each year from an available pool of $2 trillion. Nothing like this has been seen before in modern times, if ever." Continue reading →

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Gold Sector: A Small Fish in a Big Pond

"The conclusion we can draw from these two charts is rather obvious: gold stocks are a tiny constellation in a big universe. That's important, because it shows just how very crowded this little area could get when the larger universe of investors turns to the gold sector. If they invest in the bigger companies, there won't be that many to choose from, which could swell stock prices. In the meantime, gold stocks remain deeply undervalued. Let me build on Jeff's argument that gold stocks are cheap on an historical basis and compare them to other industries' price-to-book values as of July 17. How long will gold stocks continue to be so undervalued?" Continue reading →

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Federal Reserve rethinks 2003 move allowing banks to trade physical commodities

"The U.S. Federal Reserve is 'reviewing' a landmark 2003 decision that first allowed regulated banks to trade in physical commodity markets, it said on Friday, a move that may send new shockwaves through Wall Street. While it is well known that the Fed is considering whether or not to allow banks including Morgan Stanley and JPMorgan to continue owning trading assets like oil storage tanks or metals warehouses, Friday's one-sentence statement suggests that it is also reconsidering the full scope of banks' activities in physical markets, which help generate billions in profits." Continue reading →

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Gold exports in June slump 70% in India

"According to Vipul Shah, chairman of the Gems and Jewellery Export Promotion Council, 'Exports declined drastically in June as there was a shortage of raw material for jewellery manufacturing. Our main demand is that we should be provided gold on easy terms.' He added that if the current situation prevailed, it would be disastrous for the entire industry and bring in large scale unemployment. According to M Ahamed of the Kerala Jewellery Federation, exporters had initially gained from the rupee depreciation in the country, as the value of their exports in rupee terms had gone up. However, that gain has now petered off, he added." Continue reading →

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Chris Becker on South Africa, Gold and the Ludwig von Mises Institute

"We've seen huge growth in private education, private security and private medical industries in recent years, without which we would have seen rapidly declining living standards of South Africans. In a micro sense this inefficient and disorganized state leaves the space for quite a lot of personal liberty and allows people to get on with things outside of government control. With this strong central planning and regulatory ethos, if the government could actually follow through with its grand plans, South Africa would be a very unfree place. I call it 'dangerous efficiency.'" Continue reading →

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With Gold, Don’t Miss the Top

"Zero Hour is the moment the price of physical gold starts to run away from the ‘paper price’ you see on CNBC’s ticker. The most likely catalyst is a chain of events that goes like this: Western central banks have leased their gold to commercial banks like JPMorgan Chase at an interest rate of less than 1%. The commercial banks have sold that metal and ploughed the proceeds into assets that earn more than 1%. The chain of custody on gold bars has become so cloudy that a major exchange like the Comex in New York is liable to ‘default’ on a gold contract – settling in cash, instead of metal. A rush for real metal would then be underway." Continue reading →

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The Bull Within the Bear

"The reason it's important to look at the entire picture of investment demand is because an investor might draw an erroneous conclusion if they read just the headlines. For example, China and other Asian nations represent well over half of all global investment demand, while North America is just 9%. Is this bigger source of demand experiencing a lot of selling, too? Let's look at the bigger picture of investment demand for gold this year. In the following chart, we compare GLD outflows to Chinese imports through Hong Kong, as well as other sources of demand for physical metal. Here are the data through last month." Continue reading →

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A Dozen Things I’ve Learned From Michael Mauboussin About Investing

"1. 'The only certainty is that there is no certainty… With uncertainty, the underlying distribution of outcomes is undefined, while with risk we know what that distribution looks like. Corporate undulation is uncertain; roulette is risky…' There is no single number which can be used to predict the future price of an investment because the future is not only risky (like roulette) but uncertain (unknown unknowns). There are known future states for which probability is unknown and future states that are unknown for which probability is not computable." Continue reading →

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US Is World’s Largest Tax Haven

"What is the world's largest tax haven? If you guessed any country in the Caribbean, South Pacific, Asia, the Middle East, Africa, Central or South America or Europe, then you would be wrong. Only the United States can lay claim to that title. Ever since the French loaned money to the struggling revolutionaries who defeated the British to create the United States, to today where the Chinese are buying U.S. Treasury debt, the United States would not be able to maintain its economy without large inflows of foreign capital. Foreign investors can invest in the United States virtually tax free — in structures that are legally protected from risks and, currently, with secrecy." Continue reading →

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