Friday, November 6, 2009

Bank of India on Inflation as Tax

The author/investor Michael Clark brings this:
"India’s central bank Governor Duvvuri Subbarao described inflation as a “regressive tax,” justifying his steps yesterday to start withdrawing the monetary stimulus as price pressures build. “As far as public policy is concerned, it has a commitment to insulate the poor from inflation - it’s the prime consideration for the Reserve Bank of India and the government.”"
We used to hear this from radicals, then from contrarians, from MSM, and now... from bank governors?
Protecting the poor from inflation, indeed! Damn those socialist bank governors!

Professor, Don't Come Knocking on MY Log Cabin's Door

Kitco - Commentaries - Jon Nadler:
"'Mr. Roubini, the economist who predicted the global economic crisis, said a forecast by investor Jim Rogers that gold will double to at least $2,000 an ounce is “utter nonsense.” There is no inflation or “near-depression” to drive gold prices that high, Roubini said today at the Inside Commodities Conference in New York. If a severe depression came to pass, with investors buying canned goods and hiding out in log cabins, “maybe you want some gold in that scenario,” Roubini said."

Thursday, November 5, 2009

The Revolution Will Not Be Refinanced

Market Observation - Michael Panzner 11.05.2009:
"The Labor Department today reported that nonfarm productivity rose 9.5% in the third quarter, the fastest pace in six years. Boosted by lower than expected labor costs, the bigger-than-expected jump was widely hailed as positive by economists and stock traders. Huh? In a debt-challenged, consumer-dependent economy like ours, where a growing number of Americans are struggling to get by, the fact that businesses continue to benefit from squeezing wages and cutting jobs would seem to be the recipe for social unrest and revolution, not a return to economic good fortune."
Funny I should hear about revolution from a veteran investor in, not from KPFA.

Prophet of the Eternal Crash

Bob Prechter's Bloomberg Interviews over the years were arranged to create a cool (McLuhan-cool, not iPhone-cool) multimedia presentation that respects the viewer's intelligence. The promotional materials of the Elliot Wave Institute are often a cut above the others. As a fellow marketer, I find they are the rare investment advisory service that succeeds in projecting some self-respect to me. That make them actually intriguing and a joy to read. Small wonder that the Elliot guys are an object of imitation.

Yes, Prechter intrigues me. Other investment gurus I may want to have a beer or party with (on the road to nowhere), but Prechter I would like to do the Vulkan mind meld with. Like me, he is a Mensan and like me, an obsessive bear. Unlike me, he has professional background in psychology and in economics and plenty of research to back his gut feeling - which has been predicting a bearish market since the 70's. All I had was a deep mistrust of The Man. It led me to the same bearish predictions since the 70's but I had no diplomas to back my ill gut feeling. So you see son, you need to study.

I love Prechter's thinking that external events are not a cause of behavior but its result. On the personal domain, psychology (and criminology) teaches us that "I had no choice", "I was just following orders", "the devil made me do it" and "look what you made me do" (thanks, RAW) are signs of consciousness in distress. But on the social domain, we do not apply the lessons of psychology and accept that external events are indeed a cause. Does this mean we accept that our society is made of individuals in distress? In the domain of economy, we chart and expect the herd behavior - it is what we call a trend.

The other night I mentioned this idea to a psychologist friend, and it reminded her of Roosevelt's "we have nothing to fear but fear itself". Yes, this understanding is the way of the leader, the therapist and the guru. We all have heard the cliche that our world is sick, but few realize it is true, in the clinical sense. Gurus, however, have always taught that. And now, after being inspired by some Prechter reading, I watch the talking heads on TV pointing to some graph and am acutely aware that these graphs are literally charting the steps of the lemming dance down the slippery slope.

But if, like Prechter, your predictions are constantly bearish about all and every thing, what's the difference between an enlightened guru, a direct action anti-globalization activist and my late grandmother? They all have a deep truth to share but provide vague timing and hazy details. In contrast, the shrewd "no future / Kali yuga" investor wants to know not that society is going down - we do, it will, and get over it already - but when to short it, so that we can be richer than the other lemmings and go down in style (or help the other lemmings if you are compassionately inclined).

And watching this series of TV interviews done along the last couple of turbulent years, it seems to me Prechter's is an unfortunately uniform dark perspective, always thinly veiled by the same thin Vulkan half-smile. How sad it must be, being the prophet of the eternal crash! It seems one has to become familiar with his fin-du-siecle mood, read it like tea leaves, and subtract his prevailing melancholy from his public appearances to divulge the news items from it. Like a guru's asistant who, upon seeing his guru sad one day, rushes out and sells all his stocks, perhaps those familiar with the pervading Prechterian darkness, Prechter's comments can be useful for timing.

Besides, I don't get how he can suggest viewing stocks in gold terms because it is "real money" - and almost in the same breath leave it out of the short list of "hard assets". At that moment, I could almost swear that behind the suit there lives a habitual nay-sayer yet more misanthropic than even myself. Those smart pessimists are such a nuisance. I stick to my bricks. For now. If worst comes to worst I will have them fashioned into a thick ghetto-style chain around my neck. We'll see who's darker when we hit bottom and hear the bell ring!

Prechter a bear on gold? Not quite.

A bear on gold when the rest are bullish - The Globe and Mail:

"But saying Mr. Prechter is bearish on gold may be putting it too strongly. The bearish label may have fit in past years but in a September interview with Financial Sense News Hour host Jim Puplava, he seemed to soften his stance somewhat.

Mr. Puplava asked if he wished he had changed anything in the second edition due out this month for his bestselling 2002 book, Conquer the Crash (all that's new is the addition of over 150 pages containing Elliott Wave Theorist commentary from 2003 to 2007 and updated lists of U.S. financial institutions and contact services). He replied:

“If I were to reconsider one comment it is the idea that gold would have difficulties during the [deflationary period] ….there was so much inflation from 2002 to 2008 that it ignited all the markets, most of which have since collapsed …. But gold is [now] holding up. It went up the least relative to everything else and so it's probably going to hold up pretty well during the deflationary drop. But I think it's going to disappoint the people who think its going to $5,000 or $10,000 an ounce. That may happen after deflation is over.”"

Aw shucks. It's not gonna reach $5000? that's considered bearish these days?

Profit `Not Satanic,’ Barclays Says

Profit `Not Satanic,’ Barclays Says, After Goldman Invokes Jesus -
"Nov. 4 (Bloomberg) -- Barclays Plc Chief Executive Officer John Varley stood at the wooden lectern in St. Martin-in-the- Fields on London’s Trafalgar Square last night and told the packed pews of the church that “profit is not satanic.”"
1 - The issue at hand isn't profit; it's interest.
2 - Greed isn't a deadly sin? (It's actually #3).
3 - According to the vedas, greed is Tamasic (the lowly element).

Tuesday, November 3, 2009

Bartlett on Arithmetic, Population, and Energy

Monday, November 2, 2009

Jobs in Recoveries

Jesse's Café Américain:
"The current state of economics is most remarkable for its arrogant complacency in the face of two failed bubbles, a near systemic failure, a pseudo-scientific perversion of mathematics exposed, and an incredible capacity for spin and self-delusion. The people wish to believe, and Wall Street and the government economists are all too willing to tell them whatever they wish to hear, for a variety of motives. And there is an army of salesmen and lobbyists and econo-whores touting this fraud around the clock."

But the most remarkable thingy here is the chart. Go look at it now.

Michael Mauboussin's Think Twice

Michael Mauboussin's Think Twice: Harnessing the Power of Counterintuition Is Short but Sweet -- Seeking Alpha:
"All components of the human body are optimized for the ancestral environment of millennia ago. This has implications in most areas of science - Economist Arthur De Vany writes about how it affects our ideal diet and fitness regimens on his Evolutionary Fitness blog.

Michael Mauboussin's book Think Twice: Harnessing the Power of Counterintuition explores the implications with regard to decision-making - particularly investment decisions. The thesis of the book is that 'smart people make poor decisions because they have the same factory settings on their mental software as the rest of us, and that mental software isn't designed to cope with many of today's problems.' Think stone age era settings. But it's possible to think carefully (twice) and adjust for these shortcomings."

GLD a major holder of gold

Paul Tudor Jones: Gold's Undervalued (Seeking Alpha):
"Tudor then presented these amazing facts: 'The trailing 12-month ETF accumulation has 'bought' the equivalent of 25% of new mine production consistently since the beginning of the year. By year-end 2009, the total ETF gold position will hold 3% of global available supplies, making ETFs the sixth largest holder of gold in the world.'"

When was the last time in Gold's 5,000 year history that there was a major holder of Gold around which was not an empire that can be conquered or a bank that can be nationalized or outlawed? Oh, wait. GLD actually could be.