Speed
Alan Greenspan model predicts stocks to go down
Good article in Barron's today by Andrew Barry.
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central bank governors will meet in England on March 20th - 23rd. Issues
concerning the ECB will be discussed, and possibly the composition of its
reserves. Some news might be forthcoming as to whether gold should be
included in reserves, and if so, to what extent.
My problem with fuzzy logic comes from my training -- have been taught to think in absolutes, not relative terms. So - golden apple is a golden apple -- crystal clear fountain is crystal clear fountain, etc.
Perhaps that is why much of the 'New Physics' will come from untrained minds, not ones such as mine that have been cluttered with highly structured analytical methods. I must always remind myself that the greatest advances in physics, ( and probably other sciences ) were made by those who had 'the mind of a child' -- such as Einstein.
I find it amusing that so many people think they understand the Eotvos experiment, or what gravity is -- or for that matter what causes a gyroscope to turn the way it does. Yes -- we have equations to explain all of this. But -- like much of physics that is all it is -- equations. The fundamental questions have not been answered.
I will never forget what one of my physics teachers said many years ago about a physics problem we had in graduate school: 'This equation gives you all you need to understand how to work with problem 'x''. But when someone asked him what all of it meant, or how he came up with the formula, he just smiled and said: 'Well, it gives the right answer, doesn't it?' He knew very well that the fundamental questions relating to that problem were not answered.
Ever think that a permanent magnet is an example of quantized, superconducting matter?
Back to topic -- I would be very interested in your comments about the LBMA as a clearing house for gold, where everyone keeps gold as their intermediate currency while very large, short term trades are completed. Given the recent US dollar instability, this might be very popular by very large, short-term traders. Should work with virtually any commodity -- a world-class 'black market' that avoids the use of the US dollar as an intermediary. Would also explain the discrepancy between F Veneroso, and LBMA figures.
I get a sense of futility from AG -- who knows what is coming, but is powerless to prevent it. What is happening now may not be all that different from the late 20's when the US dollar was inflated on the desperate request of some rather influential European bankers that wanted their gold back. The rest of the world was in depression, and foreign investors chose the US as a last refuge. Did the US bankers, US Fed really have that much control, or were they simply swept up by the economic tide that lead to the October 1929 creshendo? I don't know.
History tends to repeat itself, albeit imperfectly.
How do you inflate the money supply without inflating the equity markets? And, how do you raise interest rates when you want the US dollar to weaken? Anything that AG does will have negative repercussions -- so -- what does he do? I think I will stick with my day job -- much easier than his, I think.
What worries me is that we could be wipsawed by a sudden equity collapse -- probably in 1999, or 2000 -- not 1998. A sudden loss of liquidity in the US equity markets will hit the precious metals equity stocks, simply because so many people will be experiencing margin calls, etc.
So, we may have a nice bull market in precious metals equities during our pending inflationary phase -- but -- we must keep one 'jaundiced' eye on the regular equity markets. Good thing they will be kept up by the baby boomers for months to come -- they will not give up easily.
I would still suggest -- keep ( at least some ) of your powder dry, because gold and gold equities will shine even more after the equity collapse. We must be patient, as this may be many years from now.
Looks like the report was for purchases made in or before 1997 and does not refer to his recent 130 million ozs.
Here is what Warren Buffet said in his report in regards to his silver investment:
"Last year, we purchased 111.2 million ounces of silver. Marked to
market, that position produced a pre-tax gain of $97.4 million for us in 1997. "
Personally, I think it is just a matter of time. A pile of lies can only survive by the addition of more lies, likely to be even more 'wild' than the previous ones. Eventually even the lies of the best liars collapse under their own weight. I do not like the presidency being under a cloud of suspicion like this -- but -- if this is what it takes to bring a liar down, so be it. We need honesty in government, as well as in our own lives. We are partially at fault, and must accept the consequences of what is coming -- a bear US stock market to go with a president in trouble. I hope we can reap long-term benefits by cleaning house in all branches of government. But -- this may not come until the economy is clearly in trouble. Good for gold, as long as the process of 'awakening' is gradual.
Famous movie line: "It's quiet, too quiet."
CUT TO -- The stuff hits fan . . .
So -- we need to separate the relatively slowly evolving type of deflation that occurs when an economy winds down, from the 'freeze dried' type of one that occurs nearly instantly when a currency is suddenly devalued, or a debt implosion occurs.
One problem with gold is that it is in highest demand while people are relatively wealthy ( still able to buy gold ) , and in its lowest demand immediately after a sudden debt/currency deflation when all that the people care about is food and shelter. If I were a SEAsian and ran out of cash, I would be selling my gold along with the rest of the SEAsians, no matter how much it was worth. But after I could work again, every 'penny' saved would go into gold.
So -- perhaps the best way of unraveling the problem of gold and deflation is to define what kind of deflation we are talking about.
Finally, no matter what kind of deflation we have, I would guess that the time gold shines the most -- inflation vs deflation -- is right after a deflationary crisis. And -- that explanation is relatively simple -- what kind of currency do you want when you are barely able to put food on the table again? Paper that may become worthless again? Bank credits from Banks that could be wiped out again? Or something that is not someone elses liability?
I think the reason gold does so well in deflation is due to the deep distrust of other forms of money that develop after severe deflationary times. Even periods of inflatin can match that level of distrust, IHMO.
One wild card is the price of oil. Our oil-based economy is sensitive to the price of oil, so we might get a 'second' wind as they say, until oil prices go up again. Could be fairly soon if the strong oil producers such as Saudi Arabia are trying to shake out the weak ones. But -- it still might take months.
Also, gold is an early warning indicator of inflation, and can go up before interest rates and commodity prices. Right now the gold/cry0 index ratio is well below the 1993 pre-gold rally minimum. My graph does not extend before 1993, so I don't know how low prior gold/cry0 index ratios were, but it is now well below a 5-year low, even without a commodity price index rally!
Deflation and inflation can occur nearly at the same time!
I too have noticed that for some reason, the Internet has not made much inroads in Japan, and that it is hard to interface with many of their web sites. Also, the Japanese have only a fraction of the computers per person that we do in the western world -- but I do not have a clue why. My Japanese professor friend was just as computer literate as I - but it never occurred to me to ask about Japan in general.
I do have a new friend who speaks fluent Japanese, as well as 7 other languages. He will be returning from SEAsia in a few weeks -- I will see what I can learn from him.
If
by Rudyard Kipling
If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
If you can wait and not be tired by waiting,
Or being lied about, don't deal in lies,
Or being hated, don't give way to hating,
And yet don't look to good, or talk to wise:
If you can dream-and not make dreams your master;
If you can think-and not make thoughts your aim,
If you can meet with Triumph and Disaster
And treat those two imposters just the same;
If you can bear to hear the truth you've spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build'em up again with worn-out tools:
If you can make one heap of all your winnings;
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breathe a word about your loss;
If you can force your heart and nerve and sinew
To serve your turn long after they are gone
And so hold on when there is nothing in you
Except the Will which says to them: "Hold on!"
If you can talk with crowds and keep your virtue,
Or walk with Kings-nor lose the common touch,
If neither foes nor loving friends can hurt you,
If all men count with you, but none to much;
If you can fill the unforgiving minute
With sixty seconds' worth of distance run,
Yours is the Earth and everything that's in it,
And which is more-you'll be a Man, my son!
However, I do know that ( nearly ) free communication is possible, because in the intellectual environment of the University I have seen it happen. And yet -- I cede to both of you that independence of thought without conferring with others is more a Western thing than it is Oriental, and even more so than I think Japanese. For example, I think the Japanese are fascinated with the independent western 'John Wayne' type of personality because it is so foreign to their own. Most of my exposure to Orientals is with those who have been westernized, since I have not traveled to Japan.
I find it intriguing that the Japanese culture, which acquired so much from the Chinese culture ( like the written language ) , is harder for us westerners to understand, than it is for us to understand the Chinese.
It will be interesting to see what happens on April 1 -- I don't have a clue what this 'big bang' thing will do -- but I will guess on one thing -- the basic cultural thing of not doing anything without conferring with others will make the charges fairly slow by our standards.
I am all ears about what anyone thinks of the effect of the 'big bang'.
My intuitive guess is that activation of the circuit breakers will continue to make mincemeat of the derivatives trades.
Is that what happened in Oct 97? Were the derivatives trades messed up?
I consider that a good indication that the bottom is near.
For the best web site on gold funds, check http://www.eaglewing.com
Imagine what the USA would be like after 700 years of strict military rule, with few freedoms. We forget how lucky we are to have what our forefathers have given us. Part of that is what allows us to do what we are doing tonight.
It has been Mozel's posts among a number of others ( you know who you are ) that I have found the the most elegant and insightful. I join in the call for his return.
My intuitive feeling is that the US markets will not crash this summer, and may not even in the fall -- the baby boomers still have the helm. However, if other markets start to fall again around the world, like they did in SEAsia last year, the US markets will eventually be affected, although they will probably last -- ie repeat of the 20's. I think a 'flight to safety' from other parts of the world will prop up the US markets, when the baby boomers falter.
I would guess that war in Korea or in the Middle east, or a complete Japanese collapse ( China devaluation? ) , or a Clinton fiasco would be the only wild cards in this prediction.
I think that Oldman is right that BC's fortunes and the market fortunes are connected, and one will not go without the other. The only problem is -- which one will be first.
This is the only armada I could find -- sorry -- I could not find the name of the armada.
So -- the Japanese understandably needed a strong military with giant China so close by. Fortunately for them, the sea barrier was a great help to them as well.
My personal feeling is that we are likely to have turmoil in the Yen/dollar relationship, simply because the Japanese have already started to sell US treasuries.
Please enlighten me about what you know, since I am interested in learning more about the currency markets. What I am especially congnisant of is the remarkable effect of Greek sales of US dollars on Friday to support the Drachma. Perhaps with the worldwide realization that gold is more valuable than the US dollar ( now how did they figure that out? ) , the US dollar will have some more surprises this year. I shudder to think about every country in the world eventually having a currency crisis, and selling their US dollar reserves to prop up their weak currencies.
We have enough trouble of our own with our own finances to be at the mercy of other countries with problems.
At least we ( our governments ) are talking about the problem. A disaster like this is not out of the question. All we need to do is remember what happened to Jupiter when that comet hit it a few years ago. A meteor/asteroid big enough to wipe out most of the mammalian life on earth could very well hit us every 50,000 years or so.
I think we should all remember how lucky we are to live as peacefully as we do on this little blue planet. The universe is a very hostile place on the time scale of hundreds of thousands, or millions of years. A nearby supernova could easily do us in -- or even a dust cloud obscuring the sun -- asteroids are not the only way we could be history. All the more reason to start human exploration of the solar system, and hopefully the galaxy. We have the skills to do it, I think, within the next 50 years -- if our world economic system holds together.
Here is to the future of humankind -- may we have the wisdom to solve enough of our problems so that we can explore the universe!
It would be a shame for us humans to fall on our faces just when we were learning how to walk!
I guess the cost of processing paper work must have gone up dramatically in the last few years...
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