Europe rapidly deteriorates, the Stoxx 50 -3%, led by Italy, -3.8%, and Spain, -3.2%. The euro goes bidless, sliding under $1.26 for the first time since August 2010. S&P 500 -1.1%. [View news story]
Facebook (FB), CEO Mark Zuckerberg, and the IPO underwriters face a class-action suit by shareholders over accusations they concealed from investors "a severe and pronounced reduction" in the company's revenue growth forecasts. [View news story]
Gold can only act as a currency if people are willing to give and to accept it as payment. I certainly would not want to be paid in something as awkward and illiquid as gold. Something I have to chemically verify? No thank you! There are a small group of fanatics who claim to think of gold as a fantasy currency in an imagined world that does not exist but I doubt even these people would exchange their god, I mean their gold, for actual goods and services. They see the gold as magical and see goods and services as mundane. All these claims about how they're going to be rich from their gold are just so much nonsense because they'd never part with (spend) a gram of it. They'd rather starve.
Japan reports holding a net $3.19T in foreign assets at the end of 2011, hanging on to its position as the world's top creditor nation. The position marks a rise from 2010, which may also dampen expectations on China overtaking the Japanese as the number one creditor anytime soon. [View news story]
Here's a table that shows US trade balance since 1960 (Col 2): http://1.usa.gov/KjJh3g You can see the big decrease in trade balance from around -100B pre-internet bubble to below -700B at the peak of the housing bubble. We're floating back up with balance around -500B but there's a question of whether that trend will continue. I like trade balance as an indicator of economic health. You can see the extent to which it would have shown the vulnerability of the housing bubble in 2006 as a false economy that was based on a runaway (and unsustainable) trade imbalance.
Japan reports holding a net $3.19T in foreign assets at the end of 2011, hanging on to its position as the world's top creditor nation. The position marks a rise from 2010, which may also dampen expectations on China overtaking the Japanese as the number one creditor anytime soon. [View news story]
Tack, I agree with most of this. And in fact you're echoing my own comment rather than disagreeing with it when you point out the significance of USD as the world's reserve currency. It's likely the USD won't be the world's reserve currency forever, but even so, there's every reason to think the USD will enjoy a continued special status and strength.
As I see it, the argument for continued strength of the USD is the expectation of future potential. The U.S. is and continues to be an economic powerhouse and a source of global dynamism. It can afford to be a debtor nation and a net importer for as long as that is perceived to be the case. I prefer to use the word "perception" because in the end that's what motivates people to hoard USD. But it doesn't at all imply that i don't think the perception is well aligned with the reality.
If you go back and read my post, i think you'll see that there's not that much difference between what I wrote and what you just wrote. As long as there's a market for USD, that market need not be a domestic one. The situation w/the Yen is different and that's what i was addressing. Where I disagree is that the *extent* of the U.S. trade deficit is irrelevant. It over-lubricated the global economy during the bubble and is now needed as a way to lubricate it again to facilitate a global recovery but its magnitude is worrisome and puts the U.S. at risk. We can't expect to grow the trade deficit indefinitely w/o repercussions. Fortunately, we do seem to be rectifying the trade deficit. Domestic energy production is increasing and businesses are choosing to repatriate production. I think it's already coming back into balance -- returning to a more modest and healthy level.
Why Halliburton May Not Be As Undervalued As You Think [View article]
Very useful article. I've been watching HAL for awhile and finally sold June 29 puts yesterday. I like the trends in their financials (increasing profitability and cash flow) but of course in any commodities-related company, there's cyclicality and I think I've not been giving that enough respect. Your article lists solid reasons for caution.
winningtrader, sorry but you're making a circular argument. "The price of gold is a simple demand/supply situation" is exactly my point. People who believe gold has semi-magical properties say things like "gold has enduring value" even as the market price for gold is crashing. This sort of reverence for gold constitutes a denial that gold is subject to the principles of supply and demand and to the vagaries of the market.
Japan reports holding a net $3.19T in foreign assets at the end of 2011, hanging on to its position as the world's top creditor nation. The position marks a rise from 2010, which may also dampen expectations on China overtaking the Japanese as the number one creditor anytime soon. [View news story]
Papaswamp, Japan's situation wrt trade balance is deteriorating. It's a big worry. I thought about mentioning that in my post but then decided it would make for too long of a post. There's also an anomaly that I omitted: After Fukushima, Japan needed to rebuild. To do that, the Japanese liquidated foreign assets, converting them into Yen which they could use to pay domestic workers. That tightened the supply of Yen, sending it up in value.
The U.S. trade imbalance is a huge worry. It got way way out of hand during the housing bubble as people took out 2nd mortgages and flipped houses, using the "proceeds" to buy imports from China. (This, btw, was when and how the U.S. money supply actually expanded, not as a result of QE, but that's another topic!) You're right that the USD was never adequately punished for that. The likely explanation would seem to be that people outside the U.S. are hoarding dollars -- in much the same way and for the same reasons that goldbugs w/in the U.S. hoard gold. It's perceived as a safe haven.
Japan reports holding a net $3.19T in foreign assets at the end of 2011, hanging on to its position as the world's top creditor nation. The position marks a rise from 2010, which may also dampen expectations on China overtaking the Japanese as the number one creditor anytime soon. [View news story]
kypsterx, yes, this is why Japan looks to be in trouble...not because of its national debt but because of its deteriorating trade balance. Demographics probably play a big part in this.
Japan reports holding a net $3.19T in foreign assets at the end of 2011, hanging on to its position as the world's top creditor nation. The position marks a rise from 2010, which may also dampen expectations on China overtaking the Japanese as the number one creditor anytime soon. [View news story]
ChicagoB, the majority of U.S. debt is owned by the U.S. But you're right that a substantial remainder is foreign owned.
Forget gold and silver. Stash away supplies of salt and pepper. In a post apocalyptic world, these lightweight, easy to carry luxury items can be traded for food and clean water with those who have extra of those necessities.
But I doubt doomsday will come when everyone is watching for it. Even the Bible reminds us it comes as a thief in the night.
Japan reports holding a net $3.19T in foreign assets at the end of 2011, hanging on to its position as the world's top creditor nation. The position marks a rise from 2010, which may also dampen expectations on China overtaking the Japanese as the number one creditor anytime soon. [View news story]
The Yen is perpetually in short supply because Japan has tended to run a trade surplus. When a Japanese trade surplus is paid off and the proceeds are brought home to Japan, foreign assets get converted to Yen. Japan illustrates the fact that national debt denominated in the currency of that nation doesn't matter. What matters is whether that nation has a net trade surplus or a net trade deficit. That's the only true measure of debt for a nation that controls its own fiat currency. Think about it: if everyone else owes you more in goods and services than you owe everyone else, you're not in debt, you're a creditor -- regardless of what your internal bookkeeping says.
bigbaboon, gold hasn't "proven itself a store of value for thousands of years". That's just mysticism. You can't sell a personal feeling of awe and reverence toward gold on the open market. In the real world of markets and trades, gold price experiences bubbles and crashes same as anything else. Regardless of how worshipful they felt inside towards it, people who in the past bought gold at the peak of a price bubble couldn't go out the next day or week and trade back their gold for the same price in any currency -- whether that currency be dollars or cans of beans.
The M1 money multiplier is below 1, which says that exchangeable currency isn't flowing into the economy. Instead, the banks are still being recapitalized: http://bit.ly/LbQ3W3
The banks took on enormous obligations during the housing bubble that they can't actually fulfill. That was when the real expansion of the money supply occurred. What's happening now can essentially be described as the fed and the feds trying to prevent that overextended set of commitments from fracturing the rest of the economy.
My guess is that doesn't imply future inflation. Rather, the implied inflation already happened before the financial crisis when lending was rampant and assets such as mortgage-backed securities were printed. What we have now is just an attempt to keep pace with that as it unwinds. These (bogus) assets and bad loans were sloshing around in the economy before the bubble burst so at worst, we go back to that level of (real) inflation. But it will likely be distributed in a different way. Pre-crisis, housing prices carried most of the inflation. Post-bubble, price increases should distribute differently. But as long as the money multipliers are below 1, we're actually in a de-leveraging environment with a net contraction of available money, not an inflationary environment.
As far as what that implies for the value of gold, I tend to think it doesn't imply anything. Gold trades on sentiment and opinion, not on real monetary or economic factors. If gold were linked to inflation, it would have soared as housing prices skyrocketed and that didn't happen.
Not So Golden Years: How An Aging Society Can Impact The Markets [View article]
Robots aren't the reason for the extreme wealth of a small number of people, though. That was driven more by the reduction in capital gains taxes to a level far below what the middle class pays on their taxes. That combined with the ability of great wealth to multiply itself relatively easily through avenues such as the stock market meant that financialists (to use Tom Armistead's term) were able to rapidly multiply their wealth -- often to the direct detriment of those who produce real goods and services. State and local tax codes are also regressive. Eliminating the inheritance tax was another driver. One could go on....
Europe rapidly deteriorates, the Stoxx 50 -3%, led by Italy, -3.8%, and Spain, -3.2%. The euro goes bidless, sliding under $1.26 for the first time since August 2010. S&P 500 -1.1%. [View news story]
Facebook (FB), CEO Mark Zuckerberg, and the IPO underwriters face a class-action suit by shareholders over accusations they concealed from investors "a severe and pronounced reduction" in the company's revenue growth forecasts. [View news story]
Why I Am Short Gold: 5 Reasons [View article]
Japan reports holding a net $3.19T in foreign assets at the end of 2011, hanging on to its position as the world's top creditor nation. The position marks a rise from 2010, which may also dampen expectations on China overtaking the Japanese as the number one creditor anytime soon. [View news story]
Japan reports holding a net $3.19T in foreign assets at the end of 2011, hanging on to its position as the world's top creditor nation. The position marks a rise from 2010, which may also dampen expectations on China overtaking the Japanese as the number one creditor anytime soon. [View news story]
As I see it, the argument for continued strength of the USD is the expectation of future potential. The U.S. is and continues to be an economic powerhouse and a source of global dynamism. It can afford to be a debtor nation and a net importer for as long as that is perceived to be the case. I prefer to use the word "perception" because in the end that's what motivates people to hoard USD. But it doesn't at all imply that i don't think the perception is well aligned with the reality.
If you go back and read my post, i think you'll see that there's not that much difference between what I wrote and what you just wrote. As long as there's a market for USD, that market need not be a domestic one. The situation w/the Yen is different and that's what i was addressing. Where I disagree is that the *extent* of the U.S. trade deficit is irrelevant. It over-lubricated the global economy during the bubble and is now needed as a way to lubricate it again to facilitate a global recovery but its magnitude is worrisome and puts the U.S. at risk. We can't expect to grow the trade deficit indefinitely w/o repercussions. Fortunately, we do seem to be rectifying the trade deficit. Domestic energy production is increasing and businesses are choosing to repatriate production. I think it's already coming back into balance -- returning to a more modest and healthy level.
Why Halliburton May Not Be As Undervalued As You Think [View article]
Why I Am Short Gold: 5 Reasons [View article]
Japan reports holding a net $3.19T in foreign assets at the end of 2011, hanging on to its position as the world's top creditor nation. The position marks a rise from 2010, which may also dampen expectations on China overtaking the Japanese as the number one creditor anytime soon. [View news story]
The U.S. trade imbalance is a huge worry. It got way way out of hand during the housing bubble as people took out 2nd mortgages and flipped houses, using the "proceeds" to buy imports from China. (This, btw, was when and how the U.S. money supply actually expanded, not as a result of QE, but that's another topic!) You're right that the USD was never adequately punished for that. The likely explanation would seem to be that people outside the U.S. are hoarding dollars -- in much the same way and for the same reasons that goldbugs w/in the U.S. hoard gold. It's perceived as a safe haven.
Japan reports holding a net $3.19T in foreign assets at the end of 2011, hanging on to its position as the world's top creditor nation. The position marks a rise from 2010, which may also dampen expectations on China overtaking the Japanese as the number one creditor anytime soon. [View news story]
Japan reports holding a net $3.19T in foreign assets at the end of 2011, hanging on to its position as the world's top creditor nation. The position marks a rise from 2010, which may also dampen expectations on China overtaking the Japanese as the number one creditor anytime soon. [View news story]
Doomsday Investment Challenge [View article]
But I doubt doomsday will come when everyone is watching for it. Even the Bible reminds us it comes as a thief in the night.
Japan reports holding a net $3.19T in foreign assets at the end of 2011, hanging on to its position as the world's top creditor nation. The position marks a rise from 2010, which may also dampen expectations on China overtaking the Japanese as the number one creditor anytime soon. [View news story]
Why I Am Short Gold: 5 Reasons [View article]
Why I Am Short Gold: 5 Reasons [View article]
The banks took on enormous obligations during the housing bubble that they can't actually fulfill. That was when the real expansion of the money supply occurred. What's happening now can essentially be described as the fed and the feds trying to prevent that overextended set of commitments from fracturing the rest of the economy.
My guess is that doesn't imply future inflation. Rather, the implied inflation already happened before the financial crisis when lending was rampant and assets such as mortgage-backed securities were printed. What we have now is just an attempt to keep pace with that as it unwinds. These (bogus) assets and bad loans were sloshing around in the economy before the bubble burst so at worst, we go back to that level of (real) inflation. But it will likely be distributed in a different way. Pre-crisis, housing prices carried most of the inflation. Post-bubble, price increases should distribute differently. But as long as the money multipliers are below 1, we're actually in a de-leveraging environment with a net contraction of available money, not an inflationary environment.
As far as what that implies for the value of gold, I tend to think it doesn't imply anything. Gold trades on sentiment and opinion, not on real monetary or economic factors. If gold were linked to inflation, it would have soared as housing prices skyrocketed and that didn't happen.
Not So Golden Years: How An Aging Society Can Impact The Markets [View article]