"If you want evidence of the intellectual bankruptcy present in much economic 'thinking', look to the comments made by Swedish medal modelers Krugman and Stiglitz, in which the bursting of a credit bubble, which was the end result of a deliberate decades long effort by Congress, to expand speculation in credit via a very wide variety of direct and indirect subsidies, is described as the result of 'anti-regulatory' behavior.
Folks, when a fat man who has been gorging for 30 years splits his pants, after he reaches 450 pounds, the fact that he didn't special order his pants seams to be stitched with filament designed to haul in a 25 foot marlin, doesn't make it accurate to say that poor wardrobe decisions are what bared his ass."
Not sure if congress is really public enemy number one in this mess (though they're on the "Wanted" list), but the point is still well taken.
Thursday, September 15, 2011
Murphy's Response
Having noticed lately that Paul Krugman and his ilk were spending some time trying to rationalize the move in gold, I had planned to comment on it. Economist Robert Murphy beat me to it, and hits the economics of it in a much more robust way than I could have. The link below to his article at mises.org does a great job of capturing the incomplete tale that is spun when the Keynesians try to rely strictly on low real interest rates to explain it away.
http://mises.org/daily/5652/Why-Are-Gold-Prices-So-High
Certainly, gold should do well when you have negative real interest rates. But, to ignore the currency debasement policies that have become global, the strife in Europe, the uncertainty here, the role of gold for thousands of years, it is, to say, a little misleading to create a model that only focuses on the former.
http://mises.org/daily/5652/Why-Are-Gold-Prices-So-High
Certainly, gold should do well when you have negative real interest rates. But, to ignore the currency debasement policies that have become global, the strife in Europe, the uncertainty here, the role of gold for thousands of years, it is, to say, a little misleading to create a model that only focuses on the former.
Wednesday, September 14, 2011
In case you thought I was joking about blind spots...
About 10 days old, but I came across the following on Brad Delong's blog in discussing what Obama should do:
http://delong.typepad.com/sdj/2011/09/thughts-on-paul-krugman-on-macroeconomic-policy.html
In particular, I would direct you to sub-point #1 on his list.
(Waiting)
Got gold?
http://delong.typepad.com/sdj/2011/09/thughts-on-paul-krugman-on-macroeconomic-policy.html
In particular, I would direct you to sub-point #1 on his list.
(Waiting)
Got gold?
Tuesday, September 13, 2011
And I, I Took the One Less Traveled By...
I recently read Adventure Capitalist by Jim Rogers, which recounts his three-year, 116 country global adventure and take on the investment opportunities that existed (or not) at many of the stops. I also follow Harris Kupperman's blog "Adventures in Capitalism" -- of late, it's primary focus has been on Mongolia, a location he has moved to as he builds a company levered to the economic growth that he envisions for that country over the next 5 to 10 years.
Which leads me to the subject of today's post. Despite a perception that American stocks are "cheap", the best investment opportunities out there are not in the United States or other "mature" economies. As we continue to struggle through the after-effects of the most recent bubble, and even though there is a continued global effort to solve our problems with more debt, opportunities will still emerge -- specifically, those that are in countries that have abundant resources, favorable demographics, a modicum of respect for property rights, sanity in their monetary and fiscal policy, and governments that know to get out of the way of the positive momentum.
I like economics -- granted, I don't have any formal background (as much of my posting probably reveals). But, being a good macro investor does not require that you can explain the IS/LM curve. Quite frankly, most of the guys who focus on that stuff wouldn't do a very good job of making you money. In a big way, you have to be able to intuit what's going on and identify the trends, without reliance on some arbitrary model. And especially as it relates to an emerging market, the data isn't always what you would hope for. But, it's possible to figure it out nonetheless.
So, while I continue to believe in gold, I also believe in diversification. But, I'm not using that term in the traditional sense of sector mix. Rather, besides asset class, I think it is a smart idea to have investments that are geographically diversified (a term I first encountered with the team at Casey Research). South American farmland, bank stocks in a former Soviet satellite state -- these are the investments that are tethered to per capita income growth and present the risk-reward I'm looking for.
Which leads me to the subject of today's post. Despite a perception that American stocks are "cheap", the best investment opportunities out there are not in the United States or other "mature" economies. As we continue to struggle through the after-effects of the most recent bubble, and even though there is a continued global effort to solve our problems with more debt, opportunities will still emerge -- specifically, those that are in countries that have abundant resources, favorable demographics, a modicum of respect for property rights, sanity in their monetary and fiscal policy, and governments that know to get out of the way of the positive momentum.
I like economics -- granted, I don't have any formal background (as much of my posting probably reveals). But, being a good macro investor does not require that you can explain the IS/LM curve. Quite frankly, most of the guys who focus on that stuff wouldn't do a very good job of making you money. In a big way, you have to be able to intuit what's going on and identify the trends, without reliance on some arbitrary model. And especially as it relates to an emerging market, the data isn't always what you would hope for. But, it's possible to figure it out nonetheless.
So, while I continue to believe in gold, I also believe in diversification. But, I'm not using that term in the traditional sense of sector mix. Rather, besides asset class, I think it is a smart idea to have investments that are geographically diversified (a term I first encountered with the team at Casey Research). South American farmland, bank stocks in a former Soviet satellite state -- these are the investments that are tethered to per capita income growth and present the risk-reward I'm looking for.
We Interrupt Your Regularly Scheduled Broadcast
From its inception, I have viewed this blog as a means of developing my thought process. While often light on posting, and sometimes vague on the specifics, it has been a way to keep a log of what I was thinking at various points in time.
And just to recap:
-The economy is in trouble
-Gold is a good investment (and pretty)
-Beware inflation
-I like the Knicks
-Most of what you see out there, peddled as serious thought and explanation of what's happening, is lacking
A fair summary, I think.
Nevertheless, I now endeavour to add a little breadth to my diet, and certainly some fiber, to make this blog more regular. Which is not to say I won't harp on those same topics -- they will remain relevant. But, at least once a week, I'm gonna see what I can come up with that might stretch beyond the bounds of that list.
And with that, off to find my inspiration for the next installment.
And just to recap:
-The economy is in trouble
-Gold is a good investment (and pretty)
-Beware inflation
-I like the Knicks
-Most of what you see out there, peddled as serious thought and explanation of what's happening, is lacking
A fair summary, I think.
Nevertheless, I now endeavour to add a little breadth to my diet, and certainly some fiber, to make this blog more regular. Which is not to say I won't harp on those same topics -- they will remain relevant. But, at least once a week, I'm gonna see what I can come up with that might stretch beyond the bounds of that list.
And with that, off to find my inspiration for the next installment.
Tuesday, August 9, 2011
Sanity Check
The Fed indicated today that it was likely to keep rates at an exceptionally low level until at least mid-2013. The market listened and did Ben's bidding. My take: the economy is teetering and recession is likely. In other words, whatever your strategy was yesterday, I don't think anything that happened today (between the market shooting up and the Fed announcement) should cause it to change.
Monday, August 8, 2011
Parlor Tricks and Market Crashes
A lot has happened since the last time we "spoke".
An entirely predictable debt deal was reached at the last moment and (surprise, surprise) it had nothing resembling teeth. To put it into perspective, it reduces the deficit by $2 trillion over the next decade, or so the story goes. But, what that really means is that instead of a national debt of (likely) close to $30 trillion by that point, it will instead only be $28 trillion. Victory for the good guys!!! Now, if only there was any suggestion that the economy had high prospects for recovery and we could expect actual growth to resemble anything that remotely matches the growth rate of debt.
But, even with that lame-o deal, the plot only thickens. Because, this past Friday, in a totally telegraphed move, S&P downgraded the U.S. from AAA to AA+. In fairness, and Alan Greenspan even commented on it over the weekend, the threat of actual default doesn't exist simply because the U.S. can always print money to pay off its creditors -- there is no principal risk. But, again, that's not the point. The issue at stake is whether the world is slowly starting to get it. There are no free lunches and prosperity won't be found through the printing press.
In other news, gold is surging, commensurate with an asset and form of money that has been around for thousands of years and is no one else's liability. This move is extreme, but it is also appropriate. And, from the sounds of talking heads, it is viewed with skepticism -- all positives. Is a correction likely? My attitude has always been that nothing goes up in a straight line. But, the trend most definitely remains your friend.
On a related note, I also think the season has come for me to add to some of the precious metal stocks that I like. Not that they can't be taken down with the rest of the market, but eventually the worm will turn. And I want to be at the party.
An entirely predictable debt deal was reached at the last moment and (surprise, surprise) it had nothing resembling teeth. To put it into perspective, it reduces the deficit by $2 trillion over the next decade, or so the story goes. But, what that really means is that instead of a national debt of (likely) close to $30 trillion by that point, it will instead only be $28 trillion. Victory for the good guys!!! Now, if only there was any suggestion that the economy had high prospects for recovery and we could expect actual growth to resemble anything that remotely matches the growth rate of debt.
But, even with that lame-o deal, the plot only thickens. Because, this past Friday, in a totally telegraphed move, S&P downgraded the U.S. from AAA to AA+. In fairness, and Alan Greenspan even commented on it over the weekend, the threat of actual default doesn't exist simply because the U.S. can always print money to pay off its creditors -- there is no principal risk. But, again, that's not the point. The issue at stake is whether the world is slowly starting to get it. There are no free lunches and prosperity won't be found through the printing press.
In other news, gold is surging, commensurate with an asset and form of money that has been around for thousands of years and is no one else's liability. This move is extreme, but it is also appropriate. And, from the sounds of talking heads, it is viewed with skepticism -- all positives. Is a correction likely? My attitude has always been that nothing goes up in a straight line. But, the trend most definitely remains your friend.
On a related note, I also think the season has come for me to add to some of the precious metal stocks that I like. Not that they can't be taken down with the rest of the market, but eventually the worm will turn. And I want to be at the party.
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