Something feels weird about the whole situation . It seems like it was announced suddenly.
Plus, the economy is in the tank, and real house prices still have a ways to fall before the market clears. This is bad for housing, and BoA still holds a significant amount of mortgage debt. Of course, the Fed would just bailout Bank of America if they took severe losses to their balance sheet, so maybe Buffett is taking advantage of his government-paid call option on BoA.
Thursday, August 25, 2011
Wednesday, August 24, 2011
Gold a bubble? and gold predictions
More and more people are saying that gold is not in a bubble - this actually makes me more nervous that it is (b/c the pundits get bubbles wrong all the time).
I don't doubt that at some point, it will become a bubble.
I agree with this analysis by Dennis Gartman on CNBC. Gold is probably not in a bubble because there is no mass-participation yet.
I was going to address my predictions a few days ago, and I had forgot to. At this moment, gold has dropped all the way to 1779.40, down almost $50 from its NYMEX open today. Over the weekend, I had stated (unfortunately not recorded online nor elsewhere) that gold will probably pull back to below 1800. I also acknowledge that it could go below $1700, and I hope it does (I'd like to buy a little more); however, I do not believe that it will. I do not see it dropping below $1600, though.
Silver is right around $40 right now. I think silver is a great buy. If it goes down to $37 or $38, it will be an even better buy.
Given the recent FOMC decision to hold the federal funds rate extraordinarily low for at least 2 years, I think both metals will continue their upward trend.
Note:Pay attention to Bernanke's speech this Friday at Jackson Hole. His address at Jackson Hole a year ago introduced the possibility of QE2. Now, the recent FOMC decision is kind of a de facto stimulus, addressed here , but there may very well be another formal asset purchase program on the horizon. I obviously don't think there should be.
A hint at another monetary stimulus will be very bullish for metals.
I don't doubt that at some point, it will become a bubble.
I agree with this analysis by Dennis Gartman on CNBC. Gold is probably not in a bubble because there is no mass-participation yet.
I was going to address my predictions a few days ago, and I had forgot to. At this moment, gold has dropped all the way to 1779.40, down almost $50 from its NYMEX open today. Over the weekend, I had stated (unfortunately not recorded online nor elsewhere) that gold will probably pull back to below 1800. I also acknowledge that it could go below $1700, and I hope it does (I'd like to buy a little more); however, I do not believe that it will. I do not see it dropping below $1600, though.
Silver is right around $40 right now. I think silver is a great buy. If it goes down to $37 or $38, it will be an even better buy.
Given the recent FOMC decision to hold the federal funds rate extraordinarily low for at least 2 years, I think both metals will continue their upward trend.
Note:Pay attention to Bernanke's speech this Friday at Jackson Hole. His address at Jackson Hole a year ago introduced the possibility of QE2. Now, the recent FOMC decision is kind of a de facto stimulus, addressed here , but there may very well be another formal asset purchase program on the horizon. I obviously don't think there should be.
A hint at another monetary stimulus will be very bullish for metals.
Sunday, August 14, 2011
GOP Primary updates, Sunday, August 14
1. As per reporting at the Daily Paul, the Ames, Iowa Straw Poll Results from yesterday:
2. Today, Tim Pawlenty ended his campaign . I thought 3rd place at the straw poll would keep him in, but I guess getting less than half of the votes of Ron Paul and Michelle Bachmann, each, made him decide that his campaign isn't going to well.
3. Rick Perry finally made a formal announcement that he is running for president. Perry has some great rhetoric on 10th amendment and federalism issues, but I think he's totally fake. He continues to claim that he is responsible for the successes of the Texas economy. I would argue that he simply hasn't messed it up very much - he didn't introduce a state income tax, which Texas hadn't had before him. He is a big spending governor though.
Now, it really looks like there is a four way race- Romney, Bachmann, Perry, and Paul.
- 28.55% (4823 votes) – Michele Bachmann
- 27.65% (4671 votes) – Ron Paul
- 13.58% (2293 votes) – Tim Pawlenty
- 9.81% (1657 votes) – Rick Santorum
- 8.62% (1456 votes) – Herman Cain
- 4.25% (718 votes) – Rick Perry (as a write-in candidate)
- 3.36% (567 votes) – Mitt Romney
- 2.28% (385 votes) – Newt Gingrich
- 0.41% (69 votes) – Jon Huntsman
- 0.21% (35 votes) – Thaddeus McCotter
0.96% (162 votes) – "Scattering"
2. Today, Tim Pawlenty ended his campaign . I thought 3rd place at the straw poll would keep him in, but I guess getting less than half of the votes of Ron Paul and Michelle Bachmann, each, made him decide that his campaign isn't going to well.
3. Rick Perry finally made a formal announcement that he is running for president. Perry has some great rhetoric on 10th amendment and federalism issues, but I think he's totally fake. He continues to claim that he is responsible for the successes of the Texas economy. I would argue that he simply hasn't messed it up very much - he didn't introduce a state income tax, which Texas hadn't had before him. He is a big spending governor though.
Now, it really looks like there is a four way race- Romney, Bachmann, Perry, and Paul.
the government minions are trying to censor the war
so that the people don't begin rallying against it.
1. Some officers are trying to prevent the Pentagon from releasing the names of those who died a week ago in the attack on the helicopter carrying Navy SEALs in Afghanistan.
2. Reinstituting a policy of the Bush administration just recently, Obama is not allowing the media to view the bodies
3. The media, no doubt working with the government to promote the war, keeps reporting this event as a helicopter "crash." Using the word crash implies an accident. This was no accident. The helicopter crashed because it was hit by an attack by the Taliban. It should be called a rocket attack. The media should be reporting that people aren't dying only because of peaceful accidents. They should point out that it is dangerous to occupy a foreign land.
I say out of respect for those serving and the families who have lost loved ones due to the corruption of those who promote the wars, we should be allowed to see every body and the media should be all over it. It might make the war politically unpopular, and it might make potential recruits question whether they want to join up. Ending a perpetual unjust war would be compensation to those who have already died in it. We should always be told the truth.
1. Some officers are trying to prevent the Pentagon from releasing the names of those who died a week ago in the attack on the helicopter carrying Navy SEALs in Afghanistan.
2. Reinstituting a policy of the Bush administration just recently, Obama is not allowing the media to view the bodies
3. The media, no doubt working with the government to promote the war, keeps reporting this event as a helicopter "crash." Using the word crash implies an accident. This was no accident. The helicopter crashed because it was hit by an attack by the Taliban. It should be called a rocket attack. The media should be reporting that people aren't dying only because of peaceful accidents. They should point out that it is dangerous to occupy a foreign land.
I say out of respect for those serving and the families who have lost loved ones due to the corruption of those who promote the wars, we should be allowed to see every body and the media should be all over it. It might make the war politically unpopular, and it might make potential recruits question whether they want to join up. Ending a perpetual unjust war would be compensation to those who have already died in it. We should always be told the truth.
Tuesday, August 9, 2011
FOMC just announced QE3 without announcing QE3
See my immediately previous entry about the FOMC statement release today.
Many news outlets and talking heads mentioned that while the Fed will be keeping rates low for two more years, there was not an announcement that the Fed will initiate 3rd round of stimulus (or "quantitative easing").
I happen to disagree with this assessment. In order to maintain credibility, the Fed needs to follow what it said in the statement (that economic conditions will likely warrant the ffr be kept at exceptionally low levels until mid 2013) and keep the federal funds rate low until 2013 - I don't think they should do this, but this is what they probably will do, and it is key to point number 1.
1. If inflation or inflation expectations start to increase, the inflation premium on treasuries will increase, which will put upward pressure on interest rates. Any other factors that decrease the desire to hold treasuries (such as if China continues to reduce its holdings, or the other ratings agencies reduce US debt ratings) will also put upward pressure on rates for treasuries. For the Fed to maintain the federal funds rate under these circumstances, it will be FORCED to purchase treasury bonds on the open market and increase the size of its balance sheet. Economists might have complicated jargon, but QE1 and QE2 were essentially increasing the Fed's balance sheet and printing money. That is exactly what the Fed would do under these situations.
2. Just this announcement itself is a stimulus - the expectation that the Fed will hold rates so low for so long will strengthen expected earnings for corporations (via the "interest rate effect"), which will increase stock prices (as the "classical theory of asset value" suggests).
Although this wasn't itself announcing QE3, it was probably meant as a stimulus, and it worked, at least temporarily on the stock market - the Dow closed up $429 points today.
Not to mention that if the stock market tanks and credit seizes up (like in 08), which might very well do, again, the Fed theoretically can use it's Section 13.3 "unusual and exigent circumstances" authority to buy what ever asset they want - even stocks!
Many news outlets and talking heads mentioned that while the Fed will be keeping rates low for two more years, there was not an announcement that the Fed will initiate 3rd round of stimulus (or "quantitative easing").
I happen to disagree with this assessment. In order to maintain credibility, the Fed needs to follow what it said in the statement (that economic conditions will likely warrant the ffr be kept at exceptionally low levels until mid 2013) and keep the federal funds rate low until 2013 - I don't think they should do this, but this is what they probably will do, and it is key to point number 1.
1. If inflation or inflation expectations start to increase, the inflation premium on treasuries will increase, which will put upward pressure on interest rates. Any other factors that decrease the desire to hold treasuries (such as if China continues to reduce its holdings, or the other ratings agencies reduce US debt ratings) will also put upward pressure on rates for treasuries. For the Fed to maintain the federal funds rate under these circumstances, it will be FORCED to purchase treasury bonds on the open market and increase the size of its balance sheet. Economists might have complicated jargon, but QE1 and QE2 were essentially increasing the Fed's balance sheet and printing money. That is exactly what the Fed would do under these situations.
2. Just this announcement itself is a stimulus - the expectation that the Fed will hold rates so low for so long will strengthen expected earnings for corporations (via the "interest rate effect"), which will increase stock prices (as the "classical theory of asset value" suggests).
Although this wasn't itself announcing QE3, it was probably meant as a stimulus, and it worked, at least temporarily on the stock market - the Dow closed up $429 points today.
Not to mention that if the stock market tanks and credit seizes up (like in 08), which might very well do, again, the Fed theoretically can use it's Section 13.3 "unusual and exigent circumstances" authority to buy what ever asset they want - even stocks!
Fed statement, a couple of changes - ! or :(
the Federal Open Market Committee released a statement from today's every-6-week meeting.
The biggest surprise was the the Fed is starting to admit that the economy is weaker than they had previously thought (it is not surprise, though, that the economy is weak).
The Fed changed something else in their statement from the last several:
for at least a year, probably close to two, the language in their policy statements were that they would likely keep the federal funds rate "exceptionally low" for an "extended period."
Kansas City Federal Reserve Bank President and former FOMC member Thomas Hoenig was a lone dissenter against this language. He was the only one to vote against the FOMC policy decisions, citing that the Fed should tighten sooner than after some time of an extended period, and therefore should change the language to reflect this.
The new language is that they will likely keep the FFR "exceptionally low" "through mid-2013." Well, that certainly increases clarity. But two more years
Interesting that the only previous dissenter was somewhat of an inflation hawk - he wanted rates up and feared keeping them low too long would increase inflation too much. According to the statement, the three who dissented this time seem to prefer a completely open ended policy without a pretty rigid commitment as the "through mid-2013" suggests. Now, it doesn't mean that they want low rates for even longer than through mid-2013, but they aren't complaining about low rates for a long time into the future.
These changes seem to be for the worse :(
The biggest surprise was the the Fed is starting to admit that the economy is weaker than they had previously thought (it is not surprise, though, that the economy is weak).
The Fed changed something else in their statement from the last several:
for at least a year, probably close to two, the language in their policy statements were that they would likely keep the federal funds rate "exceptionally low" for an "extended period."
Kansas City Federal Reserve Bank President and former FOMC member Thomas Hoenig was a lone dissenter against this language. He was the only one to vote against the FOMC policy decisions, citing that the Fed should tighten sooner than after some time of an extended period, and therefore should change the language to reflect this.
The new language is that they will likely keep the FFR "exceptionally low" "through mid-2013." Well, that certainly increases clarity. But two more years
Interesting that the only previous dissenter was somewhat of an inflation hawk - he wanted rates up and feared keeping them low too long would increase inflation too much. According to the statement, the three who dissented this time seem to prefer a completely open ended policy without a pretty rigid commitment as the "through mid-2013" suggests. Now, it doesn't mean that they want low rates for even longer than through mid-2013, but they aren't complaining about low rates for a long time into the future.
These changes seem to be for the worse :(
Sunday, August 7, 2011
John Kerry and Lindsey Graham
Flipping around the channels I saw back-to-back clips on CNN showing Senators Kerry and Graham.
I think for the first time ever, I agreed with something that Graham said in a substantive way. He claimed that had the Congress cut spending significantly, like the TEA Party had called for, treasury debt might not have been downgraded.
Kerry, on the other hand, actually blamed the TEA Party for the downgrade!!! I don't understand how a group of people calling for spending cuts and not getting them can be responsible for this!
The only excuse Kerry could have for this is that S&P cited the fact that there were no tax increases as one of several reasons that they downgraded treasuries. S&P is wrong on this point, and the fact is the out of control spending is a far bigger problem.
I think for the first time ever, I agreed with something that Graham said in a substantive way. He claimed that had the Congress cut spending significantly, like the TEA Party had called for, treasury debt might not have been downgraded.
Kerry, on the other hand, actually blamed the TEA Party for the downgrade!!! I don't understand how a group of people calling for spending cuts and not getting them can be responsible for this!
The only excuse Kerry could have for this is that S&P cited the fact that there were no tax increases as one of several reasons that they downgraded treasuries. S&P is wrong on this point, and the fact is the out of control spending is a far bigger problem.
Saturday, August 6, 2011
A prediction
I think it is likely that the government will start going after the ratings agencies. They might try to prosecute the ratings agencies for the some sort of fraud or negligence on their ratings on mortgage paper before 2008; this will surely be an excuse to punish them for starting to call out their profligacy.
All though Fitch gave stern warnings about not missing payments, they are the only big-3 ratings firm to not join the party.
All though Fitch gave stern warnings about not missing payments, they are the only big-3 ratings firm to not join the party.
what the heck is going on??
In addition to my recent post about how chaotic the recent events have been (debt-ceiling raised, stock market sell-off, gold surge, and a treasuries-outlook downgrade by Moody's), we have had even more bad news.
31 American military personnel were killed early this morning.
Standard & Poors officially downgraded US Treasury debt from AAA to AA+. This is the first time in US history that a major ratings agency has lowered it's ratings on Treasury debt.
The DJIA ended down four out of five days this past week.
All the while, there are countless reports of copper thieves stealing everything from wire to AC units, even from churches .
My predictions for this week are that the stock market is going to tank even further on Monday because of the debt-downgrading on Friday. We might see gold go down on Monday for various reasons, but I predict it will close the week higher than it opens.
31 American military personnel were killed early this morning.
Standard & Poors officially downgraded US Treasury debt from AAA to AA+. This is the first time in US history that a major ratings agency has lowered it's ratings on Treasury debt.
The DJIA ended down four out of five days this past week.
All the while, there are countless reports of copper thieves stealing everything from wire to AC units, even from churches .
My predictions for this week are that the stock market is going to tank even further on Monday because of the debt-downgrading on Friday. We might see gold go down on Monday for various reasons, but I predict it will close the week higher than it opens.
Wednesday, August 3, 2011
Milton Friedman, with us or against us?
Well, I call Milton Friedman "the master" for his explanations in favor of individual liberty and free trade.
Many economists and writers who I read and respect are critical of Friedman. In the past week, several bloggers at Lew Rockwell's website (a place I can enjoy reading great articles daily) have been criticizing Friedman.
I am critical of Friedman on one issue - that is of money and banking. Although Friedman didn't like the Fed, he did believe in central control of the money supply. But I think it is a shame that the ONLY thing that so many economists talk about and support Friedman for his one (in our opinion) incorrect view. And this results in many forgetting about his great clarity and defense of liberty. Yes, the money issue is an inconsistency, but I think instead of focusing on deriding his views on money, we should promote the rest of his views. I think Free to Choose is just as good a defense of freedom as is Hazlitt's Economics in One Lesson . I do support Austrian economics and my understanding of praxeology. That doesn't mean there's anything wrong with arriving at a pro-liberty view in a different way. In fact, in addition to his clarity, I believe having a different view but coming to the same solution can only broaden the appeal for liberty.
And even on the "negative income tax" scheme which he supported - he supported this to replace all other forms of welfare. Although neither him nor I agree that aggression should be used to take anyone's money for redistribution, I think it is an interesting idea for the government to simply hand them money instead of coupons for certain things - coupons or stamps could distort the market in favor of things that all people, rich and poor, might not otherwise want as much of.
(I don't endorse the negative income tax. But I acknowledge that it is a reasonable thing to debate if it includes ending all other welfare programs.)
Many economists and writers who I read and respect are critical of Friedman. In the past week, several bloggers at Lew Rockwell's website (a place I can enjoy reading great articles daily) have been criticizing Friedman.
I am critical of Friedman on one issue - that is of money and banking. Although Friedman didn't like the Fed, he did believe in central control of the money supply. But I think it is a shame that the ONLY thing that so many economists talk about and support Friedman for his one (in our opinion) incorrect view. And this results in many forgetting about his great clarity and defense of liberty. Yes, the money issue is an inconsistency, but I think instead of focusing on deriding his views on money, we should promote the rest of his views. I think Free to Choose is just as good a defense of freedom as is Hazlitt's Economics in One Lesson . I do support Austrian economics and my understanding of praxeology. That doesn't mean there's anything wrong with arriving at a pro-liberty view in a different way. In fact, in addition to his clarity, I believe having a different view but coming to the same solution can only broaden the appeal for liberty.
And even on the "negative income tax" scheme which he supported - he supported this to replace all other forms of welfare. Although neither him nor I agree that aggression should be used to take anyone's money for redistribution, I think it is an interesting idea for the government to simply hand them money instead of coupons for certain things - coupons or stamps could distort the market in favor of things that all people, rich and poor, might not otherwise want as much of.
(I don't endorse the negative income tax. But I acknowledge that it is a reasonable thing to debate if it includes ending all other welfare programs.)
Tuesday, August 2, 2011
Rachel Maddow and Glenn Beck
I think the two are quite similar.
They will both say very reasonable things - such as when Maddow called out President Obama for both criticizing Bush for starting indefinite detention and Obama for announcing his new regime for "prolonged detention." Rachel Maddow obviously has an understanding of the importance of the rule of law, the 4th Amendment, and limiting government power.
- and when Glenn Beck talks about how the explosive increase in government spending can be linked to abandoning the gold standard. Glenn Beck obviously has an understanding of how sound money restrains the government.
But then, they will discredit themselves in their entirety. The following examples are an insult to my intelligence. Unfortunately, many unread authoritarians on the left would actually agree with Maddow and many history-deprived crazed warmongers on the right will agree with Beck:
-Rachel Maddow accuses pro-nullification groups as being pro-slavery
-Glenn Beck fears a Muslim caliphate forming around the Mediterranean simply because those countries' have riots in the streets and social unrest.
I hate that just because the hateful Rachel Maddow talks about upholding the rule of law- that conservatives will automatically reject "rule of law" as a communist idea. - and the converse applies to the moronic Glenn Beck giving reasonable insight into sound money.
They will both say very reasonable things - such as when Maddow called out President Obama for both criticizing Bush for starting indefinite detention and Obama for announcing his new regime for "prolonged detention." Rachel Maddow obviously has an understanding of the importance of the rule of law, the 4th Amendment, and limiting government power.
- and when Glenn Beck talks about how the explosive increase in government spending can be linked to abandoning the gold standard. Glenn Beck obviously has an understanding of how sound money restrains the government.
But then, they will discredit themselves in their entirety. The following examples are an insult to my intelligence. Unfortunately, many unread authoritarians on the left would actually agree with Maddow and many history-deprived crazed warmongers on the right will agree with Beck:
-Rachel Maddow accuses pro-nullification groups as being pro-slavery
-Glenn Beck fears a Muslim caliphate forming around the Mediterranean simply because those countries' have riots in the streets and social unrest.
I hate that just because the hateful Rachel Maddow talks about upholding the rule of law- that conservatives will automatically reject "rule of law" as a communist idea. - and the converse applies to the moronic Glenn Beck giving reasonable insight into sound money.
Debt-ceiling raised - markets chaotic!
President Obama signed the "bipartisan compromise" that passed the House and Senate yesterday.
Well, some thought that if the parties and houses of Congress came together to a compromise to borrow more, that markets would react favorably. I obviously objected to this - and I predicted the exact opposite in a previous blog post - that the ceiling would be increased but that this would be bad for the economy.
chaotic events:
-Today the DJIA was down 250 points today.
-Gold increased 40 dollars today to an all time high at $1660 (yes, this is not a typo, one thousand six hundred sixty dollars per troy ounce).
-Moodys maintained a AAA rating on Treasury debt, but downgraded their outlook. All of the ratings agencies have put the US gov't on watch - cut spending or face a downgraded rating.
Well, some thought that if the parties and houses of Congress came together to a compromise to borrow more, that markets would react favorably. I obviously objected to this - and I predicted the exact opposite in a previous blog post - that the ceiling would be increased but that this would be bad for the economy.
chaotic events:
-Today the DJIA was down 250 points today.
-Gold increased 40 dollars today to an all time high at $1660 (yes, this is not a typo, one thousand six hundred sixty dollars per troy ounce).
-Moodys maintained a AAA rating on Treasury debt, but downgraded their outlook. All of the ratings agencies have put the US gov't on watch - cut spending or face a downgraded rating.
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