But again I don't think that the recent bull market in stocks was a consequence of a higher US dollar as you implied (The currencies move and the stock market responds..)
I didn't imply that. I stated that world economic conditions and particularly in the US have created a dynamic earnings environment which has driven up stock prices. Dollar strength isn't necessarily related to that. It is more related to socialism in Europe or economic mismanagement elsewhere in the world. The degree of dollar strength pushing up stock prices in the US, is minor, and certainly so in light of your below stats.
That I don't believe is true. The recent bubble was not cause by the US dollar gaining ground.
The "bubble" was due to the realization that things are extremely good and so you could expect that stock prices would rise to unusual levels.
Sure it was a factor, but a small one compared to the two other I mentioned: the Internet frenzy and the unprecedented credit expansion.
Back to the cart that pulls the horse?
True... but foreign money in US stocks is still only 8% of total US markets. Where Foreigners have 44% of US debts.
The the total risk is about 5 to 1 between the two asset classes and so the disposition of flows is correct.
Granted, the total market cap of US stock markets is almost 3X the size of the US national debt.
The US National debt has nothing to do with any of this. Foreigners don't own that. Americans do. Further, after 40 years of beating that dead horse under far more extreme national and international conditions, trotting out the corpse at this time is not going to make much difference. I don't know if you've heard but it is the Democrats and the hard money advocates who would like to continue the high taxation rate in this country to pay down the national debt. That doesn't sound very constructive for worriers about the national debt.
Still, there is twice as much foreign money in debt instruments than there are in stocks.
So what?
This really means the bubble in the US stock markets has little to do with a rising dollar or foreign money pouring in.
Who said it does? You project onto others what you believe. Also, I don't agree that the stock market is in a bubble state. The NAZ certainly has gone to excesses, but not the NYSE. It sports a multiple that is historically high and it should because in spite of what you would like to believe, the economic environment is extremely constructive and has never been as constructive, so the future is bright and your arguments to the contrary went out the window 25 years ago. There's no point in beating that dead horse. When are you wrong? In 25 years?
M3 Money Stock NSA; Billions of Dollars
safehaven.com
Consumer credit
safehaven.com;
With these two you are saying that growth in money stock and growth in consumer credit is bad. You don't put real GNP growth up there. Why not? Shouldn't all of these measures move commensurately? However, let's assume your prejudices. In your charts you can see that consumer credit has lagged money growth. How is that possible unless people are borrowing disproportionately less than they could?
S&P
safehaven.com;
Th AD line is only saying that big companies are stronger than smaller ones. That makes total sense since its only big companies which have the wherewithal to make the tremendous investments needed to achieve new economies of scale. This wouldn't be so much the case if the average tax rate was lower. What if the AD line started up? Then what would you say? Things must be getting bullish?
What happened since January 1st 1995?
A rapid increase in world wide prosperity.
I see such evidence in the charts above.
You see what your prejudice requires of you, but that isn't making any money. While you have sat in your prejudices earning two cents, the "fools" have made poor judgements, sat through crashes, and still are way ahead.
And inflation is rampant. Stocks prices are inflated. P/E ratios are inflated:
It's rampant but it never shows up. You mistake individual price changes for general price changes. You had better be concerned about deflation or isn't that within what prejudice will accept? It isn't possible now for general prices to advance for the reasons I previously gave.
1) The price of gold as a commodity is near its average total production costs
This is your estimate. Under conditions just a little bit more extreme the price of gold can easily drop to $200 because that is where its marginal cost to supply marginal demand is in equilibrium. I base this on the most efficient producers true cost to find world wide vs consumption rate.
2) CB's are already too much levereged in the gold market. They have leased between 20% and 45% of their gold depending on whose numbers you believe.
I don't believe those numbers. The CBs aren't too leveraged. They can easily get whatever gold they need by buying on the open market. That might create a short term price hoopla like last year, but you underestimate the power of nations even socialist ones. The gold issue is a minor one in the scheme of things. In one day the forex trades a value in dollars greater than the worth of all the gold in the world.
This gold has been sold and absorbed by the market. They cannot get it back rapidly.
You haven't done your homework. If a nation thinks it needs some gold, there are so many avenues available to get it that it is silly to concoct these scenarios.
The more they lease the more they become vulnerable and they (the CB's) know it.
This reminds me of the arguments you put forward about how precarious the consumer debt position is. You are talking as though nations don't have any power. I never made that claim. My only criticism of Europe or elsewhere is that they can live better than worse, but worse is far better than the best one could live 50 years ago. You underestimate what a CB could do, if they wanted. Much of what they do is designed NOT to hurt the gold mining industry and so they prefer to not aggressively change their gold position.
That was the reason for the Washington accord. In other word, although some sell program are continuing, the bulk of the dumping (via leasing) is done.
You make this sound as though gold has some profound relevance in the world. It only does during times of duress and we are nowhere near that kind of time. When do you believe what is happening all around you? Never. You have a vested interest to believe otherwise.
A few good read on the US dollar, Inflation and gold:
Hathatway's long winded claim about the dollar is that it is over-owned. The dollar is the world's currency, so how could it be "over-owned"? It is owned up to what the free market in it decides it ought to be owned and that is relative to the economic efficiency of capital in the US vis-a-vis the rest of the world. To complain about the dollar being over-owned is like complaining about the unfairness of free markets.
As for his claims about inflation and deflation, he hasn't got a clue. He pushes the same old spiel that has made the 'Bug rounds for the last 40 years and is still looking for some bail-out. I guess you 'Bugs need a mutual admiration society, but that doesn't do the point of investment any good. The question is still and has been for 70 years, how do you make money anywhere is precious metals? |
