Date: Mon Dec 27 2004 14:55
trotsky (Aurum@'you know the rest') ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
good point, otoh, the situation appears to me to be not that simple. before Putin, doing business in Russia was far more hazardous than it is now. the mafia ruled under Yeltsin - who can't remember PAAS and the Dukat property for instance, and there were many similar cases. this willy-nilly annexing of foreign investments has all but ceased.
the difference between Yukos and BGO is that Yukos was 'acquired' ( read: stolen ) under highly dubious circumstances in the Yeltsin era. by contrast, BGO is acquiring its Russian assets fair and square, and has already a successful investment ( Julietta ) going great guns for several years now.
true, Yukos has become a very successful and transparent enterprise and what has happened is unfortunate all things considered...after all, the state can't be expected to do any better in the business than Yukos has, on the contrary.
but the fact remains that the so-called 'oligarchs' have from the outset been a basically criminal clique that made use of the confusion and corruption marking the pre-Putin chaos in Russia.
and it seems to me that the move against Yukos is squarely aimed at these oligarchs, and no-one else. we have no evidence to the contrary at this stage...and i'd be very surprised if that were to change.
Date: Mon Dec 27 2004 14:35
trotsky (frustrated@how long?) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
the trough of the current K-winter should occur sometime around 2010-2014. one must caution though that cycles appear to have lengthened ( a combination imo of longer life expectancy as well as a more interventionist mindset ) .
Date: Mon Dec 27 2004 14:06
trotsky (P.Yorkie) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
just a few points:
1.
"As Sherlock Homes would say "it is a capital mistake to theorise without data". Nevertheless, not having such data immediately available I hazard a guess that much of the huge pile of I.O.U. 's you mention ( not clear whether you refer to paper used as currency or treasury debt ) is matched by rising GDP."
i refer to broad money supply. and no, its rise has NOT been matched by a commensurately rising GDP ( not even taking into account that GDP growth is vastly overstated on account of hedonic indexing and other statistical tricks ) . it has taken almost $7 in ADDITIONAL debt last year to create a single dollar of overstated GDP growth. this ratio of debt addition to GDP growth has steadily deteriorated for the past 30 years and is now at a new record high.
2.
"I would say I was persuaded years ago when the Nikkei was over 30,000 and we were all hearing all about "weight of money theory" that those guys don't have a clue about how to value equity."
true, that 'weight of money' theory was utter bunk, but what makes you think the non-Japanese world has a better idea of valuing equities? the current valuation of the SnP 500 is higher than at the 1929, 1987 and early 1973 tops. i mention those specifically because they all were followed by rather big declines, but on a more general level this simply illustrates how RARE it is for the market to trade at such valuations. iow, based on the historical record, buyers of US equities here are fools who have no better idea of evaluating equities than their Japanese counterparts had 15 years ago.
the US public debt ( cumulative debt-berg relative to GDP ) has not yet reached the alarming levels of its Japanese equivalent because Japan's cycle is further along. it's the private sector debt-berg that will do the economy and the markets in. once that happens, Keynesian deficit spending and monetary pumping will ensure that the US public debt-berg continues on its recent trajectory until it becomes indistinguishable from Japan's.
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"I don't think it safe to make statements which discribe the future when what you mean is the recent past. e.g. "why is the price of gold rising". I think what you ment was "why has the price of gold risen recently"
well, 4 years of data are a pretty weighty argument in favor of 'something is different here compared to the '70s'. all one has to do then is check if there's any historical experience with what has happened 'recently'. and there is. gold's purchasing power rises in deflationary eras - it has happened every time. in fact, since the 16th century ( that's how far back Ascani's 'gold in deflation' study goes ) , real returns of gold have been far better in deflationary than inflationary periods ( even though nominal returns tend to look better in the inflationary periods ) .
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"The reason, I suppose, is because it has got a lot cheaper when expressed in currencies other than the dollar. For example, the pound might reasonably be expected to track the Euro if the latter takes off relative to the US dollar. I suppose the same is true of gold which IMO is a sort of currency."
this isn't entirely true. if one looks at more than a 3 month chart of gold in euros, yen, aussie dollars etc., one notices that in spite of the move having stalled in consolidation over the past year and a half, gold has been in a solid ( and unbroken ) long term uptrend in ALL of these currencies since June of '99.
and gold is not a 'sort of' currency, it is the ultimate currency. the only one that is not just a 'promise to pay' someday.
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"I don't think we have had any deflation in North America for as long as I have been around here ( i.e. 32 years ) . Yes inflation has become less vigorous from those dreadful 1970's, but as it did so the price of gold came off until relatively recently .... and it was not earning interest I might add, which would have provided some compensation for the inflation of the day albeit reducing."
there hasn't been CPI deflation in the US since 1938. even in the deflationary era that has just begun we can probably expect only mild deflation at worst, nothing like the 10% annual whacks seen in the early 30's. in a fiat system one can expect the central banks to pull out all the stops to avert deflation. it'll probably take two or three more years before we see the first slightly negative CPI numbers.
as to gold's decline during the DISinflation or 'autumn' era from 1980 to 2000, this is in line with the historical experience as well. it is the season of the K-cycle that is the worst for gold, while equities and bonds tend to perform well. luckily for us it's immediately followed by the part of the cycle that is the best for gold ( i.e., now ) .
the K-cycle and its effects on different asset classes:
spring ( reflation ) : good for equities and gold,
bad for bonds
summer ( inflation ) : good for gold,
bad for equities,
very bad for bonds
autumn ( disinflation ) : very good for equities
good for bonds
very bad for gold
winter ( deflation ) : very good for gold
very good for bonds
very bad for equities
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