some good news
From: J
Sent: Fri, December 31, 2010 7:32:32 AM
Subject: Re: Comments - Week of December 20
thank you H for the reminder of the script
in the mean time, i followed up on leads discerned from mogambo - it seems that the china gold revolution has taken another baby step forward
cgse.com.hk
"The Chinese Gold & Silver Exchange, Hong Kong’s century-old bullion exchange, plans to launch the first international gold contract denominated in the renminbi in early 2011. Robert Cookson, Asia markets correspondent, talks to Haywood Cheung, the exchange's president, about what the contract will mean for global gold markets."
From: H
Sent: Fri, December 31, 2010 12:59:28 AM
Subject: Re: Comments - Week of December 20
There is so much bullish unanimity now that at the very least we should expect a strong correction. The reaction of all those bullish fund managers, futures and option traders, individual stock traders, advisors, etc. to that correction will provide us with guidance as to how big it will become. If a pullback does not immediately generate fear, then the correction could become fairly big. Not every such sentiment extreme in history has produced a major turning point, but every major turning point was accompanied by similar sentiment extremes, and such extremes have at a minimum led to a correction (last time: April 2010).
e.g. the 'smart money' OEX p/c ratio is currently at a point seen only three times before in history: January 2000, September 2000 and February 2007. None of these has been a propitious time to buy stocks, to put it mildly (although the rout in late February 2007 - the DJIA lost over 500 points in a single day when the first subprime lenders collapsed - was initially followed by a rally to a slight new high in the summer and again in the fall).
With regards to stocks and inflation - if you look at the $SSEC you will see that a flare-up in consumer price inflation is initially not good for stocks, since it invites central bank tightening. Similarly, the 'stagflation' period of the 1970's was very bad for stocks in both nominal and real terms. Only if/when an inflation goes past the threshold of 'high inflation' to 'hyper-inflation' do stocks begin to react favorably to it in nominal terms. Needless to say though, in that case you'll be better off with gold by at least one order of magnitude.
It seems to me the stock market has discounted plenty of 'good news', including the Fed's money printing exercise, a recovery in official economic statistics (that in turn is on very thin ice indeed) and the strong recovery in corporate profits from the initial recession trough. In so doing, it has however completely ignored a plethora of brewing storms.
We're still in the eye of the hurricane, but won't be there much longer. E.g. euro area CDS spreads (as per the Markit SovX) have just reached a new all time high. The next leg down in US house prices seems to be underway as well, and in the context of this, it appears that many municipalities and states will either go bankrupt in 2011 or be forced to enact spending cuts that will initially pressure the economy strongly (it's a good thing in the long term, but short term it will throw a big spanner into the works of the inflationary accounting fiction recovery).
A noteworthy facet of the echo boom in 2010 was that the stock markets of several resource-rich economies failed to make any headway in spite of a huge increase in commodity prices (notably, Australia and Brazil). This is a subtle warning sign imo - in Australia's case especially one must worry that one of the biggest real estate and mortgage credit bubbles in history is drawing toward its inevitable conclusion. Australia's banking system is entirely dependent on overseas funding and recently we hear the first mumblings from providers of capital to the Australian banks about the risk becoming too great (i.e., there's going to be a stampede out of there soon).
China can not forever hold off rate increases either - it just enacted another baby step increase that per se doesn't change much, but once you get several of those in a row, things usually become very dicey for property bubbles.
No doubt if any or all of these potential negative events rear their heads, there will be even more money printing and deficit spending in their wake, but imo not before there is some real damage done to asset prices.
On Wed, Dec 29, 2010 at 11:52 PM, J wrote:
I suppose the bullish managers can turn out to be correct, but when have opportunity we must ask them how much would coffee cost as n when Dow sits at 20k. After all, Zimbabwe was the best performing stock market in local currency terms for ten+ years.
The eventual and necessary bailout of team USA municipalities should result in more money for everything, and would of course be matched rmb/euro/yen to dollar at at least 1:1 weight.
If so, Dow can sit at 20k, and Hang Seng Index at 60k. And starbucks coffee at usd 15 per cup.
The issue not clear would be clearing levels of salaries n wages in Cleveland n Wuhan, Chicago n chongqin, washington n Beijing, new york n shanghai.
We are blessed for we shall see outcomes against which we measure our theories.
Is the rmb under-valued against the dollar or would china collapse into a trusting debt heap?
Is nikkei a buy as shanghai index craters?
Is gold for all -flations, in-de-flations, simply because its season has come?
Here be an interesting article noir.bloomberg.com re how some Japanese companies figure on growing, by re-weighting their center of gravity
"Lawson CEO Niinami Leads ‘Best People’ to China (Update2)"
Business ExchangeTFac
A continuing euro client did same starting in 2005 ... Now its share price is 5x level of when I first signed on for the very reason of formulated strategy Being successfully implemented.
So, perhaps there is a case of investing in some Japanese shares, but in the same case, shanghai must necessarily not be collapsing.
Cheers, j
Sent from my iPad
On Dec 30, 2010, at 6:17 AM, H wrote:
as the year draws to a close.....
Hedge Fund Managers Turn Extremely Bullish on U.S. Equities According to Survey; Hedge Fund Managers Betting Aggressively on Economic Recovery and Many Increase Leverage
barclayhedge.com
Glenview’s Larry Robbins Extremely Optimistic: Dow 20000 insidermonkey.com
On Wed, Dec 29, 2010 at 6:30 PM, D wrote:
Reefer Madness -- a 1930s classic!
From: H
Date: Wed, 29 Dec 2010 18:21:18 +0100
Subject: Re: Comments - Week of December 20
The demonization of marihuana that eventually led to its prohibition was also economically motivated. Hemp was seen as a big rival to artificial fibers such as nylon and rayon, as well as a competitor to wood pulp in making paper, so Du Point de Nemours financed a campaign to get hemp declared an illegal plant. The Hearst tabloids also contributed to the campaign, as Hearst had major timber interests and wanted to keep wood pulp demand up. What made this fairly easy was that the campaign was plainly racist, as most of the users at the time were blacks (notably, the DEA lists industrial hemp as a forbidden plant, a major hint as to the true motives behind the ban). The major political figures involved in the criminalization campaign all had direct or indirect ties to Du Pont and Hearst, or were appointed by people with such ties (this included Hoover's treasury secretary Mellon, as the Mellon Bank was Du Pont's chief financial backer).
A famous 1938 propaganda movie called 'Reefer Madness' was so unintenionally funny that it has become a cult film in the meantime.
On Wed, Dec 29, 2010 at 1:17 AM, J wrote:
The wastrels at crisco oil / p&g sponsored 'studies' to demo cotton seed oil is 'better' than pork fat n such, and to this day the bad science and sordid fiction remains in place.
Sent from my iPad
On Dec 29, 2010, at 4:31 AM, H wrote:
W,
I know, firstly, a lot of money is at stake for the researchers - a comparatively unimportant sub-section of natural sciences, climatology, has suddenly become the biggest recipient of tax cow funds - and this status requires keeping the scare stories flowing in order for the gravy train to be sustained. And secondly, it is a major excuse for politicians to raise taxes and increase controls and regulations over private individuals and businesses.
The more I learn about it, the clearer it becomes that is nothing but a shameless hoax - in fact, my impression is that the former Greenpeace founder (who later dropped out of the movement) was perfectly right when he noted that environmentalism has become a major sinecure for former Marxists after their sugar daddy (the Soviet Union) went belly-up. It is a very welcoming environment for their authoritarian impulses and what's more, it does not need to produce anything that is wanted in the free market to provide its members with juicy incomes and benefits. It only needs to keep the propaganda as shrill as possible.
One big advantage of serious economic downturns is that the funds for such extravagances tend to dry up eventually - there is now increasingly a backlash visible in the media too. It is not so easy anymore to just shut up the dissenting scientists (which have lately turned out to be surprisingly numerous - that wasn't evident previously, because many dared not speak out).
On Tue, Dec 28, 2010 at 8:57 PM, W wrote:
H-
I suggest you research who's funding this bogus science and responsible for providing magnanimous donations to leading universities on the vanguard of this crusade.This nonsense doesn't occur by accident,or because well-regarded researchers suddenly develop an uncanny habit of skewing their conclusions in a particular direction. Both of my parents were PhD scientists.They would be appalled at the utter lack of integrity today.
From: H
Sent: Wednesday, December 29, 2010 12:29 AM
Subject: Re: Comments - Week of December 20
OT, global warming - it gets ever more absurd. This year, Australia witnessed a rare event - snow in the middle of the SUMMER. but wouldn't you know, the fact that it seemingly gets ever colder....is due to global warming!
the NYT reports: Global Warming is Making it Cold (no kidding....)
as one letter writer at Slate remarked, it is quite funny that NONE of the predictions of the 'warming brigade' have so far come true. what i want to know in this context is why is there still a Micronesia? wasn't it supposed to disappear beneath the waves of rising sea levels something like 10 years ago?
here is the letter from Slate:
These people know no shame. Here's an infamous article from The Independent - ten years ago.
"Snowfalls are now just a thing of the past"
By Charles Onians
Monday, 20 March 2000
Britain's winter ends tomorrow with further indications of a striking environmental change: snow is starting to disappear from our lives.
Sledges, snowmen, snowballs and the excitement of waking to find that the stuff has settled outside are all a rapidly diminishing part of Britain's culture, as warmer winters - which scientists are attributing to global climate change - produce not only fewer white Christmases, but fewer white Januaries and Februaries. "
And...
"According to Dr David Viner, a senior research scientist at the climatic research unit (CRU) of the University of East Anglia,within a few years winter snowfall will become "a very rare and exciting event".
"Children just aren't going to know what snow is," he said. "
And:
"David Parker, at the Hadley Centre for Climate Prediction and Research in Berkshire, says ultimately, British children could have only virtual experience of snow. Via the internet, they might wonder at polar scenes - or eventually "feel" virtual cold. "
Read it and weep, apocalyptic kooks:
independent.co.uk
So the truth is that leading climate scientists at the heart of the global warming scare predicted WARMER winters, not colder winters. That is, until their predictions were proven to be bunk. Then, they 'predicted' that cold, snowy winters (which were allready happening for most of the last decade) would result from 'climate change.' Like 'predicting' the lottery number - AFTER it comes out.
That brilliant Dr. Viner, cited above? He STILL claims he was right - in spite of 9 out of 10 years of cold, snowy winters in the UK. So much for scientific integrity. That's 'the consensus' for you. |
