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Gold/Mining/Energy : At a bottom now for gold? -- Ignore unavailable to you. Want to Upgrade?

To: Ray Hughes who wrote (1715)	9/25/1998 1:21:00 PM
From: Ahda	Read Replies (1) \| Respond to of 1911

Ray thanks for that post i spent numerous hours yesterday trying to understand things i did not . What idealistically could be done does not account for human nature and i am getting a very negative feeling from my ever so pro business positive Son. A fledgling perhaps but an extremely smart one. From business standpoint the hedge fund issue is said and done from the publics i doubt it. i said to myson yesterday the only hope i have in this market defies logic it is going to be the gut level feeling of people like yourself that will call it. You can have all the knowledge in the world but that is not going to make one understand when a babe crys what it needs. It is the having been there done that that the cry can be interpreted correctly. This is a two and a half year stint for me the theory i am accumulating the cry i dont know how to interpret. correctly.

To: Ray Hughes who wrote (1715)	9/25/1998 2:43:00 PM
From: ahhaha	Read Replies (1) \| Respond to of 1911

Theory doesn't try to prevent or predict fluctuations. Micro management and fixed prices do. Economic theory is simple. Let the market do what they will. Don't intercede under the pretense of knowledge. The outcome of intervention is always worse than the short term benefit. We can't do that because we don't have faith nor trust. We don't have those two because we never know where stable equilibrium lies. You find out where it lies by adopting a laissez-faire attitude towards how the characterizers would like to believe the way things are. In that environment things might instantaneously fluctuate, but then they instantaneously fluctuate back. It is when we take arms against a sea of troubles, imagined or otherwise, that we do not end them. In an environment of non-intervention you find there is little fluctuation, just gradual trends. The reason why is that no one makes unwarranted assumptions about the stability of things so excesses aren't explored. Greed is limited because it is too dangerous to go there. Fear disappears because no wild swings occur. I know this Adam Smith reality is unachievable because we have guys like Merton and Scholes, the quintessence of the pretense of knowledge. The outcome is that we just muddle along. Hedge funds aren't hedged. The recent problem isn't hedging, it's risk arbitrage, or spreading. You always hear it from the option boys. How they have all the possibilities covered in their butterfly nets. They never consider the possibility of autocorrelated feedback, one leg fluctuating wildly forcing adjustments to other legs when the adjustments cause a further increment of unexpected divergence in the fluctuating leg. Merton forgot stochastic functors can diverge outside the near infinite speed required to adjust them. You have forgotten Humphrey-Hawkins again. The FED by law can't allow a drop in consumption. They would pump. During the wild days of the '70s and '80s in spite of 21% interest rates, you'll find in the time series data that consumption didn't fall. Wall Street and the financial world are disconnected to real economy more than most think. When the stock market gets whacked, there is a psychological pull back in discretionary spending, not a pull back in other spending. That hits some companies, but savings don't rise. In the past short term pent up demand busts out quickly. That has bever been the problem. You are extrapolating a '30s type scenario just like the FED does when things start deteriorating. Markets are never allowed to find equilibrium. When you ask people about the terrible effect of 26% unemployment of 1982, they don't what you're talking about. The worst unemployment got in the '30s was 24%. In 1974 people were aware of the effects of the oil embargo and inflation, but they didn't know what I was talking about when I'd rant and rave about the bad times. They would universally say, "What bad times". That astonished me. They were right. The FED doesn't let bad times occur. They think they've learned a lesson from the '30s. The lesson is worse than the cure because the same old problems of the '70s will endlessly occur as long as they interfere in the markets for money in order to support nominal prosperity. When that evolves into keeping interest rates from rising, you have the circumstances of bust. Eventually the market takes back control in order to protect the coin of the realm, and you get 21% interest rates and 26% unemployment. Thank you, intellect. I think you have things turned around, the export market is collapsing because of the strong dollar. I think you mean import market. The import market won't bail out Japan. We buy more and more from Japan's competitors. Japan must change the way their economy is structured, away from neo-mercantilism, if they are to recover. Japan can't pull us down. They aren't the Asian Tiger anymore. In the past they provided quality goods at cheap prices. If they weren't there, Americans would have to buy American. That means shoddy goods at inflated prices. Inflated by inefficient indolent American corporations and labor. The role of Japan in the past has passed to Taiwan, China, Malaysia, Mexico, to name a few. Thus Japan has a long term structural problem which they haven't even begun to acknowledge much less address. This has negative implications for the world because it means Japan is a drag. The financial shenanigans represent three days pumping in toto. That is minor. The problems begin when people panic and do stupid things. They don't stop spending, they just change their spending preferences. That isn't a bad thing, but it is disrupting and usually has the effect of causing more wrong decisions to be implemented. The tail does not wag the dog. It is easy to extrapolate a domino theory everywhere. That's what happened in the media after the Leeson Affair. Was there any consequence? No. I agree about the number of exogenous variables, but the FED, Wharton, Princeton, Harvard, they don't agree. They are fine tuning to invent permnanent prosperity. It doesn't matter how many times they re-learn the lessons. To be in power means you are supposed to know what can't be known. So you fake it. If they didn't fake it, they fear they would be out of a job. It is called "fifth wheel phenomena". To disagree means to say that the FED permits the market to determine the cost of money. They did that briefly, 1/1/80 - 8/13/82. Never again. In the late '80s and early '90s they actually got to a money supply targeting maintaining money growth at the growth of productivity. We got almost inflation free economy from it. They threw that out because it wasn't generating enough wealth fast enough for a few. Their conclusion was the same reached in the late '60s. Money doesn't matter. They thought it didn't matter because during some periods there would be high growth of money and then others, low growth. Seemed to make no difference to GNP. So they abandoned that and went back to fixing the cost of money. They think they know what the appropriate cost is and they supersede the markets determination of it by taking such a tack. Eventually, like now, no one knows where equilibrium lies because FED interferences have pre-empted the free market's price discovery mechanism. Above I said that we don't let free markets work and so we never know how little things would fluctuate. This is especially true in the market for money. The FED's fixing price only evolves into wild swings in rates. We all went through this 20 - 30 years ago. We learned nothing from it. I knew that 8/13/82. No one else on this planet knew it, not even the boys at the Hoover Institute. They have gotten old and jaded and their students have become econometricians or immigrated to Chile. It isn't very hard actually to predict accurate outcomes. You and I and everyone else does it all the time. It seems though that if you have a PhD, you can't do it but rarely, and that is to predict where they will double your salary after you've failed for the n-th time.