I live in the USA and I am concerned about the future. I created this blog to share my thoughts on the economy and anything else that might catch my attention.
This is the End and a New Beginning
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I've been thinking about this for some time.
After 21 years of writing this blog almost daily, I've decided to stop
writing the daily updates on the blog.
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Silver Deep Dive
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Silver had a memorable year (+148%). Some of this can be explained by a
decline in the dollar. I decided to do some ML analysis to look for other
insights....
My own suspicion is that we’re going to penetrate the 10 percent barrier and stay there for a while before we start down.
Although unemployment is currently at 9.83% and rising, Alan Greenspan suspects that it may actually reach 10.00% or more. I know. Sounds pretty far-fetched. Keep in mind he only suspects it though.
At some point we’re going to start to see an improvement in employment.
Although he can't say exactly when unemployment will peak or at what level it will peak at, he can say that we should see improvements in employment once it does peak. Amazing!
Watch out Miss Cleo. There's a new fortune teller in town.
Here's a glimpse showing where the big money is moving (as seen in the "Top 10 by Size" section).
1. SPDR Gold: +$12.255 Billion YTD, +$2.005 Billion in September 2. iShares Barclays TIPS: +$7.032 Billion YTD, +$0.847 Billion in September ... 10. SPDR S&P 500: -$29.725 Billion YTD, -$1.795 Billion in September
Stagflationary thoughts... they aren't just for breakfast any longer.
On the other hand, the markets can't inflict the maximum pain on the maximum number of investors without first properly aligning the maximum number of investors. In other words, just because the trend has been consistent, past performance is no guarantee of future returns.
Take my inflation protected TIP fund for instance (seen above). The distribution for October came in at just $0.04744 per share but the fund closed the day at $102.97 (above its long-term trend). In order to justify the current price, there better not be any more deflation.
I am comfortable in TIP long-term but... we are heading into Christmas with rising (and extremely high) unemployment. More deflation is a distinct possibility.
As you may know, gold has become way too rich for my blood and have said as much on my blog in recent months. I have no interest in owning gold at these levels. That said, I could very well be wrong to think this way. I do have "stagflationary" in my name after all.
Therefore, to the delight of the gold bugs I thought I'd play contrarian today.
That brings us to the fantasy half of the equation, which seems to be the main driver of gold today. Gold is the asset class of choice for those who fear grim tidings ahead. A collapse in the dollar. Runaway inflation. Civic upheaval. Some gold bugs talk of stockpiling seeds, bullets and canned goods. It can get a little Area 51.
Hey, that's almost me they are talking about! From this point on I shall refer to my extended pantry as, drum roll please...
Area 5.1
Although you can't see it all in the picture, you'd have to agree that it can't be more than 10% of Area 51. In other words, it's at best a "little Area 51". Get it? Hahaha! I crack me up sometimes. Sorry about that.
I don't expect a complete collapse of the dollar or runaway inflation, but I am somewhat braced for higher long-term inflation than the bond market is (just 1.7% inflation expected over the next 10 years as seen in the difference between 10 Year Treasuries and 10 Year TIPS). Much of what you see in the picture has outperformed the stock market since 2000. I think there's a decent chance it will continue (even if we enter a deflationary spiral). That's all. I'm just not much of a believer that we can borrow our way back to prosperity.
Civic upheaval? Despite the acoustic device battles with protestors in Pittsburgh during the G-20 meetings, the notion of collapsing civic order seems increasingly far-fetched.
How can anyone argue that it is becoming increasingly far-fetched? As unemployment approaches 100%, collapsing civic order approaches 100%. That's the math as I see it. Therefore, let's reserve "increasingly far-fetched" for the point in time when unemployment actually starts to fall. Until that time, I'll be taking extra special care when using the ATM at my local bank (especially once it gets dark). Let's just put it that way.
So, if gold is a lousy investment then what would Barron's suggest is a good investment? Glad you asked!
For inflation, investors would be better served investing in Treasury inflation-protected securities, or TIPS. The risk of TIPS declining dramatically and becoming dead money for decades is exceedingly remote. Moreover, even if inflation doesn't surge, TIPS can still be a good store of wealth, while gold could do just the opposite.
Most of my nest egg sits in TIPS. What is said is all fine and dandy, but TIPS can only provide limited inflation protection. TIPS investors have to pay tax on the inflationary gains as they appear. Those taxes can really start to hurt if inflation picks up. Investing in TIPS is kind of like buying fire insurance for your house that refuses to pay if the house completely burns down. So are TIPS investors such as myself really better served? Only hindsight will know for sure. I can say this though. Inflation better not get too far out of hand or TIPS will financially ruin me. That's a risk I'm willing to take. It is a risk though.
So what else does Barron's suggest we invest in if gold is lousy?
What's not to like? It's got both California AND the restaurant industry? Oh joy!
We also think a moderation in home price declines since early 2009 offers a glimmer of optimism for restaurant companies with heavy California exposure, and California Pizza Kitchen in particular as 40% of the company's sales are attributed to the Golden State.
A glimmer of optimism? Oh my. Sign me up. To be fair, I'm seriously underwater on my anti California Pizza Kitchen play so far. That glimmer of optimism seems to have transformed into something much larger than that based on the stock market's recent performance. I'm letting that imaginary money ride though. That's right. I'm a glutton for imaginary punishment!
I'll be tracking California Pizza Kitchen in the years to come. I've been watching California's economy. I've been watching the restaurant business. I'm ashamed of myself for not thinking of it sooner.
The risk as I see it depends on whether this is a cyclical downturn or a secular downturn. I didn't start a blog based on the former, but I could be wrong of course.
There you have it. Our monetary and fiscal polices are getting people to shop again. Splendid. If this isn't an example of moving future demand into the present I don't know what is. If enough people do it, the future is going to look pretty bleak though.
If I knew for sure that financial apocalypse would soon be upon us, I'd certainly cough up a one-ounce gold coin to buy a year's supply of food. Under no circumstances would I ever cough up a year's supply of food to buy a single one-ounce gold coin though. Hey, just something to think about.
Further, I actually thought *I* was bearish. The "overwhelming demand" for "6 Cans of Potato Chunks" and "3 Cans of Instant Milk" makes me look like a true believer in our long-term prosperity by comparison though. My idea of hoarding is to stock up on things I would actually prefer to eat in the future. Go figure.
California is going down! The guy's an actor. He's reading a script. When they tell you not to panic, that's when you run!
Generally, that's REALLY good advice. However, here we go again. It's just a movie. The2012scare will no doubt end just like theY2Kscare did... with a whimper. Well, almost a whimper. It isn't like our economy has actually prospered over the last 9 years. Come to think of it, who am I to heckle? It isn't like I'm not hoarding. It isn't like I'm not a believer in the "California is going down" theory.
Gross noted the downturn in fortunes of "once-golden" California, including a 12% unemployment rate, near a national high; the country's lowest bond rating; poorly rated schools; jammed freeways and what was a $26 billion budget deficit resulting from laws shaped from an outdated democratic system.
The Windy City, considered a favourite to be one of two finalists, mustered only 18 of a possible 95 votes. In the end, Rio de Janeiro prevailed with 66 votes to Madrid's 32.
Chicago didn't win? Shocking!
Where was thegovernor of Illinoiswhen we needed him? Impeached? Convicted? Removed from office? Prohibited permanently from holding any future office of honor or trust under the convicting State? Indicted by a federal grand jury? Inquiring minds want to know!
The effort and energy needed to make the president and first lady's quick trips to Copenhagen possible could be considered Olympic-sized by some estimates. The approximate cost of flying Air Force One round trip for 18 hours calculates to more than $1.2 million -- roughly $67,000 per hour.
The estimated greenhouse gas emissions of Air Force One for that trip amount to more than 1 million pounds of carbon dioxide. Compare that to a roundtrip on Amtrak from New York to Washington D.C. emits 220 pounds of carbon dioxide. The president's trip is the equivalent to 4,500 of those roundtrips.
The Boeing 757 the first lady rode separately emits nearly 374,000 pounds of carbon dioxide.
Those figures do not include the operational costs or emissions of the several passenger and cargo aircraft that accompany Air Force One with staff and equipment.
Ever heard of carpooling? Seriously.
We elected you to be stewards of our money and all we got was 1.4+ million pounds of carbon dioxide, a bill for $1.2+ million, and thislousy T-Shirt.
Two economists, Professors Emmanuel Saez and Thomas Piketty, developed a method for measuring income inequality using IRS data, which avoided the problems inherent in using Census Data. This data was recently updated in response to the IRS release of 2007 information, and found that: Economic inequality in 2006 was, by some measures at the highest levels, ever found in the data available for the past 95 years. In 2007, these same measure showed a further jump further bringing America to it it’s highest levels of economic inequality in recorded history.
Deep down, we know that income inequality is increasing. We don't need a report or a study to confirm it.
In 1928, economic inequality was near today’s levels.
For what it is worth, 1928 was not a great moment in time to be taking on extra investment risk. I am a big believer that income inequality and Great Depressions go hand in hand. Long-term economic stability cannot occur if poor people keep getting poorer while rich people keep getting richer. If nothing else, at some point there won't be anyone left to shop at this country's many malls.
NEWPORT BEACH – Vandalism continues to plague an abandoned shopping center in one of Orange County's most luxurious stretches of real estate, and the property owner's latest attempt to control the problem involves a whole lot of gray paint.
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