2004 Real Estate Quote (Musical Tribute)

January 4, 2004
Commercial Property; Becoming a Retail Sector Player With a Single Deal

''Residential real estate is the safe and boring part of real estate,'' said Mr. Lichtenstein, principal in a 15-year-old firm that owns and manages 16,000 apartments, in addition to office, industrial and retail properties. ''People always need a place to live, and there will always be a living in being a landlord. But it can become a routine, like chopping wood.''

Silver Thoughts

Forget gold. Silver is shining bright.

NEW YORK (CNNMoney.com) -- All that glitters isn't necessarily gold. If you want a really hot metal, check out silver.

I cringe at the thought of how well other recent "really hot" investments worked out long-term.

But the spike in silver is worth noting since it might be a sign that a global economic recovery could actually be for real.

As a believer in the "illusion" of prosperity, I have a hard time betting on a "real" global economic recovery.

In that respect, the surge in silver prices is probably more similar to the rally in other assets that had been priced for financial Armageddon, such as bank stocks and airline stocks.

As an economic bear, I wouldn't necessarily want my investments aligned with bank stocks and airline stocks. Maybe that's just me.

So, let's sum this up.

1. Mainstream media is now telling us to invest in silver.
2. Silver is "really hot" right now.
3. We should like silver if the global economic recovery is for real.
4. Silver is behaving much like bank and airline stocks.

I know my commentary is going to bother at least one of my readers, but I just call it the way I see it. Healthy debate is always good and I could very well be wrong. That said, what was good at $4.90 an ounce in 1999 might not be as good at $16.80 an ounce in 2009. I might feel differently if the price of toilet paper was rising at a similar rate in sympathy perhaps. It isn't though.

Even as a long-term stagflationist (and one who would therefore naturally embrace a silver bull story), I continue to brace for more deflation. It may or may not come but I do think there's at least a 50% chance that the bottom will fall out of the global recovery. It seems no more sustainable to me now than it did when I first turned bearish in 2004. Although the "decoupling" arguments were completely discredited in the last downturn, they are already starting to pop up again.

August 29, 2009
Emerging points in decoupling debate

"There are many recent signs that some emerging markets are forging a limited version of decoupling from the still very weak developed economies," Mr. Porter said. Over the past quarter, we have seen strong growth in China and other Asian economies while the U.S. economy remains in recession.

That would be all fine and dandy if I actually believed in the China story right now. I do not. As Andy Xie recently said, "China has become a giant ponzi scheme." That's what I believe too.

It isn't easy being a bear. You have to decide what kind of bear you wish to be. A bull can simply buy stocks. A bear has to decide if he should be buying something to protect against future inflation or if he should be selling something to protect against future deflation. No easy answers for a bear. No sure things.

For what it is worth, I'm a moderate bear. I'm neither preaching at the hyperinflationary altar nor am I preaching at the hyperdeflationary altar. I'm somewhere in between. I believe that it doesn't require either extreme to have a horrible long-term economy. Further, altars often require sacrifices. I'm trying very hard not to make sacrifices.

Want to know when hindsight shows was one of the best times in the history of mankind to invest in gold and silver?

May 31, 1999
Gold Glut

One final note: In part, recent price activity has been driven by large speculative net-short positions. These trades have been quite profitable and thus the activity will likely continue. At times, it will lead to sharp but brief rallies as profits are taken. But inevitably, with such bearish fundamentals, rallies will prove to be selling opportunities for savvy investors.

Thanks mainstream media (Barrons) for your keen insights. Using hindsight, you could not have been more wrong about the gold glut in 1999. For those investing in "really hot" precious metals right now, let's just hope that mainstream media is not as wrong now (in reverse) as they were then. I have my doubts though.

It is not whether you are right or wrong, but how much money you make when you are right and how much money you lose when you are wrong. - George Soros

This is not investment advice.

Wisconsin Sells Us Clunkers

Wis. on track to sell 500 state government cars

The actual amount of money gained from the sales of the cars is small. So far this year, the sale of 345 cars yielded $929,051, or $2,692 per vehicle.

Most of the vehicles are either at or above 100,000 miles or around 15 years old or more.

I wish I had known. I could have hoarded some of them for use in the next Cash for Clunkers Program. Buy them for $2,692 and trade them in for $4,500? Free money!

Hey! Why exactly did the State of Wisconsin avoid the Federal Government's Cash for Clunkers Program? Doesn't that seem a bit odd to you? What is it that Wisconsin sees that we don't?

If selling cars now ends up costing more later because they need to be replaced, the auctions don't make much sense, said Senate Minority Leader Scott Fitzgerald, R-Juneau.

What if they don't need to be replaced? What if times will be extremely tough in the future and there is no real need to continue to pursue expansionist policies? What if Wisconsin is simply preparing for it? What if they disbelieve that there will be a strong and robust national recovery? What if they've studied up on Japan's deflationary mess? Inquiring minds want to know!

He called the reduction in the number of vehicles "very manageable" and said state agencies are adjusting to the smaller pool.

There are a lot of things we could all do in the name of reduction. We could adjust to a smaller standard of living. We could decide that eating out at restaurants is something we could do without. We could avoid the malls. We could avoid Disneyland. There's lots of ways we could do our part to follow Wisconsin's lead.

Here's the best part. By following Wisconsin's lead we can virtually guarantee that there will be another Cash for Clunkers Program. Woohoo! I'm not quite ready to trash my car yet. It's over 13 years old but has less than 80,000 miles on it. Perhaps in 10 more years I might be ready though. So please, do your part to help me buy a replacement car in the future. Brace for the Great Depression. Don't let the naysayers tell you that we can't still get there. Be optimistic!

I hope you enjoyed the economic sarcasm. Everyone is doing it these days. It's the new global pastime.

My First Chart Revisited

On August 31, 2007 I posted the following chart.

My First Chart




I created this chart using the latest data on our economy. I'd supply the source data but there are times when I'll want to keep some things shrouded in mystery. I think it adds to the mood. I'm hoping you can appreciate charts that have an aura of conspiracy about them.

Here's an update.



My secret sources have informed me that although the voyage has run into a few slight snags and snafus, we are currently back on schedule and should be reaching a port of safety shortly.

September 3, 2009
Sinking Feeling

As Treasury Secretary Timothy Geithner headed off to London on Thursday for two days of meetings with central bankers and finance chiefs of the Group of 20 nations, he carried a letter outlining the Obama administration's plans to boost capital levels for banks around the world. Now, most people who haven’t been following this issue may scratch their heads and wonder, “Hasn’t this been done already?”

That’s an awfully good question. The financial system went into spasms last year, requiring a staggering bailout by the taxpayers, because major banks took reckless bets on derivatives and shaky mortgages—capital levels be damned. When the Titanic sank in 1912, it only took a few months for the U.S. and British governments to conduct inquiries and then to take action, boosting the number of lifeboats on sailing vessels. Heck, the U.S. Senate convened an inquiry within hours.

Yet here we are, a year later, and it’s hard to find much in the way of concrete steps to prevent a future apocalypse from taking place....

September 4, 2009
Students Borrow More Than Ever for College

The ripple effects for today's heavily indebted young people are becoming palpable. A growing body of research suggests that tough loan payments are affecting major life decisions by recent graduates, forcing them to put off traditional milestones—from buying a first home to even marriage and having children.

September 6, 2009
Poor economy driving birthrate down

And the decrease is likely to be more pronounced during 2009. A limited review of statewide hospital data shows births plummeting during the first six months of the year.

"It seems to be a common theme I'm hearing from people: 'We can't afford to have more kids with the economy the way it is, so we'll have to wait,' " said Lincoln mommy blogger Christine Young, who hears from women across the country on her site.

Meanwhile...

September 4, 2009
Plan would pay Japanese families to have kids

A proposal to pay parents about $3,400 a year per child has got her thinking seriously about expanding her family. The cash for kids plan is the brainchild of the country's new ruling Democratic Party of Japan, which came into power during the elections this week. The proposal has garnered supporters and critics.

It's like a Cash for Clunkers Program that never ends.

Nevertheless, the money for babies proposal has its critics. Economist Yuri Okina said she wonders where Japan's government is going to come up with the money to fund it.

The answer is so simple. The money is borrowed from the unborn children and grandchildren of course, just like we do in America. That money can then be given directly to the parents right now. Ponzi schemes need ever increasing numbers of investors to keep the party going. Japan's solution is to give birth to more investors as soon as is humanly possible.

You know what? I think I shall remain bearish long-term.

Detroit's Peak Bright Spot (Musical Tribute)

August 30, 2009
Detroit on brink of financial ruin

One bright spot in the city's budget in recent years has been casino tax revenue, which grew steadily from 2003 through 2007. In addition to the wagering tax, the city also collects other fees from the casinos.

That revenue peaked in 2007 at more than $179 million, according to city financial reports.

1929 - Parody of 1999 by Prince


Harris said the city lived high-on-the-hog for the past 10 years thanks to casino revenue even as health care benefits were rising and income tax revenue was disappearing. Now casino revenues can no longer offset those costs.

September 4, 2009
Cash for Clunkers Failed to Create Auto Jobs

The employment report shows that – despite the Cash for Clunkers craze, and the $2 billion Congress added to the program at the end of July – motor vehicles and parts manufactures shed 15,000 jobs in August.

August 27, 2009
Toyota Tops List of Cash-for-Clunkers Sales

The cash-for-clunkers program turned out to be a boon for Asian automakers and the small cars they specialize in.

September 3, 2009
No sequel to ‘cash for clunkers’ but…

While the $3 billion “Cash for Clunkers” blockbuster is over, Congress is not finished with Detroit.

Sorry Detroit. Congress isn't finished with you yet. You may need to somehow expand your casino operations to more closely match those of Wall Street.

As Oil Soars, Natural Gas Is a Bargain (Musical Tribute)

Something Wicked This Way Comes


Do yourself a favor. Start the video and listen to it as you read the following. It should put you in a suitably creeped out mood.

As Oil Soars, Natural Gas Is a Bargain

As oil prices surged over the last few months, natural gas prices in the United States did something that could help to cushion the economic shock. They fell.

Oops. That's a headline from November of 2007. Sorry about that. The surging oil prices combined with the plummeting natural gas prices must have created a déjà vu condition in my synapses.

Oh well. While I'm strolling down memory lane might just as well see how the predictions from 2007 panned out. The economic shock being cushioned theory mentioned in the article was ever so slightly off base. The recession/depression began the very next month and we're STILL in it apparently. Since the headline looks just as applicable now as it did in November of 2007, I'm left wondering if something wicked this way comes. Again!

At the end of 2006, oil for delivery in February 2008 cost $67.18 per barrel, while natural gas for delivery then was selling for $8.90 per million B.T.U.’s.

Forget $8.90. The "Henry Hub Spot" price for natural gas is now just $1.88 (see below). No kidding! Imagine not being able to make money off of a seemingly sure thing "natural gas is a bargain" headline like that.

The fact that natural gas prices have not risen could be good news for the American economy, which has been troubled by reports of slowing retail sales as home prices fall.

Just look at how well the American economy is doing now. We slid right into deflation and are still trying to claw our way out of it. The unemployment rate is now 9.7%. Apparently even much cheaper natural gas didn't help all that much.

Oil and Natural Gas: Ratio Explodes in 2009

Now, with oil spiking to its highest level this year and natural gas plummeting to a 7-Year low to below $3/mmbtu, the current ratio of WTI/Henry Hub price is close to 25 to 1, a historical high.

According to Bloomberg, The Henry Hub spot price for natural gas is now just $1.88. The WTI Cushing spot price for oil is currently $68.02. By my math, that puts the ratio at a whopping 36 to 1. What could oil investors possibly thinking to justify a ratio that is that far out of whack? Hey, maybe it is different this time. Right? Either that or they aren't picturing the impact natural gas powered cars would create should that ratio continue.

Natural Gas Cars: CNG Fuel Almost Free in Some Parts of the Country

While the national average price of gasoline is now $3.60, some residents of Utah are happily filling up on compressed natural gas (CNG) at $0.63 per gallon. That’s the country’s lowest price for CNG, which has understandably caused a surge in demand for vehicles running on a fuel that one man described as “practically free.”

New Hurdles Loom for Commodities ETFs

Investors consider ETFs and ETNs to be effective vehicles for gaining exposure to commodities in their portfolios. But their popularity may be working against them. Commodity ETFs and notes have to buy more underlying commodity futures contracts in order to be able to issue additional shares—and there's growing concern at the Commodity Futures Trading Commission (CFTC) that the deluge of money pouring into these ETFs and ETNs from retail investors may be distorting market prices. So far most of the attention is focused on certain energy and agricultural products, but that's enough to cause prices of ETFs that track broad commodity indexes to veer far from the funds' net asset values, making them less attractive than they were.

The Culprit: Retail Investor Demand

Doesn't that just figure? It reminds me of the gold coin proof advertised on TV. "51mg of pure 24KT gold" is roughly 1/20th of a gram of pure gold. 1 gram is roughly 1/28th of an ounce. 51 mg of pure gold is therefore currently worth roughly $1.78 (1/560th of $995). They say bad money drives out the good. 51 mg of gold for $19.95 sure seems like bad money. Clearly there is a deluge of people buying the coins though. The advertisements do continue.

I'd much rather spend the money on high quality toilet paper that can be easily hoarded for future needs than spend it on an overpriced toilet paper commodity ETF (with annual expenses!) OR a gold coin reproduction. Heck, I'm not even all that convinced gold itself is a bargain these days. Maybe that's just me looking at the gold to toilet paper price ratio. It seems nearly as messed up as the oil to natural gas price ratio in my humble opinion.

Hey, just something to think about. As hard it is to do with stagflation in my name, I'm still bracing for deflation. Something too wickedly fishy smelling this way comes for my liking. Serious inflation seems obvious in the future. Unfortunately, betting on the obvious is often a good way to lose serious money.

That said, I do think natural gas is probably a relative bargain right now. It's fallen from the 2007 "bargain" price of $8.90 all the way down to $1.88. That's like having an 80% off coupon and using it to buy something from the clearance aisle.

In summary...

Oil seems very overpriced relative to natural gas to me.
Gold seems very overpriced relative to toilet paper to me.

I have no great desire to be long oil or gold at these prices, and that does not bode well for my stagflationary name. As a saver simply trying to protect my nest egg, I am NOT complaining.

This is certainly not investment advice. I am long toilet paper though and have no positions (neither long nor short) in oil, natural gas, or gold.

The Sarcasm Report v.31 (Musical Tribute)

It's a Sarcasm Report AND a Musical Tribute? Oh happy day!

Get your 401k back in the game

The stock market is up roughly 45% from the bottom and we're now told to get back into the game? Figures. I'd say punt on 2nd down and head off to the locker room instead, but what do I know?



The research also found that only 31% of mutual-fund owners spoke with a broker or financial adviser on a regular basis.

If I buy a used car do I speak with the used car salesman on a regular basis? Do I value his continued insight on my purchase? It might be different if the typical broker or financial adviser actually offered advice better than a used car salesman I suppose. However, both sets of salesmen tend to say the same thing.

"There's never been a better time to buy."

That's just as true for brokers and financial advisers heading into the worst stock market crash since the Great Depression as it is for used car salesmen heading into the worst unemployment in decades.

Having too little in stocks now means missing out on a recovery.

News flash. You probably already missed it. Sorry!

Best Six-Month Stock Market Rally Since 1933

Those only tend to come around once every century or so. If you did miss it, does now really seem like the best time to plow back into stocks? What are you? A glutton for punishment?

Meanwhile...

Clunker Program Spurred August Sales

That's amazing! Who knew?

“G.M. and Chrysler still have a long recovery ahead of them,” Ms. Lindland said. “The fact is, they have gone as low as a company can go and still survive.”

Oh, I don't know about that. Both GM and Chrysler could go lower. They've already gone bankrupt once this year. What if they went bankrupt again at some point? It isn't like the Cash for Clunkers Program was made permanent. Oh wait. I should be optimistic I suppose.

Having too little in clunkers means missing out on the Cash for Clunkers Program!

There. That seems extremely optimistic, especially since the program has already ended.

Out of Gas

Cash for Clunkers came to a screeching halt at the end of August, prompting still-ongoing debate about just how fruitful the program will be for beleaguered dealers in the long run.

What's that saying about the long run again? Oh yeah, I remember.

"In the long run, we're all dead." - John Maynard Keynes

Keynesian economics

The advent of the global financial crisis in 2007 has caused a resurgence in Keynesian thought.

Heaven help us all.

$1,000 Whack a Mole™!

I have a new conspiracy theory based on $1,000 "precious barrier" (see below) thinking.

The powers that be (the government) don't like $1,000 gold. They'll do everything in their power to knock it down (assuming their sophisticated trading platforms can manipulate its price).

Other powers that be (some hedge funds) don't like $1,000 S&P 500. They'll do everything in their power to knock it down (assuming their sophisticated trading platforms have them positioned to profit off its decline).

It's a crazy theory of course. Totally crazy. It just doesn't make any sense that either of the powers that be would start whacking so soon.

Nikkei Comparison Suggests S&P 500 of 1400 by Year End – and 400 by 2014

Merrill Lynch Asia (Bank of America) strategists Sadiq Currimbhoy, Arik Reiss, and Jacky Tang suggest that the S&P 500 could soar another 40% by December 2010 before it collapses completely based on a unique comparison with the Nikkei 225.

...

Were we to apply the same approach to the analysis of the short-term price for gold and silver a record price would result for gold and a dramatic increase would be realized in the price of silver. Gold has gone up only 8% YTD vis-à-vis the S&P 500’s 13.9% or 57.5% as much. Therefore, should the S&P 500 go up 40% one could expect, under this scenario, that gold would go up a further 23% (57.5% of 40%) which would put gold well above that ‘precious barrier’ of $1000 to a record $1175 by year’s end. Again, the results of the comparative analysis seem achievable.

You know what? I'm fine just sitting over here on the sidelines in TIPS and I-Bonds. Permanently.