Joe's Investo-Blog

http://pragcap.com/those-who-ignore-history

by The Pragmatic Capitalist (pragcap.com)

My position over the last 2 years has been as follows: this is a Main Street debt crisis. I have been highly critical of the government’s incessant interventionist policies over the last few years largely because they ignore the actual problems at hand. First it was Mr. Bernanke saving the banks because he believed the credit crisis started with the banking sector. The great monetarist gaffe ensued. Tim Geithner piled on with the PPIP. FASB jumped on board the bank rescue plan by altering the accounting rules. And then the icing on the cake was the Recovery Act, which, in my opinion, just shoveled money into the hole that had become the output gap, without actually trying to target the real cause of the crisis – those burdened by the debt. In essence, the various bailouts primarily targeted everyone except the people who really needed it.
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Asset Allocation, Banks, Economics, Financial Crises, Growth Asset Allocation, debt, deleveraging, Economics, economy, EU, fiscal policy, history, strategy, The Administration, US treasury

http://www.bloomberg.com/news/2010-08-30/gold-rallying-to-1-500-for-analysts-as-soros-s-bubble-inflates.html

Investors are accumulating enough bullion to fill Switzerland’s vaults twice over as gold’s most- accurate forecasters say the longest rally in at least nine decades has further to go no matter what the economy holds.

Analysts raised their 2011 forecasts more than for any other precious metal the past two months, predicting a 10th annual advance, data compiled by Bloomberg show. The most widely held option on gold futures traded in New York is for $1,500 an ounce by December, or 18 percent more than the record $1,266.50 reached June 21. Holdings through bullion-backed exchange-traded products are already at more than 2,075 metric tons, within 0.1 percent of the all-time high.

“Either a swift economic recovery or further dismal economic performance should bring new buyers into the market,” said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt who was the most accurate forecaster in the first quarter and expects the metal to rise as high as $1,400 next year. “A stronger economy would create more jewelry demand. If the economy stays weak or gets worse, then investors will be looking for a safe haven.” Read more…

Asset Allocation, Gold, Inflation/Deflation, Markets Asset Allocation, economy, Gold, growth, strategy

Money Supply Confuses Deflation’s Confused Proponents
By John Tamny

http://www.realclearmarkets.com/articles/2010/07/27/money_supply_confuses_deflations_confused_proponents_98592.html

The great British political economist John Stuart Mill long ago noted that “the whole of goods in the market” composes “the demand for money.” To put it more simply, money is just the measuring rod that facilitates the real exchange of actual goods and labor.

As such, when production and labor increases, so does the supply of money. Conversely, when both decrease the supply of money declines. To make basic what is basic, money supply’s expansion and decline is a function of production.

This is important in light of all the handwringing among deflation’s confused proponents at present, Ambrose Evans-Pritchard of the Daily Telegraph the most notable in this regard. Watching the “Ms” in decline, Evans-Pritchard notes that they did much the same in the 1930s, and naturally suggests we’re headed for a 1930s style Great Depression.

Assuming we are, it can’t be stressed enough that a decline in the monetary aggregates would be and is a symptom of reduced economic activity, not a driver of same as Evans-Pritchard supposes.

Considering deflation itself, the total perversion of its meaning continues to reach staggering heights. That deflation is always and everywhere a symptom of rising currency values doesn’t seem to concern its true believers despite the fact that the world’s currencies are mostly in decline. That Japan’s deflation was a function of the yen tripling in value against gold (the opposite direction of the world’s currencies today) is wholly ignored by a deflation cult convinced that Japan’s sufferance of an overly strong yen mirrors a period of broad currency weakness. That prices fall all the time thanks to productivity enhancements doesn’t concern its religionists either. That there’s little interest in accessing credit during periods of deflation (borrowers aren’t eager to take out loans that will rise in cost) hasn’t shaken the beliefs of an economic sect that mistakes an inflationary lack of credit for deflation.
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Banks, Currencies, Economics, Inflation/Deflation Asset Allocation, Banks, Currencies, debt, deflation, Economics, exchange rates, fiscal policy, history, inflation, liquidity trap, monetary policy, monetary velocity, quantitative easing, The Fed, US treasury

To My Clients:

Our accounts are up 5.3 % for the Quarter and up 11.2 % for the year 2010 to date.

Even though the broad stock market indexes are all down over 10 % this past quarter, we have been fortunate once again to show positive returns in our accounts with a targeted and conservative approach. Our tech stock, Sandisk, was up over 20%, our gold stocks were up 12% and our long-term treasury bonds were up 10%. The largest portions of our accounts remain invested in cash and short-term treasury securities. Short-term interest rates will remain at historic lows and we expect long-term interest rates to continue to decline even as federal debt surges.

The alleged “recovery” recently has been showing signs of weakness and debt problems continue across the globe leading to volatility and weakness in the stock markets. There is considerable discussion among economists and analysts as to whether we will enter into a double dip recession. We don’t necessarily agree and tend to follow a recent new term to describe the current outlook for the economy which is “muddle through”. Read more…

Asset Allocation, Banks, Bonds, Economics, Gold, Inflation/Deflation, Markets, Portfolio Management Asset Allocation, Bonds, debt, Economics, economy, fiscal policy, liquidity trap, monetary policy, Portfolio Management, stock market, stock picks, Stocks, strategy, The Fed

There Is No Such Thing as a Sovereign Budget Deficit.

By Mike Whitney

Deficits create demand. Demand generates spending. Spending generates economic activity. Economic activity generates growth. Growth generates jobs, increases government revenues, reduces deficits and ends recessions.

Simple, right?

When consumers have too much debt, they will not spend no matter how low interest rates are. This is not theory, this is fact.

If the government cuts spending at the same time as consumers, then overall spending declines and the economy slips into recession. This is what the deficit hawks want–a return to recession. This is politics, not economics.

KEYNE’S KOAN: Increasing the deficits, lowers the deficits
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Economics, Financial Crises, Inflation/Deflation, Politics Asset Allocation, collapse, Currencies, debt, deflation, Economics, EU, exchange rates, fiscal policy, history, IMF, inflation, monetary policy, Politics, Regulators, trade

http://www.bloomberg.com/apps/news?pid=20601103&sid=aqpASviGyLQc

April 26 (Bloomberg) — The bond vigilantes who punished governments for profligate spending in past years have gone into hiding.

Sovereign bonds yield an average 2.385 percent, about the same as a year ago and below the average of 3.08 percent in 2008 when the credit market seizure led investors to seek the safety of government debt, according to Bank of America Merrill Lynch index data. The cost to borrow is steady even though the amount of bonds in the index that includes nations from the U.S. to Germany and Japan has grown to $17.4 trillion from $13.4 trillion two years ago.

While the debt helped the global economy recover from its first recession since World War II, yields show bond investors aren’t troubled that the growth will spur inflation. Consumer prices excluding food and energy costs rose 1.5 percent in February from a year earlier in the 30 countries that form the Organization for Economic Cooperation and Development, the smallest gain on record.

“The fact that inflation is very well behaved, that provides the cover for central banks to remain on the sidelines and continue to pursue accommodative policies to help the economy,” said Thomas Girard, a senior money manager who helps oversee $115 billion in fixed-income assets with New York Life Investment Management in New York.
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Asset Allocation, Bonds, Economics, Inflation/Deflation, Markets Asset Allocation, Bonds, collapse, debt, deflation, Economics, economy, fiscal policy, inflation, monetary policy, Politics, Regulators, strategy, The Fed, US treasury

To My Clients:

Our accounts are up 5.4% Y-T-D and up 25.1% for the last twelve months.

The markets continue to show buoyancy as the economy very slowly begins a recovery. To a degree, this is largely a result of the Fed’s ineffectual efforts of getting money in circulation. Using the lowest interest rates in generations, the tactic is still seeking evidence of success. The curse of our banking system that in order to create money in circulation, it is wholly dependent upon loan and debt creation to inject money into the economy. However, consumers having been severely burned, no longer want to be in debt and, banks likewise, don’t really want to lend, sometimes even to their best credits. Money in circulation cannot grow unless people borrow and banks lend. Given the recent rising markets, it appears that banks are largely pumping and loaning money into financial assets instead of into bricks and mortar businesses that create jobs. Full recovery will still take some time.

Having said all of that, the economy is Read more…

Asset Allocation, Banks, Economics, Financial Crises, Gold, Markets, Portfolio Management, Stocks Asset Allocation, Banks, collapse, debt, Economics, economy, monetary policy, performance, Portfolio Management, stock market, Stocks, strategy, The Fed

By JAMES ALTUCHER

Last Updated: 4:51 AM, April 18, 2010
Posted: 1:21 AM, April 18, 2010

http://www.nypost.com/p/news/business/rally_believing_it_D49EqJdvdwnjU0aHSrGygJ

The data suggest that the economy is starting to surge upward. Here are 25 statistics and anecdotes that suggest that the strength in the economy is real:

1. Average hourly wagesare $18.90, up from $18.52 a year ago. (Before employers hire full-time, they get their workers to work overtime, resulting in higher pay).

2. Aggregate weekly hours worked is the highest it’s been since June 2009 — again, suggesting overtime. Only so much overtime can be worked before hiring begins.

3. Industrial production index up 9 months in a row after plummeting 13 percent from December 2007 to June 2009.

4. Retail sales up 10 percent year over year.

5. GDP last quarter showed 5.9 percent annual growth.

6. Initial unemployment claims have gone from a peak of 643,000 in April 2009 to 480,000 now.

7. The Greek debt crisis seems to be ending without major fallout in the form of other nations defaulting.
Read more…

Asset Allocation, Markets, Portfolio Management, Stocks Asset Allocation, performance, Portfolio Management, stock market, Stocks, strategy

To My Clients:

Our accounts are up 24.1 % for the year 2009.

Our accounts, together with the stock and bond markets, have performed quite well this past year despite large holdings in each account of low yielding T-bills and Treasury bonds. It is still quite difficult to find reasons not to continue our successful defensive strategies of the past three years in which we’ve been quite fortunate to obtain positive returns in each year.

The credit crisis is far from over, and although there are indications that the recession is coming to an end, it also appears that it will be a far from robust recovery. The best that can be said of the economy is that it has stopped declining. Employment continues to lag and will continue to be a severe drag on any recovery. In spite of the Federal Reserve’s efforts to stimulate monetary growth, it is not happening, as banks remain fearful of lending and continue to leave their reserves on deposit at the Fed. What little stimulus we are seeing seems to be finding its way into the financial markets so far, with little to show in the real economy.

The dollar has been declining for most of this past year with only recent signs of a turnaround. This has contributed to our Read more…

Asset Allocation, Banks, Bonds, Currencies, Economics, Financial Crises, Gold, Inflation/Deflation, Markets, Portfolio Management Asset Allocation, Banks, Bonds, Currencies, debt, deflation, economy, exchange rates, Gold, inflation, monetary policy, performance, Portfolio Management, stock market, strategy, The Fed, trade

To My Clients:

Our accounts are up 20.41 % Year-To-Date.
The Dow Jones Average is up 10.66 % Year-To-Date.

Although the stock and bond markets have been quite buoyant over the last several months, it is still quite premature to declare the longest postwar recession, over. There are still considerable risks to the economy. The massive fiscal stimulus together with the central bank’s printing of money is beginning to unnerve central banks around the world that hold huge portfolios of dollars. Consequently, the dollar, which is the world’s reserve currency for trading commodities such as oil, is in decline. This means that it will become more difficult for the government to borrow massive amounts of money from foreign sources, and imports, such as oil, will rise in price. Interest rates will also rise as necessary to attract the needed capital. Likewise, gold has been rising in price and is reaching all time highs. Read more…

Asset Allocation, Bonds, Currencies, Economics, Financial Crises, Gold, Inflation/Deflation, Markets, Stocks Asset Allocation, Banks, Bonds, Currencies, debt, economy, exchange rates, fiscal policy, Gold, inflation, monetary policy, performance, stock market, stock picks, strategy, The Fed

From Northern Trust Research
September 21, 2009

Chairman Bernanke noted last week that a recovery is most likely underway. Our forecast is for a 2.5% increase in real GDP during the third quarter, which is slightly lower than the market consensus. The advance estimate of real GDP for the third quarter will be published on October 29.

The Index of Leading Economic Indicators rose 0.6% in August, the fifth consecutive monthly increase of the index. On a year-to-year basis, the index moved up 1.89%, the largest gain since May 2006. The July-August average translates to a 1.32% from the third quarter of 2008, the first increase since the first quarter of 2007. Historically, the year-to-year change in the LEI advanced one quarter has a strong positive correlation with the year-to-year change in real GDP (see chart 1). This evidence and other economic reports — ISM manufacturing survey, industrial productions index – support expectations that an economic recovery commenced in the third quarter of 2009.

Real GDPLEI advanced 1 quarterIndex of Leading Economic Indicators vs. Real GDPyear-to-year percent changepercent changer = 0.79

In August, the workweek held steady, jobless claims, orders of non-defense capital goods and real money supply declined. The remaining seven components – orders of durable consumer goods, supplier deliveries, building permits, interest rate spreads, index of consumer expectations, and stock prices moved up. Effectively, there is a widespread improvement in economic conditions, which had been brought about by policy changes. The impact from monetary policy accommodation is evident. The possible impact from the $787 billion fiscal stimulus package will be available in 2010. By the end of fiscal year 2009, roughly 24% of the fiscal package will have been spent.

Asha G. Bangalore
agb3@ntrs.com
Northern Trust Global Economic Research
50 South LaSalle
Chicago, Illinois 60603
northerntrust.com

Economics, Financial Crises Asset Allocation, collapse, deflation, Economics, economy

HOW LITTLE WE KNOW

by Harry Browne

August 22, 1984

You’ve probably had the experience of reading a newsletter’s (blog’s) explanation of what is about to happen in the world. The writer presents a sensible, logical, compelling argument that something is inevitable based on what has gone before and where we are now. His case is so plausible and rational that it’s obvious he must be right.

But then you pick up another newsletter (blog) and find another preview of the inevitable -and it’s exactly opposite to the forecast in the first newsletter. And the second writer’s arguments are just as logical, sensible, plausible, and rational as the first writer’s.

Which one are you supposed to believe? The question could be critical. Each writer might be urging you to invest all your capital in line with his forecast. To choose wrongly could be disastrous.

So how do you decide which one of them is right?   Read more…

Asset Allocation, Economics, Gold, Humor, Markets, Portfolio Management, Stocks Asset Allocation, deflation, Economics, economy, fraud, Gold, Humor, inflation, performance, Portfolio Management, stock brokers, stock market, stock picks, Stocks, strategy

To My Clients:

Our accounts are up  5.7 % Y-T-D.
The Dow Jones Average is down 3.75 % 

Very briefly, the administration is soon to engage in massive stimulus fiscal spending while the Federal Reserve continues its massive monetary stimulus activities. While these endeavors always take time to filter into the economy, the stock market and the bond market have recently been somewhat buoyant, not necessarily because an economic recovery is imminent, but possibly because of the monetary stimulus taking place. The U.S. Treasury is making enormous demands on the bond market with the huge amounts of debt it needs to sell to finance the fiscal spending and the Federal Reserve is accommodating the Treasury by purchasing large portions of the U.S. Debt.  Read more…

Economics, Financial Crises, Markets, Portfolio Management Asset Allocation, economy, fiscal policy, monetary policy, performance, Portfolio Management, stock market, Stocks, strategy, The Fed, US treasury

With the current administration’s economic policies moving solidly ahead, everyone’s a Keynsian now. Right? It was John Maynard Keynes who remarked that the gold standard is a barbarous relic. Well maybe the “gold standard” is, but central banks around the globe clearly think gold itself may be somthing of high value (Europeans excepted).

Much of the region’s Central Bank’s gold that has so far been held in London may soon return to Dubai.

The new vaults of DMCC will be a home to the gold allocated to the Dubai Gold Securities (DGS) Exchange Traded Funds (ETFs). The vault may also become a natural choice for storage of gold reserves by central banks in the regional market, analysts said. Read more…

Asset Allocation, Banks, Currencies, Gold Asset Allocation, Banks, Currencies, Gold, strategy