Can anyone refresh our memories with a timeline of what FMT went through? I thought the restructuring deals it did would take them away from the problems. What residual exposure did they have that took them down?
Who was it that was saying the insurers were going to get off scott free from the CDO debacle?
I saw Richard Kotok from Cumberland Investors stating that insurance companies were a safe way to play financials. That was several months ago.
Even funnier, two years or so ago, Cramer was pumping the red hot home builders. He argued that they were now "land banks" and therefore not subject to their previous cyclicality. What a joke. Someone should slam him with a you tube video.
OT: Can inflation persist if asset values are crashing down around us? Houses rapidly becoming worthless, along with their securities. Losses in muni bonds as tax revenue dries up. The consumer not spending and corporate profits down. Layoffs. Bank failures. This does not sound like inflation to me. Or am I totally off base?
I just bought AIG shares. These losses are likely no more than accounting issues due to having to mark these assets to market. Obviously the market value for anything subprime is very low since there are lots of sellers and not many buyers.
AIG is one of the premiere insurance companies in the world and is now selling close to book value. This will double in the next few years.
We are conditioned and jaded to all these losses, despite the staggering sum. Billions here billions there, where do they get the money from, I wondered? Good Uncle Sam! Amazing!
DaveJ,
Good luck to ya man, but trying to call the bottom on this is a fool's game as far as I'm concerned. This won't be their last write down. Everyone hasn't even taken their seats yet for THIS show.
Well the good news is that 4Q earnings season is almost over. The Financial sector as a whole will end up in the red for the quarter, normally it is the biggest earner by a big margin in the S&P 500. Time to start turning the focus to the 1Q writeoffs. Will they be bigger or smaller than the 4Q? My guess is smaller, but not by a large margin. Tomorrow i will have the latest figures and will post them (total financial sector losses vs. total earnings a year ago). Might just throw in total S&P earnings vs. a year ago. As of last week S&P total earnings were running 18.1% below a year ago, but ex financials were up almost 15%.
Tanta Alert! More anecdotes about borrowers that can afford their mortgage walking away! Brought to you by none other than the folks at the Rupert Show, otherwise known as the WSJ.
Two things, first, don't you think Buffett is doing a heck of a job with his $33 billion in goodwill accounting and second, don't yah think Bernanke is doing a heck of a job with rate cuts?
This entire site is filled with doom and gloom and I just can't see what the problem is, because this writedown is a great opportunity for someone!
I am not trying to call the bottom. I am just trying to buy something that is selling way below its true value. AIG can generate ROE of 13-16% for decades and so will grow at 10% at least. That makes it one of the bluest of blue chips and when this is over it will regain its premium valuation.
I am less concerned with some one time write-downs and more interested in the long term picture. They are after-all primarily an insurance company. This other stuff is a side business. They will also be able to take advantage of the problems with the other mortgage insurers and really make huge gains in this line of business if they want it. I really don't think that mono-line mortgage insurers have a viable business model. AIG should really dominate that business in a few years.
Senator Charles Schumer, a New York Democrat, chaired a joint House-Senate Economic Committee hearing on the issue Thursday. "It is becoming clear to all Americans, Republicans, Democrats, Independents, that by continuing to spend huge amounts in Iraq, we are prevented from spending on important goals and vital needs here at home," he said.
But Republicans argue that withdrawing troops from Iraq would have its own costs. "A virtually immediate withdrawal advocated by some politicians is not militarily feasible, and a premature withdrawal could produce immense costs, both in human terms as well as economic terms," said Congressman Jim Saxton, a New Jersey Republican.
A report by the committee's Democratic staff members estimates that the economic cost of the Iraq war has exceeded $1 trillio
OT: Can inflation persist if asset values are crashing down around us? Houses rapidly becoming worthless, along with their securities. Losses in muni bonds as tax revenue dries up. The consumer not spending and corporate profits down. Layoffs. Bank failures. This does not sound like inflation to me. Or am I totally off base?
Well, the nature of Wall Street now is that they can take a small amount of inflation in the money supply and focus it all on one area (e.g. oil and other commodities) using leverage to compound the effects.
I think this is creating the appearance of a more general inflation when there really is none (in the US -- other countries have serious inflation problems).
I think this can continue for quite some time unless the Fed gets aggressive with speculators or the economy just implodes.
With oil over $102 the economy might just implode.
DaveJ, To be devils advocate: Using Japan as an example...sometimes buyers are just not that interested in investing where they have been burned badly before. Betting on anyone related to housing for a long time may not pan out as expected. We are not just going to restart the housing cycle like its 1997.
A troubled insurance company selling at book value? Step right up folks!
Ummm, do you know what free and clear assets are included in the so-called "book value" of an insurance company? Hint: if you estimate the liquidation value of the furniture and office supplies, you won't be far off.
DaveJ,
Based on your analysis, I think you should buy 'til you're blue in the face. Pick up some homebuilders while you're at it. They're undervalued for sure.
I often wonder why analysts estimates are so important that take off or take a dive if above/below estimates.
Thats why I found this from the Bloomberg AIG piece a knee-slapper
"Excluding capital losses and the change in value of some derivatives, the company's loss was $1.25 a share, missing the 69-cent-profit average estimate of 17 analysts surveyed by Bloomberg."
anyone who thinks we're close to a bottom psychologically is way off. We haven't gotten capitulation unless you think this solvency issue was a 2 quarter hiccup that the central banks have fixed.
the equity markets are trading down but just barely scraping near bear market territory and are in a narrowly defined range, waiting for a signal up or down. I see a lot more downside risks in the credit markets and geopolitically that haven't been factored in yet, judging by the market reaction to phoney baloney monoline bailouts.
I'm guessing people who are calling a bottom in equities in this environment are forgetting [or weren't around for] the late '70s when publications like Business week and Barron's were asking "Are equities dead?"
We're not close yet. But shorts may get killed on the way down. Top two rules of equity trading are still in effect: don't fight the trend and don't fight the Fed.
The trend is sideways with downward pressure while the Fed is furiously pumping money into the system.
CR - Just a thought. I am losing track of all the write downs. I remember when it was just over $100 billion, but don't know what it is now. A plot of write downs per month over time would be a great way to visualize the progression of the impact of the solvency issues on the financial sector.
kcdOOp- "anyone who thinks we're close to a bottom psychologically is way off."
I like the way you summarize the situation, and would only add that the so-called smart money seems to think we're near a bottom. Conjure and I think they're in for a rude awakening.
Also, these new Wells Fargo guidelines are a major negative.
Financials make up approx 18% of the S&P, bothers me greatly when analysts begin to speak about ex-anything. Approximately 112 stocks in the S&P last year were down 20%+, ex-those, the performance was alright.
Ex-one time charges, earnings looked good, pro-forma, EBITDA, bullshit. Problem is one-time charges are recurring for those that report pro-forma, biggest bunch of BS reported today.
Throw in 3 or 4 paragraphs of disclosure in the regard to the importance of using non-GAAP financials to add "clarity" to the results and you're golden.
Sorry Dirk, not picking on you in particular, just the system.
I am not a housing bull by any means. I am not buying banks stocks or home builders. But AIG is not a bank. It's exposure to mortgages is large but nothing like a bank carying loads of soon to foreclose loans. AIG stopped insuring these MBSs in 2005. Vintage matters a lot even though the media usually ignores it. I am sure that CR and Tanta would agree on that.
If the AIG CEO is right that these are paper losses that will reverse in the future then this will boost reported earnings in the future just as it hurt it now.
There is another way to look at it. If houses prices drop 30% like most of us expect and foreclosures sky-rocket, this would likely bankrupt much of the US banking system. The US government would never let that happen. Bank of America would fail long before AIG does and WaMu would fail way before that. Neither of these failures is going to happen because the government is going to bail it all out. Yes that is unjust and that is not capitalism but that is going to happen nonetheless. The government is not going to allow a depression simply to satisfy some free-market purist bloggers.
Haloscan, oh Haloscan, I still hear your reload twirlin'
I see the status bar slowin'
21 minutes since I clicked Haloscan
Haloscan, oh Haloscan, I still hear your servers crashing
Hope of reading comments dashing
I click refresh and dream of Haloscan
I still see her struggling to reload
Waiting there for comments I cant see
Is there something waiting there for me?
On the blog where we had such fun
Haloscan, oh Haloscan, waiting here and sighing
Before I quit and just stop trying
Before I see your reload icon say that its done
At Haloscan, At Haloscan
DaveJ: It's too bad you don't see your errors here. I am sure you have and will continue to seek out information that justifies your purchase. Cheap companies can get cheaper, way cheaper than you are allowing for. So while your holding your well run, low book value insurance company I'll go hold a few shares of Gold and sprinkle that in with an agri name or two.
I am afraid that you will need to expand your hold horizon far longer than you are planing for as the shares are about to go lower.
I'm trying to teach my kid about saving and compound interest. I realize it's an unAmerican thing to do, since my kid learned that the government WANTS good Americans to take their $600 and BLOW it.
I'm looking for an account that might show the effects of compound interest, but Benny, is screwing my lesson plan all to hell.
Maybe I ought to take my kid to a dealership and show her a Hummer instead.
If the gov't could prevent a recession you'd get a pony with a ribbon of any collor you wanted. If you are married wifey would be sprayed with aphrodisiac and if single, you'd get a Playboy playgirl for a week of fun.
It can't. But I want my Playboy palygirl anyway. You can have my pony.
I am always amazed at these people who think they are going to get rich from gold. Buy your 100 gold coins. In 2050 you will have 100 gold coins. Sure, as long as you time the market perfectly and get out before it crashes you will do fine. However, the last time we had a run up in gold in 1980, these gold bugs just held on and probably never sold. They are always convinced that the end of the world is coming. Of course they greatly under performed stocks and bonds since 1980.
Today, tomorrow and Monday, the Treasury is issuing 76 Billion in new treasuries. The Fed has to monetize this as the primary dealers cannot carry this much. This is on the heels of already tens upon tens of Billions in earlier treasuries this year. We are getting buried in treasuries and that is what is starving out other markets for capital. With this now compounding at an accelerating rate, alot of rumours about people getting very nervous about holding T-bills as the fiscal deficit (federal) blows sky high. Watch out for a sharp and sudden increase any day in long term rates. Drowning in treasuries we are. This is what's killing the dollar, and there's no end in sight, in fact it's going to get worse as the need to issue more treasuries mounts further. fugly.
Gold might have a little juice left in it in the short term but 3-5
years from now I'd be shocked if AIG didn't outperform gold from these
levels.
HAHAHAHAHA!!! Thanks for the laugh!
Buffet himself has stated that investors shouldn't expect more than 5% annual returns for the foreseeable future. Gold will give another 150%+ within the next few years just to get back to inflation adjusted highs, and the fundamentals are much better than they were back then.
Wallster... AIG will trade in the $30s on the next downleg, before this Qtr is over. No reason to rush. I don't dispute that AIG will emerge from the financial distress and trade higher than today at some point. But why not get as many shares as you can for the money?
I'm always amazed at the gold bugs too. Just more speculation and market timing like equities. Sooner or later the price comes down and you have a box of gold. Great. Try taking that to the gas station. If you're buying gold and then selling gold you're speculating. If you're keeping it in a box, your...errr....keeping metal in a box.
OK tj, I'll bite. Please describe to me how the paper with be worthless? Please describe to me how your gold will be better. Relative to what? Worth what to whom?
"I am always amazed at these people who think they are going to get rich from gold. Buy your 100 gold coins. In 2050 you will have 100 gold coins. Sure, as long as you time the market perfectly and get out before it crashes you will do fine"
Rewrite:
I am always amazed at these people who think they are going to get rich from "PAPER". Buy your 100 "PIECES OF PAPER". In 2050 you will have 100 "PIECES OF PAPER". Sure, as long as you time the market perfectly and get out before it crashes you will do fine.
Dip sh*t...your paper goes to NOTHING in a crash. Gold still has value. You're a nut job. BTW I DID paln it perfectly. 90% of my PM was bought in 99-2000 from my bubble money. Gold ~250, silver ~4.5.
And the run hasn't even started yet, because the MSM JUST started reporting the prices of g&s in radio coverage.
Good luck schmuck.
As I said I want to hear a friggin argument about the value of those damned CDO's AIG is holding. Waiting shmuch. Stupid attack when you defend nothing. Give me that friggin CDO analysis shmuck.
tj, answer the question, it's not lame at all. I asked a question...relative to what and to whom? What are you going to do with that box of metal? What are you going to trade for it and where do you draw this conclusion from? All of a sudden, the world is going to stop and turn to gold to purchase everything? The Eurozone is going to collapse, the US government is going to collapse, etc etc? All of this by 2050?
You people are just too funny. You can never answer the question. Gold is only worth whatever you can trade for it in the currency that is accepted. And that fluxes wildly over time.
tj, instead of tossing out those straw men, answer the question directly. To whom and how much? The same with misean. Who is going to take your gold? For what? I have a box of gold. What is it's intrinsic value? What do I get for it?
And I'll toss this out there: would it be implausable for a government to make it illegal to hold or sell gold?
I held some gold myself, in GLD. I cut my position in 1/2 this week and will probably liquidate the rest soon. I don't trust it, since reserve banks hold the bulk of stock and they can begin selling any day they choose, crushing prices. A lot of nations already agreed to pare back. Won't be good for gold. Once it heads south, it's a long way down.
funny how this flamefest is about the value of gold vs paper (in a bank) on the very evening that Ben says to the government that Some Banks may Fail.
Seems to me headlines like this are why gold keeps moving up.
Yeah sure if the chances of the financial system going chaotic return to 0.01% then gold can swoon - although the CPI rises are working hard to put a floor under gold in USD - but right now the chances for chaos appear to be a good 10%! Who can predict the outcome of chaos? In that case I'm very happy to have about 20% of my liquid assets in gold. It is a good counter-weight to my USD and GBP holdings, and post-chaos I'm not even sure whether "blue chip stock" will have the same meaning.
barely that's the point. It's value isn't "intrinsic".
Gold was only used as a store of value, historically, because it is the only (common) metal that doesn't corrode. So if you FIXED a value on it (which was FIAT-based) it would always be that value by weight and, therefore, was a reliable store of that FIXED value. And the phrase "de-basing the currency" can about because the content of gold was diluted with other metals, thereby changing the weight of the gold which had some FIXED value associated with it.
Otherwise it's just a shiny object. But some people are mezmerized by shiny objects. Fiat is fiat.
"because it is the only (common) metal that doesn't corrode"
Yeah, right...that's the only reason. You obviously know jack sh*t about how RARE it is, how DIFIICULT it is to get out of the ground, and the fact that it's mining potential is declining.
Misean, If you can't eat it, put it in a tank, produce anything of use with it... - it's a pure speculation vehicle. It could double from here. I don't know. It's a game of chicken between holders. Just don't be stubborn once the price shows weakness. Good luck!
BTW - There are other PMs and minerals with real uses other than just jewelery.
Just getting in before rice & bean dinner.
Misean you be right, I bought a little gold last year not for investment but so I would eat in the future.
Dave J either really young or ?
jo6pac
2050 I'll be dust
Yes Misean I know...and all of a sudden the entire world will only take gold again. That will happen next week I'm sure.
The calamity that would bring that about none of us would survive (which means that every government would have to fail). Somehow, I think all these pieces of paper will keep going lost past my life-time.
That's just it -- throughout history there's always somebody that'll take gold. You can't say the same about ANYTHING else.
Try taking rupees into Central America; maybe pesos into Southeast Asia; heck, try getting almost anyone in South Central LA interested in a ruble. NOT HAPPENING. Gold, OTOH, will get you in the door anywhere. It's human nature at it's most basic; the value of the shiny metal is ingrained within us.
Sure the value fluctuates. Gold isn't an investment, it's the world's only true stable currency (i.e., "store of value"). Everything else fluctuates around it.
Lots of people describe it as simply a hedge against inflation. No, it does well in deflation too. Know why? Gold is the ultimate safe haven, the best port in a storm. It doesn't move with inflation, it moves inversely to economic & political stability (which run hand-in-hand, of course). Just so happens that inflation and deflation are both signs of instability.
Now, if you think goldilocks just went to the bathroom to purge and will soon be back happily binging, sure, gold will retreat as the dollar (and the economy) regains it's footing. OTOH, if you believe as I do, that the US is bankrupt, cheap energy is history, and the consumer is tapped out, well, then, gold has nowhere to go but up.
The stock markets? Sure, there's good companies out there, but they'll get dragged down with the rest of them. Happens every time.
LOL...you know that black stuff on the silver? It's OXYDATION. Why don't you look up that word and see what it means. Tarnish is oxidation on silver, which lessens the content of pure silver over time as it changes chemical composition.
Gold isn't that rare at all. And it doesn't OXYDIZE, therefore, over 100 years, it's specific weight is the same.
I understand your point, always have. But a trusted medium of exchange allows for the beneficial transfer of your labour doing X, for the product of you store keep selling Y. The dollar is tanking. If a new fiat is constructed will your old fiat, or PM be a better store to exchange for that fiat.
If things hit the fan...you think someone might like a gold or silver coin or a piece of worthless paper.
And of course if I see a turn around I will sell. I sold quite a lot of paper in 99.
No tj, you have to take the gold and convert it to the currency of the place that you mention. If something is stable, that means it's value doesn't change. Again, what intrinsic value does gold have and how do you meansure it?
Gold's only value is contained in what you can buy with it. That changes, so therefore gold doesn't have intrinsic value. You can't eat gold or burn it for heat. You can only trade it for those things. Since all currency has been disconnected from it, it's value is realtive.
Many years ago, twenty-six to be exact, I was acquainted with a couple, Bill and Herta, who both worked for the same major New York bank.
Bill talked about only four things: his luxury condo on the Hudson (Jersey side); "The One-Minute Manager," an easily forgettable book on employee supervision; HerbalLife; gold.
Anyway, Bill and Herta pumped a lot of paychecks into HerbalLife and gold. Finally, gold tanked. Bill and Herta divorced over gold. The luxury condo was sold. Both lost a lot of weight using HerbalLife. She went back to Germany and Bill ended up managing an office in Karachi, I believe.
Anyway, that's my gold story. There's probably a moral in there somewhere, but I don't know what it is.
Oh, I just love the "intrinsic value" argument. Total BS.
Anything is worth exactly what someone else will give you for it when you need to sell it. Taken to logical ends, gold has perhaps the highest intrinsic value of all, because it has always appealed to our most basic human instincts even though we have no real "need" for it.
What do we really need? Food, water, shelter and love. If I'm not hungry, I don't want your food. If I'm not thirsty, I don't want your water. BigPicture had plenty of $100 house listings the other day, and money can't buy you love.
And I'll toss this out there: would it be implausable for a government to make it illegal to hold or sell gold?
ipodius | 02.28.08 - 10:02 pm | #
No not at all, your points are something I struggle with every time I buy more, but what would the price of pot be if legalized and cultivated with modern farming techniques?
In the end the market will determine the value of the FRN's and PM's no matter what our government does. We each get to chose our own poison.
You sir are a charlatan. That black stuff is not oxidation. It is metal impurity. I have 100 year old coins of silver with no "black stuff" on them. They are PURE silve. You're an idiot discussing something you know nothing about. Silverware is 14 to 18 karat dumb ass.
You next refuse to address platinum.
Then you say something SO STUPID, that I just have to laugh. Gold really isn't that rare. Sir you are an idiot. Unless you find a credible source to backstop your stupidity, I shall ignore any other post.
Gold can hold value in an inflationary period. Under the right circumstances, it can be a good place to store some of your money. Hell, I have some gold funds in my IRAs right now.
The, "Gotta have gold, and stick it in a box in my basement, and guard it with my guns, because all of the pieces of paper are going to go to zero," argument, though, is ridiculous. It's based upon a pile of unlikely assumptions, all of which have to come true for it to be correct. The conjunction of all of those assumptions leads to such a bad conclusion, even if I have a bunch of gold in my basement, that I discard it as something to bother planning for. There are a lot of scenarios that I can imagine that I discard as options worth building my plans around.
Now, maybe it's different for Misean. It sounds like he's got a lot of wealth. Certainly, he's talked about taking possession of a lot more precious metal than I could possibly buy. So, his worst case scenario is that he's sitting on a pile of gold that depreciates a lot, but is still sufficient for him to live off of. A lot of us don't have that luxury. I have to make plans based upon the idea that in all of the likely scenarios, I can't afford that sort of haircut. I actually need the money.
So, I'm staying the hell away from any gold bug ideas.
\tNo tj, you have to take the gold and convert it to the currency of the place that you mention.
No, you don't. That's just what you've been conditioned to believe. Heck, if you believe the VISA commercials, nobody even accepts cash or checks anymore. Wake up!
Since all currency has been disconnected from it, it's value is realtive.
Back-asswards. The value of all fiat currencies is relative.
That's just it -- throughout history there's always somebody that'll take gold. You can't say the same about ANYTHING else.
Well, nuts and berries have always had value. Wheat has had value ever since it's been cultivated. Houses have always had value, though it's admittedly overblown at the moment. Cows.
More, all of these things have a direct use that makes me better off. Gold, not so much.
thoth, i spent the first half of my life programming so i type way to fast for my own good. And my reasoning is fine, as is the example about silver and gold. If you can give me a reasoned argument against what i've said, i'm all ears. as far as the bed part goes...i'm not sure what that has to do with economics or money, except if i'm taking gold for the favor
Man, y'all are pissing me off by making me jump in here.
Gold has intrinsic value to human beings, period.
Any culture, any time.
If I Give someone an eighth oz. of gold, they'll keep it. In fact, they won't lose track of it. Why? 'Cause it's gold, dumbass.
Look at gold in culture. From the story of Midas, to Rapunzel, to the "gold and treasure" of pirate lore. Two of the greatest expansion/migrations in the history of North America were because of gold. King Tut's tomb was filled with gold, as were the tombs and temples of South America, Asia, and SE Asia. According to legend, where is all of the gold in America historically kept? Fort Knox. Every school kid knows it. When Constantinople fell, the citizenry swallowed their gold and jewels, only to have it cut from their stomachs by the invading Ottoman Turks. In the Bible, the three wise men's gifts included gold. Not for nothing is the 50th wedding anniversary known as the Golden Anniversary.
Old sayings:
As good as gold.
All that glitters is not gold.
A golden opportunity.
Coins are still minted in gold. Gold is still kept in vaults (quite an expense for a "worthless shiny metal", by the way).
Gold has value to humans. Why? Who cares!
Go gold. Go silver. Go platinum and palladium. Go PMs!
No, you don't. That's just what you've been conditioned to believe.
OK tj, I'm going to Europe in 10 days on business. Please tell me where I can take my gold with me and spend it on a hotel, food, transportation, and a couple of gifts for the people i am meeting with. After that, I'm going to Argentina, so i'd appreciate it if you'd tell me where i can do the same things there.
The haircut's happening because you don't have gold. It's called fiat inflation and asset deflation.
I've done pretty well being short those assets the last eight months. Again, my argument isn't that gold can't be a good investment, or even that it isn't a good investment right now.
My point is that your arguments are a lot more extreme than that, and they are based upon a set of contingencies that are highly unlikely. You are arguing that there is no way to invest in pieces of paper (or electronic bits) that won't leave you with no wealth at all. The chances of that happening within my lifetime are remote. They're non-zero, but remote. It isn't worth my time planning for them.
Let's stop this argument. You paper bulls come back in 6 months and let me know how secure you feel in your paper and I'll let you know how many Stoli martini's I get for free.
We'll,
Keep It Simple Stupid,
"The, "Gotta have gold, and stick it in a box in my basement, and guard it with my guns, because all of the pieces of paper are going to go to zero," argument, though, is ridiculous."
Just tell me what your inflation adjusted investments are worth. Oh, and not CPI but dollar basket. CuZ that's what gold and silver track.
If anyone was paying attention to my arguments above, they'll note that I said gold was a "safe haven". That doesn't mean it's always a good deal.
In the 70's we had the cold war, the oil embargo, double-digit inflation, etc. It looked pretty bleak, like things could fall apart. Of course, gold soared. Then "the man" stepped in -- Volcker -- and kicked inflation's ass. The cold war ended, gas was cheap again, hey... things settled down (as did gold).
No need for gold when the world is safe and people are doing well.
HOWEVER, that is NOT the case these days. Like Misean, I didn't get into gold until this century, and -- no doubt like Misean -- will someday get back out of it. When we do, we'll be better off for it. It's called buy low, sell high, folks.
p.s.: If "systemic risk" does show it's ugly face, it doesn't matter what it says on your pieces of paper.
Marcus Aurelius, no one said it was worthless. The point of the discussion is, what value does it have? What can I get with it and how much? Or is it just another speculative asset?
There was a day when you gave people gold and silver because, in bad times, they could sell it. That's the tradition of silver wedding gifts and the like. You sold it if you needed money (because certain social classes didn't...you know...work). Those customs are now quaint.
So my point is that gold is just another speculative avenue that doesn't have any natural value. It only has value relative to other things. And the "worthless pieces of paper" argument is just baseless because if it gets to that, none of us are going to be around to debate it, as the ensuing world collapse will have taken all of us with it.
So buy gold as an inflation hedge if you think it's value is increasing relative to whatever you're hedging against. But don't buy it to put in a box or because you think Sam's Club is going to start taking it at the register, or you're going to buy fuel with it. That's just Mad Max syndrome.
A diverse investment portfolio, now more than ever, would seem rational to me. Trying to get my husband to twist off on some copper, of course he thinks that is nuts!
Right now, it's got a value of $970.10 per ounce. Two days ago, it was $930. What's happened to the dollar since then? Gold holds intrinsic value (enough that it ranks very high among commodities throughout history).
Ask them how much of their gold jewelry they ate off of in 2002.
Yes AllenM they sold it for something. The amount of which was determined by what? The price of the gold, or the price of the gold relative to....what? Can I eat better with that gold now? Could I eat better with it in 1590?
Heck, I'm making plenty on the short side, too. Still, the returns on gold is already 300% since 2000 -- hard to ignore, plus you have the "catastrophic insurance" angle to boot. You can never be too safe.
Okay, there's a new reason to buy gold, silver, oil or food. It's because they are hot, speculative investments in times of Fed rate-cutting, massive rebate programs, massive federal and trade deficits, Obama wanting to give away the federal store, etc.
Yes, there is liquidity out there, and it's moving into these commodities. The hedge funds that were jerking emerging markets around a few months ago now are jerking commodities around. So, why not get with the flow?
With the ETFs, you can buy these things like stocks: GLD, SLV, USO, DBA. All are doing really well in 08 so far. You can get in, make a few bucks, and get out pretty easily.
So, just think of these as the stocks du jour, but instead of being linked to the stock market they are delinked and actually linked to monetary disgust and uncertainty.
Actually, Ipodius, when I moved to Oregon in 1995 I went to a used car lot, picked out a 4X drive, and paid for it in one-ounce gold Eagles. At the time, spot price was $380., and that's what the dealer accepted it as.
You can buy with gold/silver coins anywhere except tight-ass corporate businesses.
Take a gold eagle with you and ask who wouldn't take it. Making change would be a pain, but any smaller businessman would easily accept it. It's only the robotic chains that employ people incapable of recognizing true value.
There are some folks here who are trying to conflate the argument, "Gold is a good investment," with the argument, "Gold is the only good investment." I am not arguing against the first; as I said in my first post, I own some gold. I am calling the second one ludicrous.
It was sold relative to the price in any number of currencies. ipodius, you seem to be struggling with a rational economics basis, when in reality you should ask "What is a dollar?"
Not what is gold. What is a fiat currency? What is a MEFO? Understand those and you might begin to understand what happens when what you consider money is no longer accepted by folks.
For food. Gee, if you are trading gold for food essentially, you have fallen very far down Maslow's hierarchy of needs.
The question that should be asked is how long will the rest of the world trust in the dollar like you do?
Remember, the folks making the decisions think like me.
Legend has it that king Tut was buried with Stock Certificates from the Great Egyptian Pyramid Fund. They mouldered away to dust - too bad they couldn't pass the test of time. In the end, they weren't worth the papyrus they were written on.
Marcus, they'll take the value of either at the time they can trade them for something useful...like the dollar. The same holds for the car example. Someone will weigh out the gold, look it up, and then accept whatever amount is right in terms of the dollar. Both these examples speak to my exact point.
But this discussion was fun. At least it was more lively than reading through a 10K I just get a kick out of gold bugs.
If you want to buy energy commodities, a better choice than USO right now might be DBE. It is a PowerShares ETF that is diversified across several energy complex contracts. You might get a spring bounce in gasoline.
At last I can contribute something. Silver tarnishes from sulfur compounds in the air (not from oxygen). Platinum and gold not so much. And if you want to see real inflation look at rhodium (close by to silver on the periodic table). I am thinking of keeping my dogs in the lab at these prices. These precious metal prices make it a lot harder to come up with economical processes for energy savings, since a lot of approaches use platinum group metals.
ipodius, gold is historically solid value- embodied in it's very fundament.
Gold bug I am not, inflation victim, well yes.
On the other hand, I did get a 30 year fixed mortgage for a half million bucks in dec 2005- a deal I would never had made if I didn't trust in inflation being our destiny- what value will those last payments be after twenty years of inflation? How much will those dollars buy in terms of my weekly grocery bill?
I would never suggest that anyone put all their eggs in one basket- in fact you should be diversified.
After all, chocolate will eventually be currency again;-} Just wait long enough.
But like a commenter up above said, by 2050 I will most likely be dust. Just like Keynes;-}
Under Skilling, Enron adopted mark to market accounting, in which anticipated future profits from any deal were tabulated as if real today. Thus, Enron could record gains from what over time might turn out losses, as the company's fiscal health became secondary to manipulating its stock price on Wall Street during the Tech boom. But when a company's success is measured by agreeable financial statements emerging from a black box, a term Skilling himself admitted, actual balance sheets prove inconvenient. Indeed, Enron's unscrupulous actions were often gambles to keep the deception going and so push up the stock price, which was posted daily in the company elevator.
Mark-to-market accounting method
Section 475(a) sets forth two mark-to-
market rules. First, any security that is in-
ventory in the hands of a dealer must be
included in inventory at its fair market
value. Second, any security that is not in-
ventory in the hands of a dealer and that is
held at the close of any taxable year is
treated as sold by the dealer for its fair
market value on the last business day of
that taxable year, and any gain or loss is
required to be taken into account for that
taxable year. identification of its securities.
Issue 2: Is a bank or an insurance com-
pany excepted from the mark-to-market
rules on the grounds that it is, per se, not a
dealer in securities within the meaning of
§ 475(c)(1)
I'd rather be the guy who owned soap. If this mess gets to the point where a dollar isn't worth the paper it's printed on, soap will be more valuable than gold.
Marcus, king tut was dead, and had no use for either, but burying that box of it sure did some others good that stole it. A lot if the gold was melted down, and may now even be in something you own. They traded it for whatever they could buy in the currency of the day. The rest is in display cases for people to look at.
I bought gold at 350 and silver at 5 in 2003, a lot of it and only a few oz. i got a good deal on since. I find it highly amusing to read some of these post. Hope none of you here ride this thing down when she blows but I'm sure there will be some, just like those who were buying overpriced homes in 2006. You might have a couple of years if your lucky as I'm usually that early in calling a top. New gold ETN's DGZ, DZZ, are out to short gold it may be a fun when the shit hits the fan like it always does.
Dont have any fascination for gold. Dont even look at what weve got. Of course its speculative, but its also the ultimate defensive speculation thats worked quietly, diligently, consistently for us since 2001 when we bought CEF and 2004 when we bought physical.
We could have bought a house for cash any of those years. When I told my wife wed be nuts to buy a house at 13 times ave annual income in our community, but that this stack of coins will get us there in a cash market, she blanched. Now it seems its just a matter of time. It was common sense, both given unfunded liabilities of the system and the FEDs track record: buy an encumbrance free asset that was hated by the masses.
Apparently Ipodius wishes he had bought gold seven years ago when it languished at $260/oz and all his goldbug friends recommended it.
I can't imagine any other explanation for his obtuseness.
Oh, and also, gold and silver both have powerful anti-microbial properties. Surgical instruments are now being alloyed with silver, and silver-permeated clothing has been designed for soldiers (to prevent infection of bullet wounds).
Oops, there goes dumb argument about how PM's are intrinsically useless.
unirealist who says I didn't? My only point is that it's just another speculative investment vehicle the value of which changes. There is no magic for it, and i don't believe that anyone will return to a gold standard in my lifetime. I'm just trying to understand why people think it is any different than that.
ipodius, I am 41, but from 1977-1987 I lived in milwaukee and s.e. michigan.
traumatic formative years led to an interest in economics, now a profession.
Soap is good, almost any household goods are good. Lol- Costco got its big start in the 70's due to inflation. Buy large lots of goods and you beat inflation.
One of the contributing factors to me stopping commenting on BdL's website was how ungracious he was in response to my needling him about the need for a large freezer.
Legend has it that king Tut was buried with Stock Certificates from the Great Egyptian Pyramid Fund. They mouldered away to dust - too bad they couldn't pass the test of time. In the end, they weren't worth the papyrus they were written on.
Which raises the question as to whether the Dead Sea Scrolls, or a comparable volume of ancient gold, has appreciated more...
Marcus Aurelius writes:
Right now, it's got a value of $970.10 per ounce. Two days ago, it was $930. What's happened to the dollar since then? Gold holds intrinsic value (enough that it ranks very high among commodities throughout history).
Seriously, in this bubble economy with money leaving equities and questionable bonds chasing anything that is moving higher, can you assign any reasonable cause for the rise in gold other than pure speculation? I am not disputing that the price of gold has gone up nor that it seems that it might run higher in the short term. It's foolish to read too much into the gold run. Just like the run in builder equities over the past couple of weeks.
I just think gold fever will run its course and when it does the bottom is a long way off. Gold is not a productive asset.
AllenM, lived mostly in Boston, but have worked in Chicago (1989-1992) and LA too. The only thing I liked about Milwaukee is that frozen custard that has more butterfat than a whole cow. God it's good.
Tech guy, but also studied macro and did the MBA thing. Now still do tech, but on the Finance side and also teach it. So take the arguments as fun academic challenge
But now you're talking! Personally I load up on paper goods and other items as inflation hedges. While other people are spending $2 a roll for TP, I'll still be working off my .30 stock lol. I once had a professor that went through that as an exercise. It was pretty funny.
"but burying that box of it sure did some others good that stole it."
Wrong again. King Tut's tomb was one of the first undisturbed tombs found. That was why it was such a find. Knowing history and doing research is just such a bother.
Misean, it took me exactly 20 seconds to find this on the tomb.
Carter could tell that tomb robbers had dug a hole through the upper left section of the passageway (the hole had been refilled in antiquity with larger, darker rocks than used for the rest of the fill).
This meant that the tomb had probably been raided twice in antiquity.
I just bought AIG shares. These losses are likely no more than accounting issues due to having to mark these assets to market. Obviously the market value for anything subprime is very low since there are lots of sellers and not many buyers.
AIG is one of the premiere insurance companies in the world and is now selling close to book value. This will double in the next few years.
To follow up on this discussion, I might point out that every premium AIG has collected has been invested in some kind of financial instrument, not just subprime. Heck, I trade energy derivatives, and I've had AIG Cap in buying and selling NG derivs. They are not some simple insurance company, but a financier with a portfolio that probably is only topped by a handful of global IBs.
Simply put, going forward, every time a counterparty crashes out of existence or a particular niche paper market freezes up, odds are AIG has exposure. Getting long might prove brilliant, but I wouldn't touch these guys with a ten foot pole. You just don't know what kind of insane "financial innovations" have infected their books.
To chime in on the AU discussion, I've been long the beautiful metal for a long time, but this is starting to feel like the extension of a 5 leg.
I'll never sell all of it, just because, worst case, you might need it one day to feed your family, but the sentiment out there is getting REALLY bullish. And now CALPERS. A cover story on Gold! on Time Magazine is all that's left to call a top.
The situation has become increasingly uncomfortable amid the worsening U.S. economy and the rising price of oil,'' said Mitsushige Akino, who oversees the equivalent of $555 million at Ichiyoshi Investment Management Co in Tokyo.I expect the yen to remain strong against the dollar for the time being.''
`It's still unclear how bad it's going to get with the U.S., and I get the feeling we're looking at the bleakest period right now,'' said Naoteru Teraoka, who helps oversee $21 billion at Chuo Mitsui Asset Management Co. in Tokyo. ``It's hard picking Japanese stocks at the moment, because as market falls, there hasn't been any real safe haven.''
** Naoteru Teraoka needs to pull that ninja samurai sword out of his kimono and or behind and wake up to smell jasmine tea and wake up: Qatar, which bought "under" 2% of Credit Suisse, is looking to spend between $10 billion and $15 billion over the next two years on bank stakes to diversify the country's economy from oil and natural gas, Sheikh Hamad bin Jassim Al-Thani said in an interview in Doha, Qatar.
"In the United States, we need to wait a little," Sheikh Hamad said late on Saturday. "We think there are still problems with the banks."....
"Regulators are bracing for well over 100 bank failures in the next 12 to 24 months, with concentrations in Rust Belt states like Michigan and Ohio, and the states that are suffering severe housing-market problems like California, Florida, and Georgia," said Jaret Seiberg, Washington policy analyst for financial-services firm Stanford Group.
o misean i'm pretty diversified. i don't have faith in any one thing. and i'm not naive enough to believe in the intrinsic value of anything. but i'm certain that the US government isn't going anywhere in the next 50 or so years i'll be around, and its currency will also be around. and at the end of the day, that's what i'll be paying the bills with. and i'll sell anything that will maximize that exchange.
and i don't care about leaving anything to anyone either. why should someone else live off my work? all going to be given away.
I own minted physical PMs. I don't trade, I hold. I would never consider leveraging or PM stocks (go ahead and try to time the market - you might as well play Black Jack). I also hold foreign currencies. I would expect the currencies would go to zero before the PMs.
There are $1 trillion in outstanding subprime mortgages, with potential losses estimated at about $250 billion, said Bose George, an equity analyst with Keefe, Bruyette & Woods Inc. Columbia University professor Charles Calomiris pegs the losses even higher at between $300 and $400 billion. Merrill Lynch's Bostjancic said the biggest impact of rate resets, from a dollar perspective, will come in the third quarter of 2008. She sees losses from all loan defaults exceeding $500 billion in 2008.
what the hell am I doing getting in the gold fight ? Still, in for a (gold) penny.
I'll always concede the value of good in the context of 1000's of years or even 100s of years - but that's too abstract for me - my life time is all that interests me and I tell ya - a 20 year bear market in gold ( 1980 - 200x) has a formative influence on me. I bought gold, in 1994, heck we'd had a bear market for 14 years mannnn, at $375, $400 and sat with it as it dropped to $250 ( yeah it didn't drop to cents like my dotcom stocks did , but STILL ) before it FINALLY turned around. I bought more around at 400, 650 over time, survived the dump from $730 to $556 in hmm 2 months ! a little while ago -
As ipodius says - gold is a speculative investment vehicle alright.
As Misean says - gold holds its value alright.
"no misean i'm pretty diversified. i don't have faith in any one thing. and i'm not naive enough to believe in the intrinsic value of anything. but i'm certain that the US government isn't going anywhere in the next 50 or so years i'll be around, and its currency will also be around. and at the end of the day, that's what i'll be paying the bills with. and i'll sell anything that will maximize that exchange.
and i don't care about leaving anything to anyone either. why should someone else live off my work? all going to be given away."
Then what's the bitch???
Anyway, I posted King Tut by Steve Martin above...
lol...i haven't seen that for years misean. i'm old enough to remember that on SNL. but my favorite was the spoof on the diamond cutting in the back of the car with the bris.
oh crap, i just mentioned diamonds! now someone will be hoarding those
AIG is a good company, but this is not akin to an accounting problem, a la Royal Ahold (Dutch Grocer) or other screwup. Stats are that in those cases, the market value of the company typically returns to norm in about 33 months...
This is more than just an accounting screwup. They accounted for things fine, but their whole strategy blew up in their faces. What else is hanging out there? The problem now is that this is akin to a financial version of "Transformers"; heretofore mundane and "safe" products are suddenly coming to life in a nasty little way and biting the user.
$500 Billion in resets coming | 02.28.08 - 11:35 pm
We're in such uncharted territory, we don't even have a name for it - recession, depression, inflation, deflation, stagflation, and biflation are all bandied about, but there is no catch-all term that can describe the situation we're in.
ipodius - I'm not a gold bug, I'm on your side if you feel Gold has proven itself to be a poorer store of value in the last hundred years than it was in the previous thousand or two before that. Romantic notions aside, gold isn't all that special anymore.
But when you imply that the only good thing about Milwaukee is the frozen fucking custard... it's ON!
I'm not trying to be difficult, but I sincerely don't get the gold thing at all. A productive asset would be one that, over the lifetime of the asset, produced more economic value than the cost of the asset. The key word is produced.
Gold, paper money, diamonds, shells, etc are only stores of value; that value represented by what you can exchange it for at some point in time in the current exchange medium. That exchange rate is based on external forces, supply and demand, etc.
So I don't understand why someone would think that one store of value is any better, over time, than another. The only thing gold has going for it is that it was used for a long time and it doesn't corrupt physically. But precious stones have also been used. In the end, they trade for something. And if all the peasants in the end won't take your gold for wheat because they want water, you starve.
Silver has more productive value than AU, but the AU is more productive for my peace of mind than fiat currency.
There's nothing buried in the yard and my grandkids won't have to rent a metal detector to scan the house when I'm gone, but having a bit handy is just comforting.
And if you think that the end of the world stuff doesn't have a psych impact, we went thru my wife's grandmother's home with a fine tooth comb prior to sale for cash that had been squirreled away.
What's the old banker's statement? "Keep 10% in gold just in case you need it."
Gold holds its value. Yeah, just like houses and land. We are doing into a deflation. In deflation, paper money does just fine. Commodities do not do so well.
I really do not see the reason why people are so scared about AIG. What is an insurance company? They get paid to take risks. They get paid to write their names on little pieces of paper and make promises. That is what they do. These write-downs are simply mark-to-market losses and the only reason people know about them is that these pieces of paper sometimes get sold and so have a "market price". Because of that GAAP makes them record a loss.
What about all of the other pieces of paper with insurance company promises that don't get traded. Insurance accounting works on the principle that mark-to-model is how they book profit and loss. When Buffett writes a contract to insure Lloyds against asbestos he doesn't mark that contract to market every day. There is no market so his actuaries figure out what the "earnings" or losses are. If he had to try to sell that contract he might find that he would have a giant write-down. This AIG write-down is not fundamentally different. Management has said many times that they do not expect these to result in actual cash losses. Whether or not you believe them is up to you.
Misean,
Busted. I'm with some agency that doesn't like stills. Better chop it up with an ax, or I'll come to your home and arrest you for being the only productive manufacturer in the USA.
What is all the fuss concerning PM's vs. any other form of speculation?
EVERYTHING has it's cycle, and at some point during the cycle, you jump
financially from one "ship" to another "ship" which allows you to take advantage of the current trend or "wave". What does the trend tell us presently? PM's are still rising while equities will, at best, trade sideways, for the near term. Quite obvious, but duration should be debated.
What I would discount most, presently, is ANY political leader, or CEO of ANY company trying to sell me on any of the following concepts: the USD, the ability to avoid a recession, coupled with out of control inflation, or the VALUE of stock in their company.
Yes, they get paid to take risk but their risk is an underwriting risk and not a financial risk.
The whole point with insurance is that they are paid and taking the risk that you won't die during the coverage period. Or that New Orleans won't get wiped. Or that your house suddenly has skylights where none have been before (my inlaws, courtesy of Hurricane Isabella).
YOU are paying the money - where it could have greater productivity manufacturing widgets, investing in financial paper, paying for college or investing in PM - for the promise that you're made whole in event of the event. These kinds of financial decisions by insurers do not make the policyholder terribly happy.
And they also have to satisfy ratings agencies, FWIW since they are also regulated entities. And there is an impact when the capital/premium levels go too low. AIG can handle significant losses, to a point, but cumulatively they can turn your neighborhood AIG into MBIA.
Paraphrasing Andrew Tobias, I'm not sure what the weirdest thing in the world is, but Insurance Accounting is the second weirdest.
Depressions tend to bring the DOW down & gold up to rough parity. When it does again, I'll be switching out to stocks. Until then, even good company's stocks will be going down hard. Why invest in a declining asset?
Back to basics. Yes, gold is not a productive asset. In a world where pretty much all assets are declining (and fiat is inflating), though, a stable store of value is a great alternative. Again, the safe haven.
Speculative vehicle? Damn straight. There's a lot more fiat in the world then there is gold. Once everyone wants gold, you're going to see the mother of all bubbles. IMHO gold is now about where housing was in 2002, or maybe tech stocks in 1997.
Anyone that hasn't ever had a gold coin should get at least one; there's nothing quite like the feel of real money. It transcends borders, cultures and time itself.
tj & the bear,
You speak in truths. It is funny that others fight the progression, but it will happen. PM will bubble. Thanks. It took me awhile to figure out the next bubble, you made it clear. Grasshopper. (This is not in jest by the way.)
Ever read Janszen @ iTulip.com? He wrote a chapter in "America's Bubble Economy" on the coming gold bubble. Great stuff. Pick up the book if you haven't.
I don't necessarily believe in "Peak Oil," but the fact that the Saudis are one of the world's biggest investors in alternative energy research might tell you something.
Somethin' for nothin' get rich quick 'investments' like gold, houses, insurance stocks, derivatives and other such 'money makers' caused this whole problem....bunch of hypocrits you all are loving PM's.
Anyone that hasn't ever had a gold coin should get at least one; there's nothing quite like the feel of real money. It transcends borders, cultures and time itself.
Anonymous writes:
Somethin' for nothin' get rich quick 'investments' like gold, houses, insurance stocks, derivatives and other such 'money makers' caused this whole problem....bunch of hypocrits you all are loving PM's.
Well, I'm not selling my PM's any time soon. I'm just getting a jump on the next money when the fiat system crashes and burns. I don't plan on my PMs ever being converted back to FRNs.
"I bought gold at 350 and silver at 5 in 2003, a lot of it and only a few oz. i got a good deal on since. I find it highly amusing to read some of these post. Hope none of you here ride this thing down when she blows but I'm sure there will be some, just like those who were buying overpriced homes in 2006. You might have a couple of years if your lucky as I'm usually that early in calling a top. New gold ETN's DGZ, DZZ, are out to short gold it may be a fun when the shit hits the fan like it always does."
In the same situation as you, just wondering when we know we are near the top - gold and silver...signs/symptoms?
Anon,
I'm sure you are right. Sell now. Selling early is okay as long as you buy early. PM have a long way to go, but sell now and lock in your profit. Use you profit to buy corn. That is the way to go. If corn prices decline, you can always shove it up your chimney to burn for energy....
The top will be in when everyone is telling you about their gold and readily debate the merits of various mining companies. Bubbles aren't bubbles until the general public goes crazy, and that just hasn't happened yet.
from Jeff Christians Commodities Rising: gold accts for 30% of worldwide commodities derivatives trading. it does not trade so much as a commodity but as a financial asset. the ratio of these derivatives to the underlying physical gold mkt is 60:1 and was as high as 100:1 in the 90's. in almost all other commodities this ratio is only 5:1 to 10:1 and for oil around 20:1. thus gold and silver have much deeper and broader forward mkts.
this begs the question as to why this is. the fact is that gold and silver trade like financial assets and not like commodities. one finds similar ratios of derviatives to physicals in currency trading and interest rate mkts like the US treasury bills and bond mkts.
as a general response to all you gold doubters; you scoff at the single best performing asset of the last 7 yrs? this is what Wall St describes as climbing a wall of worry.
I really do not see the reason why people are so scared about AIG. What is an insurance company? They get paid to take risks. They get paid to write their names on little pieces of paper and make promises.
Correct me if I'm wrong, but an insurance company is an arbitrage vehicle between return on investments and insurance losses.
AIG has several hundred bean counters. One group anticipates future investment returns. Another anticipates future losses. Management does some math and out pops a price that sales guys go to market with.
The problem is that the first set of bean counters, the one with the model of investment returns, predicts that the future will most likely resemble the past. They are writing policies based on 8%+ real return on investments. What happens to profits is real returns drop to 4%? What if real returns are negative?
And, there is always pressure from the sales guys on the bean counters to up the expected returns on their investment models (usually based on some untested investment strategy) and the loss bean counters are always under pressure to lower the expected losses (usually be selling some untested insurance product).
Insurance was a great buy in '81 when everybody anticipated low and declining real returns and T-Bonds were paying 14%. Effectively, you leveraged up the equity boom. It wasn't such a good buy in '69 or '29.
Of course, if this is just a blip and we're back on the road to 8%+ real returns, AIG is a great buy.
Oh and OT:
Gold is a horrible investment (high transactions costs, carrying costs) until it isn't. It isn't a productive assets, so you'll never get rich investing (opposed to speculating) in gold but you may stay rich. Sometimes that's enough.
But, if your just worried about a future where your worried about eating, store food. Gold is only a useful asset for those fleeing the storm or after the storm has passed overhead. For those caught in the storm, it's not so good.
Bought a couple of gold coins a few months ago for 740. Now they're, umm 960 or so. Not bad. But I didn't buy them to make money, but for the very small possibility I'd want them for survivalist purposes. Also have some 100 oz silver bars--they don't seem to tarnish either.
Not all eggs in one basket. Own a house, have money in the mkt--a bit--sold out most months ago.
Etc, etc.
Why is everybody being so rude to each other on this theme?
DaveJ - past performance does not guarantee future results. Enron did very well when their core business was tank terminals and pipelines and utility-related. Its when they went into the "casino" business that they got into trouble. Lesson to be learned here. When you go the the stockholders meeting, please ask them where they are hiding the losses on the environmental secured creditor insurance.
Who was it that was saying the insurers were going to get off scott free from the CDO debacle?
Just one more wrong expert.
second ?
Can anyone refresh our memories with a timeline of what FMT went through? I thought the restructuring deals it did would take them away from the problems. What residual exposure did they have that took them down?
Here is the WSJ piece about it:
Credit Crunch Hammers AIG - WSJ.com
Who was it that was saying the insurers were going to get off scott free from the CDO debacle?
I saw Richard Kotok from Cumberland Investors stating that insurance companies were a safe way to play financials. That was several months ago.
Even funnier, two years or so ago, Cramer was pumping the red hot home builders. He argued that they were now "land banks" and therefore not subject to their previous cyclicality. What a joke. Someone should slam him with a you tube video.
Oh, that's quite modest!
Merrill to shut down subprime lending unit: First Franklin
Merrill to shut down subprime lending unit: report
| Reuters
OT: Can inflation persist if asset values are crashing down around us? Houses rapidly becoming worthless, along with their securities. Losses in muni bonds as tax revenue dries up. The consumer not spending and corporate profits down. Layoffs. Bank failures. This does not sound like inflation to me. Or am I totally off base?
I just bought AIG shares. These losses are likely no more than accounting issues due to having to mark these assets to market. Obviously the market value for anything subprime is very low since there are lots of sellers and not many buyers.
AIG is one of the premiere insurance companies in the world and is now selling close to book value. This will double in the next few years.
Jakob,
CPI = Consumer price inflation.
Housing & equity prices are not measured as part of CPI. Incidentally, they are not part of national savings measurement either.
It's the Death By a Thousand Cuts.
A few billion here, a few billion there, and pretty soon it starts to add up to real money.
We are conditioned and jaded to all these losses, despite the staggering sum. Billions here billions there, where do they get the money from, I wondered? Good Uncle Sam! Amazing!
DaveJ,
Good luck to ya man, but trying to call the bottom on this is a fool's game as far as I'm concerned. This won't be their last write down. Everyone hasn't even taken their seats yet for THIS show.
Well the good news is that 4Q earnings season is almost over. The Financial sector as a whole will end up in the red for the quarter, normally it is the biggest earner by a big margin in the S&P 500. Time to start turning the focus to the 1Q writeoffs. Will they be bigger or smaller than the 4Q? My guess is smaller, but not by a large margin. Tomorrow i will have the latest figures and will post them (total financial sector losses vs. total earnings a year ago). Might just throw in total S&P earnings vs. a year ago. As of last week S&P total earnings were running 18.1% below a year ago, but ex financials were up almost 15%.
Tanta Alert! More anecdotes about borrowers that can afford their mortgage walking away! Brought to you by none other than the folks at the Rupert Show, otherwise known as the WSJ.
Borrowers Abandon Mortgages as Prices Drop - WSJ.com
Mr Enga expects 10 to 15% of those counseled will walk away. Well, I say 18%!!! Anyone 20%?
Two things, first, don't you think Buffett is doing a heck of a job with his $33 billion in goodwill accounting and second, don't yah think Bernanke is doing a heck of a job with rate cuts?
This entire site is filled with doom and gloom and I just can't see what the problem is, because this writedown is a great opportunity for someone!
17th, try to beat that!
I am not trying to call the bottom. I am just trying to buy something that is selling way below its true value. AIG can generate ROE of 13-16% for decades and so will grow at 10% at least. That makes it one of the bluest of blue chips and when this is over it will regain its premium valuation.
I am less concerned with some one time write-downs and more interested in the long term picture. They are after-all primarily an insurance company. This other stuff is a side business. They will also be able to take advantage of the problems with the other mortgage insurers and really make huge gains in this line of business if they want it. I really don't think that mono-line mortgage insurers have a viable business model. AIG should really dominate that business in a few years.
Senator Charles Schumer, a New York Democrat, chaired a joint House-Senate Economic Committee hearing on the issue Thursday. "It is becoming clear to all Americans, Republicans, Democrats, Independents, that by continuing to spend huge amounts in Iraq, we are prevented from spending on important goals and vital needs here at home," he said.
But Republicans argue that withdrawing troops from Iraq would have its own costs. "A virtually immediate withdrawal advocated by some politicians is not militarily feasible, and a premature withdrawal could produce immense costs, both in human terms as well as economic terms," said Congressman Jim Saxton, a New Jersey Republican.
A report by the committee's Democratic staff members estimates that the economic cost of the Iraq war has exceeded $1 trillio
So who else is holding out for a "Trillion" dollar loss?
OT: Can inflation persist if asset values are crashing down around us? Houses rapidly becoming worthless, along with their securities. Losses in muni bonds as tax revenue dries up. The consumer not spending and corporate profits down. Layoffs. Bank failures. This does not sound like inflation to me. Or am I totally off base?
Well, the nature of Wall Street now is that they can take a small amount of inflation in the money supply and focus it all on one area (e.g. oil and other commodities) using leverage to compound the effects.
I think this is creating the appearance of a more general inflation when there really is none (in the US -- other countries have serious inflation problems).
I think this can continue for quite some time unless the Fed gets aggressive with speculators or the economy just implodes.
With oil over $102 the economy might just implode.
Markte Watch
Time to draw a line under the financials. Despite more writedowns, the bottom is near for shares (I strongly disagree.)
Time to draw a line under the financial stocks David Callaway - MarketWatch
DaveJ, To be devils advocate: Using Japan as an example...sometimes buyers are just not that interested in investing where they have been burned badly before. Betting on anyone related to housing for a long time may not pan out as expected. We are not just going to restart the housing cycle like its 1997.
DaveJ --
AIG can generate ROE of 13-16% for decades
Perhaps, but that "E" of theirs just got chopped by $11 billion.
I am less concerned with some one time write-downs and more interested in the long term picture.
If you are absolutely certain about the "one time" part, then you have made a fine investment. Probably.
A troubled insurance company selling at book value? Step right up folks!
Ummm, do you know what free and clear assets are included in the so-called "book value" of an insurance company? Hint: if you estimate the liquidation value of the furniture and office supplies, you won't be far off.
This AIG thingy is just another Nothing Burger.
You should continue to pour money into stocks for the long term.
All this daily bad news in the MSM is a dead giveaway of a bottom in housing, stocks, everything.
Buy, buy buy.
DaveJ,
Based on your analysis, I think you should buy 'til you're blue in the face. Pick up some homebuilders while you're at it. They're undervalued for sure.
I got some Sharper Image stock if you would like some DaveJ. I feel it is way undervalued.
Did I sleep through Friday?
Is it time for the Friday Nite Loonies already?
Wheeeee! Nikkei down only 352...
Wholly F***!
Hahhaaahhahaaa!
I often wonder why analysts estimates are so important that take off or take a dive if above/below estimates.
Thats why I found this from the Bloomberg AIG piece a knee-slapper
"Excluding capital losses and the change in value of some derivatives, the company's loss was $1.25 a share, missing the 69-cent-profit average estimate of 17 analysts surveyed by Bloomberg."
anyone who thinks we're close to a bottom psychologically is way off. We haven't gotten capitulation unless you think this solvency issue was a 2 quarter hiccup that the central banks have fixed.
the equity markets are trading down but just barely scraping near bear market territory and are in a narrowly defined range, waiting for a signal up or down. I see a lot more downside risks in the credit markets and geopolitically that haven't been factored in yet, judging by the market reaction to phoney baloney monoline bailouts.
I'm guessing people who are calling a bottom in equities in this environment are forgetting [or weren't around for] the late '70s when publications like Business week and Barron's were asking "Are equities dead?"
We're not close yet. But shorts may get killed on the way down. Top two rules of equity trading are still in effect: don't fight the trend and don't fight the Fed.
The trend is sideways with downward pressure while the Fed is furiously pumping money into the system.
Death by a thousand cuts indeed.
CR - Just a thought. I am losing track of all the write downs. I remember when it was just over $100 billion, but don't know what it is now. A plot of write downs per month over time would be a great way to visualize the progression of the impact of the solvency issues on the financial sector.
DavidJ,
I think you are a tout plant.
You want an underestimated asset to invest in?
Silver, gold, platinum.
You want to argue that vs. AIG's CDO portfolio...bring it.
BTW US Peso is looking for a new bottom.
Super Colander Tin foil Hat about electrocuted me today.
Cheers,
kcdOOp- "anyone who thinks we're close to a bottom psychologically is way off."
I like the way you summarize the situation, and would only add that the so-called smart money seems to think we're near a bottom. Conjure and I think they're in for a rude awakening.
Also, these new Wells Fargo guidelines are a major negative.
Dirk-
ex-6 continents, subprime is contained.
Financials make up approx 18% of the S&P, bothers me greatly when analysts begin to speak about ex-anything. Approximately 112 stocks in the S&P last year were down 20%+, ex-those, the performance was alright.
Ex-one time charges, earnings looked good, pro-forma, EBITDA, bullshit. Problem is one-time charges are recurring for those that report pro-forma, biggest bunch of BS reported today.
Throw in 3 or 4 paragraphs of disclosure in the regard to the importance of using non-GAAP financials to add "clarity" to the results and you're golden.
Sorry Dirk, not picking on you in particular, just the system.
I am not a housing bull by any means. I am not buying banks stocks or home builders. But AIG is not a bank. It's exposure to mortgages is large but nothing like a bank carying loads of soon to foreclose loans. AIG stopped insuring these MBSs in 2005. Vintage matters a lot even though the media usually ignores it. I am sure that CR and Tanta would agree on that.
If the AIG CEO is right that these are paper losses that will reverse in the future then this will boost reported earnings in the future just as it hurt it now.
There is another way to look at it. If houses prices drop 30% like most of us expect and foreclosures sky-rocket, this would likely bankrupt much of the US banking system. The US government would never let that happen. Bank of America would fail long before AIG does and WaMu would fail way before that. Neither of these failures is going to happen because the government is going to bail it all out. Yes that is unjust and that is not capitalism but that is going to happen nonetheless. The government is not going to allow a depression simply to satisfy some free-market purist bloggers.
Haloscan, oh Haloscan, I still hear your reload twirlin'
I see the status bar slowin'
21 minutes since I clicked Haloscan
Haloscan, oh Haloscan, I still hear your servers crashing
Hope of reading comments dashing
I click refresh and dream of Haloscan
I still see her struggling to reload
Waiting there for comments I cant see
Is there something waiting there for me?
On the blog where we had such fun
Haloscan, oh Haloscan, waiting here and sighing
Before I quit and just stop trying
Before I see your reload icon say that its done
At Haloscan, At Haloscan
Cheers,
DaveJ: It's too bad you don't see your errors here. I am sure you have and will continue to seek out information that justifies your purchase. Cheap companies can get cheaper, way cheaper than you are allowing for. So while your holding your well run, low book value insurance company I'll go hold a few shares of Gold and sprinkle that in with an agri name or two.
I am afraid that you will need to expand your hold horizon far longer than you are planing for as the shares are about to go lower.
Good luck on holding your little pot o' gold.
AIG is one of the premiere insurance companies in the world and is now selling close to book value. This will double in the next few years.
DaveJ
Was that meant to be funny? The book value is the freaking problem. It's based on false assumptions. Look at the homebuilders.
DaveJ,
OK Tout plant:
"The US government would never let that happen."
And how would they stop it? Answers please. How would it be funded? No printing press BS please. Please discuss the CDO pool as well.
Cheers,
In Midsummer Nights Dream
Puck transforms Bottom to have an ass' head. I assume that it is this Bottom some experts are talking of.
The government is not going to allow a depression
THE ONLY THING I CAN SAY IS WTF?
Misean - AIG's stock price tomorrow will probably open around $48. Gold is 973.40/oz.
You would honestly take gold? I'll take AIG.
Gold might have a little juice left in it in the short term but 3-5 years from now I'd be shocked if AIG didn't outperform gold from these levels.
Super Colander Tin foil Hat about electrocuted me today.
LOL!
Regarding DaveJ:
The MSM is siting CR and other blogs.
The Touts are Effing nervous. On tech pages we have viral marketers...people going to well known discussion boards and hyping products.
DaveJ is the same thing here. Trying to get in and promote/market failing financial firms. I've seen it too many times.
These Trout paid marketeers always avoid being trolls, they try to seem rational. Their owners know that trolling gets people banned.
Cheers,
wallster,
I just loaded up on 500 oz of silver. Take your garbage paper. I'll be smokin' macunudos and sipping Stoli while you eat ramen and count your losses.
The Government won't allow a Depression...does that mean I get free Prozac with my Pony?
tj,
Dollar action has me worried. And so does Yen carry trade. Y/D couldn't do nothing...stuck at 105ish.
Cheers,
May your most prized possessions be a bicycle and a rice bowl.
I'm trying to teach my kid about saving and compound interest. I realize it's an unAmerican thing to do, since my kid learned that the government WANTS good Americans to take their $600 and BLOW it.
I'm looking for an account that might show the effects of compound interest, but Benny, is screwing my lesson plan all to hell.
Maybe I ought to take my kid to a dealership and show her a Hummer instead.
Tom Stone,
If the gov't could prevent a recession you'd get a pony with a ribbon of any collor you wanted. If you are married wifey would be sprayed with aphrodisiac and if single, you'd get a Playboy playgirl for a week of fun.
It can't. But I want my Playboy palygirl anyway. You can have my pony.
Cheers,
I am always amazed at these people who think they are going to get rich from gold. Buy your 100 gold coins. In 2050 you will have 100 gold coins. Sure, as long as you time the market perfectly and get out before it crashes you will do fine. However, the last time we had a run up in gold in 1980, these gold bugs just held on and probably never sold. They are always convinced that the end of the world is coming. Of course they greatly under performed stocks and bonds since 1980.
Today, tomorrow and Monday, the Treasury is issuing 76 Billion in new treasuries. The Fed has to monetize this as the primary dealers cannot carry this much. This is on the heels of already tens upon tens of Billions in earlier treasuries this year. We are getting buried in treasuries and that is what is starving out other markets for capital. With this now compounding at an accelerating rate, alot of rumours about people getting very nervous about holding T-bills as the fiscal deficit (federal) blows sky high. Watch out for a sharp and sudden increase any day in long term rates. Drowning in treasuries we are. This is what's killing the dollar, and there's no end in sight, in fact it's going to get worse as the need to issue more treasuries mounts further. fugly.
Gold might have a little juice left in it in the short term but 3-5
years from now I'd be shocked if AIG didn't outperform gold from these
levels.
HAHAHAHAHA!!! Thanks for the laugh!
Buffet himself has stated that investors shouldn't expect more than 5% annual returns for the foreseeable future. Gold will give another 150%+ within the next few years just to get back to inflation adjusted highs, and the fundamentals are much better than they were back then.
Wallster... AIG will trade in the $30s on the next downleg, before this Qtr is over. No reason to rush. I don't dispute that AIG will emerge from the financial distress and trade higher than today at some point. But why not get as many shares as you can for the money?
I'm always amazed at the gold bugs too. Just more speculation and market timing like equities. Sooner or later the price comes down and you have a box of gold. Great. Try taking that to the gas station. If you're buying gold and then selling gold you're speculating. If you're keeping it in a box, your...errr....keeping metal in a box.
In 2050 you will have 100 gold coins.
And you'll be holding a bunch of worthless paper. Then again, you might have used it (in the bathroom) by then.
Stuart-
That is complete bullshit, they already announced they plan to issue less this year than last and provided estimated timing for the auctions.
OK tj, I'll bite. Please describe to me how the paper with be worthless? Please describe to me how your gold will be better. Relative to what? Worth what to whom?
hey wallster
you are so right!
timing gold has been a real bitch.
you've only had a SEVEN YEAR WINDOW during which you could've bought and crushed every American market.
ipodius,
Please don't trot that lame argument out again. When push comes to shove, gold will buy you respect (and goods) everywhere; the dollar, not so much.
barely-
Compound Interest Calculator
Not so. Check out Lee Adler's report on it.
DaveJ,
OK Tout,
"I am always amazed at these people who think they are going to get rich from gold. Buy your 100 gold coins. In 2050 you will have 100 gold coins. Sure, as long as you time the market perfectly and get out before it crashes you will do fine"
Rewrite:
I am always amazed at these people who think they are going to get rich from "PAPER". Buy your 100 "PIECES OF PAPER". In 2050 you will have 100 "PIECES OF PAPER". Sure, as long as you time the market perfectly and get out before it crashes you will do fine.
Dip sh*t...your paper goes to NOTHING in a crash. Gold still has value. You're a nut job. BTW I DID paln it perfectly. 90% of my PM was bought in 99-2000 from my bubble money. Gold ~250, silver ~4.5.
And the run hasn't even started yet, because the MSM JUST started reporting the prices of g&s in radio coverage.
Good luck schmuck.
As I said I want to hear a friggin argument about the value of those damned CDO's AIG is holding. Waiting shmuch. Stupid attack when you defend nothing. Give me that friggin CDO analysis shmuck.
Cheers,
ipodius,
Don't have to show you; history already has. Every fiat currency has eventually gone to zero, and how many Dow components no longer exist?
Tell me, now -- what exactly is a stock certificate for PETS.COM worth these days?
Stuart-
That is freakin hilarious, I was just saying to myself, Stuart's been spending far too much time on Winter's blog!!!!
ROTFLMAO
Please don't trot that lame argument out again.
tj, answer the question, it's not lame at all. I asked a question...relative to what and to whom? What are you going to do with that box of metal? What are you going to trade for it and where do you draw this conclusion from? All of a sudden, the world is going to stop and turn to gold to purchase everything? The Eurozone is going to collapse, the US government is going to collapse, etc etc? All of this by 2050?
You people are just too funny. You can never answer the question. Gold is only worth whatever you can trade for it in the currency that is accepted. And that fluxes wildly over time.
We've got some nice round numbers:
EUR around 1.5
GBP around 2
CHF approaching parity
AUD approaching parity
CAD a bit above parity
JPY approaching parity (100 to 1)
When traveling overseas you won't be able to swallow the prices, but at least they'll be easy to calculate.
.
Let's see. In 1980, Gold was $800/oz. Now it is $970/oz. Wow, what a great return!
In 1980, AIGs book value per share was $0.8/share. Now it is $40/share. That is fifty times higher.
For the long term, I prefer stocks not speculating on the price of a useless but shiny metal.
Absolutely, one of the better sites out there. Should visit sometime.
tj, instead of tossing out those straw men, answer the question directly. To whom and how much? The same with misean. Who is going to take your gold? For what? I have a box of gold. What is it's intrinsic value? What do I get for it?
And I'll toss this out there: would it be implausable for a government to make it illegal to hold or sell gold?
Misean,
These guys kill me. It's like history started when they personally discovered Wall Street. Sheesh.
I held some gold myself, in GLD. I cut my position in 1/2 this week and will probably liquidate the rest soon. I don't trust it, since reserve banks hold the bulk of stock and they can begin selling any day they choose, crushing prices. A lot of nations already agreed to pare back. Won't be good for gold. Once it heads south, it's a long way down.
DaveJ,
You really are an idiot. You talk about market timing yet have no clue.
How much is your JDS unifase worth. Or your pets.com.
Moron,
Even if I bought gold in 1980, I still have something valuable, pissant.
BTW I said I bought at the height of the paper bubble, and the bottom of the PM decline. Market timing dip sh*t.
Cheers,
barely,
I own PM...I have it. They're isn't much left in the vaults. And S/A mines are being shut down. Be careful.
Stuart-
Remember not to believe anything you read on the internet, do your own research.
except of course, what tj says. (:
funny how this flamefest is about the value of gold vs paper (in a bank) on the very evening that Ben says to the government that Some Banks may Fail.
Seems to me headlines like this are why gold keeps moving up.
Yeah sure if the chances of the financial system going chaotic return to 0.01% then gold can swoon - although the CPI rises are working hard to put a floor under gold in USD - but right now the chances for chaos appear to be a good 10%! Who can predict the outcome of chaos? In that case I'm very happy to have about 20% of my liquid assets in gold. It is a good counter-weight to my USD and GBP holdings, and post-chaos I'm not even sure whether "blue chip stock" will have the same meaning.
barely that's the point. It's value isn't "intrinsic".
Gold was only used as a store of value, historically, because it is the only (common) metal that doesn't corrode. So if you FIXED a value on it (which was FIAT-based) it would always be that value by weight and, therefore, was a reliable store of that FIXED value. And the phrase "de-basing the currency" can about because the content of gold was diluted with other metals, thereby changing the weight of the gold which had some FIXED value associated with it.
Otherwise it's just a shiny object. But some people are mezmerized by shiny objects. Fiat is fiat.
tj,
Yeah I know. NOBODY WILL EVER! TAKE GOLD FOR SOMETHING. It's like 5000 years of human history smacked them upside the head and they went huh?
No fiat currency system has survived the inherent value of the underlying asset...paper.
Cheers,
ipodius,
"because it is the only (common) metal that doesn't corrode"
Yeah, right...that's the only reason. You obviously know jack sh*t about how RARE it is, how DIFIICULT it is to get out of the ground, and the fact that it's mining potential is declining.
Nope, just cuz it doesn't corrod.
Silver, platinum don't corrode either genius.
Nice educated post bud. Paper corrodes fast BTW.
Cheers,
ya, thanks I'll try to remember that. If you've got a beef with the content on that blog, take it up with them... LOL
Misean, If you can't eat it, put it in a tank, produce anything of use with it... - it's a pure speculation vehicle. It could double from here. I don't know. It's a game of chicken between holders. Just don't be stubborn once the price shows weakness. Good luck!
BTW - There are other PMs and minerals with real uses other than just jewelery.
Just getting in before rice & bean dinner.
Misean you be right, I bought a little gold last year not for investment but so I would eat in the future.
Dave J either really young or ?
jo6pac
2050 I'll be dust
Yes Misean I know...and all of a sudden the entire world will only take gold again. That will happen next week I'm sure.
The calamity that would bring that about none of us would survive (which means that every government would have to fail). Somehow, I think all these pieces of paper will keep going lost past my life-time.
ipodius,
That's just it -- throughout history there's always somebody that'll take gold. You can't say the same about ANYTHING else.
Try taking rupees into Central America; maybe pesos into Southeast Asia; heck, try getting almost anyone in South Central LA interested in a ruble. NOT HAPPENING. Gold, OTOH, will get you in the door anywhere. It's human nature at it's most basic; the value of the shiny metal is ingrained within us.
Sure the value fluctuates. Gold isn't an investment, it's the world's only true stable currency (i.e., "store of value"). Everything else fluctuates around it.
Lots of people describe it as simply a hedge against inflation. No, it does well in deflation too. Know why? Gold is the ultimate safe haven, the best port in a storm. It doesn't move with inflation, it moves inversely to economic & political stability (which run hand-in-hand, of course). Just so happens that inflation and deflation are both signs of instability.
Now, if you think goldilocks just went to the bathroom to purge and will soon be back happily binging, sure, gold will retreat as the dollar (and the economy) regains it's footing. OTOH, if you believe as I do, that the US is bankrupt, cheap energy is history, and the consumer is tapped out, well, then, gold has nowhere to go but up.
The stock markets? Sure, there's good companies out there, but they'll get dragged down with the rest of them. Happens every time.
Silver, platinum don't corrode either genius.
LOL...you know that black stuff on the silver? It's OXYDATION. Why don't you look up that word and see what it means. Tarnish is oxidation on silver, which lessens the content of pure silver over time as it changes chemical composition.
Gold isn't that rare at all. And it doesn't OXYDIZE, therefore, over 100 years, it's specific weight is the same.
Again, you people crack me up.
Seakings and A4's
Smell it burn
The circle is turning
Once again, now its your turn
Carriers dumping off the bay
gliding in over the beach
formaldehyde and beer
thai sticks and gun oil
Its getting ready to break loose yet again
I can smell it
except of course, what tj says. (:
LMAO! Thanks, rc, I needed that!
I'll have my Nothing Burger served well done, please , on a gold leaf napkin.
barely,
I understand your point, always have. But a trusted medium of exchange allows for the beneficial transfer of your labour doing X, for the product of you store keep selling Y. The dollar is tanking. If a new fiat is constructed will your old fiat, or PM be a better store to exchange for that fiat.
If things hit the fan...you think someone might like a gold or silver coin or a piece of worthless paper.
And of course if I see a turn around I will sell. I sold quite a lot of paper in 99.
Cheers,
No tj, you have to take the gold and convert it to the currency of the place that you mention. If something is stable, that means it's value doesn't change. Again, what intrinsic value does gold have and how do you meansure it?
Gold's only value is contained in what you can buy with it. That changes, so therefore gold doesn't have intrinsic value. You can't eat gold or burn it for heat. You can only trade it for those things. Since all currency has been disconnected from it, it's value is realtive.
BTW - I have a Gold tooth. A damn good one too. So uses for Gold extend to dentistry.
I have only one gold-related story.
Many years ago, twenty-six to be exact, I was acquainted with a couple, Bill and Herta, who both worked for the same major New York bank.
Bill talked about only four things: his luxury condo on the Hudson (Jersey side); "The One-Minute Manager," an easily forgettable book on employee supervision; HerbalLife; gold.
Anyway, Bill and Herta pumped a lot of paychecks into HerbalLife and gold. Finally, gold tanked. Bill and Herta divorced over gold. The luxury condo was sold. Both lost a lot of weight using HerbalLife. She went back to Germany and Bill ended up managing an office in Karachi, I believe.
Anyway, that's my gold story. There's probably a moral in there somewhere, but I don't know what it is.
Some of the unrealized losses on the guarantees will reverse over time, AIG said.
Ummmm, when? I will not be holding my breath waiting for this day to come.
Oh, I just love the "intrinsic value" argument. Total BS.
Anything is worth exactly what someone else will give you for it when you need to sell it. Taken to logical ends, gold has perhaps the highest intrinsic value of all, because it has always appealed to our most basic human instincts even though we have no real "need" for it.
What do we really need? Food, water, shelter and love. If I'm not hungry, I don't want your food. If I'm not thirsty, I don't want your water. BigPicture had plenty of $100 house listings the other day, and money can't buy you love.
Intrinsic don't mean sh!t.
And I'll toss this out there: would it be implausable for a government to make it illegal to hold or sell gold?
ipodius | 02.28.08 - 10:02 pm | #
No not at all, your points are something I struggle with every time I buy more, but what would the price of pot be if legalized and cultivated with modern farming techniques?
In the end the market will determine the value of the FRN's and PM's no matter what our government does. We each get to chose our own poison.
iop...whatever...stupid name
You sir are a charlatan. That black stuff is not oxidation. It is metal impurity. I have 100 year old coins of silver with no "black stuff" on them. They are PURE silve. You're an idiot discussing something you know nothing about. Silverware is 14 to 18 karat dumb ass.
You next refuse to address platinum.
Then you say something SO STUPID, that I just have to laugh. Gold really isn't that rare. Sir you are an idiot. Unless you find a credible source to backstop your stupidity, I shall ignore any other post.
Moron!
Cheers,
ipodius,
"Gold's only value is contained in what you can buy with it. "
Just like fiat dip sh&t.
Cheers,
Gold can hold value in an inflationary period. Under the right circumstances, it can be a good place to store some of your money. Hell, I have some gold funds in my IRAs right now.
The, "Gotta have gold, and stick it in a box in my basement, and guard it with my guns, because all of the pieces of paper are going to go to zero," argument, though, is ridiculous. It's based upon a pile of unlikely assumptions, all of which have to come true for it to be correct. The conjunction of all of those assumptions leads to such a bad conclusion, even if I have a bunch of gold in my basement, that I discard it as something to bother planning for. There are a lot of scenarios that I can imagine that I discard as options worth building my plans around.
Now, maybe it's different for Misean. It sounds like he's got a lot of wealth. Certainly, he's talked about taking possession of a lot more precious metal than I could possibly buy. So, his worst case scenario is that he's sitting on a pile of gold that depreciates a lot, but is still sufficient for him to live off of. A lot of us don't have that luxury. I have to make plans based upon the idea that in all of the likely scenarios, I can't afford that sort of haircut. I actually need the money.
So, I'm staying the hell away from any gold bug ideas.
mp, i'm sure the divorce was because neither one of them could stand each other after all the diarrhea from the herbalLife.
I mean, it couldn't be from the gold because, you know, gold has value and you never lose money with it.
ipodius:
Gold isn't that rare at all. And it doesn't OXYDIZE, therefore, over 100 years, it's specific weight is the same.
You're a hoot, man. Can't spell. Can't reason. Maybe you're good in bed.
\tNo tj, you have to take the gold and convert it to the currency of the place that you mention.
No, you don't. That's just what you've been conditioned to believe. Heck, if you believe the VISA commercials, nobody even accepts cash or checks anymore. Wake up!
Since all currency has been disconnected from it, it's value is realtive.
Back-asswards. The value of all fiat currencies is relative.
That's just it -- throughout history there's always somebody that'll take gold. You can't say the same about ANYTHING else.
Well, nuts and berries have always had value. Wheat has had value ever since it's been cultivated. Houses have always had value, though it's admittedly overblown at the moment. Cows.
More, all of these things have a direct use that makes me better off. Gold, not so much.
thoth, i spent the first half of my life programming so i type way to fast for my own good. And my reasoning is fine, as is the example about silver and gold. If you can give me a reasoned argument against what i've said, i'm all ears. as far as the bed part goes...i'm not sure what that has to do with economics or money, except if i'm taking gold for the favor
I have to make plans based upon the idea that in all of the likely scenarios, I can't afford that sort of haircut.
The haircut's happening because you don't have gold. It's called fiat inflation and asset deflation.
Man, y'all are pissing me off by making me jump in here.
Gold has intrinsic value to human beings, period.
Any culture, any time.
If I Give someone an eighth oz. of gold, they'll keep it. In fact, they won't lose track of it. Why? 'Cause it's gold, dumbass.
Look at gold in culture. From the story of Midas, to Rapunzel, to the "gold and treasure" of pirate lore. Two of the greatest expansion/migrations in the history of North America were because of gold. King Tut's tomb was filled with gold, as were the tombs and temples of South America, Asia, and SE Asia. According to legend, where is all of the gold in America historically kept? Fort Knox. Every school kid knows it. When Constantinople fell, the citizenry swallowed their gold and jewels, only to have it cut from their stomachs by the invading Ottoman Turks. In the Bible, the three wise men's gifts included gold. Not for nothing is the 50th wedding anniversary known as the Golden Anniversary.
Old sayings:
As good as gold.
All that glitters is not gold.
A golden opportunity.
Coins are still minted in gold. Gold is still kept in vaults (quite an expense for a "worthless shiny metal", by the way).
Gold has value to humans. Why? Who cares!
Go gold. Go silver. Go platinum and palladium. Go PMs!
No, you don't. That's just what you've been conditioned to believe.
OK tj, I'm going to Europe in 10 days on business. Please tell me where I can take my gold with me and spend it on a hotel, food, transportation, and a couple of gifts for the people i am meeting with. After that, I'm going to Argentina, so i'd appreciate it if you'd tell me where i can do the same things there.
The haircut's happening because you don't have gold. It's called fiat inflation and asset deflation.
I've done pretty well being short those assets the last eight months. Again, my argument isn't that gold can't be a good investment, or even that it isn't a good investment right now.
My point is that your arguments are a lot more extreme than that, and they are based upon a set of contingencies that are highly unlikely. You are arguing that there is no way to invest in pieces of paper (or electronic bits) that won't leave you with no wealth at all. The chances of that happening within my lifetime are remote. They're non-zero, but remote. It isn't worth my time planning for them.
Well,
Let's stop this argument. You paper bulls come back in 6 months and let me know how secure you feel in your paper and I'll let you know how many Stoli martini's I get for free.
We'll,
Keep It Simple Stupid,
"The, "Gotta have gold, and stick it in a box in my basement, and guard it with my guns, because all of the pieces of paper are going to go to zero," argument, though, is ridiculous."
Just tell me what your inflation adjusted investments are worth. Oh, and not CPI but dollar basket. CuZ that's what gold and silver track.
Right now $ is 73.814
Gold is $970.30
Silver is $19.67.
Cheers,
Hey ipodius:
Take the gold to someone and sell it for Pounds sterling (Sterling!) or Euros. As the dollar drops during your flight, the gold will hold its value.
If anyone was paying attention to my arguments above, they'll note that I said gold was a "safe haven". That doesn't mean it's always a good deal.
In the 70's we had the cold war, the oil embargo, double-digit inflation, etc. It looked pretty bleak, like things could fall apart. Of course, gold soared. Then "the man" stepped in -- Volcker -- and kicked inflation's ass. The cold war ended, gas was cheap again, hey... things settled down (as did gold).
No need for gold when the world is safe and people are doing well.
HOWEVER, that is NOT the case these days. Like Misean, I didn't get into gold until this century, and -- no doubt like Misean -- will someday get back out of it. When we do, we'll be better off for it. It's called buy low, sell high, folks.
p.s.: If "systemic risk" does show it's ugly face, it doesn't matter what it says on your pieces of paper.
ipodius,
on your trip to argentina, just ask around the front desk of the hotel- they will point you to the local cambio.
Ask them how much of their gold jewelry they ate off of in 2002.
Go forth and ask- report back here with your knowledge. If they outlaw gold, I will be at Costco loading up on cigs.
Someday this war's gonna end...
Marcus Aurelius, no one said it was worthless. The point of the discussion is, what value does it have? What can I get with it and how much? Or is it just another speculative asset?
There was a day when you gave people gold and silver because, in bad times, they could sell it. That's the tradition of silver wedding gifts and the like. You sold it if you needed money (because certain social classes didn't...you know...work). Those customs are now quaint.
So my point is that gold is just another speculative avenue that doesn't have any natural value. It only has value relative to other things. And the "worthless pieces of paper" argument is just baseless because if it gets to that, none of us are going to be around to debate it, as the ensuing world collapse will have taken all of us with it.
So buy gold as an inflation hedge if you think it's value is increasing relative to whatever you're hedging against. But don't buy it to put in a box or because you think Sam's Club is going to start taking it at the register, or you're going to buy fuel with it. That's just Mad Max syndrome.
Marcus,
It seems to just overwhelm these guys that this is the case.
BUT! The Touts are gone. DavidJ et. al. are gone.
Did they do they're job?
We aren't discussing AIG anymore.
Psyops are effective.
Cheers,
A diverse investment portfolio, now more than ever, would seem rational to me. Trying to get my husband to twist off on some copper, of course he thinks that is nuts!
Right now, it's got a value of $970.10 per ounce. Two days ago, it was $930. What's happened to the dollar since then? Gold holds intrinsic value (enough that it ranks very high among commodities throughout history).
Ask them how much of their gold jewelry they ate off of in 2002.
Yes AllenM they sold it for something. The amount of which was determined by what? The price of the gold, or the price of the gold relative to....what? Can I eat better with that gold now? Could I eat better with it in 1590?
KISIS,
Heck, I'm making plenty on the short side, too. Still, the returns on gold is already 300% since 2000 -- hard to ignore, plus you have the "catastrophic insurance" angle to boot. You can never be too safe.
Right now, it's got a value of $970.10 per ounce. Two days ago, it was $930. What's happened to the dollar since then?
Was was it's value in 1990? 1995? 2000?
Okay, there's a new reason to buy gold, silver, oil or food. It's because they are hot, speculative investments in times of Fed rate-cutting, massive rebate programs, massive federal and trade deficits, Obama wanting to give away the federal store, etc.
Yes, there is liquidity out there, and it's moving into these commodities. The hedge funds that were jerking emerging markets around a few months ago now are jerking commodities around. So, why not get with the flow?
With the ETFs, you can buy these things like stocks: GLD, SLV, USO, DBA. All are doing really well in 08 so far. You can get in, make a few bucks, and get out pretty easily.
So, just think of these as the stocks du jour, but instead of being linked to the stock market they are delinked and actually linked to monetary disgust and uncertainty.
Actually, Ipodius, when I moved to Oregon in 1995 I went to a used car lot, picked out a 4X drive, and paid for it in one-ounce gold Eagles. At the time, spot price was $380., and that's what the dealer accepted it as.
You can buy with gold/silver coins anywhere except tight-ass corporate businesses.
Try to trade stocks of AIG for gas. I'll bet they take gold before they take stock certificates.
ipodius,
Take a gold eagle with you and ask who wouldn't take it. Making change would be a pain, but any smaller businessman would easily accept it. It's only the robotic chains that employ people incapable of recognizing true value.
There are some folks here who are trying to conflate the argument, "Gold is a good investment," with the argument, "Gold is the only good investment." I am not arguing against the first; as I said in my first post, I own some gold. I am calling the second one ludicrous.
It was sold relative to the price in any number of currencies. ipodius, you seem to be struggling with a rational economics basis, when in reality you should ask "What is a dollar?"
Not what is gold. What is a fiat currency? What is a MEFO? Understand those and you might begin to understand what happens when what you consider money is no longer accepted by folks.
For food. Gee, if you are trading gold for food essentially, you have fallen very far down Maslow's hierarchy of needs.
The question that should be asked is how long will the rest of the world trust in the dollar like you do?
Remember, the folks making the decisions think like me.
Someday this war's gonna end...
Legend has it that king Tut was buried with Stock Certificates from the Great Egyptian Pyramid Fund. They mouldered away to dust - too bad they couldn't pass the test of time. In the end, they weren't worth the papyrus they were written on.
Marcus, they'll take the value of either at the time they can trade them for something useful...like the dollar. The same holds for the car example. Someone will weigh out the gold, look it up, and then accept whatever amount is right in terms of the dollar. Both these examples speak to my exact point.
But this discussion was fun. At least it was more lively than reading through a 10K
I just get a kick out of gold bugs.
OT-
Vulture Fund Deals With Delinquent Homeowners Lost by Subprime - Bloomberg.com
Thought this was an interesting article in Bloomberg re: hedge fund buying distressed mortgages, reworking them and selling them for a profit
If you want to buy energy commodities, a better choice than USO right now might be DBE. It is a PowerShares ETF that is diversified across several energy complex contracts. You might get a spring bounce in gasoline.
At last I can contribute something. Silver tarnishes from sulfur compounds in the air (not from oxygen). Platinum and gold not so much. And if you want to see real inflation look at rhodium (close by to silver on the periodic table). I am thinking of keeping my dogs in the lab at these prices. These precious metal prices make it a lot harder to come up with economical processes for energy savings, since a lot of approaches use platinum group metals.
ipodius, gold is historically solid value- embodied in it's very fundament.
Gold bug I am not, inflation victim, well yes.
On the other hand, I did get a 30 year fixed mortgage for a half million bucks in dec 2005- a deal I would never had made if I didn't trust in inflation being our destiny- what value will those last payments be after twenty years of inflation? How much will those dollars buy in terms of my weekly grocery bill?
I would never suggest that anyone put all their eggs in one basket- in fact you should be diversified.
After all, chocolate will eventually be currency again;-} Just wait long enough.
But like a commenter up above said, by 2050 I will most likely be dust. Just like Keynes;-}
ipodius, how old are you?
just curious.
Someday this war's gonna end...
Under Skilling, Enron adopted mark to market accounting, in which anticipated future profits from any deal were tabulated as if real today. Thus, Enron could record gains from what over time might turn out losses, as the company's fiscal health became secondary to manipulating its stock price on Wall Street during the Tech boom. But when a company's success is measured by agreeable financial statements emerging from a black box, a term Skilling himself admitted, actual balance sheets prove inconvenient. Indeed, Enron's unscrupulous actions were often gambles to keep the deception going and so push up the stock price, which was posted daily in the company elevator.
Mark-to-market accounting method
Section 475(a) sets forth two mark-to-
market rules. First, any security that is in-
ventory in the hands of a dealer must be
included in inventory at its fair market
value. Second, any security that is not in-
ventory in the hands of a dealer and that is
held at the close of any taxable year is
treated as sold by the dealer for its fair
market value on the last business day of
that taxable year, and any gain or loss is
required to be taken into account for that
taxable year. identification of its securities.
Issue 2: Is a bank or an insurance com-
pany excepted from the mark-to-market
rules on the grounds that it is, per se, not a
dealer in securities within the meaning of
§ 475(c)(1)
I'd rather be the guy who owned soap. If this mess gets to the point where a dollar isn't worth the paper it's printed on, soap will be more valuable than gold.
Marcus, king tut was dead, and had no use for either, but burying that box of it sure did some others good that stole it. A lot if the gold was melted down, and may now even be in something you own. They traded it for whatever they could buy in the currency of the day. The rest is in display cases for people to look at.
Ipodius:
Yes, grave robbers risked their lives to get the gold.
I bought gold at 350 and silver at 5 in 2003, a lot of it and only a few oz. i got a good deal on since. I find it highly amusing to read some of these post. Hope none of you here ride this thing down when she blows but I'm sure there will be some, just like those who were buying overpriced homes in 2006. You might have a couple of years if your lucky as I'm usually that early in calling a top. New gold ETN's DGZ, DZZ, are out to short gold it may be a fun when the shit hits the fan like it always does.
Dont have any fascination for gold. Dont even look at what weve got. Of course its speculative, but its also the ultimate defensive speculation thats worked quietly, diligently, consistently for us since 2001 when we bought CEF and 2004 when we bought physical.
We could have bought a house for cash any of those years. When I told my wife wed be nuts to buy a house at 13 times ave annual income in our community, but that this stack of coins will get us there in a cash market, she blanched. Now it seems its just a matter of time. It was common sense, both given unfunded liabilities of the system and the FEDs track record: buy an encumbrance free asset that was hated by the masses.
Ill be happy to sell it, but not today!
ipodius, how old are you? just curious.
lol...43. Good thing chocolate isn't currency. I have 4...no burp 3 chocolate bars
Joe Six Pack | 02.28.08 - 11:04 pm
Okay. When the going gets tough, you go ahead and trade soap.
Apparently Ipodius wishes he had bought gold seven years ago when it languished at $260/oz and all his goldbug friends recommended it.
I can't imagine any other explanation for his obtuseness.
Oh, and also, gold and silver both have powerful anti-microbial properties. Surgical instruments are now being alloyed with silver, and silver-permeated clothing has been designed for soldiers (to prevent infection of bullet wounds).
Oops, there goes dumb argument about how PM's are intrinsically useless.
unirealist who says I didn't? My only point is that it's just another speculative investment vehicle the value of which changes. There is no magic for it, and i don't believe that anyone will return to a gold standard in my lifetime. I'm just trying to understand why people think it is any different than that.
ipodius, I am 41, but from 1977-1987 I lived in milwaukee and s.e. michigan.
traumatic formative years led to an interest in economics, now a profession.
Soap is good, almost any household goods are good. Lol- Costco got its big start in the 70's due to inflation. Buy large lots of goods and you beat inflation.
One of the contributing factors to me stopping commenting on BdL's website was how ungracious he was in response to my needling him about the need for a large freezer.
Someday this war's gonna end...
Aren't these "guarantees sold to fixed-income investors." by AIG called Annuities?
Legend has it that king Tut was buried with Stock Certificates from the Great Egyptian Pyramid Fund. They mouldered away to dust - too bad they couldn't pass the test of time. In the end, they weren't worth the papyrus they were written on.
Which raises the question as to whether the Dead Sea Scrolls, or a comparable volume of ancient gold, has appreciated more...
Marcus Aurelius writes:
Right now, it's got a value of $970.10 per ounce. Two days ago, it was $930. What's happened to the dollar since then? Gold holds intrinsic value (enough that it ranks very high among commodities throughout history).
Seriously, in this bubble economy with money leaving equities and questionable bonds chasing anything that is moving higher, can you assign any reasonable cause for the rise in gold other than pure speculation? I am not disputing that the price of gold has gone up nor that it seems that it might run higher in the short term. It's foolish to read too much into the gold run. Just like the run in builder equities over the past couple of weeks.
I just think gold fever will run its course and when it does the bottom is a long way off. Gold is not a productive asset.
AllenM, lived mostly in Boston, but have worked in Chicago (1989-1992) and LA too. The only thing I liked about Milwaukee is that frozen custard that has more butterfat than a whole cow. God it's good.
Tech guy, but also studied macro and did the MBA thing. Now still do tech, but on the Finance side and also teach it. So take the arguments as fun academic challenge
But now you're talking! Personally I load up on paper goods and other items as inflation hedges. While other people are spending $2 a roll for TP, I'll still be working off my .30 stock lol. I once had a professor that went through that as an exercise. It was pretty funny.
ipodiuos,
"but burying that box of it sure did some others good that stole it."
Wrong again. King Tut's tomb was one of the first undisturbed tombs found. That was why it was such a find. Knowing history and doing research is just such a bother.
You're a bright one dude.
Cheers,
barely,
What do you mean by productive asset? A store of value and a medium of exchange is by definition a productive asset.
Cheers,
Misean, it took me exactly 20 seconds to find this on the tomb.
Carter could tell that tomb robbers had dug a hole through the upper left section of the passageway (the hole had been refilled in antiquity with larger, darker rocks than used for the rest of the fill).
This meant that the tomb had probably been raided twice in antiquity.
Want to try again with the put-downs?
DaveJ:
I just bought AIG shares. These losses are likely no more than accounting issues due to having to mark these assets to market. Obviously the market value for anything subprime is very low since there are lots of sellers and not many buyers.
AIG is one of the premiere insurance companies in the world and is now selling close to book value. This will double in the next few years.
To follow up on this discussion, I might point out that every premium AIG has collected has been invested in some kind of financial instrument, not just subprime. Heck, I trade energy derivatives, and I've had AIG Cap in buying and selling NG derivs. They are not some simple insurance company, but a financier with a portfolio that probably is only topped by a handful of global IBs.
Simply put, going forward, every time a counterparty crashes out of existence or a particular niche paper market freezes up, odds are AIG has exposure. Getting long might prove brilliant, but I wouldn't touch these guys with a ten foot pole. You just don't know what kind of insane "financial innovations" have infected their books.
What do you mean by productive asset? A store of value and a medium of exchange is by definition a productive asset.
A battery isn't a source of energy; it's merely a storage device. It's the same with gold.
ip,
I just can't argue against your total ignorance. It was a conjoined tobm. Tut's was undisturbed.
Have a nice life.
Cheers,
According to Steve Martin, King Tut also had a condo made of stone.
I wonder what that's worth.
Whatever Misean, enjoy your gold. i'm sure it makes you very happy.
lol...if it were in CA, I'm sure it would have a HELOC on it.
To chime in on the AU discussion, I've been long the beautiful metal for a long time, but this is starting to feel like the extension of a 5 leg.
I'll never sell all of it, just because, worst case, you might need it one day to feed your family, but the sentiment out there is getting REALLY bullish. And now CALPERS. A cover story on Gold! on Time Magazine is all that's left to call a top.
io
It does. I hope you have stock certs instead of an account. Maybe you can make a blanket out of them.
Cheers,
Marcus,
I though it was a Condo mada stono
YouTube -
Cheers,
The situation has become increasingly uncomfortable amid the worsening U.S. economy and the rising price of oil,'' said Mitsushige Akino, who oversees the equivalent of $555 million at Ichiyoshi Investment Management Co in Tokyo.I expect the yen to remain strong against the dollar for the time being.''
`It's still unclear how bad it's going to get with the U.S., and I get the feeling we're looking at the bleakest period right now,'' said Naoteru Teraoka, who helps oversee $21 billion at Chuo Mitsui Asset Management Co. in Tokyo. ``It's hard picking Japanese stocks at the moment, because as market falls, there hasn't been any real safe haven.''
** Naoteru Teraoka needs to pull that ninja samurai sword out of his kimono and or behind and wake up to smell jasmine tea and wake up: Qatar, which bought "under" 2% of Credit Suisse, is looking to spend between $10 billion and $15 billion over the next two years on bank stakes to diversify the country's economy from oil and natural gas, Sheikh Hamad bin Jassim Al-Thani said in an interview in Doha, Qatar.
"In the United States, we need to wait a little," Sheikh Hamad said late on Saturday. "We think there are still problems with the banks."....
"Regulators are bracing for well over 100 bank failures in the next 12 to 24 months, with concentrations in Rust Belt states like Michigan and Ohio, and the states that are suffering severe housing-market problems like California, Florida, and Georgia," said Jaret Seiberg, Washington policy analyst for financial-services firm Stanford Group.
o misean i'm pretty diversified. i don't have faith in any one thing. and i'm not naive enough to believe in the intrinsic value of anything. but i'm certain that the US government isn't going anywhere in the next 50 or so years i'll be around, and its currency will also be around. and at the end of the day, that's what i'll be paying the bills with. and i'll sell anything that will maximize that exchange.
and i don't care about leaving anything to anyone either. why should someone else live off my work? all going to be given away.
I own minted physical PMs. I don't trade, I hold. I would never consider leveraging or PM stocks (go ahead and try to time the market - you might as well play Black Jack). I also hold foreign currencies. I would expect the currencies would go to zero before the PMs.
Just in case anyone forgets:
There are $1 trillion in outstanding subprime mortgages, with potential losses estimated at about $250 billion, said Bose George, an equity analyst with Keefe, Bruyette & Woods Inc. Columbia University professor Charles Calomiris pegs the losses even higher at between $300 and $400 billion. Merrill Lynch's Bostjancic said the biggest impact of rate resets, from a dollar perspective, will come in the third quarter of 2008. She sees losses from all loan defaults exceeding $500 billion in 2008.
I don't have a problem with describing gold as a store of value, nor do I have a problem with calling it a medium of exchange.
I have a problem with calling it a productive asset.
ipodius - the only thing Milwaukee liked about you was that you left.
Maybe you should go buy a truckload of those 'forever' stamps as an inflation hedge.
what the hell am I doing getting in the gold fight ? Still, in for a (gold) penny.
I'll always concede the value of good in the context of 1000's of years or even 100s of years - but that's too abstract for me - my life time is all that interests me and I tell ya - a 20 year bear market in gold ( 1980 - 200x) has a formative influence on me. I bought gold, in 1994, heck we'd had a bear market for 14 years mannnn, at $375, $400 and sat with it as it dropped to $250 ( yeah it didn't drop to cents like my dotcom stocks did
, but STILL ) before it FINALLY turned around. I bought more around at 400, 650 over time, survived the dump from $730 to $556 in hmm 2 months ! a little while ago -
As ipodius says - gold is a speculative investment vehicle alright.
As Misean says - gold holds its value alright.
Did I square the circle there ?
-K
ipodius,
"no misean i'm pretty diversified. i don't have faith in any one thing. and i'm not naive enough to believe in the intrinsic value of anything. but i'm certain that the US government isn't going anywhere in the next 50 or so years i'll be around, and its currency will also be around. and at the end of the day, that's what i'll be paying the bills with. and i'll sell anything that will maximize that exchange.
and i don't care about leaving anything to anyone either. why should someone else live off my work? all going to be given away."
Then what's the bitch???
Anyway, I posted King Tut by Steve Martin above...
Here it is again.
YouTube -
Cheers,
ipodius - the only thing Milwaukee liked about you was that you left.
gee shnap that was such a great addition to the discussion! it made everyone really value what you have to say i'm sure.
I have a problem with calling it a productive asset.
mp | 02.28.08 - 11:38 pm
I have the same problem with houses, CRE, most stocks, fiat currency, and anything else but productive farm land.
lol...i haven't seen that for years misean. i'm old enough to remember that on SNL. but my favorite was the spoof on the diamond cutting in the back of the car with the bris.
oh crap, i just mentioned diamonds! now someone will be hoarding those
Bloody hell,
And no one noticed DavidJ...the Tout that started this...psyop...
CR is getting MSM recognition.
Where the eff is DavidJ.
Methinks we're being manipulated.
Cheers,
Homes are not productive assets, although some houses are. Gold is not a productive asset.
AIG is a good company, but this is not akin to an accounting problem, a la Royal Ahold (Dutch Grocer) or other screwup. Stats are that in those cases, the market value of the company typically returns to norm in about 33 months...
This is more than just an accounting screwup. They accounted for things fine, but their whole strategy blew up in their faces. What else is hanging out there? The problem now is that this is akin to a financial version of "Transformers"; heretofore mundane and "safe" products are suddenly coming to life in a nasty little way and biting the user.
mp,
Is a paper dollar a productive asset? If so why?
If not why not?
Cheers,
$500 Billion in resets coming | 02.28.08 - 11:35 pm
We're in such uncharted territory, we don't even have a name for it - recession, depression, inflation, deflation, stagflation, and biflation are all bandied about, but there is no catch-all term that can describe the situation we're in.
Forget the gold, silver, stocks, soap, pork bellies...
Lead is where it's at! Intrinsic value for the coming end times and available in many convenient calibers
ipodius - I'm not a gold bug, I'm on your side if you feel Gold has proven itself to be a poorer store of value in the last hundred years than it was in the previous thousand or two before that. Romantic notions aside, gold isn't all that special anymore.
But when you imply that the only good thing about Milwaukee is the frozen fucking custard... it's ON!
...sorry if this doubleposts...
Is a paper dollar a productive asset?
No, and neither is gold.
However, both can be used to purchase productive assets.
there is a time to hold more gold, silver, platinum, palladium etc and a time to hold less.
i would never want to be without any altogether.
the lone ranger had quite a use for silver...i prefer copper fmj
mack turtle
copper fmj has a place in my portfolio.
Cheers,
Regulars and new CR readers are reminded to refrain from personal disparagement and avoid feeding the trolls. Have a pleasant evening.
Oink.
F**k off, pig.
Been gone for awhile. More and more keeps hitting the fan. Why kid ourselves? Depression.
Off for moonshine 'tini. Misean, you in?
Thanks Marcus,
Couldn't have said it better myself.
Cheers,
Is a paper dollar a productive asset? If so why?
I'm not trying to be difficult, but I sincerely don't get the gold thing at all. A productive asset would be one that, over the lifetime of the asset, produced more economic value than the cost of the asset. The key word is produced.
Gold, paper money, diamonds, shells, etc are only stores of value; that value represented by what you can exchange it for at some point in time in the current exchange medium. That exchange rate is based on external forces, supply and demand, etc.
So I don't understand why someone would think that one store of value is any better, over time, than another. The only thing gold has going for it is that it was used for a long time and it doesn't corrupt physically. But precious stones have also been used. In the end, they trade for something. And if all the peasants in the end won't take your gold for wheat because they want water, you starve.
For my two cents on gold/silver.
Silver has more productive value than AU, but the AU is more productive for my peace of mind than fiat currency.
There's nothing buried in the yard and my grandkids won't have to rent a metal detector to scan the house when I'm gone, but having a bit handy is just comforting.
And if you think that the end of the world stuff doesn't have a psych impact, we went thru my wife's grandmother's home with a fine tooth comb prior to sale for cash that had been squirreled away.
What's the old banker's statement? "Keep 10% in gold just in case you need it."
funny you say 6that elvis.
My buddy and I are actually building a still.
Cheers,
Gold holds its value. Yeah, just like houses and land. We are doing into a deflation. In deflation, paper money does just fine. Commodities do not do so well.
I really do not see the reason why people are so scared about AIG. What is an insurance company? They get paid to take risks. They get paid to write their names on little pieces of paper and make promises. That is what they do. These write-downs are simply mark-to-market losses and the only reason people know about them is that these pieces of paper sometimes get sold and so have a "market price". Because of that GAAP makes them record a loss.
What about all of the other pieces of paper with insurance company promises that don't get traded. Insurance accounting works on the principle that mark-to-model is how they book profit and loss. When Buffett writes a contract to insure Lloyds against asbestos he doesn't mark that contract to market every day. There is no market so his actuaries figure out what the "earnings" or losses are. If he had to try to sell that contract he might find that he would have a giant write-down. This AIG write-down is not fundamentally different. Management has said many times that they do not expect these to result in actual cash losses. Whether or not you believe them is up to you.
Ipod,
You need to start thinking in the short-term, or redefine your short-term. Over the long term, the sun blows up. Right now, it is okay.
ip,
You keep thinking that...
I'm done for the night...
Cheers all,
Back to the barricades tomorrow.
Cheers,
Zackly Elvis! Buy gold low, sell high, put some aside. Just like everything else. Didn't you have a gold toilet?
Money (currency, coin, gold, chicken bones, dog balls) is a productive asset only if it is RENTED.
Misean,
Busted. I'm with some agency that doesn't like stills. Better chop it up with an ax, or I'll come to your home and arrest you for being the only productive manufacturer in the USA.
I rented dog balls and a tuxedo for my high school prom.
What is all the fuss concerning PM's vs. any other form of speculation?
EVERYTHING has it's cycle, and at some point during the cycle, you jump
financially from one "ship" to another "ship" which allows you to take advantage of the current trend or "wave". What does the trend tell us presently? PM's are still rising while equities will, at best, trade sideways, for the near term. Quite obvious, but duration should be debated.
What I would discount most, presently, is ANY political leader, or CEO of ANY company trying to sell me on any of the following concepts: the USD, the ability to avoid a recession, coupled with out of control inflation, or the VALUE of stock in their company.
If you paid the rent, then the owner of the dog balls and tuxedo has at least three productive assets.
MA,
I think you meant that you rented a dog in a tuxedo for a prom date and found out it had balls when it made love to you?
I am calling the second one ludicrous.
I would agree. Certainly not the case I was making.
It's foolish to read too much into the gold run.
I've already explained the why, but apparently you only listen to yourself.
Romantic notions aside, gold isn't all that special anymore.
Ah, the arrogance of "modern man". I'm sure they said that 1000 years ago and will say it again 1000 years hence.
there is a time to hold more gold, silver, platinum, palladium etc and a time to hold less.
Exactly, mock turtle. Now is the time to hold more.
Elvis,
Uhhh...
No.
Are you, by chance, related to Rick Santorum?
ipodius,
some points you are missing (yeah it's true you cant eat gold)
the bums on wall street and the central bankers can't pull gold out of their hind end...there is a relatively limited supply.
and there is art (jewelry), historical, medical, electronic, and if you buy coins numismatic value.
like land, yes gold can fluctuate in value, but try putting an acre in your pocket.
gold will always have significant value...not so much can be said, these days about the dollar (rip)
ps i used to have a stock portfolio and will again some day...i hope.
I guess what I want to know is why do the tinfoil hat goldbugs have to ruin the rational discussion at every interesting blog?
"Are you, by chance, related to Rick Santorum?"
No, was he your rented prom date?
No, that was ya' mama.
Yes, that is a fine response for a seven year-old. It is past your bedtime. You have a spelling test tomorrow.
DaveJ -
Yes, they get paid to take risk but their risk is an underwriting risk and not a financial risk.
The whole point with insurance is that they are paid and taking the risk that you won't die during the coverage period. Or that New Orleans won't get wiped. Or that your house suddenly has skylights where none have been before (my inlaws, courtesy of Hurricane Isabella).
YOU are paying the money - where it could have greater productivity manufacturing widgets, investing in financial paper, paying for college or investing in PM - for the promise that you're made whole in event of the event. These kinds of financial decisions by insurers do not make the policyholder terribly happy.
And they also have to satisfy ratings agencies, FWIW since they are also regulated entities. And there is an impact when the capital/premium levels go too low. AIG can handle significant losses, to a point, but cumulatively they can turn your neighborhood AIG into MBIA.
Paraphrasing Andrew Tobias, I'm not sure what the weirdest thing in the world is, but Insurance Accounting is the second weirdest.
Thanks.
No, you spell it I-H-A-V-E-N-O-F-R-I-E-N-D-S.
Geez, I usually have to separate my kids when they talk like this.
Colicky?
Just a question...What do investment bankers do when they lose their job? (Open mike)
When I see a later model Lexus with a Domino's sign on top, I'll know.
Depressions tend to bring the DOW down & gold up to rough parity. When it does again, I'll be switching out to stocks. Until then, even good company's stocks will be going down hard. Why invest in a declining asset?
Back to basics. Yes, gold is not a productive asset. In a world where pretty much all assets are declining (and fiat is inflating), though, a stable store of value is a great alternative. Again, the safe haven.
Speculative vehicle? Damn straight. There's a lot more fiat in the world then there is gold. Once everyone wants gold, you're going to see the mother of all bubbles. IMHO gold is now about where housing was in 2002, or maybe tech stocks in 1997.
Anyone that hasn't ever had a gold coin should get at least one; there's nothing quite like the feel of real money. It transcends borders, cultures and time itself.
Answer: Max out their HEW, max their credit cards, spend a week at Scores, and drink lots of lye.
there's nothing quite like the feel of real money. It transcends borders, cultures and time itself.
tj & the bear | 02.29.08 - 12:27 am
Yes.
Tried to show one to my daughter 'fore it went in the vault and she said "cooooool".
Then she went back to her iPod.
Some will never get it.
Enough with the gold. Either you get it (and will profit greatly from it) or you don't.
Back to 75% down in CA. This very thing was (again) predicted by many of us over at HBB in 2005. Yawn.
Of course, what the hell do I know.
tj & the bear,
You speak in truths. It is funny that others fight the progression, but it will happen. PM will bubble. Thanks. It took me awhile to figure out the next bubble, you made it clear. Grasshopper. (This is not in jest by the way.)
What, the next bubble is in grasshoppers?
Elvis,
Ever read Janszen @ iTulip.com? He wrote a chapter in "America's Bubble Economy" on the coming gold bubble. Great stuff. Pick up the book if you haven't.
Agree Tj!
The old school crowd at the HBB blog is a great archive of revelations. Its the Nostradams of Blogs.
p.s.: Kitco spot for gold is now 974.30 bid / 975.10 ask. Silver is currently 19.84
even oil will be worthless some day...but not for a long time to come.
Oil will be worthless before gold. Ever give your woman an oil necklace. Bad idea. Pearl necklace on the other hand...
i'm fairly sure a canadian maple leaf will be worth at least 100 dollars (face value) for as long as their is money.
some day the rulers will of course try to eliminate all cash money for a variety of reasons not the least of which is KONTROL.
Speaking of oil, found this on BigPicture:
Why the Fed is Compelled to Lie to Congress
I don't necessarily believe in "Peak Oil," but the fact that the Saudis are one of the world's biggest investors in alternative energy research might tell you something.
Somethin' for nothin' get rich quick 'investments' like gold, houses, insurance stocks, derivatives and other such 'money makers' caused this whole problem....bunch of hypocrits you all are loving PM's.
Anyone that hasn't ever had a gold coin should get at least one; there's nothing quite like the feel of real money. It transcends borders, cultures and time itself.
tj & the bear | 02.29.08 - 12:27 am |
tj, that brings a tear to my eye...
Looks like the Nikkei's diving into the close -- currently -356.73
Anonymous writes:
Somethin' for nothin' get rich quick 'investments' like gold, houses, insurance stocks, derivatives and other such 'money makers' caused this whole problem....bunch of hypocrits you all are loving PM's.
Well, I'm not selling my PM's any time soon. I'm just getting a jump on the next money when the fiat system crashes and burns. I don't plan on my PMs ever being converted back to FRNs.
If you are hot on gold, buy stock in companies that deal in gold.
Just sayin'.
CNN
What bad banking news means to you
What bad banking news means to you - CNN.com
Also, please give me your name, address, amount of PM, plus locations of all stills.
Thanks.
Anon,
Yes, the best way to make money's the old fashioned way. However, TPTB have screwed us over, so we have to play the cards we're dealt.
Cher, Hollywood, I'm cramping now, and isn't David dead?...or is that Sonny?
"I bought gold at 350 and silver at 5 in 2003, a lot of it and only a few oz. i got a good deal on since. I find it highly amusing to read some of these post. Hope none of you here ride this thing down when she blows but I'm sure there will be some, just like those who were buying overpriced homes in 2006. You might have a couple of years if your lucky as I'm usually that early in calling a top. New gold ETN's DGZ, DZZ, are out to short gold it may be a fun when the shit hits the fan like it always does."
In the same situation as you, just wondering when we know we are near the top - gold and silver...signs/symptoms?
Anon,
I'm sure you are right. Sell now. Selling early is okay as long as you buy early. PM have a long way to go, but sell now and lock in your profit. Use you profit to buy corn. That is the way to go. If corn prices decline, you can always shove it up your chimney to burn for energy....
NY Times
Facing Default, Some Walk Out on New Homes/You Walk Away took the negativity out of my life...
Facing Default, Some Abandon Homes to Banks - NY Times
I don't want to be cruel, but, instead of focusing on the negativity, you might want to focus on the saturated fats, Amber.
"I don't plan on my PMs ever being converted back to FRNs."
A sticky question - what to accept in lieu of PM when trading...
???
And another thing, it is late. Time to go to sleep in my oxygen chamber.
Anon,
The top will be in when everyone is telling you about their gold and readily debate the merits of various mining companies. Bubbles aren't bubbles until the general public goes crazy, and that just hasn't happened yet.
Someday, when all this has come and gone, they'll be a conjure bag interview on 60 minutes.
I can only hope I will have ascended sufficiently to be the questioner.
from Jeff Christians Commodities Rising: gold accts for 30% of worldwide commodities derivatives trading. it does not trade so much as a commodity but as a financial asset. the ratio of these derivatives to the underlying physical gold mkt is 60:1 and was as high as 100:1 in the 90's. in almost all other commodities this ratio is only 5:1 to 10:1 and for oil around 20:1. thus gold and silver have much deeper and broader forward mkts.
this begs the question as to why this is. the fact is that gold and silver trade like financial assets and not like commodities. one finds similar ratios of derviatives to physicals in currency trading and interest rate mkts like the US treasury bills and bond mkts.
Most boring discussion ever. I hope you guys got this out of your system and we don't revisit it.
Read the Barron's article on AIG's mark to market losses.
Here is a free link.
http://webreprints.djreprints.com/1893740148975.html
Phew. What a train wreck. Not much of an edumacation here tonight...
Better luck tomorrow?
just imagine when the world economy fouls the bed and energy prices drop, PM mining companies will go parabolic
When did a terrific RE blog turn into a haven for gold nuts?
as a general response to all you gold doubters; you scoff at the single best performing asset of the last 7 yrs? this is what Wall St describes as climbing a wall of worry.
Misean - ok, 500 oz of silver (London spot rate of $19.24/oz close yesterday = $9,620. $9,620/$48 share price for AIG = 200.4 shares of AIG.
Lets compare 500 oz. vs. 200.4 AIG shares over time. "The Macanudo-Ramen Challenge", we'll call it!
I really do not see the reason why people are so scared about AIG. What is an insurance company? They get paid to take risks. They get paid to write their names on little pieces of paper and make promises.
Correct me if I'm wrong, but an insurance company is an arbitrage vehicle between return on investments and insurance losses.
AIG has several hundred bean counters. One group anticipates future investment returns. Another anticipates future losses. Management does some math and out pops a price that sales guys go to market with.
The problem is that the first set of bean counters, the one with the model of investment returns, predicts that the future will most likely resemble the past. They are writing policies based on 8%+ real return on investments. What happens to profits is real returns drop to 4%? What if real returns are negative?
And, there is always pressure from the sales guys on the bean counters to up the expected returns on their investment models (usually based on some untested investment strategy) and the loss bean counters are always under pressure to lower the expected losses (usually be selling some untested insurance product).
Insurance was a great buy in '81 when everybody anticipated low and declining real returns and T-Bonds were paying 14%. Effectively, you leveraged up the equity boom. It wasn't such a good buy in '69 or '29.
Of course, if this is just a blip and we're back on the road to 8%+ real returns, AIG is a great buy.
Oh and OT:
Gold is a horrible investment (high transactions costs, carrying costs) until it isn't. It isn't a productive assets, so you'll never get rich investing (opposed to speculating) in gold but you may stay rich. Sometimes that's enough.
But, if your just worried about a future where your worried about eating, store food. Gold is only a useful asset for those fleeing the storm or after the storm has passed overhead. For those caught in the storm, it's not so good.
Bought a couple of gold coins a few months ago for 740. Now they're, umm 960 or so. Not bad. But I didn't buy them to make money, but for the very small possibility I'd want them for survivalist purposes. Also have some 100 oz silver bars--they don't seem to tarnish either.
Not all eggs in one basket. Own a house, have money in the mkt--a bit--sold out most months ago.
Etc, etc.
Why is everybody being so rude to each other on this theme?
DaveJ - past performance does not guarantee future results. Enron did very well when their core business was tank terminals and pipelines and utility-related. Its when they went into the "casino" business that they got into trouble. Lesson to be learned here. When you go the the stockholders meeting, please ask them where they are hiding the losses on the environmental secured creditor insurance.
The haircut's happening because you don't have gold. It's called fiat inflation and asset deflation.
rc helicopter
Tactical Flashlights
video game