lance sjogren

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  • TARP: The World's Largest Sovereign Wealth Fund
    Great, the government is getting a 16% return on TARP funds.

    Who believes there is any credibility in that number? Nobody knows what all that crap is worth, so how is it possible to have any idea whatsoever what gain or loss the government will have on those "assets".

    Indeed, how can one possibly know what mortgage backed securities are worth. It depends greatly on the depth of the economic downturn, which will determine the unemployment rate, which will have a huge impact on the foreclosure rate.

    Plus, with direct government intervention in renegotiating individual mortgages, something likely to be much more prevalent under the new administration, the government itself is manipulating the mortgage market directly.

    Does that mean that the government will salvage value in a lot of underwater mortgages, or will it renegotiate mortgages downward to the point where the homeowner can now hang on, but the creditor has to write down the mortgage to a much lower asset value?


    Bottom line is, with all the screwups that the Treasury and Fed have made, it is absolutely absurd to take at face value any claim regarding a return on investment for the TARP funds.

    The strongest case the author could make is that with the system so screwed up, it is presumptous for the gold bugs to think they have any better handle on the situation than those who believe in the tooth fairy or Santa Claus or the Treasury Department or the Fed.
    Jan 07 11:39 am |Rating: 0 0 |Link to Comment |View article
  • Gold's Not the Best Investment in Inflationary Times

    If economic activity does indeed need to increase in parallel with monetary growth for price inflation to occur, then oil should be a darn good investment.

    Nevertheless, I still have considerable $ in gold stocks. One thing about it, small gold exploration and development companies are dirt cheap right now and I would expect they will go up 5% for every 1% that gold goes up. So even if gold bullion is a laggard compared to other hard assets as the author predicts, I believe my stocks should do well.

    A couple suggestions for anyone interested: Eastmain Resources, Metanor Resources, and Sabina Silver.
    Jan 06 13:51 pm |Rating: 0 0 |Link to Comment |View article
  • Gold's Not the Best Investment in Inflationary Times
    The point the author is making is reasonable.

    However: The author says you have to have a pickup in economic activity to have inflation because if an expanded money supply doesn't circulate, then there is no inflation.

    But, let us say you grow the money supply by 50% and it DOES circulate. However, the money is now only worth 1/1.5 =0.67 times as much.

    So even if all the new money circulates, economic activity remains FLAT in terms of dollars adjusted for monetary inflation.

    So does that not imply that you can indeed have inflation WITHOUT an increase in economic activity?

    It would be interesting to see whether there is a flaw in this logic. If anyone can see one please speak up.
    Jan 06 13:46 pm |Rating: +1 0 |Link to Comment |View article
  • Debunking the Gold Bears' Main Argument
    Both Sobelev and NWM miss the point comparing the performance of gold and the dollar in 2008.

    Suppose gold went up 100% in first half of 2008 and the USD went down 50%.

    Then suppose gold went down 50% in the second half of 2008 and the USD went up 100%.


    That would show gold and the USD running EVEN for 2008, even though they would have performed exactly the OPPOSITE from each other.


    Comparing their prices over a 1 year span is utterly meaningless.


    That being said, I am bullish on gold. There is virtual unanimity, even among the Kool-Aid drinkers of CNBC, that the current US monetary and fiscal policies will lead to big inflation. The only question is the timeframe. 6 months from now? 2 years? 3 years?

    I don't know the timeframe but I am confident when the inflation shows up gold will go much higher. And, I do agree with Sobelev that when countries around the world are debasing their currencies, currency exchange rates will not necessarily be a meaningful benchmark for monetary inflation.

    What will be a useful gauge? Why the exchange rate between the USD and gold, of course. Remember, just because it can't be printed out of thin air doesn't mean gold is not a currency.
    Jan 05 11:24 am |Rating: +2 0 |Link to Comment |View article
  • Precious Metal Developers Provide Value and Upside in 2009
    Gold Barron:

    A 100% rise from an ultra-depressed valuation is peanuts. When small to midsized precious metals stocks rise 500-1000% from their lows of late 2008, then one can start talking about them possibly having gotten ahead of themselves.

    Secondly, in my view a market commentator has a lot more credibility if they own the stocks they are touting.

    Why is it a good thing for a market commentator to not have the courage to invest in what he or she claims they believe are good investments?
    Jan 02 12:00 pm |Rating: +3 -2 |Link to Comment |View article
  • Gold: Not an Effective Hedge Against Inflation
    TIPS are not a viable inflation hedge because they hedge against the "cooked" inflation figures put out by the govt.

    I believe shadowstats.com has some stuff on this. The more honest way inflation used to be calculated shows we have been running much higher inflation than what the phony inflation gauges that are currently used show.

    Today's inflation statistics are not a gauge of prices but rather an instrument used by the govt to convince the public that the cost of living is going up a lot less than it really is.
    Dec 23 14:06 pm |Rating: +4 -3 |Link to Comment |View article
  • James Grant Wants to Know: Who Will Buy Our Greenbacks?
    People have pointed out that all fiat money systems in history have failed.

    The counterargument is that all sound money systems in history have failed as well.

    Of course, that is a bit facile because the reason all fiat money systems in history has failed is that they are self-destroying. The reason all sound money systems have failed is that people in authority have always recognized that sound money prevents those in power from manipulating the economy for their own self-interest.


    So, saying that sound money systems has always failed is sort of like saying that the rule of law is inherently a flawed concept, because there will always be people who break the law.

    So where was I.

    Anyway, my point is I don't know the answer but I do know that individuals that are in a position to buffer themselves from the effects of promiscuous money-printing and have the good judgement to do so are liable to be a lot better off than those who do not.
    Dec 22 16:31 pm |Rating: +1 0 |Link to Comment |View article
  • James Grant Wants to Know: Who Will Buy Our Greenbacks?

    One thing about the gold standard: Look at how Roosevelt used it in the 30's.

    He was able to do an overnight devaluation of the dollar by simply changing the exchange rate between the dollar and gold.

    So even a gold standard can be corrupted.


    Bottom line is I don't think there is any way to keep governments from debasing currencies over time. And as the dollar has rotted away we have had decades of prosperity.

    If a fiat money system means you have decades of prosperity, and then make an occasional reset back to the stone age (as we are probably going to in the next several years), I can't say that fiat money is necessarily a non-viable economic system.
    Dec 22 16:24 pm |Rating: 0 -1 |Link to Comment |View article
  • James Grant Wants to Know: Who Will Buy Our Greenbacks?
    We need to sell our treasury bills to Martians.

    Greenbacks, green men. They should enjoy US dollars.


    If we can't find Martians to buy our dollars, we're in big trouble.
    Dec 22 16:19 pm |Rating: +1 0 |Link to Comment |View article
  • WSJ on the Old 'Gold as Inflation Hedge' Saw
    Deflation will not prevail.

    They always say deflation is harder for central banks to fix than inflation.

    I don't understand why. Print money like drunken sailors (who happen to have second jobs in the currency business) and how can deflation NOT be eliminated?

    They will print money up the yin yang until inflation is reignited.

    Trouble is, these things tend to respond very slowly. Look at oil. Opec lowers production, and oil continues down. Yes, the Opec cuts will probably kick in 6-12 months from now.

    Likewise, the central bankers will be printing money up the yin yang, for stimulus effect, and we will see no effect. They will figure the problem is, need a bigger hammer. Actually, the problem is that the hammer blows take a while to go into effect.

    But, they will continue to print more and more money until they get the economy to cry uncle.

    By then we will have a massive inflation baked into the cake for then next several years.
    Dec 22 16:17 pm |Rating: +4 -1 |Link to Comment |View article
  • Is the Second Great Depression Imminent?
    Asbytec:

    The US is indeed in big trouble due to debt, but you say the whole world has a debt problem.

    Are we in debt to the people of Mars?


    It was often said in the past when there was a lot of debt in the US that it was not a problem because "we owe it to each other". That was before there was a lot of foreign debt. Debt was primarily internal to the US. Which meant there was no "net" indebtedness for the country.

    The problem today is that there is a large net indebtedness between various countries. That means that the US is in a big hole, while countries like China are in a fairly sound position financially.


    The other big debt problem is that we have borrowed from the future.


    ------

    But all that is a bit off the subject. As to peak oil, yes it is imminent and yes it will probably lead to a Great Depression. The day of people driving individual automobiles will probably soon be over.

    Electric cars may possibly allow us to continue what James Kunstler refers to as the era of "happy motoring". Electric cars will be functionally inferior to internal combustion cars, however. Don't forget about that fact. Electric cars, being far more efficient, will have little or no spare energy for what have in the past been considered necessities like heating, air conditioning, and defrosting.
    Dec 15 11:34 am |Rating: +4 -3 |Link to Comment |View article
  • The Hedge Fund Business Is Finished and Bernie Madoff Is Sealing the Deal
    hillbilly said:

    "No, corruption is not a part of “free markets” it is a part of humanity. "


    That's why advocates of a genuine free market economic system, which is something vastly different than the system we have been operating under, make it clear that government has one important role in a free market system- to see that those who enter into financial agreements are required to make good on their obligations, and anyone who fails to do so is severely punished.
    Dec 14 14:50 pm |Rating: +2 0 |Link to Comment |View article
  • Peter Schiff on Gold, the Dollar and Asian Markets
    I may not have a degree in economics, but I would be happy for anyone to explain to me how the massive printing of fiat money and credit can make a society prosperous.

    Dec 05 11:28 am |Rating: +1 0 |Link to Comment |View article
  • The Coming Dollar Deflation

    I guess I would concur though that the US dollar is not toast.


    It is more like an uncooked piece of bread sitting in an electric skillet that is shut off but connected to a timer.

    The big question is, what is the setting on the timer? March 2009? July 2011? December 2008?
    Dec 02 12:35 pm |Rating: +1 0 |Link to Comment |View article
  • The Coming Dollar Deflation
    And I wouldn't agree with Bailey's contention that there is a "consensus" that the dollar is toast.

    However, the view does seem to have more adherents than before. Some of the "don't worry be happy" CNBC crowd who used to seem to think that ludicrous claims by economic officials that we have a "strong dollar policy" constituted an actual "strong dollar policy". Some of those commentators seem to have snapped out of their stupor.
    Dec 02 11:56 am |Rating: 0 0 |Link to Comment |View article

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