Jim Grant Is Confident QE 2.0 Is Just Around The Corner

Tyler Durden's picture

Jim Grant, one of the most respected voices in the financial industry, joins Zero Hedge and others, who see that the only choice the Federal Reserve has now that the temporary and shallow reprieve from the clutches of the deflationary depression is over, is to print more money in the form of another iteration of QE. Whether this will be another $2.5 trillion, like last time, which was the price of an 18 month delay of the inevitable, or a $5 trillion concerted global effort, as Ambrose Evans-Pritchard believes, is irrelevant: the only option the central printers, pardon, bankers, have left is to flood the market with yet more worthless paper (keep an eye out on the doubling in the price of gold the second QE2 is publicly announced, which will also double as the obituary for all fiat paper). In an interview with Bloomberg TV, Grant says that the first order of business tomorrow when the Fed's new additions officially join their new groupthink perpetuating employer will be "to try once more to print
enough dollars to make something happen in the U.S. economy.” The ever-sarcastic Grant manages to completely skewer Janet Yellen, Steve Diamond and Sarah Bloom Raskin, to ridicule the Fed's 100% track record of not only focusing on the wrong thing time after time, but getting the response consistently wrong with 100% precision, and also manages to makes fun of the Fed's credentialed WSJ lackeys, who courtesy of the Fed's "editorial" control over the reporting process, get a direct line into leakable Fed strategy.

Grant's thoughts on new Fed additions:

"I think the first order of business will be to try once more to print enough dollars to make something happen in the U.S. economy.”

On San Francisco Fed President Janet Yellen:

“Janet Yellen has had 36 opportunities to vote on monetary policy at the Federal Open Market Committee and she has voted ‘Aye, yes’ 36 times. 36 for 36 times. Now, has the Fed been right 36 consecutive times? No. I think that Janet Yellen is a well credentialed, consensus-hugging economist straight out of the Fed HR department. She is ideal from the point of view of the Fed bureaucracy. She will make not one ripple.”

On MIT economist Steve Diamond and Maryland state banking regulator Sarah Bloom Raskin:

“I’ve never met them but I suppose they are charming. They certainly are well credentialed. They may well have an avocation in monetary theory, but that is not their vocation. Their vocation, in the case of Professor Diamond, is fiscal policy, pensions, social security, he is an authority.  He's mentor of Ben Bernanke so he’s a formidable academic.”

"Sarah Bloom Raskin is a formidable regulator. But neither is a formidable thinker about the nature of money or about the history of money or about how the Fed might paradoxically make things worse by doing what it does trying to make things better, which I think is the great question. These are people who, I think, are unlikely to oppose novel solutions to our fundamental monetary dilemma which is that the U.S. dollar is a faith-based currency of no intrinsic value that is manipulated by the Fed and the consequences of the manipulation are often quite different from what was intended. That’s the problem.”

On Fed monetary policy:

"Deflation is a funny thing. It's a word that is much in the news, much in the markets, but is all too infrequently to find. So the Fed says that deflation is broadly declining prices. But could not also be progress?  In other words, if the world produces more at lower prices, is that so bad? Americans spend half of their weekends, it seems, looking for bargains.”

"So the Fed is telling us that bargains galore is something that the Fed must resist with radical volumes of credit creation… I guess what I would ask the Fed is would it please stop and help us understand why this is bad?  So in 2002 and 2003, Alan Greenspan, then chairman, and Ben Bernanke, then a newly fledged governor, were out giving speeches saying that deflation is a clear and present danger, and we must - they said at the Fed - must cut rates dramatically, which they did to 1 percent."

"But the price indices today are much weaker than they were in 2003. So where is the Fed? Why not broach the topic of deflation again?"

"So what I blame the Fed for, among other things, is a lack of intellectual rigor and forthrightness."

On Federal Reserve Chairman Ben Bernanke:

"I think this is not being forthcoming with us, the people, about the nature of his concerns."

"In 2003, he was all deflation all the time. Well now the Cleveland Fed's median CPI was like 1.7 percent year-over-year, now it's 0.5 percent year-over-year. So where is the concern?"

"I think the concern will surface. We'll see more on Friday when the CPI comes out. But I think something ahead of the markets is a likelihood of the Fed stepping on the gas once more, so called quantitative easing - I think that's likely to happen…The Fed is already clearing its throat. You can see this in the newspaper leaks."

 

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jkruffin's picture

QE 2.0 is a guarantee, and the FED confirmed my suspicions today that I wrote about earlier.  Get ready for DOW 30k, then inflation out the ying yang.

jkruffin's picture

The only thing that has moved the market off the Mar 2009 lows is QE funds inflating asset prices,  do you really think it will not continue to happen?  This is the plan all along.  They think(FED) if people see the stock market at all time hi's that they will think everything is hunky dory in America.

The whole purpose of their QE is too boost stocks.  What else did the money do? Nothing.

Abiggs's picture

That's a rather simplistic explanation of how the market bounced off of 666, don't you think?.

What else did the money do? - don't forget about your favorite asset (gold)... You also forgot about the credit markets (not that they are any bit important according to your logic).

Johnny Bravo's picture

Kay, but here's my point.

Is the value of the S&P or Dow higher or lower than it was before the QE?

It's lower.  Yes, the asset prices came up, but not to previous levels (that were already too high.)

That's my point.  You can print a ton of money and still not see 1576 S&P or 4.25 a gallon gas.

ghostfaceinvestah's picture

Not to mention the economy is highly leveraged to the stock market - endowments, pension funds, etc are all heavily invested in stocks and reliant on stock prices on making spending decisions.  The impact of a rising stock market is not just psychological.

The Fed knows this, so they will continue to support stocks, as they have since March 2009

equity_momo's picture

You mean like the Japs did.

Listen , all you QE fan boi fk tards : IT DOESNT WORK. Why? Because of human instinct , psychology.

 

The comment to underscore that Jim Grant made is thus : THE USD IS A FAITH - FAITH -  BASED CURRENCY.

QE2 and its lights out. Adios. Gold 3k here we come and the US will STILL have a deflation problem because QE CREATES NO ECONOMIC GROWTH , NO JOBS.

 

Seriously.Its like watching a train crash in super slow motion.

Morons.

walküre's picture

+1,000,000 Dollars for a loaf of bread soon to come to a 77777-11 near you!

MORE LIQUIDITY DOES NOT CREATE JOBS!

QE 2.0 OR QE INFINITY and not 40 million but 80 million on food stamps

Liquidity only works for the stock pumper monkeys but not for the economy.

If liquidity was such a great tool to reignite a stalling global economy it would have worked last year.

Oh, there will be winners. The resource based economies like Canada, Australia or South Africa are going to have a killer economy because they have in the ground what the world needs to keep living. The rest of the world however that is not resource based is going to remain in a slow deflationary crash.

drwells's picture

"Listen , all you QE fan boi fk tards : IT DOESNT WORK."

Are you talking to the Fed? I doubt anyone here thinks it works, except for two or three well-known nutcases.

Popo's picture

I think most ZH'ers think the Dow will rocket to new highs on QE2.  

It didn't work for the Nikkei, and it certainly won't work for the Dow.

Stimulus packages will see decreasing marginal return from here on out.

Lower highs, lower lows.

The question isn't "do people here think it will work?" -- the question is "Do people here think it will even work for equity prices?"

All those who think the Dow is going to 30k are in for a terrible shock.

 

 

SheepDog-One's picture

Totaly agree equity_momo, the dollar is NOTHING its a faith-based piece of paper, NO ONE but morons would be fooled into believing all is well based on printing another round of fiat currency crap. And in fact Im all-in on the belief it will set off complete withdrawal from dollar backed anything. What do these people think, the world is nothing but retards? IT WONT WORK!

Pamela Anderson's picture

Based on fundamentals this market should be much more lower... but fundamentals doesn't matter anymore when you have a system awash in liquidity and the people that control it very interested in distributing wealth. The government can't let pension plans go down and it won't let them Ben is going to do anything that is in his power to reflate. Absent any outside shock like the EU situation this market is going to melt up propelled by Ben & Obama love!

 

Yophat's picture

Its going to be a very sad day for the indebted when they realize the endpoint.

In our system of money created by debt it is essential to the function and survivability of the system to have ever increasing inflation (expanding money supply) in order to service interest costs. Those who get the money first will profit as it loses value as it passes hands. Thus the government/banks reap the most benefit.

Unfortunately it is mathematically impossible for the game to continue forever and at some point deflation takes over. Money created by debt is inherently deflationary in nature due to the interest costs. The only possible exception is giving away debt free money which if done in sufficient quantities (if not then you just flatline forever like Japan) would undermine the value of the currency thus causing a hyper-inflationary collapse....basically a loss of faith in the money (and government backing it) such that no one recognizes it as a means of exchange.

This (inflation created by debt free money) would negate the central banks ability to influence the world as its "their" money (they create it) Vs. deflation in which their money becomes more valuable - wields more power and control.....and to top it off - you have to pay back the IOUs created with another IOU. Try getting your wages in gold....or paying your debts with gold....or purchasing at Walmart with gold. Its their world at this point.  Do you think they are just going to give it up?

Based on this assumption I believe they will not hyper-inflate - i.e. give away free money. They may facilitate transactions with governments but only to maintain power and control over the masses.....and it will still be debt.

The endpoint is debt saturation at which point people can barely service the debt they have and cannot take on new debt. The debt saturation point is flexible and can move up or down based on interest rates (the cost of the debt).

We started to hit that point in the mid 90's and Greenspan created the sweeps program in which average checking account balances (demand deposits) are swept into a savings account and loaned out....thus creating more leverage and more money in the system. We hit that point again in 2000/2001 and Greenspan lowered interest rates to 50 year low thus lowering the debt saturation point. This resulted in huge dive into the debt pit across most of the world.

We have now hit that debt saturation point again but interest rates can't go much lower without basically offering debt free money.

I believe the debt pit (bottomless pit?) that is being dug...has been dug is designed to result in the transfer of assets/wealth. When everyone is loaded to the gills with debt (debt saturation point at lowest interest rates in history) then the carpet is pulled out from under their feet and ownership of all wealth/assets is transferred to the creator of debt based currency - the central banks and ultimately to the central bank of central banks - the BIS......at near zero cost I might add.....or outright theft!

FYI - this isn't exactly easy to accomplish. Its taken nearly a 100 years (or more) of careful planning and manipulation to get to this point. Even now 1/3 of all residential homes are owned outright. Thus it requires a careful coordinated attack from all angles - medical, food supply, energy, taxes, etc. If your goal is to steal another's wealth you have to either murder them as Cain did.....or you must trick them out of it. Money created by debt will slowly steal everyone's wealth with inflation and then quickly and rapidly with deflation at the end.

Look at what's taking place currently - collapsing demand for debt, rising taxes, rising medical, rising food, rising energy. They are taking away everything we have. Are you leveraged? Does your income rely on leverage? Is your business leveraged? Does your business rely on leveraged customers?

Now with that background lets focus on precious metals....oh my precious.

1st - we know that deflation is the final tool for the transfer of wealth.

2nd - we know that those who have the wealth make the rules. No poor man ever gave a rich man a job.

3rd - we know that when they own everything....they can create whatever system of credits they so desire and it doesn't need to be gold/silver backed.....since we are begging for the food and necessities which they will/do own and control.

4th - in the event they fall into the pit they have dug....which I interrupt as to mean complete system wide collapse.....the focus will be on food and necessities.

Thus precious metals can be a hedge by the very wealthy to protect their wealth if the whole system collapses.....but only for those who can completely isolate themselves from a deflationary spiral....or else they are just delaying the transfer of assets (or even speeding it up depending on how the central banks play the game). But we are only talking .1 to .5% of society. And most of those people will ultimately rely on the central bank version of society as a means of protecting their wealth from being ravaged by the masses - belief and support of the iron fist!

Everyone else is just speculating with borrowed dollars....

So in terms of the present - we face a deflationary gap. The gap between now and the endpoint - system of credits to utilize central bank assets (chipped) or a complete system wide collapse. In this gap the central banks will be gaining more and more power until they fall into the pit. The FRN's will be in increasingly short supply as interest costs vacuum up all the debt based money while the macro economy slides down the deflationary spiral. The value of most assets will slide with it....except perhaps the tools they have created to help force everyone (specifically those who haven't been enticed by the debt) down the spiral - medical, energy, food, etc.

The absolute best position one could be in for the above would be - debt free, ample supply of food storage, means of food production, means of energy independence, clean water supply, as healthy as possible, means of producing things other people must have (food, energy, medical, etc.), and means of protecting all of the above from others who might resort to less than admirable methods of trying to acquire it.......have I missed anything?

B9K9's picture

Long but accurate. Here's a more succinct version:

  • I lend you capital I don't really have - it's just a made up entry in an accounting ledger, which my fellow clan members accept as real money.
  • However, in exchange for this phantom value, you pledge very real assets as collateral - your farm, your livestock, your commodities, your wife/daughter(s).
  • This debt, which was conjured out of thin air, accrues interest on a compound annual basis.
  • At some point in time (which can easily be mathematically determined), the combined principal+interest payments exceed your ability to service the debt from the income stream derived from the pledged assets above.
  • Once this happens, I repossess your property and throw you & your family onto the streets.

See how simple this process works? And guess what, it's been working exactly this way for over 5,000 years. What's really astounding is that there are ancient tracts which describe (and warn against) the inherent dangers of this very process.

But typically, our story doesn't end there. That's 'cause Shylock, regardless of his era, always overplays his hand. In the usual ending of this tale, the money lender is seen running for his life with maybe a little gold stitched into the seams of the clothing on his back.

RSDallas's picture

"At some point in time (which can easily be mathematically determined), the combined principal+interest payments exceed your ability to service the debt"

Does this imply that the loan was made knowingly that the debtor could not repay?

"That's 'cause Shylock, regardless of his era, always overplays his hand."

So this is "game over"?  This is when they have loaned so much that the majority can't repay and they end up sinking their own ship?

 

Yophat's picture

Asset transfer time!  From owner to renter...

 

22 Statistics That Prove That The Middle Class Is Being Systematically Wiped Out Of Existence In America

http://endoftheamericandream.com/archives/22-statistics-that-prove-that-...

Yophat's picture

Thank you for the link....good stuff....still working my way through it!  That was a real treat....much obliged!

dnarby's picture

Posession is 9/10ths of the law.

Come and take it! http://www.google.com/images?q=Come+and+take+it!&oe=utf-8&rls=org.mozilla:en-US:official&client=firefox-a&um=1&ie=UTF-8&source=univ&ei=sZI-TKbfHMKBlAef5-m6CA&sa=X&oi=image_result_group&ct=title&resnum=5&ved=0CDwQsAQwBA

Yophat's picture

Likewise....

MOLON LABE........NON TIMEBO MALA

traderjoe's picture

Damn, nice post. I too think deflation and a debt collapse will be the transfer of assets the PTB want. I don't think they will need the last 1/3rd of homes, as they will risk taking too much that the whole system collapses. I wonder if eventual hyper-inflation is the ultimate end-game after the assets are placed on the balance sheet. Deflation => default => repossession => hyper-inflation benefitting new asset holders. 

Loved the video clip. "Consensus hugging" - bam!

And I loved how Margaret (who's hot btw) raises her eyebrows when Grant comes out and calls a spade a spade - that the dollar is fancy toilet paper that everyone believes has value. She seems surprised that he actually comes out and says that. The interview ends shortly thereafter.  

Yophat's picture

I could be wrong....but I don't think these gents will be constrained to hold back from trying to take everything.  If they can't get 1/3 of the homes through debt...they'll get them through taxes, medical, energy, etc.

RockyRacoon's picture
58% of Real Income Growth Since 1976 Went to Top 1% (and Why That Matters)

Credit was the means by which we reconciled the social ideals of America with an economic reality that increasingly resembles a “banana republic”. We are making a choice, in how we respond to this crisis, and so far I’d say we are making the wrong choice. We are bailing out creditors and going all personal-responsibility on debtors. We are coddling large institutions of prestige and power, despite their having made allocative errors that would put a Soviet 5-year plan to shame. We applaud the fact that “wage pressures are contained”, protecting the macroeconomy of the wealthy from the microeconomy of the middle class.

puckles's picture

Re your 2nd point--in our current representative democracy, poor men routinely give wealthy men jobs, simply by voting them in.  Thus the corruption cycle begins.  De Toqueville served notice about this eventuality in the nineteenth century.  We are simply doomed to utter tyranny if this continues unabated.  This was an outcome our forefathers specifically tried to avoid.

They were dealing with an economy which was far smaller, but enjoyed a truly well-educated, cosmopolitan elite.  The latter comprised a relatively large slice of colonial society, albeit one not necessarily graced with what we know as a college education. Currently, according to the Chronicle of Education, only 15% of US residents read at a level above 9.5-11.5 grades, and the lower 85% are unable to decipher simple inserts in meds.  We would be lucky to have a collectivity educated thus:

[http://www.thefreemanonline.org/columns/education-in-colonial-america/#]


CurrentlyWithout ever spending a dime of tax money, or without ever consulting a host of bureaucrats, psychologists, and specialists, children in early America learned the basic academic skills of reading, writing, and ciphering necessary for getting along in society. Even in Boston, the capital city of the colony in which the government had the greatest hand, children were taught to read at home. Samuel Eliot Morison, in his excellent study on education in colonial New England, says:[10]

"Boston offers a curious problem. The grammar (Boston Latin) school was the only public school down to 1684, when a writing school was established; and it is probable that only children who already read were admitted to that . . . . they must have learned to read somehow, since there is no evidence of unusual illiteracy in the town. And a Boston bookseller’s stock in 1700 includes no less than eleven dozen spellers and sixty-one dozen primers."

Yophat's picture

I haven't seen a poor vote win an election in the 3+ decades I've been alive.

aka_ces's picture

A similar narrative from Jan., capped w/ hyperinflation once the wealth transfer is complete --

http://www.zerohedge.com/article/origins-american-kleptocracy#comment-18...

 

Dirtt's picture

As far as your "best position" I couldn't agree more.

Popo's picture



"If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered." - Thomas Jefferson


There's a reason Jefferson said "FIRST by inflation, THEN by deflation".  Because that is, and always has been the game.

Johnny Bravo's picture

Based on fundamentals, EVERYTHING should be lower, but that can't happen because the debts to pay for assets exceed their fundamental values.

The only way is to get assets back up to debt levels, which will require money printing.
Still, it wouldn't be inflation, it'd just be getting back to par.

Spitzer's picture

Priced in what ? Gold of course.

Johnny Bravo's picture

Priced in dollars, actually.

Spitzer's picture

So you think that if the fed prints up enough dollars to cover most of the debt that those dollars will still buy a barrel of oil for under $100 ?

Johnny Bravo's picture

That really depends on other factors.

I know that they could print enough dollars to cover the debt and it would only value gold at 1500 an ounce, based on all the inflation from printing another 14 trillion in cash.

Spitzer's picture

No that does not depend on other factors. Oil is priced in dollars, the same dollars that you are printing to hand out and pay debts.

Gold is also priced in all debt based fiat denominations so your last sentence is officially the dumbest thing ever written on ZeroHedge.

Your assertion that printing these dollars to cover debts will solve the problem would only nominally work if gold is revalued by the same amount. It is impossible to have one without the other.

 

 

 

Johnny Bravo's picture

Your logic is incorrect because gold is subject to market prices.  It isn't a fixed price to begin with.  You don't get X gold per dollar based on the dollar's convertibility rules.  You get X gold per dollar based on speculation.

Oil was worth 147 a barrel.  We printed more dollars.  Now oil is worth 78 a barrel or whatever it is today.
Your argument doesn't hold water in the least.

Gold was worth 600 or whatever.  Then we DEFLATED.  Now it's worth 1250.  Based on what?  NOTHING AT ALL.
Speculation.  That's all.  It's worth that much because chumbawamba and Glenn Beck buy it at that price.

You still haven't proven HOW hyperinflation is going to happen, nor have you proven that gold's price is in any way whatsoever tied to the dollar.

The dollar went from 74 to 89, and gold stayed the same price.  Did the price of gold go down?  Nope.  Dollars were worth more.  Why did the gold price stay the same?
Speculation.

Why was oil 147 a barrel and then 34 bucks a barrel or whatever it was.  Did the dollar increase in value 4 times?
Nope.  Speculation.

That is why your arguments are fallacious at best, but not the dumbest thing written on ZeroHedge by a longshot.

The gold to 2000 by June (and the "we should have a ZH convention when it hits 25000") crowds get that honor.

Spitzer's picture

Dollars where only worth more compared to other debt based fiat currencies but guess what ??????? Gold was making all time highs in those currencies when the dollar was at 89.

puckles's picture

I'm really replying to both of you.  We still pay all our bills in dollars, not gold.  Gold is the fear quotient.  It's not a currency, yet--unfortunately.

The other day I read an estimate that the entire worldwide "worth" (if one can can call it that) of sucky derivatives, of which perhaps 75% are destined to blow (and I'm being generous here), was $1.5 quadrillion.  Guess what that's going to do for inflation worldwide.  No central bank, or concert of central banks, will be able to do much about THAT. WELCOME TO THE WORLDWIDE DEFLATIONARY SPIRAL.  That's what's making Benron look so cheesy these days.  

That much said--and it's a rather large mouthful--I have no way to predict what will happen once the spiral ends, or begins to end. We've never been in this situation before.

It may well be that the general population reacts paralytically, but I doubt that in the longer term.  The most fearsome outcome would be the rejection of any representational unit of exchange, and that has been addressed ad nauseam on the survivalist blogs.  Unless the electronic world utterly disappears, which barring a nuclear event is quite unlikely, my best guess is that some form of representational exchange will persist, regardless of innate value.  Our civilization is far too interconnected and driven by patterns most refuse to acknowledge (e.g., fractals) to permit total collapse, but I fear that we shall traverse some very deep waters before seeing an end to this crisis.

Spitzer's picture

Thats fucking wrong.

NO MARKET COLLAPSES IN A STRAIT LINE. Lots of  early money will escape and find a new home.

UncleFester's picture

Yawn....

It has been said (by smarter guys) a thousand times:  prices are nominal not cardinal.  Mankind has always desired an objective standard, look to the qualifiers: fungible, divisible, durable, etc.  Without an objective standard: current "value", calculations, predictions, projections, etc. cannot be made.  Does not compute, cannot quantitate, system failure. 

Tell a physicist to measure the energy levels of an atom, he'll have no problem producing the results.  When he presents them, you tell him: "No, no.  Your x-axis is wrong because the speed of light is different today from yesterday.  Now, most physicist educated in the US will probably go back and recalculate their results using the new metric.  They'll probably do this  two, maybe three more iterations before realizing the trick that is being played on them.  However, a handful of them will immediately give you the finger, tell you to go f*ck yourself, and find a better, more productive use of their time.

Now back to economics.  Prices are (as you all know) where supply and demand meet.  But supply and demand are constantly changing.  The best way to estimate current supply/demand and predict (speculate) future supply/demand is to look at price, and price movements.  Price is a universal signal, and therefore requires a metric.  Since the end of WWII that metric was the $.  Manipulate the $ through CB, manipulate supply through CG (taxes and regulation) and the end result...manipulate demand (mass behaviors).  The astute will notice the fundamental assumption hidden above:  price is where supply/demand meet only if the individual actors in the economy (suppliers and consumers for the dim) are free to act.

This is not about dollars and cents, this is not about deflation or inflation, this is not about public or private, this is not about pensions or 401Ks, this is not about derivatives or their underlying assets, etc, etc...This is about freedom.  I can't speak for the rest of the world, but here in the US we have none.

walküre's picture

Not sure why you got junked.

Debts on assets are higher than the assets are currently worth. Correct.

Extend and pretend and mark to fantasy have accomplished exactly that.

No real deleveraging has happened yet.

Billions in bonuses to a handful and millions of people w/o paycheques.

Unless millions of people get jobs and can participate the assets are worth shit.

We have too much of everything. It costs $35 to make an ipad in China that retails for $400 in the US. Where is the "asset"? That stupid item is worth $35 to me, not more. The rest is mark-up that some spoiled brats are willing to pay for it out of Daddy's pocket.

That's why AAPL is a $250 stock when it should be a $25 stock based on their cost of manufacturing in China. But again, some spoiled brat loves AAPL and is willing to pay $250 per share out of Daddy's pocket.

Eventually these fundamentals will be understood and Daddy is out of money so little Jack can't buy i-shit anymore.

 

Johnny Bravo's picture

Right.  If I bought an ipad, went into debt for 400 on it, but only have 200 to pay, you can give me another 200 and all that will do is support the 400 dollar ipad price.  Nobody had 400 for an ipad in the first place, so that isn't what it was REALLY worth, it's just what the debt for it is...

Same thing applies to houses.

As to why I got junked, every post I make gets junked.  There are a lot of bitter goldbugs that hate that I was right about gold being ready to fall twice now.

Spitzer's picture

And what happens when a share holder of apple finds out that most Ipads have been financed ? They will sell, then another finds out and they sell and it all goes down the line until Apple is worth half or nothing.

Did that money dissapear ? No, the first guy out profited most and found a new place for his money and the next guy and so on.

 

You have been right about nothing. No gold bug gives a shit about gold short term gyrations in price.

Johnny Bravo's picture

That wouldn't happen if Apple got government bailouts to help its customers pay like the banks did.

The reason Apple shares are 250 bucks is because that's what people can pay for them.
Houses were never worth the original price because people never had the ability to pay for the loans.
They were on option ARMs at 1% with balloon payments, hoping to fix and flip ro whatever.  They couldn't make the payments at the regular price.
What makes you think that them getting more money will make the regular price go higher than the original price if they couldn't make the payments with the money that they already had?

As far as being right, I've been talking about the rising wedge in gold for weeks.  The correction from that wedge ISN'T FINISHED YET.

Also, I was saying to go short in November/December on gold when at 1220.  Everybody else was saying "gold to 2000 by June, gold to 50000 next week" and other such bullshit.

They just couldn't believe that they were all wrong, and gold is worth less today than it was then!  

About the gold price though, it all depends on speculation of massive hyperinflation, which isn't going to happen!
There has been no core inflation to support its run up to current prices.  The production cost is 400-500 an ounce.  Nothing supports gold prices at 1250, except for people buying it at that price.
When nobody can pay that anymore (or wants to pay that anymore) the price will fall.

walküre's picture

Interesting thoughts re price of gold and price of production.

Retail can't buy it for 500 but wholesalers can.

Markup somewhere in the 'hood of 100%. The difference to the i-xyz line up made of cheap labor and infinite supply of materials is that gold has a support level.

Bring gold down to $900 and people back up their trucks. Sell Apple's i-xyz at 50% or more discount and the same is not going to happen. The demand for Apple is evenutally satisfied until the i-xyz 1/2/3/4/5 and so on versions replace the older ones. Apple is also a consumable product. It breaks down after a while.

FYI I think Apple is one of the greatest shorts here.

 

Johnny Bravo's picture

I completely agree with the idea of AAPL as a short.  At a 22.7 PE, compared to 10 for the sector, they're way overvalued.

They have a higher market cap than Microsoft, at 1/3 of the profit dollars, cash, and assets.

The iphone is a piece of junk, and it's seen its day in the sun.

If you dropped the ipad to 200, I bet you'd get more interest in it.
Gold is different though.  People don't buy it to consume.  They buy it to resell.  Of course, the price would still bring more people into the market for it.