Beyond the Stimulus by Sprott Asset Management
h/t Joel
| Attachment | Size |
|---|---|
| Sprott comment August 2009.pdf | 44.74 KB |
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on Sun, 08/23/2009 - 13:38
#45463
judgement day - coming soon
on Sun, 08/23/2009 - 14:51
#45549
http://www.youtube.com/watch?v=fsIlEIwdgzI
on Mon, 08/24/2009 - 10:17
#46116
male community (I am quoting Lizzy here, this is not meant to be a comment)....
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
on Sun, 08/23/2009 - 13:38
#45464
judgement day - coming soon
on Sun, 08/23/2009 - 13:51
#45473
I met Eric Sprott a few years ago, right after the tech meltdown. He had just come off a great year where he was short tech/ long gold. He had a nice office in downtown Toronto, with some exceptionally beautiful ladies working there (that I remember). When he arrived to the board room where we were waiting for him, he told us "so you wanna know why the world is coming to an end?". At that time, we felt he was too much of a "punter" for our taste, but what I like about him is he has a view and takes concentrated risk if he has strong conviction. I wonder if he's also suffering from performance anxiety in the latest market melt-up...
on Sun, 08/23/2009 - 13:56
#45479
I like Eric Sprott -- he was funding Dr. Fekete for awhile if I remember correctly.
on Sun, 08/23/2009 - 14:04
#45488
he did for a short while whereupon its termination
fekete wailed loudly regarding the abrupt change
in course. since then the gold standard
institute has taken the place of the sprott
endeavor.
fekete is definitely worth reading but seems to
stretch too far with certain theses....over all
though he is correct about the necessity of a
gold standard for money.
on Sun, 08/23/2009 - 14:12
#45494
I like Dr. Fekete.. I don't think *anyone* has the full picture, but I do think Dr. Fekete is brilliant. I still read him even though are many points where I disagree.
The whole dispute about the GSU funding is a bit of a shame. I respect them both (Sprott and Fekete) very highly.
On idea of Fekete's that I found really interesting : the idea that the cash value of computer pixels can decrease while the value of physical FRNs can increase. I don't think this will happen, but I did not even consider the possibility until I read it in one of his articles.
on Sun, 08/23/2009 - 16:08
#45531
I also like both Sprott and Fekete. Fekete's articles are always very thought-provoking.
Edit: Reading the Fekete piece now. He is at his best IMO making statements like this:
"It is no secret that the bonds, notes, bills, and other obligations of the United States government, or any other government for that matter, are irredeemable. That is, they are redeemable in nothing but more of the same. For example, the bonds of the U.S. Treasury are redeemable in Federal Reserve credit, which is itself irredeemable and is ‘backed by’ the self-same bonds of the U.S. Treasury."
on Sun, 08/23/2009 - 16:30
#45638
which is one of fekete's more important
contributions....
our central banking currency is functioning
like british consoles which had to be shut
down because of their fast breeder reactor
replication making them absurd and worthless as
he discusses in another fine article....
so few people get the distinction between our
fiat currency and gold based currency....the
former is based upon debt which incurs interst
while the latter is an asset which is not the
liability of someone else and thus can extinguish
debt....
in the old days currency was debased by removing
precious metal - now it is debased through
proliferation AND attachment of debt....that makes
our currency crisis unique in the history
of fiat currency....
again that is another fekete contribtution...
on Sun, 08/23/2009 - 14:07
#45491
Dr. Fekete's latest article is titled "Dress Rehersal for the Last Contango". This refers to the point at which the spot price for gold exceeds the near-futures price -- where gold goes into permanent backwardation indicating systemic crisis.
http://www.professorfekete.com/articles.asp
on Sun, 08/23/2009 - 14:15
#45502
this is one of fekete's more valuable contributions
in analyzing economic health - contango/backwardation.
of gold....
too much foolishness has been expressed dismissing
the idea based upon the nonsense that gold is
merely a commodity....when gold goes permanently
backward depression will be wholly inadequate
to describe economic stasis and prospects.
on Sun, 08/23/2009 - 15:53
#45601
I agree. Gold backwardation is the one thing I watch for more closely than anything else. Fekete often calls it "gold going into hiding".
For anyone considering reading Fekete: he uses metaphor fairly freely. Don't let his slightly odd writing style keep you from perceiving his message.
on Sun, 08/23/2009 - 18:57
#45744
fekete is brilliant...daryl robert schoon also has a similar perspective...physical gold and silver are imperative in this environment
on Sun, 08/23/2009 - 19:57
#45788
What I like about Sprott is the massive loads and fees his funds pull down.
And the fact that people actually pay them.
Anon,
Bob Dobb
on Sun, 08/23/2009 - 14:08
#45493
The only beneficiaries have been Citi, AIG, Goldman. At least 2 of them should have been GONE. The CEO of AIG said he intends to pay the taxpayers back. That is interesting. AIG has a market cap of 4 billion yet he can pay back 185 billion; at least he got the stock to pop 5 points.
on Sun, 08/23/2009 - 14:10
#45496
double dip recession?? since when did we emerge from the first dip? the correct term for our economic condition is depression. anyone spending the vast sums of money documented has acknowledged for the whole world to see that we suffer from a catastrophic depression. you don't spend double and triple digit percentages of gdp on a recession - not even in great depression 1.0!
saying we're in a recession is like saying that a quadripalegic has restricted mobility.
on Sun, 08/23/2009 - 14:18
#45506
Excellent, it's nice when the analysis makes sense - it's all about the stimulus.
Because of this, it would be nice to know theoretical limits of spending and the decision tree for Bernanke/Geitner to position options trades for the right expiring month.
on Sun, 08/23/2009 - 14:23
#45510
How many new healthy banks (and prisons to send fraudsters), could have been founded (built) with the stimulus money? I´m sure that would have been much better.
on Sun, 08/23/2009 - 14:27
#45513
The Chinese central bank has backed-off from tightening to neutrality in it's monetary policy stance, so you can expect the Shanghai Composite to be going back up a leg from here. Faith in numbers from China about the current level of non-performing loans, and concerns about such reports in the future? Pffft. No worries!
Just be prepared for when the next top forms on that index, watch for the outflows from emerging markets to really pickup, then the top completion of the S&P. Expect that to coincide with the wrapping-up of QE. So, it should be a quick run-up, and not allow for much time for reversal of current flow patterns currently seen in EM funding.
It'd be interesting to see how Li & Fung Ltd.'s orders for the upcoming holiday season appear currently, but we'll get a good indication from container movement at Long Beach, etc.
Nobody said all of that liquidity had to be productive.
Discuss.
on Sun, 08/23/2009 - 20:43
#45820
Looks like it's on for the end of October then?
on Sun, 08/23/2009 - 14:33
#45522
Didn`t know where to put this but thought perhaps this read on Friday`s exisitng home sales might be worth a post by ZH or a contributor:
http://mhanson.com/archives/140
Hanson argues that seasonally adjusted data is misleading(undjusted better picture) and that bottom calling is premature.
on Sun, 08/23/2009 - 19:31
#45769
very good and brief article....it proves that
not only do the tv personalities at msnbs not
understand economics and finance but that they
do not understand statistics....
45k is not statistically significant...and he
makes an excellent case that under the circumstances
that seasonal adjustment is misplaced given the
nature of the data series....
you have to have the brain of a termite to get
excited by a one month change or a statistically
insignificant data point...
seasonal adjustment makes sense when comparing
sequential data but when you have year over year
data available it can be dispensed....
on Mon, 08/24/2009 - 10:18
#46117
comparison to the 'developed' world, i.e., the world where taxpayers find the lifestyles of the pompous.
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
on Sun, 08/23/2009 - 14:36
#45525
Look at where AIG was founded? Look at its tenicles around the world. Ditto Citi. And then there is this...Not terribly diffuclt to figure out why C, AIG were not let fail.
http://www.jpmorgan.com/tss/General/J_P_Morgan_China_Opens_Branch_in_Gua...
on Sun, 08/23/2009 - 14:43
#45538
Hah yes -- absolutely. AIG was founded as a Chinese company in the earth 20th century. I believe it was originally called American Asiatic Underwriters. Paulson, as CEO of Goldman Sachs, made 60+ trips to China. Treas Sec Geithner grew up in Asia, speaks fluent Chinese, his wife is Chinese. He worked for Kissinger and Associates (yes Henry Kissinger) prior to becoming Turbo Tax Timmy.
on Sun, 08/23/2009 - 14:58
#45554
Part of your post may be correct, but as for Geithner's wife, Carole Sonnenfeld doesn't sound like a Chinese name to me.
on Sun, 08/23/2009 - 15:42
#45573
Thanks -- I think you are correct. I have checked the other information.
1) "AIG history dates back to 1919, when Cornelius Vander Starr established an insurance agency in Shanghai, China"
http://en.wikipedia.org/wiki/American_International_Group
2) "[Geithner] spent most of his childhood living outside the United States, including present-day Zimbabwe, Zambia, India, and Thailand where he completed high school at International School Bangkok in Bangkok, Thailand.[3]" and " He has studied Chinese[4] and Japanese.[7]
http://en.wikipedia.org/wiki/Timothy_Geithner
3) "After completing his studies, Geithner worked for Kissinger and Associates in Washington, D.C., for three years and then joined the International Affairs division of the U.S. Treasury Department in 1988."
http://en.wikipedia.org/wiki/Timothy_Geithner
social network:
http://1440wallstreet.com/images/files/geithnerrelationshipmap.png
on Sun, 08/23/2009 - 17:18
#45682
Allow me to make a correction:
Tim Geithner's wife Carol is NOT Chinese. I don't know how fluent he is, but he is said to know Mandarin.
on Sun, 08/23/2009 - 14:36
#45528
I prefer to keep the two things apart. On the one hand we have the economic stimulus of $ 787bln (ARRA). On the other hand we have the financial bailout of several trillions (TARP 700bln, TALF, etc).
Whereas the former benefits the individual in some way by way of unemployment extensions, job creation, tax cuts, etc., the latter is exclusively for the benefit of large financial institutions who take the money and sit on it. This has nothing to do with economic stimulus.
The real economic stimulus was way to small. I have stated before that if the FED had paid every American citizen over the age of 18 some $2800 p.m. that would have had a greater effect. This around $7.2 trn a year would have made almost immediately back into the economy for housing, food,clothing, utility bills, debt payments, etc. Most of it would have ended up with the banks.
Now they have pumped trillions into those black holes with zero effect (however not without enriching a select few in the process).
It doesn't help to lump all these expensions under the term stimulus in my view.
on Sun, 08/23/2009 - 14:40
#45533
"In their 2008 annual report, the Bank for International Settlements (BIS) recently reviewed previous banking crises and suggested that a sustainable recovery would require the banking system to take losses, dispose of non-performing assets, eliminate excess capacity and rebuild capital bases."
This sounds so....fundamental.
on Sun, 08/23/2009 - 15:19
#45578
Of course we all know that "Fundamentals" went the way of the dodo last September, hell maybe in 2006. Possibly 1913. Unsustainable logarithmic growth in a finite system. I think what we really have is a massive failure of comprehension.
on Mon, 08/24/2009 - 10:18
#46118
em. I have no plans on buying that stupid book or anything else they try to hock..
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
on Sun, 08/23/2009 - 15:14
#45571
This is an excellent piece, well worth the read. The authors have a lot right.
The stimulus won't work now, just like it didn't work in the 30s. As the author stated, all the stimulus has done so far is pump money into the financial markets (along with the Fed money printing).
All this talk about the government making the wrong moves in the 30s is BS. Witness:
1. Hoover was sworn in as president in March 1929 w/ a $700 million surplus, relative to a $3.3 billion federal budget, which Hoover inherited from the Coolidge Administration.
2. the stock market crashed in October 1929.
3. under Hoover, annual federal Govt expenditures expanded 30% from $3.3 billion in 1929 to $4.6 billion by June 1933; as tax receipts fell, the 1929 $700 million surplus turned into a $2.6 billion deficit by June 1933; from a surplus of 0.8% of GDP to a deficit of 4.5% of GDP.
4. Hoover in 1932, "We might have done nothing. that would have been utter ruin. Instead, we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. we put it into action."
5. FDR won the subsequent election precisely because "gigantic" Govt fiscal intervention did NOT work and by campaigning against Hoover as a wasteful big Govt spender. FDR called the Hoover Administration, "the most reckless and extravagant past that I have been able to discover in the statistical record of any peacetime government anywhere, any time."
6. THIS is why FDR won the election: wasteful big Govt spending did NOT mitigate the deepening crisis; it continued to get worse.
7. During the 1st year of FDR’s first term, the annual federal Govt expenditure for July 1933-1934 expanded to $6.5 billion – a 97% increase above 1929's annual expenditure. and unemployment still continued to rise, even after this 97% expenditure increase and even after taking a 0.8% GDP budget surplus to a $3.6 billion deficit that represented 5.9% of GDP a full 5 years later!!!
Bernanke knows this full well, which is why he is printing money like crazy. He thinks only monetary stimulus can pull us out of this mess. Maybe it avoids deflation, but where does it lead? Argentina? Zimbabwe? Not the underlying structural reform our economy needs, that's for sure.
A lot of you are obsessed with the stock market, and notably shorting it in light of the horrible fundamentals. My advice: don't, as long as excess liquidity keeps flooding the market. Take a lesson from 1999, when Greenspan printed all those dollars in fear of Y2K - the market can reach insane PE ratios despite fundamentals.
Contrary to what the author states, the Fed did not announce an end to QE, they only announced an end to buying Treasuries. That was only $300B, compared to the $1.25T of MBS they are buying. In the next four months alone they will buy more MBS than they did the entire time buying Treasuries. That money will have to end up somewhere. Shorting in front of 25B a week of new money hitting the financial markets is suicide.
on Sun, 08/23/2009 - 16:04
#45610
to carry the theme a bit further daily reckoning
published a great piece a few weeks ago about
how not only did the extraordinary efforts fail
to make any impact on the economy during the 1930s
but the war
did nothing to help the economy either....both
notions which are economic shibboleths among
the "orthodox"....
morganthau was forced to admit by 1940 that
we had to stop spending so extravagantly and
try something else because everything tried
to date was a total failure....
sometimes doing nothing is the right thing -
unfortunately there are enough type A personalities
long on enthusiasm but short on brains - per
the great von moltke - who will gurantee that
*something* will be done...a great shame...
on Sun, 08/23/2009 - 16:35
#45641
It is no longer $25B/week. It has already tapered to $20B/week.
There is currently ~$510 billion left to the commitment, and it will, according to some analysts, not terminate at the end of this year. Rather, it will probably slowly conclude around February-April to allow for market adjustment.
If you think $20B or less per week is going to provide enough liquidity for sustenance of the current equity levels, well, good luck to you sir.
on Sun, 08/23/2009 - 18:13
#45718
net purchases week Aug13 through Aug 19, $25B, not sure where you get your information.
http://www.ny.frb.org/markets/mbs/
And they are going to stop at $1.25T? What happens to agency MBS spreads after that?
They will not / can not stop before Fannie and Freddie are reformed, early 2011 at best.
on Sun, 08/23/2009 - 18:15
#45721
The Slosh Report is useful too
http://www.gmtfo.com/reporeader/OMOps.aspx
on Sun, 08/23/2009 - 18:24
#45725
You've got to walk the cat back further.
If you look at the link you've provided, go to the bottom at click on 'Purchases archive', you'll notice that through July and August the numbers have been dipping towards $20B.
on Sun, 08/23/2009 - 16:23
#45632
If Bernanke/Geitner were playing Poker, it would be clear that both have tilted and are suffering from extreme pot envy. The funds already lost in playing the hand delt is blinding their ability to see that they are holding a loosing hand and no amount of further contributions in the form of bluffing can change the ultimate outcome. As in poker, the real unknown is who is really holding the winning hand. It is clear that the US is not, but who will walk away as Poker Champion?
on Sun, 08/23/2009 - 17:09
#45666
The depression (actually a total collapse) hasn't been prevented, it's merely been temporarily postponed and even more decisively guaranteed to happen with the insanity we've witnessed in the last year.
A price always has to be paid for mistakes and the "bill" just gets bigger and bigger as the mistakes compound........
on Sun, 08/23/2009 - 22:41
#45925
agreed, the only way to really solve the problem would have been to embrace the recession / depression and allow the debt to be eliminated through bankruptcy...for the Fed and Treasury / Admin not to intervene and allow the chips to fall, regardless of the consequences. That would have solved the problem. It would have hurt but it would have fixed the problem.
Now however, we have a bigger problem than we did before, and no amount of "kick the can" will eliminate it. At some point the imbalances will have to be resolved, there's no avoiding it.
on Sun, 08/23/2009 - 22:42
#45926
Everyone keeps talking about how much has been spent and how this spending cannot go on...so what is the consensus on what happens when this spending (in it's current form) ends?
Or do 'they' plan for it to end? Seems to me, if you are going to debase your currency to keep from defaulting, pumping an extra trillion/year of printed money for the next 10 years or so seems the way to do it, all the while blustering about how you can't keep doing it forever.
It also seems the fastest path to socialism without legislating it...when a family's grocery bill is more than mom and dad's paycheck, you either accept government assistance with the legal-strings attached to it, or you starve and 'they' take your kids.
Literally, a positive future for Americans depends on stopping this spending today.
on Mon, 08/24/2009 - 08:03
#46059
Palyi is dancing in his grave, shaking his fist at us saying "I told you fools!" In effect, stimulus has produced a negative return on the "investment." We're pouring gasoline on the fire. Future historians will laugh at this present age.
on Mon, 08/24/2009 - 10:18
#46119
last hurrah is bombing the moon: the M-Day bombing will be October 8, 2009. It'll be a bang.
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
on Mon, 08/24/2009 - 10:29
#46200
This is stupid to the 10th power.
Keep fighting the tape you guys. My PA is at all time highs (all long!, not much trading). Most of the big caps have posted positive earnings (and even better CF) every quarter... some have just posted better and better earnings. The M-T-M financials thing (mainly a policy deflation error, combined with a typical capitalist bubble) is OVER!
Q - So what is a company worth that posted positive earnings every quarter through the depression and can fund at pre-tax 3% rates? ... What if they will just grow earnings from here?
A - I might say 20-30x multiple. Thats 8 of 10 large cap companies.
Q - Say you held this same view (recession will continue, debt much delever, hold Gold, etc) in 1982 or 1992. What would being wrong have cost you?
A - Everything!