- A Date Which Will Live in Infamy
President Nixon’s Decision to Abandon the Gold Standard
Franklin Delano Roosevelt called the Japanese “surprise” attack on the U.S. occupied territory of Hawaii and its naval base Pearl Harbor, “A Date Which Will Live in Infamy.” Similar words should be used for President Nixon’s draconian decision 45 years ago this month that removed America from the last vestiges of the gold standard.
Nixon points out where numerous evil speculators were suspected to be...
- Insanity, Oddities and Dark Clouds in Credit-Land
Bond markets are certainly displaying a lot of enthusiasm at the moment – and it doesn't matter which bonds one looks at, as the famous “hunt for yield” continues to obliterate interest returns across the board like a steamroller. Corporate and government debt have been soaring for years, but investor appetite for such debt has evidently grown even more.
The perfect investment for modern times: interest-free risk!
Illuustration by Howard...
- News from TINA Land
Distortions and Crazy Ideas
We have come across a few articles recently that discuss some of the strategies investors are using or contemplating to use as a result of the market distortions caused by current central bank policies. Readers have no doubt noticed that numerous inter-market correlations seem to have been suspended lately, and that many things are happening that superficially seem to make little sense (e.g. falling junk bond yields while defaults are surging; the yen rising...
- The Great Stock Market Swindle
Short Circuited Feedback Loops
Finding and filling gaps in the market is one avenue for entrepreneurial success. Obviously, the first to tap into an unmet consumer demand can unlock massive profits. But unless there’s some comparative advantage, competition will quickly commoditize the market and profit margins will decline to just above breakeven.
Example of a “commoditized” market – hard-drive storage costs per GB. This is actually the essence of economic...
- Silver is in a Different World
The Lighthouse Problem
Measured in gold, the price of the dollar hardly budged this week. It fell less than one tenth of a milligram, from 23.29 to 23.20mg. However, in silver terms, it’s a different story. The dollar became more valuable, rising from 1.58 to 1.61 grams.
Who put that bobbing lighthouse there?
Image credit: John Lund / Corbis
Most people would say that gold went up $6 and silver went down 43 cents. We wonder, if they were on a sinking boat,...
- US Presidential Election – How Reliable are the Polls?
Is Clinton's Lead Over Trump as Large as Advertised?
Once upon a time, political polls tended to be pretty accurate (there were occasional exceptions to this rule, but they were few and far between). Recently there have been a few notable misses though. One that comes to mind is the Brexit referendum. Shortly before the vote, polls indicated the outcome would be a very close one, while betting markets were indicating a solid win of the “remain” vote. The actual result was around 52:48...
- Retail Snails
Second Half Recovery Dented by “Resurgent Consumer”
We normally don't comment in real time on individual economic data releases. Generally we believe it makes more sense to occasionally look at a bigger picture overview, once at least some of the inevitable revisions have been made. The update we posted last week (“US Economy, Something is Not Right”) is an example.
Eager consumers storming a store
Photo credit: Daniel Acker / Bloomberg
We'll make an...
- The Fed’s “Waterloo” Moment
Corrupt and Unsustainable
James has been a big help. Trying to get him to sleep at night, we have been telling him fantastic and unbelievable bedtime stories – full of grotesque monsters... evil maniacs... and events that couldn’t possibly be true (catch up here and here).
He turned his head until his gaze came to rest on the barred windows of the main building. Finally, he spoke; as far as I was aware these were the first words he had uttered in more than five years....
- Gold and Silver Supply and Demand Report
The Famous Buffett Quote
The prices of the metals didn’t change much this week. We thought we would take this opportunity to quote Warren Buffet. A comment he made at Harvard in 1998 earned him the scorn of the gold community.
Warren Buffett no doubt is a good investor; but he is also one of the biggest beneficiaries of the vast monetary inflation since the 1970s, a wind that has been at his back ever since. He also doesn't seem to understand gold. We don't say this...
- The Devil You Know - or the One You Don’t?
Better the Devil You Know?
We are providing around-the-clock nursing care to our invalid wife, who is back at home, with cracked ribs, unable to move. We are upstairs in the bedroom – the shutters closed against the heat (we have no air-conditioning) – taking a few minutes to update our Diary... but with nothing important to say.
Every day, we look at the headlines, think about what is going on in the big wide world and try to connect a dot or two. It is probably the...
- Farming in France Is No Picnic
Introductory Remarks by PT:
At first we actually didn't want to post this particular Diary entry, because we felt it was too “off topic” (although we do of course occasionally discuss off topic issues), but upon further reflection it struck us that it is actually quite interesting when considered in a broader context.
EU spending: most of the budget is spent on subsidizing agriculture (which represents less than 2% of total economic output). As is the case with all...
- The Myth of Leverage
Mining Stocks, Gold Prices and Commodity Price Trends
Gold has gone up >400% over the last 16 years. Ironically, it is hard to find a gold mining equity exhibiting similar performance. In retrospect, if one invested in gold, one not only made much better returns, one also took a relatively insignificant risk in comparison to owning equities—equities can go to zero while it is hard for a commodity to fall much below its cost of production. Moreover, depending on the jurisdiction,...