Friday, January 11, 2013

Charles Plosser's Follies And Making Money Off Of Them

There are REAL laws in both the physical and the economic spheres. In both cases, they must be obeyed in order to be commanded.  A plane does not fly by “ignoring” the law of gravity.  A nation does not grow prosperous by “ignoring” the law that says that what is consumed must first be produced.  -  Bill Buckler, The Privateer (#719)
I s'pose I would be remiss if I didn't make some comment about the Denver Bronco/Baltimore Raven Divisional playoff game being played tomorrow at Mile High Stadium.  So I will:  It's going to be very cold (forecast:  17 degrees).  If one were to bet the game, I would bet the "under" (44 1/2)  and lay the points (-9 1/2).  A lot is being made of the fact that Peyton Manning is 0-3 in cold weather playoff games.  Pshaw.  All of the games were obviously on the road, two in New England.  I will counter by saying that Peyton never played on a team with the #2 ranked defense in the league going into the game...

At any rate, some of you may have noticed the paper hit put on the precious metals once again today after the Comex opened.  The catalyst was some ridiculous comments by the Philadelphia Fed's Charles Plosser.  I responded in kind to his idiocy: 
Please tell me, Mr. Plosser, where exactly is this GDP growth of 3% going to come from given that the trend in GDP going into 2013 is declining, 1% or less and the main driver of GDP over the last 12 years - consumption - is quickly eroding?
You can read my commentary here:   LINK

I discuss some trading ideas that we implemented yesterday and for which we used Plosser's mind-numbingly absurd statements to take advantage of the market's illogical response.  This is just one of those days where understanding our Orwellian system makes it a little easier to make money if you know how to take advantage of it.   Have a great weekend.


  1. LOL, OilFinder really schooled you, Dave. I don't know if he's right or you're right, but I'll say this. The dogma you and other gold bugs are demonstrating right now (Pento saying gold is going to $10,000 at a minimum, Schiff saying similar things, Sprott, you, etc.) at places like KingWorldNews and elsewhere in the media/blogosphere just scares the hell out of me.

    I think you and your gold-bug Libertarian Armaggedon "Chicken Little" buddies are just asking for humble pie and a smackdown in 2013. Gold to $1,400 and GDX to $33 wouldn't shock me, and then I will buy.

    1. Ummm, okay. I think you should start a blog and write commentary and publish it on Seekingalpha.

      People who post nonsense comments without back-up are of no use and don't have the balls to put their views out in public. They prefer to hide out in the comment sections of blogs and yahoo/finance chatboards and beat their chest by posting garbage.

      As I said in response to oilwhatever, I don't have time to put together the commentary and graphical proof to show why he's wrong. My bet is that the fundamental understanding of true money supply is over his head. Perhaps I'll man-up like I always do and put that analysis together next week and post it.

    2. "When gold falls, then I will buy"
      Spoken like a true gold bear/fence sitter when gold reached $850 a few years back-and they are STILL waiting to buy.
      US government Trillions in debt? Check
      Trillions more added to the debt every couple of years? Check.
      Paper money printed in increasing amounts? Check.
      China, India, Viet Nam, Russia and Germany (private citizens or their central banks) are buying US Dollars and US Bonds or gold?
      Gold has two forces opposing it, high interest rates or manipulation. We are not likely to get the former without killing the economy and gold manipulation eventually ends (see London gold pool)

    3. Oilfinder didn't use any facts or decent arguments so I'm not sure he "schooled" anybody in anything except in how to open one's mouth and show ignorance.
      When junior mining execs are essentially begging the TSX Venture to get rid of HFT you know the fix is on pretty good. Sad that the business I work in is being suppressed by those trying to maintain the illusions that all's ok and even sadder that people like "Oilfinder" buy into that drivel.
      I'm a "goldfinder" and I see what's happening. Only so much gold in the world so the supression can't last forever. Nadler quoted someone who was predicting gold prices could go as low as $900. How does that work when the all-in price to put an ounce of gold to market (including the discovery of new replacement ounces) is $1500. To me that's the floor. It goes below that and mines start closing which drives price back up-- real supply and demand functioning. So long as governments are printing like crazy to prop the system up gold and silver will continue to rise. I'm not a permabull, I just see where potential growth exists and right now that is STILL in the PM's. Have to add I know first hand just how hard it is to find PM's and develop a new mine and it's not getting any easier.

      Justin from Canada

    4. One can only hope they get the golf price down to $1,400. Last year at $1,600 the Chinese bought 500 tons of Western gold at $1,400 we can only imagine what the Chinese consumption will be. Personally I would like to see gold break $600 again and then we would never have to worry about the COMEX or the LBMA again.

  2. @ Anonymous Yes, why would you want to listen to someone like Eric Sprott comment on the precious metals market? He was only one of the few people in the world smart enough to be loading up on gold/silver a decade + ago. What could he possibly know. <=sarcasm if you're not bright enough to figure that out

  3. I enjoyed reading your commentary about Plosser's comments, he and the other Fed heads are really starting to get desperate in my opinion. As for the football game, as an above average wagerer on NFL i do have to differ with you on the game. We will find out if having the #2 defense in football means anything when you played Kansas City, Oakland and San Diego twice, plus Cleveland and Tampa Bay the last 11 weeks of the season. Thanks again for the guidance during this 1.5 year consolidation period in precious. Best of luck tomorrow.

  4. Keep up the excellent writing by avoiding useless arguements. We know that the economic system we live in is permanently broken. Consumerism - the driving force for the last few decades - is grinding down. Those with no debt will somehow be forced to take on debt because that's how the system is run. People like Schiff, Robert R. Prechter, Jr., and Dr. Michael Burry all predicted and prosper from the crash but I feel they are grasping at straws as to what will come next. Something IS going to break but there are a lot of things out there that can break at anytime and it's usually something we never saw coming. I believe that Food will become more priceless than Gold.

    Here's a link on the student loan bubble crisis:

    1. Thanks MJ. The student loan bubble is truly frightening and it's the perfect example of true "money" in the form of credit - at least 1/2 of which will never be repaid - that does not show up in the money aggregates but certainly contributes to the devaluation of the currency.

  5. Thanks for the thoughts Dave. Enjoy your work.

  6. Dave

    Noli arrogantium iniurias pati

    Tom the guy who lkes HL

  7. Dave , Keep the flame burning , regardless of any efforts which try and douse such a necessary tool.

  8. No offense but your gambling picks are very amateurish. Laying that many points in the playoffs is almost certain disaster. I'd be surprised if the Patriots cover their huge line also.

    Taking the under "because it's cold" is also unwise. Guess what? Everyone knows it's cold....including the guys setting the lines. By the time you think of it, it's already priced in. Same goes for rain and wind. You lose more often than you win. Take it from a guy who watches these lines closely for 15 years.

    1. LOL. My pick was more of a "homer" pick. 15 years? That's all? When I lived in NYC from 1985 - 2000, I used bet NFL, college football and college hoops with a real bookie. I made a small fortune on the Broncos run in 1996-1999. I used to clean up betting 2nd tier NCAA D1 teams like Bradley and Pacific.

      15 years? I've been watching the NFL for nearly 40 years...

    2. There always has to be one guy who has to come in after the game is over- to rub it in. That level of cowardice is quite annoying. "That guy" always tells us how smart they are after the game is over.

      So Matt Beaucgamp great watcher of lines for 15 years- where were your published pre game picks?? or better yet- there are a couple of games coming up- so let's hear your spread choices and totals.

      Of course if you are wrong- I will certainly come in on Monday and tell you how stupid you were.

      So let's hear em.


  9. Sorry your loss, Dave, twas a great game, though. Ravens really earned it. AND the Broncs really blew with that ultra lame coverage with <1:00 to go with 70 yds to go. You do that, you deserve to lose. Anyway, Peyton/Broncos will no doubt be back next year, and likely eve better. He isa coming back,no?

    1. Manning? He signed a 5-yr, $95mm contract. It's expected he'll play at least 3 yrs.

      Denver could've put the game away when they had the ball at the the end of the game. They needed one more 1st down and they could've ran the clock out. Instead they chose to run the ball into the line 3 times, punt and let their defense try to win it. Bad move given their defense hadn't really stopped the Ravens much all day.

      Denver's defense picked a bad day to play their worst game of the year. Manning played mediocre at best. O-line was sub-par. The better team didn't win, but the best team that day won.

  10. Got to agree on the #2 defense counter argument. Denver did lose to the good teams it played early in the season, then they didn have very weak schedule from Nov 11 on, barring their win against Balt week 13/Dec16.
    IMO, the truest ratings for a teams rank, is how they do against other top teams. Which, as a Giant fan, kills me because they blew SF and GB off the field. Tho down th stretch the lost ugly to ATL and Balt. No doubt NE Pats are happy they didnt make the cut.

  11. I've got a friend in Manhattan who is a high ranking treasurer at a major bank. Actually, he's been at several of them.

    Anyway, he's spouting the "what is gold good for, you can't eat it?" mantra. Amazing. This from a very bright, pragmatic guy. He suggests a traditional 5-10% weighting.

    I say, Yeah, maybe if these were traditional times. They ain't.

    The only counter argument, IMO, that holds any water, is the deflationary one. Rates with be low for a long time, because the credit bubble has popped, which has vastly decreased the amount of *money* in play.

    True enough. But as far as I can tell, that is the only legit counter argument. And, IMO even this argument - which argues that money/credit has been severely abused, ultimately, is pro gold.

    True greatness is the ability to think two contradictory things at the same time and not be destroyed. John Keats.

    1. The ultimate snappy comebaack to "you can't eat gold"

      Quote "you can't drink crude oil either, I guess oil is worthless too"

      Watch the gold bears turn red in the face with that one

  12. And as others have said, and you yoursel have.. countering the pro-gold arguments with simple "it hasn't happened yet, dummy" critique, it bogus. It has happened, it is happening. All the fundamentals and price charts
    confirm it.

    Pls, pls, ant-gold types, show us the countering price and fundamental data. AND, the political gumption to get the us spending in order. Along with Japan, the Euro, China.

    Or is it that these things don't matter?

  13. More on meaningless bank capital: Bragging banks keep mum on this number

    In his Wall Street Journal Heard on the Street column, David Reilly exposes the vast gap between the banks' claim to 'fortress balance sheets' and the reality.

    Regular readers know that bank capital is meaningless for several reasons. As pointed out by the OECD, the level of bank capital is meaningless for several reasons including:

    Regulatory forbearance has allowed the banks to engage in 'extend and pretend' and turn losses on bad debt into 'zombie' loans; and
    Suspension of mark-to-market accounting has allowed the banks to engage in 'mark-to-mythology'.

    Besides overstating book capital levels, the Basel-based bank capital ratios have their own reasons for being meaningless starting with

    Banks use their own internal models to value their securities.

  14. Guns Protect Honest People-Catherine Austin Fitts

    Fitts says we are not necessarily going to get a “new” currency, but it is definitely going digital. Fitts warns, “Once we are in a spot where the currency can be entirely digital, then we’re in a new state of very invasive control. . . . One of the reasons I love gold and silver is that it allows me not to be digital” Fitts says the real fight over the fiscal cliff is how we are going to pay for the mess. Fitts thinks, “Politicians have already committed to inflation.” Fitts predicts, “The chances of another financial collapse are very small because every time we come up to a moment where a financial collapse starts to be a real risk, what happens? We get war.”

  15. SAFE sets up office to invest foreign exchange reserves

    CHINA'S top currency regulator has set up an office to supervise entrusted loans of China's foreign currency reserves that provide credit for Chinese businesses investing overseas.

    The office, SAFE Co-Financing, is in charge of the "innovative use" of the nation's foreign exchange reserves. The loans will be provided in line with market principles, the State Administration of Foreign Exchange (SAFE) said on its website today.

    The administration said the entrusted loans to commercial banks are aimed at supporting Chinese companies' overseas expansion. The new business can widen the investment scope of foreign exchange reserves and secure the value of the holdings.

    The office was established in 2011, according to SAFE's annual report.

    China holds the world's largest foreign exchange reserves of US$3.31 trillion at the end of last year. About 70 percent of such assets held by the central bank are in the US dollar, while gold accounts for only 1.6 percent, according to the statistics released by the International Monetary Fund.

  16. The argument which surfaces up against physical gold and silver every so often stating that " you can't eat it " is a weak one and can be shot down by an obvious response.

    Answer ; You may not be able to eat it but you will be able to trade it for food ,services , and goods. Physical silver and gold will play an important role as money in very short order when the U.S. federal reserve note becomes worthless.
    All central bankers detest the idea.

    1. The "you can't eat gold" argument is 100% - for lack of a better word - retarded. It comes from anyone who does not understand the nature of money, which is about 98% of everyone at every level of society in this country.

      No, I can't eat gold, but I sure as hell can buy a lot more to eat with the gold I bought in 2002 than if I had just held the cash instead. In fact, I can buy the same amount to eat AND take a nice trip AND buy a fancy sports car if I so chose...

  17. The Neoliberal Financial Skim (January 14, 2013)

    The perfection of the Neoliberal order is a parasitic financial sector protected by the Central Bank and State.

    Precisely what benefits from this gargantuan parasitic skim flow to the general good? Into whose pockets does this gargantuan parasitic skim flow? Hint: not the lower 90% of the American populace.

    The perfection of the Neoliberal order is a parasitic financial sector protected by the Central Bank and State. That is the U.S. Status Quo in a nutshell.


  19. Western governments may soon borrow in renminbi

    The Panda market is far more important than the Dim Sum sector for China’s long march to establish the renminbi as a genuine international currency. Central banks will invest substantially in a reserve currency only if it is fully convertible and also offers deep and liquid domestic financial markets.

    The renminbi at present does not match these criteria, but is encountering heavy demand from reserve managers around the world because of its growing use in international trade settlements and investment transactions. Deepening China’s financial markets would help meet this demand, which one international banker at a closed-door Chinese-European monetary symposium in Beijing at the weekend described as “insatiable.”

    One Chinese economist at the symposium said that China and other Asian countries should build up a fully effective trade settlement infrastructure for local Asian currencies to rival the dollar-denominated SWIFT system.

  20. U.S. Government Claims – Just Like the Nazis – that the Truth Is Too Complicated and Dangerous to Disclose to the Public

    Note 1: Fascism also happened in Nazi Germany because the taxpayers became responsible for the debts of big corporations, and the corporate sector and authoritarian government worked hand-in-glove. The same is happening in the U.S. right now.

    Note 2: For Dems who assume that things improved after Bush, please note that a former Obama security adviser says that Obama is as “ruthless and indifferent to rule of law“ as Bush. And see this.

  21. Well, who knew this was going to happen yet again -

    The Social Security and Welfare Trust Funds were used for this very same purpose. Now those are full of the same Debt they cannot pay….

    Fucking remarkable how gullible the American Public is and remains.

  22. Charles Murray
    Author of The Bell Curve; Scholar at the American Enterprise Institute

    Charles Murray is one of the most influential right-wing ideological architects of the post-Reagan era. His career began in a secret Pentagon counterinsurgency operation in rural Thailand during the Vietnam War, a program whose stated purpose included applying counter-insurgency strategies learned in rural Thailand on America's own restive inner cities and minority populations. By the late 1970s, Charles Murray was drawing up plans for the US Justice Department that called for massively increasing incarceration rates. In the 1980s, backed by an unprecedented marketing campaign, Murray suddenly emerged as the nation's most powerful advocate for abolishing welfare programs for single mothers. Since then, Murray revived discredited racist eugenics theories "proving" that blacks and Latinos are genetically inferior to whites, and today argues that the lower classes are inferior to the upper classes due to breeding differences.

  23. Lawrence Lessig on Aaron Swartz

    "In a world where the architects of the financial crisis dine regularly at the White House, it is ridiculous to consider Aaron Swartz a felon."