Friday, December 10, 2010

Two Great (Quick) Reads For Your Weekend Pleasure

The first one is sourced from the King World News Blog.  The author makes the argument that, on a relative basis, Europe will begin to appear "stable" relative to the U.S.  What's interesting about this that I was meeting with prospective client who was relating a presentation he heard from some fancy economist who talked about a stronger dollar vs. all the problems in Europe.  My response was, "huh?"  California alone is a bigger problem for the U.S. than Greece, Ireland, Spain, Italy and Portugal combined.  Then layer in Califorinia, New York, New Jersery, The Rust Belt..." 

Anyway, this commentary alludes to all of that:
In no way do we see the Build America Bonds program as a panacea for what ills Municipals, rather we see it as the duct tape holding states together until growth in whatever guise comes its way. With no growth and no duct tape, we see the problems of state and local governments coming to the fore. Given California, New York, and Illinois comprise 25 percent of the US GDP, we believe headlines regarding their budget deficits will soon overtake those regarding Ireland, a country that makes up only 1.8 percent of Euro-Zone GDP.
More interestingly, he makes the argument that the best way for China to revalue its yuan vs. the U.S. dollar is to continue buying a lot more euros, which they are doing anyway in order to diversify out its increasingly worthless dollar position.  It's the first time I had thought of this issue this way and I believe he's dead right.  Here's the link and it's definitely worth reading:  Buy Euros On Dips

The second article is about silver from Sprott.  Like most of us who understand the how/what/why of the precious metals market, Sprott as an institution - and the principals of the firm individually - have overweighted silver in their investment portfolio.  I know both Eric Sprott and John Embry have 90% of their net worth in the precious metals sector because they have stated that on several occassions.  It made me feel a lot better about having 90% of my net worth in the sector as well.  At any rate, if you want to read an excellent summary on why silver is poised to provide breathtaking investment returns just click HERE.

As an aside, I was out to dinner last night with a good friend going back to 1st grade.  At one point in his career he was a Federal prosecutor at the Justice Dept who prosecuted RICO cases.  I told him about the RICO lawsuit filed against JP Morgan for manipulating the silver market.  His only response is that JPM is likely in a lot of trouble at this point...


  1. That doesn't make sense at all.
    The US government can bail out munis using freshly printed money. Short- to medium-term impact: buy, buy, buy!
    In the EU they can't even bail out Spain, let alone Italy.

    >More interestingly, he makes the argument that the best way for China to revalue its yuan vs. the U.S. dollar is to continue buying a lot more euros, which they are doing anyway in order to diversify out its increasingly worthless dollar position.

    This doesn't make sense to me either. Right now they can sell US T's to buy EUR. If they revalued they'd be able to buy more EUR, but they'd lose on US T's.

    IMHO the EU will be the first to crash, then maybe China (I used to think the US, but I'm not so sure), and the US only after that.

  2. It makes perfect sense. They buy euros and cheapen their currency vs. the euro and stimulate exports to Europe. That will enable them to shift export volumn from the U.S. to Europe AND de facto devalue the yuan vs. dollar. It's brilliant. The U.S. economy is toast anyway. The citizens are so overleveraged it's absurd. The "deleveraging" charts that all these deflationists keep jerking off over are retarded. All that's going on is shifting debt from the banks to the Govt. Great, the consumer "deleverages" because his mortgage and credit card debt is partially written off by the banks but the debt is shifted to the Treasury.

    IF the U.S, keeps the States alive by printing - which they will, it devalues the dollar anyway and China loses export volumn to the U.S. The method outlined in the article enables them to shift the volumn from here to Europe.

    Quello articolo é molto bravo!

  3. It's all so confusing! I'll be interested to see how silver works out. Bob Hoye has looked back through 300 years of stock market history and sees silver correcting more than gold in the next crash, which he reckons will happen in the next five weeks. He was right about this happening with the last big crash, but past performance is no guarantee of future performance.
    I don't have much silver myself, but if it does crash like last time then I'll buy some silver stocks on the dip, if it doesn't crash then it means we are in a new paradigm.
    Next year promises to be volatile!

  4. SDRG getting killed today. Down 3 cents (18%) as I write. No news or PR release. What's up with that?

  5. stay tuned. i bot more this morning.