He made one interesting point, which is to invest in Swiss Francs. I have been contemplating doing that over the past weeks, what are your opinions on that?
The Smartest Man in Europe Is Very Cautious
31–40 of 71 posts
Re: The Smartest Man in Europe Is Very Cautious
#32> The Smartest Man in Europe Is Very Cautious I first thought it was going to be an article about Grigori Perelman and about how we are all one step closer to Apocalypse because he was very close to finding that there is indeed no foundation for Mathematics (or any similar conclusion that is way over my head in even trying to explain). Instead I stumbled upon an article about a rich heir to "a mercantile family" who…
There is no foundation for Mathematics [1] :-)
[1]: http://en.wikipedia.org/wiki/Godel%27s_incompleteness_theore...
Re: The Smartest Man in Europe Is Very Cautious
#33Strange, one would expect The Smartest Man in Europe to be at least somewhat contrarian.
What I have read is a collection of pop fearmongering. Basically his stance is the prevalent position among people out there today. Thus it reeks of manipulation. It is a piece meant to evoke a specific emotional response. That it is written by a hedge fund executive only reinforces the stench.
Thus I mark this piece as hedge fund propaganda. True meaning is a feint within feint.
Edit: I suspect that Blackstone is trying to unload its gold and trying to create a market. Gold is probably in the last phase of bubble. Why do I think so? Only one reason. In my country there is a vocal MLM type gold investment operation going on. Very similar to what was going on with stocks and derivatives in the 2006/2007 era. If there is one fundamental truth about markets, it is that when your hairdresser and butcher start giving investment advice it is time to get out. There is no more bigger fools out there. Gold is going down.
Re: The Smartest Man in Europe Is Very Cautious
#34Strange, one would expect The Smartest Man in Europe to be at least somewhat contrarian. What I have read is a collection of pop fearmongering. Basically his stance is the prevalent position among people out there today. Thus it reeks of manipulation. It is a piece meant to evoke a specific emotional response. That it is written by a hedge fund executive only reinforces the stench. Thus I mark this piece as hedge fun…
It is true that in a bubble everyone is telling you to buy. But I don't think we're in a bubble for the gold price for a couple reasons. The first is that most people with an unsophisticated financial perspective (eg: hair dressers) are not aware of gold (in the countries I've visited.) The slightly sophisticated (Eg: people who invest in mutual funds) have been claiming there was a gold bubble going all the way back to when it was only $400 an ounce.
But the other reason is we haven't seen gold take leave of the fundamentals. The financial crisis that has been unfolding since 2008 has revealed that the only response governments seem willing to take is ever more monetary inflation. The more money out there, the higher the price of gold. Secondly, most gold trading is at the level of very sophisticated people, not the average joe. When average joes start piling in and blowing up the price, then gold may take leave of its fundamentals and we'll have a bubble.
The thing is, in bubbles, supply rushes in to meet demand-- but you cant' scale up supply of gold like you can dotcoms or houses. Environemntal regulations and kleptocratic governments keep new mine production opportunities limited.
Finally, mining companies-- which should be the darlings of the gold bubble if there is one-- are trading sympathetic with the rest of the stock market, not contrary to it. If we were in a gold bubble, then good news for gold (eg: bad financial news) would cause those prices to go up-- but they don't they go down now. This indicates that they are not seen as an alternative, but as being subject to the bad news the same way General Electric, et. al. are.
We won't enter a bubble phase until that has changed. When people start seeing gold as a safer asset (or as a bull market "you just gotta get into!") then we'll have entered a bubble. At that point, when there's bad news for General Electric, you'll see a bump in the price of GoldCorp. We saw this in the dotcom bubble-- a big IPO for a tech company would cause a decline in General Electric or Gold for that matter.
All of these are subjective observations, so neither of us can really prove the other wrong of course. I found it interesting is that we use the same signal to detect a bubble-- the hair dressers and MLM schemes. I'm impressed to see how much more popular gold is outside the USA than it is inside the USA. I take that as a sign that it is heading towards a bull market.
However, if you're right and I'm wrong, I will be very severely punished by the markets. I'm not too worried, though. I got punished by the dotcoms. I played the housing bubble successfully going up and going down and got out a bit early, but am happy with the result.
I remember being told I was crazy on forums because I said there was a bubble in housing. So, you're not crazy, I just think you're too early.
Re: The Smartest Man in Europe Is Very Cautious
#35After pointing out that "The central bankers throughout the world have lost touch with reality" and discussing the messes that have been created in large part by inept bureaucrats, The Smartest Man in Europe dismisses all of the problems brewing in China with a naive "the authorities will figure out solutions to solve them." Anyone who truly believes that the "authorities" in China are any more capable than the "auth…
Anyone who truly believes that the "authorities" in China are any more capable than the "authorities" outside of China isn't very smart at all.
A representative sample of China's Politburo:
Hu Jintao, 62, president of the People's Republic of China, graduate of Tsinghua University, Beijing, department of water conservancy engineering.
Huang Ju, 66, graduate of Tsinghua University, department of electrical engineering.
Jia Qinglin, 65, graduate of Hebei Engineering College, department of electric power.
Li Changchun, 61, graduate of Harbin Institute of Technology, department of electric machinery.
Luo Gan, 69, graduate of Freiberg University of Mining and Technology, Germany.
Wen Jiabao, 62, premier of State Council, graduate of Beijing Institute of Geology, department of geology and minerals.
Wu Bangguo, 63, graduate of Tsinghua University, department of radio engineering.
Wu Guanzheng, 66, graduate of Tsinghua University, power department.
Zeng Qinghong, 65, graduate of Beijing Institute of Technology, automatic control department.
-------------
A representative sample of the US Senate:
... 100 people who are pretty much all lawyers
Not saying this implies anything, but my money's on the government run by engineers.
Re: The Smartest Man in Europe Is Very Cautious
#36Earlier quoted context omitted.
There's a school of thought that blames the gold standard for the great depression. The French accumulated massive amounts of gold between 1928 and 1932 and some scholars say the global deflationary effects of Bank of France's policy during this time caused the great depression. The gold standard also ties money supply to gold production which is a little like tying fed policy to the quarterly flip of a coin. For exa…
The gold standard was not the cause of the Great Depression; the collapse of the investment bubble created by the Federal Reserve, along with the interruption of international trade by the Smoot-Hawley Tariff Act caused the initial problem. Subsequent interference in the economy by both Hoover and FDR extended the problems. The gold standard merely prevented the government from inflating away the dollar and using inf…
It's not that simple. The gold standard basically established an international monetary union, similar to the Euro today.
In such a setting, long-term trade imbalances cannot be balanced out by exchange rate adjustments, so there is a very real danger that countries are drained of money by running net imports in the long term. While this then prevents the country from net importing even more - which is only fair - it also reduces the purchasing power of the country's population internally.
The circulation of money is slowed, causing unemployment and the very bizarre situation where people cannot afford to buy desired XYZ, while at the same time there are involuntarily unemployed producers of XYZ. Everybody's unhappy, simply because the social construct of money ties their hands.
By decoupling from the gold standard, countries left what was effectively a currency union, which enabled them to restart internal circulation.
This is also the choice that Greece has right now, which this supposed "smartest man" does not, or for ideological reasons refuses to, see: leave the currency union to restart internal circulation of a new currency.
Re: The Smartest Man in Europe Is Very Cautious
#37After pointing out that "The central bankers throughout the world have lost touch with reality" and discussing the messes that have been created in large part by inept bureaucrats, The Smartest Man in Europe dismisses all of the problems brewing in China with a naive "the authorities will figure out solutions to solve them." Anyone who truly believes that the "authorities" in China are any more capable than the "auth…
Anyone who truly believes that the "authorities" in China are any more capable than the "authorities" outside of China isn't very smart at all. A representative sample of China's Politburo: Hu Jintao, 62, president of the People's Republic of China, graduate of Tsinghua University, Beijing, department of water conservancy engineering. Huang Ju, 66, graduate of Tsinghua University, department of electrical engineering…
China's errors seem to be ones of engineering: Overbuilding.
America's errors seem to be ones of lacking fortitude: constantly increasing over spending.
If neither change, china is headed for continued growth and maybe some painful re-allocations of capital, while the US is headed off of a cliff.
Re: The Smartest Man in Europe Is Very Cautious
#38All this talk of "but they have no other choice" amuses me. Yes they do. And they will probably exercise it.
Re: The Smartest Man in Europe Is Very Cautious
#39Strange, one would expect The Smartest Man in Europe to be at least somewhat contrarian. What I have read is a collection of pop fearmongering. Basically his stance is the prevalent position among people out there today. Thus it reeks of manipulation. It is a piece meant to evoke a specific emotional response. That it is written by a hedge fund executive only reinforces the stench. Thus I mark this piece as hedge fun…
It is true that in a bubble everyone is telling you to buy. But I don't think we're in a bubble for the gold price for a couple reasons. The first is that most people with an unsophisticated financial perspective (eg: hair dressers) are not aware of gold (in the countries I've visited.) The slightly sophisticated (Eg: people who invest in mutual funds) have been claiming there was a gold bubble going all the way back…
This is quite interesting to hear. So in the US it hasn't taken hold yet? Here in Europe the buzz is starting, the MLM aspect has been less than a year old. So I have caught this in the early stage?
Can someone else from the US confirm or deny econgeeker's claim?
This is the specific scheme I was invited to: http://www.securitas-aurum.com/
But its hard for me to believe that Slovenia (where I am from) is ahead of US on this one. We usually lag a year or two in such phenomena.
So I can explain it in 2 ways -> You are either a nugget of gold, if your statements are legit, then there is still money to be made from this one.
The other explanation is that you are one of the team doing the pumping.
What does the hive mind have to say?
Re: The Smartest Man in Europe Is Very Cautious
#40He made one interesting point, which is to invest in Swiss Francs. I have been contemplating doing that over the past weeks, what are your opinions on that?
Switzerland still has a conservative financial system, and may benefit from a "flight to safety" as the euro deteriorates. That might be his reason for buying francs.
Francs used to be backed by gold, and might still be partially backed by gold. I think they are not redeemable in gold anymore, but that the country keeps a large supply of gold onhand. So, sort of a partial fiat currency.
However, one can own gold directly, which provides a hedge against all currency risk. It sounds like this is what he is doing, and then also holding some francs against a panic in europe.