Friday, January 30, 2009

Morgan Stanley Now Warns of Hyperinflation

I have only just begun my deflation-inflation comparison and read in Alphaville this morning that:

Morgan Stanley’s Jocahcim Fels and Spyros Andreopoulos... [are saying] While such an outcome is clearly not our main case, the risk of hyperinflation cannot be dismissed very easily any longer, in our view.

I should say that I've increased the percentage of my portfolio in gold and silver to over 60% and thinking seriously about going for more, in spite of the recent spike which may be sustained and not return to old levels ever if we are going to see hyperinflation. Just the MS statement is probably responsible for a good part of today's rise.

Wednesday, January 28, 2009

Inflation or deflation?

I am going to begin commenting on the post titled Inflation v. Deflation and Part II on the Cassandra Does Tokyo blog via Infectious Greed.

The issues on both sides are relatively easy to understand but what is crucial is the timing so I will try to lay out the arguments as clearly as possible but I will keep those that affect the timing as a separate list. I happen to think that the amount of US debt that China acquires going forward is an important bellwether both for US inflation and for stability in Asia which is why I used that link for the title of this post.

I find this to be the most important of all topics and will be working on this for the next week or so. I also just received my copy of The Next 100 Years: A Forecast for the 21st Century by George Friedman and will be commenting on the provocative topics covered in this book

Sunday, January 25, 2009

Geithner’s taxes and the $700 billion bailout

This post is a rewrite of several comments I posted on a thread on Paul Kedrosky's Blog.

He cheats and he lies but he's the only one who knows where all the bodies are buried so he's got to be confirmed.

When lawbreakers must be confirmed, who's really in power? Corruption is now the stated norm, it's out in the open. Yeah, it was always part of the game on Wall Street, now it's the norm on Main St. too. Geithner's confirmation has turned a lot of honest people into cynics, you think they're going to report all income now? Other cynics will say everybody cheats, well that's much closer to the truth now.

What we are seeing suggests that some of Geithner's skeletons are not in his closet but in Congress. If a clean outsider begins auditing treasury and the whole stinking mess we may have a lot more blood on the floor.

I’m not asserting that Geithner has dirt on major players but if there are dirty major players Tim's their guy. In other words, Geithner's record at the NY Fed establishes him as a non-dirt-disturber. If he's rejected by Congress they may get a dirt disturber. I don't doubt his reputation as a financial wiz (except of course on his own taxes) but, a new broom sweeps clean and while someone else may take more time to get up to speed on the bailout questions many people are just as qualified.

I don't doubt the ''financial wiz" attribute because everyone trying to rush him into the Treasury position (and these are some impressive names) is touting him as the best man for the job in spite of his little tax cheating episode. But maybe it's just that they can't say "we want him because he's not a dirt disturber."

The "wiz" attribution appears in a recent AP story (third paragraph): quoting Ross Baker, a Rutgers University political scientist:

Geithner is sliding into Treasury on the same greased rail that gave us the 700 billion dollar bailout, and for the same reason

Thursday, January 22, 2009


Agnotology, formerly agnatology, is a neologism for the study of culturally-induced ignorance or doubt, particularly the publication of inaccurate or misleading scientific data. Wikipedia article

...Proctor argues, when society doesn't know something, it's often because special interests work hard to create confusion. from the Wired article

I think that intentionally publishing false data for personal gain should be regarded as a serious criminal offense with harsh penalties. Especially harsh penalties if the data makes appeals to human survival or itself can endanger survival.

That is fraud, fraud is illegal in every jurisdiction and is not protected free speech.

Clive Thompson via Paul Kedrosky via Barry Ritholtz

Tuesday, January 20, 2009

Godspeed, President Obama

I voted for Barak Obama with some trepidation 77 days ago but in those days I have become a believer. There is no one--living or from history--that I would rather see taking that oath.

I do worry that he will make errors with the economy, in particular emulating and repeating the errors of FDR and creating updated versions of depression era policy. The crisis we are facing is worse than most people realize. Credit default swaps on U.S. Treasury securities have risen from $8 to $60 in the past few months--that is default insurance on $10k for 5 years. Many sovereigns are on the verge of default, Argentina, Venezuela and Iceland especially. And one big default would begin a cascade.

Drug violence in Mexican border towns is approaching civil war intensity and I fear that the Obama administration will be too focused on the economy and the Middle East conundrum to pay proper attention to the borderland.

But he's my President and I haven't felt this good about America's prospects since January 1993, in spite of all the problems we face.

Sunday, January 18, 2009

Food Data

A comment thread on Paul Kedrosky's blog Infectious Greed has inspired me to gather food data. The point of Paul's post is a pie graph from the National Restaurant Association showing how restaurant spending has gone from 25% of the total food dollar in 1955 to 48% at present.

In the course of my comments it occurred to me that data on changing food habits is extremely valuable. I will be posting my work on the andilinks site but at the moment I don't know how I will format this. My first inclination is to list information sources as I do on the andifashion site, but this is an entirely different type of data set so I will leave the format open for now. I do have a few apparel projects in progress so I have no idea when I will have something worthwhile about food habits to post.

Friday, January 16, 2009

Inflation during the recession?

If TIPS (Treasury Inflation Protected Securities) are a sufficiently large proportion of M3 they are a dangerous feedback loop as are COLA and tinkering with the CPI is the only remedy short of paying down the debt with real money. The US has already spent itself into a quicksand bog and additional spending, especially if too little too late, will only make the situation worse.

Gold would be not such a great hedge against inflation if it were not for its "safe haven" attribute. Inflation worries plus crisis equal a gold spike. I am not suggesting armageddon, I don't expect to see in my lifetime. But a global crisis or the perception of one seems a possibility to me, at least enough to increase the amount of physical gold in my portfolio.

I suspect there are others like myself which would in itself increase the demand for gold over its market in normal times. There will be less demand for industrial and decorative gold but with the huge creation of stimulus and bailout in the news every day the safe haven market will grow.

Governments are trying to offset the collapse of velocity by injecting more liquidity but their increasing the money supply will be seen for what it is and will not instill the confidence needed for a true recovery. They will not dare decrease the money supply if the recovery appears fragile and so we may well see inflation as all these facors work themselves through the economy, and public consciousness is a huge component of "the economy."

Wednesday, January 14, 2009

Gold or dollars?

I am certainly no expert, but I am concerned about navigating the coming months financially. What follows is my strategy for the immediate future.

Confidence that a new administration will be more effective at turning the US economy around is keeping people and governments from dumping dollars. Official dollar/US security dumping by governments would chafe at relations with the US so we won't see much of that in the coming few months. But if confidence in the Obama administration wavers fear will take over and there will be a run on the dollar. I'm betting 60% with the dollar and a 40% hedge against. The value of no asset, income or currency is exempt from this bet--everyone is betting 100% on something or another. In my humble opinion the risk of a dollar panic is greatest now through the spring, if the Obama administration or their remedies look weak in the first three to six months I'll dump dollars for gold right down to my current month's living expenses. Absent external shocks or a big Obama stumble I expect the value of my gold and silver holdings to drift downward for a while. The rather large possibility of external shocks or the smaller likelihood of a serious Obama stumble keep me from selling/shorting silver and gold. A very difficult 2009 looms in any case.

Friday, January 09, 2009

Iceberg, dead ahead

The more I add up these numbers on the back of an old grubby envelope the more I become convinced that we are headed for a catastrophe.

The total of all the U.S. treasury securities in foreign hands is three trillion dollars and has grown 30% in just the past year. The total of all the bailouts including the upcoming municipal and state handouts may exceed ten trillion dollars. The outstanding national debt is over 10 trillion dollars. The total of all U.S. money (M2) is almost eight trillion dollars.

Foreign governments are reeling and have slowed their purchase of U.S. debt in order to bolster their own currency. When they begin redeeming their treasury securities will people begin dumping dollars? Will that be a signal?

Sunday, January 04, 2009

Extra Size Directory, Plus-Tall-Petite

I have decided to develop an extra-size directory, which will be an integral part of the Andifashion Directory as the twelve existing extra-size pages are now, but the coverage will be expanded, given in greater detail and there will be a separate extra-size index page.

Some coverage will begin to improve right away. Editing the individual entries is among the most rewarding and fun aspects of this directory but it is also the most time-consuming. The extra-size section is already the best edited and most up-to-date part of the entire site and because it is drawing significant traffic it will continue to be the main focus of my attention. I plan eventually to have a plus, tall, and petite page to compliment every existing category but have not yet projected a target date for this.

Twelve existing extra-size pages: A-C D-K L-R S-Z A-K L-Z A-K L-Z

Friday, January 02, 2009

Whipsaw, Recovery and Panic

Many are reporting that the current bailout total stands near 8.5 trillion, that is three quarters of GDP or more than 100% of M2. What is keeping runaway inflation at bay besides fear and a reluctance to lend on the part of those bailed out? Why are so many buying treasury bonds while Warren Buffet and others are buying equities? Is the value of the dollar balanced on a knife's edge here? It seems so...