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  • Archive for October, 2008

    Platinum sold out in less than 24 hours

    Posted by Frugal on 30th October 2008

    Did you see it at tulving.com? I saw it, and was still contemplating whether I should pay $129 premium over spot price, or more than 15% over spot. This morning waking up, it’s ALL gone. Incredible. Minimum order was about $5K dollar, and it’s all gone in less than 24 hours, not to mention that I believe it was available mostly just during market non-trading hours.

    If you don’t believe me on how well physical metals are selling, just monitor tulving.com. By the way, another sold-out item was 100 ounce silver bars, trading $1.49 over spot, by a no-name refiner, called Ohio precious metals. I didn’t want to buy it because of the name. Still, things are getting sold out left and right.

    Gold is coming down again today. I would buy more near $700, and load up if it ever gets to $660. Don’t think it would happen, but never say never.

    Posted in Investing | 2 Comments »

    Final low is in?

    Posted by Frugal on 28th October 2008

    I didn’t believe this from Bob Hoye, but maybe it could be true.

    He said that the low should occur by Oct 27 2008. The oversea rally seems to have confirmed this so far.

    I have got hurt very badly by Bill Cara’s early call of the end of bear market back on Sep 19 2008. He was way too early. Markets fell by at least 40% since that point, and crushed part of my cash capital.

    So far Bob Hoye is the only analyst that has got everything right.

    What has he been saying recently?
    1. Crude oil is oversold, and shares in oil will rally. (He got natural gas wrong before, but he did retract his statement quickly.)
    2. Stock markets may have a bottom on/before Oct 27 2008, and may retest again in November. Then rally towards year end and the first quarter of 2009. Worst case scenario however is that we bounce along the bottom until next January.
    3. Long term bonds will get crushed in 2 to 3 years.
    4. This bear market will last at least a total of 30 months or 2.5 years. That is there is about another 1.5 year to go.

    Given how markets have been behaving, I had given up most of my hopes for a bottom before Oct 27 2008, and has been planning for a worst case scenario for coming back to markets in next January.

    But oversea rallies are extremely strong. Maybe Oct 27 is really the magic date.

    Out of all of Bob Hoye’s statements, I believe his big picture should be correct. He has called the end of the credit bubble “correctly” or too early by about 4 months. Unfortunately that 4 months cost me dearly in shorting the markets too early. The most serious consequence of his forecast is really on the long bonds. If you don’t know the ramification, I will elaborate it in my next post.

    For now, markets are going to open in US in 30 minutes. Hopefully we will all enjoy a relief rally to come.

    Posted in Investing | 4 Comments »

    Markets won’t bottom until US dollar tops

    Posted by Frugal on 27th October 2008

    This morning US dollar index is at 87.237. It has been rising relentlessly with the merciless fall of the stock markets. The global hedge fund liquidation is still going on.

    Many lines have been drawn, the last one being at 86. Now that US dollar has exceeded 86, it may go even to 90. And that is going to be really bad news for global stock markets.

    The global stock market rout is looking more and more like a global depression to me. In fact, I start to think that the possibility for a strong bounce and recovery is fading into nothingness, and that the possibility for a global financial shutdown is growing. At some point in the “near” future, it is possible that all international trades including currency exchanges will shutdown, and gold will become literally “priceless” in that case. Priceless meaning that there is no price quote for it anymore, and that there is nobody transacting it. The shortage of precious metals may eventually get to gold. If/when it does, international finances will be in disarray.

    Think about that for a minute. If your money cannot buy gold/silver, what does money, as a medium of exchange, means to you? If that happens, global food shortage will be next.

    I hate to be a gloom-and-doom person, but we are literally looking at the edge of abyss in that case.

    Posted in Investing | 3 Comments »

    Depression?

    Posted by Frugal on 23rd October 2008

    Despite a very over-sold global stock markets, I start to think that one must consider the possibility of a Greater Depression. My biggest fear is obviously that we’re not even into the great negative ARM reset yet in mid-2009.

    Next year, most likely the layoffs at the cities and state levels and any companies doing business with state/cities will go dramatically up. Layoffs at retail and financial business will go up too. And everything will snowball from there. More layoffs mean more home foreclosures. Economy in 2009 is going to be in a really bad shape.

    That’s not my top worry. Rather my worry is that there will be a replay of the current credit crunch, but even bigger. If there is a replay, international finance and banking systems may freeze up.

    Frankly, the best bailout package should be simply giving back all federal AND social security taxes for everyone for one or two years. America is rotten at the roots, or at the consumers. Without a healthy balance sheet for consumers, we are looking at patch that won’t work. If consumers are solid, they will spend and/or pay down debts. Banks will be willing to continue to loan again. Unfortunately, the rich bastards at Washington and Wallstreet simply don’t get it.

    Yeah, dropping bucks directly into laps of consumers will certainly devalue the buck. But hey, it is far better than keeping them (or us) solvent than bankrupt. As long as there is money at the bottom, it will surely continue to flow up to the controlling banking industries. Giving money to banks however won’t make the money trickle down. They simply hoard the cash, since they know very well that US consumers are done pretty much.

    Posted in Investing | 6 Comments »

    A worsening picture for housing markets

    Posted by Frugal on 20th October 2008

    I just checked the mortgage rates over the weekend. Just before the stock markets start to drop 7% everyday, the rates were pretty good at 5.875% for 30 years, and 5.375% for 15 years. Now the rates are about 6.25% for 30 years, and 6% for 15 years-fixed.

    Housing markets are going to be so dead if rates continue to go up. Unfortunately, with the printing press at full steam at Federal Reserve, the long term treasury bond yields have been creeping up. If the monthly new purchase of 40 billion toxic mortgages by Fannie Mae and Freddie Mae cannot alleviate this situation, I think stock markets going forward will have quite a bumpy ride.

    Boy, I really hate to believe that we may be into a depression, but rather a stagflation/high inflation era. But hope is just NOT an option right now.

    Scary times indeed.

    Posted in Investing | 6 Comments »

    Follow the smart investor Jim Rodgers

    Posted by Frugal on 17th October 2008

    There are so many things that I want to blog about, but with things happening in a lightening speed, I simply cannot get to them.

    I think Jim Rodgers’ opinion sums up and represents my opinion very accurate:

    Jim Rodgers has been extremely successful in investing, and he has called the start of the commodity boom correctly.

    Bailouts are terrible. After the bailout bills were passed, I was so disgusted by it. It should have been a 4 page document, but our “beloved” Congress added some 400 pages, worth of some 150 billion dollars for their lobbyists and special interest groups. We, as a nation, are literally dying and drowning in debts. Unfortunately, Ron Paul never made it to the ballot, since the general population of USA is not smart enough to see through all the games being played by both Democrats and Republicans. And yes, there will be inflation, and more inflation, and more high inflation. The course of the road is already set, and we, the people of Unitied States, will suffer collectively for our ignorance and inaction, and all the great sins commited by Wallstreet, hedge funds, and the politicians against us.

    The world is going to so different 15 years from now. But I hold my highest optimism for the world in general, that we will all come out of this mess scathed or unscathed, reconstructing a better world after going thru the dark valley.

    The latest news on Federal Reserve, injecting $785.4 billions of liquidity. What average people don’t understand is the last short paragraph:

    …the total balance sheet at the Fed expanded to $1.8 trillion from $1.63 trillion last week.

    Before all the crisis, I recall the Fed balance sheet was about 0.8 trillion. Now it’s at 1.8 trillion, with 1 trillion newly minted US treasury bonds floating out there. Is that clear enough?

    By the way, I read a recent spooky article from DailyReckoning about US mint. DailyReckoning articles are usually way out of mainstream, but this article is the real truth: US mint has the “same” unchanged working stock of inventory of gold since April 2006! I was able to google and found another similar article elsewhere, but dated earlier, indicating that they have the exactly status report since about 2003, but I can’t find it anymore and put the link here. Using archive.org, I was able to look thru the old reports. What the authors of DailyReckoning didn’t realize that was that US mint actually have the same statement of September 30, 2008 earlier on September 2005, and not just April 2006. If anyone can find some earlier history, please add it to the comment section.

    I don’t know who can balance their own checking account to the exact last cent every month and every year. But that’s what US mint is reporting since April 2006 for their balance in gold. I think probably someone does NOT want to update the report anymore for fear of lying to the public. Zero updates can always be attributed to negligence rather than dishonesty.

    The chart from safehaven.com shows clearly that US mint cannot possibly run out of refining capacity for minting because back in 2000 for Y2K scare, the sale was some 3X to 4X higher. What is the truth behind all the physical shortage in precious metals, one may wonder?

    Posted in Investing | 5 Comments »

    Silver & Platinum Extreme Shortage

    Posted by Frugal on 15th October 2008

    I’ve tried to time the bottom of silver to make my “bulk” purchase. The bottom seems to be here, but to my amazement, both silver and platinum have basically “disappeared” on Earth.

    Initially, I thought it’s just something temporary. As time goes on, the supply situation should be relieved. But NO! I can’t find any, except the ones at tulving.com, which is charging $5.50 over spot (about 50% premium). I started calling the entire list of US mint dealer, and I gave up after calling 8 phone numbers. Both silver and platinum coins are ALL OUT everywhere on Earth right now. The earliest time that anybody may have them would be 1 to 2 months later.

    The crazy thing is that all of these dealers have been out of silver for at least 3 months now. As soon as anything comes in, it gets bought and disappeared. And the minimum amount of purchase is going up. Same for the price premium. All the people that are still buying precious metals are well-to-do people, since the minimum purchase at most places is about $10,000. Certainly, these people won’t be “flipping” coins for a quick sale, since the premium/discount on buy/sell transactions will kill any profitable quick trading transactions.

    IF you can still find some at your local jewelry stores, I advise to try at least get some. Yes, it’s really out. I didn’t mean to sound panicking, and I’m extremely surprised for the current state of shortage.

    “Nobody can get ANY silver or platinum,” a dealer told me over the phone. Now I start to believe in them. The world is NOT ending. What the hell is going on? I hate to be a conspiracy theorist, but I simply cannot understand the continual fall of silver without resorting to manipulation.

    Posted in Investing | 4 Comments »

    A simple view of black swan event blowing up Wallstreet

    Posted by Frugal on 14th October 2008

    Never say never. It’s always hard to say that the probability of an event is absolute zero. So let’s say you’ve got the following probabilities:

    98% of the chance to earn 3% annualized return, and
    2% of the chance to lose 5%.

    Now comes the “smart” and most greedy Wallstreet bankers and say that I’ve got some great idea. I will leverage 10X to 30X, and then earn a great return from that 3%. So the return becomes 30% to 90% annualized. That is just great!

    Okay, so every day or every month, a dice is thrown, and 98% of the time, it will come out winning. And then it’s winning and winning and winning, and it’s great terrific return all the way, until….

    Well, everyone knows that 2% chance is NOT an impossible event. So as time goes on, there is going to be one day that this 2% event happens. In fact, given a long enough time period, it is simply a certainty that such event WILL happen. Well, I don’t know why these people don’t think about such certainty of demise, but apparently they are just too greedy.

    Anyway, when the 2% event comes, losing 5% in a leverage of 10X to 30X becomes 50% loss to 150% losses. As soon as you cross 100% loss, you are bankrupt and game over in one single shot.

    Unfortunately from the very beginning, the leveraged players have already planned their demise.

    And WHY does our capitalistic system allows such greedy players to take away millions if not billions of bonus, jumping ahead of everyone else by leverages when things go well, and leaving up a big mess for everyone to clean up when it blows up?

    My proposed solution is that there should not be more investing leverages anymore for anyone. Just play fair. If you’ve got one dollar, you bet one dollar. If you’ve got one thousand dollar, you can bet one thousand dollars. No more messing around for Wallstreet. Don’t take everyone else down just because you don’t have those 30X money that you borrowed in the first place.

    Posted in Investing | 5 Comments »

    Wow! Markets are getting killed.

    Posted by Frugal on 10th October 2008

    It almost looks like that this market will break 2002/2003 bear market bottom. Just another day and it will be there.

    Here is something for food of thoughts, from Todd Harrison:

    The path of maximum pain for most Americans plays out like this: The savers—those who sold stocks and/or preserved capital—get the double whammy when the dollar debases and everything denominated in dollars jacks higher.

    Is there something logical and really big behind all of these crashes?

    Be extremely careful.

    Posted in Investing | 4 Comments »

    Obama will win: false optimism and great inflation

    Posted by Frugal on 9th October 2008

    I don’t know whether it is obvious to me, but it was obvious to me that Obama will win since this January. Of course, if Obama doesn’t win in November, I will really fall out of chair, and breaking my glasses.

    Why would he win? The reason is very simple. During economic downturn, the incumbent is almost always voted OUT. Since the incumbent party is Republican, it will be voted out. This rule actually applies internationally, and has been happening globally if you have paid attention to election results in other countries.

    Unfortunately, with Democrats coming, the biggest problem is their socialistic approach to voters. Their tendency is to spend more and tax more especially on the rich people. There is nothing wrong with taxing rich people. But if your income is high, and for every dollar that you earn, you are paying more than 50% to government, the incentive to earn more is less, and the incentive to lay back is more. Furthermore, when the marginal tax rate is high, it usually means that money/capital will flee in the long term.

    Alright, let’s forget about long term for a second (who cares anyway in Washington). Spending is good if it’s allocated properly. Spending will stimulate economics. But WHERE IS THE MONEY? There is no money. Only debt. Likely, US will double its debt to 20 trillions in less than 10 years. In the meantime, Asia & oil countries will probably be afraid of supporting the monetary expansion in US further. After these financial crisises, US simply has no credibility in foreigners’ eyes anymore.

    So if you have spending and more debt, but no “global saving glut” to soak up your debt, where are you going to get your money? The answer is obviously that you just PRINT it (equivalently to that Federal Reserve will be expanding its balance sheet, holding a lot more treasury bonds or IOUs to come).

    So stocks should recover somewhat, but $US should go down.

    For more specifics, as I have said previously, alternative energy should still be good for a short-term play for either Obama or McCain. I believe that there is also too much uncertainty in health care sector, especially in regards to insurance companies. I don’t want to take a bet either way on that sector. If health care sector becomes one of the inflation beneficiary, then it will be a great time to buy them. If instead, they experience heavy pricing pressure from government health plan, then they may not be the best investment. Also, if Obama gets elected as I expect, I will shy away from defense sector unless any wars break out. I still won’t get into any financial/brokerage or real estate related investments. Any rally I believe is a short-term dead cat bounce. At best, they will rise along with the markets, but with a subdued performance (not counting any initial reactionary big rise).

    And for certain, there will be more government regulations to come going forward.

    In any case, let’s hope that deflation will be averted, and inflation comes back. Inflation is always easier to deal with economically speaking. The only problem is that government as one of the participant in the capitalism always over-do it, and you end up a lot more inflation than it is desired.

    Posted in Investing | 11 Comments »