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REMINDER: All investment, economics, and finance related material now appears at the new IaconoResearch.com. For the time being at least, this has become a personal blog covering a variety of mostly unrelated topics.
This video on “stunt fails” was spotted over at Barry’s Big Picture blog the other day and it’s well worth a few minutes of your time if you happen to be in need of a good chuckle.
I haven’t laughed so hard in a while – it brought tears to my eyes (even the second time).
This week’s top mainstream financial media gold-as-a-curiosity-story (see the highlighted sections below) comes via this item in the Wall Street Journal about a guy who manages school teachers’ retirement money in Texas. (Note that this story sounds awfully familiar, but no references could be found for it at the old blog.)
There are gold bulls. And then there is Shayne McGuire. The 44-year-old pension-fund manager from Texas, who spoke recently at a gold conference in Berlin, caused a stir among the roomful of gold aficionados. His provocation: A book that predicts the price of the precious metal could soar to $10,000 an ounce, more than seven times its current price.
Like those who once boldly predicted $1,000 Internet stocks and a 36000 Dow Jones Industrial Average, Mr. McGuire is a lone voice among mainstream investors suggesting such an outsize price jump in gold’s price.
Mr. McGuire’s view isn’t idle prognostication. He runs a $330 million gold portfolio at the Teacher Retirement System of Texas. Mr. McGuire’s forecast, which he made in the recently released book, “Hard Money,” makes him a very far outlier. Most on Wall Street consider the prediction outlandish.
…
Not everyone at the Texas fund felt the same way. In one meeting, a pension executive sarcastically asked if anyone else in the room thought “the world was going to end?”
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“It doesn’t do anything but cost you charges and stare at you,” billionaire investor Warren Buffett said in a recent interview.His gold prediction is by far the most aggressive call he has made in his career, he says, but he says he ignores his doubters. “It seems like an aggressive call,” Mr. McGuire says, “but it’s really a comment on what governments have been doing to the monetary system.”Of course, the risks of such a big prediction can affect one’s entire career, much as it did former stock analyst Henry Blodget, whose bullish call on Amazon.com was lambasted after shares plunged in the dot-com bust. “
Yes, the dismissive tone is more evidence that there is probably a very long way to go for the precious metals bull market, but, gold going to $10,000 an ounce does seem like a stretch. Then again, you can get to over $6,000 an ounce simply by replicating the 1971 to 1980 move higher beginning at the cycle low of near $250 about ten years ago.
There were no surprises in today’s Commerce Department report showing the U.S. economy expanded at a rate of 2.0 percent in the third quarter – that’s exactly what markets expected.
While two percent is a number that policymakers would much rather see from the inflation data – not the growth data – it looks quite a bit better than some of the more dismal projections over the summer, some of which approached zero percent growth or worse.
After this rant from six weeks ago about what, at the time, was characterized as our unsuccessful attempt to purchase a short sale property here in Bozeman, Montana, it will surely come as a surprise to most of you to learn that, while we were on vacation over the last month, the deal somehow came back to life and it is now done.
We closed two days ago.
Five-and-a-half months after we made the offer.
Now, the reason for not saying anything about this until today is that, up until the very end, we really weren’t sure that the deal would get done.
Any of you who have been involved as a buyer in a short sale surely know that there are many twists and turns along the way to a 50-50 chance (at best) of actually completing the sale and, just when you think you’ve got a clear shot to the goal line, something comes up that either nixes the deal or sets it back by a couple months.
In recent weeks, we again had more painful waits for the bank to respond with final approval letters and there were thousands of dollars in closing costs that we thought sure they would try to stick us with and some repairs that were sorely needed, none of which we ended up having to pay for.
It’s as if the short sale gods smiled upon us.
Via this item at the NY Times Economix blog we get another example of how, with only a few exceptions (e.g., Austan Goolsbee, apparently), economists really aren’t very funny.
The disturbing aspect about this is that they don’t realize that they aren’t funny and, more likely than not, laugh at each others jokes in a manner similar to the detached group think that led nearly the entire economics profession to believe that things were hunky-dory back around the middle of the last decade.
Jeremy Grantham at GMO has penned another gem of a quarterly letter(.pdf), the Halloween themed missive on the “Night of the Living Fed” warning about the danger of loose money and asset bubbles, featuring a guest appearance by Chief Zombie Alan Greenspan.
The Ruinous Cost of Fed Manipulation of Asset Prices
My diatribe against the Fed’s policies of the last 15 years became, by degrees, rather long and complicated. So to make it easier to follow, a summary precedes the longer argument. (For an earlier attack on the Fed, see “Feet of Clay” in my 3Q 2002 Quarterly Letter.)
Purpose
If I were a benevolent dictator, I would strip the Fed of its obligation to worry about the economy and ask it to limit its meddling to attempting to manage inflation. Better yet, I would limit its activities to making sure that the economy had a suitable amount of liquidity to function normally. Further, I would force it to swear off manipulating asset prices through artificially low rates and asymmetric promises of help in tough times – the Greenspan/Bernanke put. It would be a better, simpler, and less dangerous world, although one much less exciting for us students of bubbles. Only by hammering away at its giant past mistakes as well as its dangerous current policy can we hope to generate enough awareness by 2014: Bernanke’s next scheduled reappointment hearing.
If you haven’t already done so, go have a look at page one of the .pdf file for a little more color – Runaway Commodities!, Banks Come Back to Life! – on what he’s about to detail.
By Tim Iacono, Since 2005
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