TALK BACK

Posted 2007-01-09 20:26:23.0 by Soulek1

Hi Jas, I liked your article and agree with you fundamentally that if a recession comes that bodes ill for both housing and commodities including gold and silver in the short to intermediate term. I think the main reasoning here would just be the decrease in demand for the main industrial useful commodities during a recession - barring war, etc. I think that the speculative demand for the metals may also decline in that environment temporarily. Main difference of opinion I take is the time frame and the amount of the decrease. I am in the camp of secular bull market in commodities sort of similar to your friend from dinner but with a little different slant. I think that we will see a sizeable decline in the commodities market maybe as much as 50% - I see this mainly though as a result of the coming recession / depression in housing as you do. But the eventual fed stimulus that will be provided during this recession is what will jumpstart the commodity price increases as the dollar devalues relative to other currencies. I actually agree with Faber although I think that he needs to flesh out his arguments more or they can be miscontrued. I am basically expecting the Fed to attempt to jumpstart the economy vis a vis aggregate demand stimulus as you mentioned - however this has historically meant via rate cuts. So we could see Bernanke cut Fed Funds again to 1-2% range thinking that it will get things moving again through the low money rates - but it is only at that point that he realizes that it was all in futility. You alluded to this saying it was doubtful that the Fed could turn things around on its own. Problem is that I think this interest rate cutting move will be where we get both dollar flight - to higher interest rate markets and the dollar depreciation vs other currencies. These are sort of one and the same as the more foreigners that choose to liquidate treasuries or other US securities are in effect dumping US dollars flooding the market with them and resulting in excess supply of dollars (and demand for dollars is low with less people buying US securities) - this encourages the depreciation of the dollar versus other in demand currencies which would be used to invest abroad - Europe, Asia, etc. So final point I wanted to mention was the money printing press argument. I fundamentally disagree with you on the M3 article. I dont really consider it this outrageous huge conspiracy, but I do think it a bit naive to believe that with M1 and M2 level or declining but M3 rocketing - the Fed is not goosing the market and other asset classes via repo agreements with member banks, etc. To me this is one type of monetary stimulus and can be validly categorized as an increase in money supply. Another 30-40% decline in value of the dollar relative to other currencies including gold and silver will be a main driver for the continuation of the commodities bull. The demand may be largely speculative but we have already seen what that can do to an asset class (US Housing) so even completely exempting what the speculative demand could do dollar depreciation of 30-40% could put $600 dollar gold (current price) at $800 an ounce. Speculative demand can obiously move prices much higher. Time frame I am talking hear is probably 3-5 years as the Fed is still in Phase I thinking that they may need to tighten again or at least saying so. Phase II would be the pause and probable recession and Phase III a decision by them to stimulate aggregate demand via fed funds rate cuts as the recession deepens. During the rate cuts or once they have stopped would probably be the correct "buy" point to look at commodity sector again. So basically - thank you for raising point that we will very possibly see sizeable corrections/declines in all commodities as a result of the *imminent* (famous last words) recession. Best regards, BG

Posted 2007-01-09 20:36:56.0 by Arthur

I'm familiar with Marc Faber's "work." Chicken Little is more appropriate than Dr. Doomed. He's an anti-American European, who can't accept the U.S. economy rose from almost nothing 250 years ago to become the world's only superpower and continues to surpass the sluggish European economy.

Posted 2007-01-10 04:03:53.0 by DrStrangelov

Arthur, Mark Faber is a little envious European turd, right? How much money under your management my dear hard working and slow learning American master?

Posted 2007-01-10 07:15:56.0 by WillyWonka

Come on, Arthur. You speak as though your name were "Sitting Bull" or "Bear Dancer", ie. an "original american". As far as I would surmise, you are likely of European descent as well. To speak in such superlatives is ignorant. The only reason the "US rose to power" is because during the late 19th and through mid 20th Centuries, the Europeans were busy killing each other - before that, the US was a backwater. Get out your history books and read.

Posted 2007-01-10 08:17:01.0 by Arthur

The U.S. also had a civil war, indian wars, and other wars. Japan was destroyed and rose from the ashes to become the second largest economy in less than 40 years. I agree, Europeans founded the U.S. and took high risks for high rewards. Unfortunately, Europe has lagged for too long. The Europeans created the E.U. and many world organizations to be more significant. It seems, Marc Faber would be satisfied if the U.S. dollar collapsed or some other economic catastrophe fell upon the U.S. I'd be interested to know the teaching differences of European economics compared to American economics. Europeans haven't won many Nobel Prizes, although they contributed a great deal to modern economics from the 18th century to the early 20th century.

Posted 2007-01-10 10:41:56.0 by Arthur

Also, I may add, European-based and international organization constantly "put-down" the U.S. and seem to derive some glee from their biased assessments. For example, The U.S. spent over $2 trillion on health care in 2006. However, the World Health Organization ranks the U.S. slightly ahead of Cuba in health care. Here's the WHO study criteria, which is skewed toward equality rather than absolute quality and there's no weighted average: "The WHO based its assessments on five categories: overall population health, health inequalities, health system responsiveness (based on patient satisfaction, waiting periods, etc.), distribution of responsiveness (how well the system serves people of differing economic status), and distribution of costs. The WHO gives the United States high marks for its world-class doctor training and advanced medical technology. And the United States tops the list in "responsiveness" for virtues like confidentiality, brief waiting periods, and patient decision-making autonomy. But overall, the United States ranks 37th in national performance, behind not only most European nations and Japan, but also Chile, Colombia, Saudi Arabia, and Singapore."

Posted 2007-01-10 11:02:25.0 by permabear

Arthur, you make good points about the quality of U.S. health care. It is true that many people from around the world come to the U.S. for top notch care. And for most of us with a solid health insurance plan in place, we probably wouldn't want to trade our health care for many around the world. But there is another side to it. We all have heard of the millions who don't have any health insurance. We also have heard of the burdens that our health care system is putting on our corporate and small business competitiveness. We also know that on a micro level those with poor or no health insurance who face a health crisis can face bankruptcy as a result. We also know that statistics on life expectancy and infant mortality are very poor for the United States when compared to other industrialized countries. We also know that the United States spends about double per capita on health care vs. other industrialized countries. When you put it all together, the U.S. is not getting the bang for the bucks we spend. Costs are increasing at unsustainable levels (well above inflation levels). If we ever go into recession, as many on Safe Haven believe, the problems will only multiply that much greater. In short our employer based health care system is probably unsustainable over the longterm and we will probably eventually be forced to adopt a national (yes evil socialist) health care system at some point in the future. The reality is that Medicare, which is a form of national health insurance, works well. Politically you can't touch Medicare because seniors love and depend upon it so much. The bureaucratic overhead costs of Medicare are about 2% as compared to the 20 to 30 percent for private health insurance. Yes Medicare costs are increasing at unsustainable levels as well. But with some tinkering these problems are solvable and would even be more solvable if we expanded Medicare to serve the entire United States population.

Posted 2007-01-10 11:16:02.0 by Arthur

Permabear, you're right to some extent. There's more inequality in the U.S., e.g. in health, education, income, etc. The U.S. has a flatter bell curve, where the two tails are larger, while many European countries attempt to make almost everyone average. Most uninsured Americans can afford health care. However, they choose other goods, while poor Americans qualify for free health care. There's more waste, fraud, and abuse in government health care, doctors complain about government paperwork, there are broad economic trade-offs, etc. So, the true cost of government health care is understated.

Posted 2007-01-10 14:23:47.0 by cj

when u make an argument showing a correlation between housing and commodities the least u should do is explain what and how you determine how your "housing bubble" data is derived.

Posted 2007-01-10 17:16:28.0 by Ajay Kumar

The US Healthcare is a true marvel when you look at how long the life expectancy is considering how obese the average American is. To make it possible for these overweight and out of shape people to be able to live this long is a true miracle. Which is why you can't compare Cuba where people don't have excess food stuffs to fatten themselves and therefor not fall prey to heart attacks, strokes, cancers, diabetis, knee & hip problems, and even Alzeimers which are all aggravted by excess weight and lack of exercise.

Posted 2007-01-10 22:28:24.0 by DrStrangelov

This little poor thing called Arthur. I feel bad Arthur and I have to apologise - it's a sin to abuse less fortunate ones. I have to go and confess. Father, I have sined and so on. "European-based and international organization constantly "put-down" the U.S. and seem to derive some glee from their biased assessments. For example, The U.S. spent over $2 trillion on health care in 2006. However, the World Health Organization ranks the U.S. slightly ahead of Cuba in health care." If you see nothing wrong with this statement, something like availability and average cost of a doctor visit, then there is nothing to talk about. Do you know how expensive malpractice insurance is????? How about tenths of millions without insurance? Let me gess, your original Native-American name was TwoDogs.ucking, no? Are you retarted, pardon me, logically challenged?

Posted 2007-01-11 00:05:07.0 by Arthur

DrStrangeluv, I'm sure anyone with an IQ over 70 would know what's wrong with the statement (hint: you included only part of my statement). By the way you spell apologize, you must be one of the few Europeans where no amount of government spending can raise you to average.

Posted 2007-01-25 10:04:38.0 by CuriusGeorge

My concerns about inflation comes from re-patriation of USD. Yes Demand may be boosted if central banks act in concert.What if India/China order 2000 Boing planes? MSFT Vista sells more copies in India and China than US? Also, only possible fuel for airliners is OIL. Period. Ever heard of of hybrid jet? or, nuclear powered one? There will *NOT* be a deflation. And I am an engineer. And I have misspled my Id because of length restriction. We'll touch base in 6 months! But - I am your admirer! There are nuggets of brillance in your work.

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