tag:blogger.com,1999:blog-4900303239154048192.post5195137815907249043..comments2024-03-06T06:34:42.881-05:00Comments on EconoSpeak: bubblicious gold!Unknownnoreply@blogger.comBlogger7125tag:blogger.com,1999:blog-4900303239154048192.post-6254215953312121962008-03-23T16:13:00.000-04:002008-03-23T16:13:00.000-04:00Bruce Webb writes: >A week to the day after this p...Bruce Webb writes: >A week to the day after this post we get a 10% correction right before a long holiday weekend for the markets. We'll see if this is just a speed bump or whether $1000/oz is the new ceiling. Because if I bought in at $1008 I would be feeling kind of sick by now.<<BR/><BR/>yes... I forgot to mention that recessions tend to undermine commodity prices, including that of gold.<BR/>JimEconoclasthttps://www.blogger.com/profile/08991106027036537594noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-53418838183650545472008-03-23T14:49:00.000-04:002008-03-23T14:49:00.000-04:00Irony is so ironic sometimes.A week to the day aft...Irony is so ironic sometimes.<BR/><BR/>A week to the day after this post we get a 10% correction right before a long holiday weekend for the markets. We'll see if this is just a speed bump or whether $1000/oz is the new ceiling. Because if I bought in at $1008 I would be feeling kind of sick by now.Bruce Webbhttps://www.blogger.com/profile/13222670342780912788noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-22903160504989190422008-03-14T17:03:00.000-04:002008-03-14T17:03:00.000-04:00I'd say that it's pretty straightforwards: As cap ...I'd say that it's pretty straightforwards: As cap gains from equity markets break down, 'investors' seek to compensate through portfolio reallocation towards expected to be and/or actually better performing sectors. Justifying stories are produced; the process gathers momentum, becomes self-fulfilling and runs well beyond what fundamentals would dictate. <BR/><BR/>In a sense, price and value become increasingly divorced; tension between the two sharpens; the process becomes increasingly fragile; breaks, and those unaware of how rapidly commodity markets can 'correct' (including those who have become true believers) are left holding large losses.<BR/><BR/>As might be evident from these Commodity Research Bureau charts, the commodity bubble began in 2002:<BR/><BR/>Reuters-CRB Index 1990-2008<BR/>http://www.economagic.com/em-cgi/charter.exe/crb/crb01+1990+2008+0+0+1+290+545++0<BR/><BR/>CRB Precious Metals Sub-index 1990-2008<BR/>http://www.economagic.com/em-cgi/charter.exe/crb/crb19+1990+2008+0+0+0+290+545++0juanhttps://www.blogger.com/profile/01972882431445498276noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-2419064169597049582008-03-14T16:28:00.000-04:002008-03-14T16:28:00.000-04:00"When sheet rock hangers start taking a flier in t..."When sheet rock hangers start taking a flier in the market you pretty much know the end is near."<BR/><BR/>That is soooo funny and so true. Toward the end of the tech bubble I actually had a couple of sheet rock guys in to repair a wall in my living room and damned if they weren't talking about taking out loans to buy tech stocks!Sandwichmanhttps://www.blogger.com/profile/11159060882083015637noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-16930025835959073722008-03-14T14:37:00.000-04:002008-03-14T14:37:00.000-04:00Well the following could use some historical quali...Well the following could use some historical qualification.<BR/><BR/>"We can tell if a bubble is actually happening if we start hearing about how "gold is a perfect hedge" or "you can't lose by investing in gold" or "gold prices have nowhere to go but up." "<BR/><BR/>Because there has rarely been a moment in history that you haven't heard similar comments from Goldbugs. My local paper has and has had a full page ad for gold coins that has made these claims for months and months, that is both preceding and following the huge move (about 35% gain) gold has seen over the last six months. Separating out a real bubble signal from the standard froth you hear from Goldbugs might be more difficult than you suggest.<BR/><BR/>A better signal, if it were actually available, would be participation rates. I suspected the end of the tech bubble was near when a friend of mine, a smart guy but not really educated, took out a second mortgage on his house to buy stocks. When sheet rock hangers start taking a flier in the market you pretty much know the end is near.Bruce Webbhttps://www.blogger.com/profile/13222670342780912788noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-87989593022457762422008-03-14T13:14:00.000-04:002008-03-14T13:14:00.000-04:00"Note that the winners' loot corresponds to the lo..."Note that the winners' loot corresponds to the losses of those left holding the bag: as the bubble pops, the sellers drive prices down, imposing capital losses on the late buyers."<BR/>This was the point of my post on Angry Bear which asked "where did the money go?" Jim is referring to commodities trading on a grand scale. There are likely to be financial instruments which are tied to the price of gold which should be bubbling at the same rate. That was the issue with the so called mortgage crisis.<BR/>The initial paper, the mortgage, the property that was the collateral for that mortgage and those CDO's that were created to expand the market for the original mortgages were all bubbled up and there was money put up for each of those entities. Where is it all? In the pockets of some very clever early players in the game. <BR/><BR/>There are now several posts on AB discussing the fact that the Fed will make every effort to bail out the "losers" in the banking industry. Losers who's executives need a wheel barrow to take their rewards to the bank. That's what bubbles do. As they expand some central players are rewarded with gold plated incomes. When they burst the fall out seems only to dirty the many small investors who's money was being played with all through the expansion.Jackhttps://www.blogger.com/profile/13149560477248068993noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-9536920535087799762008-03-14T12:23:00.000-04:002008-03-14T12:23:00.000-04:00comments?comments?Econoclasthttps://www.blogger.com/profile/08991106027036537594noreply@blogger.com