Rogers on how "Bernanke has been lying to us again" and other thoughts on what's happening right now and where he's investing.
Saturday, September 10
Friday, September 9
End Game: Greece to Default This Weekend?
The timing of the default would come roughly in line with my prediction. We're also seeing a softening in the euro, now down to $1.36, also as predicted.
In terms of what happens next, the first step following default would likely be a bank holiday in Greece. This would then be followed by some type of devaluation (rumoured to be around 50%) of the reintroduced drachma.
As I posted yesterday, anyone in Greece who still has their euros in a Greek bank may want to move swiftly.
Here is Professor Eichengreen with some deeper perspective and why its likely the ECB is going to be doing a lot of Ctrl+P.
Thursday, September 8
Is the slow motion bank run currently underway in Greece about to accelerate?
Why anyone in Greece is still keeping their euros in the Greek banking system right now is beyond me.
The latest here.
The latest here.
Review: Bin Laden: Shoot to Kill (Channel 4 On Demand)
A new Channel 4 docudrama on the Bin Laden raid premiered last night and provides new details on the covert op. It also features interview with senior U.S. government officials, a former Seal Team Six member, and a rather candid interview with President Obama. The trailer is embedded below; full video here.
One interesting element from the White House spin which comes through in the video is President Obama's repeated reference to there only being a 50-50 chance of Bin Laden being in the compound, and that this operation was basically a 'gamble'. President Obama has come under a lot of criticism of late for being too risk averse, so from a messaging and political strategy point of view it could be helpful for the President to beef up his risk taking image.
However, the natural question is whether this is the right spot politically for Obama to be positioning himself as a risk taker? I see two potential problems: first, by emphasizing the 50-50 gamble it makes Obama appear like he got lucky. Second, as opposed to gambling on financial regulatory or budget reform here his gamble here involved the lives of military personnel as well as a Pakistani military backlash.
From a military strategy perspective I can see advantages to emphasizing Obama's willingness to take risk on convert raids in terms of the message it sends to both U.S. enemies and 'frenemies' alike. Americans may also prefer that their President be 'lucky' rather than or in addition to being 'good'.
Overall it's an intriguing messaging strategy and the video is well worth a watch.
One interesting element from the White House spin which comes through in the video is President Obama's repeated reference to there only being a 50-50 chance of Bin Laden being in the compound, and that this operation was basically a 'gamble'. President Obama has come under a lot of criticism of late for being too risk averse, so from a messaging and political strategy point of view it could be helpful for the President to beef up his risk taking image.
However, the natural question is whether this is the right spot politically for Obama to be positioning himself as a risk taker? I see two potential problems: first, by emphasizing the 50-50 gamble it makes Obama appear like he got lucky. Second, as opposed to gambling on financial regulatory or budget reform here his gamble here involved the lives of military personnel as well as a Pakistani military backlash.
From a military strategy perspective I can see advantages to emphasizing Obama's willingness to take risk on convert raids in terms of the message it sends to both U.S. enemies and 'frenemies' alike. Americans may also prefer that their President be 'lucky' rather than or in addition to being 'good'.
Overall it's an intriguing messaging strategy and the video is well worth a watch.
Channel 4's Description:
A stellar cast of White House insiders speak on camera about the operation to find and kill Osama Bin Laden, including the first - and extraordinary - documentary interview with President Barack Obama on the subject.
From the anxiety-drenched minutes in the White House Situation Room to the deadly stairwells of Bin Laden's secret labyrinth, cinematic dramatisations take viewers deep inside one of the most important moments of our era, showing the US Navy Seals coming face to face with the most wanted man in history.
Based on high-level CIA and White House briefings, and packed with exclusive stories and fresh insights, the film reveals that President Obama received a downbeat last-minute intelligence assessment, which caused many of his senior advisors to turn against the operation.
Tuesday, September 6
SNB Gift-Wraps $2,000/oz. Gold
Today the Swiss National Bank declared that it will print an "unlimited" number of Swiss francs (because fiat central banks can do that) to prevent further appreciation of the franc.
The Swiss franc had been considered perhaps the ultimate safe haven currency, alongside perhaps to a lesser extent the Japanese yen. Both have been appreciating steadily over the past year+ in the face of periodic interventions by their respective central banks. Both countries have trade surpluses, which creates a built-in demand for their currencies as domestic firms repatriate funds. The Japanese and Swiss banking systems are also considered relatively strong. However with the SNB's decision to crank up the printing press and peg the franc to the euro at 1.20 francs will undoubtedly increase pressure on the Bank of Japan to do something similar.
Strangely, the price of gold dropped dramatically on the SNB news before rationality returned and pushed gold back up to an all-time record high of $1,923/oz. (although it did finish the day below $1,900).
Bottom line: today's news is very bullish for gold, and my prediction, made just under a month ago when gold reached $1,700/oz., that the yellow metal would push forward to $2,000/oz. should now materialize sooner than anticipated.
Monday, September 5
Tuesday, August 30
One Chart: Why Apple, Microsoft, Oracle, etc. are Teaming-Up Against Google
Here's last year's prediction, made back when Android had under 25% of the market and was smaller than the iPhone. Below are the latest comScore market share figures, which have Google's Android up 5.4% in three months and rapidly closing in on 50% of the U.S. smartphone market.
Look no further than above for an explanation of the strange bedfellows which recently united against Google.
| Top Smartphone Platforms 3 Month Avg. Ending Jul. 2011 vs. 3 Month Avg. Ending Apr. 2011 Total U.S. Smartphone Subscribers Ages 13+ Source: comScore MobiLens | |||
| Share (%) of Smartphone Subscribers | |||
| Apr-11 | Jul-11 | Point Change | |
| Total Smartphone Subscribers | 100.0% | 100.0% | N/A |
| 36.4% | 41.8% | 5.4 | |
| Apple | 26.0% | 27.0% | 1.0 |
| RIM | 25.7% | 21.7% | -4.0 |
| Microsoft | 6.7% | 5.7% | -1.0 |
| Symbian | 2.3% | 1.9% | -0.4 |
Book Review: 'Sustainable Wealth' By Axel Merk
Axel Merk’s Sustainable Wealth is very readable personal finance guide to today’s increasingly complex investment world. The book contains a wealth of practical information, and it can be particularly useful for novice investors who are interested in learning more about the role of macro forces and currencies, and how they influence markets.
About the Author
Axel was born in Munich, Germany and grew up in a family of investors. It was during college that he first began investing on behalf of clients. His academic training is in finance and computer science, and he has lived in many parts of Europe before relocating to the U.S. He is the founder and CIO of Merk Investments, a Palo Alto, California based mutual fund focused on currencies. In his personal life he is a distance runner and pilot, and he is married with children. Axel Merk also gives regular media interviews and periodically writes for SeekingAlpha.
Sustainable Wealth
With his book, written following the financial crisis in 2008, Merk aimed to reach an audience that is intelligent and interested but not necessarily educated in economics or currencies. While Merk runs a currency mutual fund, the book is not aimed at currency traders. Rather the book primarily targets the man in the street who is concerned with the actions of today’s policymakers. In the book Merk describes the pressures between where the market would like to go and the interference run by policymakers. Understanding this pull-push dynamic is at the heart of Sustainable Wealth.
One of the key themes of the book is the idea that “there is no such thing as a safe asset” and that investors may want to take a diversified approach to something as “mundane as cash”. The book contains a number of helpful, easy to understand explanations about the fundamental nature of the world’s current debt problem, and ways to address it on a personal level.
During an interview, Merk emphasized his independent opinion. That certainly can bee seen with his often seemingly minority view on the euro versus the U.S. dollar over the past 12+ months. Other than the temporary slide in the euro last summer to $1.18, Merk’s view on the euro has more or less proven correct. However, it is worth keeping in mind that Merk runs a currency mutual fund inside the United States, and that one of the ways in which more American investors would take an interest in his fund is if they are concerned about the fate of the U.S. dollar.
Continue reading the full review at SeekingAlpha here.
About the Author
Axel was born in Munich, Germany and grew up in a family of investors. It was during college that he first began investing on behalf of clients. His academic training is in finance and computer science, and he has lived in many parts of Europe before relocating to the U.S. He is the founder and CIO of Merk Investments, a Palo Alto, California based mutual fund focused on currencies. In his personal life he is a distance runner and pilot, and he is married with children. Axel Merk also gives regular media interviews and periodically writes for SeekingAlpha.
Sustainable Wealth
One of the key themes of the book is the idea that “there is no such thing as a safe asset” and that investors may want to take a diversified approach to something as “mundane as cash”. The book contains a number of helpful, easy to understand explanations about the fundamental nature of the world’s current debt problem, and ways to address it on a personal level.
During an interview, Merk emphasized his independent opinion. That certainly can bee seen with his often seemingly minority view on the euro versus the U.S. dollar over the past 12+ months. Other than the temporary slide in the euro last summer to $1.18, Merk’s view on the euro has more or less proven correct. However, it is worth keeping in mind that Merk runs a currency mutual fund inside the United States, and that one of the ways in which more American investors would take an interest in his fund is if they are concerned about the fate of the U.S. dollar.
Continue reading the full review at SeekingAlpha here.
Monday, August 29
Book Review: The Bed Of Procrustes By Nassim Nicholas Taleb
'Most people write so they can remember things, I write to forget' - The Bed of Procrustes: Philosophical and Practical AphorismsNassim Taleb's latest book is a collection of miscellaneous memorable thoughts (aphorisms), many of which relate to Taleb's disagreement and frustration with the academic economics practiced and publicly promoted by many Nobel prize winning economists.
First, the term 'aphorism' comes from the classical Greek writings of Hippocrates. Given the various ills in economics which Taleb would like to see fixed, the appeal of referencing the father of medicine is quite clear.
The second aspect of the title, the 'Procrustean Bed', is also borrowed from classical Greece. The mythological figure of Procrustes would cut or stretch people to make them fit into his iron bed. Taleb's view is that many leading economists basically do the economic equivalent by framing the world in a way so that it fits into their quantitative models, rather than the other way around.
Continue reading the full review at SeekingAlpha here.
Keynes on Printing Money, and Do Loss-Suffering Central Banks (i.e., ECB, SNB) Need Capital?
 |
| Weimar Germany during the early-1920s hyperinflation |
"A government can live for a long time, even the German Government or the Russian Government, by printing paper money."
However, "In the last phase, when the use of the legal tender money has been discarded for all purposes except trifling out-of-pocket expenditure, inflationary taxation has at last defeated itself."The above quote was excerpted from a 1997 paper by the IMF's Peter Stella titled 'Do Central Banks Need Capital?'
Can Central Banks Go Bust?
Technically speaking, the answer according to Stella is no, central banks do not require a capital buffer to absorb losses in the same sense that a commercial bank does. However, Stella states:
"Weak central bank balance sheets invariably lead to chronic losses, the abandonment of price stability as a primary policy goal, a decline in central bank operational independence, and the imposition of inefficient restrictions on the financial system to suppress inflation.
...if society values an operationally independent central bank capable of attaining price stability without resorting to financial repression, the transfer of real resources to recapitalize the central bank becomes necessary when chronic losses are sizeable."In other words, the overarching reason for central banks to hold sufficient capital is that it helps maintain confidence in the soundness of the central bank and the value of the currency it issues.
Has the ECB Become Europe's 'Bad' Bank?
As the European debt crisis has spread and intensified, central banks in Europe have been suffering heavy losses for over a year now.
The Swiss National Bank has reported losses in the tens of billions of swiss francs on its euro purchases over the past 12+ months. Whether or not the Swiss government will move to recapitalize the bank is unclear. So far as I know the Swiss central bank is unique among major world central banks in that it is publicly-traded with both government and private shareholders.
There has also recently been speculation that the relatively thinly-capitalized European Central Bank will need to be recapitalized again if it were to continue to suffer heavy losses on its purchase of European sovereign debt. The ECB recently began purchasing tens of billions in Italian and Spanish debt, which comes on top of the tens of billions in Greek, Irish and Portuguese debt it already holds. The prospect of the ECB needing additional funding is not sitting well with Germany and other rich European nations which will have to foot the bulk of the bill.
Interesting times in the world of central banking.
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