Level 3 Assets

Another example in which a large bank hide stuff under "level 3 assets" These values are "marked-to-belief" rather than marked-to-market. Their public income statements look all nice and dandy but these figures were not included inside.

Waning interest in stocks

If I'm right, a lot of traders or investors will soon generally lose interest in the stock market for quite some time. At least, that's what history suggests. From my various readings of market movements in the past, I think there's a fair chance of this happening.

Stocks have been going nowhere for the past 12 years, nominally. In real terms, it has plunged. Investors and traders alike keep on hoping for the stimulus from money-printing to keep stock prices elevated. True, in times of massive inflation, stock prices will go up, but they generally do not keep up with increases in the prices of real goods. Even Warren Buffett's real wealth has been cut substantially in the past 12 years, even though his nominal wealth has doubled in the same time. And true, if one is a good short-term market timer, he/she can try to trade. But most people will just lose money doing this.

When people realise that their stocks are not gaining nominally, or are gaining nominally but not in real terms, they will look elsewhere - most probably into commodities. Right now it is unimaginable that people will lose interest in stocks, but I think that day will come. When that happens, I may probably wait for a few months or years of pessimism in stocks, before entering the market. It doesn't mean that when things hit bottom that there will be a bull run right away. It normally takes a few years for years or decades of excesses to clear out first.

Short the banks

Large banks hide a lot of stuff under their "level 3 assets". In this example, the bank supposedly have $109.2 billion of Level 3 assets. This value is "marked-to-belief" rather than marked-to-market. I will short this bank soon. Its stock price has returned to the 2007/2008 level.

Fed Exit?

The Fed has an exit plan? As I've said a few years ago when they started their first QE program - not a chance. 

For those who still believe that the Fed can exit and raise interest rates without a financial crash. This is just one example of the amount of junk on a balance sheet of just one major US bank.

P.S. I provide a link to this at the comment section.

Clueless

here's a nice website to show just how clueless those in charge were, and still are.

http://theeconomiccollapseblog.com/archives/denial-is-not-just-a-river-in-egypt-10-hilarious-examples-of-how-clueless-our-leaders-are-about-the-economy

Sell US long term bonds

Now that my silver holdings are good and approaching my targeted 1000 oz, I've started shorting US long-term government bond. This is by far the biggest bubble in the world, and I've been waiting to short it for a few years. The bond market has been in a bull run for some odd 30 years. Many don't realise it, but this is classic euphoria. I'm in this for the long haul. Possibly months or years. I will look to short corporate bonds in the near future. I think those will go first, but haven't done enough research on them. Who knows when these bubbles will burst? I'll rather be early than late.

they psychology of economic commentators

Over the years, it has come to my attention that people like to predict a bull market right after a bear market, or a bear market right after a bull market. This is not true all the time. Certainly, we've been taught to enter the market after things hit bottom. But what we're not told is, after how long after things hit the bottom? And why should things turn around?

People rush in to buy once things hit bottom. The housing market in the US is a prime example. Now after a few years of downturn, people are predicting a housing recovery and a US recovery. Why? Well, it has to be! Because they've been down for so long! It has hit bottom! (Of course, the same people have been predicting the same thing and giving the same reasons for a few years ever since the housing collapse in 2007/2008).

Unfortunately, such assumption has no base. This assumption is made based on headlines from the media. It is made based on what is taught in schools and by investment gurus. If one were to really do his/her homework and examine the actual numbers, things are far from rosy. There're still too much EXCESSES to be cleared from the US economy and the housing market. Excess debt. Excess inventory. Excess regulations. Excess taxes. Excess spending. I've tried many times to show people the real numbers, but they're being ignored.

But maybe they'll turn out to be right. Who knows. It's highly unlikely from my perspective. Maths and history don't lie.

THe naysayers

Here one can read many interesting (and wrong) stuff people said against gold back in 1976 - after gold went down 47% in 20 months. Very similar to the situation today. Well, not so similar in terms of price action.. gold had gone down 17% from its $1900 peak only. But the rhetorics against gold are the same.

http://www.caseyresearch.com/cdd/gold-over-just-1976

china's reserves

http://www.bloomberg.com/news/2013-03-03/china-reserves-ample-to-buy-world-s-gold-twice-chart-of-the-day.html

i wonder what china, or the world for that matter, are gonna do with all those pieces of paper they've collected over the past few decades

How to invest in North Korea?

I'm digging up more and more information about North Korea. I am cautiously optimistic that North Korea is opening up economically. Looks exciting. However, the reform efforts may face resistance from the military.

Currency Wars - Jim Rickards

for investors who have not read Jim Rickards' Currency Wars, here's a vid explaining the currency war simulation that he conducted in his book (using real people - not computers - acting as various players like Russia, China, US, etc). Even the pentagon joins in. The vid summarises some of the results of the simulation.

The Sequester

Obama agreed to the sequester. He does not want to cut spending, even though he railed against Bush's spending binge. So will the US really get their $85b cut? 2 scenarios to consider here:

No - Once Obama agrees to the cut, memos are going to be sent to the various government departments to advise the heads to cut spending. This may take some time. Some departments will undoubtedly come back with protests and lobbyists. At the end of the day, no cuts will be made in those departments.

Yes - That cut is just a cut from the proposed increase in spending. It's like I'm planning to spend $1000 extra next year, but decided to reduce the planned increase in spending by $85, and I call that a cut.

Even if it's a real cut into spending and not on proposed increase in spending, the cut is so tiny that it's laughable, and they're calling it a catastrophe. Say you overspend by $15,000 on your credit card in a year, and decide to cut back just $85. Every year you overspend by this much, and charge it to your credit card. Now the interest rate is still affordable (actually not affordable, because you borrow $15,000 + interest from your relatives and friends to service the debt). This is quite a close analogy to the current situation in the US. Most of their debt are short-term debt. But wait till the interest rates rise. And wait till those relatives and friends decide to stop lending to you. Or like Mr. Schiff says, wait till they decide to impose a lending ceiling. They will not give a hoot about your self-imposed debt ceiling, because you keep raising it all the time.

Bottom line: US debt continues to grow at an alarming rate. Interest rates will rise eventually because lenders will demand higher rates in compensation for the risks that they are taking. Then we will see a real crisis there, something bigger than 2007/2008.

Bloomberg

people are still spouting the same nonsense today: 

"When it comes to the United States federal government, people do seem willing to lend us an infinite amount of money. … Our debt is so big and so many people own it that it’s preposterous to think that they would stop selling us more. It’s the old story: If you owe the bank $50,000, you got a problem. If you owe the bank $50 million, they got a problem. And that’s a problem for the lenders. They can’t stop lending us more money.” ~ Michael Bloomberg

P.S. love the top comment in the comment section.

http://politicker.com/2013/03/mayor-bloomberg-dont-panic-about-the-sequester/

Update on gold/silver

Updates on gold/silver

In the 1970s, gold went down 50% for 2 years, flushing speculators out. It then went on to give a 850% return. Such moves are typical of a bull run, be it in stocks or commodities. 

Gold is now only down about 16-17% from its $1900 high in 2011.
Silver is already down 41% from its $49 high in 2011. 

Compared to 2009, gold is up 66%, and silver is up 115%