Banker “Suicides”; Economic Myths; Food Crises; Gold Stock Analysis?


The string of suicides among the leading bank employees is indicative of the change in trend. The major Wall Street banks including Bank of America, Goldman Sachs, JP Morgan, Credit Suisse, subsequently told junior bankers to take more time off since the death at Bank of America last August of a 21-year-old Bank of America intern who died after reportedly working consecutive all-nighters at the bank’s London office.

An excellent course on behavioral economics. I took this course and highly recommend but it is a time commitment of $six to eight hours per week. Improve the YOU.

POKER: To learn about investing in the 21st Century: The great poker movie, Rounders:

Munger on Investing:

Any interest in analyzing a gold stock?

Economic Myths

Myth #8: The Fed provides a net benefit to the US economy

It never ceases to amaze us that people who understand that it would make no sense to have central planners setting the price of eggs believe that it is a good idea to have central planners setting the price of credit.

Myth #2: The Fed’s QE boosts bank reserves, but doesn’t boost the money supply.

It’s a fact that for every dollar of assets purchased by the Fed as part of its QE, one dollar is added to bank reserves at the Fed and one dollar is added to demand deposits within the economy (the demand deposits of the securities dealers that sell the assets to the Fed).

Myth #12: Inflation is not a problem unless the CPI is rising quickly

The conventional wisdom that “inflation” is not a major concern unless the CPI is rising quickly is not only wrong, it is also dangerous. It is wrong because monetary inflation affects different prices in different ways at different times, but the resultant price distortions always end up causing economic problems. It is dangerous because it leads people to believe that there are no serious adverse consequences of central-bank money printing during periods when the prices included in the CPI are not among the prices that are being driven skyward by money printing.

Read more:Economics_Myths_on_Fed_Reserves_Saville

An Expert on Bear Stearns:

 Why the rioting? fig1_crises

Social unrest may reflect a variety of factors such as poverty, unemployment, and social injustice. Despite the many possible contributing factors, the timing of violent protests in North Africa and the Middle East in 2011 as well as earlier riots in 2008 coincides with large peaks in global food prices. We identify a specific food price threshold above which protests become likely. These observations suggest that protests may reflect not only long-standing political failings of governments, but also the sudden desperate straits of vulnerable populations. If food prices remain high, there is likely to be persistent and increasing global social disruption. Underlying the food price peaks we also find an ongoing trend of increasing prices. We extrapolate these trends and identify a crossing point to the domain of high impacts, even without price peaks, in 2012-2013. This implies that avoiding global food crises and associated social unrest requires rapid and concerted action.

Tweet Map (clickable)

Clickable food prices tweet map

Press Release: Scientists show link between food pricing and global riots

A new Cambridge study issues stern warning for policy makers

(CAMBRIDGE, MA) — A new study shows that the timing of outbreaks of violence rocking North Africa and the Middle East is linked to global food prices.

Today’s headlines explode with stories of failed political systems, harsh regimes, and denial of rights underlying riots and warfare. The authors, however, point to rising food prices as a key factor too–not only in assessing the aftermath but in predicting future times of unrest.

The study, titled “The Food Crises and Political Instability in North Africa and the Middle East,” is by Marco Lagi, Karla Bertrand and Yaneer-Bar-Yam of the New England Complex Systems Institute.

Using detailed charts showing data from the FAO Food Price Index and the timing of the riots, the authors were able to demonstrate how food prices have a direct link to the tipping points of unrest and upheaval.

The authors also criticize the deregulation of commodities markets in the US as contributing to the rise in food prices.

The authors issued a stern warning that if food prices remain high, disturbances will continue. Averting further crises this year and next requires quick and concerted action by policy makers, they added.

“Our predictions are conditional on the circumstances, and thus allow for policy interventions to change them. Whether policy makers will act depends on the various pressures that are applied to them, including both the public and special interests,” said Prof. Bar-Yam.

4 responses to “Banker “Suicides”; Economic Myths; Food Crises; Gold Stock Analysis?

  1. Re: Analyzing Brazil the gold mining stock. I’m trying the quick read to examine for whether it’s worth further investigation… I’ll pass on buying the stock. Why? A glance through their latest quarterly statement, Aug, 2013, and MD & A discussion:
    1) they are an exploration company, with the emphasis on acquiring promising gold mining areas during this downturn, but no gold production facilities. A good thing is that many of the potential mining sites have infrastructure like roads and water access.

    2) How do they make money? They are down to $1.5 million in cash from $5 million a year ago, spending approx $3 million each year. They don’t actually refine or produce gold. I noticed that they recently raised more money by offering $6 million in shares (warrants), but that dilutes out the price of the company. That will buy two more years of time…

    3) 72.4 million shares outstanding, 86 million fully diluted, $1.5 million working capital, $47.8 million EV, no debt.
    By my rough calculation, $47.8 million / 86 million shares
    = $0.55 per share, less than this if it is liquidation value, because I don’t know how to value Brazilian Rainforest,( I assume that they own the mineral rights to the land.)

    Current price: $1.13 usd.
    Not a Net-Net. I don’t see franchise value.
    What am I missing?

    If no one develops what they found, how will they get a return?
    I believe gold will rise in price, but building a mine and recovering the ore is capital intensive, and I understand many junior miners are on the brink of failing if the price of gold stays suppressed, so why would even a large company want to come in and mine in a new area unless they haven’t exhausted their current open pits or underground mines.

    …This is just my uninformed opinion, based on what little I’ve learned of gold mining.

    • Whoops, I didn’t mean Brazil Resources, I meant to determine the interest in the process of valuing a mining stock. My thought was Detour Gold.

      If there is any interest I will make some posts about it.

      Few resource stocks are franchises–they are asset plays–unless their assets are unique because of unusual location (Compass Minerals) or extremely low cost (UPL).

  2. If an egg farm in New York fails catastrophically, it has no lasting effect on egg farms in New York, London, San Fransico, Hong Kong, Tornonto, the commercial paper market, or in Pigs Knuckle, Arkansas. Eggs and interest rates = false analogy. Not disagreeing with anything, just pointing out the weakness of that point. Love this blog, thanks for the hard work.

  3. Re: Food Prices and Riots – definitely prescient and very interesting.

    Comments about deregulation of the commodities market and ethanol bubbles bring to mind a quote by Buffett:

    “Speculation, I would define, as much more focused on the price action of the stock, particularly that you buy or the indexed future or something of the sort. Because you are not really, you are counting on, for whatever factors, could be quarterly earnings, could be up or it’s going to split or whatever it may be or increase the dividend, but you are not looking to the asset itself.”

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