Tag Archives: CNBC

SELL Your Gold Now! Get Out While You Can

Gold 1972-1981

I updated this post: http://wp.me/p2OaYY-245

Lee Munson of Portfolio LLC says “Sell the gold rally“.  (A hilarious video)

The question for investors and speculators alike is if gold has at long last marked the end of a wrenching nearly two-year pullback from the 2011 highs over $1,900. Lee Munson of Portfolio LLC says any rally marks a chance to make a graceful exit from their positions.

“Investors are confusing the fact that [gold] holds its value super long, hundred-year periods of time versus inflation versus making actual growth,” Munson says in the attached video. “It just holds its value. That’s not a reason to hold anything.”

Those who quibble with that analysis, parsing the numbers to maximize the apparent returns of gold versus stocks are missing the point. Gold has worked over shorter periods as a speculative vehicle but the die hard goldbugs have seen minimal returns at best and dramatically underperformed stocks.

Since 1940 adjusted for inflation the only period over which gold has outperformed stocks is 2000 – 2010; and that lead is slipping fast. History suggests gold is extremely volatile in shorter terms but dramatically lags U.S. equities for the truly committed gold enthusiasts.

Munson has simple advice for gold investors enjoying the terrific rally from the recent lows. Sell. “Exit out of the trade. Get serious. Get real.”

Disingenuous or Clueless? (from “Mish”)

I do not profess to know what the price of gold will be at any time, but Munson seems to think he does, so much so that he screams sell after a measly rally.

Munson is certainly clueless about the fundamentals of gold.

If you don’t understand the fundamental driver (and it’s not jewelry or central bank selling) please consider Plague of Gold Bears Now Say “Gold Unsafe at Any Price”; What’s the Real Long-Term Driver for Gold?

Gold outperformed between 2000 and 20010 for a reason. And that reason is global central bank debasement of currency. Gold also outperformed in the late 70s for the same reason, but it did get ahead of itself.

Additional Reading

  1. Ritholtz on Gold and on Making Predictions; How Secular Bull Markets End; Winning vs. Investing
  2. Nouriel Roubini Seriously Misguided on Gold, on Equities, on Economic Growth, on Money
  3. Speculative Gold Bets at 5-Year Low; Metal Will Get “Crushed” Says Credit Suisse

Cash, Bonds, Equities, or Gold?

You have to put your money somewhere (and somewhere includes cash).

This is not about being a “die hard gold bug”. This is about understanding the case for gold as it exists now.

The fundamentals of gold are strong, yet sentiment is so extreme that bears says “gold is unsafe at ANY price”. Now Munson says this puny rally is a chance to exit.

With sentiment this extreme in the face of strong fundamentals and a rally, I like my chances here.

Mike “Mish” Shedlock
Read more at http://globaleconomicanalysis.blogspot.com/2013/07/fools-say-sell-gold-rally.html#5AsKu1e0jpiSssK3.99




http://globaleconomicanalysis.blogspot.com/2006/04/us-vs-japan-land-prices-pictorial.html    (A GREAT post for financial history buffs)

Investment Presentation (JACK) and Readings

Don’t Confuse Growth With Sustainable Competitive Advantage

“The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors.”

–Warren Buffett, Fortune magazine, 11/22/99


Watch Ryan Fusaro, Value Investing Challenge winner present his top idea: Jack In the Box

Ryan Fusaro, winner of the Value Investing Challenge, shared his analysis of Jack in the Box and how the company’s refranchising efforts will unlock enormous value at the 8th Annual New York Value Investing Congress. Click here to watch a video of his presentation! http://bit.ly/PoQQLy

Long Jack in the Box (JACK)

Fusaro won and pitched Jack in the Box (JACK) in his talk entitled ‘Thinking Outside the Box.” He started with some history that JACK has refranchised from 25% in 2005 to 75% today.

– Incomplete financial reporting
– Potential margin improvement
– Great brands
– Cost structure hasn’t caught up with franchise model

He touched on how JACK owns Jack in the Box but also owns Qdoba, which has typically been too small to really matter but is now worth $580m by itself and value could be unlocked with a spin-off. Think McDonald’s (MCD) when it spun-off Chipotle (CMG). JACK also owns the real estate.

Fusaro says there’s a growth business embedded in a value business and also touched on unlocking real estate value.

Read more: http://www.marketfolly.com/2012/10/ryan-fusaros-presentation-on-jack-in.html#ixzz2AQm8GdUq

Presentation:Fusaro-VIC-Presentation_Jack in the Box_JACK

Let me know if you think the above was worthy of a prize?

Free-Market Money?


Dinner with Pabrai? Who will beat my bid?

Mohnish Pabrai is auctioning off two items: lunch with himself (plus a stock tip) and a life-size bronze bust of Charlie Munger. The proceeds of both will go to the Dakshana Foundation, which he established to help academically promising poor kids in India:


Do you have trading greatness? http://www.marketpsych.com/tradingedge.php

Your personality: http://www.marketpsych.com/personality_test.php

Youth has gone Austrian: http://mises.org/daily/6147/The-Future-of-the-Austrian-School



Have a good weekend.



The Federal Reserve–Watch What They Do Not What They Say

Money Supply Growth is Declining

The Fed is shrinking their balance sheet: See this CNBC video interview of Jim Grant and the graph of money supply growth is shown about 1.5 minutes into the interview….http://video.cnbc.com/gallery/?video=3000094677&play=1

The Fed was very stimulative up until the Spring of 2011, but in the past three months the Fed has been withdrawing stimulus. At the margin, the Fed is tight. Unless QE3 occurs or there is a reverse of fear money into US Treasuries, market may struggle. This is not a reason to sell good, undervalued stocks.; just be aware of conditions.


CNBC Money Honey (“MH”):Let’s solve this, All right. Welcome back it’s the hot topic on wall street. Are we going the way of Europe and headed for recession? Warren Buffett told the economic council that we’re not smarter than the people in the 1930s. We just have a system that works that’s been working since 1776. He has under his wing, I think, 80 or 79 operating companies and he’s got one of the better views on the macro economy.

Let me ask you (James Grant) about the Federal Reserve’s testimony tomorrow. Ben Bernanke is back before congress tomorrow. What are you expecting him to say? A lot of debate in terms of suggestion of more stimulus, QE 3, what do you think?

James Grant, “I think we should plan for platitudes but there’s a difference between what the FED is saying and notice what they are doing. They have increased their balance sheet and the maximum rate of growth occurred a year ago in the spring of 2010. In the last three months it’s mainly treasuries, securities, and mortgages, that has totalled an annual rate of almost 10%. The FED is withdrawing stimulus even as more and more of the governors and reserve bank presidents are talking about QE 3.  Something to bear in mind when you listen to Bernanke talk.  What is he actually doing? And what they is actually doing at the margin is shrinking the money supply.

MH: What do you think about that? Give me your analysis on that.

Jim Grant: Unless they continue buying securities, some of these bills, bonds, and mortgages mature and run off. That’s what is happening now. The portfolio is shrinking just by the natural tendency of things to come to the end of their financial lives. So unless there is some new initiative, the portfolio will continue to shrink and as the FED asset shrinks, so does the stimulus and the accumulation of those assets. I expect that there will be QE 3.

MH: “You do?”

James Grant: “I do. I think that very little prodding to do what they have done continuously almost for four or five years and….” – MH: “look, Jim, let’s face it. We had a terrible jobs number. 69,000 jobs created in the last month. I know you’re not a fan of all of this stimulus.

James Grant, “It’s market manipulation in the past. Isn’t it a fun drug?  They keep on printing the stuff and we keep on expecting more and today I think part of the source of the levitation was in Wisconsin. People are maybe discounting the prospect of something like freer or if not free markets come the fall if the GOP wins but a good part of what is going on in the market is the presence of hope of QE3, withdrawal of that hope. It is a grand manipulation.

MH, “I think you brought up a very important part with the Wisconsin thing (Public Unions lost their recall vote against the Wisconsin Governor). I’ve been asking this thing, are investors going to look at this data as it keeps on worsening and say, “Are going to have a new president and then start rallying on the expectation that it’s a Romney rally?

James Grant: I think so. I think that in a way the worst is better.  The supreme court is going to hold forth on whether Obamacare is constitutional. I can see a GOP victory and the market will discount that. If in fact we were to see more expectations that President Obama loses the re-election, then this market rallies? That’s the best hope for this stock market? It’s one hope and it’s not in I think it’s one bullish feature to be aware of.

MH, “Give me the long-term implications for all of this money. Let’s say we get QE3. Long-term implications are bad. There is nothing free in this life, in money least of all. The world I think has 2008 in its brain. The world is preoccupied with the awful memories of the 2008 and 2009. If you look at the market and volatility market, people are buying protection against a deflationary collapse. The bank regulators are demanding a deflationary event. Unexpectedly it began to generate higher than expected rates of inflation, what if interest rates went up. That might be the surprise. That’s what I’m thinking about, that we have all designated on the one hand risk assets. On the other hand, nonrisk assets, right? How about if the labels were stuck up wrong? Which they may very well be.

MH, “Are you worried about Europe?  How much of an issue is Europe?  At the end of the day I want you to button up and say, how is the investment play here? let me answer it with one short breath. We are looking for microeconomic specific opportunities in Europe.  Equities, distressed debt, busted LBOs, cheap real estate. We can’t know the future.  We can’t really handicapped these macroeconomic outcomes. But what we can do is troll for opportunity.  That’s what we’re doing. How about just cool, calm, and collected analysis? That’s what we’re trying to do. That usually works.

MH, “Jim Grant, fantastic analysis, as always.

3 Months      6 Months         12 Months

M-1 Growth Rates                  4.3%              10.1%                 17.1%

M-2                                            4.0                  5.9                      9.1

M Zero Maturity                     5.0                  6.9                     8.6

Note the deceleration of Money Growth–Yellow Lights Flashing

Last week, the Fed numbers came in with 13-week annualized seasonally adjusted money supply (M2) growing at 5.5%. Non-seasonally adjusted growing at  5.4%. And most dramatic is the simple month versus 4 month out money supply growth. It has now gone NEGATIVE with an annualized growth rate of -1.9%.

This is a major crash in money supply growth. That said, the potential for a reversal is very strong. If hot money flows into the U.S. reverse, money supply will rocket. Further, it appears that the Fed appears ready, in co-ordination with the European Central Bank, to start a new money pumping scheme. But if at least one of these factors doesn’t kick-in, pressure in the economy and stock market are likely.

What must be watched very closely is the trend of hot money flowing into the Treasury market. This hot/scared money, by putting downward pressure on rates, is causing the Fed to drain reserves because of its target Fed funds rate at 0.15%

Where’s this hot money coming from? It’s domestic and foreign money. The demand among average U.S. investors has swelled so much, in fact, that they bought more Treasury securities in the first quarter than by foreigners.

U.S households picked up about $170 billion in the low-yielding government debt during the quarter, while foreigners increased their holdings by $110 billion.

When this money moves out of Treasury securities, it will push rates higher very quickly and cause the Fed to add reserves (and grow the money supply very rapidly) The switch in the direction of Treasury security hot money can occur very quickly. (Source: www.economicpolicyjournal.com)

James Grant Opines on the Unintended Consequences of the FED and ECB’s Interventions

Investors refuse to believe that shock lies in wait…Investors do better where risk management is a conscious part of the process…survival is the only road to riches. Let me say that again: survival is the only road to riches. You should try to maximize return only if losses would not threaten your survival…You don’t want to blow it, because you don’t get a second chance. When you invest, it’s not your wealth today, but it’s your future that you’re really managing. – Peter Bernstein

Hospitalized for a serious condition: http://www.youtube.com/watch?v=pbS2WJdav6c&feature=fvsr  Pray that I can be cured……… 

James Grant Discusses the Folly of Fed Policy

James Grant Interview on CNBC March 07, 2012



CNBC Money Honey:The Federal Reserve is reportedly considering a new bond buying program to bolster the economy. The Wall Street Journal said the plan would buy more mortgage or treasury bonds, but borrow it back for short periods at lower rates. My next guest says such a plan would do more harm than good. James Grant from Grant’s Interest Rate Observer (www.grantspub.com) and Kelly Evans from headquarters are with me today. Good to see you, Jim. thank you so much for joining us.James Grant: Good to see you.

CNBC: You say such a plan by the Feds would be a wrong approach.

James Grant: We’ve had the easy money now for several years. What do you think the implications of it is? we should call this what it is, it is market manipulation, that’s what we call it in the private sector. What the Fed is doing is manhandling the structure of interest rates to the end of achieving of what it takes to be desirable macro outcomes. If the government would go down to the farmer’s market at 14th street and fiddle with the scales, there would be an understandable outcry from the customers. But the Fed and Central Banks the world over are in unprecedented ways of manipulating the value of what they’re printing, by a ton. In the latest gambit, the Fed wants to manipulate long-term interest rates lower. But in so doing, it is manipulating perceptions of risk, and it is creating a real inflation in the sense that people who want to retire in their savings, need much more cash to do it.

CNBC: And I like your latest cartoon, stick ’em up, this is a debt swap. Yeah. in the latest grant interest rate observer, in terms of the inflationary story, we’ve been talking about the threat of inflation after a long time with this easy money.

James Grant: I want to get into the ECB (European Central Bank) as well, because it’s not just the Fed. have we seen inflation yet? there’s inflation certainly in spots–obviously commodity inflation. But there’s also inflation, I think, in market assets that are stimulated, to use that favorite word of the authorities, stimulated by ultra-low interest rates. For example, in the distressed debt markets, you’ll find companies that have not made a profit in five years, issuing debt, as if this company were somehow   soundly and demonstrably solvent. by pressing down interest rates, by repressing interest rates, the Fed is in effect dulling the risk sensors of   the entire marketplace. Is this good? it’s the question to ask, Kelly. And the reason so many people are focused on the drawback of these record low interest rates and the fact that it’s also punishing savers.

CNBC: I’m curious, it may not amount to anything, but Jim, if the Fed goes this route of sterilizing its quantitative easing, and if they do another round, what does that mean to you?

James Grant: Why would they pursue that kind of action–lend long, in other words, which is in the private sector, a great way to go broke, as a bank. The Fed is going to do this. It thinks — the Wall Street Journal is floating this balloon. The Fed doesn’t want to have us believe that it is recklessly printing money to do that, ergo the gambit of locking up the funds with which this buys the bonds.

CNBC: Kelly, it looks like nothing more than what we’ve seen.  It’s the Fed interposing itself between the marketplace and — Jim, it’s an overture to people like you who think the Feds are creating inflation. Do you read a message like that and feel comforted somehow that —

James Grant, “No, I am distinctly uncomforted, Kelly. The Fed is creating, if not inflation, it is creating distortions. What has the Fed got against the price mechanism? it’s got in this country a long way over 200 years, suddenly, wherever the market sells off, we somehow have to have a fed interjection of money. What about the ECB? We’ve got the European Central Bank allowing a three-year period where the banks can pay back the lending. What are they doing with that money? They’re actually buying sovereign debt longer term. What about the ECB action? The ECB is going through a kind of adolescent growth spurt. Its balance sheet is positively exploding. its balance sheet is the equivalent of $4 trillion. It’s one-third larger than the Fed’s. Although the Euro zone has an economy about 13% or 15% smaller than ours. The Fed is a piker compared to what the  ECB has recently been doing. I think the point is, the world over we’re seeing unprecedented things (the beginning of the end of fiat currencies). We’re seeing interest rates that are lower than ever, and central banks that have never been more recklessly pro creative, to use Warren Buffett’s words, about assets. They’re printing money like mad. And people can’t seem to get enough long-term bonds, because the central banks are manipulating expectations about the future of interest rates. I think it’s all very dangerous. We can draw lessons from the depression of the 1920s, but what are the actual consequences of this continued government intervention?

Can we talk about what happened in early 1920s? Ben Bernanke can’t stop talking about the ’30s. But in 1920, ’21, the economy fell off the cliff. Nominal GDP was down 29%, wholesale prices collapsed by 40%. you know how the Fed and the Treasury reacted to this, the Treasury balanced the budget and the Fed actually raised interest rates. Guess what, the depression ended.

See video on the 1920/21 Depression by Tom Woods: http://www.youtube.com/watch?v=czcUmnsprQI

Amity Shales on the Great Depression:http://www.youtube.com/watch?v=lLeAqbOUt4c. A video destroying the common beliefs of what caused the Great Depression. The Forgotten Man.

James Grant: We keep on hearing this propaganda stick drum beat assertion that in order to get us out of our sorrows, the authorities, the high and mighty ones, say we must run immense deficits.

Article 1, Section 8 of the U.S. Constitution gives the Congress the power to COIN money and FIX the standard of WEIGHTS and MEASURES. The Constitution was not intended to give government (the Fed) the power to constantly change the yardstick of money (changing the quantity of money).  Also, the Fed interferes with the traffic signals of the economy–interest rates–by keeping the traffic light at green constantly. This will only lead to more mal-investment.