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Week Ended, August 4, 2013

DR. PETER G. KINESA'S
INTERNATIONAL INSIGHTS

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US BANKS HUGE PROBLEM PERSISTS -Unofficial Problem Banks - FDIC Report

(Read More)

Hmm ... Emerging Pattern?

Despite how others are interpreting the latest figures, reported by the FDIC - we do not share their same enthusiasm. In fact, we have grave concerns, as the pattern appears to mimic the one experienced during the credit humbling days of the Great Depression. Here are some numbers to consider.

In Q2 2009, nine months after the meltdown, only 4.7% of the 8,195 insured banks were classified as problems. By the second quarter of 2012, the percentage rose to 13.3% of 7,513 insured creditors - at the same time, over 600 banks had vanished for a host of reasons. Today, we are looking at a figure of 10.3%, on a total report of 7,018 insured banks. Now these percentages do look somewhat comparable, in shape, to the 1930-32 period graph for bank failures, prior to the big collapse of 1933. Spooky.

Add to this numerical and graphic analysis, the fact that we have seen an extended period of monetary and quantitative easing, that has not seen benefits flow down to the Main Street banks. Disturbing! These banks are indeed no where near the numbers reported just nine months after the great 2008 meltdown - 4.7% to 10.3%. Meaning the problems have not been fixed to any great extent by policy measures, so far.

But could there be another 1933 in a year or two? The odds are good that a further market and credit meltdown is in the cards. First, because policy has had very little impact on the credit system's organic health; and secondly, a rise in interest rates would deflate financial and property assets, and thereby wipe out much of the equity in an already problematic and highly levered system. Thirdly, let's not forget that the global economy is fragile and exposed to contract widely with minor tremors.

These numbers and analysis are forewarning, so it would be wise for policy-makers to have the toxic-asset bail-out (disaster) plans in place well before events transpire, breaking the bank machine. But, should we ever expect them to Think ahead? Perhaps as 2008 indicates, the idea is just too novel.

Investors should also take note that another credit crunch is, not only terrible for markets, but also the domestic economy, as the banking system that is even numerically weaker than it was back in 2009, cannot quickly act to stabilise both activity and valuation contractions. Meaning that the breach in valuations could also be much greater than the September 2008 meltdown losses, as market liquidity is also more susceptible to rapid tightening with weaker banks.

To close, analyse and draw your own conclusions, but we cannot help having this sinking feeling inside - there is something in the Autumn Air.

PLATINUM WEALTH PARTNERS

First Financial Insights

August 2, 2013

When the bank machines are broken, expect...

One big point in all this is that we simply do not have the diagnostic measures to advise us when the economy, markets and banks are headed for big troubles. This case is somewhat different in that the mathematics of financial valuations is just lurking out there, ready to pounce asset values downwards. It also makes sense from a physical economic view to see values decline, as we exponentially use the planet's resources, while printing buckets of money. No matter what markets, economics and governments cannot win the fight against physics and mathematics - it is hence only a matter of time.

Dr. Peter G Kinesa
August 2, 2013

The Jim Rogers Blog : WE ARE IN BIG TROUBLE! - There is a huge artificial Boom (video)

We are right behind Jim on this issue and recommend reminding yourself often and keeping an eye the ball, not getting caught when the trap collapses.

INVESTORS' INSIGHTS

This is beginning to sound like a chorus line with a song that sings about the coming collapse of almost every kind of asset value. We recently commented in The New York Times that values could collapse by as much as 50% should long rates rise by 2% or more. Readers got mad at us, but it's not our fault, because we did not invent financial mathematics - someone else did! Nor we do believe that these rules are open to negotiation, legislation or persuasion of any kind. They are absolute.

So how did we ever get backed into this corner? Well. you can blame the usual suspects, who lost sight of common sense and were "influenced by the political immediacy of their times." Now there is no where to run or hide.

PLATINUM WEALTH PARTNERS

First Financial Insights

August 1, 2013

Remember these guys - Unusual Suspects?

Anyone of these guys alive when Japan hit the skids and got stuck in a low interest rate trap that is almost impossible to exit? That's pretty basic financial mathematics, so no wonder their eyes glaze over when I talk about eternity, physical constraints and the exponential function. THEY THINK I"M NUTS!

I truly wonder some times...

Dr Peter G Kinesa
August 1, 2013

The Eric Sprott Blog: HA! HA! - There is a Serious Shortage of Gold - (Read More)

"I think it’s just been one big scheme to try to get people dissuaded from owning gold and to cause supply to come out. As you mentione...

So do want to buy our new book - with over 1 million pre-sold copies? The title is "The Secret to How to Make a Lot of Money Real Quick"; - write a book like this.

Sarcasm notwithstanding, Eric is basically a promoter and should disclose his personal, corporate and managed positions, so it is clear where he is coming from and fair to everyone who listens to his pitch. As well, to make this relevant for serious investors - sources, numbers and opposing views should be brought forward for objective analysis. We strongly believe, moreover, that if this was such a great investment, folks like Buffet, Bogle, Gates, Goldman and many others, would all be quietly chasing this huge home run. There is little evidence suggesting they are swinging at the plate.

In the meantime, we will continue to support the belief that gold is a psychotic placebo, that has lost substantial real purchasing power over the past 33 years, as well as being the one of the worst asset classes over that time. Making it just a speculative relic used by barbarian traders that holds none of the attributes true investors desire - like expected or defined returns.

Bottom line, we are not putting much faith in the rhetoric of gold promoters like Faber, Sprott and Rogers. For as Charlie Munger would say, "if its too good to be true, it usually is "

PLATINUM WEALTH PARTNERS

First Financial Insights

July 31, 2013

Our Message..

These wise guys are not "Gold bugs" for a reason -

On our side, my colleauges include Gates, Buffet, Keynes, Kinesa, and Roubini. There team consists of Faber, Sprott, Rogers, Schiff and Glenn Beck. Place your bets accordingly.

Dr Peter G Kinesa

July 31, 2013

The Dr Peter G Kinesa Blog: ECONOMIC GRAPH OF THE DAY: UK Wildlife Index Decli...: (Read More)

ECONOMIC GRAPH OF THE DAY: UK Wildlife Index Decline (1968 -2010) To the point, forget about all the graphs, ch...

You may think that Peter's comments are absurd, outlandish or just plain funny from an investment, finance and economic point of view. We, on the other hand, view such measures and observations quite seriously. So much so, that in the end we believe that one his upcoming books "Bugonomics - The Silent GDP of Bugs" will far out pace Freakonomics as a best seller.

Bugs by their nature are existentialists, just as Pete's Economic Doctrine plants itself in this philosophic foundation. For when man is gone, what happens to Bugs? Or is the question worded backwards? Hmm.

Read the book...

PLATINUM WEALTH PARTNERS

First Financial Insights

July 30, 2013

BUGONOMICS - The Silent GDP of Bugs

The loss of bugs may actually lead to wars long before we run out of oil and other raw materials. For without them, that should pretty much wrap things up for some time.

OK so remember you heard it here first, but evidence warns that we are now past "PEAK BUGS" - funny in a dark way, but so very true.

Dr Peter G Kinesa

July 30, 2013

 

JAPAN-- What if the water becomes contaminated?

JAPAN -- What if the water becomes contaminated? (read more - The New York Times)

What? Their water is radioactive?

Not just a passing concern nor high speculation, but a possibility that can be assigned some level of probability. Perhaps something you would not normally be concerned with when thinking about markets, however a wide-scale disaster of this sort could cause an unprecedented collapse in Japanese securities' markets. The nature of this disaster could make significant portions of the island nation just unlivable.

Anyway we remain skeptical about what authorities are disclosing and this lack of transparency,promptness and accuracy does not create a lot of confidence in competencies. We are assigning much higher levels of risk because we fear the unknown, unknowns that could emerge out of nowhere. Try to explain to clients why you didn't see this one coming,

Anyway, for sure, we are staying away from coastal properties as long-term investments. To be forewarned, is to be forearmed - invest wisely.

Dr Peter G Kinesa

July 27, 2013

ITS OK TO BE SMART

PLATINUM WEALTH PARTNERS - BLOOMBERG, ALJAZEERA, PAUL KRUGMAN

PLATINUM WEALTH PARTNERS:

Week Ended July 21 2013

 DR. PETER G. KINESA'S 
INTERNATIONAL INSIGHTS

"PLATINUM WEALTH PARTNERS"

VISIT OUR WEBSITE 

PLATINUM WEALTH PARTNERS

www.pwa2100.blogspot.com

The Marc Faber Blog: Somewhere down the line we will have a Massive Wealth Destruction

Just a short post noting that Marc's 50% prediction is in line with what we suggest is a possible valuation adjustment in our July 17th comments on Paul Krugman's Blog - Prophecies of Maestrodamus.

Not a hard one to figure out as it is really just "present value mathematics" whereby if long 30 year bond rates double, then their market value dips by 50%. Very straightforward mathematics that no amount of economic theory nor policy measures can override as it is simply a hard conceptual constraint. Mathematics cannot be persuaded, legislated nor negotiated with - and that should come as no surprise to anyone.

Down the line, looks to be a scary turbulent road ahead. 

We will post more comments from this blog later on.

PLATINUM WEALTH PARTNERS

July 21, 2013

What waits down the line?

By every account, all negotiations with mathematics have resulted in a win-lose situation. Some things are just absolute.

Dr Peter G Kinesa

July 21, 2013  

Bloomberg BusinessWeek - The Social Media Bubble is Quietly Deflating

Just a few months back, you may recall, along with Jim Rogers, we raised concerns about Facebook and generally the whole social media industry, referring to it as a generational fad and having difficulty seeing how a sustainable business model could be developed. Moreover, whether such tools or derivatives could find useful and profitable transitions into business markets. Guess what? Looks like the markets are tuning into Mr Rogers and ourselves as VC (Venture Capital) funding has plummeted to 2% this past quarter.

As one insider notes; what a business - "thinking about how to make people click ads"  And that pretty well sums up the industry's "Critical Success Factor" and how you build any sort of Sustainable Competitive Advantage around it, remains a puzzle.

Anyway we still believe that the big ticket, high margin objects just simply requires good ole face to face contact -  a little of that human touch!

INVESTORS INSIGHTS - February 18, 2013  

JIM ROGERS - Facebook is not an Investment, it's a Waste of TIME  

PLATINUM WEALTH PARTNERS

July 20, 2013

Not a Happy Camper

Comparing the social media frenzy to the dot-com bubble may not be such a good analogy, albeit in both cases you can observe that common sense gave way to a strange fear of missed opportunity combined with unrealistic expectations. The other common ground was that object business measures, standards and principles no longer applied . Market history repeated again.

And for some strange reason this won't be the last time. Humans? Go Figure?

Dr Peter G Kinesa

July 20, 2013  

Bloomberg - Spanish 10-Year Bonds Decline as Italian Yield Rises to 4.48%

In light of our market alert, regarding Portugal's Bonds, earlier this week, along with the growing concern for adverse circumstances in Europe, even more focus is now being given to European Bond Markets. Market activity in these markets may now have greater bearing on the global financial system than US treasuries. No kidding?

Similar to Japan, bond values and rates in the US appear to be hand-cuffed at low levels for some time. Moreover, enjoying the reserve currency status allows the US to gather the loose liquidity in the global system and harbour its flight and fright capital, thereby easing any upward rate pressures. Plus, an interest rate increase state-side would be absolutely devastating to the US economy at this juncture - and just pour gas on a stumbling economy's fires. 

Underlying the European bond markets are chronic diseases that  show no signs of abating - in fact there is growing evidence to the contrary. Like Japan and Middle East countries, Europe suffers from a physical economic overcapacity issue that cannot be resolved by abstructionist economic measures. Limited and declining physical economic inputs can only lead to one result - declining economic outputs. All of which is made worse as populations grow and per capita output consumption ratios thusly sink even further. Bad "Real" News!

Particularly after Cyprus, we are seeing signs of desperate central bankers pulling out devious last stops to cure the terminal economic cancer. The markets in Greece, Spain, Italy, Ireland and Portugal are at the greatest risk of crashing global bond prices. They are "bonded" by a common concern with a staggering rippling potential affecting markets with traumatic head to toe  effects. 

Our main message here - this one ain't over yet; 'cause, "it ain't over, 'til its over"  

PLATINUM WEALTH PARTNERS

July 19, 2013

A Bonding Crisis - the future is yet to come...

While the rest of the world may think that the FED is the driver behind global rates, largely because of the US reserve currency status and its trading volumes - we are not so certain, and believe as Grandma use to say "the devil is in the details - at Lehman Bros?" And so when all hell breaks loose; something small and overlooked is often perpetrating the angst.

Of course, then there was Yogi's wisdom - a great "Bondplayer" too  

Dr. Peter G Kinesa

July 19, 2013

The New York Times 

The Prophecies of Maestrodamus

Paul Krugman

Comments:

"I know one thing; that I know nothing" Hmm. I think we could all learn from one of Socrates’ last thoughts - but you never know!

Still we could attribute much of our current mess to too many who believe they know - then later we find that even simple notions were somehow forgotten. Or a fog had set in. (- R. S. McNamara).

Despite what may be economic headlines today, Greenspan's legacy may be his contribution to our current low interest rate trap - that has lasted for much too long. Getting out of it could trigger a massive deflation of financial assets - causing an unprecedented ASSET VALUE WRITE-DOWN. Evaporating years of value in moments.

A mere 2% rise in rates, for example, could deflate financial assets by as much as 50% - wiping out the equity boxes of financial intermediaries and banks , while creating massive unfunded pension and insurance fund liabilities on the basis of marked to market accounting calculations. =ing HUGE liquidity CRUNCH.

Moreover, the total value of US federal debt could grow substantively with a mathematical pen stroke, which has little to do with deficits or economic theory and activity. And I don’t even want think about what could happen if rates should revert to levels over their historic mean; it would be devastating.

So it seems that the Maestro knew how get us into this trap, but did not know how to get us out of it - but then again "who knows?" And as far as we know, he's still on first...

INVESTORS' INSIGHTS

Juky 17, 2013

I don't know?

ALJAZEERA - (English) Worldwide PC sales keep sliding

Lenovo (China) Top PC Maker???

Bad news for everyone, except China as they take the leadership position in another market that has long been dominated by American makers for decades. Who do we blame this on? Management? Tablets? Consumers? Or China's low cost producer strategy for an industry where products are becoming commoditized, as it really does not take that much to do the reverse engineering. Again China is following a "national business strategy" much like Japan did from the 60's onwards in automotive and consumer electronics.

But the real issue is what good is the WTO? How does it ensure that everyone is on an equal playing field when labour, environmental, and health standards are barbaric is contrast to North America. Add to all that a fixed currency to the US dollar and this game becomes a one horse race.

But who loses big time? North American and European union and salaried workers. In fact, in America the real hourly wage, according to St Louis, FED statistics have not risen much since 1982! So, where are the unions???

Beyond all this meaning more doom and gloom for the ordinary American worker, here 's list of PC makers facing tougher times as this saturated market begins to consolidate. Smaller players will be forced to merge or simply fade away into the sunset - while margins face continued presures from commoditization.

TOP Five PC Makers
  41% (est) Market Share

Lenova
Hewlett Packard
Dell
Acer
Asus

INVESTORS' INSIGHTS

First Financial Insights

July 16, 2013 

Those were the days - "in our home towns... and they ain't coming back"

- Bruce Springstein

The Marc Faber Blog - Oil Prices Moving to $500? - (Video) Bullish on Crude Oil , Bearish on India

The Marc Faber Blog - Oil Prices Moving to $500? - Bullish on Crude Oil , Bearish on India

Not a good picture!

 

Impossible! Could Never Happen! Well actually in mathematical terms it has happened a number of times before. And $500 a barrel is not that ridiculous when you think about it.- that's just a five fold increase  Compare that to the jump it took between 1971 and 1980 when it moved from $2 to $35 a barrel - a 17 fold increase. Meaning a five-fold increase is possible and more probable to occur as time goes on.

So Marc's bullish attitude towards oil is well founded and supported by growing demand from increasing populations and on-going economic growth in Asian markets. However, it is quite the opposite on the supply-side as most believe we are at or near peak extraction and can no longer add to reserves an amount equal to this consumption.

Doing some simple analysis, we confront a rather disturbing destiny. With present global consumption running at 30 billion barrels annually - equating to 300 billion every decade - total  reserves of 1.2 trillion are thus set to be practically depleted by 2053, if not sooner.

But what comes between this date and now is much more disturbing, as the world scrambles to find a way to replace the cheap energy equivalent provided by these 30 billion barrels. One thing is certain, if alternatives are found they will not be any cheaper than today's energies prices. Expect more political and social turbulence as the world seeks to rebalance this physical loss of energy inputs - that will dramatically affect food and basic transportation needs. 


To the point, we are bullish on oil and bearish on currencies whose national economies are highly dependent on imported supplies - their turbulence could be devastating. As well it will place huge downside pressure on stock and bond markets - so cash, and better yet a farm, are certain to become increasingly popular as oil prices rocket to new heights.

Dr. Peter G Kinesa
July 11, 2013

One last drop -

The Marc Faber Blog : Who's on First? - The Chinese Economy is Weak

The Marc  Faber Blog : Who's on First? - The Chinese Economy is Weak

Too funny. One day we are taking Jim Rogers to task on his Goldilocks predictions for the Asian economies, and just a few days later a close "Partner-in-Grime" is telling us things don't look so good for the world's second largest economy. Are things coming to a standstill? If so, it will not be good for an economy with a super debt addiction.

When economic activities begin to stall, cash flow becomes tight, debt goes into default, jobs are lost, bankruptcies are epidemic. social unrest spreads and then governments are toppled. Because as we all know in the bitter end, there is no ideology that ever supersedes "meat and potatoes" - did someone say something about Egypt?

Once again, who's on first? Who? What? Tomorrow? I don't know...


Dr Peter G Kinesa
July 4, 2013

Happy Holidays All!

" - so take me out to the ball game, take me out..."

THE JIM ROGERS BLOG : Asia Headed for Doghouse - most of the good Opportunities will be in Asia???

THE JIM ROGERS BLOG : Asia Headed for Doghouse - most of the good Opportunities will be in Asia???

Here's where the conclusions of the abstract and physical economic models diverge to the extreme. This primarily is because the one sees the world through the "Looking Glass" of neo-classical economic theory, while the other sees the world through the finite constraints of physics and absolute mathematics. Hence, we anticipate both the Japanese and Chinese economies heading towards unprecedented collapses, bringing the rest of the region to its knees.

Why? Simply, because these are relatively resource poor nations and declining at an exponential rate on a per capita basis. Remember, we are in the peak oil period and then headed for a rapid decline rate period that could be even higher than the expected 4% per annum. Unless Jim knows something we don't -like how to run an economy with without cheap energy, then water, then food, then....

Tell us more Ole Mad Hatter

Dr Peter G Kinesa
July 2, 2013

.

Listen here now Alice...

PLATINUM WEALTH PARTNERS - Nouriel Roubini, Marc Faber, Peter Kinesa #GOLD #China

PLATINUM WEALTH PARTNERS:

Week Ended June 30, 2013

 DR. PETER G. KINESA'S 
INTERNATIONAL INSIGHTS

"PLATINUM WEALTH PARTNERS"

VISIT OUR WEBSITE 

PLATINUM WEALTH ADVISORS

www.pwa2100.blogspot.com

THE MARC FABER BLOG: GOLD is a -"Psychotic Placebo"; NOT AN INVESTMENT : Continue to Accumulate PHYSICAL GOLD

In this article we first examine why so-called leading investment experts (Faber, Rogers, Sprott, et al) continue to subscribe the archaic virtues of this metal, despite all the evidence to the contrary, that gold cannot rationally store or provide value, save for its marginal commercial uses. Its alleged value is traced to and conjured by primitive cognitions and beliefs not relevant to current or future societies. And, as other elements; more critical to survival, become physically scarcer, evidence shows that gold's trending perceived, comparative and market values erode further.

Gold also demonstrates the qualities of a medical placebo that triggers some patients to psychologically believe they are being cured of their ailments ingesting a purported but non-existent  remedial drug. Gold investors  act similarly, but they are more fanatical and  psychotic about their placebo, actually believing that the metal stores a mystical intrinsic value permanently and it will ALWAYS be convertible or exchangeable for the real items that provide the basic utilities of survival. Any such transaction requires  a gold investor to find a bigger fool willing to part with key necessities of life; who is sure however to be in scarce supply when survival needs are desperately paramount.

After this and further analysis, the article closes with a lesson and  a hypothetical event of alien explorers some day landing on our planet, only to find gold bars buried underground, everywhere - being the last and sole remains of a species, who once commanded its vastness. These planetary explorers will wonder, as the Europeans did upon their arrival at Easter Island; finding a barren land, a handful of folks, and a paradise littered with thousands of magnificent statues – Why did they never learn?

For the sake of good record and transparency, First Financial Insights Inc. nor any of its affiliates holds, either directly or indirectly, any  economic positions in this asset class, nor is there any intention to do so for any long-term period nor short-term period over the ensuing year. 


Golden Eyes or Psychotic Sociopath?

First. let's try to understand why Dr Doom and others are such a BIG Promoters of Gold, despite the fact that it is nothing more than a "Psychotic-Placebo," with a vast supporting cast of sociopaths, which fails to clinically rectify or satisfy any of the emotional, concrete and abstract conditions promised and promoted. That's a mouthful. Put simply, the ownership of gold, in any form, does not match the irrational thoughts regarding its function to forever store and provide intrinsic value or convert to real usable utilities. 

Gold also conveys the hidden hypothesis that it will always be convertible into utilities that are necessary for survival.  In truth, it is merely a symbol for an ambiguous idea purporting that it somehow stores the last values and utilities of human production. However, there are no guarantees. of any kind, from anyone, that it will always be traded for national currencies or bartered in exchange for physical goods and services needed for daily consumption. So why then does Dr Doom, et al, promote this form of Snake Oil to all whom would listen?

One, he often claims to hold, in some form or other - 25% or more of this placebo in his own portfolio. So there are clear hints of self-interest from perspectives of both personal wealth and reputation Need we say more? Other than, you should probably not expect any forewarnings from Dr. Doom or others, should they one day finally conclude - Gold is only rationally worth “$50 an ounce" based on the supply and inventory requirements of commercial production.

Secondly, Dr Doom is NOT a classic investor - but more of a speculative market trader seeking profitable short and near term opportunities before the collective consensus (markets) appreciates the object’s value. Warren Buffet, on the other hand, is a classic investor, who makes judgments, based on deeply solid and sound fundamental research and analysis of deterministic relationships and probabilities. What better proof is there of the difference between a classic investor and speculative trader than their actual portfolio holdings? - Berkshire Hathaway, for instance, has never had 25% of its portfolio assets in Gold or any similar placebo. Enough said.

Thirdly, Dr Doom, Jim Rogers and others, are likely to be biased, classically-trained economists and traders, who largely ignore the way that physics and mathematics describes the real world we live in. They place way to much confidence in man-made abstracts, theories and symbols, such as; currency, GDP, CPI, GAAP, Invisible Hand and so forth, while ignoring the hard limits that the finite constructs; such as resources, biosphere and population, impose on our activities - what we have defined and coined as Realonomics. Moreover, they fail or ignore the understanding that these man-made ideas are forever diminishing or debasing in value, as the planet’s finite inventory of useful constructs is depleted.  Worse, they may actually believe  that the abstract positive–sum game  they play never ends, despite growing evidence that it is now confronting reality’s non-negotiable negative-sum finite constraints - and possibly in a deadly exponential fashion.

Gold’s comparative real value, moreover, appears to diminish faster than other abstracts and elements; largely because it has much less survival utility than the other more useful elements. Secondly gold, unlike state-issued currencies, has no constitutional or other legal entitlement to possess and own these other elements, through legitimate national governance and all its connected agencies, within its defined and specific geography. So there is no doubt, that when global water, food and energy supplies approach exhaustion; gold’s inutility would grow more comparable to the value of feathers on a fish, in the last analysis.

Market facts also support this view, considering that an ounce of gold, in 1980, would then acquire 24 barrels of oil. Today, gold only buys about 14 barrels, even though both commodities prices are peaking again, as they did in the early 1980s. Do the math - using oil prices as a proxy monetary unit for global purchasing power; this so-called last store of value has lost 41.7% of its purchasing power over the past 33 years. Inferring, therefore, that it is neither a device for creating nor protecting wealth - rather in the real terms described, gold acts in a destructive way; thus looking more synonymous with Snake Oil. (Try this 1980’s calculation with the prices of other items, if you need further proof.)

Moreover, we further observe that gold has also been one of the worst performing assets classes in nominal terms; touching four decades of markets, despite promoters' claims of real or nominal wealth creation or protection. This is also an easy one to comparatively see by using the Dow Jones Average (DJIA). The Dow Index was bouncing near the 1,000 point mark back in 1980; since then the index has appreciated to nearly 15,000, representing a more than 15 fold increase. In nominal terms Gold moved from $850 US to just short of $1,400 today. In real monetary terms, these total Dow points - translated into dollars - now yield 150 barrels of oil or a 400% real increase in purchasing power. That leaves gold's shabby 41.7% comparative decline at the far back of the class. Some investment eh?

With these numbers, one can see why gold is referred to as a "Psychotic-Placebo” with a vast supporting cast of sociopaths. Nor is this the first time this humble observation has been made or recorded. The famous children's classic, “The Wizard of Oz" actually reads as a sophisticated parody that cleverly disguises an economic, social and political discourse, evaluating the virtues of applying the "gold standard"  to the US dollar,- a hot topic of those simpler times. An issue that was finally put to rest, ironically, by an infamous American President, Richard M Nixon in the early 70s - a very tricky Wizard indeed?

Following the golden road of the parody to Oz, and then to the Wizard, we find that they all lead us to invisible qualities of courage, intelligence, compassion  along with other ideas that return us to home (enlightenment? Philosophic insight?) In the end, one may come know that it is neither the visible golden road, nor Oz, nor the Wizard’s gifts (placebos?) that are substantive, but rather there are qualities and objects far outside these symbols and gifts needed to achieve the various desired virtues, goals and wisdoms. Symbols or placebos are, hence, not substantive, but rather act to romance overactive irrational imaginations, thereby clouding the reality of what really provides substance and utility.

Sadly, not much has changed since this wonderful story was written, perhaps because it rightfully belonged in post-graduate economic courses, rather than early literary curriculum's, when economics was solely an adult word used to secure abundant supplies of soda and ice cream. Nowadays, despite the story’s wisdom, this placebo is still promoted and promised to remedy greed and fear; safeguard economic values from the ravages of both inflation and deflation; preserve wealth during depressed or expansionary cycles, and offer a currency alternative and insurance with its magical stored intrinsic value - but doing so, without a claim on or any entitlement whatsoever to the resources and output capacities of any nation. Just name any financial wealth issue and this placebo becomes the one and only economic panacea in creation. Unfortunately, it is actually just a placebo.  On the other hand, markets, as shown by the 1980 comparative value analysis, appear to have appreciated OZ's wisdom, confirming that gold provides little intrinsic value, instead it is a medium that affords believers an outlet to symbolize irrational psychotic values with concrete inutility. 



Here's another way to look at this. Without gold, the global economy would pretty much continue as is - and its value completely unaffected by the non-existence of gold. However, without the global economy - gold's value is localized and dependent upon local relevance. Still, we may fill this void with another object that would satisfy our species apparently deep-rooted psychotic flaw and need. How's about big fumy-looking statues? 

Still, the benefits claimed by gold promoters and their related cast, seems only limited by their disturbed imaginations, regardless of how object analysis reveals its invisible clothing. It is a cloth that evidences little tangible benefits, and whose price is determined by a "collective social psychosis" at any point in time. Consequently, its price can just as easily spike to $5000 or nose-dive to $50 an ounce for no logical and objective reasons.



This is because the irrational emotional basis of the demand side is infinite, while its concrete supply-side is over saturated with a physical inventory that could satisfy production needs for hundreds of years. So pricing extremes are possible, caused by emotions that are not aligned with any deterministic physical considerations. Making its value a highly speculative outcome, without supporting fact-based investment criteria for ANY price, always! (NOTE; not even the marginal cost of production sets a pricing floor because of the large inventory overhang already stored above ground)

For centuries many investors, savers, pensioners and even banks have been duped into the myths surrounding this placebo. Many ordinary working folks parted with hard-earned money to play in a game where stock promoters, professional charlatans, fraudsters and many sordid characters have historically stated their claims (sic) seeking out bigger fools. Bre-Ex and its geologists, founders, promoters and financiers form one recent example of how the sociopathic nature of the industry attracts the wayward and unremorseful. If markets were to fully discount psychotic historic and cognitive origins of gold's so-called intrinsic value; that is celebrated by its bandwagon of sociopathic followers, it would be realized that there would be very little need to again extract  any of this metal from OUR planet for a few hundred years. If EVER!

To summarize, here are some key points:

Individuals and organizations promote gold's imaginary intrinsic value for their own vested economic reasons - not using all the facts or a scientific method, but based more on the barbaric relic’s unsubstantiated psychotic (feel-good) value.

Gold promoters and buyers are considered speculators, who are not governed by classic investors’ criteria and methods as applied by top investors like Warren Buffet. Hints of sociopathic behavior haunt the industry affecting its approach.

Gold investors and other players, subscribe to neo-classical economic theory, thus ignoring how physics and absolute mathematics describes the planet’s finite economic predicament.

Gold’s real purchasing power, using  monetary proxies, diminishes as other resources become scarcer. Do you want to eat or look good? In the end, it should buy very little. And financial and commodity markets show trending evidence of this for the past few decades
.

Among asset classes, over the past 33 years, this placebo’s asset class ranks amoung the worst in nominal terms. In real terms using oil as a monetary proxy, your global purchasing power would be down big time. Include the opportunity costs of being other asset classes in nominal terms and the combined losses are mind-boggling and staggering.

Its market price is subject to wild swings in short time periods, because demand drives from collective, volatile and varied psychotic emotions, while it is arguably the most over supplied commercial element in storage on the planet. Oil prices would fall dramatically if a similar inventory  overhang was stored above ground . The more rational mind-set affecting its demand side explains why.

Gold promises everything, but delivers inutility. When explorers from planet Xenon 24 arrive on our planet, in the far distant future, finding only gold bars buried deeply underground, everywhere, they would surely not be impressed with the last remnants of our society. Who cut down their last tree? What were they possibly thinking?

Sociopaths have been players at the centre of this industry that has little concern or remorse for society. None whatsoever for future generations, whom will have 400 plus years of snake oil on hand, and not much else to live on, as many resources used in its extraction may be exhausted in 50 years or less. Not a good algebra by any means.

In the final analysis, as planetary constraints tighten their grip on the planet’s real physical economy, it would not surprise us to see gold drop below $100 ounce in nominal terms, as more economies struggle to feed, warm, employ and service their growing unrestful masses, around the globe. As mentioned above, markets are hinting and trending towards this wisdom. Leading one to believe, that it is not a just question of if its price will collapse, as resource scarcities take hold, but only a matter of when it will occur as determined by the unfolding end-game of  the planet's physical circumstances. These again are hard non-negotiable constraints

As for Dr Doom and the gang, hopefully, they will be just as forthcoming and transparent about their asset sales, as they have supposedly been about their current ownership positions. 

Oh, just one more thing; perhaps someone could also prepare and leave an explanatory investment note behind for the folks from Planet Xenon 24 to read when they arrive!  For the Record!

First Financial Insights

June 29, 2013

Why don't we trust these people?

CHINA FACES MASSIVE CREDIT CRUNCH

There is a an old sea-faring adage, that to this day, fishermen stake their lives and reputations on: "when the birds begin flying back to shore, it is time to race back to the safest and closest port, with all due haste." Well, not exactly those words.

Wisdom of the sea prevails...

Recently, markets in New York and around the world began to reflect some nervousness about Chinese credit conditions. All we can say, - it's about time! Just a few months back, we asserted our grave concerns about the highly probable "Mother of all Credit Crunches" set to occur in the Chinese Banking System and the ripple effects it would have on the global financial system. While we were not alone in raising this red flag, it behooves us to reprint our original posts (...and toot our horns a bit) with links to supporting articles and analysis. Nothing has come to light that convinces us that our opinions and judgements should change.

We highly recommend you take the time to read these articles, as the near term consequences are vast, deep and disconcerting; particularly when corruption runs amok, setting the stage for what is possibly an ENRON National Economic Collapse. Again, built on ghostly financial tales

So you can see why it is so important to watch the birds. What is it about fish lore?

First Financial Insights

June 27, 2013

Reprinted from Investors'Insights, March 10,2013

Dr Peter G Kinesa : Feeding the Dragon:Why China's Credit System Looks...

Feeding the Dragon: Why China's Credit System Looks Vulnerable click above THE BIG MAMA OF ALL CREDIT CRUNCHES This article refle...

Gotta feeling that when economic and market pullback ultimately occurs, a lot of folks will be caught swimming naked. Key words like transparency, accountability, corruption, excess leverage, and oppression are amoung those words that resonate strongly in our analysis - smoke generally leads to a fire.

At the same time, throwing BIG MAMA off this runaway train is next to impossible. So we believe when it hits the bottom - the collision will be devastating, prolonged and deep. Something will have to change.

First Financial Insights

March 10, 2013

That's Some Credit Crunch Coming

Nouriel Roubini Blog: Gold: Keynes’s ‘Barbarous Relic’: “Gold remains John Maynard Keynes’s ‘barbarous relic,’ with no intrinsic value and used mainly as a hedge against mostly irrational fear and...

Rarely, do we ever agree whole-heartily with leading economists, except when it comes to Gold! There is a common ground existing amoung them, including Keynes, Roubini, Kinesa, Krugman and others, who ALL see no sense in its perceived value nor in its ongoing extraction from the ground - just to store most of it underground again. Does this sound insane? It certainly is.

Some would argue that gold has commercial value that partly legitimizes its mining. Well, our analysis indicates that enough gold is already mined and stored to satisfy commercial needs for the next 400 years. Considering that oil reserves will most likely be depleted within 50 years, thereby changing forever our way of life - this argument mathematically and clearly backfires on its supporters. For is it not utterly foolish to continue mining a mineral and wasting valuable non-renewables for a element with little practical value? Can we not see how analogous this is to cutting down the last tree on Easter Island only to erect one final statue? While answers to these questions are obvious -  not much has changed nor been learnt since that famous last tree was cut so many years ago.

It is also said that an ancient Apache warrior once warned that the white eye would waste all the land and water. How right he may be!

Gold Bugs, however positively assert - this is an element with "intrinsic value". This phrase is a clever and ambiguous linguistic device, but what creates this abstract intrinsic and invisible value? A simple neurological answer is our  imagination. Cognition's formed by the mass and energy particles of the mind that further triggers an arbitrary feel of a good sensation somewhere in the primal inner cortex. Without this electro-chemical reaction and resultant sensations, this element thus has virtually no value or benefits related to the short, near or long-term survival needs of our species. For some reason that old saying comparing Gold's utility to the anatomical parts on a Bull is meaningful here. 

So in the end we hypothesize that as scarce non-resources move towards their inevitable exhaustion, Gold will lose its comparative purchasing power. And, moreover, there is ample evidence to verify this assertion. For instance, in 1979, when Gold peaked at around $1000 ounce it would acquire over 50 barrels of oil. Today, with oil prices hovering near $100 a barrel, an ounce of gold barely acquires 14 barrels. If that surprises you, try this calculation with cost of a hamburger or cup of coffee.

So down the road as arable land, water and other non-renewables are exhausted, gold's value should gravitate to zero. Assuming, of course; that we return to sanity and realize that cutting down the last tree goes beyond absurd. If not, the Apache warrior's prediction is not just going to be right - he will be right!

First Financial Insights

June 26, 2013

Golden whispers sing, touching the land and wind...