Well that's not a politically correct way of thinking (referring to the title of course). We were all told to not judge a book by its cover, not to decide on someone by the impact of first impressions, etc. Well in the financial markets, perception is valuable and the reality is discounted and swept under the proverbial rug. I have wanted to write a post on a certain shiny metal that really has no viable uses other than to outfit the showy with bling and now have a moment so I will. Now I know what you'll say, "but Ramblings, my cuff links / earrings / wedding ring / bracelet / whatever is my most prized and valuable possession". Really? Other than ornamental jewelry, what is a "useful" function of gold. "Well what about the gold plated connections on my $250 Monster HDMI cables? Isn't crystal clear TV reception worthy of gold (because of course I need to see every ripple of fabric on the latest American Idol contestants)" you might say. No gold plated connections are just a marketing gimmick that unfortunately, too many fall for. Gold, what's it good for. Well for one thing it has the perception of being valuable.
The perception of gold as value goes back thousands of years. Perception of value is all gold has going for it. Does it do anything like say, a barrel of oil, a bushel of wheat, a cow/pig/buffalo/horse/rabbit/etc., or an acre of land. No it doesn't. But what it does do, is captivate mens minds with the shiny glint of sunlight off the speck in the river. In an emergency would you rather have a bucket of wheat or a gold ring? Gold can buy the bucket o' wheat, but only as long as golds perception of value holds. This perception of value extends to all kinds of things including small rectangular pieces of paper with a picture of our first President located on the front.
Full Disclosure - I do have a small position in gold limited to what fits around me and my lovely wife's finger.
Friday, June 25, 2010
Monday, June 7, 2010
Sugar. The sweetest things in life are not free.
Sugar. The white crystalline goodness that I no longer put on my cereal in the morning and no longer drink in my Coke. Infectious Greed posted this graph over the weekend.
As you can see, sugar has taken a beating. Since I consider myself leaning toward a contrarion (sp?)/ value "investor" stance, I had to look up the reason(s) for sugars decline. What are they? Well google "investing in sugar" to find a ocean liner full of info. Some say sugar is crashing others say its only a trough between peaks. I think it all depends on China (doesn't everything depend on China now-a-days) and the burgeoning middle class' taste for the sweet stuff. For me, I will keep up with the idea of investing in sugar or a derivative investment vehicle for sugar, since I'm looking for a job and this gives me something to model (excel spreadsheets, not what I look like in sugar). FWIW I would GLADLY pay $0.05 - $0.10 more for my Coke if it had real sugar instead of high fructose corn syrup.
PS - Notice that the USD is beating Gold YTD. Hum very interesting.
Disclosure: At the time and date of this posting I have no positions in sugar.
As you can see, sugar has taken a beating. Since I consider myself leaning toward a contrarion (sp?)/ value "investor" stance, I had to look up the reason(s) for sugars decline. What are they? Well google "investing in sugar" to find a ocean liner full of info. Some say sugar is crashing others say its only a trough between peaks. I think it all depends on China (doesn't everything depend on China now-a-days) and the burgeoning middle class' taste for the sweet stuff. For me, I will keep up with the idea of investing in sugar or a derivative investment vehicle for sugar, since I'm looking for a job and this gives me something to model (excel spreadsheets, not what I look like in sugar). FWIW I would GLADLY pay $0.05 - $0.10 more for my Coke if it had real sugar instead of high fructose corn syrup.
PS - Notice that the USD is beating Gold YTD. Hum very interesting.
Disclosure: At the time and date of this posting I have no positions in sugar.
China Wages Skyrocket
So I blogged about China in a previous post, specifically about their property bubble. According to this article (you can get free access to FT.com), China's wages are increasing. This should help fuel the bubble. One question I will pose; if Chinese wages reach some kind of parity to Mexico/Brazil/??? then what incentive is there to ship goods from China and wait weeks for the container to float across the blue Pacific when the supposed labor rate advantage has disappeared?
Friday, June 4, 2010
Europe oh Europe Where Dist Thou Go Wrong + Linky Goodness
CAUTION (Many parentheses ahead).
So for everyone who thought that the ~$750 Billion bailout of the Euro dominated countries would solve the crisis, well, no it didn't. It kind of reminds me of the beginning of WWI, but without all the killing, when Hungary says its debt is greater than stated and so France's debt goes all illiquid (no one wants to buy the bonds) on us. Here is a great synopsis of what is happening and what could happen.
So Europe goes down in theoretical flames (or maybe real ones. Who knows, just look back at their history.), and Europe is the biggest buyer of China's goods (nope, the good 'ole USA is numero dos) so what happens to China when the ein'st and zwie'st (1st and 2nd in kind of German speak) markets are extremely soft? China already has the biggest property bubble ever seen, not counting the one before or after. It's all the rage to short China and Europe now so cheap opportunities are most likely far gone, but with a little work and luck there are things that can be done.
General links (may not include anything to do with finance)
- MetalJockey is back baby! Now with Zambian goodness.
- We just need to keep counting everyone for full employment. Here and here.
- How to live in a house for free for 1 to 2 years. Here and here. Since I actually have equity in my abode, I would most likely be foreclosed upon quite quickly.
The last set of links is interesting for a number of reasons I won't get into because most likely you didn't click on the links. One interesting reason I will discuss is the fact of what happens to the property taxes or lack there of. Past due taxes are first in line for repayment when a house is sold out of foreclosure, short sell, etc. Local Governments finance the past due taxes by selling the INDIVIDUAL tax lien to a private entity. Usually the bidding starts at an 18% return and goes down (the return, not the price, the price goes up) from there. So lets say that I'm Joe Sixpack who stopped paying my $2,000 month mortgage one year ago. If I didn't spend the money on six packs then I would have $24,000 (ZIRP world, no interest blah, blah, blah). Let's say the bank didn't pay the property taxes due to the lack of me making payments (why lose more money by paying $ out to another entity when you can transfer the risk to them for free). I show up on the courthouse steps with five grand in my pocket and buy my tax lien for a 15% return. WooHoo!!!! I just made 15% (~$750) on five grand using what is technically the banks money (leverage baby) while living rent free in my (ok actually the lenders) house. Now time value of money comes into play here because of the lack of a known time frame from buying the tax lien to the actual foreclosure sell, but really within a ZIRP world does time value of money really matter to a small individual.
So for everyone who thought that the ~$750 Billion bailout of the Euro dominated countries would solve the crisis, well, no it didn't. It kind of reminds me of the beginning of WWI, but without all the killing, when Hungary says its debt is greater than stated and so France's debt goes all illiquid (no one wants to buy the bonds) on us. Here is a great synopsis of what is happening and what could happen.
So Europe goes down in theoretical flames (or maybe real ones. Who knows, just look back at their history.), and Europe is the biggest buyer of China's goods (nope, the good 'ole USA is numero dos) so what happens to China when the ein'st and zwie'st (1st and 2nd in kind of German speak) markets are extremely soft? China already has the biggest property bubble ever seen, not counting the one before or after. It's all the rage to short China and Europe now so cheap opportunities are most likely far gone, but with a little work and luck there are things that can be done.
General links (may not include anything to do with finance)
- MetalJockey is back baby! Now with Zambian goodness.
- We just need to keep counting everyone for full employment. Here and here.
- How to live in a house for free for 1 to 2 years. Here and here. Since I actually have equity in my abode, I would most likely be foreclosed upon quite quickly.
The last set of links is interesting for a number of reasons I won't get into because most likely you didn't click on the links. One interesting reason I will discuss is the fact of what happens to the property taxes or lack there of. Past due taxes are first in line for repayment when a house is sold out of foreclosure, short sell, etc. Local Governments finance the past due taxes by selling the INDIVIDUAL tax lien to a private entity. Usually the bidding starts at an 18% return and goes down (the return, not the price, the price goes up) from there. So lets say that I'm Joe Sixpack who stopped paying my $2,000 month mortgage one year ago. If I didn't spend the money on six packs then I would have $24,000 (ZIRP world, no interest blah, blah, blah). Let's say the bank didn't pay the property taxes due to the lack of me making payments (why lose more money by paying $ out to another entity when you can transfer the risk to them for free). I show up on the courthouse steps with five grand in my pocket and buy my tax lien for a 15% return. WooHoo!!!! I just made 15% (~$750) on five grand using what is technically the banks money (leverage baby) while living rent free in my (ok actually the lenders) house. Now time value of money comes into play here because of the lack of a known time frame from buying the tax lien to the actual foreclosure sell, but really within a ZIRP world does time value of money really matter to a small individual.
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