obamunism

[fredfl]

I don't know about you all but I'm getting out of anything related to the us dollar our illustrious leader and cohorts are determined to destroy the value of our currency. Our current debt in this country is 300% of gdp and the way to fix is guess what more debt! This is absurd. If you want to get a glimpse of the future take the "crash course" offered by Chris Martenson on line it's free. Long gold,fxa,wip

[gump]

Only problem with these extreme "all in" strategies is that if you are wrong, you're screwed. I would never go over 5% gold or commodity related investments as part of a portfolio.

[idris]

For what it is worth, I have noticed that the price of gold USD and the exchange rate USD/ AUD fluctuates over months, yet the price of gold AUD sits between 1210 & 1220. [ AUD = Australian Dollar] ???

[gwhilikerz]

Just curious about how gold works? Can you buy a loaf of bread with gold at the store?

[fredfl]

Gold is a store of value unlike fiat currency(backed by nothing) Back in the early 1900's you could buy a loaf of bread for $.05 now it costs $2.00 had you saved your currency from 1900 it would be virtually worthless. Gold in 1900 was $17.00 an ounce now its $940.00 which one would you rather have? The reason for investing in the Australian dollar is that their debt/gdp is 15% while we are approaching 70% plus their currency currently pays 6% ours is 0%. The Gov't has announced that they are determined to debase our currency (quantitative easing) which really means printing money I'm believing they will accomplish their goal. Here's a quiz for you find one fiat currency that has not eventually reverted to its intrinsic value (0) throughout history i.e not worth a continental.

[gwhilikerz]

Still didn't come thru clearly in my head. Are you talking about buying and keeping gold coins or investing in gold with someone else holding the physical gold and you holding a claim on it?

[fredfl]

Personally I own gold stocks, specifically auy and gdx but depending upon one's personal situation owning the metal or for that matter silver if you can't afford a decent size gold position will work. The reason I don't own the metal is because they charge too much of a premium over the spot price and you achieve more leverage with the miners. But remember leverage works in both directions. I also own slv which is an exchange traded fund backed by silver, there is also an etf for gold (gld is the symbol) hope this is helpful.
p.s. There is also a company that allows you to buy gold and silver and use it to pay your debts it is goldmoney.com. I've looked at them some but have not invested yet. If a US company started something like this I would be very likely to invest. As I said in the first post if you take the crash course (its free on the web) you can gain a tremendous amount of understanding on investing and money creation etc. Good Luck

[Michael32170]

The Gov't has announced that they are determined to debase our currency ......
They have actually announced this? Tell me where to find this.

[fredfl]

Do a search for quantative easing and read the federal reserve directive by Bernanke. The term quantitative easing means printing money. The Fed announced that they were going to buy medium term treasuries I believe it was up to 5 year maturity. Again I would reccommend taking the crash course if you are interested in learning about money creation debt etc Chris Martensen does a very good job explaining a complex subject.

[Michael32170]

The term quantitative easing describes an extreme form of monetary policy used to stimulate an economy where interest rates are either at, or close to, zero. Normally, a central bank stimulates the economy indirectly by lowering interest rates but when it cannot lower them any further it can attempt to seed the financial system with new money through quantitative easing.

In practical terms, the central bank purchases financial assets, including treasuries and corporate bonds, from financial institutions (such as banks) using money it has created ex nihilo (out of nothing). This process is called open market operations. The creation of this new money is supposed to seed the increase in the overall money supply through deposit multiplication by encouraging lending by these institutions and reducing the cost of borrowing, thereby stimulating the economy.[1] However, there is a risk that banks will still refuse to lend despite the increase in their deposits, and in a worst case scenario, possibly lead to hyperinflation.[1]

Quantitative easing is sometimes incorrectly described as 'printing money', as the central bank creates the new money electronically by increasing the credit in its own bank account.[2]

Examples of economies where this policy has been attempted include Japan during the early 2000s, and the US and UK during the ongoing global financial crisis.

[Michael32170]

Art (http://www.bloomberg.com/apps/news?pid=20601103&sid=acUVeF0.Sm68)
Oct. 23 (Bloomberg) -- Federal Reserve officials are likely to bring interest rates down so aggressively over the next few months that they will have to search for fresh tactics to continue easing credit.

The Fed's Open Market Committee will probably reduce the benchmark federal funds rate by half a point next week to 1 percent, the lowest since May 2004, according to futures trading. The official rate has never been lower since the Fed made it an explicit target in the late 1980s.

Further cuts below 1 percent could turn Fed Chairman Ben S. Bernanke's focus away from the main rate and toward more use of alternative tools. Those might include increasing its holdings of mortgage bonds to lower costs for homebuyers and purchasing securities directly from the Treasury in order to pump more cash into the economy, Fed watchers said.

``If there is need for more stimulus, the Fed will buy up government debt'' to keep borrowing costs low, said Adam Posen, deputy director at the Peterson Institute for International Economics and a co-author with Bernanke. That's tantamount to ``turning government debt, as it is issued, into money.''

Bernanke, 54, has already thrown the central bank's balance sheet into action in unprecedented ways. Working with the New York Fed, the Board of Governors has rolled out 11 new programs aimed at absorbing risk or making dollars available when banks don't want to loan.

Assets Doubled

The result: The central bank's assets, which include a loan to insurer American International Group Inc. and a pool of investments once held by Bear Stearns Cos., more than doubled to $1.772 trillion last week from a year-earlier total of $873 billion that comprised mostly Treasuries. The latest weekly figures are scheduled for release at 4:30 p.m. in Washington.

There's more to come. The Fed announced this week a backstop for money-market mutual funds to which it will commit another $540 billion. A commercial-paper program approved Oct. 7 could buy up to $1.8 trillion of securities.

``The net effect of these facilities has been a truly staggering pace of growth in the Fed's balance sheet,'' said Jan Hatzius, chief U.S. economist for Goldman Sachs Group Inc.

When the Bank of Japan fought deflation and a banking collapse earlier this decade, its balance sheet ballooned to more than 30 percent of gross domestic product as it pumped money into the economy, Hatzius said. He predicted ``further rapid growth'' in the Fed's, which is now equal to 12 percent of U.S. GDP.

`Helicopter Ben'

As a Fed governor, Bernanke did research on alternative policy tools between 2002 and 2004, when U.S. central bankers last cut the benchmark rate to 1 percent. Traders nicknamed him ``Helicopter Ben'' after a 2002 speech that referenced Milton Friedman's comments comparing such unorthodox methods to dropping money from a helicopter.

Vincent Reinhart, the Fed's director of monetary affairs at that time, said Bernanke's policy activism, which contrasts with his predecessor Alan Greenspan's almost exclusive use of the federal funds rate, derives from the chairman's research on policy errors in the Great Depression and during Japan's rolling recessions of the 1990s.

``He saw what we viewed as an obvious policy failure and it was in the ability of human reason'' to fix it, said Reinhart, now a scholar at the American Enterprise Institute.

`Quantitative Easing'

The Bank of Japan, struggling against deflation, slow growth and consumers' reluctance to spend, brought its policy rate close to zero before turning in 2001 to a so-called quantitative easing strategy of increasing money in accounts held for commercial banks. The policy lasted for five years, before the central bank began to draw down reserves and raised its benchmark rate to 0.5 percent, where it has been since February 2007.

The Fed has flooded the economy with so much cash that excess reserve balances at banks, or cash surpluses beyond what banks are required to hold against deposits, soared to $136 billion for the two-week period ending Oct. 8 compared with an average of $1.4 billion in the same month last year.

``The Federal Reserve has already entered a regime of quantitative easing,'' said Brian Sack, vice president at Macroeconomic Advisers LLC who also worked with Bernanke as an economist in the Monetary Affairs Division.

As their liquidity programs dump excess funds into the banking system, it's become more difficult for the Fed to keep the rate at which banks lend overnight to each other in line with policy makers' 1.5 percent target.

Below Fed Target

In an effort to put a floor under the overnight rate, the central bank started paying interest on the reserves banks deposit with it. That hasn't stopped the so-called effective federal funds rate from falling below the target every day since officials lowered their benchmark by half a point in an emergency move on Oct. 8.

In the two weeks since then, evidence of a deteriorating economy has mounted and will likely push Fed officials toward a further rate cut when they meet Oct. 28-29, economists said.

Industrial production in the U.S. fell in September by the most in almost 34 years, and retail sales dropped by the most in three years. Inflation pressures are easing as oil prices fall to a 16-month low, and nine months of job losses eliminates any pressure from wage increases.

Whether the target rate ends up below 1 percent depends on how fast consumers and businesses gain more access to low-cost credit. Economists at HSBC Holdings Inc. said the Fed would like to avoid cutting to zero. Still, if the economy doesn't improve, it ``could be at zero'' by the middle of next year, said HSBC economist Ian Morris.

``There is this understanding at the Fed that the worst thing you can do is save your ammunition,'' said Ethan Harris, economist at Barclays Capital Inc. ``You move fast -- that is the whole lesson of past crises in Japan and during the Great Depression.''

To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net

[fredfl]

The country is saturated with debt 300% of gdp so the obvious answer is more debt ???

[fredfl]

Sold fxa today noticed that it tracks the S&P 500 too closely bought more auy. Saw an interesting quote in the paper today "If borrowing and printing money is the road to prosperity the Weimer Republic would have ruled the world". Will be looking at agricultural plays next week you can't print more wheat corn etc. ;D

[Michael32170]

Currency ETFs (http://etf.stock-encyclopedia.com/category/currency-etfs.html)

[oeb]

What percentage of small cap oil stocks (e.g.; WRES, PLLL) do you think it would be desirable or even safe to hold near term in one's modest portfolio?

[fredfl]

I like any commodity type stocks in this environment but I would not own too many US companies as the possibility exists that as soon as they start to show a profit Washington will pass a windfall profits tax or some other tax to confiscate their profits. I like the Canadian producers as there might be a gain on the currency along with protection from US confiscatory taxes. I own pwe and like su as well. Some of the foreign majors pay a nice dividend as well.

[fredfl]

Auy price when reccomended 5/20=$10.00 close today $11.77. Congrats to any who bought.

[oeb]

Looking up north then, and in view of future supply/price projections, what advice is offered in re a long position in BQI? Also, will all the hype about BAK (albeit a US outfit) prove to be even partly for real?

[fredfl]

BQI is obviously a start up company with no earnings but with a book value higher than the current price it could be a good speculative bet. The concerns I have with oil sands plays are that they are very capital intensive and take many years to get off the ground how patient are you? BAk is a Brazilian co. with growing earnings I like Brazil and believe they will be one of the leaders in the post crash environment especially with their newfound oil discoveries. Good luck

[fredfl]

I sold 2/3 of my AUY position friday am at 11.74 but am hoping to buy it back early next week but the way it finished strong in the p.m. might mean another gap up opening come monday. I think most people wanted to be long gold going into the weekend. If any negative developements occur in Korea or if (God help us) comrade Obama decides to bail out California then gold will be off to the moon again. If you see the Gov't announce a bailout of Cal. the bondholders will go ballistic and destroy the dollar and treasury rates will explode. TBT would be the play. The fiscal insanity of the current leadership knows no bounds. By the way I need to correct a previous quote that our debt to GDP was 300% it really is 350% and climbing. It is estimated that the current debt load of each American citizen is between 300-500 thousand dollars (includes unfunded ss and medicare) do I hear someone say time for socialized medicine!

[oeb]

Ah! BAK is Brazilian. I like it now, indeed (but I'm wondering about my chief advisor, the oldest brother, for mislocating it). I'm thinking very long with BQI as part of a trust set up. I very much appreciate your reply.

[fredfl]

Your brother might have assumed because it is listed on a US exchange it is US it most likely is an ADR (American Depositary Receipt) which is the venue most used by foreign companies who want to list on US exchanges. This means that they are subject to US accounting standards which is not a bad thing.

[fredfl]

Had this funny thought (can't help myself). If the insolvent federal gov't bails out the insolvent California gov't who bails out the insolvent California municipalities ..... ;D

[oeb]

We would-- with reals, perhaps... hahaha! Hmmm, how could one "move" AU coin into Brazil.

[gump]

Fred -

I assume you are including the pending or future obligations our social programs owe in your debt/GDP calc right?

[fredfl]

Yes I was including unfunded ss and medicare obligations sorry it took so long to respond been on vac last 3 weeks. Looking at agricultural plays this week, food stocks are at all time lows any disruption in supply drought, flood etc could really cause large price increases. Corn,wheat stocks are at 30 year lows. Bought some dba today and will be looking at moo, pagg, rji ,mon. This problem is getting very little press at the moment may be good time to invest.