By Eldon Mast, on July 20th, 2009
The immortal words of Gomer Pyle rang out in financial headline after headline this week, “Surprise, Surprise, Surprise!”
First the banking sector became awash in surprisingly good news. Four of the US top banks smashed all earnings estimates and posted collective net profits of $13.6B for the second quarter.
Bank of America (BAC) posted a profit of $3.2B
Citigroup(C): $4.3B
Goldman Sachs (GS): $3.4B
JP Morgan Chase (JPM): $2.7B
The technology sector followed with Intel’s surprise. It posted its best quarter over quarter sales increase since 1988. Further, the chip leader formally asserted that this current quarter ending in Sept, will be significantly stronger than any analysts had even dreamed of. IBM also added its vote of Q3 confidence later in the week.
And there was more surprisingly good news in the jobs data Thursday. The number of initial claims in the week ending July 11 fell 47,000 to 522,000 – the lowest level since early January. The data for continuing claims also fell by 642,000 — the largest drop on record! This huge downward surprise even pulled the four-week moving average of these continuing unemployment claims down by 110,250.
And then on Friday, the housing market chimed in with surprises of its own. Contractors started building single-family homes at the fastest rate in 4-1/2 years. “The bond market was completely caught off guard by the increase in housing starts,” said Jane Caron, chief economic strategist at Dwight Asset Management in Burlington VT.
And stocks surprised most strategists as well. Just last week many had forecast stocks to continue their recent declines (or at least continue to move sideways). Q2 earnings jitters dominated the news. But as markets closed on Friday, many traders were left scratching their heads as the Dow rocketed to its best weekly gain since March, closing within easy striking distance of the 9000 mark.
But perhaps the mother of all surprises this week came from the bear of all bears, Doctor Doom, Nouriel Roubini. Just last week the ultra depressing economic prognosticator wrote an article “Brown Manure, Not Green Shoots.” But this week in a significant flip, flop, Roubini actually stated, “the worst of the worst is behind us.” (He later of course whined that his words were taken out of context.)
Gomer Pyle frequently exasperated his immediate supervisor Sergeant Carter with the Private’s Pollyanna-style demeanor. With positive economic surprises everywhere, it is no surprise that Roubini feels a bit frustrated as well.
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By G.L.C., on July 17th, 2009
When the concept of law and economics came into existence, behavioral economics was a central point of contact. The Coase theorem is the foundation of law and economics. According to the theorem, the outcome is not affected by allocation of legal rights to one party or another if transaction costs are sufficiently low because when the transaction costs are low, the parties are expected to bargain to the efficient outcome under either legal regime.
The Coase theorem’s claim about the domain within which normative analysis of legal rules – whether one set of rules is preferable to another or the reverse – is actually relevant and central to law and economics.
Daniel Kahneman, Jack L. Knetsch, and Richard H. Thaler came out with a study using Cornell University mugs, and the results were direct contravention of the Coase theorem. They referred to this as the endowment effect – the refusal to give up an entitlement one holds initially even though one would not have been willing to pay to acquire that entitlement had one not held it initially. The endowment effect showed that Coase theorem’s prediction of equivalent outcomes, regardless of the initial entitlement, no longer holds. This plays an important role in drafting of legal rules.
Law and economics tries to assess the desirability of actual and proposed legal rules. For this purpose, the endowment effect is more suited than the Coase theorem. In the presence of endowment effect, the value attached to a legal entitlement varies based on the initial assignment of the entitlement.
Context plays an important role in the occurrence of endowment effect. Prior to the Cornell University mugs study, there were many studies which concluded that the Coase theorem was empirically robust in a set of domains. In all these studies, the value of each possible outcome was directly specified in dollar terms by the researchers. These studies found that if the transaction costs are sufficiently low and people are told specifically what each outcome is worth to them, they will generally find their way to a value-maximizing outcome. The Cornell University mugs study proved that if people are not told about the value of the outcome, the results of the earlier studies would be different.
The study of behavioral law and economics examines human limits to means-end rationality. The endowment effect plays an important role in behavioral law and economics. Other features of behavioral economics also pay an important role. Unbounded rationality, unbounded willpower, and unbounded self-interest are considered to be normal traits of humans. For studying behavioral law and economics, humans must be viewed as departing from traditional economic assumptions in three distinct manners: bounded rationality, bounded willpower, and bounded self-interest. The legal system can be influenced by the results of such studies. Using behavioral law and economics, courts can adjust legal reasoning and conclusions accordingly and legislators can design more effective laws.
By Trace Mayer, on July 17th, 2009
THE FAR EAST
China is a completely different world and the way of doing business there clashes with traditional Western practices. If the West’s great contribution to humanity was the rule of law then the East’s great contribution is bureaucracy. This method for allocating capital does have some advantages but that hardly means it is done morally or efficiently. China is not communist and I saw more entrepreneurship there than in America; particularly since the emergence of the Goldman Sachs Web. As Bill Gates has observed, “It is like capitalism on steroids. It is a little scary.”
STERN HU ARREST
Bloomberg reports that Rio Tinto executive Stern Hu who had a ’sharp focus’ on 2009 iron-ore negotiations was arrested and detained in Shanghai on charges of obtaining classified information or ’state secrets’ about steel mills. Both Australian Foreign Minister Stephen Smith and Australian Prime Minister Kevin Rudd are upset with China’s behavior.
A PRIZE FLOWER
Rio Tinto is a highly desired asset. With a recent announcement of $58B in gross revenue, $10.3B in underlying earnings, a monstrous $20.7B of cash flow from operations, a 50% decline in net income to $3.7B and a $45B market capitalization Rio Tinto is a world leader in finding, mining, and processing mineral resources such as gold, silver, platinum, copper, zinc and aluminum.
Rio Tinto rejected a BHP Billiton offer and a later hostile takeover valuing the company at $147B. Chinalco, a Chinese government owned resource group, purchased 12% of Rio Tinto’s London shares to complicate the hostile takeover. Chinalco currently owns 9% of Rio Tinto.
As Javier Espinoza of Forbes.com observes, Chinalco has a deal pending approval from American, Chinese and Australian regulators where the proposed investment structure involves $12.3 billion for the purchase of ownership interests of Rio Tinto assets in its iron ore, copper, and aluminium operations, plus $7.2 billion for convertible bonds. The transaction would bring Chinalco’s ownership of the company to approximately 18.5%.
Australia is a major exporter of iron ore and China has a voracious appetite. The Chinese are on a hunting trip for natural resources and Rio Tinto is an exceptional trophy asset.
CHINESE CORRUPTION
Like the American bailouts the $586B Chinese stimulus package is ripe pickings for the corrupt. As Chinese business leaders have gotten rich their allegiance to the central government has weakened. Some business leaders have even disobeyed the central government’s orders outright. The central government is most likely attempting to centralize power over key industries. This is similar to how Russia is dealing with their oligarchs.
Back when the United States used to define a dollar they had a low tolerance for corruption regarding financial matters. Under Section 19 of the Coinage Act of 1792 provided, “That if any of the gold or silver coins which shall be struck or coined at the said mint shall be debased or made worse as to the proportion of fine gold or fine silver therein contained, or shall be of less weight or value than the same ought to be pursuant to the directions of this act, through the default or with the connivance of any of the officers or persons who shall be employed at the said mint, for the purpose of profit or gain, or otherwise with a fraudulent intent, and if any of the said officers or persons shall embezzle any of the metals which shall at any time be committed to their charge for the purpose of being coined, or any of the coins which shall be struck or coined at the said mint, every such officer or person who shall commit any or either of the said offences, shall be deemed guilty of felony, and shall suffer death.”
Like the United States used to, China deals harshly with those involved in corruption who are not high enough on the bureaucracy ladder. For example, the New York Times reported that Zheng Xiaoyu, former head of the State Food and Drug Administration in China, admitted to taking bribes to approve untested medicine and he was swiftly executed.
There has been civil unrest in China. Significant unrest is happening opposite of Beijing in Xinjiang. Since 5 July 2009 shopkeepers have been unable to open their shops because the Grand Bazaar has been occupied by paramilitary troops. With 20,000 troops deployed in the area, over 192 people have died and more than 1,400 have been arrested and threatened with the death penalty. On 16 July 2009 most Chinese paramilitary troops withdrew.
THE GOLDMAN SACHS WEB
Goldman Sachs’ deep capture of the government of America, Washington DC and the various regulatory agencies has led to some interesting circumstances. Imagine what would happen to the country of America if current and former Goldman Sachs executives, which received over $10B of government bailout funds yet reported $3.4B in earnings due to generally accepted fair value lying standards and because of their ‘unmatched risk taking and management skills‘, received the same treatment?
It would be most unfortunate for Goldman Sachs’ earnings if some Scout Sniper, like Mark Wahlberg in the highly rated fictional movie The Shooter, felt their patriotism had been abused because they and their combat buddies were expendable resources not for defending freedom but for the benefit of derivative traders and therefore decided to rectify the situation.
CHINESE LEADERSHIP MOTIVATION
The central government’s leadership knows they hold a bunch of worthless FRN$s. They know real assets are what matter. In China over the past 25 years over 300M people have been lifted out of poverty. They know regime change in China happens only one way and therefore they must quell any dissent.
To consolidate political power they are pressuring domestic businessmen, cracking down on ‘corruption’ and requiring greater evidence of allegiance while smashing domestic unrest with a bloodied iron hand. Some of those the central government deems ‘corrupt’ are executed.
As the financial crisis continues and the Chinese continue losing millions of jobs it will be even more difficult for the central government to maintain their power. Therefore, the Chinese are on a hunting trip for real assets so they can maintain and increase the standard of living of the average Chinese which will preserve the current political structure.
CONCLUSION
There has been some bad press to China for kidnapping Stern Hu. It will likely have negligible impact. China is probably still perturbed from the failed Unocal acquisition. Now they are playing corporate hardball and acquiring real assets.
Rio Tinto is only one company of many that the Chinese government wants to own. As one of the leading mineral resource producers it is a prized trophy. China is attempting to assert their power beyond their borders and international companies will take notice. The Chinese central bank acquired over 450 tons of gold and did not report their holdings. The Chinese know how to buy gold and why, to avoid the FRN$ bubble.
On the other hand, Goldman Sachs keeps stealing things, not doing anything productive for society, looting the American people, hijacking the United States federal government, making tons of profits and the victims keep getting angrier. There is one hardball game that will be very interesting to watch: Goldman Sachs v. China.
Disclosure: Long physical gold, silver and platinum with no interest in the problematic GLD or SLV ETFs, Goldman Sachs or Rio Tinto.
By Winton Bates, on July 16th, 2009
The life events I propose to discuss here are things like major improvements or worsening in financial situation, getting married or divorced, having a child, serious personal injury, death of a spouse, being made redundant and change of residence. I will focus on subjective well-being, as measured by surveys which ask people for a numerical rating of their satisfaction with life.
One way to compare the impact of life events on well-being is to calculate what change in income would have an equivalent impact after controlling for other factors. Some readers might recall research findings for the U.S. and Britain which suggested that the increased income equivalent of a lasting marriage is around $100,000 and an increase in income of around $60,000 would be required to compensate for the loss in well-being associated with becoming unemployed. (These numbers come from some pioneering research by David Blanchflower and Andrew Oswald published in 2000.)
There are several problems with the methodology of this early research which tend to overstate the income changes equivalent to life events. First, the methodology is based on estimates of the (small) impact that higher incomes have on current well-being without taking account of the impact of higher incomes on future well-being. Higher incomes enable the wealth accumulation (and the redistributions through tax and welfare systems) that make it possible for people to maintain their well-being during periods when earning potential is diminished (e.g. during retirement) or when they incur heavy costs or heavy costs are incurred on their behalf (e.g. education and medical expenses).
Second, the methodology focused on the impact of being in a particular state (e.g. married or unmarried) rather than on the duration or timing of the effects that life events have on well-being. Life events typically have large impacts on life satisfaction for only a relatively short period.
Third, the methodology was unable to distinguish causation. For example, it was unable to assess whether married people are happier than unmarried people because marriage tends to make people happy or because happy people are more likely to get married.
Research in this area has progressed a great deal in recent years, with the use of ongoing surveys that enable changes in the well-being of the same sample of people to be linked over time to life events. The HILDA survey (Australian data) shows that the events with the greatest positive effect on life satisfaction for both males and females included a major financial improvement in the past three months, having been married in the last three months and birth of a child (less than nine months ago). The events with greatest negative effect on life satisfaction included being detained in jail, a major financial worsening at any time in the last year, a recent separation from a spouse or partner and recent death of a relative or family member.
A recent paper by Paul Frijters, David Johnston and Michael Shields estimates the one-off windfall improvement in finances needed to compensate for various life events (‘Happiness dynamics with quarterly life event data’, DP 3604, IZA, July 2008). The windfall approach seems preferable because a comparison of the effects on current well-being of different life events avoids the conceptual and measurement problems of attempting to compare the effects of life events with the effects of differences in income levels.
The authors obtained the following estimates of compensating windfall financial gains for various life events:
Death of spouse/ child: + $178, 300
Serious personal injury or illness: + $ 59,200
Change of residence: – $ 53,000
Birth or adoption of child: – $ 18,300
Marriage – $ 16,500
Separation from spouse or partner: +$ 14,900
Fired or made redundant: + $ 6,900
Victim of property crime: +$ 2,700
(Currency: Australian dollars; $A1 = about $US 0.80. Assumed discount rate = 5% ) .
I should note that these compensating windfall estimates are additive. For example, a person who is fired might become separated from his or her spouse and experience a major financial worsening at the same time.
It seems to me that the magnitude of these estimated compensating windfalls generally make a lot more sense than do the much larger estimates of income-equivalents of life events. Nevertheless, I feel uneasy about the idea that the life satisfaction of people who suffer the death of a spouse or child would be unaffected, on average, if they received a windfall gain of around $A 178,300 at the same time. Can any amount of monetary compensation actually be sufficient to enable life satisfaction to remain unaffected while a person is mourning the loss of a loved one?
By Bron Suchecki, on July 16th, 2009
Many commentators like to draw parallels between the run up in the gold price in 1980 and now, or to look for matching patterns. A perfect example of this is a chart by www.zealllc.com where he overlays 1971-1981 over 2001-2009, but I can’t find the link at the moment.
When reading Martin Armstrong’s Practical “Laws” of Global Economics (26 Nov 2008) this bit got me thinking about drawing parallels:
Before fax machines, the analysis I produced was delivered by Western Union via telex and in the early 1980s, sending just one telex on one market cost $50 to the middle east. Every day, each market was covered in the financial group including precious metals, stock indexes, and all major currencies. The cost to take all the subscriptions could exceed $200,000 just in telex fees that adjusted for inflation in 2006 dollars would be $1.6 – $2 million. So the audience just happened to be the major institutions and government around the world.
Compare the slowness, and limited distribution, of information at that time to what the Internet now provides us with. As a result I can see no validity in trying to deduce what will happen to the gold price by analysing movements from the 1970s, apart from generalisations. Information flow and feedback are hyper accelerated. So will be the rush to gold if (when) confidence in fiat is lost.
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By Eldon Mast, on July 15th, 2009
Even though recovery has begun many job seekers continue to be effected by the recession just past. Many are beginning or in the midst of their search for new careers. I’ve written about recession proof jobs, careers and industries before, but here is yet another look.
- Jobs that Protect Life and Property – Jobs like firefighters, paramedics, police officers, 9-1-1 dispatchers, and other security staff are always in demand. In state and local budgets, these personnel are likely the last to be cut in the case of staff reductions.
- Health Services – Nurses, doctors, psychologists and psychotherapists are always in high demand. Additional caregivers and medical assistants, particularly home health assistants are growing in demand.
- Legal Jobs – The legal services sector seems to always be strong. Lawyers and paralegals in the claims and compensation sectors, or those dealing with bankruptcies, and contractual disputes usually see more work during recessions.
- Repair Techs – Skilled service techs like plumbers, electricians and auto mechanics typically do not lose their jobs during recessions. When new houses are not being built or new cars not bought, emergency home and auto repairs become vital. As homes and cars age they need to be servicing with greater incidence.
- Personal Care Professionals – Barbers, hair stylists, and cosmetologists typically are not effected during economic down drafts.
- Energy Jobs – The real boost in these jobs will come from federal and state government commitments to a more efficient energy systems. Power plant operators with vocational training, insulation works with secondary education and electrical power-line installers and repairers are likely to have jobs as energy demands continue to increase.
- Green Jobs – With nationwide push to make homes and office buildings more energy-efficient and the drive to develop alternative energy sources (solar, wind, nuclear) as well as fuel cell technology, any job involved with wind power, either the design or related products, will likely be recession proof. Environmental scientists, environmental engineers and hydrologists are all great choices.
- Sales and Marketing – Businesses need to market more aggressively in hard times. Skilled marketing and salespeople working on commission pay basis always keep their jobs even during the recession days.
- Education – The need for trained educators and their support personnel are frequently highly sought after even during economic dips. A review of the professions listed above yields the need for training in these recession proof occupations. As job seekers look to transition to other careers, demand for teaching professionals increases dramatically.
For more specifics on 150 careers, their average salaries, and the growth potential of each, have a look at the Time article titled, “The 150 Best Recession-Proof Jobs Overall” or the excellent book, “150 Best Recession-Proof Jobs.”
You may also remember that these 28 national firms are offering over 50,000 jobs. And these firms say, “No Layoffs – Ever!“
By David Barr, on July 15th, 2009
I am something of a technophobe. When some new technology is hyped as the latest greatest thing, nine times out of ten I am unimpressed.
1. Cell Phone Features: I want to be able to do three things with my phone; talk, text and store numbers. Beyond that I value battery life over every other damn thing that can be put on my phone. I don’t need to check email, take photos, look up restaurant reviews or play scrabble 24 hours a day. The best phone I have ever had was the first one I got for free with service in high school .
2. Kindle: I like reading books. Removed from electronic connections it allows the reader to spend hours immersed in the authors world experiencing the content as the author envisioned it. When reading from electronic content people want to customize the view, follow links, look up unfamiliar concepts etc. I just feel no desire to fold books into the broader spectrum of electronic media.
3. Twitter: Seriously, I don’t get it. Has anything so useless ever been so hyped. Have any of the throngs of reporters breathlessly declaring twitter the second coming of language ever actually read a twitter. We all have a stream of random thoughts running through our heads, but until now no one expected everyone they have ever met to care.
By Eldon Mast, on July 15th, 2009
Many economists have claimed that as recovery begins in the current economic cycle that the rebound will be lifeless.
However several economists and indices argue that many times deeper than average recessions are followed by a significant economic rebounds.
As this current earnings seasons begins, Intel agrees. On Tuesday the technology leader boosted its formal guidance for revenue in this quarter by $1B beyond consensus estimates. The strong third quarter prediction follows a 12 percent jump in second-quarter sales from Q1 results. It was Intel’s largest quarterly sequential increase in sales since 1988.
“It was a superb quarter for them.” said Patrick Wang, a New York-based analyst at Wedbush Morgan Securities. “Intel’s results reflect the stabilizing environment.”
Intel’s stock was up significantly in after hours trading. US stock futures also jumped late Tuesday and trading in Asian markets rallied strongly early Wednesday morning.
With initial unemployment claims at their lowest level since January, investors positioning capital for commercial real estate buys, and firms like Alcoa and Intel shattering earnings and revenue estimates, it appears that this recovery could be anything but lusterless.
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By Trace Mayer, on July 14th, 2009
Gold is the primary tangible monetary asset because of the large above ground stockpiles. It is primarily produced to be hoarded not consumed. The other quasi-monetary commodities are silver, platinum, palladium and copper. The role of the precious metals will be markedly different in the Information Age than during the Industrial Age.
WHAT IS PLATINUM
Platinum is a silvery-white metallic element with the symbol PT. Platinum does not have a vast history like gold or silver. A reason may be because its melting point is 1,768.3?°C or 3,214.9?°F compared to gold’s 1,064.18?°C or 1,947.52?°F; or silver’s 961.78?°C or 1,763.2?°F. If you thought silver or gold was hard to smelt then platinum must really surprise you. Think of how much energy it must take to convert platinum ore into a salable bar or coin.
As Mary Elvira Weeks observes in Discovery Of The Elements, the first European reference to platinum appears in 1557 in the writings of the Italian humanist Julius Caesar Scaliger who described the unknown noble metal found between Darién and Mexico as one “which no fire nor any Spanish artifice has yet been able to liquefy.” Even the name platinum has Spanish roots being derived from an expression for silver; la plata
PLATINUM USES
Platinum has many industrial applications. The bulk of production is used for catalytic converters in the automotive industry. Ironically, usually the greener the car the more platinum it takes for the emissions control.
According to the USGS 2006 Minerals Yearbook of the 239 tonnes of platinum sold in 2006, 130 tonnes were used for automobile emissions control devices, 49 tonnes were used for jewelry, 13.3 tonnes were used in electronics, and 11.2 tonnes were used by the chemical industry as a catalyst. The remaining 35.5 tonnes produced were used in various other minor applications, such as electrodes, anticancer drugs, oxygen sensors, spark plugs and turbine engines
PLATINUM PRODUCTION
In 2006 South Africa accounted for 77% of world platinum production with about 170 metric tons. South Africa appears to be muddling through their power shortages. Thus total annual world production is about 7 million ounces or a mere 10% of the world’s annual gold production of 76 million ounces. Seven million platinum ounces at the current spot price is about $7.8B.
So let me get this right. The total above ground gold stockpiles are about 160,000 tons and increasing at approximately 2,400 tons per year. There are no significant above-ground platinum stockpiles like gold or silver and annual production is a mere 220 tons or so and valued at about $7.5B. On the other hand, over the past year the Adjusted Monetary Base for FRN$ has increased from about $800B to over $1.6T in approximately 8 months.
PLATINUM VALUATION
Like silver and despite reduced production from the electricity problems this extremely rare precious metal appears to be fairly cheap.
 The reason is likely on the demand side. Automotive sales have fallen off a cliff. The general economic slowdown is reducing demand for this precious industrial metal. Nevertheless, Obama’s ‘green economy’ will likely require significant amounts of physical platinum bullion to be consumed.
Platinum producers are extremely rare. There is Angloplat (AMSJ.J) which produced 2.5M ounces in 2007, Impala Platinum (IMPJ.J) which produced 1.9M ounces for year ending 30 June 2008, Lonmin and Norilsk Nickel (GMKN.MM). Stillwater Mining Company (SMC) is the only one domestic United States platinum producer and they are majority owned by the Russian Norilsk. With commodity producers there tends to be a leveraged effect on earnings relative to the commodity price. Consequently, a significant rise in platinum without hedging will tend to exponentially affect their bottom line either positively or negatively.
For those ahead of the curve who see platinum’s role changing in the Information Age there is likely significant value to be made. While most people will likely still be wondering how to buy gold or silver you may already be using platinum in ordinary daily transactions.
PLATINUM IS MONEY
In November 1983 the Isle of Man was the first nation to mint a legal tender platinum coin, the Nobel. They were followed by Australia’s platinum Koala, Canada’s platinum Maple Leaf, China’s platinum Panda, the British Royal Mint’s platinum Britannia and Russia, who was the first to mint platinum coins in the 19th century, have since made the Russian Ballet series . Under 31 U.S.C. § 5112 (k):
The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.
In 1997 the United States the $100 Platinum American Eagle which, according to the United States Mint, may be included in IRAs. But generally the premiums for these platinum coins does not make them very attractive investments. Their legal tender status throws even more confusion into the mix of answering the question: What is a Dollar?
From a monetary science analysis the same assertions and logic used to define gold as money are applicable to silver or platinum. Consequently, like gold, at all times and in all circumstances platinum remains money.
PAPER PLATINUM LIQUIDITY INCREASES
It appears that the same paper problem which plauge gold and silver likewise affects platinum although not to the same degree. Platinum has been steadily increasing for decades. Bob H Takai, Deputy General Manager of the Commodity Business Department for Sumitomo Corporation remarked:
Next, let’s look at the platinum market which is the most successful contract in the history of Japanese futures industry (the TOCOM). In 1985 when the contract was launched, the annual trade volume was a mere 430 mt, which had skyrocketed to 9,240 mt, more than a 20-gold, by 1998 …. Daily trade volume was 30 mt [Note: About 1.1M ounces or $1.2B], which compares with annual import figure of 50 mt.
The Swiss have launched a platinum ETF, which I have not thoroughly researched to determine if it has the same structural deficiencies as the GLD ETF, and both its holdings and volume have been increasing at healthy rates.
PLATINUM USED AS MONEY
In the Information Age digital commodity currencies, like GoldMoney, allow any metal to be turned into a digital commodity currency and easily used in ordinary daily transactions. Want to make payments with gold, silver or platinum for a can of soda, automobile, aircraft or anything else? There is an app for that on the Apple iPhone.
The process completely removes payment risk from cash balances and counter-party risk because the metals are held in bailment instead of on depsoit with a fractional reserve institution. While they currently only have about 12,000 users with over $630M in precious metals; 10 July 2009 the platinum feature was released and that is 12,000 more people who can easily use platinum in ordinary daily transactions. This monetary evolution is a prime example why the barbarous relic called the Federal Reserve should be razed.
The premier digital commodity currency, GoldMoney, now allows platinum to be easily used in ordinary daily transactions and as a cash balance. Their puny 12,000 user-base could purchase the entire annual platinum production with $625,000 each which would put them above the FDIC’s $250,000 limit.
CONCLUSION
During The Great Credit Contraction capital will seek safety and liquidity. Platinum, a tangible asset, is incredibly safe and has now gotten more liquid. There is a miniscule amount of platinum compared to the illusions in the liquidity pyramid.
For example, the annual worldwide platinum production is valued at about $7.8B compared to the FDIC’s $13B of reserves to cover $4,831B of insured deposits. In other words, current FDIC insured deposits are greater than 62,000% more than annual worldwide platinum production and about equal to the total above ground stockpiles of physical gold bullion.
Like silver, platinum currently appears to be fairly undervalued and will likely return to its 2:1 ratio with gold. Much of this demand will likely come from investors and holders of capital seeking safety for their cash balances. A mere 0.16% of FDIC insured deposits would purchase the entire annual worldwide platinum production. Because of the generally accepted fair value lying standards anyone who thinks their cash is safe in an FDIC bank needs a mind transplant.
If anyone purchases some platinum and wants to use it in an ordinary daily transaction then contact me. My assistant just returned with some printed copies of The Great Credit Contraction I can sign; so we can work out a deal that may include a discount because of lower costs.
Like freedom must bubble up from the people; so likewise must a commodity currency standard. This is an example of how that happens. Imagine what the financial landscape will look like when stocks, real estate and other major transactions are settled and extinguished primarily using commodity currencies.
Platinum looks like a terrific deal if only because there is so many illusions and it is the hardest and rarest of the precious metals. Why not move at least 1-5% or more of one’s cash balances into this alternate currency? Platinum can never become worthless. I think being able to purchase this rare precious metal without obdurate coin or bar premiums has resulted in myself being bit by the platinum bug.
Disclosure: Long physical gold, silver and platinum with no interest the problematic GLD or SLV ETFs, the Swiss platinum ETF or in the Angloplat, Impala Platinum (IMPJ.J), Lonmin and Norilsk Nickel (GMKN.MM) or Stillwater Mining Company (SMC).
By Ajay Shah, on July 14th, 2009
In order to make progress on doing macroeconomics in India, one weak link has been business cycle measurement. This, in turn, requires access to a wide range of seasonally adjusted time-series. In most countries, the infrastructure of seasonally adjusted data is produced by the statistical system, but in India this has not come about.
Seasonally adjusted series are particularly important in tracking current developments in the economy. The familiar year-on-year change is the moving average of the latest twelve monthly changes. In order to know what is happening in the economy, it is better to look at recent months, rather than looking back 12 months. The familiar y-o-y changes are a sluggish indicator of what is happening. Month-on-month changes are more informative: but this requires seasonal adjustment.
We have initiated some computation and release at cycle.in
At present, we have a dataset with seasonally adjusted levels for a few time-series. We will be updating this every Monday. At the above URL, you get a sense of what is happening with month-on-month changes of seasonally adjusted data in these series.
In the spirit of creating public goods, we make it easy for you to embed these graphs into your work products. We also have a .csv file with data for levels which can be the foundation of further work.
This will be useful in tracking current developments in the economy, and also make possible research in macroeconomics, which critically requires seasonally adjusted data.
We hope this is useful.
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