Austrian Investing

Video- Roubini and Patrick Chovanec on China

2012-02-12T04:08:00.000-08:00

The important part: "They need a growth rate of 8% plus in order to keep social stability".

We know this. This means that in order to keep this thing going, they don't need to just beat the US. They need to beat their population down by keeping them happy with the growth. A 5% unemployment rate in China means millions of people on the street with no social programs and a government that supposedly does take care of them. The system will need to shift and it won't be pretty.

But don't listen to the parts on 'fiscal stimulus is needed'. They need to let their economy correct and move away from the communist model. But knowing that the powers do not want this to happen, they will pump money and do something very similar to what they prescribe.

VIDEO- Micheal Pento on Inflation, Gold, and the Dollar

2012-02-11T08:30:00.000-08:00

He used to be #2 to Schiff but now he's on his own. Smart guy though and it's a great video

Fed thinking of buying Mortgage bonds

2012-02-10T13:25:00.000-08:00

http://news.yahoo.com/fed-may-buy-more-mortgage-bonds-williams-162801658.html

This article could be titled- Fed bails out Fannie and Freddie (again).
"The Fed is increasingly pinpointing housing as the key to the nation's recovery, and Williams is the second regional Fed president in a week to make the case that any more monetary policy accommodation should come through the purchase of more mortgage-backed securities."

This is another bad idea. I think housing has gone down quite a bit and barring a freddie or fannie collapse, it should keep pace with inflation from here in many areas. This policy however is mainly to bail out the banks and institutions that are stuck with worthless derivatives. I think we're getting back to the point where people will buy the houses, but they sure as hell won't buy a security claiming title to a bunch of houses. This is the free market telling the bankers that MBS were a horrible idea.

Either way, more money will flow into the economy through the banks, which will continue to lead to high overseas inflation and a slowly weakening dollar as people try to shift out of it.

Marc Faber--Picks for 2012

2012-02-10T09:04:00.000-08:00

" People say large-capitalization stocks are inexpensive, and I agree. I would buy a basket of high-quality big-caps in Europe and the U.S. You can by Total [TOT], in France, which yields more than 5%, and Nestlé [NESN.Switzerland] andNovartis [NVS] and Pfizer [PFE]. These stocks don't have huge downside risk. Because emerging markets saw big declines last year, you could also buy SATS [SATS.Singapore], in Singapore, which provides catering services to the airline industry and ports. It yields 5% and trades for 13 times earnings. I also like K-REIT Asia Management [KREIT.Singapore], a real-estate investment trust that yields 7%. The stock has fallen by about 50% and the dividend might be cut. But even if it is cut to 4%, this is an OK investment. These stocks won't go up right away, but reinvesting dividends will yield an adequate return over time. StarHub [STH.Singapore], the mobile-phone company, yields 6.9% and the P/E is 14." --from Barron's

Currency Devaluation and the Euro

2012-02-10T05:42:00.001-08:00

http://mises.org/daily/5904/Will-Currency-Devaluation-Fix-the-Eurozone

An excellent Mises article debunking Roubini's idea that Europe needs to devalue their currency in order to grow out of the problem.
To me this is similar to the lemonade stand example. Imagine you sell 100 cups for 1 dollar each. You want more business so you start selling 200 cups at 50 cents each. Now all of the Keynesians would see all of your hard work (low unemployment) and say that we are much better off. In reality, the only people who win are the buyers (foreigners who buy our goods) for half the price. We have to work twice as hard and waste even more of our resources for the same amount of money. Even if we had a small increase in money, the real beneficiaries of the devaluation are the buyers, not the seller.

On the drop in the labor force

2012-02-09T13:23:00.000-08:00

http://www.zerohedge.com/news/guest-post-bringing-not-labor-force-mystery-light

"According to the Census Bureau, the civilian population [age 16 and over] grew by 1.5 million people in 2011. But the growth wasn't distributed evenly. Most of the growth came among people 55 and older and, to a lesser degree, by people 16-24 years old. Both groups are less likely to work than people in their mid-20s to early 50s. So the share of the population that's working is actually lower than previously believed. Taking that into account, the employment-population ratio went up. The unemployment rate wasn't affected."

It's ridiculous that we just switch the metric like that. The whole point of the number is that it is supposed to be consistent. We all know that the true number is now closer to 16%, but at least before, the BLS number represented a metric to show at least a muted version of how it was moving. Now we can't really look to the number to anything more than a confidence barometer used to appease the masses.

VIDEO-China: Hard, Long, or Soft Landing - Chanos, Pettis, O'Neill

2012-02-09T05:41:00.000-08:00

Great Video. I agree with Chanos (despite his left lean), but think that everyone has great points. It will be a long landing and China's government may be able to postpone it for a while.

VIDEO-Marc Faber - Stansberry Radio

2012-02-08T13:23:00.000-08:00

It's a long interview with Marc. He goes over just about everything.

Euro is oversold in near term. And a rebound may occur (I definitely agree). But he feels that both the US dollar and Euro are bad investments.

The investment gets more personal as the time goes on, and he goes over his favorite books and places to visit.

He leaves at 40 minutes when his phone rings. So you can stop there.

Iran to halt oil exports to EU

2012-02-08T05:42:00.000-08:00

http://www.youtube.com/watch?v=WchRCWdJ1G4

The video is just a news story if you haven't heard all of the details. The issue is that 18% of Iran's oil exports go to the EU. They are now stopping those exports since as they claim "we have other buyers".
If you don't remember, we sanctioned Iraq since Gulf War I for 10 years in order to soften it for an attack. When you impoverish the people, they are much more susceptible to an occupation at some point in the future. This is the exact same strategy and the people of Iran know it. The leaders of the western world want the exact same outcome as Iraq and Afghanistan, an occupation with a propped up leader.

This should help oil prices though and it will hurt Europe (mainly southern Europe) as oil prices there will go up. It will take a month or two for these cut offs to really affect the supply, but I wouldn't be surprised if oil started rallying very soon.

VIDEO- Ron Paul on the CFPB

2012-02-08T05:13:00.000-08:00

Having the government protect you is like letting a pedophile babysit your kids.

VIDEO-Jim Rogers on RT

2012-02-07T12:02:00.000-08:00

It's a long video, but you can skip the first 4 minutes if you just want to see Jim.

Ridiculous Article

2012-02-07T09:27:00.000-08:00

http://sg.news.yahoo.com/swiss-central-banker-euro-crisis-nostradamus-153529911.html

And I quote the headline: "Swiss central banker a euro crisis Nostradamus?"

And why: "Nearly two decades ago, the man now likely to become the head of Switzerland's central bank foresaw the neighboring euro zone's troubles in a doctoral thesis, saying the likes of Ireland, Italy and Greece would not be able to control their debt.
Vice Chairman Thomas Jordan, who has served on the Swiss National Bank's governing board since 2007 and is currently interim chairman, also said a currency union gave some states the incentive to load up on debt and could lead to a banking crisis."

Jesus Christ this is ridiculous. Any Austrian could have told you that the EU was going to fail. Hell I'll predict right now that the US will fail from states and the federal government not being able to control their debt. It's not magical, it's free market economics. Giving greece lower interest rates than they could have gotten as a sovereign nation of course leads to more debt and more promises. It's amazing that rather than admitting free market economics is correct, they would rather say that this guy has a crystal ball and he predicted something that no one could have foreseen. I bet he also predicted the housing bubble....no one saw that coming.

VIDEO- Peter Schiff on the dollar and printing

2012-02-07T05:35:00.000-08:00

The big news is at the end...Peter has a new book coming in out May. The video is typical Schiff though, and he goes into how the US needs to cut government in order to prosper and how the dollar is going to collapse. He's still very bullish on Asia and he's long currencies like the Krone, Loonie, and Franc.

VIDEO- Santelli on the Jobs Report

2012-02-06T11:36:00.000-08:00

great job

More Iranian Sanctions

2012-02-06T11:13:00.001-08:00

http://www.cbsnews.com/8301-202_162-57371889/u.s-slaps-new-sanctions-on-iran-amid-tensions/

"President Obama has ordered new sanctions on the Islamic republic, including its Central Bank, in a move to enforce a law he signed in December."

We're one step closer to them retaliating. This is similar to the UN sanctioning the US for not adopting the full measures of their climate control pact. Of course we would get pissed as individual citizens and retaliate.

For the short term, this will be a boost to gold and oil prices as iran stocks up on gold and the EU has to get it's oil from somewhere else. In the long run, Iran is a big trading partner for India, China, and Russia and they will find ways around these sanctions. Someone's going to do something stupid and the whole world is going to be plunged into war. I just hate that I live in DC at the moment.

VIDEO- Marc Faber on Facebook

2012-02-06T10:04:00.000-08:00

He's a bad ass. "I never buy anything that is in the limelight"...listen to the man

VIDEO- Schiff on the Fed

2012-02-05T12:00:00.000-08:00

Peter schiff cares not that the commentator wants to talk.

Weekend VIDEO-The Gold Standard in Theory and Myth (by Joseph Salerno)

2012-02-04T05:33:00.000-08:00

An excellent lecture on the gold standard. I know it's not the most relevant of videos for investors, but there is some great economics in there and if you like currencies there are some fundamental lessons in the video.

But the gold standard debate is very important for any Austrian to know. Although most of us prefer a free market system for currencies, the pre-Fed gold standard was the closest the modern world has come, so we need to learn that it wasn't some horrible period of booms and busts.

Currency Wars- Mises Review

2012-02-03T12:33:00.000-08:00

http://mises.org/daily/5897/Currency-Wars

An excellent article.

Some thoughts:
It is shocking how few people see gold as relevant in today's world. The average political pundit sees gold as nothing more than jewelry and a fear trade that is mainly controlled by inflation hawks and libertarian. The truth though is that gold is still held by most every government and the ones without it are seeking to increase their share. A paper currency from 200 years ago has nothing but numismatic value. Gold is still gold. If you expect a nation to last, you have to realize that your paper currency will fail and that history shows gold will replace it until the political elites can scam the populace into accepting another piece of paper.

The other thing to realize in the book is that financial warfare is as devastating as real war. Just look at Iran. The wealthy are fine because they have real assets. The ones who are crushed are the poor and especially the middle saving class. We did it to Iran and caused a 50% devaluation of their currency in a week. If a few countries got together and tried to do that to the US, it might not be that bad, but even a 10% devaluation in a week would cause more problems than our politicians are willing to admit.

Invest in real things, don't listen to the main stream.

Job gains big in January

2012-02-03T06:22:00.000-08:00

We dropped the unemployment to 8.3% and added 250k jobs. To put it into perspective, we need about 130K just to keep up with population growth. Along, real wages have been stagnant since the recession started, so any job gains are pretty much just a sacrifice of wages for new hires (which is a good thing). Either way, at this rate we still have 19 million americans unemployed. So assuming 120K per month we will need 6.5 years to cut the unemployment rate in half. And remember this was the best month in quite some time and 6 of the 12 months in 2011 we didn't even keep up with population growth.

Also, if you're doing the math, there is no way that adding 120K jobs can lower the unemployment rate. Well...the 1.2 million who dropped out of the labor force did that. So now we have a labor force participation rate of 63.7%, a number not seen since the 80's when most women didn't have jobs. Maybe we can just take out all workers under 25 next since they pull up the unemployment. It's ridiculous I know.

So it's sort of good news, but I expect the unemployment rate drop in the next few months as the stock market goes up and we have a temporary rally in an election year. I don't think that the rally will last all the way until november, so at some point an announcement of a recession in Europe or another black swan will push us back into negative territory. Long term the economy is broken and trying to correct, so be prepared for either really bad news or a long period of just disappointing news.

VIDEO- Bill Gross on the Fed

2012-02-03T05:34:00.000-08:00

He's much more free market than I thought he was. I don't like that he gives Bernanke a 9, but if you're a bond guy then Bernanke has been you're best friend. "When the twist ends in June, they start writing checks again". This means that no one is out there to buy our treasuries except for the Fed. And listen for the shout out.

Brazilian Property bubble

2012-02-02T13:06:00.000-08:00

Like other EM's (ahem, China) Brazil is having some inflow issues. The chart shows that Brazil's real estate increased at 26% last year, mainly driven by large demand in cities from urbanization and foreign investment.

Like China, Brazil could carry this thing on for another year or so, but signs of a weakening Brazilian and Chinese economy are becoming evident. Unlike the Yuan which is low, the Real is stronger than ever (which makes these numbers even more shocking). A bust is likely in the next few years where these emerging economies have their currencies readjusted as the dollar crashes and the whole global system goes to hell. But stay away if you're thinking of buying some condo's in rio anytime soon.

VIDEO-Ron Paul On The Kudlow Report 01-30-12 ~ Dollar Would Be Linked To Gold ...

2012-02-02T05:36:00.000-08:00

President Paul? I hope we at least get Treasury Secretary Paul

Marc Faber Specific Shorts

2012-02-02T05:23:00.000-08:00

BM [IBM] is a good short. It is the back office of the world. There is room for earnings disappointment. If China implodes, the Australian dollar will go downwhill. That's another short. A third is Salesforce.com [CRM], which I recommended shorting in the June Roundtable - in The Barron's Roundtable I agree with both shorts, but I might wait to start shorting for a few months as I see the market going up in the short term. Tech stocks are very over priced still and like Jim Rogers says, this is a long term short that could end in something of a crash. With the facebook prospect of a $100 billion IPO, we all know that the hype is there and we also know that these websites will never make that much in revenue.

VIDEO- Jim Rogers on Europe and the Greek crisis

2012-02-01T11:26:00.000-08:00

The world is doomed. Jim doesn't really talk much, but this lady is excellent.