The Young Cons....

Good rap...and message

Canada is the Place in Live!

The Economist Intelligence Unit Poll today released the ranking of the cities in the world to live. Three Canadian cities were in the top ten! Rankings were:

Vancouver
Vienna
Melbourne
Toronto
Perth
Calgary
Helsinki
Geneva
Sydney
Zurich

Last was Harare the capital of Zimbabwe

UK cities of London was number 51 and Manchester was 46.

Maybe I need to move back to Canada!

Time to Buy REITs?

I read but did not act....recommended REITs are up 30% in a month!

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From Porter Stansberry's Investment Advisory, May 2009

Why do I think the bear market in REITs is over? Because the floodgates of new capital have opened... Sentiment and access to capital play a huge role in real estate prices. The more capital that's available, the higher prices will move. The higher prices move, the more capital becomes available – because there's more collateral. Sentiment is incredibly important to these markets because it opens the flow of new capital.

And sentiment is now completely different than it was in March. Simon Property announced another equity offering [in addition to the $500 million it raised in March] – this time $800 million in new equity. The fact that REITs have this kind of access to capital tells me the yield spread has peaked and it's time to buy REITs.

Get Ready for Inflation and Higher Interest Rates

Look out....things are changing big time...

From WSJ
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The percentage increase in the monetary base is the largest increase in the past 50 years by a factor of 10 (see chart nearby). It is so far outside the realm of our prior experiential base that historical comparisons are rendered difficult if not meaningless. The currency-in-circulation component of the monetary base -- which prior to the expansion had comprised 95% of the monetary base -- has risen by a little less than 10%, while bank reserves have increased almost 20-fold. Now the currency-in-circulation component of the monetary base is a smidgen less than 50% of the monetary base.

Breathing - It works

"Practicing regular, mindful breathing can be calming and energizing and can even help with stress-related health problems ranging from panic attacks to digestive disorders."
Andrew Weil, M.D.

Since breathing is something we can control and regulate, it is a useful tool for achieving a relaxed and clear state of mind. I recommend three breathing exercises to help relax and reduce stress: The Stimulating Breath, The 4-7-8 Breathing Exercise (also called the Relaxing Breath), and Breath Counting. Try each and see how they affect your stress and anxiety levels.

Gold or Savings in Bank?

Investment in gold pays no interest.

Money in the bank pays almost no interest. However, governments can print money, but they can't print gold.

If the Central Banks keeps interest rates near zero for the foreseeable future, the obvious outcome is that it will take more slips of paper (dollar bills) to buy gold.

History lesson for economists in thrall to Keynes

Very good points by Niall Ferguson regarding why interest rates will be going up.
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From the FT London May 29, 2009 By Niall Ferguson May 29, 2009

On Wednesday last week, yields on 10-year US Treasuries – generally seen as the benchmark for long-term interest rates – rose above 3.73 per cent. Once upon a time that would have been considered rather low. But the financial crisis has changed all that: at the end of last year, the yield on the 10-year fell to 2.06 per cent. In other words, long-term rates have risen by 167 basis points in the space of five months. In relative terms, that represents an 81 per cent jump.

Most commentators were unnerved by this development, coinciding as it did with warnings about the fiscal health of the US. For me, however, it was good news. For it settled a rather public argument between me and the Princeton economist Paul Krugman.

....Of course, Mr Krugman knew what I meant. “The only thing that might drive up interest rates,” he acknowledged during our debate, “is that people may grow dubious about the financial solvency of governments.” Might? May? The fact is that people – not least the Chinese government – are already distinctly dubious.

....The policy mistake has already been made – to adopt the fiscal policy of a world war to fight a recession. In the absence of credible commitments to end the chronic US structural deficit, there will be further upward pressure on interest rates, despite the glut of global savings

Quote of the Day

"Don't tell me where your priorities are. Show me where you spend your money and I'll tell you what they are." - James W. Frick

Staying Rich in the New Normal

Bill Gross - June 2009
The obvious solution to both dollar weakness and higher yields is to move quickly towards a more balanced budget once a sustained recovery is assured, but don’t count on the former or the latter. It is probable that trillion-dollar deficits are here to stay because any recovery is likely to reflect “new normal” GDP growth rates of 1%-2% not 3%+ as we used to have. Staying rich in this future world will require strategies that reflect this altered vision of global economic growth and delevered financial markets. Bond investors should therefore confine maturities to the front end of yield curves where continuing low yields and downside price protection is more probable. Holders of dollars should diversify their own baskets before central banks and sovereign wealth funds ultimately do the same. All investors should expect considerably lower rates of return than what they grew accustomed to only a few years ago. Staying rich in the “new normal” may not require investors to resemble Balzac as much as Will Rogers, who opined in the early 30s that he wasn’t as much concerned about the return on his money as the return of his money.

Oil prices rise as Goldman turns bullish

Crude oil prices rose by more than $1 on Thursday, rebounding after a sharp fall in the previous session and leading a rally across commodity markets.

Base metals and agricultural commodities rose while gold stabilised after dropping in Wednesday’s session.

Julian Robertson's Steepener Swap Play

From Market Folly - Short Treasuries and Bonds, inflation is coming. But not now, there has been a huge drop in bond prices eg 25% ytd 2009. They should be finally due for a correction.
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Simply put, Julian Robertson is the definition of a hedge fund legend. And, his success is noted by the fortune he has amassed as he now graces the Forbes' billionaire list. He has pioneered a successful investment methodology, he has generated outstanding returns at his famous hedge fund Tiger Management, and his influence has sprouted some of the most successful modern day hedge funds in the form of the 'Tiger Cubs.' And, most importantly, he predicted the financial crisis two and a half years ago in an interview with Value Investor Insight. When he talks, you listen.....

The sudden and rapid decline is most likely due for a correction and we do not feel that the current time is ideal to initiate a position in shorting treasuries. We would look for any sign of a rebound before putting on a new short position. That said, we still feel the move in treasuries will take many years to fully play out and this is a very long-term inflationary bet. While short-term moves like the one we've seen this year are nice, things could take much longer to play out than people realize. We consider the publication of our post on this topic to be a contrarian indicator. After all, when there are headlines saying for you to get into something after a big move has already taken place, it's time to at least take some profits. So, place your bets with caution, as you'll have plenty of time before inflation truly rears its ugly head.

Cinnamond Tops Bill Gross in Lone Victory for Stocks Over Bonds

From Bloomberg

Eric Cinnamond is the only diversified stock manager to beat Bill Gross’s Pimco Total Return Fund, the world’s biggest fixed-income fund.

Cinnamond said the fund excelled in 2008 because it had a cash hoard and a number of companies able to weather the economic and market slump, such as Chicago-based Oil-Dri, the world’s leading maker of cat litter.....It’s a perfect example of what we like,” he said. “It has a good balance sheet, good cash flow and it is predictable.”

Bullish Expectations Don't Bode Well for Gold

From the WSJ / Barron's.... timing is important

The buzz that that bullion will climb above $1000 an ounce could very well doom its chances. There 's talk that the price of gold bullion will once again get back to trading above the $1,000 level, where it has been three times before over the last 18 months.

Furthermore, bullishness among gold timers is also back to where it stood on those three prior occasions.

Quote...

"Magnitude of losses and profits is purely a matter of position size. Controlling position size is
indispensable to success. Of all the traits necessary to trade successfully, this factor is the
most undervalued." - Mark Ritchie

China is buying Gold

From China Daily...

Bitten by the gold bug, Chinese investors are now rushing to hoard the yellow metal as fears over the global recession deepen.

The increased sales of gold bars and gold jewelry in Shanghai, Beijing, Guangzhou and other large cities are reflected in the precious metal's price surge on the Shanghai Gold Exchange (SGE), which trades in gold contracts for forward deliveries. Gold prices quoted on the SGE have increased by an average 6.74 percent in the past month to the current level of about 209 yuan a gram.

"Gold demand in China in the first quarter rose to 114 tons, up 2 percent over the same period last year, solely boosted by an increase in jewelry demand," according to the latest Gold Demand Trends report for the first quarter of 2009 published by the World Gold Council.

The report said global demand for gold rose 38 percent year-on-year to 1,016 tons, representing a 36 percent rise in value. China is the world's second largest gold consuming country after India.

"As we know, in late April, the People's Bank of China announced its gold reserves had risen 454 tons since 2003 to 1,054 tons, a signal that the central bank is taking gold as a reliable hedge against financial uncertainties," said Cheng.

According to Cheng, China now plays a greater role in the global gold market. Based on its increased holdings, China is fifth-largest gold reserve nation after the United States, Germany, France and Italy. In addition, China is also the world's largest gold producer and the second-largest gold jewelry consumer next to India.

"China's demand for gold bullion reached 68.9 tons in 2008, up 176 percent from 25 tons in 2007," said Cheng.

Yardeni: Rising Yields Threaten Economy

Economist Edward Yardeni says the rise in bond yields and mortgage rates threatens to stall any economic rebound.

The founder of Yardeni Investments coined the term 'bond vigilantes' in 1983 to describe bond investors who dump their holdings when huge budget deficits threaten to spark inflation.

The bond market is full of concern that the government's huge budget deficit "eventually might lead to higher inflation," he points out.

Others agree. Economist James Bianco tells The Wall Street Journal, that the market figures the $1 trillion-plus deficit can't be financed without Fed assistance.

But that assistance has sparked the inflation worry, he says. "We're caught in a vicious cycle."

China students laughed at Geithner

What was it?

U.S. Treasury Secretary Tim Geithner told a crowd of students in Beijing that the trillion dollars worth of U.S. government bonds the Chinese hold are "very safe."

The Students laughed....they know better.

Boom Times Are Back - Just not here in the United States.

Things are changing....history teaches us that it does happen.
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It is becoming increasingly clear that the story of the global economy is a tale of two worlds. In one, there is only gloom and doom, and in the other there is light and hope. In the traditional bastions of wealth and power—America, Europe and Japan—it is difficult to find much good news. But there is a new world out there—China, India, Indonesia, Brazil—in which economic growth continues to power ahead, in which governments are not buried under a mountain of debt and in which citizens remain remarkably optimistic about their future. This divergence, between the once rich and the once poor, might mark a turn in history.

....But from the Spanish Empire of the 16th century to the British Empire in the 20th century, great global powers have always found that their fortunes begin to turn when they get overburdened with debt and stuck in a path of slow growth. These are early warnings.