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April 17, 2008 – Comments (5)

More and more economist are forecasting more than a $1 trillion in losses in housing.  Frank Veneroso has added his voice to the estimates, $2 trillion in his case.

I had the opportunity to have a very small group economic question period with Frank Veneroso at the Cambridge investment conference in Vancouver in 2007.  Frank does a lot of work on base metal commodites and predicts a nuclear melt down in them.  

I do not find it easy to find 20 years warehouse supply charts for base metals, and you really do have to look at very long term graphs to appreciate how quickly base metals can change.  It is as if when the market goes to over supply, it is never gradual, but straight up, like nickle appears to be doing.   Frank showed quite a few of these graphs.

5 Comments – Post Your Own

#1) On April 17, 2008 at 2:21 AM, DemonDoug (32.57) wrote:

the problem is that things like M2 and M3 are likely growing way faster than base metals.  And while nickel might be growing, what about copper?

(p.s. - check out your previous blog post.  and here's hoping you have a sense of humor too :D)

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#2) On April 17, 2008 at 12:40 PM, seabass6251 (< 20) wrote:

In all fairness, the weakness in the US dollar is the main reason for price appreciation in base metals and precious metals and grains and currencies and etc. The Fed, beyond the scope of their foundation in my opinion, had the evil duty of sacrificing the US dollar or undercutting the stale growth in the economy. Unfortunately in direct disagreement with your analysis, the Fed chose to sacrifice the dollar, thus increasing the price of raw materials dominated in US dollars.

The Fed has taken to running money presses on overtime to maintain "liquidity" in the market. That's what they report on CNBC anyway. But, isn't the Fed really pushing the value of our dollar down and subsequently pushing the price of raw materials higher by default? Why aren't stocks going higher? That's easy. Foreigners see no VALUE there...yet anyway. And we, as American consumers, are in the unenviable position of being stuck with bad policy waiting on those same foreign countries to save us by returning some of the weak dollars they hold. Too bad if you ask me.

The housing market debacle wouldn't be a problem if wages had followed suit with the inflation we've had the past 8 years or so. Let me give you an example. I'm 29 and recently retired. When I began in my last profession, I was paid $25K 8 years ago. Up until the day I retired, I was paid a salary of $50K, but 8 years after I started, that $50K only maintained the purchasing power I had 8 years ago. Simple adjustments for inflation would dictate then that REAL inflation was closer to 9% than what has been reported, and most wage earners would agree that their standard of living has not risen 9% annually. If the standard of living hasn't increased equal to or greater than inflation, then you get Brian Williams every night on NBC reporting the plight of the working man every time his family tries to buy groceries.

Commodities have always worked on 30-year price cycles (and always will by the way). Check prices of raw materials in the late 70s. Compare those times to these. I love when talking heads, finance professors, bank CEOs, etc. say that it's different this time. No it isn't. It is and always will be the same. Markets repeat themselves consistently, which is the very reason that I can speculate successfully in any market situation.

Graphs and financial analysis are useless. Money is made in markets by understanding this simple idea: profits equal price fluctuations over time. That's it. No grand idea, just a simple one. I had an economics professor that could literally find a chart that represented the 20% of dissenting movements (opposite the 80% expected movements) 100% of the time and would go into great detail explaining how this was the rule of Wall Street. I would suggest to you the same that I expressed to my professor: you can always find a chart to substantiate your position much like a child can always find an excuse to explain away their actions.

That leads me to a very good point. Actions are what is important. Take the simple idea from above and follow the actions of those active in markets. Natural movements are easy to identify and follow. Say you are observing a person walking through the woods. That person will naturally walk a certain trail. The time to make decisions is when that person comes to a fork in the road. After the person decides which direction he will take, you get back to easily identifying the person's next step. And to link this to the current situation in the stock markets, after many forks in the road, a person walking through the woods may end up exactly where he started.

 Just don't be fearful of markets. Newsletter editors prey on your fear to keep you buying their product. Yes, it's true that a large financial firm may say everything is rosy on Monday but have a fire sale to the House of Morgan on Sunday, but that's just a land mine along the way. The best way to avoid these burps is to stear clear of the mines in the first place. Dump every financial issue you have. Buy the economic leaders (like the ones you evidently don't like from your earlier blog) like gold/silver/copper miners, ag producers, and oil companies. Short the financials on any natural rally that provides little risk (don't worry about the reward as it will come...you often make the money in an operation when it is taken and not liquidated or covered).

Just one more thing....turn off CNBC for good.

Report this comment
#3) On April 17, 2008 at 12:44 PM, seabass6251 (< 20) wrote:

In all fairness, the weakness in the US dollar is the main reason for price appreciation in base metals and precious metals and grains and currencies and etc. The Fed, beyond the scope of their foundation in my opinion, had the evil duty of sacrificing the US dollar or undercutting the stale growth in the economy. Unfortunately in direct disagreement with your analysis, the Fed chose to sacrifice the dollar, thus increasing the price of raw materials dominated in US dollars.

The Fed has taken to running money presses on overtime to maintain "liquidity" in the market. That's what they report on CNBC anyway. But, isn't the Fed really pushing the value of our dollar down and subsequently pushing the price of raw materials higher by default? Why aren't stocks going higher? That's easy. Foreigners see no VALUE there...yet anyway. And we, as American consumers, are in the unenviable position of being stuck with bad policy waiting on those same foreign countries to save us by returning some of the weak dollars they hold. Too bad if you ask me.

The housing market debacle wouldn't be a problem if wages had followed suit with the inflation we've had the past 8 years or so. Let me give you an example. I'm 29 and recently retired. When I began in my last profession, I was paid $25K 8 years ago. Up until the day I retired, I was paid a salary of $50K, but 8 years after I started, that $50K only maintained the purchasing power I had 8 years ago. Simple adjustments for inflation would dictate then that REAL inflation was closer to 9% than what has been reported, and most wage earners would agree that their standard of living has not risen 9% annually. If the standard of living hasn't increased equal to or greater than inflation, then you get Brian Williams every night on NBC reporting the plight of the working man every time his family tries to buy groceries.

Commodities have always worked on 30-year price cycles (and always will by the way). Check prices of raw materials in the late 70s. Compare those times to these. I love when talking heads, finance professors, bank CEOs, etc. say that it's different this time. No it isn't. It is and always will be the same. Markets repeat themselves consistently, which is the very reason that I can speculate successfully in any market situation.

Graphs and financial analysis are useless. Money is made in markets by understanding this simple idea: profits equal price fluctuations over time. That's it. No grand idea, just a simple one. I had an economics professor that could literally find a chart that represented the 20% of dissenting movements (opposite the 80% expected movements) 100% of the time and would go into great detail explaining how this was the rule of Wall Street. I would suggest to you the same that I expressed to my professor: you can always find a chart to substantiate your position much like a child can always find an excuse to explain away their actions.

That leads me to a very good point. Actions are what is important. Take the simple idea from above and follow the actions of those active in markets. Natural movements are easy to identify and follow. Say you are observing a person walking through the woods. That person will naturally walk a certain trail. The time to make decisions is when that person comes to a fork in the road. After the person decides which direction he will take, you get back to easily identifying the person's next step. And to link this to the current situation in the stock markets, after many forks in the road, a person walking through the woods may end up exactly where he started.

 Just don't be fearful of markets. Newsletter editors prey on your fear to keep you buying their product. Yes, it's true that a large financial firm may say everything is rosy on Monday but have a fire sale to the House of Morgan on Sunday, but that's just a land mine along the way. The best way to avoid these burps is to stear clear of the mines in the first place. Dump every financial issue you have. Buy the economic leaders (like the ones you evidently don't like from your earlier blog) like gold/silver/copper miners, ag producers, and oil companies. Short the financials on any natural rally that provides little risk (don't worry about the reward as it will come...you often make the money in an operation when it is taken and not liquidated or covered).

Just one more thing....turn off CNBC for good.

Report this comment
#4) On April 17, 2008 at 12:44 PM, seabass6251 (< 20) wrote:

In all fairness, the weakness in the US dollar is the main reason for price appreciation in base metals and precious metals and grains and currencies and etc. The Fed, beyond the scope of their foundation in my opinion, had the evil duty of sacrificing the US dollar or undercutting the stale growth in the economy. Unfortunately in direct disagreement with your analysis, the Fed chose to sacrifice the dollar, thus increasing the price of raw materials dominated in US dollars.

The Fed has taken to running money presses on overtime to maintain "liquidity" in the market. That's what they report on CNBC anyway. But, isn't the Fed really pushing the value of our dollar down and subsequently pushing the price of raw materials higher by default? Why aren't stocks going higher? That's easy. Foreigners see no VALUE there...yet anyway. And we, as American consumers, are in the unenviable position of being stuck with bad policy waiting on those same foreign countries to save us by returning some of the weak dollars they hold. Too bad if you ask me.

The housing market debacle wouldn't be a problem if wages had followed suit with the inflation we've had the past 8 years or so. Let me give you an example. I'm 29 and recently retired. When I began in my last profession, I was paid $25K 8 years ago. Up until the day I retired, I was paid a salary of $50K, but 8 years after I started, that $50K only maintained the purchasing power I had 8 years ago. Simple adjustments for inflation would dictate then that REAL inflation was closer to 9% than what has been reported, and most wage earners would agree that their standard of living has not risen 9% annually. If the standard of living hasn't increased equal to or greater than inflation, then you get Brian Williams every night on NBC reporting the plight of the working man every time his family tries to buy groceries.

Commodities have always worked on 30-year price cycles (and always will by the way). Check prices of raw materials in the late 70s. Compare those times to these. I love when talking heads, finance professors, bank CEOs, etc. say that it's different this time. No it isn't. It is and always will be the same. Markets repeat themselves consistently, which is the very reason that I can speculate successfully in any market situation.

Graphs and financial analysis are useless. Money is made in markets by understanding this simple idea: profits equal price fluctuations over time. That's it. No grand idea, just a simple one. I had an economics professor that could literally find a chart that represented the 20% of dissenting movements (opposite the 80% expected movements) 100% of the time and would go into great detail explaining how this was the rule of Wall Street. I would suggest to you the same that I expressed to my professor: you can always find a chart to substantiate your position much like a child can always find an excuse to explain away their actions.

That leads me to a very good point. Actions are what is important. Take the simple idea from above and follow the actions of those active in markets. Natural movements are easy to identify and follow. Say you are observing a person walking through the woods. That person will naturally walk a certain trail. The time to make decisions is when that person comes to a fork in the road. After the person decides which direction he will take, you get back to easily identifying the person's next step. And to link this to the current situation in the stock markets, after many forks in the road, a person walking through the woods may end up exactly where he started.

 Just don't be fearful of markets. Newsletter editors prey on your fear to keep you buying their product. Yes, it's true that a large financial firm may say everything is rosy on Monday but have a fire sale to the House of Morgan on Sunday, but that's just a land mine along the way. The best way to avoid these burps is to stear clear of the mines in the first place. Dump every financial issue you have. Buy the economic leaders (like the ones you evidently don't like from your earlier blog) like gold/silver/copper miners, ag producers, and oil companies. Short the financials on any natural rally that provides little risk (don't worry about the reward as it will come...you often make the money in an operation when it is taken and not liquidated or covered).

Just one more thing....turn off CNBC for good.

Report this comment
#5) On May 16, 2008 at 7:24 PM, Nainara (< 20) wrote:

On a 20 year chart, every major shift looks fast.

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