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Gary Shilling: "The Two-Tier Recovery"

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March 23, 2011 – Comments (4)

Good interview with Gary Shilling. I can't embed the video, but it is worth watching: http://finance.yahoo.com/tech-ticker/%22the-two-tier-recovery%22-why-most-people-are-not-feeling-it-gary-shilling-explains-536062.html

4 Comments – Post Your Own

#1) On March 24, 2011 at 4:49 AM, checklist34 (99.73) wrote:

I like listening to that guy.

but listen, a new paper came out by the same guys (bannister, etc.) that posted up the other commodity/stock ratio paper.  A bunch of new stuff in it.

I'll post it up one of these days, probably this weekend.  Its pretty neat, and they gave an opinion on the fate of that ratio.  

 

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#2) On March 24, 2011 at 5:06 AM, checklist34 (99.73) wrote:

so, Paulson and Einhorn, and possibly others, offer "gold shares" of their hedge funds.  Where you are in the same investments, long, short, whatever, as a normal share, but they convert your input from dollars to gold.

Basically, I suppose, they would sell dollars or dollar futures, and use it to buy gold futures.  A cashless transaction, leaving the original investment dollars in place to buy, short, hedge, whatever.  

I suspect that something similar could be accomplished with ETFs, but I haven't thought about it too much.  

And beyond that...  I suspect that it would be possible to set up ones portfolio to be currency-neutral.  

So like instead of owning 100 shares of GE at 20 bucks, denoted in US dollars, you could convert your exposure to canadian dollars in this manner, or Euros, or a basket of worldwide currencies to be "currency neutral".

In the end, overall, I think this is a concept that has some merit.  If I was a Canadian, I may want my investments to be denoted in those dollars I guess, as they are what I'd spend at the mall or something.  

In all honesty, I'd be more prone to being a dollar bull right now than a dollar bear.  But I don't dispute that ultimatley the USD will decline, because thats what the powers that be want, and in all honesty again I think that the benefits outweigh the downsides for those policies.  I'm going to get shot for saying that I suppose.

I don't know one thing about currency trading, and I mean not one single thing.  

If I did, I suppose this would all be as easy as just shorting some dollars and using the proceeds to buy Euros, Pounds, Yen, Australian dollars, Canadian dollars, Real, Krona, Francs, etc.  

One could also tie your investments, in this same manner, to a basket of currencies + commodities.  

In retrospect, 2 years ago, it was pretty clear that being long oil would have been a decent idea.  when it was like 35 bucks.  The S&P has returned 100% since then, oil has returned probably 120% or something since march 2009...  

Today I wouldn't really want commodity exposure...  But... sometimes. 

But then it would become a situation where one would become tempted to become a currency trader.   Or a commodity trader, on top of being a stock trader.

And the negative impact of a deflationary shock would become much more pronounced.  

So, it adds more options, so more risks, but in all honesty I think that being long whatever, but neutralizing some percent of ones currency risk would not be a bad idea.  

I wonder if I called my broker if they'd just say "ok, thats fine" and it'd be that simple?  Sell $1000, buy that much worth of Krona or something?

random ponderings.

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#3) On March 24, 2011 at 9:49 AM, binve (< 20) wrote:

but listen, a new paper came out by the same guys (bannister, etc.) that posted up the other commodity/stock ratio paper.  A bunch of new stuff in it. I'll post it up one of these days, probably this weekend.  Its pretty neat, and they gave an opinion on the fate of that ratio. 

Cool! I am definitely looking forward to that!

so, Paulson and Einhorn, and possibly others, offer "gold shares" of their hedge funds.  Where you are in the same investments, long, short, whatever, as a normal share, but they convert your input from dollars to gold. Basically, I suppose, they would sell dollars or dollar futures, and use it to buy gold futures.  A cashless transaction, leaving the original investment dollars in place to buy, short, hedge, whatever.

This is why I don't pay any attention to that crap. 

Because the reason for owning gold is for owning gold, as in physical. If I wanted just some claim on gold, I would go and buy the futures themselves, or own GLD (which is backed by some physical, but not nearly all of it by a long shot).

There are a few actual physical funds (who have audited gold in vaults backing all shares): CEF, PHYS, and IAU (I am more positive on the first two and less so on the third). Anyways, CEF and PHYS are the only 2 I own as a proxy for actual gold.

Regarding all of the currency movements:

Yeah, there is definitely some money to be made in currencies. The Forex maket absolutely dwarfs the equitiy markets. 

But I am not sophisticated enough to be a forex trader :( (in fact, I am pretty much not sophisticated at anything :) )

 

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#4) On March 24, 2011 at 11:33 AM, checklist34 (99.73) wrote:

yeah the last thing I want is to be a currency trader... 

it would be to just ensure "consistent global buying power" or something, and avoid acute us dollar risk.  

 

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