I Was Wrong About Gold

I thought $1,250 was a top. Sept. 4 I posted my opinion that gold would start to go down and go back to $800. It isn't happening.
In fact gold is up almost 5% from there.
At that rate it would be up to $2,000 in a year.
But I still believe gold is in a bubble.
And it is not easy to call the top of a bubble.
The shape of the bubble curve is usually a hyperbola followed by a quick crash.
How high is high?
Can't say until the crash happens.
When will the top arrive?
The future is not predictable.

Why Does California Have Budget Problems?

I wish there was a comprehensive analysis of this question somewhere.
Maybe there is.
The usual suspects

Public employee unions
Public employee pensions
Poor immigrants needing services such as public education and medical care
demographic changes, too many young and too many old
tax policy causes wealthy to move to Florida
Anything else?
Prop 13
unemployment
initiatives of all sorts

So what is the truth? Who has really looked at it carefully?

SWAN

What's Wrong With 2% Inflation?

A little thought experiment

You have a million dollars
You invest it all in a nice stock that pays no dividend.
The stock goes up exactly 2% a year. Inflation is also exactly 2% a year.
10 years later you sell for $1,220,000 (compound return)
A nice gain of $220,000
You pay tax on the gain at 15% for a tax of $33,000

That $33,000 was really just a confiscation of your wealth.
The gain was no real gain
After inflation you just broke even.
And then you paid a tax on a gain that was no gain.

I suggest indexing capital gains. That would be fair. In this situation there would be no gain to report if the gain were indexed.

Infinite Growth And The Fed

The Fed came out yesterday and said they want a higher rate of inflation. They said they have a comfort level for the core rate on inflation and that recently it is running too low for them. Sounds like they want 2% inflation.

To me, this is just sick. 2% doesn't sound like much, but in the long run the dollar still goes to zero. Even a slow persistent inflation eventually takes away all the value. There is a curve to describe this process. It is the curve for exponential growth. They call it hyperbola.

Our rulers want a hyperbolic economy. Don't they realize this is impossible in the long run? Hyperbolas go to infinity, and it happens rapidly.

To me, the comfortable level of inflation is zero! In my lifetime the dollar has lost about 90% of its value. And the policymakers like that and want it to continue.

Inflation is not a good thing. The fear of deflation is not a good thing.

Genius Returns

Humanity is not a bunch of fools, or idiots.
We are resourceful.
We are creative.
We make progress.

Things keep getting better.
When problems come up, we solve them.
And people are not evil.
I believe everyone is doing the best they can.

Everyone does the best they can.
Things are already wonderful but if you need them to be better, or choose for them to be better, then the best thing is more education and freedom of information.
Knowledge
Truth
Thought

What a great world we live in.

The Folly Of Gold

Yes, gold has done well recently.
But experience of the long term tells a different story.
My family came to Los Angeles in the 1920s. Bought land. Recently sold the land.
Price had gone up 700 times.
Gold then was $32 per ounce. Now around $1,250. That is up around 40 times.
700 is much better than 40.
And guess what.
That land was an income producing item. Over the years that land generated spendable income.
Gold just sits there. In fact, storing it costs money!

I hope for real prosperity.
I hope for the people to live in praise and thanksgiving.

Time Marches On

HERE I AM
many years ago
in Santa Monica

The Irrelevance of Bankers

If I need my car repaired do I need a banker?
NO! I need an auto mechanic!

If I need a haircut do I need a banker?
NO! I need a barber!

If I need food do I go to the bank?

NO! I go to the supermarket.

All the real stuff is everywhere. I see houses. I see cars. I see people. It is great stuff and there is plenty of it.

It's a Recession Not a 'Catastrophe' | Alan Reynolds | Cato Institute: Commentary

It's a Recession Not a 'Catastrophe' | Alan Reynolds | Cato Institute: Commentary

This is an old article,from February of 2009, but it is good to consider. I really agree that Mr. Obama should not be spreading fear and negativity. Things are so much better than people think. It is amazing to me how negative most people still are even now when the recovery phase is just about over and the expansion phase is for real.

peak to trough gdp this time ended up at almost 4% and unemployment at 10.5%,
so this was severe in those terms

I always look at it from the perspective that we have so much, when you take away 4% of it you still have way more than you need

Also, the accumulated wealth was not destroyed. Saying something is worth $10 one day and $5 the next has not really destroyed any wealth. Wealth is finally real things, not the dollar value that people put on things.

Is Gold Done?

Looks like a double top in gold.
Time to sell? Or sell short?

I expect gold to fall back to around $800 per ounce.
That means a bear market in gold.
As the recovery becomes an expansion and stocks perform better the interest in gold and bonds will be going away.