Sunday, October 16, 2011
I have just finished a run-through of "La Vie En Rose," the filmed biographical portrayal of Edith Piaf, as performed by Marion Cotillard.
In brief, Ms. Piaf's short life was not at all a happy one, though it was long on adventure, discovery, improbable twists and creativity.
The French love this film, which despite being created in the French Language, saw Ms. Cotillard win the 2007 Best Actress Academy Award for her performance. (She bested Cate Blanchett as Elizabeth, among others.)
My comment here is brief. What fascinated me is how Ms. Cotillard studied for her leading role in the film. She spent many hours reviewing historical information and documentary footage concerning Ms. Piaf.
However, she emphasizes that she never attempted to imitate Ms. Piaf's voice, gestures or mannerisms. Rather, she immersed herself in understanding who Ms. Piaf was....
The consequence? Critic after critic remarked that she had captured the very spirit of Edith Piaf.
The immediate lesson? Comprehension trumps imitation.
Once having seen it, you will not be able to forget this film. It burrows into deep places, and thus lingers afterwards.
The broader life lesson?
Don't plan a life based on "what" or "how" you want your life to be. Focus on who you want to be. The rest will follow.
Tuesday, October 11, 2011
My recent comment on Business Insider (I was responding to a statement by a reader, "Nobody knows what is really going on"):
As to knowing what is going on, it's pretty obvious.
The central planners have interfered in the marketplace and destroyed the currency and the economy.
The only way we can get good numbers is to torture the data and pretend that inflation doesn't exist. Thus we can now call negative numbers positive numbers, and lots of numbers ARE positive IF (and only if) the Shadowstats (real) inflation numbers are disregarded.
However, the over-riding facts of high unemployment, record public and private debt, absence of capital investment, etc., make clear that we are reliving a high tech version of the 1930s.
The gold price of course is a direct indicator of the destruction of the economy by our political leaders and government agencies.
I'd rather have an economy that works, but that is not where we are. It can only repair itself when the real damage is priced into everything, which will hurt a lot of people (and already has).
On the upside, the central planners will be in broad disfavour, and those who exploit their shareholders will be out of a job.
I live for the day.....
NOTE: In case you didn't know, San Jose, California is functionally bankrupt. It's one of the richest cities in the world - and it still can't meet its obligations. 2000 city workers have been let go, and obligations are still soaring - they will almost double by 2014, with no corresponding increase in revenues. Read about it here.
This is, unfortunately, the value destruction process at work. It hurts people.
We need to get out of the way and let markets start creating value again - without central planning!
Is this too anecdotal for you? Here are 100 US economic facts to feed your mind.
Wednesday, October 05, 2011
Unless this is worse than I think, the Canadian gold and silver miners have put in a double bottom against the gold price.
Both charts show the indices divided by the rising price of gold. This particular metric seems to have fallen far enough to satisfy most technical analysts!
The Canadian Venture Index divided by the gold price (exact double bottom?):
The S&P/TSX Global Gold Index divided by the price of gold (pretty much the same thing):
Of course, it can always get worse, but I can't think of any real reasons why this sector should continue to underperform in the current crisis-focused macro environment.
Onwards and upwards, my friend....
Sunday, October 02, 2011
Forget Greece, Forget Europe, Forget the US - This Week's Story is China & the Declining Copper Price
Thanks to Bruce Krasting and the Business Insider for this story.
Mr. Krasting reports: "Entities in China have been using copper warehouse stocks as collateral for financing all manner of things for the past two years (L/C backed financing)."
I was driving today and listened to the financial news on Sirius (it's a great service).
Here's what's happening. The declining copper price is pressuring a multitude of financial deals in China - and forcing selling in the base metal (it's no longer working as collateral).
Another piece on the news today: Chinese project developers are failing to meet payments on newly-ordered equipment. Just caught this on the radio, and the story is hard to track online.... I think this is meaningful information.
This is early-breaking stuff, but the collapsing copper price is a shot across the bow. It's linked to the late-day collapse in North American equities today.
China will soon be the world's largest economy in purchasing power parity terms.
The Chinese central bank has been tightening (raising interest rates) for 2-/12 years.
The Shanghai index has been falling for four years:
Figure it out. Greece is small stuff, as are the PIIGS. The US financial crisis has been well-described. But, until now, China has been "bullet proof." However, the collapse in copper will tip a few more dominoes in China. It looks like a big story from here.
My guess, this is bearish for most all asset classes for now, including gold and silver (people and financial entities under pressure will be forced to sell to meet obligations, particularly as the copper collateral system is failing. Longer term, gold and silver will remain a preferred asset class - in a sharply narrowing field!
For the first time in a long time, we have a "Made-in-China" problem on our hands.
We had better get used to it. This is likely to become THE BIG STORY by the end of this year....
29 September 2011:
Copper is trying to find a bottom. Up weakly today. The action is certainly not decisive.
However, I have been reminded by Bill Fleckenstein that, as the Chinese have been tightening (raising interest rates) for 15 months, "if things start to get dicey in China, they will cut rates AND relax credit." So China has other options besides sailing off into the sunset if the pressure continues to build (I think it will).
However, China's way out looks very much like the course followed by Ben Bernanke and our friends at the politburo - er, sorry, the Federal Reserve.
Thus, by some time in 2012, if not earlier, we could see China, the Europeans and the US all "forced" (by political pressures, not by necessity) to re-enter into inflationary policies to avert collapse in the credit markets, interlinked defaults, and protracted unemployment.
Wonder how that may impact gold?
Well, for a start, plan to buy your gold on the Pan Asia Gold Exchange. Yes, by June 12, next year, China will be on its way to becoming a major gold-trading hub. And eventually, perhaps THE major gold-trading hub.... independent of LME, CME and COMEX margin hikes, etc.
Read about it here. This is an important story too. Very important.
Here is Pan Asia's official link.
Another story here (from "Gold Wars").
2 October 2011: OK. Goldman's Jim O'Neill says we may be way over-reacting to events in China. His words follow (thanks to Business Insider):
It is pretty obvious that you will have some failed property lenders, where a country’s policymakers deliberately choose to stop a strong rise in property prices before it gets out of hand like the US and Europe, as the Chinese have done in the past 2 years. I can’t understand why it therefore translates into a “hard landing”. The Chinese property market has some issues because of deliberate policy. In fact, it is remarkably impressive, and a huge contrast to virtually any evidence I can see from my days in the markets, that a policymaker would choose to prick a property bubble before it gets to the stage that we all know only too well.
China, as I have written about now for nearly a year, has entered a new phase of development where the quality of growth matters more than the pure quantity, and with it, the sustainability of growth.This does make sense. Obviously Chinese policy makers are trying to slow things down, and it's working.
Even lower copper prices - not so good for the copper collateral system, but good news for builders everywhere... so long as it lasts - in an environment where inflation is originating from many places other than China!
3 October 2011: Patrick Chovanec, a well-known China authority based at Tsinghua University, acknowledges that China is tightening, but cautions that speculation and leverage could cause a greater than expect contraction, particularly in response to a global slowdown.
There are multiple indicators that speculative excesses are causing an economic crunch, including multiple business failures, "disappearing" and bankrupt executives, abandoned property development schemes, and collapsing valuations on mainland Chinese bank assets in the Hong Kong market.
So yes, China is reining in speculation. The question is if it is still timely to do so, or if the speculative excesses have already been too great.
Click here for Mr. Chovanec's analysis.
Oh yes, the copper price is still falling. Click here.
8 October 2011: This quotation from Marc Faber is going around. As seasoned readers will know, Mr. Faber, a Swiss National, has lived and worked in Asia for decades:
"The price of copper is signalling a very serious slowdown (if not complete collapse) in China. This is what is really behind the move down in all commodities. A hard landing in China would be devastating for the global economy. The Shanghai composite is making new lows along with copper, which is very bearish. Also stay away from the Australian and Canadian currencies. If China crashes, these markets will get massacred"
However, Bill Fleckenstein remains less worried, as China has many options before the onset of any collapse, beginning with interest rate cuts.
That is, the current developments are the intended effect of present Chinese policy, which is to slow down rampant speculation and market excesses, and it seems to be working.
Saturday, October 01, 2011
Four years ago, I predicted that over the next ten years, BHP Billiton might increase in market value tenfold, while Google could fall in market value tenfold, making BHP worth 100 times as much as Google in terms of market capitalization. (Click here and here for the original articles.)
We are not there yet, but as the chart shows, the trend is clearly in favour of BHP, which has doubled relative to Google since the beginning of 2007. (I have continued to comment on the comparison between February 2008 & April 2011.)
Had we done the comparison in April of this year, BHP would have tripled in market capitalization relative to Google at that time (compared to January 2007). BHP happens to be in a downdraft right now over global recession worries. Of course, that hasn't stopped it from doubling Google's performance over the past almost 5 years!
By the way, both are great companies. All I'm saying here is (1) in our inflationary era, things that are real preserve their value relative to things that are "not," and (2) Equities are in a secular (multi-decade) downtrend which will return valuations to earth (as though they were pinned to the mat, to be blunt) - it's just what markets do.
All posts on this topic:
Revisiting BHP and Google at Year Four
An Early Update on Google versus BHP
Google versus BHP Billiton - Part II
Meet Me Here in Ten Years' Time: BHP Billiton vs. Google