Table On-Topic Summary - 26-Oct-2002
A compilation of this board's financial/economic posts From 44104 to 44122

Post  44104  by  oldCADuser       OT: My understanding...

Post  44105  by  garhart       Reply
Decomposed, I have been a long time lurker on this board.It has been my favorite for a long time. I do not post often because I do not feel I can deliver at the level which would make me comfortable here. None the less, I take GREAT exception to the premise which you lay down this post to which I am responding. Specifically your statement "monsters just happen". I believe I have invested more time on this particular subject than anyone else you are likely to encounter. I am willing to discuss this with you, but not on this board.If you are interested in further discussion on the subject, I may be contacted through the email listed on my profile page.

Post  44106  by  maniati       OT: OCU: What do you expect from CNBC? They're idi
Post  44107  by  Decomposed       ot: garhart,
Post  44108  by  Decomposed       OT: Table ON TOPIC SUMMARY Oct 25, 2002

Post  44109  by  Decomposed       Reply
re: maniati, OCU, CNBC,

Cut CNBC some slack. is a finance site. And, although I don't often watch the cable channel you were discussing, my recollection is that its emphasis is financial as well. Commemorations -- which I'm sure will be forthcoming -- might be appropriate if the station covers the public ceremonies and response, but beyond that should be relegated to the editorial and opinion segment of a journalistic program. It does not qualify as "breaking news" -- which is what think OCU was watching.

Do you think Barrons and WSJ will cover the Wellstone tragedy differently? I don't, though because they are print media, they do have far more time to formalize their report. Live TV needs some leeway in this respect.

The headline on reads:

SEN. PAUL WELLSTONE was killed when his chartered plane crashed in northern Minnesota. The Democratic senator's wife and daughter also died. Wellstone was in a tight re-election race seen as key to maintaining his party's control of the Senate. (See more on Wellstone's life, and reactions to his death.)

The cover story on CBS Marketwatch begins:

WASHINGTON (CBS.MW) -- Two-term Democratic U.S. Sen. Paul Wellstone of Minnesota died in a small-plane crash Friday afternoon, less than two weeks before Election Day.

Wellstone, 58, was in the middle of a hard-fought re-election campaign against Republican Norm Coleman, a former mayor of St. Paul. The Minnesota race has been expected to play a key role in determining political control of the Senate, where Democrats held a one-seat majority.

To me, this coverage doesn't sound substantially different from what OCU says he encountered on CNBC.

Post  44110  by  lkorrow       OT: Thanks OCU, now on to what came in the mail, a
Post  44111  by  kduff       OT: October 26, 2002

Post  44112  by  pacemakernj       Reply
Roof, RE: Gold. Just an update from MSDW.

Here are some highlights from their latest report dated 10/18/02 by Michael Durose.

Many investors are a little blurry-eyed as we enter the last quarter of 2002. Stock market declines continued unabated in 3Q02. Nasdaq was down another 9.2% in the past three months, and the Dow was off 4.4%. However, the US dollar appears to be stabilizing against a basket of currencies, including the Euro. In our view, it's not so much that the outlook for the US economy has improved but that investors have less faith in the Euro and the Yen.

Investors' lack of confidence in paper assets is why we think our investment thesis for gold remains intact. We reiterate our Attractive view of the gold industry, which we expect to outperform the broader markets.

While consolidation of capacity continues, some companies plan to extend existing mines or develop new ones.

On the demand side, year over year demand for gold slipped by 15.1% in 1H02, to 1537 tonnes, according to the world gold council. But the gold price is higher. Despite the decline in gold demand, the price of gold has risen as speculators and hedge funds remain net long gold and open interest levels are firm. In our view, this is because many of the macro elements thatwe believe are constructive for gold remain in place. Real rates are negative, the Fed's bias is neutral as it attempts to avoid a deflationary spiral, and the low contango in the gold market is deterring hedge funds and gold producers from selling short. In fact gold producers have been net buyers of gold.

Gold stocks seemed fairly valued to us. The price to NAV multiple for gold stocks rose steadily with a strengthening gold price since bottoming in early 2001. However, stock valuations peaked at the end of June and have been declining over the past 3 months, significantly more than the POG. We think gold equities have corrected sufficiently and now represent fair value relative to the underlying spot price. Our view is that the gold rally has not run its course and that their is further potential upside. Our advice is to buy gold stocks on price pullbacks. However, those who believe gold is going to trade below $300 per ounce should lock in profits now.

Gold in a deflationary environment. Many investors have asked how we think gold would behave in the event of a deflationary environment. We think it would react very well, but it really depends on whether investors view gold and precious metals as a useful hoarding instrument. Typically, investor focus shifts from capital appreciation during boom periods, to capital preservation during a corrective phase, and then to hoarding of capital during periods deteriorating credit quality. Historically, gold has been viewed as a hoarding instrument because it is nobody's liability. During periods of deflation, the purchasing power of gold has typically risen because paper currencies were backed by gold. Today, however, "fiat currencies" are not backed by gold. Therefore, we think the key to understanding gold's behavior during periods of deflation lies in the deteriorating credit quality of currency issuers. Because deteriorating credit quality typically leads to a hoarding mentality, we believe gold could benefit under such circumstances, as well as other precious metals.


Post  44113  by  oldCADuser       OT: I'm sorry to say,...
Post  44114  by  oldCADuser       OT: I did some research (which I should have done
Post  44115  by  Decomposed       ot: hacking,
Post  44116  by  pmcw       OT: Decomp, It doesn't surprise me at all that you

Post  44117  by  pmcw       Reply
pace, As you ponder what might happen to the price of gold next week, year or decade, I encourage you to consider the advice shared with us by William of Occam:

"Entia non sunt multiplicanda praeter necessitatem" (Entities should not be multiplied more than necessary)

In modern English this might translate to "KISS" (Keep It Simple Stupid). - No offense to your intellect is intended.

Basically, Occam's Razor reminds us that when faced with a variety of explanations and limited hard data, the most direct (simplest) is usually the best choice and more often correct. We should only consider those more complex if and when additional data rules out the more simple solution.

I asked a while back if anyone could tell me what has happened to the "real" price of gold (after inflation) during the last two hundred years. I never got a response. Let me share with you the answer - it hasn't moved an inch. In real terms gold is priced exactly the same as it was in 1802! Of course, the dollar has fallen since 1933 significantly (due to inflation), but gold has held as solid as a rock. However, with the exception of the Civil War years, gold and the dollar were connected at the hip.

Since taking separate roads in 1933, gold and the dollar have diverged considerably. Inflation has eaten well over 90% of the dollar's value and gold has continued to hold the line. The dollar's hardest fall came during WWII when the US suffered inflation that approached 20% (actual inflation was just over 18%). Of course, gold took a very temporary trip to bubble land when the US abandoned the gold standard in 1971, but history doesn't suggest those days will return.

Interestingly, Britton left the gold standard in 1931 just as the US stock market was crashing and the dollar was appreciating (deflation). The cumulative deflation during the three years following the crash of '29 was roughly 25%. Following the market bottom of 1932 and Britton's abandonment of the gold standard, the world saw a mini version of the 1970's gold bubble. However, in both cases, normalcy quickly returned to the price of gold.

My point here is to again echo, gold is not an investment. A gold mine is an investment, but gold bullion is not. Gold is a method by which one can store value and hedge against inflation, but it will not grow in value unless the thing by which it is measured (US$) shrinks in value. Two hundred years of history say this is so and Occam's Razor says this, as being the simplest answer, is the right choice until evidence is available that says it is not.

Regards, pmcw

Post  44118  by  lkorrow       OT: OCU, that's sad. Benefits should be common and
Post  44119  by  maniati       OT: The discussion as to "who creates monster

Post  44120  by  lkorrow       Reply
Pace, Roof, re: Gold demand down 15%, 1H2002. Surprising with the press on Japanese buying, etc. Maybe gold producers will regret dehedging one day as the world economy stabilizes and the selling starts?

Post  44121  by  oldCADuser       OT: At EDS...
Post  44122  by  ljpit       OT: that's why we make a distinction between hacke