Story Comments

Dear Visitors,

This blog is really nice and informative. We are pleased to know this blog is really helping people. It's our pleasure to post informative content on this useful blog created by webmaster.

As budget season is approaching so it is wise to think before investing as we can witness very volatile market in coming days. Moreover, we are expecting some stock market correction in post budget session


We advise every investor to book profit before budget and try to grab value stocks at further decline for short to medium term.

For any query feel free to contact us.

Regards
<a href="http://sharetipsinfo.com" title="SHARETIPSINFO TEAM">SHARETIPSINFO TEAM</a>

+91- 9891655316
+91- 9899056796
+91- 9891890425

great article! all of america needs to have this mindset!

It's still $5 below its level at the same hour last trading day. Don't hold your breath!

Well, you go ahead and sell yours; maybe you should buy T-bill with it. I will hold on to my gold stocks. Btw as of 9:50 p.m., price of gold has gone up again by 1.1%, a new rally.

In other words it is a "rate of the rate of change issue," not a "rate of change issue."

By the way "backwardization" is a symptom and not a cause. The relative effects between the dollar and gold will be mild and will not last.

ds3212, granted, all excellent points but you aren't considering the same upward pressures on the dollar. Believe me, the demand pressures (look at T-Bill rates) on the dollar are already exceeding the demand pressures on gold. You are sounding a little irrational.

MarkASadowski,

Well, the foreign debt may represent 25% of the total public debt ($11.3 trillion as of Oct /2008) however this amount does not include the injection of $1.5 trillion of stimulus and more to come to an estimated level of $7 trillion (Bloomberg), which would amount to a total of $18.3 trillion for public debt in a near future.

The fact is, on Dec 2, 2008 gold went into 'backwardation' on the COMEX exchange for the first time ever in history at 1.98% discount to spot (Dec 31 delivery) and 0.14% discount (Feb 27, 2009 delivery). On Dec 3, 2008 the situation was even worse at 2% and 0.29% respectively. The negative value against spot represents shortage of delivery, meaning gold hoarding has already begun (fleeing U.S. dollar), now the so-called velocity should follow very soon when the safe-haven of T-bill is no longer considered safe enough.

As I've mentioned previously, it is by no coincidence that there was a sudden surge by some of the major ...(Read more of this comment)financial institutions around the world (Goldman, HSBC, BNS, Royal Bank, and others) liquidating their stocks in order to increase their capital reserve and buying huge amount of gold from COMEX (future market) as if they know something is about to happen, very soon.

After all, 10,000 flies can't be wrong!



(Show less of this comment)

Interesting debate between Mark and dw. I tend to agree with Mark's position.

We are now in a full blown global recession which started in the US but has spread everywhere.

Even though we are going through the credit crunch - paradoxically going forward the issue will be excess liquidity - but no takers. (paradox of thrift).

Because of the large shock to the financial markets and the housing market the over extended consumer is now in "super saving mode" and trying desperately to stay above water. For ex: Consumers represent 75% of GDP and assuming a 10% cutback in consumer spending will shave ~7.5% of GDP - this could drive unemployment to 10% plus.

Govt. has to fill in the large "hole" in the GDP - to break the negative feedback loop which can result (as it naively did in the 1930's by raising taxes and building trade barriers). The gold standard at that time prevented monetary response and quantitative easing was unknown.

Increased d...(Read more of this comment)ebt does not matter (US - debt/GDP ratio in still not bad at around 60%) esp. as it is denominated in USD. (Japan is close to 200%). I also think a large stimulus is necessary as an insurance policy so that we don't sink into a depression.
(Show less of this comment)

dw3212, what you're oviously thinking about is the case of Weimar Germany. There's an important distinction. Germany was subject to the London Ultimatum that they had to pay war reparations in gold or foreign currency. Our net foreign debt is currently about $2.5 trillion, not $20 trillion and we have the unique luxury of having our debt evaluated in our own currency. If it deflates that only improves our net foreign asset position, and our foreign creditors hardly want to cut their own throats. This is a false analogy cultivated by Austrian School economists and other incurable gold bugs. There's a time to buy and time to sell. Now is the time to sell.

MarkASadowski, PS, the velocity of money you're referring to is really based on absence of confidence and that will happen sooner than you think.

Case in point, we are already experiencing or about to experience the classic Weimar Hyperinflation in the U.S. as a result of our money supply's rapid expansion (76% in just last 3 months, at an annualized expansion rate of > 300%), the nation's massive foreign debt ($10-$20 trillions and counting), and our shrinking economy.

So, there is really no point being in denial.

MarkASadowski,

There is a fundamental flaw in your reasoning. Bankrupt sovereign states most commonly use the currency printing press as a solution to not having enough money to cover their obligations. The alternative would be for the U.S. to renege on its existing debt and obligations.

The main cause of hyperinflation is a massive and rapid increase in the amount of money, which is not supported by growth in the output of goods and services. This is exactly what's happening today. Governments from around the world (G20), including the U.S. is injecting a huge amount of liquidity into the financial system to fix the ongoing credit crisis but with little or no success.

Currently, there are huge amount of liquidity in the system without even counting any stimulus packages while assets are continuously falling and the economy is in deflationary mode (no one is really buying). Currently, the insurance marketplace for risk underwriting is in sustained decline ...(Read more of this comment)and is paving a road to a next Depression. Jacking up interest rate to counter inflation in middle of a deflation is certainly not going to help in the current situation, especially the problem is now globally.

Let not forget, the Great Depression of the early 30's was started in the U.S. and FDR had to devalued the Dollar by 75% to get out of Depression. Since U.S. is a focal point for the world's economy, other countries must follow to do the same, thus the revaluation of gold or return to the 'gold standard'.

Bankrupt sovereign states most commonly use the currency printing press as a solution to not having enough money to cover their obligations. The alternative would be for the U.S. to renege on its existing debt and obligations.


(Show less of this comment)

dw3212, there's one small detail you left out: the velocity of money. It doesn't matter how fast the monetary base is growing when the velocity is shinking as fast or faster. Since we're already at a zero intrest rate policy (at least in nominal terms) the dollar cannot be depreciated any further (thus, now is the time to sell gold). As the economic crisis continues to spread to other parts of the world expect the demand for dollars to continue to increase and T-Bills to earn record low rates. I wouldn't consider buying gold until the world economy hits bottom and/or inflation returns, and that might not be for a year or two. I know it seems absurd, but hyperinflation is not on the way. Despite the fact that the monetary base went up five-fold between 1929 and 1944, the overall price level was no higher after 15 years. That's what happens during a deflationary liquidity crisis.

Since the price of gold was pegged during the Great Depression we cannot look to it for evidence of ...(Read more of this comment)what is going to happen now. I would look to the last great commodity bubble when gold was allowed to float: the late 1970s to early 1980s. Although we had inflation (not deflation)throughout that period, note that gold, oil and inflation all peaked in 1980. Therafter, despite occasional rallies, the price of gold fell for over two years before stabilizing.It took 27 years before it exceeded its previous nominal price high, and it never recovered its real price high.

Well this time, gold peaked in March, oil peaked in July and year over year CPI peaked in July. I don't expect gold to exceed its March price for a very long time.

I could be wrong but I don't think so. As for conspiracy theories I don't buy them. (Show less of this comment)

You assume that just because we got it wrong last time, and that we are doing the opposite now, that we will get it right this time.

You fail to consider the possibility that there is no way to prevent a house of cards from collapsing.

Because Benanke and Paulson are doing the opposite of the fiscal policy that was instituted during the great depression does not necessarily mean the result will be the opposite effect.

Hoover and FDR made their share of blunders, as are Bernanke and Paulson, as will Obama and crew.

Massive de-leveraging needs to run it's course. Firing up the virtual printing presses, encouraging more leverage, etc and saying "this time will be different" doesn't make it so. As went the "new economy" of the 2000's, so will go the recession cum "new depression".

Sure, there will be shades of differences - but the underlying economy is fundamentally exponentially over-leveraged. Not to mention the $50+ TRILLION we're ignoring in social security & medicare obligations. Our current debt of $13-15 trillion balloons to $70+ trillion when you do real generational accounting of our obligations.

To meet these obligations, we would have to increase our revenues by ...(Read more of this comment)30-50% per year starting now.

Also, when does the Fed balance sheet stop exploding? Since late September, it has been growing at over 100 billion every two weeks.

Our reaction to this depression may be different from Hoover's & FDR's - the result of the Government's actions now may spread the pain more evenly than was the case in the 30's (and shift the fiscal burden down a few years).

The US is bankrupt, consumers are over-leveraged, the world is in recession, even China's projected 8% 2009 GDP growth is unimpressive when you factor in the fact that their stimulus package package is 10% of their GDP.

The fundamentals are just flat out awful because of the expansion of the money supply over the last 25 or so years that has led to an unsustainable credit-driven boom.

We can throw some made up money at the piper, but eventually we will have to pay the piper in ernest. Milton & Bernanke may end up eating Hayek's shorts this time. But if I'm right and you're wrong, a lot of us are going to end up sans pants.




(Show less of this comment)

MarkASadowski,

In fact, I am investing much more today before a sudden spike hits, which is designed to be out of reach for most.

It would no longer be viable to peg yours against your neighbor's currency while your neighbors have also been busy printing theirs. The fact is, you cannot just keep on printing money to buy gold. There is only a LIMITED supply of gold in the entire world.

FDR had to devalued DOLLAR by 75% against GOLD in 1934 to kick start the economy.

Sorry dw3212 but gold has already peaked. I'm getting ready to sell mine. The difference between now and the Great Depression is that the dollar is not pegged to gold. As a result. in a period of deflation. the dollar will actually buy more gold over time. I hope I sell mine before you have a chance to sell yours (just a matter of self interest).

'Those who doubt that there is much connection between the economy of the 1930s and the supercharged, information-age economy of the twenty-first century are invited to look at the current economic headlines -- about high unemployment, failing banks, volatile financial markets, currency crises, and even deflation. The issues raised by the Depression, and its lessons, are still relevant today.' {Essays of the Great Depression - by Ben Bernanke 2004]

According to the descrIption provided by Bernanke (2004), we are already in or heading towards Depression (taboo). Just look and see what's happening around the world. The entire world's economy is in trouble and they are pumping trillions and trillions of paper currencies, yet we still have credit crisis. The worse is yet to come. There is a wide speculation that these stimuli from around the world will have to be absorbed somehow before hyper-inflation sets in, while in the middle of this [high unemployment, failin...(Read more of this comment)g banks, volatile financial markets, currency crises, and DEFLATION] . The world may be heading back towards 'gold standard'

All the major Canadian banks are having stocks sales worth about $7B to raise their capital reserve (possibly in gold) in a middle of a Recession. According to newswire, there is a sudden surge by some of the major financial institutions around the world (Goldman, HSBC, BNS, and others) buying huge amount of gold from COMEX (future market) rather than from London spot market, as if they know something is about to happen in a near future.

One possibility is, the price of gold will no longer be 'artificially suppressed (unofficially, of course)' and it could jump to over $2000 oz in a matter of few months to more than $10,000 oz. to absorb the trillions and trillions of these excess currencies from around the world. It would no longer be viable to peg yours against your neighbor's currency while your neighbors have also been busy printing theirs. The fact is, you cannot just keep on printing money to buy gold.

It may be a good time to invest in gold stocks now. You may potentially double … triple … 10X your investment capital in a matter of few months.
(Show less of this comment)

You are yet another incurable optimist. So far the doom and gloom crowd has had a better track record.

In similar past incidents, stock market indices have typically dropped until ten-year average price-to-earnings (P/E) ratios were approximately 6-7. This not only happened in the Great Depression. It also happened in 1974 and 1982. In today's terms that range will be reached when the Dow Jones falls to about 3400 to 4000. Stock index troughs historically are reached about 60% of the way though a recession. Assuming the credit markets continue to ease this means that the stock market should reach bottom sometime in the first quarter of 2009. Based on this I would say that the stock market has a lot further to go before it hits bottom but it should do so relatively quickly and this may come about as deleveraging picks up pace in the coming few months. Incidentally I'm not alone in this assessment as both Robert Shiller and Carl Rogers feel exactly the same way.

As for...(Read more of this comment) tax rates, I would say that by themselves they are irrelevant, as the size of the deficit matters more in a deflationary liquidity crisis. The Great Depression is one of those incidents where people's memories are a little bit fuzzy. True, during the contraction from 1929 to 1933 under Hoover, when GDP fell an average of 7-8% annually, there was a big hike in the top marginal personal income tax rate from 24% to 63% and a more modest increase in the top marginal corporate tax rate from 11% to 14% by 1932. But capital gains tax rates were maintained at a record low rate of 12.5% throughout the contraction. And yes, taxes were also raised under Roosevelt. But during the period 1934-1937 the GDP managed to grow at a blistering pace of 10-11% annually. This was despite the fact that the top marginal income tax rate was raised 78%, the top marginal corporate income tax rate was raised to 15%, and the top marginal capital gains tax rate was raised to 39% by 1936. In short taxes were lower during the contraction than during the recovery. It was irrelevant because there was a shortage of aggregate demand during the contraction, not a shortage of investment. Even if current top marginal tax rates were to be raised modestly, I don't think it would do any harm, given the size of the proposed fiscal stimulus. And it might serve as a way of transferring income from the very wealthy to those less so in order to boost aggregate demand.

As for tariffs, I would agree that Smoot-Hawley was a major culprit in the collapse of international trade in the Great Depression. But note that international trade is also currently in a steep decline even without increased protectionism.

And I also agree that the Federal Reserve has been much more aggressive this time in preventing bank failures. But it was a little late getting off the starting block. Letting Lehman Brothers go under set off a huge financial panic that was completely unnecessary, and we will be paying for that mistake for years.

And finally, let me say a word about monetary policy. Yes the Federal Reserve's monetary policy was too tight during the initial phase of the Great Depression. But you fail to mention that they did at least make a halfhearted effort to raise the money supply during the contraction. For example, why did you fail omit the fact that the monetary base in fact rose from $6 billion in 1929 to $7.6 billion in 1933 even as broader measures of money declined? Then like now, money velocity took a nose dive. Furthermore, when you have deflation even zero nominal interest rates are high in real terms. Today monetary policy has essentially become ineffective.

I don't share your rosy perspective. I'm more inclined to agree with Nouriel "Dr. Doom" Roubini that the worst is yet to come.It might not be as bad as the Great Depression, but it will be the first deflationary contraction since then, and that should give everyone a pause.(Show less of this comment)

This is a very upbeat article but is contrary to all the data out there. 2009 will be a rocky road and it is prudent to wait and see what happens. Check out GloomBoom.com - it will make your day!

It is very apparent from reading through the archives of Donald Luskin that there is no accurate prediction happening here. This is the same person that said we were headed into economic recovery this April and that there would be no recession. Take everything you see here with a grain of salt.

There maybe bargains now, but there will be better bargains later. Company earnings and stock prices will continue to decline until mid 2010, when the housing market will begin to recover.

"If I'm right, and this view starts to gradually seep into public consciousness"...BAHAHAHAHAHAHAHAHA

"If your right".BAHAHAHAHAHA...............You and Kudlow, a couple of economic hacks..How both of you still have a job is beyond me....

You've been saying it's time to buy for months, all the way down...eventually you're bound to be right but unfortunately there's no consequences for you for all the times you've been wrong...pity the poor fools who followed your advice months ago and bought in when the market was 20-30% higher...sad.

HI,
After Mumbai attack sentiments were really negative in the stock market. Still BSE managed to touch 10K mark which is a great achievement and it shows the confidence of investors which they have in Indian economy.

Long way to go

Regards

ShareTipsInfo Team


e or there inner self is waking up??

What you have to say about it??, Looks like some political move is there!!

Now stock market will be affected by all political moves, though sentiments are not good but on technical charts market is quite bullish for very short term, still sentiments will effect Nifty movement. So all are advised to trade in small quantity and with strict stoploss till the picture is clear.


Regards

www.ShareTipsInfo.com Team

Call at:-

+91-9891655316
+91-9899056796
+91-9891890425

On Yahoo Messenger: ShareTipsInfo@yahoo.com or ShareTipsInfo_1@yahoo.com

On Google Talk: ShareTipsInfo1
...(Read more of this comment)
Mail at:-
contact@sharetipsinfo.com
sharetipsinfo@yahoo.com
sharetipsinfo_1@yahoo.com
sharetipsinfo@gmail.com






(Show less of this comment)

Posted by: jim on Sadly, No!

How on Earth can this ass-whuppin’ post not even get 100 comments while those other sluttier posts get way more? These threads are being rigged … by ACORN! Wake Up sheeple!!1!1!@!

Posted by: Shklovsky on Sadly, No!

My god, did you drop some Sugarhill AND 9353 in the same column? A man of parts!

Posted by: Dr.BDH on Sadly, No!

Sadly, there are people who read Smart Money for financial advice. It’s not like Luskin only wrote for The Washington Times or The Weekly Standard. “Smart” Money put this idiot in print month after excruciatingly wrong month. And that was after he revealed what an ignorant fool he was by going up against Krugman and being completely discredited. I recommend you submit this to Dumb Monkey as a cover story on how not to report on the economy. They owe to their readers.

Posted by: tatateeta on Sadly, No!

Wow! This guy Luskin is a whack job.

Posted by: sukabi on Sadly, No!

after watching a clip of the CNBC financial brain trust interviewing Roubini and Nassim the other day, I wasn’t sure if your portrayal of Luskins “advice” was satire or not… looks like you took a serious look at what passes for “expert advice”… you sir, have done the country a service.

Posted by: dex on Sadly, No!

this post? this post, genius. thank you for the genius post.

Posted by: protected static on Sadly, No!

Too bad you can't ask the Chicago City Comptroller Coalition Provisional Authority about that… WordPress willing, FTFY Just remember: pallets of bills, totally unaccounted for. C-5s full of cash.

Posted by: int argc on Sadly, No!

Is this the same Donald Luskin that engaged in a several-years-long war of attrition with the Light Blue Satan, resulting in several hilariously futile attempts to out the notorious Atrios? Because if he is the same person, I didn’t think, until reading this post, that he could be more thoroughly punked. Bravo.

Posted by: Daverz on Sadly, No!

The only way I can explain Luskin getting a forum anywhere is that there really is a conspiracy to keep you poor and stupid.

Posted by: Gore Vidal Sassoon on Sadly, No!

It’ll be a recession in a couple of months when they can pin it on Obama with a straight face.

Posted by: OB-GYN Kenobi on Sadly, No!

I suspect that if they have been listening to him. they likely can't afford the rope. I believe justme has won the thread.

Posted by: henry lewis on Sadly, No!

I dunno about this bold thing. Every comment looks like a stern e-mail.

Posted by: ifthethunderdontgetya™³²®© on Sadly, No!

owlbear1 said, February 11, 2009 at 12:06 Who the f!*k is Luskin's audience? Why haven't they lynched him yet?His audience is the usual dupes of the Church of Free Market Triumphalism.

Posted by: jim on Sadly, No!

Yeah, he’s dead-on about this being a great time to buy stocks - if you get the ones with all the ornate lettering & fancy-ass graphics, I hear they make real pretty wallpaper. Donald Luskin is the Bill Kristol of Wall Street!

Posted by: owlbear1 on Sadly, No!

Who the f!*k is Luskin’s audience? Why haven’t they lynched him yet?

Posted by: justme on Sadly, No!

how about rainbow toe socks and short pants.I’d prefer not to have to remove my eyes with an impromptu spork. I suppose the double wetsuit reference goes here.

Posted by: Lesley on Sadly, No!

I'd love to see this clown in stocks. If stocks aren’t possible, how about rainbow toe socks and short pants. Every day for the rest of his life.

Posted by: Lesley on Sadly, No!

I wish I could be wrong so often and still keep my job. Heh, that would be sweet. Try the Securities Exchange Commission. They prize incompetence almost as much as moral bankruptcy.

Posted by: Snorghagen on Sadly, No!

Holy s!*t. Somebody pays this guy to write columns?Amazing, isn’t it? And he gets away with it, year after year. He’s turned being a moron into a lucrative career.

Posted by: Smut Clyde on Sadly, No!

In fact, you'd think it had fallen into a boiling hot volcano. That's how empty you'd think that glass was. Empty? You call that ‘empty’? When I were a lad, we had glasses that were so empty that we had to hold them under a running tap for 20 minutes just to get the sides wet. But you didn’t hear us complaining, mainly because our throats were too dry.

Posted by: justme on Sadly, No!

I’d love to see this clown in stocks. I think we really need to bring those back. The wooden ones with holes for the wrists and neck, that is. If we as a nation invested in that sort of stocks, heavily, like lining the National Mall with them, and made them the punishment for being a media asshat who is always wrong, we’d be waaaaaayyyyyyy better off. Oh, yeah. They get to be the sentence for douchenozzle politicians, too. Baskets of rotting veggies for all! Sigh. Sweet reverie, a man can dream, can he not?

Posted by: CNBC on Sadly, No!

Based on this story, I’m investing in d!*k commodities. Oh wait, we already have a surplus. Maybe if we package Kudlow with Deutsch we can make a couple of worthless commodities look like a good deal. I better get the team on this. Bulls Away!

Posted by: M. Bouffant on Sadly, No!

Corporate executive is another possibility.

Posted by: Grace Nearing on Sadly, No!

I wish I could be wrong so often and still keep my job. Heh, that would be sweet. Well, the trick is to pick a job for which there is no pesky oversight board like, say, the American Bar Association; or one in which you may inadvertently kill your clients, like medicine, and then have to face litigious family members; or rat catcher, where if you kick back too long the rats start nibbling your toes; or bus driver or airplane pilot, where your miscalculations not only are going to get you maimed or killed but also wind up on the evening news. So that pretty much leaves politician and media personality.

Posted by: M. Bouffant on Sadly, No!

As long as Mr. Luskin is getting his commission, the best time to buy stock is now, as well as tomorrow, also.