Showing this to the kids next time they don’t want to practice piano….
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I spoke to some of you on Fly’s blog the other day about how I’d had a conversation with a couple of traders whom I respect greatly, and whose collective net worths range into the billions. They were/are considering moving their capital to some less confiscatory climes if the current regimes remain in power past November of 2010. They said this bluntly and with little rancor. The conversation, in fact, was for the most part calm and matter-of-fact. A sense of resignation permeated the meeting.
“It is what it is” seemed the pre-dominant theme.
Many times I’ve said on this site that “capital is mobile.” That phrase should be embossed in gold bas relief a top both Congressional Speaker’s podiums in both the House and Senate. It’s a phrase all governments should take to heart, but ours most specifically because our success today as a global Colossus (dare I say “Atlas?” lol!) is due to the flight of both specie and intellectual capital to our shores.
What I mean is that governments unfriendly to capital, be they in Cuba, the Soviet Union, France, and for a time (ironically) Mainland China and India forced intellectual and physical capital off-shore into the arms of nations more friendly to its use and protection. The most hallowed place, up until recently, was in our own U.S.capital markets system.
Forget about “your tired and poor” — America became great on the backs of your innovative and rich, Asia and Europe. Sorry, that’s just the way it’s been. Thank our Constitution and integral respect for property rights for those wins.
The question each of us must ask, however, is can that win streak continue? If the hard fought aspects of U.S. exceptionalism (not my term, but there it is) are gradually worn away, and we end up looking like just another 50% government oriented European state, will entrepreneurs, innovators and capital investors continue to be interested in our ability to create wealth? Will that ability even remain a core competency in the 21st century?
Hard questions. In the mean time, U.S. Congressmen dumber than even their mulish appearance would convey, are calling for the “freeing” of the Chinese currency. This would be a disastrous turn of events, not just for us but for the Chinese themselves, who depend upon the artificial cheapness of their goods to feed the American consumer maw and thereby continue their growth in productivity and efficiency. Break that equilibrium and the Chinese will suffer — temporarily… as they move from a Third to a First World country and begin becoming emboldened consumers in their own right. Such an evolution for China — like post-war Japan’s — is all but inevitable.
As a result, the U.S. will be shorn not only of its cheap goods, but of its single most important financier — the Chinese Central Bank, who has been sterilizing our crap paper for years. Soon that subsidization will end, and we will have to face the reality of our over-spending. That day of reckoning will come all the sooner if we force the Chinese hand, as so many critically stupid Congressmen are now attempting to do.
The play this week (surprise, surprise) is the precious. I bought another 2k of AGQ on Friday, and tried to add 2k more SLW, but I was busy that day and only got to call in the trade to my broker. Unfortunately, I noted this evening there is no additional SLW in my account, so I will have to administer 40 lashes tomorrow morning to aforesaid sloth-like attendant. My kingdom for competence!
Sigh.
All the silvers and golds look good right now, but none more than my favourite (sic) gold ANV, which seems to be going to the stratos. I continue to like EGO and also RGLD, especially after the recent Goldman capital raise.
Best to you all, and watch out for those rem-nem-bee’s. They sting when aggravated.
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Criminy! This one is even better!
I think he’s a little older here.
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Jake,
Please break some of this down. Some of us, albeit well educated, are total newbies in matters of money.
“I continue to like EGO and also RGLD, especially after the recent Goldman capital raise”.
“especially after the Goldman raise,” what is it and what does it mean and why is it important?
And wtf’s a “rem-nem-bee’s?” I’d be glad to watch out, but have no idea where to look.
I sure hope they’re not in my house tonight.
Geez, Hawaii, pay attention.
We talked about Goldman and HSBC raising money for RGLD the other day on the blog. I’m quite certain you were around. They raised money in the mid-$48’s. I said I was pissed at the discount, but felt good those two were in the deal, which means large money is entering that stock.
Remnembi is the other name for the Chinese currency, the yuan. I think one is only tradeable in country, the other without.
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Jake,
Great post! I fear you are right on target.
Although I think it may be renminbi.
With the shit our government is proposing, Jimmy Roger’s move to Singapore is looking rather smart.
My current belief (partially stolen from Felix Zulauf) is that when deflation turns to inflation or hyperinflation it will do so in days or weeks, not like the 70’s. If you’re not invested properly ahead of time, one day you’ll wake up to a 20-40% haircut.
Nice silver article.
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We do not need china to finance our debt. Like japan, we will do it ourselves.
At zirp rates like the Japanese? That aging merry to round is grinding to a halt as well, you know.
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Hey Jake,
When you say the Chinese have been sterilizing our borrowing for so long, what precisely do you mean? Do you just mean that they’ve been buying our notes keeping our rates down? Because if you do, I would retort that it’s far more complicated than that. For one thing: they do not finance us… So the interest rate mechanism and our borrowing are not tied directly to one another, no matter what all the deficit hawks say.
As for the billionaires who are considering offshoring, when are they not?
When taxes on invested capital are low enough to make sense to leave risk capital here instead of in an overseas bank account.
In the former example, the capital benefits all America, which is why we don’t want to be stupid and chase it away.
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For one thing: they do not finance us…
Of course they do. By keeping the yuan artificially low, they are financing our deficits.
So the interest rate mechanism and our borrowing are not tied directly to one another, no matter what all the deficit hawks say.
Not the short term mechanisms no, but the more long term market oriented bonds will call the tune again soon, as they did in the seventies.
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“financing our deficits?” Do you mean they are producing our trade deficits?
Do you know what the breakdown is of the US trade deficit? how much goes to china and how much goes to the oil producers?
Methinks this is a crowded trade that is going to spank a lot of people who think that long-term interest rates have only one direction to go.
Will they go negative? How much longer can this bond bull hang on? It’s been running since 1982 for goodness sakes.
We don’t have the savings, so we must rely upon the rest of the world to buy our cheap bonds. That’s sustainable?
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China is where we store the notes we’re not using and don’t want to admit we printed.
Cool. Pull-offs ain’t easy on an acoustic, even for a strapping lad like me. Kid’s got some strong hands.
Jake, do you have some targets in mind for Gold and Silver or more specifically for your most prized plays ANV, AGQ, RGLD, SLW and PAAS? I’d hate to let sales slip by as gold and silver are roaring before they exhibit a pullback… know what i’m sayin
Jake,
Can you explain what happening with gold right now …most were up dramatically and then backed off dramatically. Is this good, bad, normal movement or is something sinister going on?
I’m interpreting it as high volatility before a strong break to either up or down. The 20-day MA is acting as support right now. If it breaks, we will probably see the 50-day, which will be a good spot to load up on miners. I’m not seeing any volume on GLD yet, so we may percolate for a few more days in the 122-123 range.
Looks like a coordinated move. G-20 this weekend. None of them can like a high gold price.
I will be looking to add that SLW I didn’t get the other day.
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http://www.zerohedge.com/article/second-gold-price-intervention-hour?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29
Thanks!!
Much appreciated!
Yes, thanks… I would tend to be in agreement w. that stuff.
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Amazing vid …the kid’s fingers don’t even span the neck and he has to get at the frets from the other side.
Make sure you check the second one linked in the first comment. I think he’s a little older and more confident there…
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Jake,
How long would you wait to add to GLD. I want to add more, but not sure of timing. Would you give it more time to shake out or see this as a good buy point or maybe add in increments? Right now I have a 5% and want to get it to 10%. I was planning on buying today, based on TA and other tools I have that suggested this was a good buy point. As I was getting ready to pull the trigger, it took a dump!
Also, would like to know how much of port would you recommend.
GLD is “bullion” in my book. So with physical, I think you want 10-20% in these times.
You should own physcial too, though.
As for buying… I’d look at the 20 and 50 day EMA’s on GLD… they have been “bog standard” for quite a while now.
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Thanks Mr. Limm!!!
If we fall far enough down, we will fall into the trap that took down rome. Using vice to shore up the republic, games, spectacles, and other, worse things. And then we might fall to the modern barbarians. But that judgement will be many decades from now.
Rand,
It’s my belief that states will legalize drugs to raise revenue, just like a gas tax. Actually, I’m in favor of that – if done properly, not because I will ever use drugs but because it would eliminate lots of crime & related violence. Prohibition was a failure. The “war on drugs” is a failure. A certain % of the population will use them, legal or illegal. Better to control it & punish abuse, not use. If Joey-bag-o-crac crashes his car, they can look up his use & say, “hey Joey, I see her ya just purchased some fine cocaine from the state drug store 2 hrs before your crack-up. We gonna have to throw the book at you.
Not decades away.
I don’t think the innovators and entrepreneurs will leave America en masse anytime soon. Think about the wealth of information available in America that is non-existent in emerging economies. We have infrastructures of not only standards for production/consumption but massive supplies of information and the intangible experience that gets passed down through generations in professions requiring higher levels of technical expertise.
One reason that India I believe is growing at a healthier rate than China is that they’ve tapped the Western adoption of democracy and have English as a spoken language in their country. Look how they have been able to integrate into our society more so than the Chinese on a social level, save colloquialisms and suchness. The ability to read and speak English provides them with the opportunity to attend first class universities and perhaps, allow our country to prosper from their immigration.
I don’t see it as an immediate brain drain. More like one done after years and years, like in the experience of former Empire Great Britianistan.
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