5 ms·

The Smartest Man in Europe Is Very Cautious

89 points by rafaelc 15y ago

chrismealy 15y ago
The smartest man in Europe is about an enlightening as Thomas Friedman column.
rajpaul 15y ago
Why should I believe that "The Smartest Man in Europe" is anything other than a sock puppet talking up Blackstone's book?
- meric 15y ago
  Still, an interesting read nonetheless.
  - roel_v 15y ago
    Depends I guess on how often one reads finance articles. There's nothing new in there, there is an entire 'school of thought' that has been saying what's in this article since 2008. New economies are the future, fiat money is bad mmkay, US and Europe don't have enough room for growth to out-grow debt. The appeal to authority with the Baghdad real estate deal is one of those tell-tale signs of a sensationalist article. If the building in case had been blown up and nothing could have been recouped because nobody wants to insure a building in Baghdad, nobody would've ever heard about the whole deal. Survivor bias at its most obvious.
thadeus_venture 15y ago
I don't always invest, but when I do, it's in gold and Swiss francs.
- deleted 15y ago
  [deleted]
- dualogy 15y ago
  You invest your money... in money? Well, guess it's a smart move these days =)
  - Estragon 15y ago
    It's a reddit-style joke. ("Most interesting man in the world.")
  - anonymoushn 15y ago
    U.S. dollars are also a bet, you know.
JeffL 15y ago
"All the problems really started when the dollar was no longer convertible into gold. That happened in August 1971 and eliminated all currency restraints because money became only paper and not backed by anything real." Interesting to find that in the middle of the article.
- mmaunder 15y ago
  There's a school of thought that blames the gold standard for the great depression. The French accumulated massive amounts of gold between 1928 and 1932 and some scholars say the global deflationary effects of Bank of France's policy during this time caused the great depression. The gold standard also ties money supply to gold production which is a little like tying fed policy to the quarterly flip of a coin. For example, the Australian and Californian gold rushes of the 1850's caused huge short term price instability. I'd counter the above statement with the following: Many problems were solved with our departure from the gold standard and paper money is backed by the faith and credit of the country that prints it and it's value should, and does, fluctuate accordingly. But arguing with an anonymous "smartest man in Europe" is a little like arguing with Santa.
  - wisty 15y ago
    Well, the collapsing credit money couldn't be offset by more printed paper money; so that's what made the Depression cut so deep. But the credit money was only able to collapse because it had gotten so high in the first place. Whether your money is a bank account, commercial bonds, government bonds, or gold; it doesn't pay to have fluctuations in total volume. Keeping the base (i.e. gold or dollars) fixed won't stop the banks (and governments) from borrowing and loaning more every year, until a crisis shows them that they have gone too far.
  - buff-a 15y ago
    Many problems were solved with our departure from the gold standard Such as having to give the Saudis, and now the Chinese, all our gold. Instead we give them paper, and they then reinvest that paper in: * internet companies * enron * property * banks
aj700 15y ago
I knew all this. Stocks are bound to be crap, they depend on making a profit from selling goods and services. There are only two types of people left in unequal economies. Those who can't afford the stuff and those who don't need to buy any more than they do. Consumption, profits and stocks would all be much higher if societies were more equal. There is tons of money locked up that never needs to be spent by the people who've got it. Economic demand is money + (desire or need). Every consumer has one or the other but not both. Maybe the poor deserve no more a share of the resources than they get, after Reagans tax cuts, but the result is terrible for companies. To sell anything PROFITABLY, chase the super-rich. Everyone else is broke. We won't be able to transfer the unneeded wealth of people in Luxembourg to Nigerians or Romanians of course, we must wait a few decades for the abolition of scarcity (of most things) and the abolition of money and economics. Otherwise known by: "Tea, Earl Grey, hot."
- nazgulnarsil 15y ago
  replicators won't get rid of status. holodecks, however, will. at least for anyone who doesn't care.
- econgeeker 15y ago
  I disagree with you strongly, but I think you made a good attempt at an argument and I think it is wrong you were downvoted, so you have my meager upvote. I think your argument is disproven by walmart. Walmart doesn't chase "the super rich" they actually chase the bottom end of the market. They make good money by doing their darndest to make prices as low as possible, both to increase volume (and marketshare) but also to cater to the market that doesn't have a lot of disposable income. I don't see the problem here as a lack of "equality", in fact, the super rich are taxed more than the poor. If things were equal they'd all pay the same dollar amount (not even the same percentage, the same amount in absolute terms.) That would be more moral as well. The reasons those with less money have trouble affording things is that they have been impoverished by government. Presume you're at the lower tax bracket and paying %15 to the IRS. You're paying another %15 to Social Security (though only half is reported on your check, you have to earn the other half as well or you wouldn't have your job.) You're paying- what %4 to medicare? %3 for unemployment insurance, say %5 in state income taxes (just picking a low number since some states don't have it and it varies.) That's %42 of your income right off the bat. Now if you're just scraping by, that means you're spending all of the remaining %58! All of that is taxed at rates from %8 (city sales tax) to %30 (cable, phone, an flights) to as much as %40 (gasoline). If we take the lowest figure there, %8, then that means of every $100 that person makes, government takes %50. It is worse fro people in the middle and lower middle incomes. Their state and federal income taxes are higher. That's why people have trouble making ends meet.
TheSkeptic 15y ago
After pointing out that "The central bankers throughout the world have lost touch with reality" and discussing the messes that have been created in large part by inept bureaucrats, The Smartest Man in Europe dismisses all of the problems brewing in China with a naive "the authorities will figure out solutions to solve them." Anyone who truly believes that the "authorities" in China are any more capable than the "authorities" outside of China isn't very smart at all.
- trb 15y ago
  Maybe not capable, but surely more focused? As far as I know there are no elections that change the top leadership every few years. This way they have a larger interest in planning beyond their political term and the private industry has less influence through campaign contributions. But I might be wrong, I'm way out of my comfort zone here.
  - TheSkeptic 15y ago
    In China, "private industry" doesn't truly exist in many industries. To do business, you need to be politically connected to some degree. In other words, campaign contributions are unnecessary; the state and private industry are already married.
- wisty 15y ago
  They aren't more capable, but at least they are able to take responsibility. Banks will be nationalized the minute they look shaky. Local governments will be recapitalized, and the leaders might get punished. But there won't be as bad a crisis, because someone will foot the bill. OK, it will cause a moral hazard. There will be a big need to reform. But there already is a big need to reform. And I think there's already a commitment (from the top, and from the general public) for reforms. Plus, it's easier to grow when you are under 1/5th the GDP per capita.
  - roel_v 15y ago
    What are you talking about? Banks already are 'nationalized' for all intents and purposes (rather, they've always been under central leadership). And that's exactly the core problem with the debts owned by Chinese banks comes from.
sandstrom 15y ago
I hope Byron Weiss is better at picking smart men than predicting the future: http://www.zerohedge.com/article/byron-wiens-prediction-track-record-zero-out-ten http://www.zerohedge.com/article/byron-wiens-prediction-trac...
wickedchicken 15y ago
I found a fun game to play whenever reading superlatives from financial news sources: append ", in finance" to every one you see. Thus, "the Smartest Man in Europe" becomes "the Smartest Man in Europe, in finance." Things start to make more sense that way.
paganel 15y ago
> The Smartest Man in Europe Is Very Cautious I first thought it was going to be an article about Grigori Perelman and about how we are all one step closer to Apocalypse because he was very close to finding that there is indeed no foundation for Mathematics (or any similar conclusion that is way over my head in even trying to explain). Instead I stumbled upon an article about a rich heir to "a mercantile family" who talks about money, money, money. Not that's anything wrong with talking about money, but if that's we consider as the "smartest thing" in an entire Continent I think we have a problem.
- singular 15y ago
  There is no foundation for Mathematics [1] :-) [1]: http://en.wikipedia.org/wiki/Godel%27s_incompleteness_theorem http://en.wikipedia.org/wiki/Godel%27s_incompleteness_theore...
  - praptak 15y ago
    Goedel's theorem is not about nonexistance of foundation in mathematics, it's about existence of true but nonproveable statements in every nontrivial formal system. One could imagine a hypothetical stronger result - maybe every nontrivial set of axioms can actually derive p^(not p)?
    - singular 15y ago
      IANAM, but I do know it was an unassailable problem in Russell + White's efforts to found mathematics on a firm basis in Principia Mathematica [1]. [1]:http://en.wikipedia.org/wiki/Principia_mathematica#Consistency_and_criticisms http://en.wikipedia.org/wiki/Principia_mathematica#Consisten...
      - oelewapperke 15y ago
        You want to actually understand mathematics, here's what to do. Reading any theory, any theory at all. Look at the author. Do a wikipedia search. If the article starts with what a great philosopher they are, burn the article, wash your hands in holy water and beg for forgiveness. Their articles and books do not actually have a basis for their consistency except "LGTM", they're less than worthless, and can easily convince you that idiocies are real if you're not careful. And if you're careful you'll find a massive unproven leap in logic in the first sentence of the first page and you'll be unable to continue reading. Avoid philosophers like the plague. Including Russell, including Principia mathematica. Rip them to shreds if you find them in a bookstore. You'll be doing the world a big favor.
terhechte 15y ago
He made one interesting point, which is to invest in Swiss Francs. I have been contemplating doing that over the past weeks, what are your opinions on that?
- econgeeker 15y ago
  Switzerland still has a conservative financial system, and may benefit from a "flight to safety" as the euro deteriorates. That might be his reason for buying francs. Francs used to be backed by gold, and might still be partially backed by gold. I think they are not redeemable in gold anymore, but that the country keeps a large supply of gold onhand. So, sort of a partial fiat currency. However, one can own gold directly, which provides a hedge against all currency risk. It sounds like this is what he is doing, and then also holding some francs against a panic in europe.
JanezStupar 15y ago
Strange, one would expect The Smartest Man in Europe to be at least somewhat contrarian. What I have read is a collection of pop fearmongering. Basically his stance is the prevalent position among people out there today. Thus it reeks of manipulation. It is a piece meant to evoke a specific emotional response. That it is written by a hedge fund executive only reinforces the stench. Thus I mark this piece as hedge fund propaganda. True meaning is a feint within feint. Edit: I suspect that Blackstone is trying to unload its gold and trying to create a market. Gold is probably in the last phase of bubble. Why do I think so? Only one reason. In my country there is a vocal MLM type gold investment operation going on. Very similar to what was going on with stocks and derivatives in the 2006/2007 era. If there is one fundamental truth about markets, it is that when your hairdresser and butcher start giving investment advice it is time to get out. There is no more bigger fools out there. Gold is going down.
- econgeeker 15y ago
  It is true that in a bubble everyone is telling you to buy. But I don't think we're in a bubble for the gold price for a couple reasons. The first is that most people with an unsophisticated financial perspective (eg: hair dressers) are not aware of gold (in the countries I've visited.) The slightly sophisticated (Eg: people who invest in mutual funds) have been claiming there was a gold bubble going all the way back to when it was only $400 an ounce. But the other reason is we haven't seen gold take leave of the fundamentals. The financial crisis that has been unfolding since 2008 has revealed that the only response governments seem willing to take is ever more monetary inflation. The more money out there, the higher the price of gold. Secondly, most gold trading is at the level of very sophisticated people, not the average joe. When average joes start piling in and blowing up the price, then gold may take leave of its fundamentals and we'll have a bubble. The thing is, in bubbles, supply rushes in to meet demand-- but you cant' scale up supply of gold like you can dotcoms or houses. Environemntal regulations and kleptocratic governments keep new mine production opportunities limited. Finally, mining companies-- which should be the darlings of the gold bubble if there is one-- are trading sympathetic with the rest of the stock market, not contrary to it. If we were in a gold bubble, then good news for gold (eg: bad financial news) would cause those prices to go up-- but they don't they go down now. This indicates that they are not seen as an alternative, but as being subject to the bad news the same way General Electric, et. al. are. We won't enter a bubble phase until that has changed. When people start seeing gold as a safer asset (or as a bull market "you just gotta get into!") then we'll have entered a bubble. At that point, when there's bad news for General Electric, you'll see a bump in the price of GoldCorp. We saw this in the dotcom bubble-- a big IPO for a tech company would cause a decline in General Electric or Gold for that matter. All of these are subjective observations, so neither of us can really prove the other wrong of course. I found it interesting is that we use the same signal to detect a bubble-- the hair dressers and MLM schemes. I'm impressed to see how much more popular gold is outside the USA than it is inside the USA. I take that as a sign that it is heading towards a bull market. However, if you're right and I'm wrong, I will be very severely punished by the markets. I'm not too worried, though. I got punished by the dotcoms. I played the housing bubble successfully going up and going down and got out a bit early, but am happy with the result. I remember being told I was crazy on forums because I said there was a bubble in housing. So, you're not crazy, I just think you're too early.
JulianMorrison 15y ago
All this talk of "but they have no other choice" amuses me. Yes they do. And they will probably exercise it.
kahawe 15y ago
> I remain positive on China. I cannot help but wonder about China... I am convinced they are extremely clever in toying our Western system of capitalism and number games one way or another. The only example coming to mind right now is the artificial surge in car sales in China and the government is behind a lot of it, buying and storing cars in huge parking facilities. And the refusal of publishing economic statistics or just blatantly making them up. And they are just as incredibly clever and diplomatic in political affairs; the rhetoric used in their more recent foreign affairs are nothing but jaw dropping and display an unprecedented self-understanding an pride that is bordering smugness. They do not even try to hide or acknowledge violations of human rights; they simply wipe it off with "none of your frakking business" kind of answers. They are showing very clearly: we bow to no one. For me as a European, their last display of power here in Europe felt like a slap in my face when they offered to "help" in the current financial crisis in Greece and the rest of the EU when I saw how little their ongoing violations of human rights mattered all of a sudden. Please note I am not bashing Chinese people but wondering about Chinese politics and their regime and how the west, generally so proud of their "humanity" and "human rights", bends over back- and sideways now that China is becoming an influential world power.

89 points by rafaelc 15y ago

The smartest man in Europe is about an enlightening as Thomas Friedman column.

Why should I believe that "The Smartest Man in Europe" is anything other than a sock puppet talking up Blackstone's book?

meric 15y ago
Still, an interesting read nonetheless.
- roel_v 15y ago
  Depends I guess on how often one reads finance articles. There's nothing new in there, there is an entire 'school of thought' that has been saying what's in this article since 2008. New economies are the future, fiat money is bad mmkay, US and Europe don't have enough room for growth to out-grow debt. The appeal to authority with the Baghdad real estate deal is one of those tell-tale signs of a sensationalist article. If the building in case had been blown up and nothing could have been recouped because nobody wants to insure a building in Baghdad, nobody would've ever heard about the whole deal. Survivor bias at its most obvious.

thadeus_venture 15y ago

I don't always invest, but when I do, it's in gold and Swiss francs.

deleted 15y ago
[deleted]
dualogy 15y ago
You invest your money... in money? Well, guess it's a smart move these days =)
- Estragon 15y ago
  It's a reddit-style joke. ("Most interesting man in the world.")
- anonymoushn 15y ago
  U.S. dollars are also a bet, you know.

JeffL 15y ago

"All the problems really started when the dollar was no longer convertible into gold. That happened in August 1971 and eliminated all currency restraints because money became only paper and not backed by anything real." Interesting to find that in the middle of the article.

mmaunder 15y ago
There's a school of thought that blames the gold standard for the great depression. The French accumulated massive amounts of gold between 1928 and 1932 and some scholars say the global deflationary effects of Bank of France's policy during this time caused the great depression. The gold standard also ties money supply to gold production which is a little like tying fed policy to the quarterly flip of a coin. For example, the Australian and Californian gold rushes of the 1850's caused huge short term price instability. I'd counter the above statement with the following: Many problems were solved with our departure from the gold standard and paper money is backed by the faith and credit of the country that prints it and it's value should, and does, fluctuate accordingly. But arguing with an anonymous "smartest man in Europe" is a little like arguing with Santa.
- wisty 15y ago
  Well, the collapsing credit money couldn't be offset by more printed paper money; so that's what made the Depression cut so deep. But the credit money was only able to collapse because it had gotten so high in the first place. Whether your money is a bank account, commercial bonds, government bonds, or gold; it doesn't pay to have fluctuations in total volume. Keeping the base (i.e. gold or dollars) fixed won't stop the banks (and governments) from borrowing and loaning more every year, until a crisis shows them that they have gone too far.
- buff-a 15y ago
  Many problems were solved with our departure from the gold standard Such as having to give the Saudis, and now the Chinese, all our gold. Instead we give them paper, and they then reinvest that paper in: * internet companies * enron * property * banks

aj700 15y ago

I knew all this. Stocks are bound to be crap, they depend on making a profit from selling goods and services. There are only two types of people left in unequal economies. Those who can't afford the stuff and those who don't need to buy any more than they do. Consumption, profits and stocks would all be much higher if societies were more equal. There is tons of money locked up that never needs to be spent by the people who've got it. Economic demand is money + (desire or need). Every consumer has one or the other but not both. Maybe the poor deserve no more a share of the resources than they get, after Reagans tax cuts, but the result is terrible for companies. To sell anything PROFITABLY, chase the super-rich. Everyone else is broke. We won't be able to transfer the unneeded wealth of people in Luxembourg to Nigerians or Romanians of course, we must wait a few decades for the abolition of scarcity (of most things) and the abolition of money and economics. Otherwise known by: "Tea, Earl Grey, hot."

nazgulnarsil 15y ago
replicators won't get rid of status. holodecks, however, will. at least for anyone who doesn't care.
econgeeker 15y ago
I disagree with you strongly, but I think you made a good attempt at an argument and I think it is wrong you were downvoted, so you have my meager upvote. I think your argument is disproven by walmart. Walmart doesn't chase "the super rich" they actually chase the bottom end of the market. They make good money by doing their darndest to make prices as low as possible, both to increase volume (and marketshare) but also to cater to the market that doesn't have a lot of disposable income. I don't see the problem here as a lack of "equality", in fact, the super rich are taxed more than the poor. If things were equal they'd all pay the same dollar amount (not even the same percentage, the same amount in absolute terms.) That would be more moral as well. The reasons those with less money have trouble affording things is that they have been impoverished by government. Presume you're at the lower tax bracket and paying %15 to the IRS. You're paying another %15 to Social Security (though only half is reported on your check, you have to earn the other half as well or you wouldn't have your job.) You're paying- what %4 to medicare? %3 for unemployment insurance, say %5 in state income taxes (just picking a low number since some states don't have it and it varies.) That's %42 of your income right off the bat. Now if you're just scraping by, that means you're spending all of the remaining %58! All of that is taxed at rates from %8 (city sales tax) to %30 (cable, phone, an flights) to as much as %40 (gasoline). If we take the lowest figure there, %8, then that means of every $100 that person makes, government takes %50. It is worse fro people in the middle and lower middle incomes. Their state and federal income taxes are higher. That's why people have trouble making ends meet.

TheSkeptic 15y ago

After pointing out that "The central bankers throughout the world have lost touch with reality" and discussing the messes that have been created in large part by inept bureaucrats, The Smartest Man in Europe dismisses all of the problems brewing in China with a naive "the authorities will figure out solutions to solve them." Anyone who truly believes that the "authorities" in China are any more capable than the "authorities" outside of China isn't very smart at all.

trb 15y ago
Maybe not capable, but surely more focused? As far as I know there are no elections that change the top leadership every few years. This way they have a larger interest in planning beyond their political term and the private industry has less influence through campaign contributions. But I might be wrong, I'm way out of my comfort zone here.
- TheSkeptic 15y ago
  In China, "private industry" doesn't truly exist in many industries. To do business, you need to be politically connected to some degree. In other words, campaign contributions are unnecessary; the state and private industry are already married.
wisty 15y ago
They aren't more capable, but at least they are able to take responsibility. Banks will be nationalized the minute they look shaky. Local governments will be recapitalized, and the leaders might get punished. But there won't be as bad a crisis, because someone will foot the bill. OK, it will cause a moral hazard. There will be a big need to reform. But there already is a big need to reform. And I think there's already a commitment (from the top, and from the general public) for reforms. Plus, it's easier to grow when you are under 1/5th the GDP per capita.
- roel_v 15y ago
  What are you talking about? Banks already are 'nationalized' for all intents and purposes (rather, they've always been under central leadership). And that's exactly the core problem with the debts owned by Chinese banks comes from.

sandstrom 15y ago

I hope Byron Weiss is better at picking smart men than predicting the future: http://www.zerohedge.com/article/byron-wiens-prediction-track-record-zero-out-ten http://www.zerohedge.com/article/byron-wiens-prediction-trac...

wickedchicken 15y ago

I found a fun game to play whenever reading superlatives from financial news sources: append ", in finance" to every one you see. Thus, "the Smartest Man in Europe" becomes "the Smartest Man in Europe, in finance." Things start to make more sense that way.

paganel 15y ago

> The Smartest Man in Europe Is Very Cautious I first thought it was going to be an article about Grigori Perelman and about how we are all one step closer to Apocalypse because he was very close to finding that there is indeed no foundation for Mathematics (or any similar conclusion that is way over my head in even trying to explain). Instead I stumbled upon an article about a rich heir to "a mercantile family" who talks about money, money, money. Not that's anything wrong with talking about money, but if that's we consider as the "smartest thing" in an entire Continent I think we have a problem.

singular 15y ago
There is no foundation for Mathematics [1] :-) [1]: http://en.wikipedia.org/wiki/Godel%27s_incompleteness_theorem http://en.wikipedia.org/wiki/Godel%27s_incompleteness_theore...
- praptak 15y ago
  Goedel's theorem is not about nonexistance of foundation in mathematics, it's about existence of true but nonproveable statements in every nontrivial formal system. One could imagine a hypothetical stronger result - maybe every nontrivial set of axioms can actually derive p^(not p)?
  - singular 15y ago
    IANAM, but I do know it was an unassailable problem in Russell + White's efforts to found mathematics on a firm basis in Principia Mathematica [1]. [1]:http://en.wikipedia.org/wiki/Principia_mathematica#Consistency_and_criticisms http://en.wikipedia.org/wiki/Principia_mathematica#Consisten...
    - oelewapperke 15y ago
      You want to actually understand mathematics, here's what to do. Reading any theory, any theory at all. Look at the author. Do a wikipedia search. If the article starts with what a great philosopher they are, burn the article, wash your hands in holy water and beg for forgiveness. Their articles and books do not actually have a basis for their consistency except "LGTM", they're less than worthless, and can easily convince you that idiocies are real if you're not careful. And if you're careful you'll find a massive unproven leap in logic in the first sentence of the first page and you'll be unable to continue reading. Avoid philosophers like the plague. Including Russell, including Principia mathematica. Rip them to shreds if you find them in a bookstore. You'll be doing the world a big favor.

terhechte 15y ago

He made one interesting point, which is to invest in Swiss Francs. I have been contemplating doing that over the past weeks, what are your opinions on that?

econgeeker 15y ago
Switzerland still has a conservative financial system, and may benefit from a "flight to safety" as the euro deteriorates. That might be his reason for buying francs. Francs used to be backed by gold, and might still be partially backed by gold. I think they are not redeemable in gold anymore, but that the country keeps a large supply of gold onhand. So, sort of a partial fiat currency. However, one can own gold directly, which provides a hedge against all currency risk. It sounds like this is what he is doing, and then also holding some francs against a panic in europe.

JanezStupar 15y ago

Strange, one would expect The Smartest Man in Europe to be at least somewhat contrarian. What I have read is a collection of pop fearmongering. Basically his stance is the prevalent position among people out there today. Thus it reeks of manipulation. It is a piece meant to evoke a specific emotional response. That it is written by a hedge fund executive only reinforces the stench. Thus I mark this piece as hedge fund propaganda. True meaning is a feint within feint. Edit: I suspect that Blackstone is trying to unload its gold and trying to create a market. Gold is probably in the last phase of bubble. Why do I think so? Only one reason. In my country there is a vocal MLM type gold investment operation going on. Very similar to what was going on with stocks and derivatives in the 2006/2007 era. If there is one fundamental truth about markets, it is that when your hairdresser and butcher start giving investment advice it is time to get out. There is no more bigger fools out there. Gold is going down.

econgeeker 15y ago
It is true that in a bubble everyone is telling you to buy. But I don't think we're in a bubble for the gold price for a couple reasons. The first is that most people with an unsophisticated financial perspective (eg: hair dressers) are not aware of gold (in the countries I've visited.) The slightly sophisticated (Eg: people who invest in mutual funds) have been claiming there was a gold bubble going all the way back to when it was only $400 an ounce. But the other reason is we haven't seen gold take leave of the fundamentals. The financial crisis that has been unfolding since 2008 has revealed that the only response governments seem willing to take is ever more monetary inflation. The more money out there, the higher the price of gold. Secondly, most gold trading is at the level of very sophisticated people, not the average joe. When average joes start piling in and blowing up the price, then gold may take leave of its fundamentals and we'll have a bubble. The thing is, in bubbles, supply rushes in to meet demand-- but you cant' scale up supply of gold like you can dotcoms or houses. Environemntal regulations and kleptocratic governments keep new mine production opportunities limited. Finally, mining companies-- which should be the darlings of the gold bubble if there is one-- are trading sympathetic with the rest of the stock market, not contrary to it. If we were in a gold bubble, then good news for gold (eg: bad financial news) would cause those prices to go up-- but they don't they go down now. This indicates that they are not seen as an alternative, but as being subject to the bad news the same way General Electric, et. al. are. We won't enter a bubble phase until that has changed. When people start seeing gold as a safer asset (or as a bull market "you just gotta get into!") then we'll have entered a bubble. At that point, when there's bad news for General Electric, you'll see a bump in the price of GoldCorp. We saw this in the dotcom bubble-- a big IPO for a tech company would cause a decline in General Electric or Gold for that matter. All of these are subjective observations, so neither of us can really prove the other wrong of course. I found it interesting is that we use the same signal to detect a bubble-- the hair dressers and MLM schemes. I'm impressed to see how much more popular gold is outside the USA than it is inside the USA. I take that as a sign that it is heading towards a bull market. However, if you're right and I'm wrong, I will be very severely punished by the markets. I'm not too worried, though. I got punished by the dotcoms. I played the housing bubble successfully going up and going down and got out a bit early, but am happy with the result. I remember being told I was crazy on forums because I said there was a bubble in housing. So, you're not crazy, I just think you're too early.

JulianMorrison 15y ago

All this talk of "but they have no other choice" amuses me. Yes they do. And they will probably exercise it.

kahawe 15y ago

> I remain positive on China. I cannot help but wonder about China... I am convinced they are extremely clever in toying our Western system of capitalism and number games one way or another. The only example coming to mind right now is the artificial surge in car sales in China and the government is behind a lot of it, buying and storing cars in huge parking facilities. And the refusal of publishing economic statistics or just blatantly making them up. And they are just as incredibly clever and diplomatic in political affairs; the rhetoric used in their more recent foreign affairs are nothing but jaw dropping and display an unprecedented self-understanding an pride that is bordering smugness. They do not even try to hide or acknowledge violations of human rights; they simply wipe it off with "none of your frakking business" kind of answers. They are showing very clearly: we bow to no one. For me as a European, their last display of power here in Europe felt like a slap in my face when they offered to "help" in the current financial crisis in Greece and the rest of the EU when I saw how little their ongoing violations of human rights mattered all of a sudden. Please note I am not bashing Chinese people but wondering about Chinese politics and their regime and how the west, generally so proud of their "humanity" and "human rights", bends over back- and sideways now that China is becoming an influential world power.