Daniel delivers some great lines in this one...
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Update:
Hat tip to ukipwebmaster for these vids. Here is another flogging of PM Brown, including the subject of his sale of England's treasure! (For those of you who have asked, Nigel spoke a few moments before Daniel Hannan had his turn at lambasting Gordon Brown)
The other one is a little confusing to me as an American. But here is the link. It is a speech about the fallout from these conservative speeches on the conservative party.
Ukipwebmaster, some further explanation would be helpful.
FOFOA
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Does anyone else find this stock market rally a bit strange? The Dow rose 152 points today while riots are breaking out in the streets of London during a G20 meeting that's likely to do nothing but disappoint worse than another gift from the President. And the biggest car maker in the US is preparing for bankruptcy. Three quarters of a million jobs lost in the last month alone. And bailout commitments (read: monetary printing) "approaches the value of everything produced in the country last year." Meaning we will print an entire years worth of productivity. Yet the stock market rallies 152 points?
Everyone knows what a P/E ratio is, right? It is the price of a company divided by one year's worth of earnings. So if a P/E is 25, then if you bought up all of the shares and owned the whole company, it would take you 25 years of collecting profits to get back your initial investment. And then from the 26th year on, it would be all icing on the cake. A small businesses, like say a laundromat, would usually sell for a P/E of around 9 or 10. But on the stock market, speculators drive the P/E ratios up to 25 and higher. Even up to 70 in some cases during boom times. That would mean 70 years of ownership until you hit the icing on the cake. With this lead in, here is a snip from John Mauldin...
P/E Ratios at 200? Really?
Just for fun, when I was interviewing with the New York Times today, I went to the S&P web site and looked at the earnings for the S&P 500. It's ugly. The as-reported loss for the S&P 500 for the 4th quarter was $23.16 a share. This is the first reported quarterly loss in history. That almost wipes out the expected earnings for the next three quarters. For the trailing 12 months the P/E ratio, as of the end of the second quarter, is 199.97. Close enough to 200 for government work.
But it gets worse. The expected P/E ratio for the end of the third quarter is (drum roll, please) 258! However, taking the loss of the fourth quarter off the trailing returns allows us to get back to an estimated P/E of 23 by the end of 2009. The problem is that you have to believe the estimates, which I have shown are repeatedly being lowered each quarter, and which I expect to be lowered by at least another 25% in the coming months.
Lowered estimates should lower the price of stocks even if the P/E stays at 23. But before it's all over I would expect P/E's to plunge to around 12, then overshoot on the downside to 7 or 8, and then bounce back up to between 11 and 17 where they should level off for a while. But that's just my non-technical opinion.
In any case, why is the stock market rallying right now? Is the worst of it really over? Some people say it is. Perhaps the stock market is already sensing hyperinflation (but without gold? I don't think so.)
Anyway, we seem to have some building pressure right now. Exuberance in the stock market and unrest in the real world. On top of that, the US Government is two weeks away from finding out that a lot of its tax payers are going to be reporting capital losses this year. That means they will be demanding refunds instead of paying taxes due along with penalties and interest.
So when is this phoney baloney nonsense going to end? How far can you stretch the rubber band before it breaks? I don't know. But I've still got my eye on Marty's April 19th. I will be paying close attention, looking for that tipping point in the public's confidence. Could the public lose confidence in the stock markets? Or would it be the dollar? Or will China lose confidence in Tim Geithner? Perhaps "Big Trader" will lose confidence in Comex. Or maybe the people will lose confidence in their new messiah. I guess we'll just have to wait and see.
FOFOA
I don't get it either.
I noticed(I think on jsmineset) that on April 19th new mini contracts will be coming out on the comex..contracts that don't deliver
Seems kind of odd
Hi
The stock market has, at least it seems so to me, lost any sense of reality and sound fundamentals, like the P/E ratios you mention. It is simply an algoritmic play, a battle of machines if you like, where untold computer digits move back and forth in the world's trading venues dictated by "black boxes" implemented in hedge fund's computer rooms.
I think all that is irrelevant at this point as confidence in computer digit generated losses and profits will vane and real things and real work will be appreciated.
All brought to us by the perverse system where the people that produce more debt with debt (aka bankers) are more appreciated then the people producing real wealth from whatever true capital is left. Bankers see money in a very different view than us the little people.
Perversion of reality, infantilization of the populace, vulgar perceptions of the true state of our existence and a healhty dose of western arogance and elitism, thats what is going on now.
I have long since lost faith in governments to do anything significantly positive. They are all just observers and simply react to circumstances rather than to curb the digital raping of our (the individual citizens) wealth.
@alek_a
I am not sure that you are right about things. This generally holds for most people talking about the gold standard and fair economics. Although I agree with the general line of thinking, I notice many gold watchers actually believing that they know something others don't, and that it makes them better. As a consequence they tend to focus explicitly on arguments and newspaper stories that confirm their ideas, while neglecting other material. I do not believe that is the way to deal with things.
As I said, I also see the flaws in our current money system, but I assure you that we are not the only ones seeing them. It's sort of similar to pollution: most people know about it, but the public generally does not care enough to actually "walk the talk". The same holds for the financial system: quite some people understand it's basic flaws, but they know that they cannot change the system by themselves, and as long as they can make some money they will play along. I agree that we've been seeing some cracks lately, but so far everything is still standing.
As a matter of fact, despite all the focus on gold and talks of its price going through the roof, some stock markets performed way better. For instance, the FTSE China 25 has practically doubled since november last year. Most people on the critical/gold watch fora completely missed out on this.
As for the riot in London: some (very) small group people disagreeing with current policy does not mean that the entire economy is in slump (maybe it is, but we should draw that conclusion from other indicators).
Bankruptcy of GM etc. have been in the air for quite some time, and hence could have been discounted in the stock market already.
Off course one could argue that the current rallies indicate a new wave of inflation, but that is a quite complex statement to accurately defend.
As for P/E: this is an indication of the expected future. Should earnings remain failry constant P/E is indeed a reasonable indicator of break even on a stock. However, one can feel free to expect earnings to rise drastically in the future and hence purchase a stock at a premium now to benefit from that expected improvement in the future.
An yes, I to acknowledge that one scenario is that we are to truely see a world wide collapse of financial markets anytime soon. I have however not put all of my money on that one scenario.
Hi Martijn,
I started writing this as an addition to my previous post and saw your reaction in the meantime. What I wrote about originally and my expanding thoughts coincide with the response I would have given to your reaction. Thats kinda cool. Anyway, lets go.
We have been "given" the perception that a "virtual reality" world is one where we escape to for relaxation/fun and where we can do anything we want. Of course, there are also the trivial (infantile) messages embedded in the popular mediums of social molding, stating that we should be careful not lose the distinction of what is real and what is virtual. But, because that is nowadays almost forgotten (and "so 90s"), the warning carries little influence.
I see the school shootings etc. in this light: over-gamed people (exclusively men!) that lost the capacity to view the border. I still remember the days when gaming was considered the worst thing you can do as a kid, leaving you socially awkward and unrealized, full with misconseptions and a psychological weakling. But I digress.
So, this is how I think things are and will be for many of the sheeple going forward. What do you think will happen when a reasonably functioning mind-computer interface starts being mass-produced?!?! The real world will become a burden and virtual reality will be the place where happiness can be sought after. How will you stop your kids from donning that helmet? Here in the Netherlands there was the news yesterday that game-addicts can look for help at addict clinics... together with the bottom dysfunctional layers of society addicted to crack and cheap drugs. A transition to a new enslavement (addiction) mechanism?
The financial markets are the opposite of this setup. This is where virtual reality has literally taken over the real world instead of the virtual reality being entertainment. This is where mindless machines determine the futures of millions of people through currency-exchange speculation, sovereign debt speculations and commodity market speculation. Example: the oil bubble that burst half a year ago. Even our currencies and wealth are virtual!
We always thought that computers cant take over humanity because it is almost impossible to train/build them to be as intelligent as human individuals. But individuals dont matter. What we forget is that a mass of people is as intelligent as a sophisticated hedge-fund black box. Its not the machine that is superior to a single individual, it is the scaling factor that is important: >1 for machines and <1 for people. Put enough of them together and the machines will ultimately prevail.
I dont know about markets and finance but I know something about algorithms and computing due to my profession. The obstacle of making an intelligent machine (Hal-9000 from Odyssey) is that it has to learn, just like babies need decades to become men and women. It is this process that gives intelligence to the substrate, whether the latter is a biological neural network of unimaginable connectivity or a planar solid-state circuit of unimaginable speed.
Do you think a sophisticated trading algorithm implemented in silicon (or something else maybe) that had decades to "learn the trade" (pun!) and has the processing capacity to identify and simulate the most intricate and obscure market-mechanics will out-perform a central banker or any institution of men?
Notice that I rarely mention gold in my posts. I am not a gold-bug really. I am far more concerned with the lowering of the quality of men's product, the infantilization of mankind and whether Keynes was right or was he just the beginning of the virtual world revolution.
And BTW, I am not a reductionist. I mention only intelligence, i.e. ultra-efficiency, the capacity to identify patterns, visualize systems and solve practical problems. The latter even dont have to be real. BUT, we are not only intelligence, there is also consciousness, the capacity for abstract thought (what we do now, mathematics etc.) and even maybe morals. These things are not present in Nature. We are a construct of Nature (built from stardust - Carl Sagan) but are NOT equivalent to Nature.
But for all purposes that are competitive in their mechanics, for instance markets etc. intelligence is what matters and we are there out-performed by our creations. What does a good trader say: forget about what YOU think or feel/sense is right - focus on the mechanics and the price. Be unemotional, dont philosophize and simply act as a machine. The market doesn't care about our emotions, frustrations, perceptions (abstracts), egos or psychological burdens.
As I said, I am interested whether the Keynesian political economy, also a construct of modern (wo)man, has helped to achieve this state of things. Have we, unwittingly, cuffed ourselves with a no way out by accepting $ digits as the epitome of wealth?
There was someone on a chat site that used to say:
"You need money? Here you go: $10.000. I give you these digits, take them. You want more, just gimme a call - I have a good keyboard."
The difference between a string of characters "$1.000.000" that I just typed and 1000 notes of 100$ bills is the authority of the issuer. Authority is either forced or earned. Which one does the FED use?
(and thus I spent the whole morning writing this... instead of doing my work. Addiction, anyone?)
Interesting post Alek. I'll get back on it.
In the meantime I think that we can agree that there is a difference between people fundamentally analyzing the financial system and it's flaws, and investors. The former kind tends to be rather idealistic (although not unintelligent), and the latter is interested in increasing there welfare/monetary position.
Now what I was refering to is that sometimes these "idealists" confuse themselves for being an investor, and put their money where their mouth is.
As I said, they are right in a way (as are some environmentalist - not CO2 hoaxers), but there is more to the world than their focus (although they often believe they hold the only truth). Hence, I would advise one to be aware of the distinction when investing.
Hmm, for some reason I seem to have managed to substitude the verification word for my name in the previous post.
Of course you can make money on the stock market as an individual. You learn to trade, understand the language, look at fundamentals, pick specific issues and simply execute your trades. If you have found a solid trading scheme, you will be making money more often than losing. I really dont know how that goes in the specifics (I have only a few shares from Sincialr's company: buy&hold stuff, I dont trade myself), but I suspect it is just like any other profession: you have knowledge (acquired in training etc.) and you apply it in the ways that are most beneficial for the given task at hand.
And I do sound too "armchair" idealistic - I realize that after some time from positing. The reality of things is probably more complex than what I write..
The alghoritms, I suspect, are most efficient when there is a high liquidity in the game played. This probably has to do with the statistically driven decision making in the program - connected to the requirement to have a large enough sample size to apply mean-field type of theories for instance. Thus, I imagine that industry-sector index funds are the "entry level" where a hedge fund will initially apply their machine. For individual issues I think the game theory used in algorithms will need to extend outside the financial virtuum, where people do have the advantage. But all that is in size and liquidity above the average index fund is a machine-dominated world I believe.
The central bankers and co. simply hold the "on/off" switch and control a few valves entering this world. Sometimes even they forget that it is so. Thus Sinclair's "its out of control" and similar statements.
Quite an inspirational article for people enjoying a fundamental analysis of things!
http://business.theglobeandmail.com/servlet/story/RTGAM.20090331.wreynolds0401/BNStory/robColumnsBlogs/home
@FOFOA
Although looking for confirmation is not the right way of testing a theory it can help in building one. In that light the previous link matches what was said in the video about the mayan calender rather well.
Makes it a bit more interesting.
FOFOA,
P/E ratios are pretty useless when applied over a short period of time. The P/E ratio you mention is due to losses of financials. Ex-financials the P/E ratio is around 12. Hardly expensive by any measure. Specially with interest rates this low.
Price to sales are better indicators near trough earnings.
As I have said many times on my blog. Gold is going to get its butt kicked by everything until its overbought condition versus everything is resolved. I think we are approaching that but an overreaction with S and P at 1000 and Gold at $850 would not surprise me either.
Most likely I see 1:1 parity before the real fun in Gold begins.
@Mad
Why should we see 1:1? Over history the average ratio has been increasing since the 1900s and is currently closer to 1:20 than 1:1.
Martijn I think you misunderstood. I was talking about GLD:Spy ratio. That is what I see on the charts. When it was at 1.35 it looked very overbought and I felt that it will correct back down to at least 1.0 or maybe to its 200 day MA at 0.90.
Gold :Stocks ratio was stretched like a rubber band to great extrmes and it had to pull back. Longer term I see Gold going maybe 5X or 10X the S and P.
You may be interested in watching the other speech that preceded Daniel Hannan's:
http://www.youtube.com/watch?v=XDwQEEAZhWM
And there's also an interesting follow on:
How do you solve a problem like Daniel, Roger and Stuart?
http://www.youtube.com/watch?v=fzldaK_psPM
Please embed these if you like them.
Thanks
@ukipwebmaster
Great videos, good to see some people opposing all this nonsense.
Here is Max Keiser. Although he can be a bit annoying, from 4:30 min onward he offers an interesting perspective on our financial system.
http://www.youtube.com/watch?v=SdZMsPWnwMk
@FOFOA
And here is Brown in a Church calling for world government and using the force of the hart. We might really be in some sort of transition at the moment.
"'Our financial system must be founded on the very same values that are at the heart of our family lives,' he said."
Well, interesting developments altogether, although there is no real reason to believe anything Brown says.
http://www.dailymail.co.uk/news/article-1166182/Brown-DOES-God-calls-new-world-order-sermon-St-Pauls.html
Hello everyone,
It is very nice to have a lot of comments to look at, and recommended links to explore. Thank you all.
Martijn,
You do a good job of discounting each of the individual observations I made yesterday. But allow me explain the reason for that comment I posted. Since I am deeply aware of everything going on, I rely on my wife as a barometer of what thoughts mere casual exposure to the MSM news might be creating. She doesn't follow my blog and she doesn't read news or commentary on the Internet.
And then yesterday, after watching a little bit of news, she told me that she was frightened that I was right. That some big change is right around the corner. She habitually resists the more dire predictions I make, but yesterday I could see a visible shift in her thoughts.
So I got to wondering... are these thoughts and fears now spreading throughout the other 99%?
Of course my wife has a bit of a head start having to listen to me from time to time. But what exactly does this development I observed mean in the flow of confidence through the collective mind of the world? And how does this reconcile with a rise in the stock market?
Martijn,
You have mentioned several times now that goldbugs tend only to seek out confirmation of their beliefs. With as much of my blog as you have read, it should be quite obvious that I actually seek out opposing views constantly. And my arrival at my current beliefs is quite recent. It was only about a year ago that I bought my first gold coin. In fact, prior to 2008 I had never even considered gold. But in the last two years, I have lost a great deal of wealth, through both real estate investments and stock market investments. This sent me on a quest for the truth.
Over the past year I have done almost nothing but read. I often do this for more hours of the day than most people spend at work. And the conclusions that I have come to are so far from the mainstream that you would be hard pressed to claim them as dogma. The very definition of dogma is a thought that is held without question. And that is the exact opposite of what I do. I am constantly seeking the opinion of others and from that, I am weaving my view of the world.
The fact that my conclusions seem to fit with what a few other people accept as dogma does not invalidate them. On the contrary, it puts my conclusions under a microscope. I am well aware of this, which is why I am almost daily offering up my thoughts in as clear and logical of a way as I am capable of. Clearly, I do not shy away from debate.
So my point is that I hope your statements like this are not in reference to me...
"I notice many gold watchers actually believing that they know something others don't, and that it makes them better. As a consequence they tend to focus explicitly on arguments and newspaper stories that confirm their ideas, while neglecting other material."
Because if they are, I'm afraid you couldn't be farther from the truth. If I tend to post things that support my view, that is because I am trying to share my view with others. That does not mean I only read these things. And actually, I often base my posts on opposing views, to which I offer counter-arguments leaving myself exposed to open debate.
By the way, I take no offense at your comments and I greatly appreciate your views.
So now I'm off to seek out some fresh opposing views, and to check out the recommended links posted here.
Sincerely,
FOFOA
@FOFOA
Thanks for the (kind) reply. My statements surely are not in reference to you in particular. They are mostly a reaction to some previous comment by someone else and address the "common goldbug" (as far as one exists). I also indicated (perhaps on another thread) that I do value persons having a fundamental and moral view on economics.
There is however a difference between most of those people and investors, as I have also indicated.
As for yourself I believe you to be a fairly open minden guy and certainly not a goldbug in the traditional meaning of the word.
And I too hold open the scenario of a massive collapse and soaring gold prices and off course I have some (but not all) money on that.
So, my comments about goldbugs are generally ment at correcting a narrow way of thinking I suspect in some other comments, and are not aimed at anyone defending gold for fundamental reasons.
About your wife: very interesting indeed. I have also read some other pretty convincing messages about the gold manipulation coming to an end on other blogs, so I definitely do not disagree with your view at all.
It is interesting that Obama used the term "turning point", a term I have been using for months. On this, he may be correct.
When in doubt, and when short on time, print! This is a one-trick pony we are watching.
In other news, the Queen's new video iPod was juiced up with show tunes, pictures of Obama, and audio of Obama's speeches.
Now THAT'S some serious narcissism!
It might very well be a turning point, there is plenty of evidence pointing in that direction. It is as of yet however unclear where the new road will take us.
Btw don't miss Chavez calling for an oil backed currency called the petro on a conference in DOha (came across it on a Belgian blog).
Just a thought, but I imagine the realization that you can snap your fingers and create a trillion dollars out of thin air must be about a thousand times more addictive than heroin.
And for an African man to find himself in such a position of power must be quite intoxicating.
Okay, calm down. Don't get your panties in a wad. I was talking about this guy.
Hi Mad,
Good to see you. Thanks for the info on P/E's. As a former small business starter, buyer, owner, and seller, I like to think of stock market P/E's as they relate to businesses in the real world. And if they don't relate, I don't trust them. 12 is reasonable. It is certainly good compared to past years. But I don't think I'd buy a business right now at a P/E of 12.
Looking at sales instead of earnings is one thing, but I think you have to really put yourself in the shoes of a "business buyer". And that means looking at profits versus price. Sales mean nothing without the costs figured in.
Of course my comments do not come from the perspective of a stock analyst... which I most definitely am not. :)
I certainly can see your 1:1 S&P ratio happening. I wouldn't bet on it, but I wouldn't bet against it either.
FOFOA
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