Aug 1, 2008
The subprime thinking still dominates the banking sector
Last week, during our financial conference in Vancouver, we attended the presentations of various financial analysts ... trying to understand what is happening in the world of investment.
On the stage, our old friend Paul van Eeden explained why the price of gold is perhaps overstated.
"Gold is a currency," said Paul, "and almost entirely a currency". It can therefore forget supply and demand. To calculate the price of gold, we must simply watch what he will buy compared to other currencies. The only time gold abandons its "theoretical value" - as measured because they buy - that is, when speculation puts it above or below what it really is.
Paul is certainly right. If Based on what he can buy, or should be only about $ 800. But speculators are far ... and so do we. And we believe that gold will become much more attractive for speculators. It is above its "theoretical value" because current inflation is rising. Investors want to protect themselves. And if inflation rises again, or continue to climb dramatically.
But "the real threat is located east of an ear and west on the other," says another old friend, Rick Rule. "The subprime economy and the problems it caused were the result of the subprime thought. A few years ago, were found in southern California posters offering to pay people to 125% of the value of their homes. Je vous asks: Is this a good case that pay more than the value of collateral to people who can not repay the money to buy houses overvalued? No, of course. It is a thought subprime. "
According to Rick, eliminate the segment "food" and the segment "energy" of the U.S. index of consumer prices is also a syndrome thought subprime.
* "The measure of goods and services used by the government to describe the growth of the economy, calculating productivity and make adjustments to inflation was completely fraudulent," says Rick.
* "Other effects will be felt," he continues. "Credit cards, for example. Again, it lends money to people who often can not repay. Let's say that a man wants to buy a giant television screen and can not afford it. He uses his credit card, believing it will be easier to pay one year later, having paid 18% interest. Then they bring together millions of such loans and sell them to a fund pension ".
* "Or take loans for LBO (leveraged buyout, leveraged buyout). It seemed brilliant when sales and profits climbed. But when profits decline, it becomes difficult to repay all this debt. In fact, it was allowed the big fish of Wall Street to do the same thing as the freak who bought a house he could not pay. "
* "But there are bankers who know what they are doing. They have one big advantage now ... they have money, and others in need. It's always an advantage when competition is completely écervelée. Now, there are opportunities in the financial services sector, but we must really think 'non-subprime' to find them ... and have the courage to act accordingly. "
** But back to financial news. Lu on Moody's Economy.com:
* "The U.S. household finances are deteriorating rapidly under the pressure of increased debt and falling house prices, threatening the health of the U.S. economy, according to new research conducted by Moody's Economy.com, a branch of Moody's Analytics" .
* "The quality of credits household crumbles quickly, and heavily indebted households are at the heart of the problems of the economy," said Mark Zandi, chief economist at Moody's Economy.com. "The losses on growing household debts put at risk the financial institutions and cause difficulties in the economy for the remainder of the year and during much of 2009".
* Yet on Wall Street, major banks have undergone a major rebound, while gold and oil fell.
* "Is it reached the floor?" That's what everyone wants to know. Many investors think that was the case. And they think they can profit by buying large banks - managed by the same benêts that conditioned subprime loans and sold them to their best customers ... then lost fortunes for their shareholders while they agreed bonus of several million dollars.
by erectusplus at 4:57 AM |
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