Current stock market (Nov. 2010) not reflecting reality

people do need a good advisor - you are right that it is not fair to expect people to be their own pension manager no matter what their profession.

That's what I do actually - I am a financial advisor, and I run through these numbers with prospective clients to show them how they should have been making money while the rest of the world was losing or breaking even. Pretty effective tool.

As for hedge funds - I used to work for one. Too hard to pick the needle in the haystack - to find a good one. Most are nothing special.

Since that advice is coming from someone who doesn't even invest, I'll decline your invitation and deny the insinuation behind it.

Mother wrote:

You sound like a child. Grow up.

Flagpole wrote:

Another big day on Wall Street. Now just 637.59 shy with more good news to come.

well! just today the wsj proves at least part of my guess on why gold is rising in a low-inflation environment. The Chinese have been buying gold in huge quantities. Is that sustainable and do you want to buy alongside a huge autocratic government or play against them? I choose play against them.

http://online.wsj.com/article/SB10001424052748703377504575650410761463990.html

China Buys In to Gold's Allure

Gold's record rally has been attributed to everything from worries about inflation, the dollar and the emergence of exchange-traded funds. One big factor many may have missed: huge buying from China.

Data cited Thursday by China's state-run Xinhua news agency showed that China imported 209.7 metric tons of gold in the first 10 months of the year, a fivefold increase compared with the same period last year.

That surpassed purchases made by ETFs and surprised analysts, who until now had no clear insight into the size of China's buying.

Gold demand in general has soared globally this year, as a result of the sovereign-debt crisis in Europe and the Federal Reserve's new round of bond buying. Gold prices were pushed up to an all-time high of $1,409.80 a troy ounce on Nov. 9. Thursday, gold settled $1.20 higher, or 0.1%, to $1,388.50, up 27% for the year.

"Everybody in the gold market knew there was a surge in investment demand, but they didn't know it was China," said Jeff Christian, managing director at CPM Group.

China's import growth is a reminder of the country's huge but nascent purchasing power.

It comes as the government loosens its restrictions on gold purchases by financial institutions and individual investors. In August, the country began allowing more banks to import and export gold, opening up the gold market to the institutions and their clients.

Then this week, the Chinese securities regulator approved the country's first gold fund designed to invest in overseas-listed gold ETFs, a move analysts interpreted as another bullish sign for gold.

"The big picture is that China is continuing to relax the rules governing the domestic gold market," said Martin Murenbeeld, chief economist of DundeeWealth Inc., which oversees $69.9 billion in assets. "What we are seeing is the latent demand that has been there all the time and now can be exercised in the market because now the market is freed."

The World Gold Council estimates that China's gold demand could double in 10 years as more investors there embrace precious metals.

Until several years ago, China's gold market was strictly controlled by the central bank, which bought all the gold mined domestically. It then sold the metal to jewelry makers. The country, which is now the largest gold producer, remained largely self-sufficient in gold, with imports at a meager 31 metric tons in 2009, according to GFMS Ltd.

This year, fears of inflation have driven many Chinese investors to include gold in their portfolios as a store of value. At the Shanghai Gold Exchange, trading volume increased 43%, to 5,014.5 tons, in the first 10 months of 2010, exchange Chairman Shen Xiangrong said, according to Xinhua.

At a speech at the China Gold and Precious Metals Summit in Shanghai Thursday, Mr. Shen detailed the size of China's imports this year, Xinhua said. Those purchases were big enough to absorb all the gold that the International Monetary Fund had shed during that time period, which stood at 148.6 tons. It also dwarfed the SPDR Gold Shares, the world's largest gold-backed ETF, which added 159.48 tons of gold into its holdings in the same period.

China also is home to a booming gold-mining industry that keeps it as the world's largest gold producer. Wednesday, China's Ministry of Industry and Information Technology said the nation's gold production reached 277.017 metric tons in the January-to-October period, up 8.8% from the same period last year.

China's 2010 gold production is expected at about 350 metric tons, according to Standard Bank head of commodity strategy Walter de Wet.

"We note that there is likely to be illegal gold exports and imports from and to China," Mr. de Wet said in a note to clients. "This would distort the actual gold numbers for China. However, the trend is undeniable, gold demand in China is rising rapidly."

Just to prove I'm not just a market cheerleader, today the market is likely headed for a big fall (I haven't checked yet) because added jobs were much less than predicted, resulting in an increase in the unemployment rate. This is too bad. Long term, I'm still all in of course, but the short term fun has hit a bump today.

agip wrote:

people do need a good advisor - you are right that it is not fair to expect people to be their own pension manager no matter what their profession.

That's what I do actually - I am a financial advisor, and I run through these numbers with prospective clients to show them how they should have been making money while the rest of the world was losing or breaking even. Pretty effective tool.

As for hedge funds - I used to work for one. Too hard to pick the needle in the haystack - to find a good one. Most are nothing special.

While the day is early, the market barely reacted to an awful labor report, especially after two consecutive days of heavy buying. I guess it's not reflecting reality. agip, I'm not going to give you advice, because you don't need it, but just be aware that there is something nefarious brewing under the surface. As I've already acknowledged, the Fed can and likely will stoke continued "asset inflation," which hardly makes me a permabear, but I do not see velocity improving in any meaningful way in the short to intermediate term, given the headwinds of secular deleveraging and deflation. Any bad number will likely be taken as an excuse for underperforming managers to put money to work. I just hope your focus is not entirely on US equities and a little bit of Treasuries and other "fixed" income products.

While others were regurgitating CNN Money and economists who projected an employment rate of 7.6%, I told you unemployment was going to 10%+ and that the stimulus would be an abysmal failure. The market likes this monopoly money and the growing likelihood that tax cuts will be extended for everyone, as well as the fiscal austerity being imposed by a "new" apparatus in Washington. But I fear the Fed is ultimately "pushing on a string," lacking a paradigm shift or new killer app.

I could be wrong. Like throwing the ball in football, there are three potential outcomes, only one of them good (well, I guess two if you consider a pass interference penalty). That's how I see the Fed's compass. And it's painfully obvious that Unlce Ben and Tiny Tim are no longer the tail wagging the G-20 dog.

But President Urkel promised me that unemployment wouldn't go above 8% if I voted for him and he could pass his stimulus. Well I voted for him 13 times and unemployment hasn't been under 8% in God knows how long, I'm now without a job, and I still haven't seen my stimulus check. I want my 13 votes back!

Fagpole wrote:

Just to prove I'm not just a market cheerleader, today the market is likely headed for a big fall (I haven't checked yet) because added jobs were much less than predicted, resulting in an increase in the unemployment rate. This is too bad. Long term, I'm still all in of course, but the short term fun has hit a bump today.

"The payrolls count in September and October was revised higher by a cumulative 38,000. Payrolls fell a revised 24,000 in September and rose by 172,000 in October.

An alternative measure of the unemployment rate, which includes discouraged workers and those forced to work part-time because of the weak economy, held steady at 17%.

Among all industries 52% were hiring, down from 58% in October

Retail sales lost 28,000 jobs in November. This caught economists by surprise. Many had expected shops to add workers for the holiday season.

The factory sector lost 13,000 jobs.

Temporary help services and health care added jobs.

The government sector shed 11,000 jobs in November.

The average workweek was steady at 34.3 hours.

Average hourly earnings in September were virtually unchanged at $22.75. Economists had been expecting a 0.2% gain. Earnings are up 1.6% in the past year."

- MarketWatch

Pretty awful. On the other hand, the labor report is a lagging indicator, and the ISM services hiring and new orders indexes rose slightly for November, though the price index fell.

He did not comment on being a broker, so you have your answer.

I hear you, Sagarin. Certainly the financial world is shuddering. Like a bad driver struggling with a manual transmission - will the car stall or accelerate away?

Fortunately/unfortunately these days it is rare to have clients who want to be more than 50% in stocks - for most of them I need to keep most of their money in cash and bonds.

And of course there are great opportunities overseas - I'm there, stocks and bonds.

Umm...I said "neither".

agip wrote:

Fortunately/unfortunately these days it is rare to have clients who want to be more than 50% in stocks - for most of them I need to keep most of their money in cash and bonds.

This goes to my summation that there is a lot of cash on the sidelines. Glad to have that confirmed from the horse's mouth.

gtastic wrote:

well! just today the wsj proves at least part of my guess on why gold is rising in a low-inflation environment. The Chinese have been buying gold in huge quantities. Is that sustainable and do you want to buy alongside a huge autocratic government or play against them? I choose play against them.

This isn't a low-inflation environment.

You can't fight gold and silver, the only real money. You aren't playing against China in some patriotic move, you are siding with our own huge autocratic governmen and the illegal Federal Reserve. You make yourself an enemy of the Constitution and your own people.

Yep. Still some bad news out there. You are correct to mention that the labor report is a lagging indicator, and that is really important, but at the same time, we don't have a full-on recovery until those jobs come back.

agip wrote:

I hear you, Sagarin. Certainly the financial world is shuddering. Like a bad driver struggling with a manual transmission - will the car stall or accelerate away?

Fortunately/unfortunately these days it is rare to have clients who want to be more than 50% in stocks - for most of them I need to keep most of their money in cash and bonds.

And of course there are great opportunities overseas - I'm there, stocks and bonds.

Look at Canadian, Australian, and South American juniors and their associated hard assets, though I would only buy a pullback at this point. Turkey, Vietnam, Egypt, Czech Republic, and Chile are also interesting, to name a few. Non-US, Japanese, and European currencies. Turkey has more exposure to Europe than I like. Of course, much of this has played out, but I think there's more to go. Anyone who thinks China is not in a bubble is smoking Afghan opium, probably not a bad investment itself. Of course, if the global sovereign debt bubble bursts, emerging, emerging markets will be hit hard, and people will flock to safety, though I no longer believe that's dollar-denominated assets, unless deflation really gets major traction.

But in the really long term, the US will probably fare ok. Fukking boomers and their expectations. Go live in Nicaragua for a year and come back with your expectations. The Costa Ricans farm out coffee bean picking to the illegal Nicaraguans, who expect nothing more than a US $1.50 per basket and nothing else.

Anyway, this is not advice, merely an opinion, however well or ill-informed. AGQ is flying again.

FED ANNOUNCES QE2 "BUY MORE STOCKS":

http://www.youtube.com/watch?v=iAhayy1NGJ0

Quantitative Easing Explained:

http://www.youtube.com/watch?v=PTUY16CkS-k&NR=1

Well, wealthy Americans who go to Nicaragua to live or retire are in the best parts, close to the beach and close to other wealthy people. They view it as paradise.

Flagpole wrote:

This goes to my summation that there is a lot of cash on the sidelines. Glad to have that confirmed from the horse's mouth.

While mutual fund cash is extremely low and insider selling extremely high, it's certainly possible that the dumb money will flock back in at precisely the wrong time, which could propel us higher. And while INORGANIC growth may improve for a time, that's still no reason to own the US relative to other asset classes.

What am I still doing here? Not learning, that's for sure. Back to the Pat Porter thread.

Wish they traded futures on the possibility of an exogenous shock. Have a good weekend.