David Fuller's Free (Abbreviated) Comment of the Day.
Thursday 11th March 2010 Browning Newsletter on Climate, Behavior and Commodities: Triad - My thanks to Alex Seagle for the latest issue of this fascinating report published by Fraser Management Associates. It is posted in the Subscriber's Area but here is the opening: Anyone
who is familiar with the "triple witching hour" will understand what
is happening with the weather. The expiration of three financial instruments
results in extra stock volatility. Similarly, the peak of three climate oscillations,
hitting at the same time, results in very volatile stormy weather. Just ask
Washington D. C. The volatile "Snowmageddon" closed down the federal
government for four days. All of
these factors have combined to create a complex and abnormal global weather
pattern, especially in North America. In the Northwest, the Vancouver Winter
Olympics have been fighting to keep Mt. Cypress from melting into a giant mound
of slush during the warmest winter weather on record. In the South, storms have
been taking a cross-country road trip on Route 66, and Interstate 40. At one
point every state except Hawaii had snow on the ground. Storm after storm slammed
the Midwest while Nor'easters ripped up the East Coast. Meanwhile Northern Canada
roasted as cold air and winter storms glided south. While a variety of complex climate patterns have combined to create this misery, three main patterns, the Arctic Oscillation, the El Niño/Southern Oscillation and the Atlantic Multidecadal Oscillation are the major culprits. All three of these have united to make this winter memorable. The big question is whether they will continue to make 2010 a year of misery. My view - If the extreme weather conditions experienced by North America and Europe this winter similarly affect the spring and summer crop cycle we can expect some turbulence in prices for staple foods. This item continues in the Subscriber's Area.
"DAVID, REGARDING THE QUERY YESTERDAY REGARDING GOLD'S PERFORMANCE VS INFLATION, I HAVE 2 POINTS: 1) IN THE DAYS OF THE GOLD STANDARD BY DEFINITION GOLD KEPT UP WITH INFLATION SINCE GOLD WAS MONEY. 2) IN THE FIAT ERA, GOLD OVER THE LONG TERM WAS BEATEN INFLATION. FOR EXAMPLE OVER THE 40 YEAR PERIOD FROM 12/1969 TO 12/2009, THE PRICE OF GOLD DIVIDED BY THE US CPI INDEX INCREASED 5.41 TIMES, A REAL RATE OF RETURN OF 4.31% PER YEAR. "OF COURSE, OVER SHORTER PERIODS YOU CAN GET ANY RESULT YOU PREFER. ALSO GOLD HAD BEEN HELD AT $35 FOR 35 YEARS IN 1969, SO THE PRICE HAD SOME CATCHING UP TO DO WITH INFLATION. BUT RETURNS WERE STILL POSITIVE IF YOU GO BACK TO 1942. "KEEP UP THE GOOD WORK." My
comment - Thanks, and I agree with your first point,
although few of us can remember when currencies were last on true gold standards.
The history of gold standards is interesting,
not least that countries could not endure it indefinitely because their bullion
reserves were eventually drained by creditors at the first hint of fiscal problems.
This paragraph from Wikipedia is informative: The gold
specie standard ended in the United Kingdom and the rest of the British Empire
at the outbreak of the World War I. Treasury notes replaced the circulation
of the gold sovereigns and gold half sovereigns. However, legally the gold specie
standard was not repealed. The end of the gold standard was successfully effected
by appeals to patriotism when somebody would request the Bank of England to
redeem their paper money for gold specie. It was only in the year 1925 when
Britain returned to the gold standard in conjunction with Australia and South
Africa, that the gold specie standard was officially ended. The British act
of parliament that introduced the gold bullion standard in 1925 simultaneously
repealed the gold specie standard. The new gold bullion standard did not envisage
any return to the circulation of gold specie coins. Instead, the law compelled
the authorities to sell gold bullion on demand at a fixed price. This gold bullion
standard lasted until 1931. In 1931, the United Kingdom was forced to suspend
the gold bullion standard due to large outflows of gold across the Atlantic
Ocean. Australia and New Zealand had already been forced off the gold standard
by the same pressures connected with the Great Depression, and Canada quickly
followed suit with the United Kingdom. My reservation
about your second point is that I do not regard US CPI as an accurate measure
of inflation in the USA (See Email 2 on Monday.)
However I cannot think of a better very long-term hedge against inflation than
gold.
"Don't know if I've mentioned it but I'm sitting on top of the Marcellus Shale formation here in Pittsburgh, PA. Estimates are as high as 500 TRILLION cu. ft!! Perhaps more than 10% is recoverable. There are problems w/ quicker than expected declines in the Barnett formation (Texas), but as the technology is so new, no one is sure why. I have been looking for land w/ mineral rights the past year but as you might expect, it hasn't been easy. This year, given the real estate crunch here, and still weak natgas prices should be the time to pull the trigger. (if I can find a gun!) "Shale
gas IS the game changer in the energy world. There is a bill
in congress that would encourage natgas transportation research and development." My comment - Good luck with the prospecting. As one who has presumably studied sites which may contain hidden reserves of shale gas, do you think I should try to obtain the mineral rights beneath our home in London SW7?
Buy
Asian Stocks Before 'Lights Turn Green,' Goldman Sachs Says -
Thanks to a subscriber for this interesting article by Shiyin Chen for Bloomberg.
Here it is in full: Investors
should buy Asian stocks after valuations dropped and before sentiment strengthens
further, Goldman Sachs Group Inc. said. This section continues in the Subscriber's Area.
China's
southwest region is suffering from a severe drought, with water levels in major
rivers at record lows, the Ministry of Water Resources said. My view - Yunnan is primarily known for its industrial metal deposits but is also a relatively high rainfall area which feeds the Yangtze, Pearl and Mekong rivers. If this area is experiencing drought, it is reasonable to assume that water levels further down river, where major agricultural activities take place, are somewhat lower than normal. At the very least, if there is drought in one area, there will need to be excess rain somewhere else to make up the shortfall. This is having no effect on commodity prices right now but the situation is worth monitoring due to the potential for bullish impact on rice prices later on this year.
"Re J REIT discussion, I suggest people also look at Astro Japan (AJA) an Australian listed REIT which concentrates on Japan and has an enticing yield of 20% (disclosure, I own it). It has high leverage (70%), but it is non-recourse beyond the individual security properties. See also recent announcement for background." My comment - Thank you for highlighting this Australian listed fund investing in Japanese property and the associated announcement. The 20% yield, as you mention, does not come without risk and is unlikely to be sustained at such high levels. Nevertheless, the REIT remains a recovery candidate. This section continues in the Subscriber's Area.
"1.
Can you set up say 4 charts per screen and by sinking 2 screens, you have 8
chart types in total, with all different time periods and you use that as a
master format. And then you can tab up/down with your keyboard from code to
code and they all update together for the selected code. My comment - Thank you for these questions which may also be of interest to other pre-subscribers. Let me address your fourth question first: The Fullermoney Global Strategy Service includes the Comment of the Day, Subscriber's Audio and unlimited access to the Chart Library's more than 18,000 stocks, bonds, funds, indices, commodities, currency cross rates, ratios, spreads and overlays. An annual subscription, permitting access to all of the above costs £500 and either a monthly subscription or trial costs $50. The current strength of the Australian Dollar against the Pound suggests that now would be an opportune time to consider taking out a subscription if so inclined. Returning to your questions, I'll take them in order: It is possible to have seven charts, tiled one above another on one screen using the Chart Library's "View All Charts" function, but they would all have to show the same timeframe. This feature was designed to facilitate looking through multiple instruments in a relatively short period of time. You can
save customized formats for individual charts as Preset templates and apply
these to whatever instrument you wish. Here is a link to Comment of the Day
on June
17th 2009 where a detailed explanation of this functionality is outlined.
The Chart Library can produce Daily, Weekly, Monthly and Quarterly charts over 3-months, 6-months, 1-year, 2-years, 3-years, 5-years, 10-years, 20-years or 50-years. The Chart Library Filter system can scan through the Chart Library menus or your customized lists using Performance parameters such as ranking by best or worst performers over timeframes ranging from 1-day to 1-year. The High/Low filter scans for 3-month to All Time highs and lows within the previous 5 days. Here is a link to Comment of the Day on August 7th where a much more detailed explanation as well as a number of examples are provided.
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