Hedging is having your eggs in different performing baskets. Hedging is a sales tool used by Wall Street to sell new product. The BIG problem with hedging, we learned, is that virtually all asset classes perform the same — good when things are good. And bad when things are bad. Gold is somewhat different. It really does do well when other things — like equities and real estate — do awfully. That’s the biggest reason to buy gold. Remember, in the ten years to December 31, 2009, gold rose 275%. The S&P 500 fell 9%. That’s a dramatic difference.
Last week I listened in on a conference call by etf Securities. They, like several others, sell precious metal ETFs, including SGOL. The presentation was low-key and seemed reasonable. Here are some of their key slides:
Taleb’s new black swan. A new soft cover edition of Nassim Taleb’s The Black Swan is out.
To promote it, he’s doing the obligatory TV tour. On CNBC yesterday he He talked about the world’s huge unsolved debt problems. He said his next black swan event would be a failed bond auction. Such an event could throw a serious spanner into world financial markets. It seems funny to me to now predict black swan events — essentially events that aren’t predictable. But I do share his fear. The interview and story is here.
The Flag delivers $28.6 million and a message. The sale was a record price for Johns. The message was twofold: there’s big money around for art. Second, many people see art as a hedge against what might happen with inflation and the dollar.
Jasper Johns’ Flag went for $28.6 million this week, far above its $15 million pre-sale estimate. I love this work. He did several flags.
Manhattan’s luxury apartment market has suddenly become tight, with prices for renting and buying escalating. strongly. There is significant money around — I suspect much of it from gigantic Wall Street 2009 bonuses paid in recent weeks.
More cockroaches for Goldman Sachs, and others. Yet another reason I wouldn’t touch the financials with a 20 foot barge pole. From today’s New York Times:
Prosecutors Ask if 8 Banks Duped Rating Agencies
The New York attorney general has started an investigation of eight banks to determine whether they provided misleading information to rating agencies in order to inflate the grades of certain mortgage securities, according to two people with knowledge of the investigation.
The investigation parallels federal inquiries into the business practices of a broad range of financial companies in the years before the collapse of the housing market.
Where those investigations have focused on interactions between the banks and their clients who bought mortgage securities, this one expands the scope of scrutiny to the interplay between banks and the agencies that rate their securities.
The agencies themselves have been widely criticized for overstating the quality of many mortgage securities that ended up losing money once the housing market collapsed. The inquiry by the attorney general of New York, Andrew M. Cuomo, suggests that he thinks the agencies may have been duped by one or more of the targets of his investigation.
Those targets are Goldman Sachs, Morgan Stanley, UBS, Citigroup, Credit Suisse, Deutsche Bank, Crédit Agricole and Merrill Lynch, which is now owned by Bank of America.
The companies that rated the mortgage deals are Standard & Poor’s, Fitch Ratings and Moody’s Investors Service. Investors used their ratings to decide whether to buy mortgage securities.
Mr. Cuomo’s investigation follows an article in The New York Times that described some of the techniques bankers used to get more positive evaluations from the rating agencies.
Mr. Cuomo is also interested in the revolving door of employees of the rating agencies who were hired by bank mortgage desks to help create mortgage deals that got better ratings than they deserved, said the people with knowledge of the investigation, who were not authorized to discuss it publicly. …
The logic of statistics
An East Texas Couple, both real-live rednecks, had nine children. They went to the doctor to see about getting the husband “fixed”.
The doctor asked them why, after nine children, would they choose to do this?
The husband replied that they had read that one out of every ten children being born in North America was Mexican. They didn’t want a Mexican baby. Neither of them could speak Spanish.
Harry Newton, is so happy this morning after Muriel, his beloved life-long assistant of 30 years, told him yesterday “You look the best you’ve looked in 20 years.” Then she explained, “You look healthy, you’re keeping thin … and you’re not wearing your hair long and straggly, like you used to.” All my exercise and it comes down to my haircut. If only I had known 20 years ago. Everyone in those days thought my hair was a fashion statement. It wasn’t. It was simply cheaper to cut it less often.
