[rseiser]

I would just laugh to see people having paid off their credit card debt, now having trouble servicing their monthly mortgage/home-equity-loan payments. Maybe some will take out debt on their credit card again to avoid defaulting on their house payments? Talk about a useless round-trip, haha.

[rseiser]

After reading Jim Rogers’ book Hot Commodities I have a few things to add regarding our discussion about China keeping up commodity prices. He makes two points.
His first one is that during a commodities bull-market most commodities go up simply because their supply/demand imbalances, which take many years to correct. In the 1970s everything went up, even though the economy was slowing. I also want to insert here that many commodities are interconnected, so when oil rises, most commodities that need oil to be produced will of course rise too.
His second point is that China will clearly have a hickup, and a recession will put a dent into consumption and commodities prices (like we discussed before). But the trend will continue, and when some countries recover it will be back to renewed consumption outpacing supply. This would also be a perfect example why not all commodities rise exactly in parallel. Sometimes the energies, industrial metals, precious metals, or agricultural commodities will surge.
We will see in this current correction, if it is true and new commodities emerge as temporary leaders.

[rseiser]

I just have glance across the Credit Suisse’s arguments, and I can already tell that it is garbage. Jobs, wages, and tax cuts, huh? I just read a few pages on Ben Anderson, and even there he said that nothing is that simple. He mentions for example how credit creation can help the economy only in instances where there is missing capital and available workers who put the credit into productive ventures. If not, credit will just withdraw important capacity from somebody else (or just end up in speculation). The same questions I could ask: What jobs? What wages? And what tax cuts? Jobs are in real-estate, financing, hedge-funds or other nonsense. Wages keep hardly pace with inflation. And tax cuts, useless too, if we can’t afford them. Yeah, I am happy about a 15% tax on my investments. Now I don’t have to work so much, haha. It’s all magic, just drop the tax and economy will soar. Why haven’t all countries dropped the tax rate to 0%?
It’s about using your brain, and stimulate where there is drive to improve our future, not add fuel to an already burning fire.

[rseiser]

Sure Cramer has some good instincts sometimes, but he is also often wrong. Most of his reasons sound pretty ridiculous, like #1,#4,#6,#7. And if house prices come more in line with history, i.e. drop for a few more years, then even #5,#8,#9, and #10 don’t mean anything. A bounce is certainly accepted, but usually bubbles and vertically performing stocks come ultimately back to where they broke out, i.e. 2001 prices. For TOL I think that was a $10 price. Taking just 2003 earnings with a P/E of 10 would be a $17 price, which wouldn’t be unrealistic either. But a lot higher than $27.5, no way, IMHO.

[rseiser]

Gold and mining stocks have both their advantages. Mining stocks might do even better when gold rises faster than oil. So far oil got ahead of gold, and the large-cap mining stocks could have done even better otherwise. Also, way down the road, when everyone gets really scared and a shortage develops, the physical gold could to better too and go vertical, while miners might already price in a lower average price.

[rseiser]

On Jim Puplava it was mentioned that OPEC could easily defend $60 by cutting production, which is running at 98% of capacity anyways. Not sure if that’s true, but I agree that $40-$60 is possible. Anything in this range might be a good buying opportunity again, if one believes in the longer term commodities bull-market like Jim Rogers does. After reading “Hot Commodities” I know that Jim also allows for a recession which will create intermediate-term corrections. His long-term prediction arises though from the shortage in supply, where it will take several years to bring on new capacity. While a recession in the US can take longer and the dollar might cave, other countries might emerge and recover fast, and fill up the demand with their stronger currencies.

[rseiser]

I see all your views, and sure, the reporter was persistent and the camera-man tried to get sensationalism on tape. But sometimes that is necessary since our police system isn’t perfect either. My friend’s car was broken in, and he found out within hours who the thief was, who had stolen his lap-top and camera. He didn’t dare to confront the thief, but called the police. It took the police five(!) weeks to finally go to the thief’s house and take the lap-top away from him (not the camera). The thief got only a warning for possession of stolen goods.

[rseiser]

heavyd and vrudny,
I have not met Soros, but from what he writes I have good impression. At least he is interested in the scheme of things and not just the money. The same for hedge-funds in general. All hedge-fund managers (or even some venture capitalists) I met were always nice people. Originally I thought they must be arrogant and cut-throat, keeping all the secrets to themselves, but not at all. They were all very rational thinkers, and well interested to share their views (since it helps them if other people join the particular trade). I would almost say that some of them are heros, since they foster good economics, taking money from the crooked companies and investing it in the productive ones. What’s better in life than stand up for the right thing and make money too.

[rseiser]

I have a question to both of the stocks: Regarding COP, I agree with most of you that it has pretty good value as well as the other oil-companies, provided there is a commodity bull market. I was skeptical on oil will all the hype, but on the other hand nothing has changed yet. People drive more than ever, and there are hardly alternatives. So after some pull-back, whenever that ends, there will probably at least one more leg up at some point. And the Oil companies pay good dividends in the meantime.
My real question is more on the charts. It is so curious to see COP near a support line while all the other oil companies are above. If COP breaks it, what does that mean for the others? Or what if COP holds and the others go towards their support line? How have such things played out in the past?

Regarding Ivernia, how can you find out more about them. If they are for real, it might be a good opportunity. Jim Rogers always talks abot lead, and I have no clue how to buy it, and nobody talks about it either. With the poisoned in China, it shows what an awful business that is. Probably no competition for a long time.
Regarding if they are for real, this is quite tough, because I think most penny-stocks aren’t. You must really know something detailed about the people running it, and I wonder if Zeal even know that much detail. Usually there is hardly any positive proof (except earnings and a dividend), but much more contrary proof. Contrary proof would be all kinds of things to make me stay away. Like if you ask them questions, and you don’t get a precise answer. If you ask about an obvious business strategy, and they pretend that they don’t understand your question. Or they show you only apples to oranges comparisons. In all these cases, either they are lying or they are so dumm that they don’t deserve your money. Next, if their compensation is outrageous or simply flawed in respect to motivate them. Handing out stock options left and right sounds like one example.
I think readers on this board have some more examples too.
Anyways, do you have more information on them from Zeal?

[rseiser]

Hi anx,
I have to join your stock-picking club. I had the same experience in the last two days. It seems all my longs are down and all my shorts are up. Maybe one can interpret this as me being a moron, but I tend to interpret this as the market having gone totally nuts. Just go to etfconnect.com and type in the fund CLM and compare the stock price to its net asset value (NAV) over the last months. Does that make any sense?
Maybe we will reach a peak sooner than later.

[rseiser]

I am still short a small part of my LEND short (in the interest of full disclosure). What this second guy on the Yahoo board misses is what everyone else in investing misses too, and that is that we are not in an one-dimensional world. Same as in the decline of the Nasdaq, where SEVERAL problems surface at the same time.
For the lenders, for example, they not just have their possible risky loans. If housing prices tank, loan volume might go down dramatically, ARMs especially, and the loan amounts will shrink, too. So revenue will be even lower, cutting into profit margins hard. Next could be competition for selling loans, whatever who can at any price. And even as Rich pointed out, real-estate loans might be seen as riskier and trade unfavorably, even if treasuries’ rates drop. People will have to put up higher down-payments, which leads to lower loan amounts as well. And add to this all the momentum followers, who will get scared to death if the trend is really down. I am sure there are even more reasons that you guys might know about.

[rseiser]

Above I wrote: “By the way, the ROTH is the greatest thing if you believe in high inflation, because it is the only instrument, where you don’t get taxed on the extra artificial gains caused by inflation.”
Thanks to the inspiration of Prof. Piggington I realized that the regular IRAs also end up at exact the same tax savings (if one is in the same tax bracket when withdrawing vs. contributing). This is because the deferred tax in the IRA (sort of a free loan) grows at the same rate as the principal, and the gains on these pay exactly for the taxes you pay on your other gains when you withdraw.
To repeat: Both regular and Roth IRAs protect you from artificial gains caused by inflation, and therefore anyone who is afraid of inflation should make the maximum contribution. (Otherwise, the homeowners could have their field day, since houses e.g. in low past appreciation areas could be good in a high inflation environment.)

Also, thanks to vrudny for answering some of the questions I stated and for the links. There are many more little details to consider, but one little advantage of the Roth seems to be that one can leave funds in there longer (growing tax free), even beyond age of 70. So if you get really old this might matter.

[rseiser]

Very interesting. I have been contributing the maximum ROTH IRA amount since I heard about it, and I use an Ameritrade account, which works very well. Also great for trading, since one doesn’t pay short-term capital gains, while in the regular accounts one could rather hold for long-term capital gains. By the way, the ROTH is the greatest thing if you believe in high inflation, because it is the only instrument, where you don’t get taxed on the extra artificial gains caused by inflation.
Sorry for my low knowledge, but this post inspired a lot of questions:
a) Regarding that IRA rollover, can you roll-over more than your annual ROTH contribution limit? I never heard of this.
b) Regarding the income limit, does anyone know how capital gains are treated. E.g. if one has a salary of $80,000 and sends in the $4,000 to the ROTH at the beginning of the year. During the year, one ends up making $70,000 in capital gains from regular investments. Does this exceed the income limit? If yes, does one have to take out the $4,000 again?

I don’t expect precise answers, but good links would be nice.

[rseiser]

Here are my two cents about using economics for investing or just do trading. It depends on several factors including time spent on it, if you like doing it, risk willing to take, or simply your talent.
There is no answer as to what is better, and even traders often put some of their money into investments.

[rseiser]

I thought of this “chicken and egg” problem many times and came to the conclusion that low interest rates are quite a lot to blame. I mean we all agree that the government has been artificially lowering interest rates since at least 1987 to combat any little problem that crept up. When you keep interest rates low, a lot of things happen. People start borrowing and speculate, this drives up asset prices, thus rewards the risk takers. So people quit their jobs, stop producing, start borrowing more, start consuming, savers get punished, and in the end everyone ends up buying from abroad. This has lost us a lot of our long-term planning, our savings, and even our production potential. Now everyone focuses on the short-term, because it seems to work. When it stops working it will take a long time to unwind this whole process, so in my opinion there is nothing like: “Houses will just correct for a few percent, and then they will continue their uptrend”. Not until we do something serious about the whole thing.

[Author]

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