The property bubble has much more to go before we start approaching realistic property values, and reach an equilibrium.
Massive property supply is hitting the market. Meanwhile, ask yourselves where the banks have marked their property holdings.
Guest post by Gresham’s Law.
Even though gold has already enjoyed an 11-year bull run we still think that it’s a good investment. Here we present a few charts that suggest that the current gold price is actually quite cheap!
There are three simple (but apparently elusive) charts that indicate the cheap valuation placed upon gold at present. [Note: We'll be updating these charts every week so that you can track their progression over time.]
Chart 1: What Percentage of Each Federal Reserve Note is Backed By Gold?
We are amazed by the many articles discussing (and giving advice) the JPM “perfectly hedged” trading CIO book, by mainly journalists that don’t understand risk, trading nor (the) greeks. JPM, claiming to have one of the world’s most sophisticated risk management, has apparently lost at least 2 billion USD. What actually happened will probably never hit the media. While journalists debate whether or not to drop VaR as a risk measure, we think it is appropriate to review an old article from Nassim Taleb, one of few clever minds when it comes to understanding “real” risks. From Taleb’s Fourth Quadrant, via Edge.
Statistical and applied probabilistic knowledge is the core of knowledge; statistics is what tells you if something is true, false, or merely anecdotal; it is the “logic of science”; it is the instrument of risk-taking; it is the applied tools of epistemology; you can’t be a modern intellectual and not think probabilistically—but… let’s not be suckers. The problem is much more complicated than it seems to the casual, mechanistic user who picked it up in graduate school. Statistics can fool you. In fact it is fooling your government right now. It can even bankrupt the system (let’s face it: use of probabilistic methods for the estimation of risks did just blow up the banking system).
The current subprime crisis has been doing wonders for the reception of any ideas about probability-driven claims in science, particularly in social science, economics, and “econometrics” (quantitative economics). Clearly, with current International Monetary Fund estimates of the costs of the 2007-2008 subprime crisis, the banking system seems to have lost more on risk taking (from the failures of quantitative risk management) than every penny banks ever earned taking risks. But it was easy to see from the past that the pilot did not have the qualifications to fly the plane and was using the wrong navigation tools: The same happened in 1983 with money center banks losing cumulatively every penny ever made, and in 1991-1992 when the Savings and Loans industry became history.
Guest post by Doug Short.
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 0.1 as reported in today’s public release of the data through May 4. This is essentially unchanged from last week. However, the underlying WLI again rose fractionally from an adjusted 124.6 to 125.4 (see the fourth chart below).
ECRI Reaffirms it’s the Recession Call … Again
The big news this week, however, is not the weekly data update but ECRI’s latest reaffirmation of its recession call in a Bloomberg interview with ECRI’s Lakshman Achuthan earlier this week. I’ve embedded a link to the nine-minute video on the Bloomberg website.
Two of Achuthan’s key points in in the interview are that year-over-year jobs growth is falling and real personal incomes, year-over-year, are at recessionary levels. To illustrate the second point, here is a chart of Real Personal Incomes, year-over-year, since the BEA began tracking this data in 1959.