Dust flux, Vostok ice core

Dust flux, Vostok ice core
Two dimensional phase space reconstruction of dust flux from the Vostok core over the period 186-4 ka using the time derivative method. Dust flux on the x-axis, rate of change is on the y-axis. From Gipp (2001).

Thursday, November 27, 2014

False confidence rising in the US

A recent article argues that the increasing demand for consumer credit is an indicator of increasing consumer confidence. The argument seems reasonable due to the way it is presented--there is an entirely different conclusion one would draw were the argument presented differently.

If you had a very low income, and few assets, yet people kept lending you money--money that greatly exceeded your assets--would that not suggest that these lenders had confidence in you? It may be that this confidence is unjustified--but we can infer its existence by the continued willingness of others to lend you money despite the fact that you appear to be ruined.

In just the same manner, we can infer the confidence that lenders have in a country by computing the ratio of a nation's debt to its actual holdings of real money. A high ratio suggests great confidence--even though it could just as easily be a measure of ruin. In the case of the US, we have used the ratio of its official debt to its official gold holdings. For other countries, we would have to include foreign currency holdings as "wealth".

Confidence in the US hit an all-time high in September 2001. Then something happened, and confidence in the US fell steadily until the end of 2012. The falling confidence level occurrred because the value of the US gold holdings rose faster than its debt (which itself was increasing at the greatest rate ever). In other words, the US dollar was losing value (relative to gold) faster than the US gov't could spend it.

Confidence increased in 2013, as the gold price fell while debt continued to increase. But is this real confidence?

The ratio of debt to gold can only be considered a measure of confidence if foreign entities are willfully buying the debt. If, on the other hand, the government simply monetizes the debt itself, or orders its vassal states to purchase the debt, then it wouldn't be correct to look at this ratio to be a measure of confidence. It is a measure of ruin--and faked confidence.

We have also seen that higher confidence correlates to periods of lower unemployment. The correlation appears to have continued into 2013, but with all the shenanigans involved in reporting unemployment, I have to caution that I have no confidence in the reported unemployment rate. However, it appears that goosing confidence may be a fore-runner to improved employment, and reiterate that there are only three ways governments and central banks can bring about such a result--increase debt (without the gold price falling); sell gold; or pray for the gold price to fall. Pray hard. Very, very hard.

The second chart really shows faked confidence compared to faked unemployment numbers (particularly the last couple of years). But at least it shows that things are getting "better" in the US.

Wednesday, November 26, 2014

Black Day in July (or November)

The riots in Ferguson recall earlier times.

If you are American, you may never have heard this song--it was banned for years throughout the US

Sunday, November 23, 2014

Do you like Canadian miners?

Do you thrill to read about brave little companies with their gold showings in the romantic Yukon, or Nunavut, or Saskatchewan?

Are you a geologist? Do you know what it takes to make a mine? Do you understand the economics of mining?

If not, then before you invest, you might want to consider the handy table below.

Gold reserves by province and territory, as of December 31, 2011 (tonnes)

  N.L     N.S.    N. B.   P. Q.     ON     MB      SK     BC      Yukon     NWT      Nun

  13        0          0       667     1,101    72       13       96         14            0        69

Source: Natural Resources Canada, Information Bulletin, March 2014, available here

It seems to be very difficult to build reserves anywhere but Ontario and Quebec. And no, I don't know why Alberta isn't on the list.

I get it. I lived in Newfoundland for nearly four years, and I loved the place. I love reading about gold discoveries on the Island (or in Labrador). But I don't invest.

Friday, November 21, 2014

Decision time

Last month we saw this chart--in which the swings in the GoldxUSDX index had formed a triangle going back over a year. At that time we were quite close to the apex.

The last few weeks have been eventful. We saw a clear break below the lower trendline, followed by a bounce up above the upper trendline. It appears a decision has been made.

Barring further smashdowns, it seems we are moving out of the triangle and into a climb. Supporting this is the action of the last few weeks in the chart of USDX vs gold price.

In the last two weeks, we are seeing the impossible--a rise in the gold price and the US dollar.

This isn't as impossible as it seems--we've seen this before, from late 2009 to about mid-2010. It was a good time to be invested in gold equities.

Our current position on the chart is given by the yellow arrow. We are virtually in the same position as we were in late May of 2010. The yellow ellipse covers the area of the move of the last three months. Now is the time to be long gold and gold miners.

Notice that during the impossible trend in the past, gold and USDX never rose together for more than two consecutive weeks. The move was seemed to be a series of cycles and countercycles, over which both parameters increased.

As I've argued previously, rising gold and US dollar is the most economically favourable environment for gold equities--particularly those with production. If the number of dollars you receive per unit of gold increases, and at the same time the value of those dollars increases, your revenue increase will reflect both inputs.

Saturday, November 15, 2014

In Kaifeng

. . . cosplay is very popular.

. . . real women wear six-inch heels when they cross steep, uneven wooden bridges. In the rain.

(This is the bridge)

. . . there's lots to eat

(warm polenta with dried fruit slices)

(soup-filled dumplings)

. . . your soul can be weighed (and found wanting)

. . . statues play chess

. . . you can get a lot of inspiration for the next water feature you install in your yard

. . . there seem to be a lot of Hakka running around

(Hakka were a nomadic group in China--stereotyped as having ugly women, because they didn't practice foot-binding).