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Intriguing Reader Feedback   (March 25, 2006)


This blog had the good fortune of being linked this past week to several very popular websites:
  • gold-eagle.com's Editorial page
  • patrick.net's "SF Bay Area Housing Crash Continues"
  • Marin Real Estate Bubble Blog

    As a result, this humble outpost on the great World Wide Web received over 3,000 unique visitors in one day--about the monthly average for this site. With so many curious, intelligent readers coming through the door, so to speak, it's to be expected that I received some interesting feedback.

    First up is I.M. Vronsky, the editor of the gold-eagle.com website, who addresses the question, "What has been the best investment in the past 5 years: Real Estate or Gold Equities?" in a piece entitled The Real El Dorado: Real Estate or Gold Equities? Calling this "The Cardinal Question of the new Millennium," Vronsky lays out the case that gold and silver actually outperformed real estate over the last five years, and are poised for continued outperformance for a number of reasons. Here is an excerpt:
    That amounts to $4 Trillion, which is 36 TIMES GREATER than the total combined market cap of all publicly owned gold and silver stocks in the world AT CURRENT PRICES ( i.e. $110,000,000,000 is the market cap of all the world's gold stocks/equities - Source: Sept. 25, 2005, Denver Gold Conference). CLEARLY, spec investments in Real Estate represent a hugh reservoir of money that can flow toward high performance precious metals. It then logically follows if any fraction of spec RE monies divest their properties with the objective of taking advantage of the formidable recent returns in Gold and Silver Equities, precious metal values will soar to unimaginable levels.
    So if you're an investor (and who isn't, in one way or another), please check out this important essay.

    Next, reader Richard C. posited another explanation for the "conundrum" which I discussed in the March 20 entry, e.g. who's snapping up Treasury bonds despite the risks and low returns:
    Your Arab money explanation is highly plausible, but here's another possible scenario for you to consider: the "secret" buyer of US Treasuries is the Federal Reserve itself (possibly in collusion with the Arabs), acting on a political agenda to stabilize the market in US Treasuries to prevent the system from falling apart when foreign governments of record balk at buying. The Fed, of course, can create the money out of thin air.

    US financial markets have been manipulated for some time--at least since Bob Rubin showed how it could be done by setting up the so-called "plunge protection team" to step in at strategic times to prevent or buffer a stock market meltdown. So I would not be surprised to find that a similar phenomenon is occurring in the market for US government debt.
    For an explanation of the Plunge Protection Team from our esteemed colleagues across the pond (The Evening Standard in London), read this: Plunge protection and rallying shares.

    Reader R.C.D. sent along a link to THE FED OFFICIALLY KICKS OFF THE NEXT RECESSION, which I highly recommend for its clearly "insider" account of how the Federal Reserve can tighten lending under the radar of both the public and the media. The article suggests the Fed has signaled just such a cycle of tightening, hence the title of the piece. Especially disturbing is how the Fed is dispensing with the time-honored M3 measurement of money supply; one naturally wonders if it's to hide what they're doing with the tens of billions of dollars they're creating out of thin air. According to this source:
    Over the past 8 weeks, M-3 is up 129.6 billion, an 8.2 percent rate of growth, and is up a whopping $249.7 billion over the past 12 weeks, a 10.7 percent annualized rate of growth, a $1.0 trillion annual expansion.
    Yikes! $250 billion is serious money. I wonder if this will replenish the stash of the Plunge Protection Team, which may well already be at work pumping up the suspiciously resilient stock and bond markets....

    On a lighter note, reader Craig S. had an inspired suggestion regarding the design of the Jank Coffee Shop:
    Please allow me to offer constructive feedback on your Jank Coffee concept. It is good, but the English are known for their love of tea, not coffee. How about an upscale Brazilian Planter decor?
    Your wish is my command, Dear Reader, and though it's a tough challenge, I'm toiling away on a design which will reflect this brilliant concept. Thank you, Craig S., and everyone else who is willing to suspend belief for a moment and put up with the occasional absurdities which crop up (perhaps too regularly) on this site.

    As always, it is my honor to host you, readers, and a special honor to receive comments from such thoughtful, knowledgeable folks.

                                                               


    copyright © 2006 Charles Hugh Smith. All rights reserved in all media.

    I would be honored if you linked this wEssay to your site, or printed a copy for your own use.


                                                               


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