A Titanic Disaster - By Byron King (14/9/12) PDF Print E-mail
Byron King   
Friday, 14 September 2012 14:00

The Daily Reckoning

(This Daily Reckoning “Classique” first appeared in Whiskey & Gunpowder on December 1, 2004, recounting a Philadelphia exhibit of Titanic artifacts.)

The first item is a set of gold-rimmed eyeglasses. Further on, there is a pocket watch stopped at 11:14. Then there is a brown leather suitcase, somewhat worse for the wear. There are stacks of white dishes and racks of dark green bottles. Another display shows brass plumbing fixtures and a gray, steel wrench. And at another stop along the walk one sees a copper and glass engine thermometer. There is a jade rosary, and a man’s boulder hat, of all things, in remarkably fine condition, considering... And a pair of woman’s shoes, made of black leather. Not one shoe, but a pair, recovered from the sea floor beneath 12,000 feet of cold North Atlantic water.

Then there are the coins and paper currency. Gold coins, silver coins, copper. British, American, French. This was real money back then, from a gold standard era. And the paper notes also tell a tale. They are a collection of official British and American treasury promissory notes, and a remarkable amount of scrip from private banks, redeemable in precious metal.

Every note has an annotation at some spot or another, promising to pay to the bearer some quantity of gold or silver. “One Dollar Silver Note,” from a bank in New England, redeemable in an ounce of silver from that institution. Or a “Two Dollar Silver Certificate,” to be paid on demand by the Treasury of the United States of America in, not surprisingly, two ounces of silver. Or “Ten Gold Dollars,” half an ounce of yellow metal in 1912, promised by and intended to be paid to the bearer from the precious gold assets of the Government of the United States.



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And Here’s Why Gold Will Remain Money - By Dan Amis (13/9/12) PDF Print E-mail
Dan Amis   
Thursday, 13 September 2012 10:44

Daily reckoning

One of the longest-running myths in financial markets is going to damage a lot of portfolios: the myth that central bank money printing — in the context of a modern banking system — hikes the value of stocks.

Many academics still think printing lots of money — which is thought to permanently increase stock prices — will lead to some sort of trickle-down economy phenomenon. Ben Bernanke said as much in his famous November 2010 Op-Ed in The Washington Post: “Higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.”

Since then, the S&P 500 has rallied from 1,200 to 1,430, mostly on the belief that stocks are a good substitute for bonds. Printing from the Fed and other central banks has front-loaded returns. Front-loading returns means the potential market gains will be depressed. In other words, the Fed’s actions have temporarily pushed stock prices above intrinsic value, and when the Fed stops money printing, stocks could quickly fall back to intrinsic value.

Yale professor Robert Shiller created the “Shiller P/E ratio,” which is the most-robust measure of the intrinsic value of the broad stock market. The Shiller P/E ratio is calculated as follows: Divide today’s S&P 500 index by the average inflation-adjusted earnings from the previous 10 years. I look at 10 years of earnings and cash flow data in researching stocks to get a feel for how earning might look in the future. Most investors remain too focused on the quarter-to-quarter minutiae, which often leads to surprises at turning points in the earnings cycle.



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Greece’s Bailouts And The Economics Of Social Disaster - By C J Polychroniou (13/9/12) PDF Print E-mail
C J Polychroniou   
Thursday, 13 September 2012 10:38

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How To End the Fed, And How Not To - By Gary North (11/9/12) PDF Print E-mail
Gary North   
Tuesday, 11 September 2012 13:23

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The Economic Consequences Of Cheap Money - By Ludwig von Mises (11/9/12) PDF Print E-mail
Ludwig von Mises   
Tuesday, 11 September 2012 13:21

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