Saturday, May 31, 2008

Got Doled?

Disgruntled employees can be very dangerous. The latest disgruntled one is Scott McClellan, a former White House press secretary in the Bush Administration. Scott took advantage of the anti-war sentiment and conveniently vented his disgruntlement, while cashing in big time. In the midst of this mess, a former Republican Senator Bob Dole wrote a letter to Scott to show his displeasure. From the letter, you shall see how Scott McClellan got Doled.


There are miserable creatures like you in every administration who don't have the guts to speak up or quit if there are disagreements with the boss or colleagues. No, your type soaks up the benefits of power, revels in the limelight for years, then quits, and spurred on by greed, cashes in with a scathing critique.

In my nearly 36 years of public service I've known of a few like you. No doubt you will "clean up" as the liberal anti-Bush press will promote your belated concerns with wild enthusiasm. When the money starts rolling in you should donate it to a worthy cause, something like, "Biting The Hand That Fed Me." Another thought is to weasel your way back into the White House if a Democrat is elected. That would provide a good set up for a second book deal in a few years.

I have no intention of reading your "exposé" because if all these awful things were happening, and perhaps some may have been, you should have spoken up publicly like a man, or quit your cushy, high profile job. That would have taken integrity and courage but then you would have had credibility and your complaints could have been aired objectively. You're a hot ticket now but don't you, deep down, feel like a total ingrate?


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Friday, May 9, 2008

As Good As Gold

Yours truly has been too busy to wander in this realm for a while. Truth be told, my company actually bans posting on blogs. To comply, I've honored that code of conduct by bolting the door to this domain during my work hours. Unfortunately, when I was home I watched FoxNews until I was spent. That's just how my life has been lately. One pleasant surprise about my new job is that I have an Indian co-worker ,whose talent ought to be utilized in the financial sector rather than in the engineering industry, and I've learned a thing or two from him about the financial market. Being away for a few weeks, I would like to contribute my newly acquired market insight on how to maneuver through the current market uncertainty.

Ready for the crap?

Gold, the ever desirable, has always been the symbol of value, love, and standard. If you happened to invest in gold as recent as two years ago, please pat yourself on the back for doubling your investment, on paper. Look at the gold price now:it is $870 per ounce as the market closed this afternoon. Too high to buy? Let's look closely and from a slightly different angle. The following is the gold price history over the past 10 years:

In May 2001, one ounce of gold cost you around $300. 300 bucks!! In May 2008, one ounce of gold cost you around $870, 870 bucks!!

Kicking yourself for not jumping into the golden pool 7 years ago?

Well, assuming that you are one of those euro carriers, have you also made a killing by investing in gold? In May 2001, one euro was worth about $0.87; today one euro is worth about $1.50. To make it easier for my loyal readers, I'm doing the math for you. Back in May 2001, one ounce of gold would cost you 344 euro, while in May 2008, one ounce of gold would cost you 580 euro. That's a 68% increase. Comparing to the 190% increase in dollars, it does raise an eyebrow on how much more valuable gold really is today.

Or can we say if the value of gold has been steady, the currency we use, either euro or dollar, have become so inflated that they are quite hopeless in terms of face value? You might think yours truly is an alarmist who sexes up the inflation number to scare you. Isn't 2-3% annual inflation what we've heard?

Think again.

Today US government is reporting inflation 8% lower than the way it was calculated back in 1980. Back in the early 1980’s inflation was raging at a clip of over 14%. The Feds had to raise interest rates dramatically to prevent hyperinflation and to support the US dollar. This era was when 16-18% mortgage interest rates existed. Fed Chairman Paul Volcker was able to finally tame the inflation beast and interest rates fell dramatically, making it possible for the US economy to begin to grow. Late in the 1980’s, the US decided that one way to prevent run away inflation expectations from growing was to modify the way inflation is calculated; hedonic adjustments to inflation was born. The following graph shows the disparity between the two different inflation calculations:

We have seen oil go from a low of $20 per barrel in 2002 to $120 today, with very little increase in reported inflation despite the rather large component the cost of energy plays in the US. Understanding inflation is actually quite inflationary. By the US reporting inflation significantly below the actual inflation rate, it allows the Feds to cut interest rates far lower than where they should be. In a way it was designed to stimulate the market.

How much is gold's real value now? If we look at the oil price hike, it should give us some idea, roughly. As uncertain as the current market is, the wisdom of the old sounds pretty good to me. As good as gold, if I'm going to bet my money I'm going to put it on gold.

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