Of Weak Dollars and Printing Presses

When I fly west to LA I often head up to the cockpit to chat with the pilots. We track the US Mexican border, just a hundred or so miles into Mexico and the shadows on the terrain are so pretty. I could be sitting there having a scotch, smoking a cigar and give the pilot a bearhug (no not 'that' kind of bearhug ..  like old friends) and we'd all have a good laugh up there. You'd get 20 years for trying that on an America West flight. Quite a dichotomy.

On this recent flight I sat there for a while looking at all the gauges as "George" the autopilot flew and the crew chowed on chicken cordon blue..  I asked the senior pilot; if he was flying with just the front window (dead reckoning) and "one gauge" of his choice..  what would it be?  The pilot thought about it for a second and then said: "The EGT".

Exhaust gas temperature is a gauge that reveals several data points at the same time. It can be used to indicate how fast you're going because it tells you how hot your exhaust is..  EGT is low?  You're going slower..  EGT is high..  you're going faster.  It also tells you the potential condition of those engines in a crisis situation etc etc.

The temperature can't be gamed. 

I was thinking about the temperature of our markets this morning ..  you've got sub-prime and Alt-A  -- even prime loans having real problems in the US, yet the stock market is fine with it. Stocks are strong in Asia 'and' the US ..  The dollar is lower but stable against other currencies. Bond jockeys are confidently predicting a long bull run with rates dropping later this year. Oil is holding in the low 60's .. but Gold is way up at $680 an ounce..  The metals have been moved somewhat by hedge-funds in recent years,  but they are harder to game because they pay no interest.  Buy an ounce of Gold and that's what you've got. It gets no greater or smaller because it pays nothing. That keeps BIG investor money out for the most part. Mainly the gold-bugs are in this.  I am thinking about buying more gold because everything looks gamed to me. The USA has been running the printing presses in overdrive to pay for two wars, other currencies (Euro, C$, Yen) have competitively reflated along-side so they can keep exporting to the US. 

Real Estate is problematic because its number one characteristic is that it's immobile.  You can't move your house in FL to Paris or China ..  you have to sell each house and physically relocate.  I do not like Real Estate (aside from your principal residence) for that reason and I used to be a licensed realtor with half a dozen properties in his portfolio.

Gold is the greater market's EGT, so I am going to try to take a bigger stake in that on the dips.. Domains and Gold..  what a weird combo.

Comments

[Tom McDonald]

[Good] Domains *are* gold... you're not stretching all that much after all. :)

[rhart]

Gamed?...Will you define "gamed" as you know it. I think of it as "rigged" or "propped up".

You speak a language that makes you sould like a "trader"...like a friend of mine that trades soybeans on the CBOT. They see all these specific gauges or "indicators". It makes the common investor (whether stocks or real estate or whatever) feel like they just rolled the dice, without considering very much. I knew I should have studied harder in my Finance class, and not just used it to scope out sorority girls. Is that your background? Well I am glad that while not considering all those things, I did invest in domains and according to your temperature "gauge" that is good.

***FS*** Thanks very much.. by gamed I mean if I print more money to fund a war... then you print more money to keep up.. thats a form of gaming.. competitive currency debasement. I'm an economics dropout. Not enough sorority girls for my liking.

[Jon Pedersen]

Funny you mention gold and domains in the same breath. I made my first six figure domain purchase within the last year and my first PM (physical gold /silver) purchases ever within the last month. I convinced my wife to sell Boston rental propery in 2005 but couldnt quite convince the sale of our primary residence in Newport Beach which has doubled in 4 years. We are truly entering interesting times with the global housing bubble/credit bubble, Fed Reserve no longer publishing M3 money supply #'s, subprime meltdown etc. Should be very interesting when you remove the 20-25% of the homebuyers who would have never qualified if not for the unrestrained underwriting utimately funded by Wall St. and a look the other way gov't.

***FS*** May you live in interesting times.

[Steven]

Frank (Do not Publish),
I work for TD Ameritrade (tdameritrade.com) Do you do any online trading? I do not work off commission so I am not trying to sell you anything. I am evaluated on the inflow and outflow of assets. I would love the opportunity to earn your business when you decide to buy some additional gold or other securities. If your interested, let me know.

I am always looking for ways to fund that next domain name purchase...LOL

Regards,

Steven

[Drewbert]

Hey Frank,

Have you read Lee Iacocca's new book yet?

http://www.bordersstores.com/features/feature.jsp?file=wherehavealltheleadersgone

***FS*** No I haven't be he asks a very good question. It's been a long time since America has had a leader that could make people feel good. The Country needs to get that feeling back and (in the context of this post) get its fiscal house in order.

[Dr. Christopher Hartnett]

Gold, Silver,Diamonds, Rubies, Sapphires, Emeralds, are not just portable hard assets but have been long term preservations of wealth and capital for kings and queens for thousands of years, century after century, year after year, day after day.

Only recently (last two hundred fifty years) has the world learned to worship at the alter of the paper gods: paper currency, paper bonds, paper stocks, t-bills, money markets, CD's, annuities,futures, options,contracts, derivatives, spreads, mortgages, loans,REITs,leases, S&P contracts,index futures, hedge funds, funds of funds etc... Can't we learned from history that never has one of these fiat currencies ever lasted longer than a hand full or two, of generations. Real wealth should have a component that is diversified, portable, tangible, liquid, stable, accessible, tradeable and Global.

By the time the masses "get it", it is always too late. Almost everything changes, constantly, but few things remain the same and stand the test of time. Maybe our digital heavens and our virtual conglomerates should be build upon the rocks as well as the sands, so that the empire of today is a dynasty of tomorrow. What will your domain be built upon? When the paper gods start their bonfires, will we be able to drag our gold upon our private jets along with all our other assets? How will we refuel without those credit cards and worthless paper dollars? No wire transfers, no money market accounts, no checks, nor paypal.

If we found an old Chinese Emperor, or Indian Maharaja that had been hidden away from civilization for hundreds of years, what assets would he have at such a time. Would ours stack up to his? These are the questions a foolish man dismisses and a wise man ponders. A smart man plans for and a ignorant man believes he doesn't need to waste his time with. In a moments flash, we all can be humbled.

***FS*** Chris .. beleive me I get it, but I'm a realist.. The richest men (and women) in the world made their money with fiat currency.. While I thank you for keeping us grounded .. you need to accept the machinations of the world in which you live, make money in whatever way you can; then if you want to take that worthless fiat money and convert it to rubies, or move to a bunker in montana or zurich with tonnes of gold, go for it :)

[Dr. Christopher Hartnett]

Well said Frank. I too am a realist. No doubt, the fiat currency and the domain names fuel the pipeline for the hard assets and open the door for the long term preservation of capital and diversification of substantial wealth. A bunker in Montana or Zurich sounds like fun but having to "get there" when one might need to, concerns me on some level. After 10+ years in the domain name world and fifth generation in the precious gemstone business, I prefer a pocket full of precious stones over the bunker (same total value yet much easier to handle, access and transport), but it should be noted that in the interim, I consider some of my domains as being the "real gems" and "precious gifts" in the world of the fiat paper illusion. I have the luxury, security and joy of being a miner and a hoarder in both worlds.

[Aggro]

I find it interesting that in the same sentence of preservations of wealth, the good Dr used diamonds as an example.
Fact is that were it not for DeBeers' monopoly, limiting the worldwide supply and marketing expertise, diamonds would be worth diddly squat ie. close to industrial value.
In fact synthetic/organic diamonds (very high quality) are now available at a fraction of the price - that even a diamond expert would need a $50,000 machine to determine that it's synthetic vs mined.
Anyway in all the examples, the premium (over industrial use) is largely based on their desirability as luxury items.
Guess what happens when times get harder eg depression - the bottom falls out of the luxury market.

Also gold went nowhere for about 20 yrs even before factoring inflation...would have been a terrible investment.

[David Wrixon (aka Rubber Duck)]

Gold? Why not. It can be a good way of protecting your wealth. Not generally a very good wealth generator in the longer-term, but a good hedge against dollar weakness.

It is not necessarily the hedge that is going to yield the greatest reward. For that you need a profitable business that is denominated in a currency with good upside prospects. But risk is generally proportional to reward and and offshore a business to China or India is not on everyone's agenda.

[Patrick Kerr]

Frank, just read this post on investing in gold and domains--as an investor in both i may be biased but i think it's a great combo--in fact- i sort of combined them with CommodityBroker.Net which i have set up to be a service to match investors to the best commodity broker for them---also since you have an interest in making money etc i thought you and your readers might enjoy this video of T. Boone Pickens discussing oil recently http://paul.kedrosky.com/archives/2007/05/02/debating_peak_o.html ----based on this video and stuff i've learned from your site we recently set up OilGasFutures.Com which will be open in a few days---it's a registered brokerage firm which specializes soley in energy futures---and finally for those interested in all of the above but just want to practice we set up Ptrades.com a commodity futures community i co founded with karel baloun of facebook fame---anyway---i realize all this is a bit self-promo---but could be of interest to you

***FS*** Thanks for the links.. self promo is not the end of the world, when it provides some useful info.