A cruddy year — for every asset class
"So far this year, gold has lost less than 3%," noted Bill in yesterday's DR. "But stocks are down 14%."
That's cold comfort for many gold bugs — or for anyone whose investment strategy relies on what the pros call "non-correlated assets." Isn't one asset class supposed to rise when another falls?
In this regard, 2008 is feeling a lot like 1981: Every major asset class is taking a beating.
The late Harry Browne advocated a "permanent portfolio" strategy — taking the money you absolutely can't afford to lose and tying it up in equal proportions among gold, stocks, bonds, and cash. The idea is that no matter the external economic condition — inflation, prosperity, deflation, or recession — one of those four asset classes performs well enough to pick up the slack for the other three and you can average a gain of about 8% a year.
But the key word there is "average." Some years return better than 8%. And on rare occasion, everything gets hammered. That's what happened in 1981. The four asset classes were down an average 6%. And so far, 2008 is playing out much the same way. As Bill noted, gold is down 3% and stocks 14%. As a proxy for long bonds, the iShares Lehman 20+ Year Treasury Bond Fund (TLT) is down about 1%. Roll over a bunch of T-bills for your cash position, and you might be up about 1%. That's an average loss of over 8%. And by the reckoning of John Williams at Shadow Government Statistics, consumer price inflation is running about the same as it was in 1981. Ouch.
Of course, 1981 marked a turning point in many regards. Paul Volcker's Fed was putting the hammer on inflation. We were on the cusp of an epic bull market in stocks. Neither of those appear to be the case now.
By the same token, gold's bubble had already burst in 1981. And while the world's central banks did a swell job in the summer of 2008 goosing the U.S. dollar and taking down the price of gold on commodities exchanges below $800… just try buying a one-ounce gold coin for a reasonable premium over the exchange-quoted price: You'll be waiting weeks for delivery. (Word came yesterday the U.S. Mint is resuming one-ounce gold Eagle sales, but it's putting dealers on allocation.) At some point, the ticker price will have to catch up to real-world demand.
Even analysts like Marc Faber who've given up on commodities (at least for now) still believe it's worth your while to accumulate physical gold. And for some additional gold ideas, check this out.
Sphere: Related Content
The only asset class that still hasn’t taken a beating is white males. My prediction is that asset class will take a severe beating November 2008. Adjust your portfolio accordingly with a big fat short on whitey. This is actually good investment advice if you will think it through. Whitey is about to get his comeuppance
Obama 08
Comment on August 27, 2008 @ 6:41 am
The only asset class that still hasn’t taken a beating is white males. My prediction is that asset class will take a severe beating November 2008. Adjust your portfolio accordingly with a big fat short on whitey. This is actually good investment advice if you will think it through. Whitey is about to get his comeuppance
Obama 08
Comment on August 27, 2008 @ 6:41 am
sorry for the double entry. As a product of inferior urban schools I am still impaired in my computer skiills
Comment on August 27, 2008 @ 6:43 am
Justabrother
I am a white male. I haven’t had a raise greater than inflation in more than thirty years and neither has the rest of the bottom 80% of white males.
You must hang out with the other 20% of white males. The ones doing a little better than most white males, or maybe the one percent doing a lot better than most white males.
Comment on August 27, 2008 @ 10:01 pm
[...] say about the economy or the markets for well over a week. What's to say, really? Every asset class is still getting hammered. I wrote some about the Russo-Georgian war, which is at bottom a [...]
Pingback on September 5, 2008 @ 9:51 am
Alaskans Speak (In A Frightened Whisper): Palin Is “Racist, Sexist, Vindictive, And Meanâ€
September 5, 2008by Charley James –“So Sambo beat the bitch!â€This is how Republican Vice Presidential nominee Sarah Palin described Barack Obama’s win over Hillary Clinton to political colleagues in a restaurant a few days after Obama locked up the Democratic Party presidential nomination.According to Lucille, the waitress serving her table at the time and who asked that her last name not be used, Gov. Palin was eating lunch with five or six people when the subject of the Democrat’s primary battle came up. The governor, seemingly not caring that people at nearby tables would likely hear her, uttered the slur and then laughed loudly as her meal mates joined in appreciatively.“It was kind of disgusting,†Lucille, who is part Aboriginal, said in a phone interview after admitting that she is frightened of being discovered telling folks in the “lower 48†about life near the North Pole.Then, almost with a sigh, she added, “But that’s just Alaska.â€Racial and ethnic slurs may be “just Alaska†and, clearly, they are common, everyday chatter for Palin.Besides insulting Obama with a Step-N’-Fetch-It, “darkie musical†swipe, people who know her say she refers regularly to Alaska’s Aboriginal people as “Arctic Arabs†– how efficient, lumping two apparently undesirable groups into one ugly description – as well as the more colourful “mukluks†along with the totally unimaginative “f**king Eskimo’s,†according to a number of Alaskans and Wasillians interviewed for this article.But being openly racist is only the tip of the Palin iceberg. According to Alaskans interviewed for this article, she is also vindictive and mean. We’re talking Rove mean and Nixon vindictive.No wonder the vast sea of white, cheering faces at the Republican Convention went wild for Sarah: They adore the type, it’s in their genetic code. So much for McCain’s pledge of a “high road†campaign; Palin is incapable of being part of one.Tough Getting People Who Know Her to Talk
It’s not easy getting people in the 49th state to speak critically about Palin – especially people in Wasilla, where she was mayor. For one thing, with every journalist in the world calling, phone lines into Alaska have been mostly jammed since Friday; as often as not, a recording told me that “all circuits are busy†or numbers just wouldn’t ring. I should think a state that’s been made richer than God by oil could afford telephone lines and cell towers for everyone.On a more practical level, many people in Alaska, and particularly Wasilla, are reluctant to speak or be quoted by name because they’re afraid of her as well as the state Republican Party machine. Apparently, the power elite are as mean as the winters.“The GOP is kind of like organized crime up here,†an insurance agent in Anchorage who knows the Palin family, explained. “It’s corrupt and arrogant. They’re all rich because they do private sweetheart deals with the oil companies, and they can destroy anyone. And they will, if they have to.â€â€œOnce Palin became mayor,†he continued, “She became part of that inner circle.â€Like most other people interviewed, he didn’t want his name used out of fear of retribution. Maybe it’s the long winter nights where you don’t see the sun for months that makes people feel as if they’re under constant danger from “the authorities.†As I interviewed residents it began sounding as if living in Alaska controlled by the state Republican Party is like living in the old Soviet Union: See nothing that’s happening, say nothing offensive, and the political commissars leave you alone. But speak out and you get disappeared into a gulag north of the Arctic Circle for who-knows-how-long.Alright, that’s an exaggeration brought on by my getting too little sleep and building too much anger as I worked this article. But there’s ample evidence of Palin’s vindictive willingness to destroy people she sees as opponents. Just ask the Wasilla town administrator she hired before firing him because he rebelled against the way Palin demanded he do his job, or the town librarian who refused to hold the book burning Walpurgisnach Mayor Palin demanded.Ironically, Palin was pushed into hiring the administrator by the party poobahs who helped get her elected after she got herself into trouble over a number of precipitous firings which gave rise to a recall campaign.“People who fought her attempt to oust the librarian are on her enemies list to this day,†states Anne Kilkenny, a Wasilla resident and one of the few Alaskans willing to speak on-the-record, for attribution, about Palin. In fact, Kilkenny actually circulated an e-mail letter about Palin that was verified and printed by The Nation.For good measure, Palin booted the Wasilla police chief from office because, she told a local newspaper, he “intimidated†her.Running on Extreme Fringe Evangelical Views
Sarah Palin drew early attention from state GOP apparatchiks when, during her first mayoral campaign, she ran on an anti-abortion platform. Normally, political parties do not get involved in Alaskan municipal elections because they are nonpartisan. But once word of her extreme fringe evangelical views made its way to Juneau, the state capitol, state Republicans tossed some money behind her campaign.Once in office, Palin set out to build a machine that chewed up anyone who got in her way. The good, Godly Christian turns out to be anything but.“She’s doesn’t like different opinions and she refuses to compromise,†Kilkenny notes. “When she was mayor, she fought ideas that weren’t hers. Worse, ideas weren’t evaluated on their merits but on the basis of who proposed them.â€Sound familiar? Palin may well be Dick Cheney’s reincarnate.Something else has a familiar Republican ring to it: Her tax policies, and a “refund surpluses but borrow for the future†attitude.According to Kilkenny and others in Wasilla as well as Juneau, Palin reduced progressive property taxes for businesses while mayor and increased a regressive sales tax which even hits necessities such as food. The tax cuts she promoted in her St. Paul speech actually benefited large corporate property owners far more than they benefited residents. Indeed, Kilkenny insists that many Wasilla home owners actually saw their tax bill skyrocket to make up for the shortfall. Two other Wasillian’s with whom I spoke said property taxes on their modest, three bedroom homes rose during the Palin regime.To an outsider, it would seem hard to do, but an oil-rich town with zero debt on the day she was inaugurated mayor was left saddled with $22 million of debt by the time she moved away to become governor – especially since nothing was spent on things such as improving the city’s infrastructure or building a much-needed sewage treatment plant. So what did Mayor Palin spend the taxpayer’s money on, if not fixing streets and scrubbing sewage?For starters, she remodelled her office. Several times over, as a matter of fact.Then Palin spent $1 million on an unnecessary, new park that no one other than the contractors and Palin seemed to want. Next, Sarah doled out more than $15 million of taxpayer money for a sports complex that she shoved through even though the city did not own clear title to the land; now, seven years later, the matter is still in litigation and lawyer fees are said to be close to at least half of the original estimated price of the facility.She also worked hard to get voters approval of a $5.5 million bond proposal for roads that could have been built without borrowing. Anchorage may not be the center of the financial universe but, like good Republicans everywhere, Sarah Palin knows how to please Alaskan bankers and bond dealers.For good measure, she turned Wasilla into a wasteland of big box stores and disconnected parking lots.Sarah Barracuda
En route to the governor’s igloo, Palin managed to land what Anne Kilkenny says is the plumb political appointment in the state: Chair of Alaska’s Oil and Gas Conservation Commission (OGCC), a $122,400 per year patronage slot with no real authority to do anything other than hold meetings. She took the job despite having no background in energy issues and, as it turned out, not liking the work.“She hated the job,†an OGCC staff member who is not authorized to speak with the news media told me. “She hated the hours and she hated what little work there was to do. But she couldn’t figure out a way to get out of the thing without offending Gov. Murkowski†and the state Republican Party regulars, some of whom were pissed off they didn’t get appointed.But ever the opportunist, Palin quickly concocted a way. First, she waged a campaign with the local news media claiming that the position was overpaid and should be abolished – despite the fact that she lobbied Murkowski hard to get it. Then, mounting what she saw as a white horse, Palin raised a cloud of dust by resigning from the OGCC and riding away with an undeserved reputation as a “reformer.â€But when a local reporter dared to suggest that the reformer Empress has no clothes, Palin tried to get her fired.“She came at me like I was trying to steal her kids,†said the targeted reporter, who now works for an oil company in Anchorage. “I heard she had a wild temper and vicious mean streak but it’s nothing like you can imagine until she turns it on you.â€Not surprising since some of her high school classmates still openly call her “Sarah Barracuda,†Kilkenny insists.Still, as a Republican Party hack Palin managed to get herself elected running under the false flag of a “reformer.â€And what did she bring to the job? No legislative experience other than a city council of a village of 5,000 people, which is smaller than some high schools in Chicago. Little hands-on supervisory or managerial experience; after all, she needed to hire a city administrator to run Wasilla. No executive experience, except for almost being recalled as mayor. A philosophy of setting public policy based on one word: No.And what has she done since winning the job?According to Kilkenny, nothing. Well, nothing other than suggesting the state’s multi-multi-million dollar, oil-generated surplus be distributed to residents and finance future state needs by borrowing money. Gee, doesn’t that sound precisely what George Bush did with the surplus he inherited from Bill Clinton in 2001 and we all know in what great shape Bush’s economic policies left the nation.It may explain why, when asked by reporters, including me, what she thought about Palin being picked to be McCain’s running mate, her mother-in-law replied with a sardonic, “What has Sarah done to qualify her to be vice president?†Of course, when the woman – said by many I spoke with to be well-respected in Wasilla – was running to succeed Palin as mayor, Sarah refused to endorse her, so that may explain the family tension.As Governor, Palin gave the legislature no direction and budget guidelines, according to the chair of a legislative committee. But then she staged a huge grandstand play of line-item vetoing countless projects, calling them pork. “They were restored because of public outcry and legislative action,†the aide said. “She vetoed them mostly because she had no idea what they were or why they were important.â€But it was enough to get the McCain, who is mostly unobservant of the world around him anyway, to think Palin has a reputation as being “anti-porkâ€.In fact, Juneau observers note that Palin kept her hand stuck out as far as anyone for pork ladled out by indicted Sen. Ted Stevens. She only opposed the “bridge to nowhere†after it became clear that it would be politically unwise to keep supporting it, these same insiders assert. Then, Palin fell back on her old habits and publicly humiliated him for pork-barrel politics.As for being “ready on day one†to be commander in chief, despite the repeated public claims she’s made, the Alaska National Guard commander said that, “she has made no command decisions, other than sending some troops to help fight a few brush fires and march in parades at county fairs.â€â€œSambo Beat the Bitchâ€
“Palin is a conniving, manipulative, a**hole,†someone who thinks these are positive traits in a governor told me, summing up Palin’s tenure in Alaska state and local politics.“She’s a bigot, a racist, and a liar,†is the more blunt assessment of Arnold Gerstheimer who lived in Alaska until two years ago and is now a businessman in Idaho.“Juneau is a small town; everybody knows everyone else,†he adds. “These stories about what she calls blacks and Eskimos, well, anyone not white and good looking actually, were around long before she became a glint in John McCain’s rheumy eyes. Why do I know they’re true? Because everyone who isn’t aboriginal or Indian in Alaska talks that way.â€â€œSambo beat the bitch†may be everyday language up in the bush. Whether it – and the outlook, politics and worldview Palin reflects when she says such things in public – should be part of a presidential campaign is another thing altogether. The comment says as much about McCain as it does about Palin, and it says a lot of things about Americans who overlook such statements (as well as her record) and vote anyway for McCain.by Charley JamesCharley James is an American journalist, author and essayist who lives in Toronto.
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Comment on September 9, 2008 @ 6:48 pm