Investing Themes - As investors, from time to time we have to change our thinking about what is good as opposed to what was good.

Below is an exerpt of an article written in 2004. The timing may have been off...but when compared to say gold, commodities, even real estate...the banks have been a poor relative investment...I missed the explosion in credit would give them a "last hurrah" - it did. I suspect their glory days are over!...Utilities anyone?

The past is certain, the future obscure.

Thales (640 AD - 546 AD)

...(edit).

The banks are a case in point. You would be in the majority to think that investing in Banks has been a good investment over the last 10 years - and you would be correct! But if we look more closely at the performance of banks over the last 2 years we see things may have changed. We all know that lending has grown at tremendous rates and over the last few years, banks have continued to lend an ever increasing amount, as the growth in residential property borrowing verifies.

On this basis you would assume that all Bank share prices would be well in excess of that achieved 2 years ago. Not so. The “Big 4” banks are all under their record highs and their recent performance is nothing to get excited about – especially if you consider the high volatility they have shown. ...

Could the bull market in “debt” be coming to an end and could this lead to lower profits (or lower growth in profits) for the banks? It is possible.  (comment: years early CT! :-))

2011:
- higher capital adequacy
- higher wholesale funding
- lower debt demand/growth
- governments demanding their pound of flesh
headwinds!!

Australia - the lucky country indeed!

The seeds of Australia's own inevitable "calamity" are well and truly being watered.

Having ridden on the sheep's back over a 100 years ago, we now ride on the Asian Tiger (how ironic given our historic policy of "2 Wongs don't make a white"). What a ride!

Resource millionaires have been on the rise for the last decade. And so has the wealthy Australian house owner! But I believe rising home prices over the last 10 years, have masked a number of flaws in our economy:
- Wages growth has been marginal at the middle to lower end
- It has been acceptable while house prices have gone up - Serious income inequality is brewing.
- Debt grows and grows

Australians, having seen the economy stay resilient, believe the government all powerful and able to come to the rescue, having forgotten the wastage of programs like the pink batts fiasco.

The banks today, lend ever increasing amounts, on higher LVR's, using values that are at extreme levels (as identified by Jeremy Grantham of GMO). But have no concern dear Aussie, our banking system is "safe".

The governments (state and federal) assume their tax revenues are somehow "normal" and continue to increase the range of programs and subsidies creating a welfare psychology at higher and higher levels of income. And in the last few weeks, the bloated federal government now proposes a carbon tax - capital knows when it is not liked!

The cost structure in this country is now at high levels. Try to get reasonable service in the tourist destinations - no wonder people are heading to Asia! Add mechanics on $120 to $180 per hour, truckdrivers making a $100k and yes you have a boom.

All is good until it isn't.

So are we the lucky country, or just a country with some luck? Our beaches are nice though - especially in Tasmania!

This cannot end well...it won't

http://www.fgmr.com/golds-hyperbolic-trajectory.html

It will be a gold blow-off...the question is at what price?

Mr Turk makes a case that gold is in the midst of a hyperbolic move.

Not many understand the gold tune...Those that do hear it clearly...Thankyou Dan!

http://traderdannorcini.blogspot.com/2011_03_23_archive.html

The only reason that gold has a sustained price rise is because of a lack of confidence in the monetary system. It does not rise sharply because of such things as jewelry demand or industrial demand - it rises when fear, distrust, doubt, suspicion and uncertainty over Central Bank policy reigns. It rises when REAL interest rates are negative and investors understand the insidious process of currency debauchment practiced by these monetary authorities is underway. It thus cries aloud and issues a warning to those who can hear it and what it shouts displeases many Central Bankers because they are among those who while they despise its message, are all too keenly able to hear that message.

Mr J Hussman...weekly is a must read...

My only disagreement might be that any of this is actually "water under the bridge," because the same basic policies that produced the bubble are still very active. These policies have driven financial assets to rich valuations and low prospective returns, which compete sufficiently well with zero interest rates, but offer little for long-term investors. Meanwhile, the financial sector has a continuing overhang of delinquent and unforeclosed homes, which the FASB still allows banks to carry on their books at amortized cost. When the main source of "prosperity" is the policy-induced elevation of asset prices - rather than the allocation of savings into productive investment - it helps to remember that present gratification often equates to future unpleasantness.

http://www.hussmanfunds.com/wmc/wmc110321.htm

Money is not reliable...

http://www.financialsense.com/contributors/robert-blumen/value-investors-hate-gold

Value investors like Grantham only want to buy something when they have a quantitative estimate of its intrinsic value. While this rule works well enough during periods of stability, it provides no guidance for rational action when the monetary system is no longer able to provide reliable money prices. Value investors have successfully invested in countries experiencing a monetary breakdown by using an external stable currency to calculate prices. The present crisis, which is global, threatens to disrupt all of the external stable currencies, making them less useful for this purpose.

Capital Talks, while BS sells papers...

http://www.smh.com.au/business/buy-iodine-sell-gold-and-forget-the-aussie-20110318-1c005.html

What might be amazing to gold’s true believers is how comparatively little gold has done while the Middle East was becoming more volatile, let alone when catastrophe struck Japan. If all the scary stories about oil and nuclear meltdown can’t move the yellow metal much, what will convince the next fool to pay more for the yellow metal?


Meanhwhile the Billionaires...Soros, Paulson, Tudor Jones, Dalio et al are holders of the barbarous relic...

Even the strong Aus dollar not enough to hold the shiny truth teller down...The truth? Debt is killing the globe!