Quote Originally Posted by Finster
Sinclair is no dum-dum, but he is vastly over-rated. Heís just another competent analyst that happens to have developed a cult following. Sure he made a lot of money in the seventies, but as with success in many fields, a lot of is has to do with being in the right place at the right time. For my money, his scope is too narrow. Whether and how much to invest in the field he follows is far more important than the specifics of which securities and minute timing details. Also in part due to his oracle-like image, he has tendency to get away with ambiguity that others cannot. As with the infamous Greenspeak, if something can be interpreted in more than one way, in hindsight - after the fact - people will tend to credit him with the interpretation most consistent with what actually transpired. Iím no Sinclair follower, so I might be being unduly hard on him. But the reason I donít follow him is that I found nothing in my first couple exposures that was useful.

Your material, in contrast, has proved useful on numerous occasions. The USD is a security which none of us can escape dealing with and its value is relevant to every investor on the planet. The Fed, in turn, is the most important player in that equation, and you, in turn, help us understand what it is doing. Maybe I am somewhat biased due to the complementary nature of our work (like yin and yang), but to me itís like the difference between a guy with a seismograph and laser core sampler and another one with a divining rod and silver cross.
I think that by virtue of your longer range investing horizon and that you seldom do trades lasting days or a few weeks, it's not surprising you feel that way about Sinclair. He's one of my regular daily reads, partly due to his background, partly due to his track history of trading success and partly for his charts and overall views. I agree that he is narrow too, but it's both his area of expertise and I wouldn't expect him to not talk some from "his book" too.

I also greatly respect his overall ethical approach and the occasional little bits of trading wisdom and of course the "behind the curtains" zingers and tips. Some of that ambiguity is intentional too - many floor and big traders read his stuff too and can "set up" to counter any recommendations he makes.

But you're right too - my charts and approach are both much broader than just gold, silver and mining stocks and also a bit more "everyman"... and I can hear the shock too, considering some of the "out there" stuff I track like TIOs.

Quote Originally Posted by Finster
Totally on board with you on the changeable nature of many commodities. This is not your fatherís corn and beef weíre talking about. But Iíd assumed - perhaps wrongly - that if you had futures contract that called for delivery of, say, the original (non-GMO) corn and someone actually delivered the frankenstuff, theyíd be in default. The next contract might allow for delivery of the latter, but then that wouldnít be treated in the index as the identical thing.

Or am I all wet here?
To tell the truth, I haven't looked that closely at contract specs but I doubt that it would distinguish between GMO and non GMO corn, just given the priority to pricing & costs. If a farmer is willing to deliver corn at a given price, it's likely acceptable. Hybrids have been around for decades too.

Quote Originally Posted by Finster
Perhaps so, but thatís exactly what makes gold useful for comparisons. This time In 1972, the S&P traded around 105. Now it trades around 1395. But in 1972 we were using a far different dollar to measure it with than we are here in 2007! How can you conclude the S&P is actually worth 13.3 times what it was 35 years ago?

Answer: You canít!

A far, better way to approach the question is to throw out those changeable (i.e. shrinking) dollars and use something that is the same now as it was then. Enter the venerable ounce of gold. At today's ~ 650 versus 1972 ~ 47.5, it also is trading about 13.3 times what it did 35 years ago.

So it turns out that when we do so, the S&P is the same price today as it was 35 years ago.

Anyone besides me tempted to conclude that the bonar is just worth around 1/13.3 times what it was then?

True - and you can also do similar comparisons with the FDI, and I with CPI plus John Williams adjustments (it's about 9x now, CPI being about 5x, and the trade weighted dollar being another 3.5x). That's the real value in my opinion - when similar conclusions can be reached with wildly varying approaches, the probabilities sure can make for better trading/investing returns.

Quote Originally Posted by Finster
Exactly. But we can factor out the common denominator - the currency unit - and ask how much of either the gems or art or whatever traded at the same prices as the same amount of stock. When we do so, we find that commodities do actually depreciate just a little compared to capital over long periods (multiple cycles) of time. It must be so, because it takes less labor to produce them as technology advances. Moreover, capital pays dividends, which allows us, by looking at price only - to make a more direct comparison. If we are to compare productive business capital with commodities on a total return basis, we are better off comparing stock returns to commodity futures returns - the latter effectively pay a dividend as well, providing a real return to the futures buyer derived from the economic service he provides. Indeed, over these very long periods of time, total returns from stocks and from commodity futures have been comparable. This was shown in the now-famous study done by researchers Gary Gorton and K. Geert Rouwenhorst at the National Bureau of Economic Reasearch (NBER), Facts and Fantasies about Commodity Futures.
Soothsayer... and more shameless indirect FDI promotion too... ;)

Nice pickup and insertion of that study. I note it on my futures page too since it goes a long way to remove false information from the general area. The leverage and "gotcha's" in futures can be quite dangerous and I don't intend to appear to be promoting them... but huge leverage is not required and they can be a very direct play for those with the correct attitude and education and experience.