volatility imageThis recent article from the Upshot over at the NY Times attempts to explain why stock markets across the world have been experiencing so much volatility. Surely some of you have noticed and have even heard reports about how the “fear index” is unusually high right now, how the “VIX has jumped”, how “China is slowing”, how “Commodities are plummeting”, how the “Fed might hold on raising rates”, and so on. Basically, if you pay attention to financial news, it’s clear that something’s amiss and volatility is back. Well, to understand the why, we should first review the what. Continue reading

crude oil rigPreviously we reviewed how, historically speaking, gold has proven to be a rather poor hedge against inflation, despite the reality that many continue to promote it for just that purpose. What, then, is a reasonable inflation-hedging investment vehicle? It just so happens that a historically-significant and helpful one is also a commodity – crude oil, the most widely and heavily traded commodity in existence today. Historical data indicates that it functions better than most other proposed hedges out there, especially gold. Continue reading

financial crime fingerprintOn Monday, August 3rd of this year, a single individual was found guilty in London and sentenced to 14 years in prison for profiting off certain fraudulent trades by participating in what many recognize to have been a systemic practice in the banking world of manipulating LIBOR rates. Tom Hayes, a former UBS and Citigroup trader, is more or less the first person to be convicted of financial crime essentially on behalf of the entire financial industry complex worldwide for any criminal activity that the industry has engaged in during this century. The presiding judge, Jeremy Cooke, made no bones about the sentence: “A message needs to be sent to the world of banking.” It’s not enough, though, and it’s not the ideal way to send the message. Continue reading

golden nickelGold is not a good inflation hedge. Yes, it has been touted as one in the past and continues to be touted as one now, but there is little evidence supporting the claim. What’s more, it is rare that any wealth manager or gold bug or supporter of such an idea will tell you why or how it is an effective hedge. It is typically presented as nothing less than a simple statement of fact, a truth everybody should already be familiar and comfortable with. If any reasoning is provided, it might sound something like this – fiat currencies are not backed by anything anymore, unlike before when they were backed by gold. Hence, as central banks the world over pump paper into the system to salvage their ravaged economies, it is inevitable that they will ultimately devaluate their currencies and trigger inflation in the process; they will overdo it, overshoot the mark, mismanage, screw up. People will “wake up” and realize that paper is just paper, that the overzealous “printing” of it has created too much of it chasing too few goods, and they will lose confidence in their central banks and in the currencies they manage. As confidence is lost, so will be value and purchasing power. Furthermore, paper is not like gold, which is a physical thing that has a limited supply (there’s only so much of it that is accessible, anyway), a thing that must be mined, processed, and stored, whereas paper is just…paper. Continue reading