David Lentz

334 Comments

    • GLD Amassing Physical Gold [view article]
      "It's funny to see the gold price about 15 percent lower than the peak earlier this year while the inventory is about 15 percent higher."

      Yup. One should tread very carefully here, as it certainly looks like the price of gold is being manipulated -- probably by central bankers.

      If you convert the total amount of gold available in the world today to dollars (or euros, or any other fiat currency), is it dwarfed by the global money supply of the fiat currencies. This means that gold is the central bankers' bitch -- it can be made to do ANYTHING THEY WANT IT TO.

      People expecting gold to leap upward and displace all the fiat currencies are doomed to disappointment, and probably substantial losses. Gold is only a commodity, one whose value is based mostly on the fear that fiat currencies will fail. When they do not fail, but are only bruised, gold inevitably suffers a steep and precipitous fall. The history of gold is full of examples of this. When one fiat currency DOES fail, we do not see a gold-based economy springing up in its place, but instead we see another fiat currency replacing the old.

      Watch what happens to the Zimbabwe dollar, whether it is replaced by gold when the reins of power change hands there, or whether either another fiat currency springs up, or the Zimbabwe dollar is simply devalued and the game starts anew.       Oct 01 11:45 AM
    • Amidst Market Turmoil, Apple Has Unique Opportunity [view article]
      Zach, the bailout bill does NOTHING to halt the driver of the meat-grinder that is laying waste to our credit markets. ARMs will continue to reset, and homeowners will continue to be driven into bankruptcy and foreclosure, and houses will continue to pile up in inventory. We are only about halfway through the mortgage mess, with the foreclosure rate accelerating.

      While Apple is in a unique position, that position is only to survive, not to prosper. As America (and dragging much of the world with it) slides into depression, with unemployment soaring and the consumer economy contracting at near-light-speed, any companies that have even small amounts of debt will expire. Apple will not.

      I look for this Christmas season to be the worst in living memory, with only the future making it look good by comparison. About the only thing that will be moving in volume through the Apple Stores will be iTunes gift cards. People will be unwilling to plunk down coin for new Macs or high-end iPods or iPhones. Unless this mysterious new product comes out undercutting existing products that perform the functions it does by a significant margin, it is not going to be a blockbuster. Perhaps a revamped AppleTV, with a builtin tuner, to serve as HDTV set-top converter boxes, for $99 or so might get a bump from Joe Sixpack being forced to converting next February -- but in my own sampling of that market, most of those conversions have already happened.

      But I really, really doubt that Apple's new unnamed product will be prices at anything like $99 a pop. And anything priced higher is unlikely to sell very well, with the financial Grim Reaper outside everyone's door.

      However, as Apple WILL survive, given its substantial cash cushion, I see owning Apple shares as something akin to stuffing one's mattress with cash. Yeah, the stock price will decline, as the PE implodes, pushing the stock price down to under $100 (which will be one of the great buys of this century), but the company will retain all of its creativity and vigor for when we eventually emerge from the depths in a decade or so. And following an initial small contraction in sales volume, the rising iPhone revenue that has been pushed out via subscription accounting will kick in to support the stock, even as Mac and iPod sales shrivel a bit.

      But some competition will still be out there. Microsoft will likely still be a major player (but with most of new Windows sales occurring on foreign PCs, as Dell disappears and HPQ struggles with its debt). You are correct, that Apple will have some significant opportunities to expand into other markets, possibly (warning: entering fantasyland) buying Akamai, or picking up a struggling cellular phone company (Sprint?), or entering the more prosaic consumer electronics field, by producing a smart big screen HDTV coupled to an expandable disk array while merging with Disney (OK, that's far enough into the Twilight Zone).

      Yup Apple has potential, but in a different future than the one you see.       Sep 28 10:50 AM
    • 9 Feature Comparisons: G1 vs. iPhone [view article]
      Also omitted is the G1's nicest feature -- networks other than AT&T ! Sep 24 08:20 AM
    • Jonathan Ive: More Valuable to Apple than Steve Jobs? [view article]
      The author confuses the company with its products. There are magnificently managed companies with unglamorous products and companies that are horribly managed (for a while, before they implode into ruin) with fantastic products.

      He fails to show that Ives has any talent whatsoever at running a business.       Sep 24 08:16 AM
    • Looking for the Silver Lining: Predicting Our Future [view article]
      More importantly, both Apple and Google (along with others that will do well in the weeks and months to come) are internally financed and are not dependent on the debt markets to fund their growth. Having little or no debt on the balance sheets is now more important than ever. Sep 22 10:34 AM
    • Options Trader: Friday Outlook [view article]
      The thing that is most worrisome is that the powers-that-be are seemingly running helter-skelter, pulling one scheme after another out of ... in order to deal with the crisis of the moment.

      I suspect that a lot of these "fixes" are simply triggering the next crisis.

      In the end, we will be unable to avoid the consequences of decades of fraud and abuse, mainly in the mortgage markets, but also in the broker-dealer community, the banks, and who knows where else.

      I suspect that the bottom lies ahead. There is no value in this market, only chaos.       Sep 20 11:20 AM
    • Gold Bull Sees Huge Run for Gold [view article]
      Another thought that occurs is that if foreigners effectively "own" the Treasury -- or at least the Treasury's ability to sell more debt -- that they might decide to exercise some control, and that we might see our taxes going up a lot more than politicians would be otherwise inclined to do, in order to shore of all that debt they hold.

      While the Treasury can "print" all the "money" they want, since that "money" is "printed" by issuance of debt, all that has to happen to make that an undesirable strategy is to refuse to buy it. You can't push a string. Anybody know what the rate is on Zimbabwe bonds?       Sep 20 10:52 AM
    • Friday Outlook: T.G.I.F. [view article]
      Mr Fry, I found your choice of graphic to be perfect.

      This will end the same way as the wicked witch did, with the government dissolving into a steaming, screaming puddle.

      Of course, in America the government IS the people.

      Chill out, preserve your health and sanity. Don't have a stroke over this.

      And now a short commercial interlude -- I'd like to plug my new money fund, The Sasquatch Money Fund, 100% guaranteed by the US Government. Anticipated returns of 15%.

      Act now and send in your cash. No checks, please -- I accept only cash.

      And please be sure to print your own receipt, in the unlikely event that you need it to present to Hank Paulson, as in the interests of efficiency, and saving our clients' money, we do not supply receipts or records. I accept unmarked paper bags of US currency (they can also be sent through the mail, and there's no need to insure them), delivered to my doorstep.

      Please tell your friends (and even better, your enemies) about this exciting offer.       Sep 19 12:29 PM
    • Options Trader: Tough-Decisions Tuesday [view article]
      From what I have seen, we are only about halfway through the number of existing ARMs out there. We can expect the beatings to continue until morale improves, or until somebody changes the machine that is delivering the beatings. Sep 17 03:28 PM
    • Options Trader: Tough-Decisions Tuesday [view article]
      Let me try once more to be clear about this -- Homer Simpson is sitting at home, knocking back a brew or six, with the thought of what is he going to do when his ARM resets? He knows he can't handle the payment, and he knows his home now has a lower market value than the balance on his loan, so he cannot refinance?

      What has occurred to daye, is that the Homers of America have sat on the train tracks, watching the train approach (admittedly, some have just walked away from their mortgages before going broke), closer and closer, until they are busted, without a home or assets, and their house goes to further depress the housing industry as yet more excess inventory.

      Under my scheme, Homer gets a letter from his mortgage company that tells him his mortgage has been replaced -- by virtue of the new law -- with one that locks in his current interest rate (that he is able to make the payments on) for 130 years (for example). Now Homer has no choice in the matter (unless he can find a buyer, and if he could do that, he wouldn't be in the mess he is in), but he gets to keep his home, and is not driven into bankruptcy or made homeless. He still has whatever disposable income he had before to support the rest of the economy. OTOH, he is chained to that house for the rest of his life, or until home values appreciate enough to enable him to sell it.

      Cost to the taxpayer? Virtually nil. The punishment is shared by homeowners and lenders alike, as the lenders do not get the revenue stream at the rate they originally planned on. The chain reaction of imploding ARM resets, mortgage failures, lender and borrow failures would be ended.

      It's easy. No hand-outs or bail-outs required.       Sep 17 03:25 PM
    • Options Trader: Tough-Decisions Tuesday [view article]
      Phil and Cover -- you misunderstand me -- I do not think that ANYONE would willingly sign up for a hundred-year mortgage. But rather that the still-outstanding ARMs (which are going to continue to implode like clockwork as their rates ratchet up), be forcibly converted to fixed-rate loans, with the rates at reasonable levels so that they can maintain the payments, but that they would suffer for their foolishness, and their lenders not bear all the punishment, by having the terms of those mortgages extended until the total interest collected would be the same as it would have been under their current ARMs.

      I repeat, this would only apply to existing ARMs. New mortgage seekers would be free to choose any kind of mortgage they could obtain (except ARMs, which should be barred from use by homeowners). The intent here is to stop the implosion of the existing ARMs, and stop the build-up of the housing overhang. That's all.

      And this would do so, far more cheaply than any other scheme. And at this point, it appears that cheap is a major consideration, Uncle Sam having blown the family nest-egg at the local saloon.       Sep 17 03:14 PM
    • Options Trader: Tough-Decisions Tuesday [view article]
      There is an even cheaper way to stop the madness.

      Simply require that all holders of ARMs convert them to fixed-rate mortgages, at the going rates that the GSEs offer.

      To prevent the lenders from getting a haircut, and taking all the pain, merely extend the terms of the new mortgages such that the lenders will ultimately receive all the interest that they would have if the ARMs had continued, or some reasonable fraction of that money.

      The net impact of this is that the borrowers that are in over their heads get effectively converted to renters, with mortgages of over a hundred years on houses whose value is below the amount on the mortgage.

      So they can't sell the homes until housing market valuations recover, but they are also not forced out of their homes, dumping the repo'd properties onto a scrap heap that is crushing the industry.

      In the end, these folks are probably toast anyhow, but at least it does not happen in just a year or three, but instead is spread out over decades, with unlucky individuals facing up to their problems as they are either forced to move or suffer economic calamities (lose their jobs, divorce, etc) that place them in the position of having to deal with their under-water mortgage.

      This would immediately stop the inventory build-up in unsold housing, would allow millions of homeowners to remain in their homes (albeit saddled with a debt burden they will, in all likelihood, spend the rest of their lives paying off), and allow things to stabilize in the ravaged housing industry.

      Then we can have a measure of sanity (not too much, as that wouldn't be normal) in the financial industry, and begin to lay the groundwork for a recovery. The powers that be would have the time necessary to implement a sane regulatory framework -- instead of some emergency claptrap that will be riddled with a whole new set of problems, which is where we are heading now.

      It's really easy to bring all this to a responsible conclusion. Instead our collective head is on fire, and we are attempting to put it out with a hammer.       Sep 16 01:41 PM
    • Apple: Leading the Way to a Total Tech Breakdown [view article]
      People, people, people -- please remember that equity markets are part fundamentals and part emotional response. Prices are driven mostly by one or the other of these factors only at the extremes.

      Anyone claiming looking at the state of the global economy and expecting ANY company that makes its money selling to the public to do well over the next 6 months to a year is looking into another universe.

      We can rationally expect to see PE compression as an ongoing fact of life, so that if AAPL's earning rise by 20% and the PE compresses by about a third, it will still decline in price.

      It really doesn't take a rocket surgeon to see this. What it means is that APPL will be a better buy later than it is today, which is exactly what Zach has said. You can either ride out a downturn and wait for better days (which I think everyone will agree are eventually coming), or sell now and buy back in at a lower price point.

      Different strokes for different folks.

      Only those buying now and expecting to reap profits over the next quarter or two are going to be disappointed -- I think there's a saying, something about fools and their money, that might apply here.
       Sep 15 11:21 AM
    • Why It's Going to Be a Long Recession [view article]
      "... Kinda makes the war in Iraq seem cheap, doesn't it ..."

      Nope. Not even a little bit. Even the grand gesture to bail out the Chinese, Japanese, and PIMCO is small compared to the amount we are burning in Iraq in order to ... ?

      Oh yes, keep the terrorists over there.

      But what about the terrorists in Washington?       Sep 08 11:31 AM
    • GSEs Into Conservatorship: Can Housing Stabilize Now? [view article]
      "What a stupid comment. Government backed is risk-free."

      Tell that to the folks in Zimbabwe.

      According to the pie chart on the tax forms, in 2006 we paid 6% of our national outlay merely to pay interest on the debt. Since then, the debt has expanded a LOT, and this will boost it still more.

      How long until Uncle Sam has trouble making the payments on the interest?

      Yes, he can always kick the monetary printing presses into high gear, but to reiterate my initial point, just ask the folks in Zimbabwe how well that has worked out.

      When we have a national interest expenditure in the 15% and up range, it will be VERY DIFFICULT to get the debt under control (as if it wasn't difficult before!).

       Sep 08 11:13 AM
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