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O'Shag
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Saddened by the News of Audio Research Sale

It was a surprise to read of the sale of Audio Research. I didn't realize the company was in any difficulty. Surely Audio Research must be considered the American audio icon, along with Mark Levinson, Krell, Conrad Johnson, Rowland, and Pass Labs. My fear is that the company's dedication to service (they service everything they've ever made) will suffer. I still don't understand how this could happen, given the excellent Reference products of late. Oh well, as Queen would have it..'another one bites the dust'

dcstep
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Re: Saddened by the News of Audio Research Sale

Levinson sold out long ago, lest we forget. Seems like I read that Krell has "adjusted" its business plan. All the brands that you listed started as small, independent businesses addressing a niche market. Most continue as small, independent business.

Over the years Pass designed several monumental products that were produced by his employers, before he put his own name on them. (Pretty common actually). PS Audio disappeared and came back with a slightly different emphasis.

Hopefully C-J and Rowland will enjoy continued success, but "luxury" markets can be very fickle.

Dave

silvertone
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Re: Saddened by the News of Audio Research Sale

Based on the products Mark Levinson will be unleashing later this year, it seems they are on a mission to reclaim the high end audio throne.

I can't wait for Stereophile to review their new stuff

greenelec
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Re: Saddened by the News of Audio Research Sale

From the way I read the news release, Audio Research was not in any trouble. They just had the best year ever. This makes them a valuable asset. They have been aquired by an Italian investment group.
Investment groups that are successful buy assets that are worth something. Unlike most retirement fund managers .This group also owns Sonus Farber, a very good speaker manufacturer. It would seem that there may be hope for a outcome for the customers of Audio Research.
Anyway I am hopeful that William Zane will be compensated for all the wonderful work he has done and the great products and business model he developed. I think this could be a better outcome than happened with John Dunlavy, whose great speaker company died soon after being sold.
If you have ever been to Italy you know they do things a little differently there than we may be used to. This could work out really great, hope for the best!

gkc
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Re: Saddened by the News of Audio Research Sale

In our system of debt capitalism, business depends on credit.

In case you all haven't been following the latest follies among our (chuckle) private and central banking authorities, their are no bids for bundled debt. Because nobody knows what it is worth. Nobody. If you are in debt, and your business depends on the stable value of that debt, you are in trouble.

Dammit, I hate to tell you all "I told you so," but I have been yammering about gold since $400 and silver since $7.50.

The chits are being called in. And the Fed is fighting the process by panicking. The chucka-chucka-chucka sound you hear is not a police surveillance 'chopper or the News at Ten reporter. It is "Helicopter Ben," pissing on a wildfire.

I, too, am sorry about Audio Research going under. Expect more on this story, not less.

Or, better yet, worry about your wire.

Vote early and often, as big Al advised. Vote for the candidate who espouses low taxes and honest money.

Now, just who in hell might THAT be?

Happy tunes. When you take something for granted, it always seems to disappear at precisely the wrong moment. Now, who among you all didn't already know that ?

Amp_Nut
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Re: Saddened by the News of Audio Research Sale

Clifton Said:

Quote:

I, too, am sorry about Audio Research going under.

That is That is COMPLETELY INCORRECT ! It has NOT 'gone under' but merely been sold...

dcstep
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Re: Saddened by the News of Audio Research Sale


Quote:
In our system of debt capitalism, business depends on credit.

In case you all haven't been following the latest follies among our (chuckle) private and central banking authorities, their are no bids for bundled debt. Because nobody knows what it is worth. Nobody. If you are in debt, and your business depends on the stable value of that debt, you are in trouble.

Dammit, I hate to tell you all "I told you so," but I have been yammering about gold since $400 and silver since $7.50.

The chits are being called in. And the Fed is fighting the process by panicking. The chucka-chucka-chucka sound you hear is not a police surveillance 'chopper or the News at Ten reporter. It is "Helicopter Ben," pissing on a wildfire.

I, too, am sorry about Audio Research going under. Expect more on this story, not less.

Or, better yet, worry about your wire.

Vote early and often, as big Al advised. Vote for the candidate who espouses low taxes and honest money.

Now, just who in hell might THAT be?

Happy tunes. When you take something for granted, it always seems to disappear at precisely the wrong moment. Now, who among you all didn't already know that ?


Wow. Before you go on a rant perhaps you should get your facts straight.

If you'd read the related article you'd know that AR had their best year ever in 2007. They're now selling because they want to. (Maybe someone's nearing retirement age, or just getting tired of the grind, but that's not really relevant to us).

You wrongly interpret one post and launch into a rediculous position of no relevance to the discussion.

Dave

Elk
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Re: Saddened by the News of Audio Research Sale

But it was a high quality rant.

gkc
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Re: Saddened by the News of Audio Research Sale

As I understand it, this was a forced sale. I have no idea how things will turn out.

My rant may be a sin against your assumptions, but it is based on Economics 101. If you have to pay somebody $20,000 a year to answer the telephone, and somebody in Euroland, Britain, China, or India can get the job done for half to a tenth of that sum, you are doomed to bankruptcy -- it is only a matter of time.

This is the penalty for living with a weak currency. And the $USD is weak. It will not go to zero, nor will it continue to decline in a straight line. But rallies will be capped, and new lows will be made.

Whatever the new owners are willing to pay to keep the current AR staff on board, it won't be in Euros, and it most certainly won't continue to pay the rent.

Competition is ruthless. We, as a country, are not competitive on the worldly scale. I bought the Aussie $ 2 months ago -- it pays 7% and is strengthening against the $USD. I bought Loonies 3 years ago. At $US.80. Now, the Loonie is at par or slightly better against the $USD.

Facts are facts, no matter what the press release claims. Of course, AR is no Enron...but, as I said, facts are facts.

I love the AR sound. I suspect there will be a time not too far in the distant future when it will no longer be heard, no matter what logo rides the faceplate.

I am sorry to be irrelevant. However, my core and trading portfolios are at LEAST tracking the damage, and, actually, doing a bit better than that. It is a tough environment out there. As I said, expect more of this.

dcstep
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Re: Saddened by the News of Audio Research Sale


Quote:
As I understand it, this was a forced sale. I have no idea how things will turn out.

Would you please provide us a link to where you got that understanding?

What do you mean by "facts are facts?" If you're trying to tell us that business is competitive, your newsflash is incredibly old. Thanks goodness and hope it stays competitive.

Stuff your money into a matress if you can't take your portfolio fluctuations. Otherwise, always keep a significant percentage in cash (40% to 60% interest earning) and deversify your holdings if you feel that you must invest in equities. Now's a good time to invest in spread plays, but don't do it if you don't know what a spread play is because you won't know when to get out. As soon as spreads began to widen last July I invested in Capstead (CMO) and I've doubled my money. Other financials can benefit from spreads after all the bad mortgage news plays out in late 2008. US Bank kept their noses clean and would be a good financial stock to own now, etc., etc. There's money to made in every market, but you need to keep your eyes up and avoid the herd.

Dave

gkc
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Re: Saddened by the News of Audio Research Sale

I "can't take" my "portfolio fluctuations"? Dcstep, I love my portfolio fluctuations, since they are net to the upside.

I don't "invest" in equities -- I speculate in them, along with commodity futures. "Spread plays," as you so quaintly put it (do you mean strangles, butterflies, and collars?), do not attract investment capital, either, unless one is running a hedge book. My annual returns have averaged over 236% since 1999, so I do believe I'll pass on the mattress thing.

The "mattress" these days is the 2-year Treasury -- 1.96% yield on today's close. That is what the Fed is trying to unlock -- as long as you see scared money willingly taking a 3% hit on inflation, just for the safety, you will see illiquidity in the credit spreads. Banks who cannot catch a bid on their paper are increasingly unwilling to loan their reserves to businesses, and this hurts the small entrepreneurs the most (these are the good folks, of course, who dominate the landscape of the high-end audio business, in numbers , if not in financial clout). Without the constant influx of new entrepreneurial capital, the high-end cannot survive as the growing, diverse community we now know and love. And, yes, these are the facts. Right now, we are teetering on the brink of a sustained credit crunch -- the home equity ATM is now closed, and the consumer is near maxed out on his credit card, as the latest default numbers show. And, we have a weak dollar, a confused Fed, and a group of head-in-the-sand politicos running for national office.

I believe the Harmans of this world will survive just fine, along with the best balance sheets in Britain, Euroland and Asia. I'm not so sure about anybody else...

dcstep
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Re: Saddened by the News of Audio Research Sale

Well then why are you so excited about a correction in the mortgage markets? They were overhyped, poorly underwritten and in need of a serious adjustment. It sounds like you'd support the Chairman of IndyMac when he says the Fed caused it with too loose monetary policy for too long after 9/11. The Fed didn't have anything to do with totally absent underwriting, negative amortization loans and rediculous teaser rates that sucked in ignorant homeowners and clueless investors from Europe and Asia. This mortgage incident is all about greed (mortgage companies, ratings agencies and Wall Street), not monetary policy.

You still haven't said anything about where you heard that AR was in trouble before the sale.

You have very impressive returns. Not even Warren Buffet can match you. Where do we invest? Some of our former hedge fund money is looking for a new place to park. Really, I can't turn my back without investigating those kinds of returns further.

Spread is back and not just for hedgers. A steeper yield curve and all the vol has really gotten things pumping again. Treasuries have benefited tremendously.

Dave

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Re: Saddened by the News of Audio Research Sale

I'm diversifying, in an attempt to have financial base in multiple enterprise and countries. If one rock sinks, I can still cling to another, as I am hanging on to more than one. At least, that's the plan. As usual, at the heart of any workable plan involving any enterprise, lies something that is essentially - quite simple. Otherwise, it tends to fail.

As said in 'Life of Brian', "Kidnap Pilot's wife - issue demands." An example of KISS at it's finest. Of course, they managed to screw even that up.

gkc
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Re: Saddened by the News of Audio Research Sale

There is a correction in the housing market. There is a disaster in the mortgage markets. They are two entirely different market segments, with entirely different ripple effects.

My sources for information about AR are probably the same as, or similar to, yours. Apparently our inferences are quite different. I hope their product lines survive under new ownership, but I doubt it. The economic environment is too tough.

I am sure Mr. Buffett (2 t's) had a better decade than I did. He operates in a much wider universe. He buys the vultures, I buy and sell the carrion. He is an investor, I am a speculator.

My focus has been entirely on commodities (primarily gold, silver, and the various forex contracts, but the grains have been very good to me, also). I wrote a Stereophile staff member in 2004, and I suggested then that gold, silver, and a few mining stocks were about to explode further upward (gold was $390 at the time, and silver was around $7). I also suggested Goldcorp as a conservative play (GG, NYSE) at around $10. It closed today at $36.34. I also liked Kinross (KGC, NYSE) at around $6.50. It closed today at well over $22. I bought both of these stocks in 2001 for around $2. I bought Pan American Silver for $2.80 (PAAS, NASDQ). It is now over $34. Ditto Silver Standard (SSRI, NASDQ). I also bought Sunshine Mining at $1.90. I sold that one for 50 cents, just before it went to zero. C'est la vie -- you win a few, you lose a few. But, I will tell you the GOOD ones have been much better on the upside than the bad ones have on the downside.

There were many signs that the entire complex was about to explode. I read 'em and believed 'em -- most of the wall street crowd read 'em and ignored 'em. Things haven't changed much on THAT score, although a few analysts are starting to come around.

I plucked the low-hanging fruit. There is still a lot of money to be made in the precious metals complex, but it will be tough going from here on out. I doubt if I will average over 200% a year over the 5-8 years, but who knows? There will be a good short-selling opportunity coming up in the S&P 500 futures contract in a short while, and maybe I'll be able to get on it.

Good luck on your "spreads," and happy tunes.

dcstep
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Re: Saddened by the News of Audio Research Sale


Quote:

My sources for information about AR are probably the same as, or similar to, yours. Apparently our inferences are quite different. I hope their product lines survive under new ownership, but I doubt it. The economic environment is too tough.

I read about AR on this site. The related article says that 2007 was their best year ever. I don't understand how that would lead to assume that the sale was forced.

Oh well, good luck with your metals. I'll stick with my treasury futures and options. Love that volatility.

Dave

gkc
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Re: Saddened by the News of Audio Research Sale

2007 is now ancient history. If you are trading bond (bills? eurodollars?) futures, you well know that what is in the headlights is far more important than what is in the rear-view mirror. Wes wrote a great piece (he always does) about the transfer of ownership, but it wasn't "business"-oriented (nor should it have been -- the true stakeholders are concerned owners of AR products bought under different ownership...the new corporate structure will have to deal with debt, distribution, labor costs, branding, currency crosses, and all that other stuff that has nothing to do with how a $15,000 preamplifier sounds, or how often a $30,000 power amp blows up).

Business is business, as you must know. And the bottom line is always how to turn a profit next year. A few years ago, Harman made a great decision when they decided to go after the luxury automobile market (which will always have legs), and proceeded to jump light years ahead of their competition with their Lexus and Mercedes contracts. Make no mistake. This is a very tight arena. And it is going to get tighter, as credit allocation becomes more selective. Risk is back in the markets. No matter how busy Air Bernanke becomes.

AR has been one of my favorite high fidelity brands. It no longer exists. I am not their only fan. And the good folks at corporate headquarters are aware of the extent of their popularity in a tiny universe. You sell for one of two reasons -- things can't get any better, or they are about to get a lot worse.

As I began this irrelevant exchange, so I will end it. I, too, am saddened by the demise of Audio Research.

rabpaul
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Re: Saddened by the News of Audio Research Sale


Quote:
I, too, am saddened by the demise of Audio Research.


What demise? Unless they are into Chapter 11 there is no demise.
Microsoft wants to buy Yahoo. Let's say they finally agree on a price. No more Yahoo? Of course not.
Its the same with the ARC except apparently the deal is done. We all just hope that a change in ownership does not change the products.

Elk
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Re: Saddened by the News of Audio Research Sale

Thanks, guys - very interesting interchange.

Let's hope that AR remains a high quality, viable brand.

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Re: Saddened by the News of Audio Research Sale

I guess I'll admit to being a little bit sad about the news, but for my own idiosyncratic reasons...

It marks a change from what I thought of as a smaller "artisan" style company ebing bought out by "monolithic" corporate America. I know I'm stereotyping, but it does signify to me another small loss of individual character. The new company's products may benefit me even more that AR ever did, but that first twinge of sadness was my hippy dippy first 'feeling.' Not trying to take any pot shots, just a 'feeling.'

It reminds me that if the owners of AR were getting old and wanted to retire or slow down, then time must be passing for me, too. It made me realize I am aging at the rate of one second per second, just like them.

The combination of the first two created nostalgia for the excitement AR has caused in my life in Hi Fi.

The sale is yet another reminder of the bottom line always being something in life a company has to consider; but when an individual owns a company, he can sometimes make some choices that bring him personal satisfaction instead of feeding the growth or dividend monster. I do admit to liking some things in the hobby keeping the modern business model slightly at bay. All apologies to Adam Smith and all, I just find it charming when a person has the ability to think "that's enough profit" instead of "what's the most profit I can get?"

Another part of all this is just liking things the way they are and feeling sad about "change." (Except for in politics...the only platform agenda I am watching right now is the "change" platform.)

The sale also makes one hope the owners of AR are OK, and wishing them good returns for their years of making cool gear.

All that sounds sappy, but it's more of an ear/heart thing than an ear/brain thing.

Cheers.

BillB
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Re: Saddened by the News of Audio Research Sale

I know what you mean.
I think, though, that sometimes a new company/owner can increase the value -- that is, when "synergy" actually works, we might get the same quality for a bit less money? Or better reliability for the same price?
I've no experience with AR so just asking generally, in the sense that Walmart has reduced prices people pay for stuff, or in the way that Jaguar reliability improved after Ford bought it.
(I shouldn't mention Wal-Mart, that might open a new can of worms. Please ignore that part.)

gkc
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Re: Saddened by the News of Audio Research Sale

I think this is whistling in the dark, Bill. You could well be right, but I don't see how the current credit market conditions can allow for continued expansion of the high end. Contraction, to me, is the more likely scenario. I assume the good folks who bought AR knew what they were doing, in the financial sense, and that (again, to me...only time will tell) means they paid a discount to people who wanted to get out while the getting was good (or, at least bearable). I think the buyers wanted to cash in on a premium name, but I don't think they will be able to sustain any significant mileage out of that premium name without cutting back on costs. For me, this is simply the world we live in.

I want to throw one more opinion in here, before this thread dies a deserving death. As a speculator, I am NOT bullish on gold (or the miners) over the short term (that is, the next 3-9 months). With the exception of a few small-cap flyers in the mining sector, I believe the incredible run-up since August is a short-term climax. Bullish consensus is too high, and all the news good for gold has most likely been priced (all markets look ahead, not behind). You could get one last spastic run at the shorts, which could produce a piss hard-on at $1000-$1200 gold. If that happens, do not get sucked in at the top. You all know how long piss hard-ons last....

This current move needs to be consolidated, no matter where its "true" top is. And that means a significant correction, some time, from some point. My own suspicion is that the short-term top is in. But the market is much bigger than I am.

HOWEVER. If you own NO gold, learn about it. Learn the story. Judge for yourself. Be smart and buy the dips. The fact is, we did not leave the gold standard volutarily, in 1971 -- we were rudely kicked off it. The party line, among monetarists, is that we needed a fiat currency to allow room for economic expansion.

Fremer noted, in the March issue, that AR-3 speakers cost around $500 a pair when one of the records he played was cut, while he was reviewing a $6300 speaker, and he allowed that this made the Dali's a decent enough bargain for the money.

HUH????!!!

I will become evangelical and then quit. If you don't own SOME gold (and/or silver), you are a believer in the great lie...that you are in charge of your own purchasing power. Buy the dips. A truly great one may be in the works before farmers have to decide to plant soybeans, corn, or wheat. Better yet, forgo a couple-three triple latte's a week (or day), accept the lesser substitute, and buy a one-ounce US Silver Eagle per week (around 18-20 bucks, current prices, depending on your dealer) -- you won't miss the money, and you will be surprised at how well this turns out, a couple years down the road. No Apocalypse Now, but that doesn't mean our economy (and the world's) isn't still in deep shit.

Big money hates relativity. It is a selfish motivation. Big money wants a basis, a floor underneath it all. That is why gold is $910 and silver is $17.20 (in 1971, they were $35 and $2, respectively). Big money is behind this move, and will keep driving it until the world's monetary authorities get religion.

Happy tunes.

dcstep
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Re: Saddened by the News of Audio Research Sale

I don't dispute Clifton's advice. His moderate suggestions for investing in precious metals are very sensible. However, lest one jump off the deep end into precious metals and gem stones they need to read "Extraordinary Popular Delusions and the Madness of Crowds" before they get too invested in these strategies.

Gold and diamonds, for instance, actually have value as industrial products that create demand for them; however, much of their demand comes from their uses as decorative items and perceived scarcity (particularly in the case of diamond). How much of this intrinsic value is "real" vs. "perceived"?

I can't answer that question, but each potential investor needs to consider that when thinking to invest. ALL markets have emotional component. If markets are rational and efficient, I believe it's only in the long haul. In the short term I believe that markets behave irrationally. This presents opportunities for traders, but not the casual investor.

The idea of making a small regular investment and holding long-term is a classic strategy and highly recommended. It's part of what I do.

Dave

gkc
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Re: Saddened by the News of Audio Research Sale

More than 99% of all the gold ever mined, during the whole of human history, will never grace the neck, ear, or finger of anyone. Gold is a monetary reserve, a basis against which paper is always measured by the markets, no matter what any given age's monetary authorities scheme up. When the supply of unbacked paper balloons, as is now the case, gold simply marks to market. Diamonds have to be graded, and, of course, they have a huge presence in the jewelry business, but central banks do not keep them as monetary reserves.

I have read Mackay's book. But, having been written in the mid-nineteenth century, it has no relevance to our age of computers and derivatives. Right now, there are over $400 trillion out there (nominal, or "notional" value), in credit-swap derivatives, and nobody is sure exactly where the bid is. Mackay had no idea...

There is a reason why the inestimable Mr. Brown's decision to sell his country's gold, at prices in the $260-$270 range, revitalized the most incredible secular bull market in gold ever seen (i.e., the one that started in 1971, at $35 per ounce) in modern market history. It came during a time period when decisions were being made at the highest national government levels to, once again, print money to pay for the future. It was a bluff that failed, a post-modern experiment in relativity that merely re-affirmed what men, women, and nations always knew -- you can't print wealth. There has to be a basis.

Elk
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Re: Saddened by the News of Audio Research Sale

What prevents gold's perceived value from simply evaporating?

Is it simply a function of how many accept that it is the de facto basis for the monetary system?

Curious Elk.

dcstep
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Re: Saddened by the News of Audio Research Sale


Quote:
What prevents gold's perceived value from simply evaporating?

Is it simply a function of how many accept that it is the de facto basis for the monetary system?

Exactly.

Gold has no intrinsic value when placed in reserve, it's merely a perceived value. Governments realized that they could name anything as a monetary basis (say the dollar) and, given faith, it would have value. (Some cultures even used beans or shells, now we use paper).

Both the dollar and gold valuation contain political risks. There has to be faith that the US treasury won't just start printing dollars out of proportion to true economic growth. This does NOT stay in perfect balance, thus currency values flucuate. However, over decades markets have developed faith that the dollar will be supported, thus its use as a monetary icon.

Gold is also merely an icon. However, it is an icon with hundreds of years of history and therefore a lot of "believers". I'm not damning gold as an icon or thing of value and a potential investment, just suggesting that everyone keep "The Madness of Crowds" in mind as they consider it.

Dave

gkc
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Re: Saddened by the News of Audio Research Sale

Fiat currencies always have taken the stamp of the political regimes that have created them. Aristotle noted that gold was ideal as money because it was rare, divisible, and portable, and because nobody could counterfeit or politicize it. These are not arbitrary characteristics.

Your question is abstract and hypothetical -- the answer has always been, in so many words, because gold, by a process of elimination, is what is left after the negative characteristics of other candidates for money have made them finally unsuitable. The temptation of all political regimes has always been to buy votes with money that doesn't exist. Gold's essential scarcity won't allow for false promises. Gold is simply what is left, after all the promises have been broken.

Gold has earned its status as a de facto basis for monetary systems because all other possibilities have failed. Paper has failed because political regimes and economic systems that have used it have failed to maintain monetary stability.

Anything will do, for awhile, as Dave mentions, but beans, seashells, teeth, pebbles, and gemstones have always proven to have crucial limitations.

Actually, Dave got it backwards. Gold's value is almost 100% intrinsic. True, it has some extrinsic uses -- its unique properties (malleability, superior conductance, etc. -- you know them all) have made it useful in various EXTRINSIC applications such as electronics, medicine, dentistry, and, yes, jewelry. But all these relatively few extrinsic applications comprise less than 1% of its value.

Gold is MOST valuable when it is the basis for a given monetary system, when it "just sits there." It then becomes the only monetary asset for which there is no corresponding liablility. Gold is discipline, and is thus not kindly towards charity and feeding the poor. Our current system, in its benevolence, has borrowed against its own printing presses so far into the future that there is no possibility of any of these liabilities (political promises) being filled. The discipline of gold prevents this. And, that is unfortunate. But Economics is the study of "allocating limited supply to unlimited demand." And losers in any system are thus factored into the basic human equation. I hate it, you hate it, and everybody with any kind of social conscience hates it, but human activities have always been zero sum, especially when it comes to Economics, and one has to compete for one's sustainance. Animals simply kill each other for survival, with no need for any rationales. Humans, being capable of language, invent verbal schemes to accompany their decisions as to who prospers or who perishes.

What could I add here, to solve in a few words what nobody has solved in the entire history of our magnificent and miserable species? There has to be a basis, and gold is it. Gold's function, unfortunately, only emerges during times when paper has been overborrowed. The people who overborrow the paper begin to lose confidence, and begin to slowly recyle it back into gold. That is what is happening now. The accumulators of the great fortunes in this world are nervous, and are beginning to hedge their credit bets into gold. Unfortunatelty, the process of creating more debt to push the balancing and reckoning necessities further and further into the future has created an atmosphere of mistrust. So, slowly and surely, big money is quietly moving into gold, the basis. All you have to do is look at the price charts since 1971.

Sorry to ramble on, but there are no simple answers, here. The fact is, gold was chosen by trial and error thousands of years ago, and nothing else has worked since. Silver? That would be better than what we have -- floating promises 'til the end of time -- but gold has always been the ultimate choice.

Cheers.

dcstep
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Re: Saddened by the News of Audio Research Sale

That's a well done, classic, elegant argument for gold.

Read "Madness of crowds" and consider for yourself.

gkc
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Re: Saddened by the News of Audio Research Sale

Wasted words. I do it all the time. Dave, I have no interest in how you spend your paper. But spend it. Spend it like there is no tomorrow. Buy something solid with it. A house. Hell, a stereo system that you can sit down to and say, "Now, THAT's what I want in my listening room."

But be careful how you SAVE it. Be very, very careful. Right now, inflation numbers are being politicized. If you lock in the 4%+ rate on the 30-year US Treasury bond, you lose. It is not a dramatic loss. Rather, it is the death of a thousand cuts. Your purchasing power erodes over time, because ANYONE who keeps track of expenses knows that the prices on things needed (can you spell, C-O-M-M-O-D-I-T-I-E-S, as in "THINGS you NEED"?) are accelerating at a much faster rate than current politicos and monetary authorities want you to sense, know, or understand. Hell, go out 2 years on the Treasuries. Earn 2.7%. Hoo boy. Even the loaded government inflation numbers are lower than THAT. These are FACTS. Repeat -- I do NOT make this shit up. Inflation is 3%-4% annually, using massaged numbers, and the good ol' US Treasury will pay you 2%-3% to loan them MORE of your scratch.

P.T. Barnum was right.

Yeah, I know -- "just give me another 2-5 years, and we'll fix this shit...we PROMISE." And, the check is in the mail, I won't come in your mouth, and we will honor our commitments to Social Security.

I read Mackay. As I told you. Mackay wrote "Extraordinary Popular Delusions and the Madness of Crowds." I mentioned this in my last post. Didn't you know the author of the book you recommended? Damn. Might as well talk to an onion. The study, actually, confirms my points about gold, politics, and Economic necessity. The book cries out for a montetary basis. Bubbles are created by too much liquidity in the paper of the day. All of Mackay's examples are rooted in easy credit.

The book was written in 1841. Did you know that? Are you looking for universals BEFORE the age of futures contracts and their derivatives, CDO's, and SIV's? There is no chapter on gold in this book, because gold is the basis, not the spin-off from the basis. The derivative credit instrument is the tail, gold is the dog. The dog wags the tail.

Forgive my sharp tone. It is the same old complaint -- you ignore what it is convenient to ignore, concerning my (snort!) deathless prose, and limn out what you deem to be convenient to your purposes.

Repeat. I read Mackay's book. Probably, before YOU did. Its subject is not the basis, but DEVIATIONS FROM THE BASIS. Leverage is impossible without debt and false promises. Leverage is short, and creates bubbles. Reality is long and creates final reckonings.

I doubt (who knows?) that I will be around when the cards currently being played are called in. Somehow, that fact comforts me. The "buy now and pay later" game can be played out, in cycles, for a long, long, time -- longer than you or I will survive.

But we are in one helluva cyclical move towards the basis, and away from political promises. And it will be a tumultuous move. You haven't seen ANYTHING, yet.

It is 8:25, Pacific Time. Do you know where your money is? Do you know WHAT it is? If you do, pray, please call Helicopter Ben. He doesn't, and I just KNOW he would appreciate your counsel on how to handle all this paper floating around -- for which, I might add, there is no bid. No bid. Yup. No bid.

NO BID! This is a fact. NO BID! I did NOT make this shit up. It is being flogged on every media outlet around the world. Bernanke dropped the Fed funds rate by nearly half in 3 months. The US Treasury is going to send every taxpayer in the country $600-$1200. Ask yourself, "Why?" Is this not, indeed, EXTRAORDINARY??? When was the LAST time the Damn' Gummint sent you a check? Business as usual? Oh, no problem. The authorities are in control. Hell, the guy has a PhD from Princeton -- he MUST know what he's doing.

Well, shit. I'm sure a nice check will calm things down...

Please call him. Explain to him that this is just a "popular delusion and madness." Better yet, send HIM a copy of Mackay's book. Perchance the Post-Modern crowd at Princeton hasn't gotten around to making it required reading for Economics 101. Yet.

Aw, hell. Why argue? Just max out that ol' credit card. You'll never have to pay it off, right? Just keep makin' those minimum monthly payments, and your survivors may just have enough room on 'em to pay for your funeral.

Better yet, buy music. Avoid the dirges.

gkc
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Re: Saddened by the News of Audio Research Sale

I am so sorry. I made a mistake. Blame it on senility. I stated that you could lock in 2.7% on the 2-year Treasuries. Make that 1.9%. The 2.7% number was for the 5-year. Both, however, are well under the massaged, homoginized, and sanitized government numbers for inflation, which are running in excess of 3% -- and, if you believe THAT, I have a CDO for you. True, it has an offer...but no bid. Never fear, though -- Mr. Buffett, bless his generous heart, will underwrite the insurance on it. Snicker.

I apologize. I am not usually this sloppy. Damn. I gotta sober up.

Such a deal.

bifcake
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Re: Saddened by the News of Audio Research Sale

Oooof! Wow, someone's been hitting the sauce! Holy moley!

gkc
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Re: Saddened by the News of Audio Research Sale

Shazam.

Moley? Yeah. Buy Molybdenum.

No shit. There's not enough of it to go around, and the Neo-Coms need it for hi-tech blooey.

And the Neo-Coms rule. Go with the flow.

Shhh. Don't tell anyone you heard it here.

bifcake
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Re: Saddened by the News of Audio Research Sale

I'm playing Twilight Zone theme here.

dcstep
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Re: Saddened by the News of Audio Research Sale


Quote:

I read Mackay. As I told you. Mackay wrote "Extraordinary Popular Delusions and the Madness of Crowds." I mentioned this in my last post. Didn't you know the author of the book you recommended? Damn. Might as well talk to an onion. The study, actually, confirms my points about gold, politics, and Economic necessity. The book cries out for a montetary basis. Bubbles are created by too much liquidity in the paper of the day. All of Mackay's examples are rooted in easy credit.

Sorry for the confusion, but I wasn't talking to you, I was addressing the our other readers. Since I was "responding" to your thread I can see where you may have thought I was talking to you.

I wouldn't suggest to anyone that they buy and hold treasuries except as a percentage of their portfolio. At least the returns are always positive, so long as you hold to maturity or don't pay a premium.

Lately we're getting 30% returns with no leverage, but it's part of a hedging program and the returns are net of the hedge correlation. It's not a practical program for most individuals YET, but we're trying to develop a structure to include individuals, not just banks and mortgage banks. Anyway, there are several ways to invest in treasuries other than buy and hold. As a gold trader and FX guy I'm sure you're active in the CBOT. We don't tend to bet, so our returns stay in the double digits, not triples. I don't have the stomach for calling interest rates.

Ciao,

Dave

gkc
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Re: Saddened by the News of Audio Research Sale

Sorry about the paranoia, Dave -- I have done the same thing (i.e., posting a message with no specifiec audience).

I takes balls of iron to buy ANY investment vehicle, "real" or derivative, when it OUGHT to be bought. This is why most investors and speculators lose -- the best buys at the lowest prices come with such a flood of negative news, that the average player just can't muster up the guts to step in and grab the good grab. Ditto, the highest prices and the best news -- the same folks just cannot sell when the press screams, "higher, higher!"

I blame the monetary environment for this dilemma -- true investment (where you just buy and check once a year) OUGHT to be possible. Yet, we are all being forced to become speculators, just to beat real inflation. The average guy/gal hasn't a chance swimming in this shark-infested lagoon. You had better learn how to read a bar chart (hourly, daily, weekly, and monthly), along with the various RSI, Stochastic, and MACD momentum oscillators, and track useful derivatives for hedging purposes (i.e., options), or you might as well be wandering through a casino looking for a hot wheel.

It is more dangerous out there than it ought to be. And it is your fault if you lose.

Cheers.

Elk
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Re: Saddened by the News of Audio Research Sale

Thanks, guys!

Seriously - this was a great read!

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Re: Saddened by the News of Audio Research Sale


Quote:
...Yet, we are all being forced to become speculators, just to beat real inflation. The average guy/gal hasn't a chance swimming in this shark-infested lagoon. ...

It is more dangerous out there than it ought to be. And it is your fault if you lose.

Exactly.

I know quite a bit about mortgage securities and mortgage derivatives (I was a risk management consultant and FAS133 "expert" for some large players before I got into my own deal) and even a sophisticated investor had little hope of understanding those structures. They relied on S&P, Moody's and Fisk to rate securities that offered meger premiums for the actual risks taken and were frankly incorrectly rated. Now the whole market is dead because potential investors know that they can't rely on the ratings agencies. I'm afraid that market will be stalled for a long time, harming both good products and bad.

Dave

gkc
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Re: Saddened by the News of Audio Research Sale

It will remain a great mystery to me how I can successfully navigate the keyboard for "molybdenum" and, at the same time, miss "neocon" and "moly."

Holy Moley! It's moly.

Actually, as unintentional as it was, "neocom" wasn't a bad muff -- if you put a neocon and a neocom in the same room for 30 minutes, only one of them would walk out, and, no matter who it turned out to be, he would want your name, age, 'phone number, SSN, and bank account number, and if you refused, he would blow your head off.

Politics. The subjugation of the many by the few. Oy.

Monty
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Re: Saddened by the News of Audio Research Sale

I might write in Pat Paulsen. Better yet, John Galt!

gkc
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Re: Saddened by the News of Audio Research Sale

Monty, I'd vote for either one of 'em, given the miserable choice that is shaping up.

We may have missed the boat with Dr. Ron Paul, a Congressman who hates being in debt. Sigh. People just aren't ready for a concept so advanced and radical, yet. Not enough pain, I suppose. But Dr. Paul won't live forever, so this may be a window in time not taken.

I would flog this man to the rooftops, but he probably emerges too soon along our painful learning curve. He has no chance. Not even as a gadfly. But, there is no doubt in MY mind that he is the man for the job.

When you are drowning in a shitstorm of debt, on both the national and individual level, what do you do? Borrow more, apparently.

Buy gold and silver. Average in over time. Think of them as the ageless answers to reckless spending, NOT as ways to make more money to leverage into more debt. 1% here, 5% there. If the government and monetary authorities (and remember, they ARE separate and different...) won't do it for you, do it yourself. Put yourself on your own gold/silver standard. For the sake of your kids, if not for yourself. Medicare and Social Security? They are NEVER going to be able to pay for this shit. But they WILL try to print it...so, in my mind, all you can do is back this magic fluff with 1%, 5%, 10% as your own gold standard, and do what paper does best with the rest of your money -- spend it.

Just my thoughts. Hell, it has worked for me, over the past 36 years. These miserable dipshits can't harm me, no matter how crazy things get. I get paid in paper, and it's backed with gold and silver. And I speculate with whatever is left.

Just today, the story came out on CNBC about good old Pete (I can't remember his last name). He has been in arrears on his $1,000,000+ mortgage (Florida beachfront property, apparently) for six years. Yep. That is a six, folks. Hasn't made a payment. Every time the bank sends somebody over with foreclosure papers, he asks them a simple question: "Can you prove you own the mortgage for this property?" "Um, no, I guess not..." is the answer. And the banker goes home, and Pete pours himself another Marguerita and watches another sunset. Good old Pete. Now, why doesn't HE run for President? All of you surely know the answer to THAT one.

Sorry to be such a pain in the ass, y'all, but the fools are messin' with our money, BIG time. They have already spent it into the next 50 years. And our national production of goods and services (if you call lawsuits, tax-preperation, and CDO's true economic "services"), is still trying to catch up with the 1990's. Hoo-wee! Let the good times roll!

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