http://www.wired.com/wired/archive/7.09/zeros.html?pg=1&topic=&topic_set=

Hmm. Technology seems to be doing fine (although Moore’s Law will probably hit a wall in the next 10 years). This is a financial crisis caused by the financial system. It had no “external” cause.

http://www.vimeo.com/7339317 (video of Thiel’s talk)

http://www.leveragingideas.com/2009/10/04/notes-peter-thiel-singularity-summit-talk/ (the notes for those who do not want to hear him for forty minutes)

I like Peter Thiel’s ideas; well, he is a libertarian too. However, he hasn’t been that successful lately especially with his hedge fund’s bets this year.

I actually find Thiel to be a true contrarian (as opposed the many people who spout Austrian economics on Seeking Alpha; there is diversity among that group with inflationists and deflationist; my point was not to denigrate Austrian economics , merely just to point out that it is no longer a contrarian macro view). Unlike most libertarians, he is not a vocal gold bug. He doesn’t emphasize gold in his investment strategy or macro views.

Gold is a consensus investment, and its inherent logic is somewhat correct. The attractiveness of gold is based on the fact that nothing backs the US dollar (except that it is still used for trade and can pay taxes and debts which makes it objectively valuable during deflation.) While it is true that nothing backs the US Dollar, only future tax revenues and the assets of the Fed, gold is backed simply because its supply is finite and because people deem it with high subjective value. There is a lack of confidence in the dollar, and the primary focus has been the allegedly atrocious fiscal and monetary policies.

Gold is said to protect wealth, not to create it. There is a lack of confidence in the dollar because allegedly atrocious fiscal and monetary policies of the United States. This is that key point Austrians stress, but instead, I find another story more compelling. While fiscal and monetary policies have effects on the economy, I think science and technology play a greater role in our quality of life. I agree with Thiel that the credit crisis is actually an innovation or technology crisis. Since credit is a claim on the future, if there is not enough real growth, then those claims will not be paid back. Leverage was the means to fight low returns in a world of low innovation.

A real contrarian investment is to be long innovation. This is easier said than done as Thiel points out that many tech companies are implicit short innovation bets.

“Peter slams the NASDAQ explaining that most listed companies are actually not technology companies, rather, they are zero-sum bets against technology (ex: investing in Google is feeding a monopoly on search, Microsoft doing well means linux suffers, etc). NASDAQ companies are more like banks than they are true innovators.”

Dave Ramsey on FOX Business this morning said gold was a joke as an investment. We’re nowhere near a mania in gold yet. Nevertheless, I too anticipate a sharp correction sometime soon.