sbenard

The Downfall of Keynesian Economics and the U.S. (Part 3 of 3)

U.S. Government debt is the Mother of all Bubbles. I have been hearing more and more people say that they are starting to short treasuries.

This morning, I heard a professor on CNBC say that Obama needs to stimulate to the tune of $10 trillion to avoid a depression. Is he kidding? He wants to double the national debt in one year to avoid a depression!? This debt will NEVER be repaid!
Yesterday, I thought Rick Santelli said it best. When Steve Liesman quoted Treas Sec Paulson when he said that without the $700 billion bailout package, the American People would have paid a very heavy price for a collapse in the financial system, Rick Santelli replied that the American People are paying that very heavy price anyway. Indeed, we are! Are we're only just beginning!

One of my friend told me something insightful a few months back. He reminded me that there is no international bankruptcy court. There is no such thing as national bankruptcy. Instead, governments use hyperinflation. When everyone heads for the U.S. government debt exits, the only thing that will have value will be hard assets -- commodities and real estate. Paper assets, including bonds, stocks, and currency, will be worthless.

Effects of the Long Dated Treasury Bubble

U.S. government debt is the mother of all bubbles. When this one pops, it will be the greatest panic in world history, with everyone running for the exits at once! The only safe place to store value will be in hard assets: a place to live, plenty of food to eat, some means of storing or renewing energy. This pop will be felt by everyone. EVERYONE!

Is This the Last Great Bubble?

I he DID own it, you'd complain that he was talking his book. You'd say that he was just trying to persuade all of us to join him in a "misery loves company" recommendation. This is a "damned if you do, damned if you don't" argument. At least if he doesn't own it, no one can claim that he has a conflict of interest. If he DID own it, we would all be crying about such a conflict of interest.


On Oct 24 11:59 AM daytrader wrote:

> mcadoo3312
>
> this guy is a SCHMUCK!!! THAT IS WHY HE DOESN'T OWN IT!
>
> you tell me where you are going to make more money.a treasury bill
> or rrpix.take a look at thier chart.more bs.preservation of capital!

Is This the Last Great Bubble?

Apparently, Jim Rogers agrees with this author:

"The American government bonds are the world’s last bubble and the price of commodities has to increase." Jim Rogers

Jim has said that he IS short US Treasuries.

Can Obama's Policies Revitalize Traditional Oil ETFs?

Pipo, I was glad to find your blog. I've been a fan of Jim Rogers for years. No one speaks with such candor as he does!

Can Obama's Policies Revitalize Traditional Oil ETFs?

Thanks for that link! Good stuff!


On Nov 12 06:52 PM Pipo wrote:

> Pickens on Oil: "I don't see any lower than it is today"
>
> oiltradersblog.blogspo.../

Back at the Bottom

Now that's interesting: the "fantasy book" indicator. Let's all buy right now!

I get such a kick out of all these guys that say that we should take a long term approach, buy now, and hold through thick and thin. I think we refer to that in the business as trying to catch the falling knife. That's a fine way to get bloodied badly! Just because prices have fallen far doesn't mean they won't fall a lat farther!

Besides, by tieing up funds now in a plunging stock market, investors incur the opportunity cost that those same funds might have been placed during the intervening period in something that might have MADE money. Instead, they lock away those funds for 3-5 years where they probably won't even break even, and will likely lose even more money.

Most of the people who advocate this long-term, buy-and-hold approach are just talking their book. They're hoping that if they can persuade enough people to start buying, it will drive prices higher and bail out their losses. Misery loves company, and they are miserable because they are in a badly losing position in a market that is only getting worse, and they now want the rest of us to join them!

No thanks! I'll stay short the market until real indicators tell me it's safe to go long. I'll keep making money by taking money from those who try to catch the proverbial falling knife and end up with their own financial blood on their hands.

Can Obama's Policies Revitalize Traditional Oil ETFs?

I hate to say it, but the truth is that under an Obama Administration, crude oil prices are bound to rise rapidly as soon as the slightest sign of an eocnomic rebound occurs. That seems to be the gist of this article. Since we are so heavily dependent on both oil, and imported oil, this is eventually going to be a no brainer investment.

I saw Boone Pickens on television today, and he warned that the low oil prices we are seeing right now will only be temporary. He said crude will be over $100 again a year from now. He pointed out that global crude reserves are 6-9% lower at the end of 2008 than at the beginning of 2008. That only bodes well for one thing -- costly crude!

ETF Update: Tax Swaps, Leverage Caution, October Performance Report, Retail Doldrums

Does someone know of an ETF to SHORT retail?

Out of the Election and into the Frying Pan

What do you mean by "no honeymoon for Obama"? He's had one for the past two years!

Impact of Commodity ETFs on Prices: An Update

Fellow forum members:
Calling someone a "lunatic" because you disagree with them is unbecoming a professional. It suggests that since you can't make a case for your opinion, you resort to denigration of the author of the opposing viewpoint. Weak minds and poor arguments must resort to profane and denigrating language because they can't express themselves forcefully any other way than through the shock value of crude language. It would be better to make your case with reasonable and powerful arguments rather than denigration!

Furthermore, your use of such language tells me NOTHING of the author of this article. However, it speaks MULTITUDES of your character -- or lack thereof! We learned more about YOU in your snide posts than than we learned about the author of this article!

Impact of Commodity ETFs on Prices: An Update

Coincidence is NOT causality. The existence of funds that invest in commodities does not mean that they caused those price rises. That would be like saying that just because you choose to sleep in the garage, you must therefore be a car!

To the contrary, the year-long study by the CFTC that was released about 10 days ago shows that the percentage of futures contracts attributable to speculator/investors has DECLINED over the past two years. The increases in commodity markets were attributable to the entrance of more and more commercial hedgers, NOT speculators.

The CFTC study showed that the commodities that have experienced the sharpest price rises were the commodities that had the least speculator/fund influence, and the commodities that showed the smallest price increases were the ones with the largest percentage of speculators/funds. This is because speculators are a moderating influence on prices; because of their sensitivity to high prices, speculators are the first market participants to short the market when prices are overbought. Commercials tend to cause prices to escalatte more rapidly because the higher the prices go, the more frenetic becomes their buying, as they panic to buy more of the commodity that they need in their business before it goes even higher. This is why, as speculators exit the market, as they did late last year, prices tend to rise faster and higher.

Just watch! As Congress imposes more restrictions on commodity trading (higher margins, smaller positions, more restrictions), the size of commodity markets will shrink, and prices will become more erratic, the Dollar will decline faster (capital flight), prices will spike much higher (the commodities will flow to places where people are willing to pay market prices), and shortages (lines at the gas stations) will become commonplace in those places where governments attempt to control the markets.

I know that this is counter-intuitive, but as fewer market participants are allowed entrance to the marketplace, a few large players can exert greater influence on the smaller market size. A few big fish in a smaller pond can throw their weight around. The more market participants there are and the larger the market pool, the more impossible it becomes for "big fish" players to manipulate those markets. Smaller markets benefit large participants MORE (ala Hunt Bros. in the silver markets 20 years ago) rather than restricting them. The Hunt Bros. lost their shirts when more and more market participants finally caused a collapse in the silver markets. As silver prices rose, more people entered the market to sell silver, including even housewives who sold their silverware for a quick buck. The Hunt Bros. never anticipated that this would occur and that the market would expand so large with so many new participants. As the market became larger and more participants entered, the Hunt Bros. could no longer corner the market, and they eventually lost their shirts as the price collapsed. The point is that the larger and more liquid a market is, the more it keeps extreme prices in check. Bigger markets are better markets! Bigger markets keep extreme prices in check.

EMERGENCE OF INVERSE COMMODITY ETFS
One aspect of the subject of "ETF influence" that wasn't covered here is that over the past six months, there have emerged many new ETFs that also SHORT commodities. Early this year, I was writing many of the ETF provider to beg for these, since I saw an opportunity coming when commodity prices became overbought. Interestingly, these inverse commodity funds emerged at just about the time the commodity prices topped out, suggesting the possibility of some influence, although it may have been merely coincidental, as I mentioned earlier in my post. This, we may find going forward, will likely have an even greater moderating force on commodity prices. In fact, my own research has shown that these inverse commodity ETFs have grown much more rapidly, and are now much larger, than their long ETF twins. (There is also now a rather unique commodity ETN that takes both long and short positions in the same fund!)

The best examples of these paired long/short ETFs are the family of Deutsche Bank ETNs. The short and 2X short ETNs are much larger and more liquid than their long/2X long twins, in some cases by more than 10 times the size of their long-fund twins! DB has matched short/long ETNs in oil, commodities (in general), precious metals, ag/grain commodities, and base metals. In each of these cases, the short funds are currently significantly larger than their long twins. However, as commodity prices show more signs of bottoming out, this phenomenon is beginning to shift. The existence of more of these inverse funds, I expect, will play a moderating role in the commodity sector in the future. I am glad to see these short ETFs to counter-balance the (purported/supposed) inflationary impact of the long-only funds. There are new players in the game now, and their presence is sure to be felt.

Thanks all, for sharing your thoughts/perspectives.

MacroShares to Launch Case-Shiller ETFs

I've been waiting weeks for these. No symbols yet?

Plethora of Commodities ETFs for Retail Investors

One of my favorite commodity ETFs is one that is truly unique. It takes both long and short positions in a single ETN, and is rebalanced monthly. And guess what? While most long commodity funds are down over the past 2 months, this one is higher. The symbol is LSC.

Dividend Aristocrats Handily Outperforming Main Indexes in 2008

I always get a kick in the pants from people who say that index XYZ performed BETTER than the market, when in reality, they just lost LESS!