occdude

The Top Ten ETFs for Decoupling 2.0

I dont get FXA if you have CEW you got it covered. I like CYB better than both of them though, because the Yuan is pegged to the dollar on the downside (in case of deflation) and has a very good potential for appreciation if the Chinese let the Yuan float (which eventually they will).

Dollar-Gold Relationship Inspires 'New Economic Theories'

It makes perfect sense how the dollar and gold have been like long, lost buddies (except for today).

Deflation was all the rage, BUT there are hints that massive infllation is in the works. This would lead to one buying both as a hedge. The line of reasoning would go like this "deflation is definitely kicking behind but, Bernanke keeps talking about qualitative easing and literally printing money. What should I do?" . That being said how would you react? Maybe just a wee bit confused??

It's heartning to see however, that an inflationary cycle is kicking in as of TODAY with fed starting to monetize. The normal relationship between gold and the dollar where one goes up or down against the other is being re-established.

It's also interesting to see the transfer of momentum between inflation and deflation manifesting as a coupling between the dollar and gold for a short period as one force seeks to dominate the other.

As of today and for probably the next 6mos. inflation is going to rule. Look for higher prices, equities, commodities, retail prices and maybe even real estate, but especially gold.

Cramer Grilled on Jon Stewart

So I'm confused. Are we supposed to be cheering the guy who advocates "bailing out" the poor, ignorant homeowners or the people who want to bail out the rich,greedy, incompetent bankers?

The free market (for all you dwindling number free marketeers out there) wants to execute BOTH of these parties. The free market would never have let these excesses happen in the first place. Were there crooks out there? Absolutely! But they were on BOTH sides of the this.

Now I know Mr. Stewart is beating the populist wardrum right now and it feels really good to stick it to the CNBC circus barkers BUT remember that Mr. Stewarts response is to Santellis rant against a bailout for homeowners which Mr. Stewart apparently advocates.

I say two wrongs don't make a right, and be careful of lining up behind a "pied piper" because only rats do that and we know what happened to them.

Citi Breaks the Buck

Next stop, bankruptcy.

2009 Depression Will Be Nothing Like 1929

On Mar 06 06:14 AM 22thoroughbred wrote:
Thoroughbred thats a fair question that a lot of people don't want to address. Their busy enjoying the giant flame out of our economy but once the fire dins then the clean up begins.

Unemployment will continue to increase and will eventually rise to the high teens (17,18,possibly 20 percent), ALTHOUGH if you were to calculate the unemployment rate like they did back in the thirtys it probably would be in the high twenties low thirties. They'll be many more very large bankruptcies with much of the S&P 500 companies going under as the economy makes the shift from service to more core productive entities like staple manufacturing, agriculture and mining. The "productive internet" will be exposed for the time waster it really is (lets face we are in a period of diminishing returns as far as the internet is concerned. Most of the new functions are entertainment ones.)

Its important to note, that this is not a RECESSION which indicates that things have to slow down, back and fill. This is a DEPRESSION which is indicating major fundamental flaws in our system which need complete restructerring. Debt needs to be pared back and eliminated. People need to spend more time in productive enterprises and less time in leisurly pursuits and fluff. Savings rates will go up into the high teens from negative. People will get alot more frugal and cost conscious. Budget travel and entertainment will be the rule again. People will use patch kits again to fix their pants, and if you have a faded pair of jeans, it's because you've had them long enough and you washed enough to make them faded, you didn't buy them that way.

On a societal note. People need to start taking care of one another again. Look to your family, friends and community. Set up ties with social organizations. In the absence of government assistance, your gonna need them.

This is not the end of the world. What you should really be worried about is the governments response to this. This is the time where the government seizes the most amount of power for itself and they are extremely reluctant to give it back. Add to that these idiotic notions of "qualitative easing" as well as incompentency and mismanagment you could turn what would be a bad situation into a hyperinflationary depression ( a depression without the soup lines) then you have major problems.

Most impending retirees will not be able to retire when they wanted to. Many current retirees are going to need to come back into the work place. Most peoples retirement accounts have been decimated and are about to cash out and get into government bonds just as inflation starts to take hold. Most peoples homes have plummeted in value. Few people have real savings and many are carrying paralyzing debt.

I look for Dow of 2000-4000, gas at about 10-12bucks a gallon with "qualitative easing policies" of course that price will give you an idea of other consumer good prices which will trigger government price controls, rationing, scarcity and a thriving black market.

All this is tolerable, I don't worry about making due with less. I worry about my fellow citizen freaking out and burning things or cynical politicians pushing us into a un-necessary war because "the last depression was ended by world war 2". Tell that story to Britain who had a slower recovery than Germany even though the Brits won the war.

So I'am not going to sugar coat things. Things will be very hard in relation to the way things are now. But the way we were was unsustainable, we have to give other people who are willing to work hard and save, an opportunity to raise their standard of living using the relatively few natural resources we have.


> I still want to know what a "depression" looks like when people have
> some assets, during '29 our grandparents lived check to check, waited
> in soup and bread lines, etc. because they had no savings, today
> a reasonable percentage of people have a 401K with $100k or more,
> have some money saved, so what will an '09 depression look like,
> because honestly I believe as an economy we are there and it will
> get worse before it gets better. Thoughtful replies please

2009 Depression Will Be Nothing Like 1929

On Mar 06 06:14 AM 22thoroughbred wrote:
Thoroughbred thats a fair question that a lot of people don't want to address. Their busy enjoying the giant flame out of our economy but once the fire dins then the clean up begins.

Unemployment will continue to increase and will eventually rise to the high teens (17,18,possibly 20 percent), ALTHOUGH if you were to calculate the unemployment rate like they did back in the thirtys it probably would be in the high twenties low thirties. They'll be many more very large bankruptcies with much of the S&P 500 companies going under as the economy makes the shift from service to more core productive entities like staple manufacturing, agriculture and mining. The "productive internet" will be exposed for the time waster it really is (lets face we are in a period of diminishing returns as far as the internet is concerned. Most of the new functions are entertainment ones.)

Its important to note, that this is not a RECESSION which indicates that things have to slow down, back and fill. This is a DEPRESSION which is indicating major fundamental flaws in our system which need complete restructerring. Debt needs to be pared back and eliminated. People need to spend more time in productive enterprises and less time in leisurly pursuits and fluff. Savings rates will go up into the high teens from negative. People will get alot more frugal and cost conscious. Budget travel and entertainment will be the rule again. People will use patch kits again to fix their pants, and if you have a faded pair of jeans, it's because you've had them long enough and you washed enough to make them faded, you didn't buy them that way.

On a societal note. People need to start taking care of one another again. Look to your family, friends and community. Set up ties with social organizations. In the absence of government assistance, your gonna need them.

This is not the end of the world. What you should really be worried about is the governments response to this. This is the time where the government seizes the most amount of power for itself and they are extremely reluctant to give it back. Add to that these idiotic notions of "qualitative easing" as well as incompentency and mismanagment you could turn what would be a bad situation into a hyperinflationary depression ( a depression without the soup lines) then you have major problems.

Most impending retirees will not be able to retire when they wanted to. Many current retirees are going to need to come back into the work place. Most peoples retirement accounts have been decimated and are about to cash out and get into government bonds just as inflation starts to take hold. Most peoples homes have plummeted in value. Few people have real savings and many are carrying paralyzing debt.

I look for Dow of 2000-4000, gas at about 10-12bucks a gallon with "qualitative easing policies" of course that price will give you an idea of other consumer good prices which will trigger government price controls, rationing, scarcity and a thriving black market.

All this is tolerable, I don't worry about making due with less. I worry about my fellow citizen freaking out and burning things or cynical politicians pushing us into a un-necessary war because "the last depression was ended by world war 2". Tell that story to Britain who had a slower recovery than Germany even though the Brits won the war.

So I'am not going to sugar coat things. Things will be very hard in relation to the way things are now. But the way we were was unsustainable, we have to give other people who are willing to work hard and save, an opportunity to raise their standard of living using the relatively few natural resources we have.


> I still want to know what a "depression" looks like when people have
> some assets, during '29 our grandparents lived check to check, waited
> in soup and bread lines, etc. because they had no savings, today
> a reasonable percentage of people have a 401K with $100k or more,
> have some money saved, so what will an '09 depression look like,
> because honestly I believe as an economy we are there and it will
> get worse before it gets better. Thoughtful replies please

Time to Buy China, Copper, the Canadian Dollar and Oil

The decoupling play is going to take a long time to play out. Deflation is now, decreasing asset prices are in full control. If you want to invest your money for the long term without looking at it for the next ten to twenty years without having a heart attack then the authors advice makes sense. Otherwise the only way to sleep well with your investments is to actually sleep on top of your investment. Be very careful and dont get mauled by this market.

How Much Downside Could Still Exist?

First, anybody see the jobs numbers today? 700 thousand jobs lost in Feb alone whats that going to do to future companies earnings and whats that tell you about current companies earnings? How are next months job numbers going to look? Up, Down? I'd guess down. So since less people will have jobs do you think they will be spending more money or less? I'd guess less. Companies get their earnings from people spending, also companies laying off people indicates that people are spending less. So the question becomes if companies are getting less earnings will the stock market be higher or lower? My guess lower. The question how much lower AND when is the proper way frame the question and the answer is not in the foreseeable future and barring technical "spurts" will we see the downside.

My guess is that the fundamentals have to kick in before the downside is reached, investing in equities will have to be eniticing again from an inco me perspective rather than speculative price appreciation one. Namely dividend yields will have to go up again to not pre-crash 2-3 percent but more like 6-8 percent. Companies will have to first have earnings to yield, therefore layoffs will have to stabalize before we can entertain thoughts of recovery. Second there will have to be a "theme" like the internet, steam engine, whatever, which will have to be a direction that the economy is going which looks viable, profitable and innovative to spur interest in equities.

I see none of the above happening in a time span even worth considering. We're in a secular bear market which depending on how bad the govenrment screws up price signals in the economy will last a long time so invest accordingly until things change DRAMATICALLY on a fundamental basis.

This Is Just the Beginning

I remember one of the first videos of Mr. Schiff I saw, which dated all the way back to 2002 where he said "the economy is a giant bubble looking for a pin, and its gonna find it!"

This was before the real estate fiasco, back in pretty benign times by comparison to today. The unwavering convinction portrayed was unmistakable, this man was either an economic genius or insane. well it turns out he wasn't insane.

Mr Schiff knows his macro econ. He knows why things are the way they are and more importantly what governments actions are going to be before they actually do it, which is beyond economics training and entails a yet to be defined discipline, perhaps government psychology. Mr Schiff in my opinion ALWAYS made the case for deflation and his most accurate predictions were deflationary (although anybody remember rising emmerging markets and oil not 7mos ago?)

Now his decoupling thesis has yet to bear itself out, but I really think thats coming as well, just not in the short time span that Mr. Schiff thinks. I also think he underestimates the deflationary effects of this massive credit bubble and expects, ironically, "government efficiency" when it comes to reflating and possibly hyperinflating this economy.

This is going to take time. This scenario didn't make itself overnight or even within the last decade, but perhaps over the last century.

Developing markets have to devise a "work around" for the dollar, and the Chinese need to retool for other markets than the US. They'll do all this and more, but the question is what will we do and how much pain do we need to change to the new realities out there that we're broke?

Thinking the Impossible: Could Bank of America Go to Zero?

By the time this is all over, there wont be a single bank INVESTOR that hasn't gone to zero. The government is loath to let a bank named after AMERICA go bust if for no other reason than to try to keep up morale<inject sarcasm here>.

But if this bank and most of these banks were left to themselves and had to bring in ALL of their assets and put them on the balance sheets, we would learn why there's negative numbers that go so high.

They're busto!! End of story. What should happen is, these "stodgy, old, conservative banks" that make up perhaps 10-20 percent of the banking market should now realise their reward for being prudent. They should be picking up all these assets for pennies on the dollar. They could put together consortiums of investors with money under the mattress to liquidate these assets and get money flowing again. This would be short term traumatic, but long term would lead to a much more healthier banking sector. Throw in tighter reserve requirements, sound money creation, less government spending and regulating and you could have a very powerful economic LONG TERM financial recovery.


As long as there is no market forces involved in valuing these banks that are being shored up by the government, there can be no security in investing in any of these banks.

Right now on the current course the government is going to nationalize all these banks and wipe out the shareholders and burden the tax payers.

WSJ Weighs in on Peter Schiff

I reiterate. Barring the "all in equities crowd", Mr. Schiff recommended more than just equities. He recommended substantial positions in gold and foreign currencies as well. To his credit I think he makes very little with the latter recommendations also, he doesn't encourage churning of accounts and favors a buy and hold strategy suitable for passive, less that knowledgable long term investors. I read both Mish and Schiff regularly and respect both of their opinions but realize that Mish is more short term and Peter has a good macroeconomic outlook WITH the fundamentals on why he thinks the way he does.

It seems that people are all ready to throw Mr Schiff under the bus for 8 mos of performance in a highly unusual market dynamic. Hopefully people don't throw out the baby with the bath water and ignore Peters long term analysis and curative suggestions, because I think he really has a handle on the fundamental economic problems today .

In Defense of Peter Schiff: A Response to Mish

I read Schiff and Mish avidely and I am both saddened and elated that the Austrian economic tent is big enough to accomodate both almost diametrically opposite views.

Deflationists have the upper hand as of late and will continue to thump the "inflationistas' as long as there is a credit bubble that needs deflating. Ironically Schiff reallly thought that the domestic market was going down, was he wrong? Is he a deflationist?? He also recommended holdings in PM, commodities and foreign currencies if all those asset classes were averaged in would Mr Schiffs portfolio show a better return than foreign equity holdings alone? Meanwhile his equities are still paying their dividends for the most part in countries with low credit exposure and or high manufacturing or commodity exposure.

Long term I think there will be a currency crisis, once we get away with the first couple of trillion in printed money without everyone raising their eyebrows we'll continue to try and print our problems away until finally our lenders will have had enough and will take away the punch bowl.

At that point you'll see the Schiff scenario come roaring back, but this is going to take a while. The world economic system is realigning did you think this would happen overnight? The dollar will not go gently into the night, its gonna need a good push and maybe even a drop kick.

I think buy and hold is good for the passive investor who has a long term perspective and you could do alot worse than follow Mr Schiffs advice if you're not interested in running your own portfolio.

One thing both Mish and Schiff DONT disagree with is the fact that PURCHASING POWER of the average American is going to go down hard,

The Scariest Chart Ever

If we make so much stuff then why do we have to borrow upwards of 2 billion a day to finance the trade deficit? Dont confuse where you buy stuff ie wallmart with where you make stuff ie.China.


After four years of war induced deprivation there was pent up demand for consumer goods which had been rationed during the war. Couple that with the high savings levels that resulted from the rationing, the fact that we were the only nation not in tatters after the war, a good work and moral ethic in general, a hyper industrial manufactoring capacity and you have the unique American experience of world supremecy post ww2.

Now this may bother you but heres the nasty. Not only are things going to get worse due to deleveraging with high unemployment etc. but we have to establish a high savings rate again to fuel the recovery. Now when your in a severe recession anyway and have to add on top of that a decrease in your current consumption level even more to get some savings, you can see the immense gravity of the situation.

Debt is not an option so dont even THINK ABOUT IT! Debt is our current problem and deleveraging is correcting it as fast as the government will let it, not that it will be an option anyway, because the rest of the world is "gonna get religion" about issuing debt to a people who cant pay it back.
On Jan 20 09:13 PM Crocodilian wrote:

>

How the Treasury Bubble Will Burst and Why

The author forgot to mention that once people flee treasuries they'll land in commodities and the more acute the crisis, the higher the price of the one commodity that functions as money will go in relation to EVERYTHING, so before this plays out gold will be the last panic inspired bubble and it too will pop.

A new currency will come out of this. One based on actual stuff and the dollar will loose its foreign reserve status. This will result in a INDIVIDUAL PURCHASING POWER decline for Americans until we can build up our productive capacity again to either provide for our needs domestically or trade internationally again in this new, yet to be defined currency.

Gold being a good store of value long term will maintain purchasing power in anything but the most apocolyptic environment in which case you should also have a store of REAL GOODS ie. food,clothes,personal hygiene products etc. These are measures of ACTUAL wealth, but due to their difficulty of storage, spoilage etc are not good LONG TERM mechanisms of wealth.

The most prudent strategy is storing dollars for existing fixed debt, gold for maintainence of CURRENT purchasing power for FUTURE use and hoarding goods and food staples that you would otherwise consume in the near term and in case the SHTF (which can be purchased rather cheaply currently.)

These are not investing strategies but insurance. Investments and speculations will be partaken with whatever purchasing power you're able to salvage from this global re-alignment.

Marc Faber on the Economy, Gold, WWIII

Mark Faber is on my short list of people who are getting it right. It seems the mainstream economists don't know whats up and these eccentric somewhat geeky guys that are out on the margin are the ones who know.


The only problem with people like Mr Faber is that they don't understand POLITICAL economics they just know what works. Keynes understood I think that economics was one part science and one part politics.