Against Aphobus

The Bailouts Are Doomed - All of Them

After several such incidents, it is becoming less likely that Congress is really "befuddled" and more likely that they are active players in this sort of scam.

It is frightening how easily the public swallows the whole show with no more than a bit of grumbling. People are so short-sighted and disinterested only because the costs to them don't show up on their next monthly bill. It requires less effort to be uninformed than outraged. Every dollar stolen or misappropriated does go on our tab eventually. The People should be outraged.

A Bull Is Born, 2009

What about the fact that none of the economic fundamentals have improved!?! The market will not just rise (sustainably) because some time has passed and a few sketchy technical points have been crossed. Inflation is the one "force of nature" effect that will push markets up (not in VALUE but in PRICE). Other than that, I don't see much of a case for a sustained bull market.

Even admitting that inflation by itself is a bullish force on stock prices, with earnings in the toilet and borrowing difficult, I'd rather invest in commodities.

Will We Have a Good 2009? Not If History Is Any Guide

I agree. It's nice that the media (and government) woke up to the fact that we were in a recession--if a year late. What continues to be very troubling is the naive acceptance of the misappropriation of funds in TARP. We have acknowledged some of the crises, but still fail to provide more than a bandage solution to any of them.

Just yesterday, I heard another pundit prattling (I believe on Fox News) about how "nine times out of ten the market rises after a bad year" and that the "worst thing you could do is try to time the market and miss it". What they failed to mention was that the one time it was not up was during the Great Depression, and that going long after the first year, you would have lost something like 43% of your remaining money.

Another interesting point that everyone seems to be missing is that the Great Depression didn't happen overnight. While they label this just another measly recession and not a depression, the markets are down more in the first year of this "recession" (38%) than they were in the first year of the great depression (30%).

Yes, maybe down years following immediately after down years are a 1 in 10 rarity, but so far we are positioned more strongly that way than even we were during the beginning of the great depression!

It would be fantastic if what I'm saying turns out to be a false alarm. I just find it very reckless to ignore the danger.

I'm afraid that until there is more caution and some real solutions--hard choices made, that there is still room for the markets to fall.

Profiting From Bernanke's Super-Fed and Obama's Newer Deal

Very eloquent! You clearly communicate the deep concerns shared by many of us "irrational gold-bugs".

Yes, your expectations do not fit nicely within the channel of normal market ranges and yes, more and more people are beginning to make similar statements, but wouldn't you expect as much if we are in fact witnessing a real paradigm shift?

Beat the Bull Market With Oil and Russia Plays

I replied to your other article calling for a 2009 bull market (see below). This one seems far more valid. Oil should do well. Stocks have many issues left to overcome.

On Jan 04 10:03 AM Against Aphobus wrote:

> What about the fact that none of the economic fundamentals have improved!?!
> The market will not just rise (sustainably) because some time has
> passed and a few sketchy technical points have been crossed. Inflation
> is the one "force of nature" effect that will push markets up (not
> in VALUE but in PRICE). Other than that, I don't see much of a case
> for a sustained bull market.
>
> Even admitting that inflation by itself is a bullish force on stock
> prices, with earnings in the toilet and borrowing difficult, I'd
> rather invest in commodities.

Returning to a Gold Standard Is a Bad Idea

Ricard, Your argument is thought provoking, but isn't it just as possible that the U.S. would have benefited monetarily in this crisis if we were on the gold standard?

Yes, people would likely not be fleeing to treasuries rignt now, but all the over-valued CDS, stock, bonds, etc. that were sold to the rest of the world would have already been paid for in gold ;)


On Dec 30 09:21 AM Ricard wrote:

> This argument is not valid.
>
> If we were on the gold standard during this crisis, gold itself wouldn't
> have prevented the majority of Americans from borrowing to the hilt.
> Gold may bring your much-sought-after accountability, but it wouldn't
> have prevented the leverage that destroyed so much wealth.
>
> In this case, your accountability would have dire consequences.
> America would have been stripped of its gold by foreigners as they
> redeem their dollars for gold instead of Treasuries, and we would
> only have one way to regain it back: war. If we do not wage war,
> our economy would have been so crippled from this bout of euphoria
> that we would have not only lost our pre-eminence, but quite possibly
> our nationhood due to the subsequent lowering of our per capita consumption.
> Remember, we don't really produce as much anymore, and without large
> gold stocks, it would cost us dearly as a percentage of gold stocks
> remaing to purchase what others produce.
>
> This doesn't sound like a reasonable solution for fiat to me. Your
> "accountability&am... only comes as the consequence of inane choice.
> It does not counsel or deter stupidity.
>
>
>
> On Dec 30 08:56 AM archman82011 wrote:

Will We Have a Good 2009? Not If History Is Any Guide

Good point nowhereman,

The dollar strength throws a bit of a curve ball. History also never repeats itself exactly the same way. Thought the dollar strength is IMO undeserved, it is a force to be reckoned with and will hopefully stall or soften our economic fall.

On the other hand, if the government continues to abuse the support other nations have vested in our dollar, (as they have increasingly for the last 30+ years), the government will at some point see an abrupt abandonment of that support.

I have seen no confirming signs so far, but hopefully under Obama (and Volker) there will be policy smart enough to use this temporary dollar strength wisely and as part of a real solution rather than just as an opportunity to procrastinate and exacerbate the problems.


On Jan 04 09:55 AM NOWHEREMAN wrote:

> Everything said presupposes a dollar drop. If the dollar rises, what
> then? If the Treasury Bubble persists because of the CDS and rising
> bankruptcy outlook, will the stock market rally?.
>
> You look at 1929, I look at 73- 74. If you use 1929 as your guideline,
> the Dow is heading below 2,000. IMO

2009: Expecting a Massive Rally

Another interesting factor is that much of the run-up of the last twenty years was driven by the emergence of 401ks. The average guy is involved like never before and has their life savings in the market. I really don't think it was ever appropriate for uneducated investors to be so completely vested, but it was hard to argue against the returns.

As the baby boomers retire, we may go decades before we see the same level of inflows that have been happening since the 1980's. They may also begin to wake up to the fact that the stock market is not risk free and permanently move some of their needed retirement funds out of equities.

We'll probably build from here, but there are still some substantial potential pitfalls and a lot of bad earnings to work through. Any sharp rally will probably fail and though cautiously bullish in the longer term, I'll be selling into any exaggerated spikes.

2009: Expecting a Massive Rally

SugarDaddy,

Not sure what you mean. The broad media seems to make reference to the Great Depression only to dismiss the idea that we could ever face something similar.

I make reference because although the statistical sampling is too small to be of much use, the consequences of ignoring the similarities could be very dire. I think that the current problems of our economy have probably less than a 5% chance of causing a depression, but given the huge impact of one, I feel compelled to take precautions.


On Jan 04 01:52 AM SugarDaddy wrote:

> We have had only one depression to try and compare stat's and notes!
> This time is a lot different than the 30's in so many ways, I'm not
> sure why everyone keeps making reference to it.
>
> So many people are going to be unprepared, I just can't imagine what
> the chaos will be like when the coming 12-24 months of reconciling
> takes place.

2009: Expecting a Massive Rally

asleeper,

I agree. It's nice that the media (and government) woke up to the fact that we were in a recession--if a year late. What continues to be very troubling is the naive acceptance of the misappropriation of funds in TARP. We have acknowledged some of the crises, but still fail to provide more than a bandage solution to them.

Just yesterday I heard another pundit prattling (I believe on Fox News) about how "nine times out of ten the market takes off after a bad year" and that the "worst thing you could do is try to time the market and miss it". What they failed to mention was that the one time was during the great depression, and that going long after the first year, you would have lost something like 43% of your remaining money.

Another interesting point that everyone seems to be missing is that he great depression didn't happen overnight. While they label this just another measly recession and not a depression, the markets are down more in the first year of this than they were in the first year of the great depression.

Yes, maybe down years following immediately after down years are a 1 in 10 rarity, but so far we are positioned more that way than even we were during the beginning of the great depression!

It would be fantastic if what I'm saying turns out to be a false alarm. I just find it very reckless to ignore the danger.

I'm afraid that until there is more caution and some real solutions--hard choices made, that there is still room for the markets to fall.


On Jan 02 11:32 PM asleeper wrote:

> This is good data, and I've seen it before. I've also seen an overlay
> of the current recent DJIA market drop over the 1929 market crash.
> That first 48% sucker rally after the crash was a great opportunity
> I suppose if you disbelieved the pundits at the time and believed
> instead the market was headed for an even greater fall.
>
> If this market is similar, you could ride the current rally up and
> sell in say March. But, it is not clear if the road ahead is deflationary
> as it was in 1929-1932 or the Fed will succeed in a relatively rapid
> reflation of the money supply. The Fed, the banks, and the money
> supply appear to be the key just as in 1929-1932, but no one knows
> for sure how their actions will play out.
>
> The Fed Monetary Base has spiked dramatically but the credit freeze
> has not thawed yet. Look for evidence that the credit freeze is
> thawing before bettting on any sustained rally. We are more likely
> to get a sucker's rally until it does. It might be tradeable if
> timed right and with trailing stops, but this is not a buy and hold
> market or unless volatility continues to drop, it is not even a good
> trader's market.
>
> FWIW, my gut feeling is we will see a rally in Jan-Feb, maybe longer,
> but my gut also says to sell in March-April or whenever the rally
> falters, and the market will topple again another 20% below its recent
> lows.
>
> On Dec 29 02:43 PM mkreisel wrote:

Deflation on the Ski Slopes?

User 330008,

This is not a criticism but a serious question: Given the expectation of inflation, is it a good idea to save up cash and wait for house prices to (hopefully) drop further? Wouldn't it be just as expedient to buy now and bank on inflation wiping out much of the mortgage price in a few years?

I just think that since the govt. loves using inflation to fix problems (while stealing our wealth), and since we are in a huge debt-related crisis, we can bet on them inflating it all away. Yes, income may lag for a while, but I think jumping on the inflation band wagon might be the better play for a 30yr investment.


On Jan 02 03:00 PM User 330008 wrote:

> Inflation will only affect home prices if incomes rise with the inflation.
> Over the past 8 years, wages have been stagnant in the face of inflation
> quarter after quarter. Now employers are freezing wages and cutting
> wages, let alone laying people off. This is largely deflationary
> and will affect home prices much greater than inflation. Secondly,
> once inflation begins to trump deflation, you can bet banks will
> raise their interest rates on mortgages; that will reduce the purchasing
> power of home buyers and bring prices down further.
>
> If you're considering buying property, don't. Rent in a comfortable
> home/location and save as much cash as possible. In 3 - 5 years
> when the HPI graph falls in line with its trendline since the 1950s
> or undershoots a bit (due to over capacity), then buy a house.

Looking at the Market Through Slightly Bullish Lenses

Gold may very well hit 600. I'm still loaded up and will buy more at that level.

The easiest way to make house prices, the market and the economy appear to be stronger is to inflate the dollar. Even if it fails to work in the longer term, it seems to be the government's chosen solution.

While not a rabid gold bug, gold's price seems to be manipulated as I've been buying it near spot and selling it at 45% profit on Ebay--often reserving my replenishment the same day from the mines. I also can't see central banks taking on any massive program of selling when they don't even trust each other enough to lend money. Gold (and silver) have not just made me about 65% in two years, they also serve as a nice insurance policy in case things get really bad.

Our society, and especially our politicians can very dependably be assumed to take the easiest and most expedient way out of a problem. Right now that looks to be throwing money at every problem.

Stocks should rise like everything else due to the watering-down of currencies, but gold still looks pretty good to me.


On Jan 02 01:20 PM 1977°C wrote:

> Gold 600 in a blink of an eye.

2009: Expecting a Massive Rally

It looks likely that the low of Nov. 20, 2008 will hold. We dropped back to the 30 year trend line in most indexes (effectively erasing the accelerated level of gains in the market from 1995 on).

I called a bottom the morning of Nov 20 and am still about 95% optimistic that it will hold. With any luck, we see a continuation of the fall in volatility and selling interest despite the weak economy.

The recent relentless pounding of new bad news is disconcerting though. Though improbable, if we have a routing of confidence here and scare off all the money edging back in to the market in hopes of catching a rally, the effect on the market could be quick and catastrophic. If DOW 7500 doesn't hold, I can't see a floor.

Deflation on the Ski Slopes?

As JonG alludes, inflation is the likely outcome of current government stimulus efforts. Your chart adjusted for massive inflation would look much different. Though house VALUES may not rise for a decade, the powers that be will surely do all that they can to make sure that house PRICES do not continue to plummet.