Financial topics

Investments, gold, currencies, surviving after a financial meltdown
Higgenbotham
Posts: 7436
Joined: Wed Sep 24, 2008 11:28 pm

Re: Financial topics

Post by Higgenbotham »

John wrote:A web site reader has informed me to expect a financial crisis before
the end of August.

.....

I don't know how soon this crisis will come, but it sure
can't be held off indefinitely.

John
August is still my guess too. I know none of the specifics Jim Willie is talking about in this comment, but it seems reasonable. Unless these economic numbers turn by late August (it never looked likely the numbers would turn to begin with and now the data is confirming it), they will need to throw in the towel because the insolvency problem in the banking system cannot be cured. As has been stated on this board weeks ago by me and others, Fed and Treasury wil now be forced to reverse course and let their guarantees go. Once the markets realize that's coming, we get the "deflationary jolt". Because of the way this attempt at false recovery was engineered, it can happen very quickly.
While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.

aedens
Posts: 4753
Joined: Tue Nov 04, 2008 4:13 pm

Re: Financial topics

Post by aedens »

Either it is a the blatant lie or the most blatant truth John. I was assuming October many month ago as conveyed given what I was seeing then to net working capital as in actual cash flow going forward to what we doing in reality to market conditions. Hysteria is no master but I never have dismissed its effects and we may soon see the net effect. You have collected numerous rational informations of irrational people in a generational context which does model many of my inner thought's. Iceland's litmus test will convey the resolve to the next incremental power brokers. We have witnessed the call money in the markets as of late to short positions being decimated and I defer its implication to others but observe what has been conveyed in the past that Equity survived and bonds perished to default. To imply that this conveyance has no dire consequences will not be a tipping point would be a fools errand. The question is in my mind what draconian measure do the gatekeepers do to pull the weeds in the garden that caused this avarice. A President will be made or broken on a decision to serve the people or quo.

Here is the raw data for timers: http://dshort.com/articles/2009/volume-disconnect.html

Total number of market days: 29,552 (through August 12, 2009)
Total number of days making a new high: 1,172
Percent of days making new highs: 3.966%
96% picking High your wrong. http://dshort.com/
Last edited by aedens on Mon Aug 17, 2009 12:43 am, edited 5 times in total.

jwfid
Posts: 56
Joined: Thu Nov 13, 2008 11:10 pm

Re: Financial topics

Post by jwfid »

John,

This isn't the first time I've heard about the bank holiday rumor. Really scary if true.

I read the link your reader provided and it sparked a question in my mind concerning the deflation vs. inflation debate. Inflation is a very easy concept for me to grasp. After all, I've lived with it for my entire life. Deflation is far more difficult to understand. As you have said, we will experience deflation because of the massive amounts of dollars that have gone poof in the form of derivatives based on real estate that is falling in value. I'm wondering what would happen, however, if the countries who bought our Treasury Bonds suddenly decided to sell them. Wouldn't the dollar inflate (worth less) because the debt that backs that currency falls in value.

Thanks for your thoughts everyone,

Joe

wvbill
Posts: 65
Joined: Sun Oct 05, 2008 9:46 pm

Re: Financial topics

Post by wvbill »

jwfid wrote:John,

This isn't the first time I've heard about the bank holiday rumor. Really scary if true.

.... I'm wondering what would happen, however, if the countries who bought our Treasury Bonds suddenly decided to sell them. Wouldn't the dollar inflate (worth less) because the debt that backs that currency falls in value.

Thanks for your thoughts everyone,

Joe
Joe, I am far from expert in this but will give my understanding:

If everyone decided to sell bonds that would decrease the price which would be deflationary--money disappearing from the system.

Keep in mind: deflation means decrease in supply of money and inflation means increase in supply of money. Price increase or decrease is a by product. Also keep in mind that while the dollar's value may decrease as a currency, its purchasing power might still increase due to deflation--less dollars avaliable.

Clearly we are currently in deflation as money is disappearing faster then it is being created. The future is the question???

Perhaps others will give a more complete answer...

Bill

Higgenbotham
Posts: 7436
Joined: Wed Sep 24, 2008 11:28 pm

Maximum Ruin Update

Post by Higgenbotham »

I am currently still short the S&P futures from the 938 level. At the high tick on August 7, my net worth was down 4.6%. At tonight's last quote, it is down 3.8%.

On Friday, I moved more money into my futures account with the intention of doubling my short position in the event that the S&P futures were to move up toward the 1030 level on Friday. That didn't happen so I remain with the original position.

Although I think the market will go down this week, I feel there is too much risk in increasing my position at the current level.

I've been trading futures for 15 years and watching markets for about 35 and would have to say being short the S&P Index at these levels is the second best trade I have ever encountered. However, as stated previously, I never recommend that anybody attempt to do what I am doing.

The best trade I have ever encountered was back in the 1980's. I was buying foreclosed homes at average prices of about $15,000 in a midwestern city that had been hit hard by the declines in manufacturing. It has always amazed me how very few people were interested in buying homes at that time for those prices. But when I sold them at much higher prices, they lined up to buy. The current situation in the stock market feels very similar. Time will tell.
While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.

aedens
Posts: 4753
Joined: Tue Nov 04, 2008 4:13 pm

Re: Financial topics

Post by aedens »

jwfid wrote:John,

This isn't the first time I've heard about the bank holiday rumor. Really scary if true.

I read the link your reader provided and it sparked a question in my mind concerning the deflation vs. inflation debate. Inflation is a very easy concept for me to grasp. After all, I've lived with it for my entire life. Deflation is far more difficult to understand. As you have said, we will experience deflation because of the massive amounts of dollars that have gone poof in the form of derivatives based on real estate that is falling in value. I'm wondering what would happen, however, if the countries who bought our Treasury Bonds suddenly decided to sell them. Wouldn't the dollar inflate (worth less) because the debt that backs that currency falls in value.

Thanks for your thoughts everyone,

Joe
http://mises.org/rothbard/agd.pdf

aedens
Posts: 4753
Joined: Tue Nov 04, 2008 4:13 pm

Re: Maximum Ruin Update

Post by aedens »

I am waiting for the appropiate drift to buy in. Given a political economy the interest rate will prolong the natural process to investor indifference.
Some opinions as we know are inclusive to stretch things out and we know the CBO debt farming plan so i feel your somewhat early but seeing things as they are also indeed you may be closer than we want to admit. This is a exhaustion process and as we know a balance sheet depression. TD @ ZH gives a very good protrayal to as things are to wit to the consumer. http://www.zerohedge.com/article/detail ... s-consumer
I think as a minority view also to many got left behind in the mid 70's "regional" and perculated the overflow somewhat also we are still adjusting to today. The Fed is On there quest to 2.0% inflationary which emunerates the consumers phase transitionary trip to serfdom in numbers. I do think still you are correct but they want it to drift so they can heatmap positions out so good hunting.
Sat Aug 01, 2009 2:20 pm As stated, I am walking orderly out the door to properly rated contracts. 2.94% to go and then I wait.
Higgenbotham wrote:I am currently still short the S&P futures from the 938 level. At the high tick on August 7, my net worth was down 4.6%. At tonight's last quote, it is down 3.8%.

On Friday, I moved more money into my futures account with the intention of doubling my short position in the event that the S&P futures were to move up toward the 1030 level on Friday. That didn't happen so I remain with the original position.

Although I think the market will go down this week, I feel there is too much risk in increasing my position at the current level.

I've been trading futures for 15 years and watching markets for about 35 and would have to say being short the S&P Index at these levels is the second best trade I have ever encountered. However, as stated previously, I never recommend that anybody attempt to do what I am doing.

The best trade I have ever encountered was back in the 1980's. I was buying foreclosed homes at average prices of about $15,000 in a midwestern city that had been hit hard by the declines in manufacturing. It has always amazed me how very few people were interested in buying homes at that time for those prices. But when I sold them at much higher prices, they lined up to buy. The current situation in the stock market feels very similar. Time will tell.
Last edited by aedens on Mon Aug 17, 2009 12:31 am, edited 3 times in total.

Higgenbotham
Posts: 7436
Joined: Wed Sep 24, 2008 11:28 pm

Re: Maximum Ruin Update

Post by Higgenbotham »

aedens wrote:I am waiting for the appropiate drift to buy in. Given a political economy the interest rate will prolong the natural process to investor indifference.
Some opinions as we know are inclusive to stretch things out and we know the CBO debt farming plan so i feel your somewhat early but seeing things as they are also indeed you may be closer than we want to admit. This is a exhaustion process and as we know a balance sheet depression. TD @ ZH gives a very good protrayal to as things are to wit to the consumer. I thing as a minority view also to many got left behind in the mid 70's and perculated the overflow somewhat also we are adjusting to today. The Fed is On there quest to 2.0% inflationary which emunerates the consumers phase transitionary trip to serfdom in numbers. I do think still you are correct but they want it to drift so they can heatmap positions out so good hunting.
Sat Aug 01, 2009 2:20 pm As stated, I am walking orderly out the door to properly rated contracts. 2.94% to go and then I wait.
From what I am hearing there are some retail futures traders still short with 1016 stops. Oddly enough, the overnight high last Friday A.M. was 1015.75 and therefore those stops weren't taken out. Due to the thin overnight volume, given no fundamental change, they could have run those stops and gapped the market higher Friday morning. I fully expected that, which was why I got ready for a possible island top reversal bar on Friday that never came. So my guess is that short term this market is going to come down and what turned the tide overnight and failed to take 1016 out was the confirmation in Shanghai. What I think will be important this week is whether any downward move can penetrate and close below about 988 as the market has hit that approximate level 7 times and failed to penetrate it. This is similar action to the 1930 top:
http://theoptiontrader.com/History-Char ... harts.aspx
Select Index DJI, Year 1930.

From a GD Maximum Ruin perspective, the purpose of the undulating action that lasted for 8 days at the 1930 high and 9 days at this high is to get as many shorts as possible to barf up their positions. I do believe fundamentals are starting to take over and the undulating action can't continue or it would. Granted, I thought the Shanghai bubble had more staying power and New York would lead it down as happened in 2007. At that time, New York led Shanghai by 10 days. This time, at least so far, Shanghai has led New York by 3 days.

At last read, S&P futures are down 8 points, a large move for a Sunday night, as Shanghai continues lower tonight, down another 2.7% currently for a total 15% drop from the August 4 high. The dam is beginning to break but there is as yet no initial price confirmation. If we follow the 1930 pattern, that will happen tomorrow.
While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.

aedens
Posts: 4753
Joined: Tue Nov 04, 2008 4:13 pm

Re: Financial topics

Post by aedens »

It hinges on consumer and commodity price pressures and we know where the money went last month so I concur on your premise.
Since there is no natural interest rate I must feel as I do. I will not enumerate the reasons since we basically know what they are already.
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gerald
Posts: 1681
Joined: Sat May 02, 2009 10:34 pm

Re: Financial topics

Post by gerald »

John wrote:A web site reader has informed me to expect a financial crisis before
the end of August. As support, she points to this article on the
Kitco site:
Jim Willie wrote: > Back to reality on US soil. Many reports have come to the effect
> that at the end of August, a financial breakdown is due, and a
> shutdown of US banks is planned. We await the trigger events with
> mystery and intrigue as overtones. Some on Wall Street, arrogant
> to the end, believe that widespread awareness prevents the actual
> unfolding of events. They are suffering from a terminal disease
> though, as they believe they are in control. They are not. The
> USGovt creditors are in control. The August Hat Trick Letter
> reports have identified five major factors pointing to a severely
> stressful period of time at the end of August and into September.
> The FDIC is scheduled to release its Second Quarter Report that
> could reveal up to 1000 banks expected to croak, surely enough to
> exhaust their rescue fund by between 20-fold and 100-fold. ...

> To be sure, many tripwires are laid out from the systemic
> complexity and lost control, not to mention haphazard design and
> frenzied defense. A massive juggling act is taking place, as US
> bank and political leaders are juggling more balls, and heavier
> balls with each passing month. The risk of accidents is rising
> exponentially from incredible backroom movement of massive funds
> to avert disasters on a weekly basis. WHEN IT COME THE ACCIDENTS,
> PLANNED EVENTS, OR UNEXPECTED RESPONSES TO MINOR DISTURBANCES
> WITHIN THE SYSTEM, TREMENDOUS COLLATERAL DAMAGE WILL ARRIVE, BUT
> THE PRECIOUS METALS WILL STAND TALL AND ENDURE EFFECTIVELY, EVEN
> THRIVE. See gold, silver, and platinum, at least. The broken parts
> and ‘bad apples’ are likely to be eliminated in a flash. We will
> see. People will be hurt, and life savings will take hits. Even
> communication lines will be interrupted. Power structures will
> dissolve. We are approaching historically unprecedented times. The
> signs are omnipresent, often ignored.

> My best sources of information report that some unexpected deep
> shocks are coming from USGovt creditor nations. They are simply
> fed up, frustrated, and astonished at the manner of lost control,
> spiraling debts, and blatant monetization amidst lies in denial of
> that same monetization. The USTreasury auctions now have domestic
> hidden elements, and global hidden monetization elements. ...

> Mainly what we witness is more channeled funds to the big banks,
> more coverage of credit derivative fires, and more announcements
> of bond support. See the $1.25 trillion support for Fannie Mae
> bonds, aka USAgency Mortgage Bonds. The Green Shoots have now been
> dismissed as a marketing ploy. The Stress Tests have now been
> dismissed as a marketing ploy. The Stimulus Plan has now been
> dismissed as a marketing ploy. The only USEconomic recovery will
> be a statistical recovery. A Jobless Recovery is a recovery for
> stocks and a redemption for the bankers. Main Street continues to
> be discarded.
> http://www.kitco.com/ind/willie/aug132009.html
Kitco, of course, is in the business of selling gold to investors, so
that slants some of the article, and perhaps makes it wishful
thinking to some extent. But the idea that foreign creditors are
getting disgusted with what's going on in Washington is quite
credible. (See the article on Iceland's crisis that I posted earlier
today.) I don't know how soon this crisis will come, but it sure
can't be held off indefinitely.

John
Yes, Kitco is pushing precious metals, and his thinking may be right. However, if the government does another "FDR"
calling in gold at the governments price, what good is buying precious metals? For that matter why hold money, the government can change it's value by decree , as has happened in history. An Ancient Roman once said, "Yes the government and society are corrupt, but where does one go? Everywhere else is worse". As John has pointed out, a small country like Iceland is at the mercy of larger powers. It may be better to ride a deranged bull then to seek comfort behind a lamb. An old Chinese curse says "may you live in interesting times" these are interesting times and it seems they will become more so. So much for my downer.

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