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View Full Version : "Please walk your deflationista only in archery range" - HOLD IT, NOT JUST YET!!



Contemptuous
05-28-09, 12:26 PM
I don't think the entirety of Rick's assessment will occur, but he may just be spot on about the potential for a serious USD breakout here. That would be due to a fresh round of dollar denominated plunging asset settlement, which is dead ahead IMO.

BTW - Do we have capital punishment here for posting such deflationista rank heresies? :eek: Up against the wall and shot by firing squad at dawn?? :p Seriously, I think Rick is sniffing out a story here.

_____________________

IF DOLLAR IS BOTTOMING, KILLER DEFLATION IS NEXT

by Rick Ackerman on May 28, 2009 1:49 am ·

Has the dollar put in an important low? It looks like it, since the NYBOT Dollar Index widened the gap on Wednesday between it and a key Hidden Pivot support at 80.04 that we drum-rolled here earlier. We had been using that number as a downside target since late April, when DXY was trading just above 84; it was first touched last Friday, then exceeded by a scant 0.23 points before bouncing back.

Now, if the dollar is indeed embarking on a major rally in line with our forecast, stocks are likely to fall, and gold and other precious metals to come under pressure, for the foreseeable future. These new trends may have begun to emerge yesterday, since the Dow Industrials fell 173 points and Comex June Gold reversed a promising rally early in the session to settle more than $10 below the day’s highs.


http://www.rickackerman.com/wp-content/uploads/2009/05/dxy-rally-looks-serious-small.jpg

The short squeeze that has powered the stock market’s bear rally since March 6 corresponds precisely to a period of weakness in the dollar, and that is why we expect shares to fall hard if the dollar strengthens.

Why should this be so? The simplest answer is that a rising dollar is going to catch borrowers around the world with their pants down. For despite the deleveraging of the financial system that has occurred since the U.S. mortgage market began to implode about two years ago, borrowers are still caught in a vise, and the world is still massively short dollars because that is the currency in which nearly all borrowing has been done.


World Massively Short Dollars

Scores of millions of homeowners who are mortgaged to the hilt have implicitly bet against the dollar. So have financiers who have used derivatives to borrow dollars in some leveraged fashion. There are hundreds of trillions of dollars worth of these instruments still in play, most of them denominated in U.S. dollars, and if they cannot be rolled forward, the borrowers will have to settle up in cash.

Similarly urgent demand for otherwise shunned equity shares creates short squeezes in the stock market all the time, and there is no reason why a fundamentally worthless dollar could not be squeezed higher by the same implacable forces.

A rising dollar is most surely not what the world needs right now, since it will increase the real burden of debt on all who owe dollars. That is the crux of deflation, not the increase in the money supply that inflationists have been blathering about for years. Who cares what the supposed money supply is? Most of the yo-yos who cite growth in the money supply as inflation per se don’t even know the difference between money and credit.

You should pay them no mind in any event, since the far more important concern, at both the personal and macroeconomic levels, is whether your and everyone else’s debts are becoming easier to service, or harder. As long as the latter condition persists - and it will, unless a bailout package comes along that arbitrarily adds three or four zeros to every American’s bank account - all who owe will be subject to the asphyxiating effects of deflation.


$13 Trillion Just ‘Spit’

A deflationary outcome might seem highly unintuitive at the moment, given that the U.S. is in the throes of the biggest fiscal and monetary blowout since the founding of the Republic. But as we continue to point out, the $13 trillion that has been expended already on bailout this-or-that is just spit compared to a global asset deflation that has already sucked $60 trillion to $80 trillion of asset values into a black hole.

We think this trend will continue and that asset values have much farther to fall before deflation has run its course in perhaps five or six years.

ax
05-28-09, 12:39 PM
Interesting, Lukester. Just curious how you juxtapose this argument against hyperinflation led Dow 32K?

Contemptuous
05-28-09, 12:54 PM
One is a five year long process - that's the DOW 32K suggestion, and will get off to a lumbering start. The observation Ackerman is making, is a quite short term call - maybe producing a 3-6 month long effect. I thought that would be entirely apparent here?

BTW, I think one of the core factors that can push the USD up hard here has nothing to do with what's happening internally to the US - I'm wondering why this cannot materialize if we see a rising level of stress and crisis in other currencies, which can spark generalized weakness vs. the USD?

Of course we can't claim that anything has been improving in the USD fundamentals (that's almost a bad joke). It is other currencies which could still weaken sharply vs. the USD due to a new and expanding wave of asset unravelling abroad, combined with the call on the USD implied by settling all of those bad bets.

The discussion here at iTulip seems to me to be reexamining the USD internals repeatedly, which makes sense as that is a picture that's rapidly changing. But it seems there is less scrutiny of other major currencies own prospects, and 95% scrutiny of USD prospects. This is where a major upset in the prevailing thesis may appear. I think this is not ruled out to occur again?

This is the theme I'm imagining could play out - tremendous USD abuse, combined with very marked weakness in other currencies, which "herd with the USD", producing a USD ramping inflation which remains "hidden" on the USD index, and some really strange artifacts elswhere, as the generalized real inflation of them all begins to look for available outlets. The **stock market** then comes to mind ... sooner or later.

Anyway, regardless of whether this materializes, I am of the view that the Euro zone will enter into ever increasing pressures, creating a lot of weakness up ahead for the EURO. That alone is enough to kick the legs out from under any USD collapse on the dollar index. I certainly don't have a coherent idea of how all these pieces fit together - but I keep thinking that's where it's headed.


Lukester, Ackerman is a bright guy, and I don't hold some of the losses he and Einhorn accumulated last year entirely against them as they were literally screwed by the no shorting rules. Just curious how you juxtapose this argument against your hyperinflation led Dow 32K?

ax
05-28-09, 01:08 PM
whoops, guess you saw my unedited comment first where I confused Ackerman with Ackman, my apologies....thanks for the response.

sadsack
05-28-09, 01:30 PM
Interesting, Lukester. Just curious how you juxtapose this argument against hyperinflation led Dow 32K?


One is a five year long process - that's the DOW 32K suggestion, and will get off to a lumbering start. The observation Ackerman is making, is a quite short term call - maybe producing a 3-6 month long effect. I thought that would be entirely apparent here?

It is manifestly NOT apparent :confused: - Ackerman forecasts several years of deflation:



We think this trend will continue and that asset values have much farther to fall before deflation has run its course in perhaps five or six years.

I think the above item in the OP is the cause of the confusion here.

*T*
05-28-09, 01:48 PM
World Massively Short Dollars

How can he say that when there are so many treasuries held abroad? And the swap lines the fed opened?

Also, the mortgages he mentions are in the US! The dollar is supported by exports paid for in dollars. This has mainly been export of IOUs of one type or another, trasuries or agency debt. Although also, to an extent, the world uses dollars for trade.

The world is massively long dollars, not short. Internal US debt doesn't count, it's just the left hand owing the right hand. The dollar is supported by the treasury ponzi game played by FCBs. The game is now ending. This year or next, probably this summer, the dollar scarcity meme will be proved wrong. Treasury bond yields will rise to surprising heights. There will be debt deflation and price inflation. Tax receipts will vapourise and unemployment will skyrocket. Treasury panics can only be manufactured so many times.

I worked this out for myself. I value EJ's opinion, but I am not a 'groupthink' victim. My expectation of hyperinflation in the US has been held for at least 2 years and remains a minority expectation. The guy you're quoting is not contrarian, he's just wrong.

*T*
05-28-09, 01:56 PM
Of course we can't claim that anything has been improving in the USD fundamentals (that's almost a bad joke). It is other currencies which can weaken sharply vs. the USD due to a new and expanding wave of asset unravelling abroad, combined with the call on the USD implied by settling all of those bad bets.

The discussion here at iTulip seems to me to be recursively going back to the USD internals repeatedly. There is perhaps 5% scrutiny of other major currencies own prospects, and 95% scrutiny of USD prospects. This is where a major upset in the prevailing thesis may appear. I think this is due up, shortly.

This is the theme I'm imagining could play out - tremendous USD abuse, combined with very marked weakness in other currencies, which "herd with the USD", producing a USD ramping inflation which remains "hidden" on the USD index, and some really strange artifacts elswhere, as the generalized real inflation of them all begins to look for available outlets. The **stock market** then comes to mind ... sooner or later.

Anyway, regardless of whether this materializes, I am of the view that the Euro zone will enter into ever increasing pressures, creating a lot of weakness up ahead for the EURO. That alone is enough to kick the legs out from under any USD collapse on the dollar index. I certainly don't have a coherent idea of how all these pieces fit together - but I keep thinking that's where it's headed.

I roughly agree with this. Competitive devaluation. Apart from the stock market part, which may go up nominally, but P/E for example will not benefit from inflation. Alternatively, look at it as discounted future cashflows, and higher yields in an inflationary environment will not help valuations. The broad stock market is the worst place to hide apart from cash.

Contemptuous
05-28-09, 02:29 PM
Uh, just to clarify - I don't agree with Ackerman's "several years of deflation". That's his preoccupation. I was only remarking on his mention of a renewed call on the dollar that would derive directly from a fresh wave of asset unraveling - everywhere outside the US.

I believe both iTulip and 99% of all of us, already consider that part obvious? We merely acknowledge that there's been a large call on the USD in the past year and a half, due to settlement of disintegrating debt worldwide in USD.

That spells our 21st Century brand of "deflation". Or not. Doesn't bother me, whatever name for it we choose. What happens when or if this malady recurs, is we get a large new synthetic bid on the USD - which makes nice, valuable things like gold quite a bit cheaper for a while. :) (yum).

Ackerman's point is just a comment on that: "hey, there's a lot of that stuff still out there, and what happens to USD when it's all ready to barf again"? If it barfs, it will require another wave of USD to settle. Mechanical consequence?

Contemptuous
05-28-09, 02:43 PM
*T* - Thanks very much for your input. I am certainly not convinced of this Ackerman thesis - only very curious about it. Please note though, regarding the world being massively long the USD dollar, that this was largely already the case during the entire recent large rise of said USD, no?

So you have a massive implied long position in the USD, by "the world" already fully entrenched by the past five years, then the arrival and (successful?) conclusion of a massive short term "synthetic call" on the USD by the deleveraging?

I think the USD may give some very significant hint in the next 3 months of which way it's going to break. Clearly so, as we just bounced off the 80 mark on the index. What's going on in the USD index from here forward is "very interesting" in terms of tipping it's hand.

Please feel free to elaborate your own thesis at will either here or elsewhere, and I for one will read it with interest. I do hesitate to argue with it as there's much that I agree with in your idea anyway - I only see it on a bit different time frame.

metalman
05-28-09, 03:25 PM
*T* - Thanks very much for your input. I am certainly not convinced of this Ackerman thesis - only very curious about it. Please note though, regarding the world being massively long the USD dollar, that this was largely already the case during the entire recent large rise of said USD, no?

So you have a massive implied long position in the USD, by "the world" already fully entrenched by the past five years, then the arrival and (successful?) conclusion of a massive short term "synthetic call" on the USD by the deleveraging?

I think the USD may give some very significant hint in the next 3 months of which way it's going to break. Clearly so, as we just bounced off the 80 mark on the index. What's going on in the USD index from here forward is "very interesting" in terms of tipping it's hand.

Please feel free to elaborate your own thesis at will either here or elsewhere, and I for one will read it with interest. I do hesitate to argue with it as there's much that I agree with in your idea anyway - I only see it on a bit different time frame.

ever gone back and read all your forecasts here?

one word... random.

no such thing as a 'trading thesis'.

an 'investment thesis' doesn't change weekly.

you have an 'idea' or a 'hunch'.

if you had a 'thesis' you believed in you'd trade every ten years not every ten minutes.

nothing wrong with trading, but 'trading' and 'thesis' don't mix.

Contemptuous
05-28-09, 03:47 PM
Yes, well thank you for your insights here Metalman.

I seem to recall I've read this advice from you somewhere before? Repetition makes Jack, and Jack's presumed pupil Lukester, both dulled boys. :rolleyes:

I won't lift a finger to argue it further with you. How's that? Nice and peaceful? As in, "peaceful coexistence"? ( Wassat? :confused: ) :p I'm gonna go the Ghandi route here, and try some passive resistance. ;)

Hint for the esteemed Metal-didact-o-phone: "everything" is possible in the short term.

Your argument on this question boils down to this: "Yes, the USD did indeed soar an astonishing amount - more than any time since the early 1930's, due to a synthetic short bid on it from unraveling bad bets which we all readily observed, in (very large) action - but we are sure now, that all the bad bets are fully unraveled!".

Get that? No more bad contracts to resolve in the world requiring USD! Everything's squeaky clean that might have required USD's to settle. :) Duh. Somebody mentioned a notional 80 trillion but they are an addle-brained twirp-nudge. That's so obvious and this is all ancient history. ;)

Slimprofits
05-28-09, 03:49 PM
I think there is something too this, but can't go beyond what I suggested elsewhere. There appears to be range with a floor and a ceiling of 80 - 89. Maybe USDX trades between this level during the ongoing period of deleveraging, until a massive dollar event occurs?

The IMF in April said,
"As a result of continued pressures in credit markets, global financial institutions and other holders could face larger potential writedowns, according to our estimates (Table 1.3). Looking at the range of assets originated in the United States over the same cumulative period (2007–10) as in prior GFSRs, expected writedowns have risen to some $2.7 trillion, up from the $2.2 trillion estimated at our interim update in January 2009, and from the $1.4 trillion estimated in October 2008. The rise represents the credit deterioration that the worsening economic cycle is creating (Figure 1.27). Considering a much wider set of outstanding loans and securities to include European-originated loans and related securities as well as Japanese-originated assets (totaling some $58 trillion compared to earlier estimates based on $27 trillion of U.S. originated loans and securities) provides a broader, albeit more uncertain, assessment of potential writedowns of some $4.1 trillion. While banks are expected to bear about two-thirds of the writedowns, other financial institutions including pension funds and insurance companies also have significant credit exposures. Among other market participants, hedge funds have suffered losses related to both mark-to-market declines and forced asset liquidations due to redemptions."

http://www.imf.org/External/Pubs/FT/GFSR/2009/01/index.htm

Contemptuous
05-28-09, 03:58 PM
But how could my mentor Metalman be wrong? You must have mis-spoken, dear Sir. :)

aaron
05-28-09, 04:17 PM
Lukester and Metalman: You both provide so much good information, but your arguments are becoming tiresome. Yes, I can hit the "ignore" button, but then I'd miss your insights.
Can you guys play nice, or take it to the private messaging area?

Contemptuous
05-28-09, 04:20 PM
Aaron - actually, I would dearly love to be able to post this thread without getting one more lecture on how I am grasping the essentials so profoundly incorrectly. I am not the one venturing "arguments" here. I started this thread, and other than one reply to Metalman, I am more interested in other's comments, such as *T*'s for instance.

I am perfectly prepared to be engaged with Metal's comments also, although the didactic approach makes the finding of any common ground conclusions a little more difficult. But it's cool. I am just going to unplug whatever synapse in my head that takes anything that is overly didactic too seriously. Then the didact-o-phone can post anything he wants by way of opinion. Beg pardon, the esteemed Metalman.

I have resolved to avoid any further undue stress, when depositing remarks here that might be even vaguely bullish the USD or cautious of gold going into the immediate future (months).

It's never a bad idea to at least take exercises in being agnostic of one's major thesis. Or does everyone who wanders over towards the edge of that cesspool of idiots instantly contract the equivalent of mad cow disease in their economic thinking capacity?

Ohmigod! I've got bovine spongiform USD encephalopathy! Aaagh! :eek:

1631

*T*
05-28-09, 04:43 PM
Uh, just to clarify - I don't agree with Ackerman's "several years of deflation". That's his preoccupation. I was only remarking on his mention of a renewed call on the dollar that would derive directly from a fresh wave of asset unraveling - everywhere outside the US.

I believe both iTulip and 99% of all of us, already consider that part obvious? We merely acknowledge that there's been a large call on the USD in the past year and a half, due to settlement of disintegrating debt worldwide in USD.

That spells our 21st Century brand of "deflation". Or not. Doesn't bother me, whatever name for it we choose. What happens when or if this malady recurs, is we get a large new synthetic bid on the USD - which makes nice, valuable things like gold quite a bit cheaper for a while. :) (yum).

Ackerman's point is just a comment on that: "hey, there's a lot of that stuff still out there, and what happens to USD when it's all ready to barf again"? If it barfs, it will require another wave of USD to settle. Mechanical consequence?

Ah, well in a word, yes. This is what I was thinking when I said oil would get to $20 before $200.
But the action in treasuries makes me think it was a one-trick pony, that is, the synthetic short position is fully unwound as you put it. The next wave of unravelling may well not look like the last. This time, the fed is monetising. Why then would people panic into long-maturity treasuries? We had a silent panic from longer maturity treasury debt into bills and 2y notes. The next panic could be out of treasuries altogether, the final blow. Why hold treasuries when tax receipts have collapsed 30% y/y and the fed is printing? There is so much new supply, where will the marginal buyer come from? FCB's can't step it up with collapsing exports and dollar receipts.

The current stress seems very US-focused, the gold action we're seeing is purely in USD. In Sterling it hasn't budged at all. Apparently it's all about the dollar and govt. debt. I am wondering if this is because we are seeing the beginnings of this final panic.

*T*
05-28-09, 04:48 PM
ever gone back and read all your forecasts here?

one word... random.

no such thing as a 'trading thesis'.

an 'investment thesis' doesn't change weekly.

you have an 'idea' or a 'hunch'.

if you had a 'thesis' you believed in you'd trade every ten years not every ten minutes.

nothing wrong with trading, but 'trading' and 'thesis' don't mix.

So what's your opinion on the actual topic metalman?

Contemptuous
05-28-09, 05:33 PM
oops. Double post.

Contemptuous
05-28-09, 05:34 PM
I am totally cool with the Metalguy posting whatever he likes here. Go ahead and post some more! Or go get a spongiform-free hot dog with mustard and all the fixin's, and mull it over! Do what you like! Anarchy rules! Only the good noodles rise to the top of a boiling pot! And so forth!

metalman
05-28-09, 06:28 PM
I am totally cool with the Metalguy posting whatever he likes here. Go ahead and post some more! Or go get a spongiform-free hot dog with mustard and all the fixin's, and mull it over! Do what you like! Anarchy rules! Only the good noodles rise to the top of a boiling pot! And so forth!

i have a thesis. my thesis is that i'm going to drink a beer now. my thesis indicates that after that... not sure exactly when but i have conviction in the trend... i'll pee. but that's about as far as my thesis for the evening goes. if i have another beer i may have to update my thesis.

Contemptuous
05-28-09, 07:14 PM
Now everybody has to figure out what is hidden in this deceptively simple comment, with reference to the near term prognosis for the US dollar. He's doing a Greenspan here - hiding the real signifier under a cloak of ambiguous suggestions. "Beer". "Pee". "Beer again". :cool: :cool: This is gonna be a tough one to decode. It's something to do with liquidity. There being ample US dollar liquidity? A toilet involved? No. I can't figure out the rest. We must hang Ackerman up for another day, and await developments.

metalman
05-28-09, 07:27 PM
Now everybody has to figure out what is hidden in this deceptively simple comment, with reference to the near term prognosis for the US dollar. He's doing a Greenspan here - hiding the real signifier under a cloak of ambiguous suggestions. "Beer". "Pee". Beer again". :cool: :cool: This is gonna be a tough one to decode. It's something to do with liquidity. There being ample US dollar liquidity? A toilet involved? No. I can't figure out the rest. We must hang Ackerman up for another day, and await developments.

rick's predictions on deflation have been wrong-o for how long?... Does the New York Times confirm deflation spiral theory or signal the end of disinflation? (http://www.itulip.com/forums/showthread.php?p=58659#post58659)

not much chance he'll start to not be wrong now, is there?

buuuuurp.

Contemptuous
05-28-09, 07:45 PM
Uhm - EJ's talking in the cited post about what was to develop inside the USD zone? This is not what Ackerman is really referring in the post above - pointed rather at what may further unravel in other countries, and their currencies, vs. the USD, which could "notionally" spark large *external* new calls upon the buck.

What does any of that have to do with the "United States of Goldman Sachs"?

The US Treasury & Fed do powerfully affect other currencies and their credit situations, but they are not exactly joined at the hip to large numbers of tottering foreign banks at this juncture, are they? You accept any any scrap of a notion, that *a variety of* foreign banks could stage another whole layer of fails with very large USD obligations involved?

Anyway, I'll pass this over to anyone else that wants to chip in a further comment. And if not, just let this sit and we'll see how it pans out.


Of course we can't claim that anything has been improving in the USD fundamentals (that's almost a bad joke). It is other currencies which could still weaken sharply vs. the USD due to a new and expanding wave of asset unravelling abroad, combined with the call on the USD implied by settling all of those bad bets.

The discussion here at iTulip seems to me to be reexamining the USD internals repeatedly, which makes sense as that is a picture that's rapidly changing. But it seems there is less scrutiny of other major currencies own prospects, and 95% scrutiny of USD prospects. This is where a major upset in the prevailing thesis may appear. I think this is not ruled out to occur again?


rick's predictions on deflation have been wrong-o for how long?... Does the New York Times confirm deflation spiral theory or signal the end of disinflation? (http://www.itulip.com/forums/showthread.php?p=58659#post58659) not much chance he'll start to not be wrong now, is there? buuuuurp.


Rick,

I always enjoy receiving your notes, but you’ve got to be kidding. Is it possible that you and I both live in the same country, the United States of Goldman Sachs? We both know that our Minister of Finance Henry Paulson’s company recently turned–presto!–into a commercial bank so that it could absorb the assets of failed banks at a fire sale prices.

The disinflationary period we’ve been warning about years before the housing bubble popped, producing asset price deflation and spilling over–if only briefly–into commodity prices and wages, is here. Now all you have to do to see it is look out the window. Your mistake is that you can’t see past it to what is on the other side.

[ US ] Government, and lots of it!

metalman
05-28-09, 07:57 PM
Uhm - EJ's talking in the cited post about what was to develop inside the USD zone? This is not what Ackerman was referring to - it was rather, what could be unraveling in other countries, and their currencies, vs. the USD, which could spark large *external* new calls upon the buck. But what does any of that have to do with the "United States of Goldman Sachs"?

The US Treasury & Fed do powerfully affect other currencies and their credit situations, but they are not exactly joined at the hip to large numbers of tottering foreign foreign banks at this juncture, are they? You accept even a scrap of a notion, that any foreign banks could stage another whole layer of fails with a complex overlay of very large obligations to be settled here, and generate significant new synthetic USD demand?

yep, as he states himself he's been saying that since 1998...

http://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=line&graph_id=0&category_id=&recession_bars=On&width=630&height=378&bgcolor=%23B3CDE7&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&preserve_ratio=true&&s_1=1&s%5B1%5D%5Bid%5D=DTWEXM&s%5B1%5D%5Btransformation%5D=lin&s%5B1%5D%5Bscale%5D=Left&s%5B1%5D%5Brange%5D=Max&s%5B1%5D%5Bcosd%5D=1973-01-02&s%5B1%5D%5Bcoed%5D=2009-05-22&s%5B1%5D%5Bline_color%5D=%230000FF&&s%5B1%5D%5Bmark_type%5D=NONE&s%5B1%5D%5Bline_style%5D=Solid&s%5B1%5D%5Bvintage_date%5D=2009-05-28&s%5B1%5D%5Brevision_date%5D=2009-05-28&s%5B1%5D%5Bnd%5D=&undefined&undefined

wrong from 2001 - late 2008... but he's right now!

ridiculous.

timing.

is.

everything.

Contemptuous
05-28-09, 08:06 PM
Well then I must defer to your guidance here Metalman, right? Or the old brain will turn into a piece of Gruyere cheese so quickly that I won't even know I became afflicted. Did you predict the blistering original USD breakout too?

thunderdownunder
05-28-09, 08:31 PM
Deflation we have - Inflation we need . Have you ever asked yourself why you can't have inflation in an economic graveyard?
Deflation is everywhere at the moment, You would have to be blind freddy in a coma not to see it. Housing, durables and non durables, Autos, wages/salaries,land prices,computers,clothing and shoes, the list is long and obvious.
Rio Tinto signed contracts for the supply of coking coal at 30% off previous agreement so then the Algorithm's start to kick in. The steel manufacturer has deflated input costs for the coal and maybe cheaper shipping costs as well as cheaper lower or capped labor costs coupled with cheaper energy costs. That manufacturer has a new buffer to at the gate prices- It can go straight to profit if demand stays or be used in discount if demand is low. Only the future knows because SO MANY parts are moving around in the world's economy. So much is either artificially propped up or working through to bankruptcy or to those, who are the benificiaries of bankruptcy in their sectors. Don't fear bankruptcy(Corporate Death) as it thins the ranks of the sick and obese allowing the surviving to prosper.
The USD is the only game in town when it comes to exchange for inputs - name me one raw product not settled/quoted in exchange for USD.
Say I sell XXXX bushel's of Australian wheat to China,I am quoted and settle in USD- then I can convert to any currency I want Euro,yen, zolts, Melanesia sea shells or back to AUD. What happens is that conversion costs money so I convert what I need and hold some USD for settlement of the new John Deere harvester I've ordered. This happens around the world 24hrs a day 365 days a year on a vast scale. In a deflation cycle the prices fall and the demand for USD is correspondingly weakened (less $'s needed /per unit) so if demand rises the world is chasing more $ to settle rising prices/rising supply needs so the price for USD will rise.
What we have at the moment is a fear that the US government (and others) are printing or liquifiing the currency. That fear would be well founded if it wasn't for the clear fact that a massive crater has opened up and swallowed asset values - the Balloon has a leak to the tune of $100 trillion and rising around the world, yet the loans that backed it remain. So they put the air back, enough to keep it from going flat while we await (nay pray) that the leaks seal. If they continue to inflate after the leaks seal then you have inflation (Off, I might add, a deflated state). Simply they are replacing what is being lost but deflation tells me they are not filling quick enough. Lets hope another hole doesn't open somewhere.
One thing is for sure, if you allow deflation to beat the reinflation you have a doosee of a problem if you hold debt and need principle+ interest payments to shave a margin of profit. Daily, money to make those payments is being vaporised, the end users of credit are loosing jobs/wages/ready buyers of produced goods/accrued and perceived wealth.
What the World needs, undesirable and unpalatable as it is proven to be is one big puke up of all that is festering in the bowels of the economy- Bankruptcy of the Banksters

OR


A World War and bankers are proven cowards.

metalman
05-28-09, 08:31 PM
Well then I must defer to your guidance here Metalman, right? Or the old brain will turn into a piece of Gruyere cheese so quickly that I won't even know I became afflicted. Did you predict the blistering original USD breakout too?

it's not a 'breakout'. the dollar is not a canadian junior mining stock.

i don't make predictions. i don't know shit, as you know, except what i do not know.

Contemptuous
05-28-09, 08:36 PM
So what's all this palaver about, if you are so amenable to provisionally entertaining multiple theories? Nobody's making predictions here Metalman. Ackerman was only pointing to a "possibility". Do you do "possibilities"? :p


it's not a 'breakout'. the dollar is not a canadian junior mining stock. i don't make predictions. i don't know shit, as you know, except what i do not know.

Contemptuous
05-28-09, 08:44 PM
As good a summary of the potential for surprises in how this thing resolves short term (1-2 yrs), as any other I've read recently. The badweather chap downunder for me offers a nice pragmatic description of the premise. I think what he means here, is to offer a nod to the several unpredictable ways this could play out - *short term*.

And *short term* here could be a period of time that's a little bit longer that we wish to allow. To insist upon one's own thoroughly studied, macro-economically rational, and rigorously analysed outcome requires every last other squirrely variable to *get in line* in an orderly procession towards US dollar kaput.

Given how many moving parts we've got in this ongoing USD train wreck, that may be leaning on LADY CHANCE a bit here - to provide a dollar decline trajectory that is rational, and to one's own precise specifications. Lady luck does not always comply with "rational" endings, at least not until the very, very end.

An analogy might be it's like a spinning top, that slows down to a dangerous wobble and could fall any direction. This USD swan dive thing could break in more than one direction.

a warren
05-28-09, 09:46 PM
*You've lost me.

jtabeb
05-28-09, 10:47 PM
I don't think the entirety of Rick's assessment will occur, but he may just be spot on about the potential for a serious USD breakout here. That would be due to a fresh round of dollar denominated plunging asset settlement, which is dead ahead IMO.

BTW - Do we have capital punishment here for posting such deflationista rank heresies? :eek: Up against the wall and shot by firing squad at dawn?? :p Seriously, I think Rick is sniffing out a story here.

_____________________

IF DOLLAR IS BOTTOMING, KILLER DEFLATION IS NEXT

by Rick Ackerman on May 28, 2009 1:49 am ·

Has the dollar put in an important low? It looks like it, since the NYBOT Dollar Index widened the gap on Wednesday between it and a key Hidden Pivot support at 80.04 that we drum-rolled here earlier. We had been using that number as a downside target since late April, when DXY was trading just above 84; it was first touched last Friday, then exceeded by a scant 0.23 points before bouncing back.

Now, if the dollar is indeed embarking on a major rally in line with our forecast, stocks are likely to fall, and gold and other precious metals to come under pressure, for the foreseeable future. These new trends may have begun to emerge yesterday, since the Dow Industrials fell 173 points and Comex June Gold reversed a promising rally early in the session to settle more than $10 below the day’s highs.


http://www.rickackerman.com/wp-content/uploads/2009/05/dxy-rally-looks-serious-small.jpg

The short squeeze that has powered the stock market’s bear rally since March 6 corresponds precisely to a period of weakness in the dollar, and that is why we expect shares to fall hard if the dollar strengthens.

Why should this be so? The simplest answer is that a rising dollar is going to catch borrowers around the world with their pants down. For despite the deleveraging of the financial system that has occurred since the U.S. mortgage market began to implode about two years ago, borrowers are still caught in a vise, and the world is still massively short dollars because that is the currency in which nearly all borrowing has been done.


World Massively Short Dollars

Scores of millions of homeowners who are mortgaged to the hilt have implicitly bet against the dollar. So have financiers who have used derivatives to borrow dollars in some leveraged fashion. There are hundreds of trillions of dollars worth of these instruments still in play, most of them denominated in U.S. dollars, and if they cannot be rolled forward, the borrowers will have to settle up in cash.

Similarly urgent demand for otherwise shunned equity shares creates short squeezes in the stock market all the time, and there is no reason why a fundamentally worthless dollar could not be squeezed higher by the same implacable forces.

A rising dollar is most surely not what the world needs right now, since it will increase the real burden of debt on all who owe dollars. That is the crux of deflation, not the increase in the money supply that inflationists have been blathering about for years. Who cares what the supposed money supply is? Most of the yo-yos who cite growth in the money supply as inflation per se don’t even know the difference between money and credit.

You should pay them no mind in any event, since the far more important concern, at both the personal and macroeconomic levels, is whether your and everyone else’s debts are becoming easier to service, or harder. As long as the latter condition persists - and it will, unless a bailout package comes along that arbitrarily adds three or four zeros to every American’s bank account - all who owe will be subject to the asphyxiating effects of deflation.


$13 Trillion Just ‘Spit’

A deflationary outcome might seem highly unintuitive at the moment, given that the U.S. is in the throes of the biggest fiscal and monetary blowout since the founding of the Republic. But as we continue to point out, the $13 trillion that has been expended already on bailout this-or-that is just spit compared to a global asset deflation that has already sucked $60 trillion to $80 trillion of asset values into a black hole.

We think this trend will continue and that asset values have much farther to fall before deflation has run its course in perhaps five or six years.

Naw, your good. Just don't try to say "gold is money", that will get you in deep doo-doo.:D


Luke, I don't get you. Rick's line of logic is EXACTLY why I parted ways with Uranium when I did, weren't you around the last time this crap happened.
I agree with him (and apparently so do you), so I don't get it?


BTW this is excellent as well:

http://www.financialsense.com/editorials/casey/2009/0528.html
Now consider that the base cause for all that dislocation was the subprime sector. And how big is that? Not very. Subprime mortgages account for only about 15% of all home loans. Their influence has been way out of proportion to their numbers, because of derivatives. Here’s the good news: the subprime meltdown has about run its course. These loans were resetting en masse in 2007 and the first eight months of ’08. Now they’re pretty much done.

And the bad news? No one in the mainstream media seems to be asking what should be a pretty obvious question: What about loans other than subprime? Truth is, the banks didn’t just trick up their subprime loans. ARMs were the order of the day – across the board.

Now, here’s that frightening graph we referred to earlier.



Take a good, long look. You can see that from the beginning of 2007 through September of 2008, subprime loans (the gray bars above) were resetting like crazy. Those are the ones people were walking away from, sending a shockwave from defaults and foreclosures smack into the middle of the economy. Now they’re gone.

The ARM market got very quiet between December 2008 and March 2009, hitting a low that won’t be seen again until November of 2011. Small wonder a few “green shoots” have poked their heads above ground. But in April, resets began to increase and will reach an intermediate peak in June. After that, they tail off a little, going basically flat for the next ten months.

It’s not until May of 2010 that the next wave really hits. From there to October of 2011, the resets will be coming fast and furious. That’s 18 months of further turmoil in the housing market, and the beginning is still nearly a year away! (Although the months in between are likely to be no picnic, either.)

While it isn’t subprime ARMs that are resetting this time, neither are they prime loans. Those eligible for prime loans wisely tended to stay away from ARMs in the first place, as indicated by the relatively small space they take up on each bar.

No, the next to go are Alt-A’s (the white bars), Option ARMs (green) and Unsecuritized ARMs (blue). Alt-A’s are loans to the folks who are a small step up from subprime. Unsecuritized loans are a 50-50 proposition; either the borrowers were good enough that they weren’t thrown into the CDS pool, or they were so risky no one would insure them.

Those two are bad enough. But Option ARMs are the real black sheep, loans with choices on how large a payment the borrower will make. The options include interest-only or, worse, a minimum payment that is less than interest-only, leading to “negative amortization”—a loan balance that continually gets bigger, not smaller. Imagine what happens with those when the piper calls.

Once the carnage begins, will it be as bad as the subprime crisis? That’s the $64K question. Perhaps not. For one thing, subprime loans were a much larger chunk of the market when they started going south. For another, there’s been a lot of refinancing as interest rates dropped; that should help ease the default rate. And the government has massively intervened, with measures designed to prop up those who would otherwise lose their homes.

thunderdownunder
05-28-09, 10:49 PM
What your going for a beer as well?
Or does it mean that the weather prediction, that states,tomorrow you can expect..............
"Clear,fine and hot with some snow flurry's about the east side and a 50% chance substantial rainfall, low cloud and fog patches leading to a 20%- 80% likelihood of hurricane developing sometime through the day" is in all probability going to be right, most of the time, I think
Nah I'm with Metalman I'm off to get a beer with a 100% certainty of a pee but a declining chance of a Shag the more beer I drink. I graphed it, the chart does not lie, happens all the time, you can bet on it.:D:D:D:D:D:D

jtabeb
05-28-09, 10:57 PM
How can he say that when there are so many treasuries held abroad? And the swap lines the fed opened?

Also, the mortgages he mentions are in the US! The dollar is supported by exports paid for in dollars. This has mainly been export of IOUs of one type or another, trasuries or agency debt. Although also, to an extent, the world uses dollars for trade.

The world is massively long dollars, not short. Internal US debt doesn't count, it's just the left hand owing the right hand. The dollar is supported by the treasury ponzi game played by FCBs. The game is now ending. This year or next, probably this summer, the dollar scarcity meme will be proved wrong. Treasury bond yields will rise to surprising heights. There will be debt deflation and price inflation. Tax receipts will vapourise and unemployment will skyrocket. Treasury panics can only be manufactured so many times.

I worked this out for myself. I value EJ's opinion, but I am not a 'groupthink' victim. My expectation of hyperinflation in the US has been held for at least 2 years and remains a minority expectation. The guy you're quoting is not contrarian, he's just wrong.

The Dollar IS scarce if you are leveraged long anything and use USD as your funding currency. Your statement rests on a supposition, that FCB's will finally dump the dollar. If they DO, then I agree with you. If they DON'T, then it's another round of deflation (dis-de-non-defaltion, whatever Itulip's tortured definition of the day is). But the bottom line is, if the Dollar Maginot Line can hold 1 more time, we will have our second deflationary impulse leg.

(and I think that it is more likely than not BECAUSE it allows another round of UST financing to go through at low cost to the US GOV.)

Remember, the rule is:

1. Secure good credit terms

THEN

2. Unilaterally debase the currency.

NOT the other-way-round. (Don't work too well)

I hope that article about the Bildeberg stuff is correct and they choose the "Hard-Fast-Crash" option vs the Long-Drawn -out Lost Eon scenario.

Now that we have a good idea what's wrong with the world, I'd like to get started making it better (which makes the universal reset a pre-req).

metalman
05-28-09, 11:36 PM
then it's another round of deflation (dis-de-non-defaltion, whatever Itulip's tortured definition of the day is).

try to be a bit more respectful of your hosts.

the definition is not 'tortured'

to old timers, the persistent effort of trolls to not 'get it' is torture.

disinflation... a short period of deflation after the crash of the fire econ before the fed & partners in crime stop it with our money, our kids' money & their kids' money.

not itulip's fault there's no standard term for a short deflation after the gov't lets asset price inflation rip then bails out their buds after the ******* thing (duh) crashes.

everyone else forecast either deflation spiral ala 1930s or hyperinflation ala argentina.

only itulip got that right... so far.

maybe the inflation goes on to hyperinflation... then itulip is wrong and john williams, faber, schiff, are right.

for now...

Oil prices jump above $65; first time for 2009 (http://biz.yahoo.com/ap/090528/us_oil_prices.html)

check these off as wrong...

paul krugman
gary shilling
karl denniger
rick ackerman
mike shedock

ThePythonicCow
05-29-09, 12:36 AM
I hope that article about the Bildeberg stuff is correct and they choose the "Hard-Fast-Crash" option vs the Long-Drawn -out Lost Eon scenario.Another possibility is that we get the "Hard-Fast-Crash" option, but orchestrated by some Chinese-Russian-Arab actions, without the consent of or prior consultation with the Bilderberg group.

Contemptuous
05-29-09, 12:37 AM
The 80 level on the dollar might be worth watching is what Ackerman suggests. Some market technicians are looking at that unfolding behavior and there are some bets on the table that the consecutive break from here can be up rather than down. That's about it.


*You've lost me.

metalman
05-29-09, 01:12 AM
The 80 level on the dollar might be worth watching is what Ackerman suggests. Some market technicians are looking at that unfolding behavior and there are some bets on the table that the consecutive break from here can be up rather than down. That's about it.

ackerman & other pundits yapped about that magic 80 level for years. the hooting and hollering and claims that no way the dollar breaks 80 or the world ends... cats and dogs sleeping togther, raining frogs, real wrath of god type stuff... got real intense in the early months of 2007. remember?

until the dollar smashed through it 2007-04-13 like a boulder through thin ice... all the way to 69.86 on 2008-05-21 before the panic into crap treasuries out of even crapier crap started.

it was one of the 35449 reasons i've heard from him & others since 2001 why i should sell my gold. dollar's gonna rise, ya see, and that'll kill gold. reason #2535. roubini a few months' ago... when he was on tv all the time before we all got tired of the vaginas on his nyc condo walls stories... said gold's up on account of the intense financial crisis but when the panic is over gold's down hard again.

blah, blah, blah. what a pack of no clue f&cks.

anyway, this bogus & meaningless number 80 stuck in ackerman's head, nonetheless, like skunk stink on my dog... every time he gets damp still smells like f&cking skunk. maye i'll wash him in beer.

ackerman needs to do spring cleaning... toss the garbage out of his head..

Contemptuous
05-29-09, 01:17 AM
A vintage Metalman disclaimer. Applied with muriatic acid and a good stiff brush to the pervasive sludge. :D

I give up. I surrender. Jtabeb's got to carry this heroic investigation forward from here, and as he is very energetic and determined, you will be mired in an argument with him running from here to next Sunday. He's trained for hi-G manoeuvers so maybe he'll outlast you. Meanwhile, I'm feeling in a conciliatory, Jimmy Carterish mood today.

I wonder if we could strike a deal with you "Centurions of the Correct Path", and arrange for a permanent free permit to post more trash like this in some sub-sub-sub directory of "i've lost my mind just now" - maybe called something like "iTulip's bullshit brigade" or whatnot.

And once you've talked Fred into allowing it, then all of us flakes with occasional greasy deflationista backslidings can sort of skulk around down there furtively posting more maggots-in-the-brain stuff like this?

I'm thinking of the very early persecuted Christians, hiding fearfully down in the catacombs during the time of Caesar, celebrating their primitive early mass? Those few weak souls here with occasional frankly acknowledged deflationista fantasies could fit in well with that catacomb crawler early Christian meme perhaps.

I think you should talk to Fred about setting up a catacombs subdirectory down there in the iTulip bilges, where some of this economic analysis puke can get posted freely- you know, with all the valid iTulip permits issued?


ackerman & other pundits yapped about that magic 80 level for years. the hooting and hollering and claims that no way the dollar breaks 80 or the world ends... cats and dogs sleeping togther, raining frogs, real wrath of god type stuff... got real intense in the early months of 2007. remember?

until the dollar smashed through it 2007-04-13 like a boulder through thin ice... all the way to 69.86 on 2008-05-21 before the panic into crap treasuries out of even crapier crap started.

it was one of the 35449 reasons i've heard from him & others since 2001 why i should sell my gold. dollar's gonna rise, ya see, and that'll kill gold. reason #2535. roubini a few months' ago... when he was on tv all the time before we all got tired of the vaginas on his nyc condo walls stories... said gold's up on account of the intense financial crisis but when the panic is over gold's down hard again.

blah, blah, blah. what a pack of no clue f&cks.

anyway, this bogus & meaningless number 80 stuck in ackerman's head, nonetheless, like skunk stink on my dog... every time he gets damp still smells like f&cking skunk. maye i'll wash him in beer.

ackerman needs to do spring cleaning... toss the garbage out of his head..

metalman
05-29-09, 01:28 AM
A vintage Metalman disclaimer. Applied with muriatic acid and a good stiff brush to the pervasive sludge. :D

answering another post, ran across this. honest to god, when i saw it all i could think of was you!

http://2.bp.blogspot.com/_PG9h1CS1dfo/SBIXN3OihjI/AAAAAAAABWc/0Ie6yju7RYQ/s400/this-dog-is-the-new-ball-boy-at-wimbledon-this-year.jpg
lukester

jtabeb
05-29-09, 02:23 AM
try to be a bit more respectful of your hosts.

the definition is not 'tortured'

to old timers, the persistent effort of trolls to not 'get it' is torture.

disinflation... a short period of deflation after the crash of the fire econ before the fed & partners in crime stop it with our money, our kids' money & their kids' money.

not itulip's fault there's no standard term for a short deflation after the gov't lets asset price inflation rip then bails out their buds after the ******* thing (duh) crashes.

everyone else forecast either deflation spiral ala 1930s or hyperinflation ala argentina.

only itulip got that right... so far.

maybe the inflation goes on to hyperinflation... then itulip is wrong and john williams, faber, schiff, are right.

for now...

Oil prices jump above $65; first time for 2009 (http://biz.yahoo.com/ap/090528/us_oil_prices.html)

check these off as wrong...

paul krugman
gary shilling
karl denniger
rick ackerman
mike shedock

can we please stop trolling for trolls, sir?

Finster called it deflation, I call it deflation, heck even John Williams called it deflation (and he's predicting hyperinflation for God's sake!);)

Just trying to call it like I see it, that way if I'M wrong, people will know it because I had a clear, unambigious posiiton, and I suppose the converse would be true as well.

Fair enough?

jtabeb
05-29-09, 02:24 AM
Another possibility is that we get the "Hard-Fast-Crash" option, but orchestrated by some Chinese-Russian-Arab actions, without the consent of or prior consultation with the Bilderberg group.

I'm guessing there were a few of these at the meeting per chance?

jtabeb
05-29-09, 02:30 AM
A vintage Metalman disclaimer. Applied with muriatic acid and a good stiff brush to the pervasive sludge. :D

I give up. I surrender. Jtabeb's got to carry this heroic investigation forward from here, and as he is very energetic and determined, you will be mired in an argument with him running from here to next Sunday. He's trained for hi-G manoeuvers so maybe he'll outlast you. Meanwhile, I'm feeling in a conciliatory, Jimmy Carterish mood today.

I wonder if we could strike a deal with you "Centurions of the Correct Path", and arrange for a permanent free permit to post more trash like this in some sub-sub-sub directory of "i've lost my mind just now" - maybe called something like "iTulip's bullshit brigade" or whatnot.

And once you've talked Fred into allowing it, then all of us flakes with occasional greasy deflationista backslidings can sort of skulk around down there furtively posting more maggots-in-the-brain stuff like this?

I'm thinking of the very early persecuted Christians, hiding fearfully down in the catacombs during the time of Caesar, celebrating their primitive early mass? Those few weak souls here with occasional frankly acknowledged deflationista fantasies could fit in well with that catacomb crawler early Christian meme perhaps.

I think you should talk to Fred about setting up a catacombs subdirectory down there in the iTulip bilges, where some of this economic analysis puke can get posted freely- you know, with all the valid iTulip permits issued?

Gold is money,Ooops! I mean not. Papers Please!

You know what happens after super-novas right? Black holes.

Did you also know that no matter how much energy and matter you put into a black hole (an infinite amount even) it will never ever again become a radiant star.

Is that shit not deep, or what?:p

(Kind of like God leaving us an Aseop's tale, no?):eek:

ThePythonicCow
05-29-09, 02:35 AM
I'm guessing there were a few of these at the meeting per chance?So far as I know, there are no Russian, Chinese or Arab representatives in the Bilderberg and related organizations. Sometimes Western nation experts on or advisors to Russia, China or the Arab nations attend.

ThePythonicCow
05-29-09, 02:57 AM
The Alex Jones PrisonPlanet site has an article entitled "The Bilderberg Plan for 2009: Remaking the Global Political Economy" from which I obtained my current understanding of attendees. I won't directly link the site, as it falls lower on the reputation scale than iTulip.

Contemptuous
05-29-09, 03:00 AM
IMO we haven't had supernova market yet. Supernova's up ahead. We got a baby black hole now, but the big ugly-ass papa-bear black hole is out in 2015, after the arrival of the 32K DOW inflatable inner-tube, in 2014. Next job is getting out of baby black hole, then three or four vigorous years of inflating the 32K DOW. That part will require a whole lot of huffing and puffing. But I think we are collectively up to the job.


You know what happens after super-novas right? Black holes.

*T*
05-29-09, 06:44 AM
The Dollar IS scarce if you are leveraged long anything and use USD as your funding currency. Your statement rests on a supposition, that FCB's will finally dump the dollar. If they DO, then I agree with you. If they DON'T, then it's another round of deflation (dis-de-non-defaltion, whatever Itulip's tortured definition of the day is). But the bottom line is, if the Dollar Maginot Line can hold 1 more time, we will have our second deflationary impulse leg.

(and I think that it is more likely than not BECAUSE it allows another round of UST financing to go through at low cost to the US GOV.)

Remember, the rule is:

1. Secure good credit terms

THEN

2. Unilaterally debase the currency.

NOT the other-way-round. (Don't work too well)

I hope that article about the Bildeberg stuff is correct and they choose the "Hard-Fast-Crash" option vs the Long-Drawn -out Lost Eon scenario.

Now that we have a good idea what's wrong with the world, I'd like to get started making it better (which makes the universal reset a pre-req).

Agree with you exactly. I am just claiming that the maginot line is now cracking as FCBs move to shorter maturities, and have less dollar receipts.

If not this wave, then next.

jpatter666
05-29-09, 08:45 AM
As an corollary, found this interesting posting on Germany. We haven't heard much on the European situation -- there was a huge mess in Eastern Europe, then there wasn't (maybe).

http://absolutideas.com/financial-ve...lu-in-germany/ (http://absolutideas.com/financial-version-of-the-swine-flu-in-germany/)

One of the main takeaways from this posting I had not realized was that elections are this fall. They may be trying to hide everything under the rug until then (if they can). If Germany (Euro) gets a crisis, I'd imagine the dollar would take off again on another safe haven run. Different cause, but same effect as Oct-Dec.

we_are_toast
05-29-09, 09:12 AM
Did you also know that no matter how much energy and matter you put into a black hole (an infinite amount even) it will never ever again become a radiant star.


Yes, but if you stop putting matter and energy into it, it will radiate at a different wavelength (Hawking radiation) and eventually evaporate and come out of it's darkness. ;)

jtabeb
05-29-09, 09:19 AM
Yes, but if you stop putting matter and energy into it, it will radiate at a different wavelength (Hawking radiation) and eventually evaporate and come out of it's darkness. ;)

Even Deeper!:rolleyes:

Contemptuous
05-29-09, 01:42 PM
Thanks for posting that jpatter666 -

An excerpt or two included in your post mght even be in order, highlighting the very fragile state of German banking. This is the hard core of the EURO mentioned here. IMO it strongly supports the thesis that at some point in the next year the EURO is going to display it's "true colors" and start showing an real resemblance to an over-ripe pumpkin. That revelation will result in some notable "surprise adjusting" appearing on the USD index.

Germany's entire banking system according to this piece is in some really hot water.