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View Full Version : The cheh shaped recovery – Part I: End of the beginning - Eric Janszen



EJ
06-17-09, 12:32 PM
http://www.itulip.com/images/chehshapedrecovery300.gifThe cheh shaped recovery – Part I: End of the beginning

Cyrillic letter depicts the FIRE Economy Depression
Defusing the Dollar Bomb
What mixes like oil and water? Deflation theory and $70 oil.

Forget the boom bust cycle. This economic crisis spells the end of the FIRE Economy. The elongated process of devolution has many components, from the FIRE Economy debt hangover that drives the Debt Deflation Bear Market to Peak Cheap Oil. Going into midterm elections in 2010 with U-3 unemployment over 10%, the political component looms large.

Political Pig Pile

Harsh cover article in this month’s Harper’s Magazine (http://www.harpers.org/archive/2009/06/hbc-90005235). Kevin Baker in "Barrack Hoover Obama" hammers the new president for lack of sack. The chorus of armchair presidents including Bill Maher opines: the policy of do-it-all bi-partisan appeasement is failing. You can’t reason people out of their perceived self-interest. Obama should channel his inner Dick Cheney to bring out the conniving take-no-prisoners ass kicker within to punch a pared down to-do list.

To be fair, the administration inherited an overflowing economic outhouse built atop 30 years of politically expedient policy effluent dumped by both Republicans and Democrats. Monetarist in booms, Keynesian in busts, by turns the two parties filled the ground that was America’s productivity promise with a heap of reeking debt to overflowing.

The soggy floor above it all sagged under the weight of the Bush administration’s megalomaniac military ambition to keep oil cheap by force of arms starting in 2001. Oil prices responded by heading in the wrong direction and the floor caved in. But as hastily as the GOP scampered from the building as all the floor boards crumbled away President Obama leapt in like a kid into a lily pond on a hot summer’s day, without so much as holding his nose.

At a news conference at the end of April (http://www.wwenglish.com/en/voa/stan/2009/04/2009050131566.htm), he said that one of the biggest surprises of his first months in office was the sheer number of crucial issues that have come to the fore at the same time.

Democrats confronted this unforeseen challenge as Dave Barry once aptly described in a quip that distills our two political two parties to their essence:
"The Democrats seem to be basically nicer people, but they have demonstrated time and again that they have the management skills of celery. They're the kind of people who'd stop to help you change a flat, but would somehow manage to set your car on fire. I would be reluctant to entrust them with a Cuisinart, let alone the economy. The Republicans, on the other hand, would know how to fix your tire, but they wouldn't bother to stop because they'd want to be on time for Ugly Pants Night at the country club."
True to form, the Obama administration quickly set about burning down the FIRE Economy to save it. He hired a Treasury secretary with a record of ineffectuality (http://www.smh.com.au/opinion/obamas-economic-saviour-savaged-as-keating-lets-rip-20090306-8rk7.html?page=-1) and the knavish genius Larry Summers to manage economic policy. Within days of taking office, the bloom of change was already off the rose.

The Wall Street Journal reported: (http://online.wsj.com/article/SB123879462053487927.html#mod=testMod)
Top White House economic adviser Lawrence Summers received about $5.2 million over the past year in compensation from hedge fund D.E. Shaw, and also received hundreds of thousands of dollars in speaking fees from major financial institutions.

A financial disclosure form released by the White House Friday afternoon shows that Mr. Summers made frequent appearances before Wall Street firms including J.P. Morgan, Citigroup, Goldman Sachs and Lehman Brothers. He also received significant income from Harvard University and from investments, the form shows.

In total, Mr. Summers made a total of about 40 speaking appearances to financial sector firms and other places, with fees totaling about $2.77 million. Fees ranged from $10,000 for a Yale University speech to $135,000 for an appearance paid for by Goldman Sachs & Co.
Bribery in third world countries goes on under the table, behind closed doors, hidden from nosy journalists. In the U.S. bribery of public officials occurs in broad daylight, paid out as speaker’s fees and advisor’s compensation.

I know, I know. You don’t want to hear this. The crisis passed. Green shoots and all that. Jon Stewart’s dressing down of Jim Cramer? Dismissed. The assertion by Bill Black (http://www.boston.com/news/nation/articles/2008/02/28/amid_mccains_new_status_old_scandals_stir), the senior federal savings and loan regulator during the S&L crisis, to Bill Moyers (http://www.pbs.org/moyers/journal/04032009/transcript1.html) that the current banking crisis is “1000 times worse, perhaps, certainly 100 times worse, than the Savings and Loan crisis" yet no one has been prosecuted? Forgotten. The revelation from Simon Johnson (http://www.pbs.org/moyers/journal/02132009/transcript1.html), Director of the Research Department at the IMF and Sloan School of Management at MIT Professor of Entrepreneurship, that the U.S. is not run by either Republican or Democratic parties but by a American bank oligarchs?

Simon who?

Down the memory hole they go. Within months, the events of the Cramer’s ear boxing, Bill Black’s warning, and Johnson’s epiphany will join those of last year’s winners of “So You Think You Can Dance?” in America’s collective gnat memory.

http://www.itulip.com/images/dollarbomb300.jpgDefusing the Dollar Bomb

Already lost is the fact that by the time Obama took office in early 2009, the Fed had already fired every monetary bullet fighting the early stages of the FIRE Economy Depression. Only fiscal stimulus remained to pull the nation out of a spin dive. But can we afford it?

Buried far deeper in the bottomless abyss of American’s forgotten past are the darkest days of the Carter administration when U.S. deficits spiraled out of control. Gold prices doubled and doubled again as one hundred articles pronounced the dollar doomed.
Shrinking Role for U.S. Money (http://www.time.com/time/magazine/article/0,9171,916948,00.html)
Oct. 15, 1979 (TIME Magazine)

Frenzy in the gold and currency markets heightens an urgent issue

From the harried canyons of Wall Street to the outwardly calm boardrooms of Zurich, the world's financial centers experienced a whiff of panic last week. In two days of frantic trading, the price of gold on the London exchange soared a breathtaking $50 per oz. to $447 at one point; then it plunged back down almost as steeply, closing the week at $385. Silver, platinum and copper also gyrated wildly. Said a New York bullion trader: "The market's gone bananas."

The madness, as usual, was not over precious metals so much as money—specifically the battered U.S. dollar. Once again greenbacks were being sold off heavily in world markets in exchange for more robust currencies. Struggling to keep the buck from plunging further, which would hurt West German exports, the Bundesbank spent $1.2 billion in deutsche marks to buy up unwanted dollars last week. By happenstance, as the buck was worrying down again, central bankers, finance ministers and some 6,000 other leading moneymen were gathering in Belgrade, Yugoslavia, for the annual meeting of the 138-nation International Monetary Fund. Treasury Secretary G. William Miller and Federal Reserve Chairman Paul Volcker had hardly arrived when they were besieged with calls for U.S. action to stem the panic.
Twenty years before GATA and conspirational gold manipulation theories appeared, real live gold manipulation occurred out in the open, with Volcker in the lead.
Volcker promptly returned to Washington to draft plans for what could be the second massive dollar-rescue program the U.S. has had to mount in eleven months. Among the steps under discussion:

LARGER GOLD SALES. The 750,000 oz. of Fort Knox bullion the U.S. now sells monthly might be doubled, in hopes that this might help drive prices down. Hinting at such a strategy, Under Secretary of the Treasury Anthony Solomon said last week that the gold boom was "extremely unhealthy for the world economy."
Owners of U.S. debt held a mere fraction of a percent of GDP on those days, modest by today’s standards. Yet when the U.S. started running a tiny sub-billion dollar trade deficit lenders demanded that future U.S. bonds be issued in local currencies, aka Carter Bonds.
MORE "CARTER BONDS." Since last November the U.S. has sold $4.2 billion of so-called Carter bonds in West Germany in order to raise marks for the dollar defense. Plans have been worked out to issue more such bonds.

The foreign moneymen worry about the Carter Administration's resolve to hold down inflation at the cost of higher unemployment as the 1980 political campaign picks up steam. They found fresh reason for skepticism last week: it was revealed that to get the unions to join in the Carter anti-inflation program, the Administration agreed not to try to penalize any violators of the "voluntary" wage and price guidelines. Miller attempted to soothe his colleagues in Belgrade by promising that the Administration would "stay the course" in battling inflation, but doubt remained. Said one West German Cabinet minister: "The problem is Carter's chaotic leadership."
The macroeconomic backdrop for the FIRE Economy Depression is 50 percent 1975 and 50 percent 1930. Three items top of the 1930 depression versus 1970s recession comparison checklist. One, is the economy collapsing under the strain of a post credit bubble debt deflation? Check. Two, is monetary ammo exhausted and deficit spending the remaining line of defense? Check. Three, is U.S. a net creditor? No it is not. This will prove to be the critical difference as U.S. creditors back away from the dollar like a construction crew from an unexploded bomb discovered while digging the foundation for a new building—very carefully.

You’ve heard apologists for America’s unofficial weak dollar policy explain that the U.S. external debt position does not expose the U.S. to balance of payments crisis such as led Argentina down a road to ruin that culminated in a currency crash and capital flight in 2001 (http://www.itulip.com/forums/showthread.php?p=78579#post78579). You see, the U.S., owes its foreign debts in its own currency.

Not if current trends continue and the U.S. owes more and more in short term debt and soon Obama Bonds.
Top Chinese banker Guo Shuqing calls for wider use of yuan (http://www.telegraph.co.uk/finance/financetopics/financialcrisis/5473491/Top-Chinese-banker-Guo-Shuqing-calls-for-wider-use-of-yuan.html)
June 15, 2009 (Telegraph - Malcolm Moore in Shanghai)

The head of China's second-largest bank has said the United States government should start issuing bonds in yuan, rather than dollars, in the latest indication of the increasing importance of the Chinese currency.

It was the first time the head of a major Chinese bank has called for the wider use of the yuan, although a chorus of senior government officials have already voiced their concerns about the stability of the dollar and have said the yuan should be used more widely.

"I think the US government and the World Bank can consider the issuing of renminbi bonds," he said, asking for a "mutual cooperation" between the US and China to promote Chinese financial services. He said bond issuance could be relatively small, at between 1bn and 3bn yuan (£100m to £300m).
Shuqing’s shot added to the salvo of criticisms launched by Chinese officials at the Obama administration, each claiming reckless public spending to bail out the FIRE Economy and shaky banks stretched America’s credit limit. Only six months earlier, ex-New York Fed economist Richard C. Koo, now the Chief Economist of Nomura Research, pointed to the experience of Japan in the early 1990s as an object lesson on how not to manage debt deflation. He made a convincing case that aggressive monetary policy will prevent the U.S. economy from collapsing into a deflationary spiral as in the 1930s, but that only fiscal stimulus can prevent the U.S. economy from devolving into a Japan style “lost decade.”

http://www.itulip.com/images/oildrums.gifOil and water: Deflation forecasts and $70 oil

Whatever happened to that deflation spiral, anyway? The deflationists have been mighty quiet lately.

Issuing debt in other nation’s currency, no matter how modest at first, signals a return to a stage of devolution that took the U.S. dollar to the brink of losing reserve currency status in the late 1970s. Investors seem to know this, bidding up the prices of oil and other commodities to hedge the loss of future dollar purchasing power.

The dollar has only ever been about oil; a review of history ends the mystery of how the U.S. has avoided a 1930s style deflation spiral or Japan style liquidity trap. Continuing the 1979 TIME story:
The central bankers were especially doubtful about the President's ability to cut U.S. oil imports, a chief cause of the dollar's weakness. Only last week did Congress step up work on the energy program that Carter presented in July. Overriding objections from environmentalists, the Senate voted to create an Energy Mobilization Board that will be empowered to cut through the federal, state and local regulatory barriers that delay key energy projects. This week the Senate Finance Committee is expected to pass its version of the important windfall profits tax that will finance the new projects. The Senate is likely to approve a tax one-third smaller than the $104 billion House version: President Carter originally demanded a $142 billion tax.

The urgency for action on the energy program becomes clearer all the time. Brandishing the oil weapon in Belgrade, Saudi Arabia's Finance Minister Mohammed Ali Abdul Khail warned that continued depreciation of the dollars that the OPEC countries are paid for their oil might very well "evoke reactions." By that he presumably meant that the OPEC countries might force buyers to pay in a "basket" of many currencies rather than just in dollars; if this were to happen, demand for dollars would decline and they would slide further in value.
The global monetary system was at the brink.
Though the greenback strengthened a bit late last week as the markets anticipated new dollar defense moves, worry remains deep about the future of the monetary system that helped create the world's postwar prosperity. The central problem is the roughly 1 trillion footloose dollars that slosh around banks and currency markets outside the U.S. For many years during the 1950s and 1960s, Europeans complained about a "dollar gap." Greenbacks were the only currency that was accepted everywhere, though there were not enough of them around to finance world trade and development. But the dollar gap has since become a dollar glut. Due to heavy foreign spending, first to pay for the Viet Nam War, more recently for oil imports, the U.S. has exported enough dollars in the past decade to boost the reserves held by foreign central banks from $24 billion to $300 billion. Private international banks hold another $600 billion in Eurodollars, which are dollars loaned abroad.
Today these numbers sound quaint. All this before the U.S. worked out the petrodollar recycling program that saved the day by putting oil producers’ earnings on account at the Fed as reserves. But while crisis was forestalled for 30 years the problem never went away.
Central banks and private holders are reluctant to accept any more dollars, whose value declines almost daily. OPEC countries in particular are attempting to put new oil earnings into marks, yen or gold. Says Washington Economic Consultant Harald Malmgren: "The Arabs have learned that they pump oil out of the sand, hold the dollars, and the dollars turn back to sand." Nervous central bankers also fear that dollar holders will suddenly try to move large funds into another currency or into gold. Warns Karl Otto Pohl, president-designate of the German Bundesbank: "If this mass of dollars ever begins to crumble, it could start an avalanche that would bury all other currencies."
The avalanche did not happen. Yet. But imagine three years from now the following report, perhaps in TIME Magazine:
The “foreign moneymen” worry about the Obama Administration's resolve to hold down inflation at the cost of higher unemployment as the 2010 mid-term elections pick up steam. They found fresh reason for skepticism this week: it was revealed that to get the banks to join in the Obama re-inflation program, the Administration agreed not to try to penalize any violators of the bank stress test guidelines. Geithner attempted to soothe his colleagues in China by promising that the Administration would "stay the course" in maintaining a strong dollar, but doubt remained. Said one Chinese official: "The problem is Obama’s chaotic leadership."
Or something like that. Whether we see high, moderate, or modest inflation from here, a question we dig deeply into in Part II, one fact is certain, throughout the crash we did not nor were we ever in danger of falling into a deflationary spiral. Everyone who made that call can officially throw in the towel.


http://www.itulip.com/images/deflationfiredepressionvsgreat.gif



Game over for deflation forecasters. No deflation spiral.


(Hat tip to member Largowinch: Full report here. (http://www.itulip.com/forums/showthread.php?t=10414))




We have delayed our re-distribution of part of our gold and Treasuries barbell portfolio until we see one of these Fed crashes in action as it attempts to raise interest rates without raising interest rates. Key measures we keep an eye on:


Yield curve
Unemployment
Dollar
Commodities
Oil
Housing
Personal Consumption Expenditures
Freight Rail Traffic
Bank solvency
Personal Consumption Expendatrues

Staying in gold and Treasuries since 2001 has yielded us approximately 7.4% compound annual returns with zero transaction costs or management fees with no draw down. As the first rule of iTulip is do not harm, and taking a trade minimalist stance, we approach any changes to this position with care.

We have been doing diligence on energy, and oil in particular. We are convinced that the markets have another big crash in the wings, as the Fed experiments with ways to reverse its creative anti-deflation policies in an environment of fiscal stimulus/deficit spending fueled economic growth, and that the rally off March 2009 lows has been driven first by technicals, then by sentiment, and most recently by funds who cannot be seen by their clients sitting in the dust behind funds that got into the rally early.

But as we demonstrate in Part II, there is no fundamental justification for a rally of this magnitude, and nothing to sustain it beyond a widespread fear of not being in it. Not one politically difficult major root cause of the crisis has been addressed, and many new crises set in motion by the collapse or before are about to arrive.

While we read about U and V and L shaped recoveries, we had to go to Russia’s Cryllic alphabet to find a letter shaped like the outcome we see for the end of the FIRE Economy, a crash, a rebound, and a long decline—unless current policies change.<table valign="top" align="left" border="0"><tbody><tr><td>
http://www.itulip.com/forums/../images/chehshapedrecovery300.gif

</td></tr></tbody></table>

The cheh shaped recovery – Part II: Yield curve says what? ($ubscription) (http://www.itulip.com/forums/showthread.php?p=104806#post104806)

ZIRP hell for debtors
First Bounce is over
Entering the high volatility zone

The yield curve is talking. Rising of the short end to long, the steepening curve says: inflation. But why?

Here we take a different path than we took in Deflation fare thee well, we hardly knew ye - Part II: Asset valuations in a post-market world (http://www.itulip.com/forums/showthread.php?p=97923#post97923). Rather than looking for confirmation of that analysis we instead look at all of the reasons why the yield curve is getting steeper other than the one that conforms to the theory that inflation expectations are rising due to:


Credit crunch induced supply shock
Weakening dollar and cost-push inflation from energy imports
Inflationary impact of excessive money growth
Inflationary institutional policy bias
Bankruptcies induced industrial concentration

Is it possible that the economy is simply on a path to self-sustaining recovery? More ($ubscription) (http://www.itulip.com/forums/showthread.php?p=104806#post104806)

iTulip Select (http://www.itulip.com/forums/showthread.php?t=1032): The Investment Thesis for the Next Cycle™
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Slimprofits
06-17-09, 01:33 PM
Whatever happened to that deflation spiral, anyway? The deflationists have been mighty quiet lately.

There is at least one that still talks about it on an almost daily basis - David Rosenberg.

jiimbergin
06-17-09, 01:42 PM
Quote
The soggy floor above it all sagged under the weight of the Bush administration’s megalomaniac military ambition to keep oil cheap by force of arms starting in 2001.

EJ,
Doesn't Itulip prefer facts. I have never seen any facts to back up this statement. Does Itulip has a link where this is verified?

Otherwise nice post, EJ. Thanks

jim

icm63
06-17-09, 03:00 PM
The USD dollar bull is not dead, ... gold and $USD are at crtical stages.

Gold has failed to push up, and even if it does push up will it hold new high prices as inflation expectations are mute. Gold to sell off as the big boys realise that inflation issues are a long way off yet...

Are the stock market lows in, I would say not, just look at the action of the 10ry yield. ON this anaylsis dollar bull has more juice in it. :)

UPDATE1 : Why did the 2 yr pop, because things are getting better, hell no, they popped cause no body wants the stuff.

UPDATE2 : Sorry didnt read the 2nd part.. we of mostly of the same mind, dollar will find a bid as fed must pull back on the juice and gold will stutter sideways as inflation issues are way off in the future.

Digidiver
06-17-09, 03:06 PM
I sure hope you're right... been wanting to jump in and pick up some more but it's hard to read the near term direction.

grapejelly
06-17-09, 04:25 PM
I think oil will dip again, as deleveraging continues and the USD goes up again against major currencies. But I don't think that will last very long. Maybe another year. At some point the flight into tangibles creates liftoff for oil and gold.

Chris Coles
06-17-09, 06:38 PM
The Times, London had a piece about UK£ Gilt sales yesterday that will also start to point towards what is going to happen in the United States and the $US. It has long been my opinion that the old mantra that if the US sneezes, the UK catches a cold and with that in mind I believe the UK will lead into the inflation.

The Times
<!-- this will be populated from CMS --><!-- BEGIN: Module - Advert:Top --><SCRIPT type=text/javascript><!--//Retrieve yaoo Cookie Valuevar yahoo = "no";var IsYahoo="no";if (GetQueryString("yahoo")=="yes" || get_cookie('YH') == "yes") IsYahoo="yes";if (IsYahoo == "yes" || get_cookie('YH') == 'open') {set_cookie ("YH", "yes", "", "" );yahoo = "yes";} else {set_cookie ("YH", "no", "", "" );yahoo = "no";}window.onunload = setYahooCookie;//--></SCRIPT><!-- For Travel Search --><!--SECTION:parameter parameter="dart.server" /--><!-- END: Module - Advert:Top -->
June 16, 2009

Government tries out taste for debt with £5bn gilt sale

<!-- END: Module - Main Heading --><!--CMA user Call Diffrenet Variation Of Image --><!-- BEGIN: Module - M24 Article Headline with no image (a) --><!-- getting the section url from article. This has been done so that correct url isgenerated if we are coming from a section or topic --><!-- Print Author name associated with the article --><!-- Print Author name from By Line associated with the article -->Ian King, Deputy Business Editor

http://business.timesonline.co.uk/tol/business/economics/article6506753.ece?&EMC-Bltn=BCJBUA

johngaltfla
06-17-09, 07:14 PM
I think we see a test of the 78 level on the USD index then one final run to close and run up past the 82 level. After the Chinese and Russians sell off enough of their dollar denominated garbage and set up contracts for commodities with the rest, they begin the process of throwing BRIC bonds at the dollar via IMF SDRs. This will create a massive contraction in the desire to own or bid on dollar denominated debt.

After that, it's all over but Ben and the Fat Lady singing. He will HAVE to monetize the debt or allow a political realignment to occur which destroys the policy arm of the Fed and creates massive unrest in the U.S. and Mexico.

In the mean time, the BRIC nations make out like bandits because they know the playbook and Obama has no clue as to what is about to hit him. The one consideration the wizards at the Fed never thought was possible is simple:

What happens when creditor nations elect to short the dollar with their SWF's?

occdude
06-17-09, 10:29 PM
woaaaaaaaaaaaaaaaaaa, there Nelly. Aren't we forgetting something? If foreigners dump dollars, THEIR dollars dump. Can they dump them all at once? Heck no, thats why the Ruskies and the Japanese act like the dollar can do no harm. Will the Fed monetize? Lets say yes, they monetize and people dump bonds which the Fed purchases back with OH!, OH!........dollars. See the problem? Thats why no pump and dump. The game plan is, you monetize, we drive up interest rates which makes you more likely to monetize, drive up rates etc.......The Fed is between a rock and a hard spot.

You think they can just dump dollars into commodities? If they even THINK about doing that on a large scale, the prices will go to Pluto and beyond, to some other galaxy yet to be named...... No, they need to ween themselves and the markets off. This won't be a quick flight, but a slow steady march out of the dollar and into a more reliable store of value.

johngaltfla
06-17-09, 11:03 PM
woaaaaaaaaaaaaaaaaaa, there Nelly. Aren't we forgetting something? If foreigners dump dollars, THEIR dollars dump. Can they dump them all at once? Heck no, thats why the Ruskies and the Japanese act like the dollar can do no harm. Will the Fed monetize? Lets say yes, they monetize and people dump bonds which the Fed purchases back with OH!, OH!........dollars. See the problem? Thats why no pump and dump. The game plan is, you monetize, we drive up interest rates which makes you more likely to monetize, drive up rates etc.......The Fed is between a rock and a hard spot.

You think they can just dump dollars into commodities? If they even THINK about doing that on a large scale, the prices will go to Pluto and beyond, to some other galaxy yet to be named...... No, they need to ween themselves and the markets off. This won't be a quick flight, but a slow steady march out of the dollar and into a more reliable store of value.

Keep in mind the march started last August with the Chinese and Russians rotating 10's and 30's into 1-3-6 month and 2 year or less durations and short term instruments. They have no interest in holding anything longer than 2 years in their reserves. The problem is not their "dumping" dollars; it's the problem of setting up contracts for commodities, long term continuous contracts I might add, with third world countries for resources then they repatriate them here for ag products primarily, then weapons and very little else of what we produce.

The Fed has put themselves in this box by not allowing the markets to liquidate the bad debt at a correct valuation. Hence we are about to see the monetization cycle from hell you are referring to.

soulonfire
06-18-09, 03:25 AM
Does this mean I can use a stock screener to find the stocks the highest p/e ratios and sell short these stocks ?</TD><TD align="left" width="60"></TD>

Chris Coles
06-18-09, 04:03 AM
There is nothing to the right of the cheh; empty space. No one is talking about the role of capital in the economy. It is as though it never existed.

Once again I return to point out that every time the government makes statements about bonds and interest rates, they fail to account for the need to invest capital in the form of new equity. And, as I have already pointed out, the one place you can insert new equity capital investment and not, as a nation, lose it; is right at the grass roots of a nation. Placing the funds into the very institutions that have caused the problems does nothing to re-invigorate the local community grass roots of the nation.

Until everyone recognises that we must invest new equity capital, from the savings of the nations, into the empty space to the right of the cheh; nothing will change the long term prospects of any economy.

vinoveri
06-18-09, 10:04 AM
sorry for being dense, but Where are we (US, world) on the cheh?

FRED
06-18-09, 02:28 PM
sorry for being dense, but Where are we (US, world) on the cheh?

In this part of the process? Perhaps here?


http://www.itulip.com/images/bunchofchehs.gif

Moe_Gamble
06-18-09, 03:14 PM
We have been doing diligence on energy, and oil in particular. We are convinced that the markets have another big crash in the wings, as the Fed experiments with ways to reverse its creative anti-deflation policies in an environment of fiscal stimulus/deficit spending fueled economic growth, and that the rally off March 2009 lows has been driven first by technicals, then by sentiment, and most recently by funds who cannot be seen by their clients sitting in the dust behind funds that got into the rally early.

I agree that the short-term picture depends on the Fed's moves, and I agree that Bernanke and the Fed are stupid enough to trigger another big crash. Bernanke is like a guy in his first-ever month of trading. You'd think he'd find an advisor who knew how to read a chart.

But they might not trigger another big crash. Did you see how quickly they backed off the headlines about the G-8 looking at draining stimulus money [BLUFF!], and did you see the headlines downplaying the chances of an interest rate increase later this year? Did you see the retreat in bets on a Fed Funds rate increase?

That tells me they are scared sh1tless of triggering a crash, and rightly so, because another crash will absolutely guarantee, among other things, an oil price spike to killer highs, instead of just a rocky climb to gruesome but still manageable prices.

Right now oil and the dollar look pretty comfortable in their trading wedges. We'll see.

metalman
06-18-09, 03:25 PM
I agree that the short-term picture depends on the Fed's moves, and I agree that Bernanke and the Fed are stupid enough to trigger another big crash. Bernanke is like a guy in his first-ever month of trading. You'd think he'd find an advisor who knew how to read a chart.

But they might not trigger another big crash. Did you see how quickly they backed off the headlines about the G-8 looking at draining stimulus money [BLUFF!], and did you see the headlines downplaying the chances of an interest rate increase later this year? Did you see the retreat in bets on a Fed Funds rate increase?

That tells me they are scared sh1tless of triggering a crash, and rightly so, because another crash will absolutely guarantee, among other things, an oil price spike to killer highs, instead of just a rocky climb to gruesome but still manageable prices.

Right now oil and the dollar look pretty comfortable in their trading wedges. We'll see.

agree 100%. but... time is not on their side.

ThePythonicCow
06-18-09, 04:05 PM
But they might not trigger another big crash. Perhaps California will give them a hand :confused:.

<blockquote>
<i>Ben, Ben, he's our man. If he can't crash it, nobody can.</i><p><i>Tim, Tim, he's our man. If he can't crash it, nobody can.</i><p><i>Arnold, Arnold, he's our man. If he can't crash it, nobody can.</i><p></blockquote>
(Silly take off on an old high school football cheer ;) ).

Mashuri
06-18-09, 04:08 PM
As always, EJ, a very well thought out analysis. I think we're at a point where Bernanke cannot stop the impending second crash he helped to set up with the "Rally of Hope". We're in for another round of deflation and strengthening dollar after which gold should smash through the $1,000 barrier and never look back.

D-Mack
06-18-09, 04:16 PM
Perhaps California will give them a hand :confused:.

<blockquote>
<i>Ben, Ben, he's our man. If he can't crash it, nobody can.</i><p><i>Tim, Tim, he's our man. If he can't crash it, nobody can.</i><p><i>Arnold, Arnold, he's our man. If he can't crash it, nobody can.</i><p></blockquote>
(Silly take off on an old high school football cheer ;) ).


Most typical was the response of Treasury Secretary Tim Geithner, who almost lost his cool on the issue. On recognizing EIR's White House correspondent, Bill Jones, at the Washington Post pre-dinner party, Geithner was at first somewhat taciturn. "You're getting yourself into real trouble in your attempted bailout of the toxic assets," Jones said. "Don't you realize that you will bring on hyperinflation?"

Geithner responded somewhat tight-lipped, "It ain't gonna happen," he said.

Jones continued his argument as to how Geithner's policy would lead to hyperinflation. Then suddenly the mild-mannered, urbane Treasury Secretary, suddenly underwent a Jekyll-and-Hyde- like transformation into something akin to the neighborhood bully. "It ain't gonna f***in' happen!" he half-shouted. "The Fed is an independent entity and they will make the call. And Congress will also have a say in the matter. They would stop it if they felt there were a problem." "I hope to hell they do," Jones replied. "We'll see," said Geithner, eager to discontinue the conversation.

http://www.larouchepac.com/node/10208

http://www.huffingtonpost.com/arianna-huffington/wall-street-dc-and-the-ne_b_201899.html?page=11&show_comment_id=24166210#comment_24166210

I wish there was video

ASH
06-18-09, 04:41 PM
Does this mean I can use a stock screener to find the stocks the highest p/e ratios and sell short these stocks?

Broadly speaking, I think that would be consistent with EJ's view that:


We are convinced that the markets have another big crash in the wings, as the Fed experiments with ways to reverse its creative anti-deflation policies in an environment of fiscal stimulus/deficit spending fueled economic growth, and that the rally off March 2009 lows has been driven first by technicals, then by sentiment, and most recently by funds who cannot be seen by their clients sitting in the dust behind funds that got into the rally early.

I don't personally trade on margin. If you choose to short stocks with high p/e ratios, I think you will accept significant risk related to your timing. The part of this essay that I zeroed in on says that the Fed is likely to trigger a further market crash, and that fundamentals won't sustain the recent rally, but it doesn't necessarily say when the Fed will stumble into this action, or when the market will realize that it is treading on air. (One possible clue is the timing of stimulus spending, but that's not exactly bullet-proof.) In my opinion, the essay doesn't give timing advice that is tradeable by selling stocks short, with acceptible risk.

I am a novice investor, but my perception of the risk involved is that if one is inclined to speculate on the market falling in response to future actions of the Fed (or simply the failure of hope in the face of fundamentals), then long-dated options contracts are to be preferred over trading on margin. But, as I say elsewhere, I'm not the right guy to be giving you trading advice. I'm simply the guy who's willing to take a stab at answering your question.

c1ue
06-18-09, 04:47 PM
FYI - an interesting dynamic:

If the US is attempting to weaken the dollar - then one possible goal for the BRIC financiers to work toward is selling their own currencies in order to keep the relative exchange rates even (i.e. negate all or some of the US dollar weakening).

Ironically while this does serve to keep the dollar from weakening as quickly as it should, on the other hand these extra dollars can then be used to disintermediate the US from its own currency.

After all, the US dollars being 'quantitatively eased' are mostly stuck in big US banks. For the importers/exporters, small businesses, etc etc the dollar squeeze in the form of credit squeeze still exists.

I'm still considering what this means if true.

Roughneck
06-18-09, 04:51 PM
Aw come on I heard on WSJ radio this morning that cpi inflation came back lower than expected and inflation is not a concern.:rolleyes:

WildspitzE
06-18-09, 06:53 PM
Broadly speaking, I think that would be consistent with EJ's view that:


We are convinced that the markets have another big crash in the wings, as the Fed experiments with ways to reverse its creative anti-deflation policies in an environment of fiscal stimulus/deficit spending fueled economic growth, and that the rally off March 2009 lows has been driven first by technicals, then by sentiment, and most recently by funds who cannot be seen by their clients sitting in the dust behind funds that got into the rally early.

I don't personally trade on margin. If you choose to short stocks with high p/e ratios, I think you will accept significant risk related to your timing. The part of this essay that I zeroed in on says that the Fed is likely to trigger a further market crash, and that fundamentals won't sustain the recent rally, but it doesn't necessarily say when the Fed will stumble into this action, or when the market will realize that it is treading on air. (One possible clue is the timing of stimulus spending, but that's not exactly bullet-proof.) In my opinion, the essay doesn't give timing advice that is tradeable by selling stocks short, with acceptible risk.

I am a novice investor, but my perception of the risk involved is that if one is inclined to speculate on the market falling in response to future actions of the Fed (or simply the failure of hope in the face of fundamentals), then long-dated options contracts are to be preferred over trading on margin. But, as I say elsewhere, I'm not the right guy to be giving you trading advice. I'm simply the guy who's willing to take a stab at answering your question.

while not the same, and littered with it's own risks and flaws, another approach is to look at it by sector/industry. analyze the sectors that have the high p/e ratios, or whatever signals that you're looking for, but that have inverse etfs available against them.

just spit ballin' alternatives for shits and giggles, not making any recommendations.

Chris Coles
06-19-09, 04:23 AM
In a very real sense we are now in the mind mode that creates all those tiny upward movements in a long downtrend graph. Timing is everything. If you take the long term view, you will, as EJ seems to point, sit and wait with your funds in a position of least risk until certainty flushes over the current sentiment. However, if you are in it for the fun and games then taking the risk of stabbing at when and where is all a part of the fun. Some will win but many will, inevitably, lose out.

BlackVoid
06-19-09, 03:06 PM
If the markets do crash, that should crash oil prices as well in my opinion.

If that happens I plan to go long on oil with as much money as I can (which is not that much).

Slimprofits
07-31-09, 02:59 PM
Down the memory hole they go. Within months, the events of the Cramer’s ear boxing, Bill Black’s warning, and Johnson’s epiphany will join those of last year’s winners of “So You Think You Can Dance?” in America’s collective gnat memory.

Harry Markopolos (on the SEC)...

EJ
07-31-09, 03:48 PM
Harry Markopolos (on the SEC)...

Harry Markopolos is an unusual case. He chose to stay out of sight.

Ross Kerber, an excellent reporter for The Boston Globe, wrote this story on Harry back in January.
The whistleblower (http://www.boston.com/business/articles/2009/01/08/the_whistleblower/)

Dogged pursuer of Madoff wary of fame

A month ago, Harry Markopolos was an accountant unknown outside Boston's financial community.

Now the slight, bookish 52-year-old from Whitman is under siege. Christmas week, he spent Monday being interviewed by "60 Minutes," Tuesday preparing to testify in Washington, and Wednesday sorting through pitches from book authors and movie producers. His mother-in-law now answers the door at his suburban stucco house and shoos away the reporters who knock at all hours.

Markopolos is hoping the buzz around him will soon die down so he can resume a low profile. He now works on whistleblower cases, conducting forensic accounting analyses for attorneys who sue companies under the False Claims Act and other statutes, which he said is best done with a certain degree of anonymity.
Ross wrote a story on me years ago (http://www.itulip.com/GlobeArchiveJanszen.htm). He's old school, tough and rigorous.

Speaking of reporters I know, my old college pal Carol Rosenberg is getting herself into trouble again.
Military and Media Clash In Complaint (http://www.washingtonpost.com/wp-dyn/content/article/2009/07/24/AR2009072403664.html)

Navy Spokesman Alleges Abuse by Miami Reporter

By Howard Kurtz (http://projects.washingtonpost.com/staff/articles/howard+kurtz/)
Washington Post Staff Writer
Saturday, July 25, 2009

Tensions between journalists and military officials are nothing new. But a bitter series of clashes between a top Navy spokesman and a Miami Herald military reporter reached a new, eye-opening level this week.

In a letter to the paper's editor, Cmdr. Jeffrey Gordon accused Carol Rosenberg of "multiple incidents of abusive and degrading comments of an explicitly sexual nature." Gordon, who deals primarily with the Guantanamo Bay, Cuba, prison, said in the letter that this was a "formal sexual harassment complaint" and asked the Herald for a "thorough investigation."

"Her behavior has been so atrocious over the years," Gordon said in an interview. "I've been abused worse than the detainees have been abused."
I'll know that financial reporters in the U.S. are starting to do their jobs when a Goldman Sachs executive files a complaint against a financial reporter.



I'm not holdng my breath.

Ghent12
07-31-09, 05:38 PM
Harry Markopolos is an unusual case. He chose to stay out of sight.

Ross Kerber, an excellent reporter for The Boston Globe, wrote this story on Harry back in January.
The whistleblower (http://www.boston.com/business/articles/2009/01/08/the_whistleblower/)

Dogged pursuer of Madoff wary of fame

A month ago, Harry Markopolos was an accountant unknown outside Boston's financial community.

Now the slight, bookish 52-year-old from Whitman is under siege. Christmas week, he spent Monday being interviewed by "60 Minutes," Tuesday preparing to testify in Washington, and Wednesday sorting through pitches from book authors and movie producers. His mother-in-law now answers the door at his suburban stucco house and shoos away the reporters who knock at all hours.

Markopolos is hoping the buzz around him will soon die down so he can resume a low profile. He now works on whistleblower cases, conducting forensic accounting analyses for attorneys who sue companies under the False Claims Act and other statutes, which he said is best done with a certain degree of anonymity.
Ross wrote a story on me years ago (http://www.itulip.com/GlobeArchiveJanszen.htm). He's old school, tough and rigorous.

Speaking of reporters I know, my old college pal Carol Rosenberg is getting herself into trouble again.
Military and Media Clash In Complaint (http://www.washingtonpost.com/wp-dyn/content/article/2009/07/24/AR2009072403664.html)

Navy Spokesman Alleges Abuse by Miami Reporter

By Howard Kurtz (http://projects.washingtonpost.com/staff/articles/howard+kurtz/)
Washington Post Staff Writer
Saturday, July 25, 2009

Tensions between journalists and military officials are nothing new. But a bitter series of clashes between a top Navy spokesman and a Miami Herald military reporter reached a new, eye-opening level this week.

In a letter to the paper's editor, Cmdr. Jeffrey Gordon accused Carol Rosenberg of "multiple incidents of abusive and degrading comments of an explicitly sexual nature." Gordon, who deals primarily with the Guantanamo Bay, Cuba, prison, said in the letter that this was a "formal sexual harassment complaint" and asked the Herald for a "thorough investigation."

"Her behavior has been so atrocious over the years," Gordon said in an interview. "I've been abused worse than the detainees have been abused."
I'll know that financial reporters in the U.S. are starting to do their jobs when a Goldman Sachs executive files a complaint against a financial reporter.



I'm not holdng my breath.
With respect, sir, your friend appears to have been quite unprofessional in those instances with the Navy Commander. There are a thousand and one ways to pursue a story, and this way was a poor choice.

EJ
07-31-09, 06:54 PM
With respect, sir, your friend appears to have been quite unprofessional in those instances with the Navy Commander. There are a thousand and one ways to pursue a story, and this way was a poor choice.

I've known Carol for 30 years. I am sure she was disrespectful, profane, and utterly ruthless in her pursuit of this story. I can try to second guess her reasons for taking the approach she did, but I trust her judgment.

Real journalism is not a knitting circle. Few people have any idea what goes into getting a real story, versus the advertising we see every day posing as journalism. One in a million has the stomach for it.

I have never known her to go after a good guy. Every institution has bad guys, even the Navy.

This story will be great for Carol. Her outstanding record will come to light.

My father was a Navy man, by the way. Ran away from home in 1924 when he was 17, lied about his age, and joined. Later, during WWII, he returned to the Navy to design and test torpedoes in Panama. Had some great stories.

metalman
07-31-09, 11:55 PM
i get the idea... we know < 1% of it...

touchring
08-01-09, 03:44 AM
FYI - an interesting dynamic:

If the US is attempting to weaken the dollar - then one possible goal for the BRIC financiers to work toward is selling their own currencies in order to keep the relative exchange rates even (i.e. negate all or some of the US dollar weakening).

Ironically while this does serve to keep the dollar from weakening as quickly as it should, on the other hand these extra dollars can then be used to disintermediate the US from its own currency.

After all, the US dollars being 'quantitatively eased' are mostly stuck in big US banks. For the importers/exporters, small businesses, etc etc the dollar squeeze in the form of credit squeeze still exists.

I'm still considering what this means if true.


China is in worst shape that the US. They will never let the dollar depreciate against the yuan. You know they don't have social security in China, when it is impossible to find another job, workers will rather kill their managers if there are layoffs.
http://www.itulip.com/forums/showthread.php?t=11091

If the US wants to devalue the dollar, it will have to find some other ways - such as imposing a subsidy on exports or...... a tax on imports. ;)

jpatter666
07-12-10, 12:20 PM
Someone has been reading iTulip! Better late than never I guess.... :-)

"So, we finally arrive to the shape of the current recovery. The current economic recession will have the shape of the Greek letter Eta. It will look like this – ɥ."

http://www.financialsense.com/contributors/krassimir-petrov/the-eta-recovery

CanuckinTX
07-12-10, 01:16 PM
I'm no Greek scholar but thanks to a google search that isn't the symbol for the Greek letter Eta.

If he's going to steal someone's work he should be a bit more thorough about it!:D

jpatter666
07-12-10, 03:06 PM
Ha, you are right! Well, I guess saying "cheh" would have stretched the plagiarism a little too far? :-P

FRED
07-12-10, 05:46 PM
I'm no Greek scholar but thanks to a google search that isn't the symbol for the Greek letter Eta.

If he's going to steal someone's work he should be a bit more thorough about it!:D

Bagged by eagle eyed iTulipers!

"Until then we will continue in the shape of ɥ."

Hey, Petrov (http://www.financialsense.com/user/222).


You mean like this?


http://www.itulip.com/images/chehshapedrecovery300.gif

jimmygu3
07-13-10, 01:17 AM
You should read Petrov's other original work, like Ka-Blammo Theory and The Adjustable-Wrench Dollar. ;)

D-Mack
07-13-10, 08:33 AM
η3457

it goes down, up and down again

Why not use it when, when it's in your headline?