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EJ
04-28-10, 07:29 PM
http://www.itulip.com/images2/wheelsoff300.jpgThe Next Crash - Part I: How the First Bounce of the Debt Deflation Bear Market ends

The First Bounce of the Debt Deflation Bear Market has gone on for four months longer than we expected. Will it end with a down-for-the-count crash or a correction followed by quick recovery? What will end it? Rate hikes by the Fed? The escalating sovereign debt crisis in Europe? A banking and financial crisis in China’s credit bubble economy? The next Peak Cheap Oil recession? Our answer: All of them, and pretty much all at once. If you thought the 2008 crash was bad, wait until you see the next one.

• Europe's overdue debt crisis
• Goldman pig pile
• Skipping the round trip in stocks

CI: Until yesterday it was DOW 11,000 party hats time again. Your December 10, 2009 “Asylum Markets of the post FIRE Economy – Part II: The Next Recession (http://www.itulip.com/forums/showthread.php?13391-Asylum-Markets-of-the-post-FIRE-Economy-%96-Part-II-The-Next-Recession-Eric-Janszen&p=138349#post138349)” said, “The stock market will revert to the mean after an external event, most likely a sovereign debt default.” That article makes an interesting read given events in Europe and the stock markets the past two days, even the part about gold rising as stocks fall, “... as a form of flight capital in response to this risk,” you said.

EJ: When the capital is fleeing both Europe and the United States, flight capital has to be denominated in something. If not euros or dollars, then the fourth currency (http://fourthcurrency.com/). Before yesterday, anyone who rode out the Debt Deflation Bear Market through 2008 and early 2009, life had to feel much better than in February 2009 when the stock market was down 47% from December 2007 when we got out. Even after yesterday’s bad day, the markets are only down 17% nominally and 20% in CPI adjusted terms, if you believe the CPI is a valid measure of inflation, which it is not. In any case, the average buy-and-hold stock market investor thinks in nominal terms and must feel close to vindicated for riding it out, at least until yesterday. But most investors remain nervous, and that’s why we got the strong reaction to the latest escalation of the Old Europe debt crisis.

CI: Is this it, the big one?

EJ: I’m not ready to say “Time to short” it yet, but the fix is in. The consensus is usually wrong, but in this case it’s so obvious that even the average wealth manager gets it. For example, a wealth manager who works for one of the big investment banks recently counseled a friend that his firm couldn’t beat the risk-adjusted returns he was getting on his current CD holdings earning 1.5% over the next 18 to 24 months. In fact, I can’t find anyone in the professional investment community who doesn’t expect a major fallout from the extraction of monetary and government supports that hammers stocks and bonds. A friend in the hedge fund industry who has been consistently correct with his generally optimistic assessment of the stock market since March 2009 sees the rally that we call the "First Bounce" ending n the Autumn. He colorfully describes the events that are likely to cause the correction as a “shit show.”

http://www.itulip.com/images2/DJIAnominalDec2007-Apr2010.gif
First Bounce Nominal



http://www.itulip.com/images2/DJIAdeflatedCPIDec2007-Apr2010.gif
First Bounce CPI adjusted


CI: Remind readers what the Debt Deflation Bear Market is.

EJ: It is the negative reaction of the stock market to cycles of economic contraction and growth that result from policy shifts toward and away from zero interest rate monetary policy (ZIRP) and deficit spending to alternately ward off inflation and maintain expansions after an over-indebted economy crashes. Our models are Japan after 1990 and the United States after 1929 and 2000, but brought up to date.

The first year was predictable, at least to us, with stocks falling 40% in 2008 as we forecast at the end of 2007 (see Time at last to short the market (http://http://www.itulip.com/forums/showthread.php?2774-Time-at-last-to-short-the-market&p=23126#post23126), Dec. 27, 2007). The next step in the process, reflation via monetary and fiscal policy, and bank rescues via loans and purchases of bad debts and unmarketable assets, was also predictable and forecast as a Debt Deflation Bear Market First Bounce (http://www.itulip.com/forums/showthread.php?9008-Debt-Deflation-Bear-Market-First-Bounce-Eric-Janszen&p=86995). We did not believe that a prolonged period of deflation was in the cards, and we were right. Stock and commodity prices didn’t plunge for years as they did in the 1930s (http://www.itulip.com/images/cpi192801935.gif) but only for four months (http://www.itulip.com/images/cpi2000-Aug2009.gif) in a brief period of deflation we call disinflation, just as we forecast. But, after that, the markets are driven by unpredictable political decisions. Anyone who tells you precisely what’s going to happen and when from here is full of it—including me when I told you I thought the First Bounce was due to end before the end of 2009. I won’t do that again. But I can give you my opinion on the dominant underlying processes and the likely scenarios.

CI: Is the First Bounce over?

EJ: Anything can happen to derail the recovery process that stock market investors come to view as sustainable, even though government continues to influence the recovery in many respects. The data show that the recovery is picking up steam at this point not losing it, and the analysis we show in Part II portray a run-of-the-mill recovery, consistent with our forecasts from December 2009, and we compare forecasts then to actual data today. That said, there are many oddities in the data. Also, the overall context of the recovery has been lost in most of the recovery stories I read. So before we go further, let’s get our bearings. Most of the discussions of the topic of the recovery lack context, just as the Housing Bubble Recession was discussed out of context when it happened.

First, let’s remember that we didn’t just go through a garden variety recession caused by the Fed raising rates to reign in one of the two forms of inflation that occur in a modern economy, either commodity price inflation in the Production/Consumption Economy or asset price inflation in the FIRE Economy.

We live in a post-bubble hangover economy. It’s not like the 1990s or early 2000s recovery or any other. It’s unique, as are the threats to its recovery that are itemized in the opening of this article: future rate hikes by the Fed, the escalating sovereign debt crisis in Europe, a banking and financial crisis in China’s credit bubble economy, and the next Peak Cheap Oil Cycle recession. Complicating matters, there are inter-dependencies. For example, a second recession triggered by a sovereign debt crisis may forestall the next Peak Cheap Oil Cycle by again reducing oil demand worldwide as occurred in 2008 and 2009.

http://www.itulip.com/images2/ZIRP2010.gif


Fed Funds rate lowest, longest--ever


Short-term rates set by the Fed are still zero, for all practical purposes, and have been since December 2008. That’s easy to forget that because no one talks about it anymore. It's like the wallpaper in your bedroom at this point. It's just there, and no one notices. But it’s never happened before in the United States except for very brief emergency periods of a month or two.

We’re supposed to believe that the reason for the extended ultra low rates today is to “stimulate the economy” by making credit cheap for businesses and consumers. Actually, that’s how the private sector got into the position of over-indebtedness in the first place, by the Fed making credit too cheap relative to incomes both directly via rate cuts and indirectly by implicitly guaranteeing bad loans made by banks to households. Today’s near zero short-term rate policy remains in place because the economy is so fully loaned up that it cannot operate if interest expenses rise. The demand on cash flow to pay interest will choke off the recovery. We are, like the Japanese, stuck.

CI: I want to stop you a minute. Was there ever a time when interest rates adjusted automatically?

EJ: That’s an excellent question. How were interest rates set before the era of central banks? Greenspan in the early days of running the Fed used to lament the loss of the automaticity of interest rate adjustments under the gold standard; interest rates adjusted upward automatically when depositors withdrew gold deposits in response to the perception that banks were over-extended and lending too carelessly. Loose lending showed up as an increase in defaults, rising inflation, or both. In response to the gold reserve withdrawals the banks had to raise rates to attract deposits back, to compensate depositors for the added default and inflation risk. The higher rates in turn reduced lending activity and brought both non-performing loans and inflation back into line. It was a stable system for hundreds of years, except when governments interfered through the credit markets outside the banking system as in the 1860s and 1920s in the United States.

Getting back to the context for the recovery, besides ultra-low short-term interest rates, government spending net of tax collections has never been higher.

http://www.itulip.com/images2/usnetgovsaving1947-2009.gif
The difference between outlays and revenues is government saving.
Net dis-saving reached -9% of GDP in 2009.



The other antecedent to recovery to keep in mind is government spending. We’re not supposed to worry about this because we’re going to grow our way out of it, but try to imagine what might happen if the next recession occurs before tax receipts recover to previous levels while government outlays are cut. We think it might go something like this.

http://www.itulip.com/images2/usnetgovsaving1986-2016.gif
Might deficit spending to stimulate the economy in a next recession
produce a $4 trillion shortfall, or 21% of GDP?


Those are the antecedents and the implications. We can’t afford another recession anytime soon, but we are likely to get one anyway, in our opinion around 2013, after the next US Presidential election.

CI: Let’s go back to your article on March 27, 2009 at the height of the panic. When others were calling for an extended period of deflation, you forecast a Debt Deflation Bear Market First Bounce (http://www.itulip.com/forums/showthread.php?9008-Debt-Deflation-Bear-Market-First-Bounce-Eric-Janszen&p=86995). I’ll quote from it:
"In a recession, a recovery in personal consumption, incomes, and retail sales signals the start of recovery. The virtuous cycle of credit growth--and its corollary, debt growth—combine with rising incomes as the rate of unemployment growth slows. Credit expansion leads the economy out of the cycle, followed by incomes. That is what many stock market participants think they are seeing now, as previous experience has trained them to see. But they are wrong."
That turned out to be accurate. But later you go on to forecast the DJIA falling back to 5,000.

EJ: Just as a market driven market crash is process not an event, not an event, a government financed reflation rally within a Debt Deflation Bear Market is a process, too. And a long one--ask the Japanese. The first bounce of ours one started with the brave leaders crawling out of the crater, buying stocks in March 2009. They were followed by fund managers that summer who could not afford to be left out as the market recovered. The crisis headlines subsided as trillions of stimulus and bailout money rescued the banks and started to lift the economy. Stock prices went up, and more and more investors got back in. We had a brief setback with the first signs of the PIIGS debt crisis this winter, and everyone thought the problem had gone away after the leading edge of it in Greece was reported alternately as solved and not solved several times. Market sentiment, increasingly positive economic data such as retail sales and unemployment, and rising stock prices themselves, boosted sentiment that in turn pushed the markets higher in a wave of increasing confidence. This confidence was informed by past experience. Jeremy Grantham astutely labeled it “the last hurrah” in a private presentation I saw him give a few months ago, hosted by UBS.

In periods of inflation such as we have been in since 2001, talking about market price levels over multi-year periods is tricky. For example, DJIA 10,000 in 2010 is roughly equivalent to DJIA 6,000 in 2000, yet everyone seems perfectly happy to celebrate DJIA 10,000 now as if it were some kind of achievement when in fact it represents a 40% loss in real market value over ten years. So how shall I talk about another 50% loss over the next ten years? Shall I forecast DJIA 10,000 and explain each time that I mean DJIA 5,000 in 2010 dollars, or shall I talk about DJIA 5,000 in which case when the market is trading around 10,000 it appears that the forecast is off by 50%? It's a conundrum that I have yet to solve.

CI: Do you regret not getting back in back into the stock market in March 2009?

EJ: No. We skipped the trip from 2007 completely, as of today leaving us 20% ahead of the game in real terms. In fact, readers who have been hanging around here since March 2000 have skipped the trip from NASDAQ 5000 to 2500 today and S&P500 1500 ten years ago to 2200 today. Now, if you got out in December 2007 with us but then got back in March 2009, then you’re a genius—unless of course the market crashes again.

CI: Like yesterday...

EJ: That was a just a speed bump. What is more interesting is the rise in volatility after a long period of quiet.

CI: Are investors starting to question the durability of the recovery, or is the market starting to look into the next recession?

EJ: The question is not whether spending a few trillion dollars will get an economy going again. We can see that in the data. Look at it this way. Imagine you’re deeply in debt and you’ve lost your job and your wife has, too, and you have 300 million kids and piles of bills to pay. You’re like the USA. What to do? Well, you can stop paying your bills, which will make your creditors unhappy and cause them to raise interest rates on you and further slow your cash flow. You can cut your expenses, which makes millions of your family members unhappy. You can beg and threaten friends and relatives for money to cover short-term expenses while you find a new job. But that’s about it. But not when you are a country, and especially not when you are the world’s largest economy with hundreds of military bases all over the planet keeping the oil flowing and a lid on factions that are not chummy with your oil suppliers. Also, you owe all of your friends and relatives so much money that if you either default or inflate that debt away they’ll all collectively go into an economic and political nosedive. In that case you have an emergency credit card. You can use it to borrow even more money from friends and relatives and print money yourself to tide you over until you and the wife and the kids find new jobs, and soon enough the family is in the black again. Everything is rosy and going in the right direction, except now you have even more debt than before. Imagine having that emergency credit card that you can pull out in a pinch to cover everything until you are back on your feet. That’s what the United States has. Problem is, we’ve used the card one time too many. Asylum Markets (http://www.itulip.com/forums/showthread.php?p=138356#post138356) investigates what might happen if the United States finds itself facing a fresh recession in 2013, triggered by a sovereign debt crisis or the next Peak Cheap Oil Cycle (http://www.itulip.com/forums/showthread.php?12799-Peak-Cheap-Oil-Update-Part-I-The-glass-is-half-empty&p=131484#post131484), among the most likely causes.

So while most economic indicators are pointing to growth there remains this nagging problem of where the economic surplus will come from, and in the short run whether the money that is financing the short-term loans will keep coming in if China has a crisis, and whether the old loans can be rolled over as they come due. So, on the surface, a post-bubble recovery looks like any other, but under the surface the problems that led to the crisis remain as acute as ever.

CI: Last year you identified a European sovereign debt crisis as the most likely source of the next crash. What’s going on in Europe?

EJ: As in the case of the private credit markets crisis in the United States that began in 2007, the sovereign debt crisis in Europe that began in Greece has been brewing for decades.

CI: Is this Europe’s version of “the subprime crisis is contained”?

EJ: The dynamics are entirely different. The concept of containment and contagion makes sense in the context of a private credit markets crisis, such as from low quality, high risk debt in the market for subprime loans in the United States infecting higher quality, lower risk debt. Think instead of escalation not contagion, because the process of a sovereign debt crisis is a political process not a market process. Before I go on I want to make sure that readers know what the term “sovereign debt” means. It means the government debt of sovereign states, as compared to bonds issued by local governments, municipalities, prefectures, and so on. I should also talk briefly about my sources. Two are Greek. One now runs a few billion of private equity but as a youth ran through the streets of Athens throwing Molotov cocktails at the riot police that represented the dictatorship there at the time, which protests were ultimately successful in ending the dictatorship there.

The government there has not been as much improved as one might hope, and the ruling elite that took over did maintain certain advantages as before, such as not paying taxes. Tax revenues thus not being sufficient to maintain infrastructure and other social amenities at the level expected by the Greeks as European citizens, the difference needed to finance the lifestyle to which voters had become accustomed was borrowed abroad. Thing is, every German and Frenchman and other European has been perfectly aware of this forever. The French and Germans are famous for levying hefty taxes on any large moving financial object. The ruling elites are heavily taxed to the point where it is practically illegal to be as rich as, say, Warren Buffett or Bill Gates. Thus, when the European debt crisis eventually arrived, triggered by the US mortgage credit crisis, ironically, the Germans and French were in no mood to send money to Greece’s ruling elite to save their bacon, and still aren’t. Faced with a threat to its credit rating, rather than change the tax laws to tax themselves and end the fiscal crisis that is at the bottom of the PIIGS debt crisis, the Greek leadership instead decided to cut expenses and impose “austerity,” that is, extract even more from the Greek middle class, such as it is. That didn’t go over so well with voters, and soon the Greeks were out on the streets as my friend was so many years ago. It’s a tradition there that does not exist here.

CI: What about the IMF?

EJ: After several months of public bickering with Germany, the IMF showed up. Then the shit really hit the fan. The Greeks, it turns out, can read. And what they read about the past behavior of the IMF in Latin America and Asia and everywhere else they’ve shown up to “rescue” a country in debt is a 100% consistent record of bailing out the ruling elite while imposing austerity on everyone else and leaving the country even more indebted than before. The Greek people are not buying the line, "We're the IMF and we're here to help you."

So now we have an impasse. Germany and other European countries with progressive tax regimes refuse the bail out the Greeks whose people refuse to accept further cuts in jobs and services for the benefit of their ruling elite.

CI: How does it end?

EJ: I don't see how it ends well. The thing to remember is that when things go to hell in a sovereign debt crisis, they go the hell in a hurry. The process is escalation, de-escalation, further escalation, then de-escalation. Finally, one fine day a payment has to be made that can't be made and creditors throw in the towel even if it means taking a huge loss. Here’s what happened to bond prices when the IMF threw in the towel on Argentina in 2001.

http://www.itulip.com/images/argembisprdNOTES.gif
Currency peg ends badly for Argentina


CI: This explains why the euro is falling but not why the dollar is not rising while gold is rising.

EJ: I’ll answer that with a story.

http://www.itulip.com/images2/Cootie-Race-Car300.jpgThe Next Crash - Part II: Out of Gas ($ubscription) (http://www.itulip.com/forums/showthread.php?15379-The-Next-Crash-Part-II-Out-of-Gas&p=159530#post159530)

• Forecasts compared
• News reviewed
• Conclusions drawn

CI: If you were so sure in December 2009 that the economy was going to recover this way, in spite of the problems with the banks and consumer creditors, why didn’t you go back into the stock market at the time? It was trading 10% below where it is today.

EJ: You might as well ask me why I wasn’t buying houses in August 2002 when I forecast the housing bubble to last for several years or stocks in 2003 when I was forecasting a housing bubble fueled “recovery.” The recovery looks real enough today, just as the last one did from 2004 until the end of 2007, yet it’s just as unreal as then albeit in a different way. And what did I miss by staying out of the market the whole time, since 2000 when stocks peaked at levels that are still 40% above current levels in real terms? That was the time to buy commodities. Commodity prices have gone up more than three fold in real terms since then. Oil and just about anything else would have worked, but not commodity stocks. Perversely, Treasury bonds were the other buy then, and that’s the only other major holding we have, although it’s clearly time to start getting out of those. more... (http://www.itulip.com/forums/showthread.php?15379-The-Next-Crash-Part-II-Out-of-Gas&p=159530#post159530)

iTulip Select (http://www.itulip.com/forums/showthread.php?t=1032): The Investment Thesis for the Next Cycle™
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chr5648
04-29-10, 01:52 PM
First again:D

Here is what Kissinger had to say about the greeks

http://www.greekrealm.com/forum/greek-politics/1162-henry-kissinger-anti-greek.html



Henry Kissinger

As reported in the popular Greek magazine, Oikonomikos Tachydromos on 14 Aug. l997, Henry Kissinger, while addressing a group of Washington, D.C. businessmen in Sept.1974, said:

The Greek people are anarchic and difficult to tame. For this reason we must strike deep into their cultural roots: Perhaps then we can force them to conform. I mean, of course, to strike at their language, their religion, their cultural and historical reserves, so that we can neutralize their ability to develop, to distinguish themselves, or to prevail; thereby removing them as an obstacle to our strategically vital plans in the Balkans, the Mediterranean, and the Middle East.

This debt mongering seems to be more than meets the eye? Great article EJ.

cjppjc
04-29-10, 02:05 PM
Great piece.

icm63
04-29-10, 06:53 PM
Whos is CI ????

icm63
04-29-10, 06:55 PM
And What happened to the PDF tool ??? Dam that was cool??

BigBagel
04-30-10, 09:27 AM
http://en.wikivisual.com/index.php/Anti-Hellenism

The alleged Kissinger quote is a great tribute to the character of the Greek people but the quote is an apparent urban myth.

metalman
04-30-10, 12:22 PM
it's like something he'd say, tho, ain't it?

bart
04-30-10, 02:19 PM
So how shall I talk about another 50% loss over the next ten years? Shall I forecast DJIA 10,000 and explain each time that I mean DJIA 5,000 in 2010 dollars, or shall I talk about DJIA 5,000 in which case when the market is trading around 10,000 it appears that the forecast is off by 50%? It's a conundrum that I have yet to solve.


I struggle with it too, but "DJIA" and "Real DJIA (adjusted for inflation)" is my current preference, although I also use a corrected CPI as most know.

Another way is two charts ("DJIA" and "Real DJIA (adjusted for inflation)"), and use a standard color scheme with the inflation corrected ones.

metalman
04-30-10, 05:00 PM
stocks plunge, gold up... my kinda day! stocks fall on rising sovereign default risk, gold up as flight capital refuge... nice call. no 2nd 'deflation' plunge... did anyone else other than ej figure this out?

jpatter666
04-30-10, 05:15 PM
stocks plunge, gold up... my kinda day! stocks fall on rising sovereign default risk, gold up as flight capital refuge... nice call. no 2nd 'deflation' plunge... did anyone else other than ej figure this out?

Sure they did. Fleckenstein and Fred Hickey just to name two....

metalman
04-30-10, 05:31 PM
Sure they did. Fleckenstein and Fred Hickey just to name two....

cool... what was their argument for stocks & gold not falling together?

jpatter666
04-30-10, 07:40 PM
cool... what was their argument for stocks & gold not falling together?

Essentially the same that has been made here -- realization that fiats are failing. Gold not falling is a result of people being far less willing to part with it, and more buyers coming in to buy on ever smaller dips.

Another point that has been made is that gold/silver miners are starting to show some teflon on stock falls as well.

sishya
04-30-10, 07:57 PM
I got out of my stocks (have stocks in 401K only) in Feb 2007: S&P 1250. Got in back in March 12th approx(around S&P 688 on way down). But got out at S&P 920 and moved to Money Market. I felt like a moron with S&P around $1200 now but I guess at least I did not lose any. If S&P goes to 1500 I will feel bad like most of us will. At least my physical Gold is doing good. I am thinking of moving some Gold to my native country as a point of diversification.

cjppjc
04-30-10, 08:46 PM
Another point that has been made is that gold/silver miners are starting to show some teflon on stock falls as well.

As Ice Cube would say "Today was a good day."

chr5648
04-30-10, 09:10 PM
As Ice Cube would say "Today was a good day."

When ice cube is being quoted at itulip you know $hit is going down. /s

Jay
04-30-10, 09:45 PM
When ice cube is being quoted at itulip you know $hit is going down. /s
Love that.

metalman
05-01-10, 09:09 AM
Essentially the same that has been made here -- realization that fiats are failing. Gold not falling is a result of people being far less willing to part with it, and more buyers coming in to buy on ever smaller dips.

Another point that has been made is that gold/silver miners are starting to show some teflon on stock falls as well.

nothing like the case made here... never seen the phrase 'fiat money' used by ej. the itulip argument has nothing to do with fiat money... 'fiat falling' is not the itulip case for stocks fall & gold rises... has nothing to do with fiat money. if that is the fleckenstein & hickey argument... they are right on stocks & gold but for the wrong reasons.

jpatter666
05-01-10, 01:13 PM
nothing like the case made here... never seen the phrase 'fiat money' used by ej. the itulip argument has nothing to do with fiat money... 'fiat falling' is not the itulip case for stocks fall & gold rises... has nothing to do with fiat money. if that is the fleckenstein & hickey argument... they are right on stocks & gold but for the wrong reasons.

Shrug. I wasn't going for the perfect description. Basically, I find them in rough alignment with EJ for similar reasons. Fleckenstein in particular called for investing in gold as early as EJ, although I'll give EJ more credit for the "all-in" call.

I know I'll never convince you that anyone was as near brilliant in all this as EJ so I'm not even going to bother.

icm63
05-01-10, 03:52 PM
stocks plunge, gold up... my kinda day! stocks fall on rising sovereign default risk, gold up as flight capital refuge... nice call. no 2nd 'deflation' plunge... did anyone else other than ej figure this out?

That wont last, if stocks fall 10% plus, there will be contagion selling. Its just a matter of cash flow redemptions for the funds..cant be stopped.

icm63
05-01-10, 09:24 PM
Dear EJ

You state that USA has a pile of debt, and creditors will force interest rates up if they are not paid.

You argue for the negative that USA is a pile of debt with no ability to pay it off, or pay it off at a faster rate than today.

Well here is a few polices that can assist the paying off of debt at keep the USA creditors at bay.

1) VAT/GST at 10%
2) Sell off govt assets (parks, reserves, etc)
3) Drill for OIL

Assuming the revenue would be used to pay back debt and not fuel further govt spending etc.

The real danager is when the USA is like the UK and all govt revenue prospects have expired. The UK cant add any more taxes or increase GST, they are done, all over red rover !

USA is not at the UK stage yet...

cjppjc
05-01-10, 11:30 PM
That wont last, if stocks fall 10% plus, there will be contagion selling. Its just a matter of cash flow redemptions for the funds..cant be stopped.


Did I miss the gold below $1,000 move. Never mind the gold to $850 move.

hayekvindicated
05-02-10, 03:16 AM
No. We skipped the trip from 2007 completely, as of today leaving us 20% ahead of the game in real terms. In fact, readers who have been hanging around here since March 2000 have skipped the trip from NASDAQ 5000 to 2500 today and S&P500 1500 ten years ago to 2200 today. Now, if you got out in December 2007 with us but then got back in March 2009, then you’re a genius—unless of course the market crashes again.

Marc Faber went on Bloomberg and advised his clients (and listeners) to buy stocks on 6 March 2009 (http://www.youtube.com/watch?v=1BgnSPnO-I8). He was right. I didn't buy because I listened to your advice. Im glad you now admit that Faber is a genius.

The market was "extremely oversold" as he explained. That was precisely the kind of period in which a contrarian buys stocks - unless of course you are the kind of contrarian who has a certain theory about the world which tries to explain everything in the economy. And buying stocks doesn't fit within that theory. So you don't buy. Some emerging market indices have more than doubled in a year. Im sure iTulip readers are happy to keep 70 percent of their money in short term UST. That's a great investment strategy.

I've learnt my lessons from here going forward.



In periods of inflation such as we have been in since 2001, talking about market price levels over multi-year periods is tricky. For example, DJIA 10,000 in 2010 is roughly equivalent to DJIA 6,000 in 2000, yet everyone seems perfectly happy to celebrate DJIA 10,000 now as if it were some kind of achievement when in fact it represents a 40% loss in real market value over ten years. So how shall I talk about another 50% loss over the next ten years? Shall I forecast DJIA 10,000 and explain each time that I mean DJIA 5,000 in 2010 dollars, or shall I talk about DJIA 5,000 in which case when the market is trading around 10,000 it appears that the forecast is off by 50%? It's a conundrum that I have yet to solve.

Your advice indicated the DOW heading to 5000 in nominal terms (not real terms). Anyone can dig out the references from that time and check for oneself. To now infer that it is 5000 in "real terms" is disingenuous to say the least.


After several months of public bickering with Germany, the IMF showed up. Then the shit really hit the fan. The Greeks, it turns out, can read. And what they read about the past behavior of the IMF in Latin America and Asia and everywhere else they’ve shown up to “rescue” a country in debt is a 100% consistent record of bailing out the ruling elite while imposing austerity on everyone else and leaving the country even more indebted than before. The Greek people are not buying the line, "We're the IMF and we're here to help you."

While Im no expert on IMF bail-outs, I can speak with some authority about the impact of the IMF's bail-out of India in 1991. India is an IMF success story (http://en.wikipedia.org/wiki/Economic_liberalisation_in_India). The Indian Government was close to broke in 1991 and the only alternative left was to ask the IMF for money. The IMF as usual offered a loan but on certain conditions (de-regulation of industry, devaluation of the currency etc). It worked. No one talks about it. Had the IMF not stepped in, India would be stuck in its socialist five year plans and 2 percent GDP growth. The opening up of the economy had a transformative effect and India is where it is today largely because of that seminal event.

I understand why people don't mention this because once again it doesn't fit the ideology. Anyway, one could posit that the many African, Asian and Latin American countries that have got into more trouble after the IMF's bailouts got into trouble because of the way they are run (which the IMF doesn't control and cannot control). They would probably be a shambles even if the IMF didn't step in. One should perhaps consider this before positing the IMF as the dragon representing international financial interests.

metalman
05-02-10, 10:14 AM
Marc Faber went on Bloomberg and advised his clients (and listeners) to buy stocks on 6 March 2009 (http://www.youtube.com/watch?v=1BgnSPnO-I8). He was right. I didn't buy because I listened to your advice. Im glad you now admit that Faber is a genius.

The market was "extremely oversold" as he explained. That was precisely the kind of period in which a contrarian buys stocks - unless of course you are the kind of contrarian who has a certain theory about the world which tries to explain everything in the economy. And buying stocks doesn't fit within that theory. So you don't buy. Some emerging market indices have more than doubled in a year. Im sure iTulip readers are happy to keep 70 percent of their money in short term UST. That's a great investment strategy.

I've learnt my lessons from here going forward.

he said genius if he did both... got out in dec 2007/mar2000 and back in mar 2009. did faber advise his clients to get out of the market dec. 2007 & before in mar 2000? nah.... he's still down 20% or 40%... respectively.


While Im no expert on IMF bail-outs, I can speak with some authority about the impact of the IMF's bail-out of India in 1991. India is an IMF success story (http://en.wikipedia.org/wiki/Economic_liberalisation_in_India). The Indian Government was close to broke in 1991 and the only alternative left was to ask the IMF for money. The IMF as usual offered a loan but on certain conditions (de-regulation of industry, devaluation of the currency etc). It worked. No one talks about it. Had the IMF not stepped in, India would be stuck in its socialist five year plans and 2 percent GDP growth. The opening up of the economy had a transformative effect and India is where it is today largely because of that seminal event. india is not an oligarchy ala argentina/greece/etc ... imf worked there for that reason?


I understand why people don't mention this because once again it doesn't fit the ideology. Anyway, one could posit that the many African, Asian and Latin American countries that have got into more trouble after the IMF's bailouts got into trouble because of the way they are run (which the IMF doesn't control and cannot control). They would probably be a shambles even if the IMF didn't step in. One should perhaps consider this before positing the IMF as the dragon representing international financial interests.

the standard coverage from the wsj...


(http://online.wsj.com/article/SB10001424052748704093204575216562275667180.html?m od=WSJ_World_LeadStory)Athens Confronts Sisyphean Task in Austerity Program (http://online.wsj.com/article/SB10001424052748704093204575216562275667180.html?m od=WSJ_World_LeadStory)‎

Greeks face years of austerity as their government seeks to get its heavy debt burden under control and meet conditions for a bailout from the International Monetary Fund and fellow governments of the euro zone.

With Greeks already taking to the streets of Athens to protest measures announced so far, many analysts say the Greek government will be unable to impose the spending cuts needed to trim its budget deficit by 12% of its gross domestic product in three years. But history suggests that such efforts aren't that unusual.

Harvard economics professor Alberto Alesina says that from an economic perspective such cuts are feasible: "The question is political more than economic. Economically, it's possible, but whether it can be done politically is the issue."

not one mention in the story re the cause... fiscal crisis... the rich don't pay taxes.


Studies by the IMF and others show that major austerity programs of the size Greece is now promising are far from rare, even in Western Europe. Finland in 1993, Denmark in 1983 and Sweden in 1994 all began programs and cut their budgets by more than Greece is expected to now. In fact, Greece itself has done it before, IMF data show, twice in the past 35 years.

But if governments have often succeeded in slashing budgets deficits, in Europe at least, they have rarely achieved their ultimate objective: to bring down their debt burdens. A new study of European austerity packages over the last three decades by the Centre for European Policy Studies in Brussels concludes: "The goal of the large fiscal adjustments is to make public finances sustainable. However ... this goal was rarely achieved."

but why? the reporter never says... because the tax system in greece is a friggin joke.


The study has further bad news for Greece: If a budget deficit starts out large, like Greece's, the less likely an austerity program is to cut debt. Moreover, the higher a country's debt is to start with, the tougher it is to bring down.

Many countries in the past have escaped Greece's current trap through devaluation. In fact, the IMF regularly used to prescribe devaluation as part of its programs. When Asian economies suffered financial crises in 1998, they allowed their currencies to sink. Indonesia's currency dropped by 83%; Thailand and Malaysia's by 40% and South Korea's by 35%. But within a year or so, they were growing again: crisis-hit South Korea's economy contracted 6.7% in 1998; in 1999, it grew 10.7%

Most assessments of the Asian crisis suggest devaluations played a big role in reviving growth, helped by favorable winds in the global economy and expansionary domestic policies.

really? "most assessments of the asian crisis suggest devaluations' were a disaster & were caused by taking the imf's advice & not imposing currency controls. china & taiwan ignored the imf & came thru with flying colors.


But these three positive factors are entirely absent in Greece. It is being forced to shrink its budget, the global economy is sluggish, and, because it is in the euro zone, it cannot devalue its currency to boost exports and growth.
Cinzia Alcidi, one of the authors of the CEPS report, says not being able to devalue "makes everything more complicated." Argentina, which had locked its currency to the dollar, was a decade ago struggling with low growth and heavy debts. In January 2002, it abandoned the peg to the dollar, defaulted on its debts, and within a year the country was growing again.

after the imf abandoned the country. argentina learned its lesson, tho...
Argentina says it better off without IMF advice | Reuters (http://www.reuters.com/article/idUSN2414517920100424)


Some economists aren't persuaded that devaluation would work for Greece. They say the country's powerful trade unions would press for wage increases that would quickly erase any competitive advantage. Furthermore, the disruption from leaving the euro would be far higher than from a typical devaluation, because all domestic contracts and bank deposits are in euros and the economy would be hit by a wave of defaults.

ah, there we go. no... it's not the fact that the ruling elites in greece don't pay taxes... no it's those all powerful trade unions that are the problem. gimme a break.


However, without devaluation, Greece must follow the example of Ireland and Latvia: imposing austerity, cutting public-sector wages, curbing social programs and raising taxes. Ireland's efforts so far appear to have been relatively successful—but unlike Greece, Ireland is an economy open to foreign trade and finds it easier to export its way out of its troubles.

Latvia, which isn't part of the euro zone but has anchored its domestic currency to the euro, has embarked on a program more austere than Greece's. Its economy has collapsed, shrinking by more than a fifth since 2008. (Unlike Greece, it is unwinding from a housing boom financed by mortgages from foreign banks.)

2 points for the wsj... got this part right.


Greece's economy is expected to contract this year and many economists say the official forecast of a 2% contraction is way too optimistic. Jürgen von Hagen, economics professor at the University of Bonn, says countries such as Latvia and Greece that are trying to slash budgets by more than 10% risk a downward spiral. "When you cut by that much, the economy tanks," he says.

Tax revenues fall, making deficit targets harder to achieve. Meanwhile, the shrinking economy expands the ratio of debt-to-GDP.

not only makes deficit targets harder to achieve, but debt payments, too. downward spiral begins.


European officials insist a Greek restructuring isn't an option and IMF officials say it isn't under consideration. "For the moment, restructuring is not being contemplated at all, which means there is a Plan A but not a Plan B," says Ms. Alcidi. "I believe that is not the right approach."

and there ya have it... the one option that will work is 'not under consideration'.

now, what were you saying about the imf?

bill
05-02-10, 10:27 AM
now, what were you saying about the imf?

SAVAGE

http://www.bloomberg.com/apps/news?pid=20601087&sid=aE.Yt34w8ha4&pos=1


May 2 (Bloomberg) -- Greece accepted an unprecedented bailout from the European Union and International Monetary Fund valued at more than 100 billion euros ($133 billion) to prevent default, agreeing to budget cuts that unions called “savage.”
The measures are worth 30 billion euros, or 13 percent of gross domestic product, and include wage cuts and a three-year freeze on pensions, Finance Minister George Papaconstantinou (http://search.bloomberg.com/search?q=George+Papaconstantinou&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) said in Athens today. Greece’s main sales tax rate will rise to 23 percent from 21 percent. The exact bailout amount will be announced later, he said. Euro-region finance ministers meet at 4 p.m. in Brussels. Germany will provide 28 percent of the euro region’s contribution.
“Greece will be shielded from the international markets and will be able to put its house in order,” Papaconstantinou said in Athens before heading to the EU capital. Prime Minister George Papandreou (http://search.bloomberg.com/search?q=George+Papandreou&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) said “avoiding bankruptcy is a national red line” and the agreement will demand “big sacrifices” from Greeks to avoid “catastrophe.”
Policy makers are trying to prevent a Greek default as its fiscal crisis shows signs of spreading through the euro region. The agreement, following 10 days of talks and protests, comes after a surge (http://www.bloomberg.com/apps/quote?ticker=GDBR10%3AIND) in Greek borrowing costs left the government struggling to finance its debt and investors speculating that Portugal and Spain could also suffer their fate.
Daily Attacks
The bailout plan will give Greece time to fix its budget before returning to the market, which it wants to do “as soon as possible,” Papaconstantinou said.
“We want to implement our plan without the daily attacks of markets on Greek bonds,” he said. Other measures include abolishing the 13th and 14th wage payments that civil servants get annually for workers earning more than 3,000 euros per month, he said. Payments for those earning less than that will be capped at 1,000 euros, he said.
About two-thirds of the funds will come from Greece’s 15 euro-area partners, which must still sign off on the disbursement by a unanimous decision. The European Commission said today it approves of Greece’s request for aid. The International Monetary Fund will provide the rest of the funds.
The financial lifeline will last three years and will force Greece to cut its budget deficit below the EU’s limit of 3 percent of gross domestic product by the end of 2014. That’s one year later than originally planned. The shortfall was 13.6 percent in 2009.
‘Deep, Deep Recession’
The scale of the budget cuts has prompted some economists to speculate that Greece will have to restructure its debt because the strains placed on the economy will be too great. The government now expects the economy to shrink 4 percent this year and 2.6 percent in 2011 before expanding 1.1 percent in 2012 and almost double that in the following two years. In January it forecast a 0.3 percent contraction for 2010.
“There is a very real possibility that at the end of two or three years, Greece will still have an unsustainable debt and will have to restructure because it will have a deep, deep recession in the meantime,” said Barry Eichengreen (http://search.bloomberg.com/search?q=Barry+Eichengreen&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), economics professor at the University of California, Berkeley.
“We find ourselves before the most savage, unprovoked and unjust attack,” Spyros Papaspyros (http://search.bloomberg.com/search?q=Spyros+Papaspyros&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), head of the ADEDY civil servants union, said last week after seeing an outline of the cuts.
At stake is the future of the euro 11 years after its creators left fiscal policy in national capitals. As the Greek talks dragged on this past week, bonds dropped across Europe on investors’ concern that Portugal and Spain will also struggle to cut their deficits.
Contagion Risk
The extra yield (http://www.bloomberg.com/apps/quote?ticker=GDBR10%3AIND) that investors demand to hold Portuguese debt over German bunds surged to 298 basis points on April 28, the most since at least 1997. The Greek premium touched 827 points. The spread on Spain climbed to the highest since March 2009. Standard & Poor’s followed its decision to cut Greece’s credit rating to junk on April 27 was followed by downgrades on Portugal and Spain.
“After the immediate relief, however, the focus will be squarely on implementation risk in Greece and I believe Portugal, and probably Spain, will need to put on the table a stronger fiscal effort to avoid coming under renewed pressure in the coming weeks and months,” said Marco Annunziata (http://search.bloomberg.com/search?q=Marco+Annunziata&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), chief economist at UniCredit Group in London.

c1ue
05-02-10, 10:35 AM
Greece accepted an unprecedented bailout from the European Union and International Monetary Fund valued at more than 100 billion euros ($133 billion) to prevent default, agreeing to budget cuts that unions called “savage.”
The measures are worth 30 billion euros, or 13 percent of gross domestic product, and include wage cuts and a three-year freeze on pensions, Finance Minister George Papaconstantinou (http://search.bloomberg.com/search?q=George+Papaconstantinou&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) said in Athens today. Greece’s main sales tax rate will rise to 23 percent from 21 percent. The exact bailout amount will be announced later, he said. Euro-region finance ministers meet at 4 p.m. in Brussels. Germany will provide 28 percent of the euro region’s contribution.

So 100 billion euro bailout - coincidentally a big portion of the German/French bank exposure - in return for a 13% government spending cut.

Items to follow:

1) How will the bailout occur? A check to the Greek government or perhaps buying out of French/German bank debt owed by the Greek government?
2) Will the previous riots escalate? And will Papandreou's government survive?

metalman
05-02-10, 10:52 AM
So 100 billion euro bailout - coincidentally a big portion of the German/French bank exposure - in return for a 13% government spending cut.

Items to follow:

1) How will the bailout occur? A check to the Greek government or perhaps buying out of French/German bank debt owed by the Greek government?
2) Will the previous riots escalate? And will Papandreou's government survive?

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hayekvindicated
05-02-10, 12:08 PM
he said genius if he did both... got out in dec 2007/mar2000 and back in mar 2009. did faber advise his clients to get out of the market dec. 2007 & before in mar 2000? nah.... he's still down 20% or 40%... respectively.

What do you know? Do you subscribe to his newsletter? Other than regularly prattling "we told you to buy gold in 2001", what else do you say? I would have bet the ranch that the first assault in response to my criticism would come from you. Well, I had hoped we would get responses of a higher quality than this. Everyone who has criticised EJ on this site gets attacked by you first. Unfortunately, the attacks are never of good quality.

Faber was on record in late 2007 saying that stocks were in a bubble. He went heavily into cash around Jan/Feb 2008 (http://video.google.com/videoplay?docid=4273579651604025785#) (when emerging markets topped out) - he said he was 80 percent in cash around that time. AND, he saw that October 2008 was the bottom for emerging markets. And he went on record asking his clients to buy stocks. So there.



india is not an oligarchy ala argentina/greece/etc ... imf worked there for that reason?

What do you know about India? Not only do the RICH not pay any taxes in India, nobody does (http://in.biz.yahoo.com/050312/32/2k54q.html). Is India facing a crisis of Greek proportions?



not one mention in the story re the cause... fiscal crisis... the rich don't pay taxes.

That's not the only cause. Greece has a ridiculously bloated public sector in which public sector employees get paid 14 months wages for (allegedly) doing 12 months work and where the retirement age is 53. That's what I call a friggin joke. Have you ever crossed the Atlantic by the way? Your responses indicate an ignorance that is quite shocking.



really? "most assessments of the asian crisis suggest devaluations' were a disaster & were caused by taking the imf's advice & not imposing currency controls. china & taiwan ignored the imf & came thru with flying colors.

When did China face a balance of payments issue? It has always had healthy foreign exchange reserves. Read about the devaluation of the Rupee in 1991 and what happened after that. The Rupee was devalued by more than 60 percent against the Dollar. And it worked. Often devaluation is the only alternative. A country that is running out of foreign exchange reserves cannot support a currency at an artificially high level. How do you maintain a higher price for a currency than its fundamentals would support if you don't have large forex reserves? Actually, trying to maintain an artificially high rate of exchange is a surefire way of losing your forex reserves in a hurry.



ah, there we go. no... it's not the fact that the ruling elites in greece don't pay taxes... no it's those all powerful trade unions that are the problem. gimme a break.

You really sound like someone who has never been abroad - yeah I guess maybe Mexico is as far "abroad" as you've ever been. Come to Asia sometime. Tax evasion is RAMPANT in Asia. How many Asian countries today are facing the same crisis as Greece? do you think the Chinese rich pay their taxes honestly?

If you are going to go on the attack like a Rottweiler every time someone criticises EJ, come up with better arguments.

On a side note, we heard from EJ in 2008 that Russia was going to default - "you heard it here first". What happened there? At least Faber is humble and honest when he gets it wrong. Perhaps we need more of that here.

aaron
05-02-10, 01:24 PM
hayekvindicated --> Since I joined this site, I am "up" overall. Gold has gone up. However, you are absolutely right. EJ made a very poor call. Metalman seems to forget that a lot of us joined AFTER the crash and EJ has not earned his American Idol status since then. Had I found this site 1 year earlier, I would think EJ walks on water too.

hayekvindicated
05-02-10, 02:11 PM
hayekvindicated --> Since I joined this site, I am "up" overall. Gold has gone up. However, you are absolutely right. EJ made a very poor call. Metalman seems to forget that a lot of us joined AFTER the crash and EJ has not earned his American Idol status since then. Had I found this site 1 year earlier, I would think EJ walks on water too.

Aaron, is being "up" enough? If inflation in real terms is running at 9 percent and you make 7 percent year on year using the iTulip gold+UST strategy (which I've never followed), you are actually losing money every year (though at a lesser rate than those who chucked everything into the stock market back in 2000).

Perhaps EJ made so much money in the dot com boom that he can afford to lose 2 percent every year (if one uses shadowstats' measures of inflation rather than the CPI which indicates that inflation in the last decade was more like 9 percent). But if you are young and ambitious and want to beat inflation in real terms, 7 percent returns year on year don't cut it. You need to be making double digit returns on an average just to beat inflation and experience positive inflation adjusted returns. Anyone who is using this site for that purpose will not succeed in doing that. Perhaps a disclaimer to that effect is in order.

aaron
05-02-10, 04:56 PM
Aaron, is being "up" enough? If inflation in real terms is running at 9 percent and you make 7 percent year on year using the iTulip gold+UST strategy (which I've never followed), you are actually losing money every year (though at a lesser rate than those who chucked everything into the stock market back in 2000).

Perhaps EJ made so much money in the dot com boom that he can afford to lose 2 percent every year (if one uses shadowstats' measures of inflation rather than the CPI which indicates that inflation in the last decade was more like 9 percent). But if you are young and ambitious and want to beat inflation in real terms, 7 percent returns year on year don't cut it. You need to be making double digit returns on an average just to beat inflation and experience positive inflation adjusted returns. Anyone who is using this site for that purpose will not succeed in doing that. Perhaps a disclaimer to that effect is in order.

I agree with you... but you forgot to put the big "YET" at the end of that. Since I joined the site, I have beat inflation. If high inflation does come like EJ predicts, then I fully expect to do very well. If it does not, well shit, I still have some cash to buy the deflated stuff.

His call for a market crash was wrong and cost me chunk of change in my lost bet (puts). EJ greatly underestimated the effectiveness of government intervention in the financial markets. If Faber says to get out now, then just buy some puts and enjoy your future gains.

hayekvindicated
05-02-10, 05:09 PM
I agree with you... but you forgot to put the big "YET" at the end of that. Since I joined the site, I have beat inflation. If high inflation does come like EJ predicts, then I fully expect to do very well. If it does not, well shit, I still have some cash to buy the deflated stuff.

His call for a market crash was wrong and cost me chunk of change in my lost bet (puts). EJ greatly underestimated the effectiveness of government intervention in the financial markets. If Faber says to get out now, then just buy some puts and enjoy your future gains.

True. it would be unfair to subject anyone to this kind of scrutiny over just one year. But the iTulip gold+UST strategy has been in place since 2001. And the average return over that period has been 7 percent. If inflation has averaged 9 percent over that period (according to Shadowstats), then over a ten year horizon, people have lost 2 percent annually in real terms. That's BAD.

Faber hasn't said that he expects a huge crash. He has gone on record saying that if the DOW goes below 8000, they will print money like crazy. I don't doubt this in the least. The absolutely WORST place to be in the next few years will be government bonds. Harder to stay how stocks will perform, but Im sure that if the Dollar tanks hard, stocks will outperform bonds quite easily - past history indicates that in severe inflationary environments, stocks outperform bonds by a healthy margin.

Speaking for myself, I have been fortunate to have enjoyed double digit returns since 2004 - last year was the only year when I ended flat. 08 was a great year and I averaged between 35 and 40 percent that year.

aaron
05-02-10, 05:24 PM
Speaking for myself, I have been fortunate to have enjoyed double digit returns since 2004 - last year was the only year when I ended flat. 08 was a great year and I averaged between 35 and 40 percent that year.

So YOU were on the opposite side of all of my "investments". I want my money back!

hayekvindicated
05-02-10, 05:49 PM
So YOU were on the opposite side of all of my "investments". I want my money back!

LOL!! unlikely. I didn't short the stock market in 08.

bart
05-02-10, 05:59 PM
Aaron, is being "up" enough? If inflation in real terms is running at 9 percent and you make 7 percent year on year using the iTulip gold+UST strategy (which I've never followed), you are actually losing money every year (though at a lesser rate than those who chucked everything into the stock market back in 2000).

Perhaps EJ made so much money in the dot com boom that he can afford to lose 2 percent every year (if one uses shadowstats' measures of inflation rather than the CPI which indicates that inflation in the last decade was more like 9 percent). But if you are young and ambitious and want to beat inflation in real terms, 7 percent returns year on year don't cut it. You need to be making double digit returns on an average just to beat inflation and experience positive inflation adjusted returns. Anyone who is using this site for that purpose will not succeed in doing that. Perhaps a disclaimer to that effect is in order.

Can you please give it a rest? That's about 5 posts that rip EJ and iTulip.

I got it.

Alvaro Spain
05-02-10, 06:15 PM
Aaron, is being "up" enough? If inflation in real terms is running at 9 percent and you make 7 percent year on year using the iTulip gold+UST strategy (which I've never followed), you are actually losing money every year (though at a lesser rate than those who chucked everything into the stock market back in 2000).

Perhaps EJ made so much money in the dot com boom that he can afford to lose 2 percent every year (if one uses shadowstats' measures of inflation rather than the CPI which indicates that inflation in the last decade was more like 9 percent). But if you are young and ambitious and want to beat inflation in real terms, 7 percent returns year on year don't cut it. You need to be making double digit returns on an average just to beat inflation and experience positive inflation adjusted returns. Anyone who is using this site for that purpose will not succeed in doing that. Perhaps a disclaimer to that effect is in order.

Hayek, I am quite happy with my 30% investment in gold, especially since I bought the gold with the euro at 1.50 dollars . I understand that you are looking for even more upside than this, and I respect your point of view. I surmise that you read some good financial reports and I would like to ask you, which analyst or newsletter would you recommend? Thanks for your reply.

we_are_toast
05-02-10, 06:35 PM
Your criticisms of the recent accuracy of iTulips/EJs analysis is fair. And I'm not too fond of the way they danced around some of the analysis that didn't appear to hold up, like the unemployment call, and the DOW call.

But I've yet to find a place where the logic behind an analysis and the data supporting the analysis is presented in such detail. Not only is it presented, but it's offered up for criticism by the entire community. When someone explains in such detail the reasons they believe things are the way they are, or why they believe an event will happen in the future, it no longer becomes their call, it becomes my call. I can either chose to agree with the data and reasoning offered, and take some action, or I can disagree and not take an action.

But if someone tells me to buy stocks because the market is oversold, or to buy gold because we have a fiat currency and the Feds printing money, I have nothing to go by but their word. It truly is their call and I'm simply rolling the dice that they know what they're talking about. If someone can show me a consistent track record of accuracy over the last several years, I'll roll the dice a few times and see what happens. And if someone shows me careful analysis that is consistently wrong, I'll have to conclude there is something fundamentally wrong with their approach.

I really believe it is different this time. We are in uncharted waters in more than just the economy. It's more important to me now than ever that I know there are good reasons to risk my hard earned dollars. I'm often amazed that under these crazy economic conditions that anyone would even try to make a forecast. And I really appreciate all the comments and information that gets posted here at iTulip, even the ones I strongly disagree with. In the end I have to make my own decisions and I have to find what I believe to be the best source of information to help me make those decisions. I guess that's why I'm posting this here at iTulip.

jiimbergin
05-02-10, 06:41 PM
Well said. You summarize my feelings exactly.
jim

D-Mack
05-03-10, 03:52 AM
How can three US based rating agencies with a horrible record or even criminal history(housing/credit bubble), trigger or amplify a european crisis?



Ohio Funds Sue S&P, Moody’s, Fitch

04-29-2010 | Source: emii.com (http://www.emii.com/)
Ohio’s attorney-general, Richard Cordray, has filed a suit against Standard & Poor’s, Moody’s Investors Service and Fitch Ratings, on behalf of five public employee retirement and pension funds, Financial Times reports. Cordray accused the agencies of providing unjustified and inflated ratings of mortgage-backed securities, in return for fees from securities issuers.
The attorney general alleges that the rating agencies misrepresented the mortgage-backed securities a safe and assured the employee pension funds that they had highest credit ratings and the lowest risk. According to the AG, the improper ratings cost Ohio funds losses of more than $457 million.

http://www.emii.com/Articles/2476319/Derivatives/Derivatives-Articles/Ohio-Funds-Sue-SP-Moodys-Fitch.aspx




ECB Scraps Greek Collateral Rules Indefinitely (Update1)



“The Governing Council of the European Central Bank has decided to suspend the application of the minimum credit rating threshold in the collateral eligibility requirements for the purposes of the Eurosystem’s credit operations in the case of marketable debt instruments issued or guaranteed by the Greek government,” the Frankfurt-based central bank said in a statement today. “This suspension will be maintained until further notice.”
Downgrades from credit-rating companies had threatened to render Greek bonds ineligible for collateral for ECB loans after Standard & Poor’s last week downgraded the nation to junk status. Had Moody’s Investors Service and Fitch Ratings followed suit, Greek bonds would have no longer been accepted under the previous rules, threatening to inflict further pain on the economy and its banks.


http://www.businessweek.com/news/2010-05-03/ecb-scraps-greek-collateral-rules-indefinitely-update1-.html

flintlock
05-04-10, 12:27 AM
Well said. You summarize my feelings exactly.
jim

Same here. Especially this part, " I'm often amazed that under these crazy economic conditions that anyone would even try to make a forecast."

I will say however that I have also considered the fact that maybe the Itulip thesis is more geared for wealth preservation than growth. Neither is necessarily better than the other, just different goals for different people in different situations. At times I have a sinking feeling that we may look back 10 years from now and see these days as the end of an era when you could actually make money investing.

Ben
05-04-10, 10:53 AM
It's important to bear in mind that iTulip is primarily about long-term asset allocation (the only site I know that does it so well).

We shouldn't forget that buy and hold gold in 2001 was the trade of the decade. It delivered you ~15% p.a. consistently, during a time when stocks have fallen about 20%.
Buying government bonds in 2000 was the second best buy-and-hold asset class decision.

(The possible exceptions are commodities and emerging markets, but these involved FAR more volatility.)

Of course, if you can effectively outperform the stock market or time your entrances, you could have beaten gold, but that's not what iTulip is about.

Not re-entering the stock market March 09 seems like a less serious mistake when viewed in this context. (More accurately, he said there would be a rally, leaving it open for readers to participate, but incorrectly forecasted that it would last for under a year).

I think where EJ went wrong is not only in underestimating the effect of govt stimulus on the market, but more importantly, he missed the observation that US markets tend to always rally for at least 2 years after the end of a 20%+ decline bear market (even more so after 40% declines). That's how the stockmarkets tend to go. I view this as a strong reason to re-enter the market last year, and a reason to stay in the market for another year or so, with caution increasing as time goes by.

However, I appreciate how EJ laid out his reasons for this belief:
1. The market never became cheap
2. In Japan, there was a significant correction after about 1 year
3. There's no sustainable recovery in the real economy. The market will head down again if stimulus is removed.
4. There are serious potential problems like inflation, the china bubble and sovereign default that could cause a sharp sell-off
These factors mean that it's reasonable to predict a renewed bear market sooner than ever before after the end of the last one (also, the sample size on these severe bear markets is pretty low, so it's difficult to know how good a guide history is in this case). Staying aware of these issues is going to help us avoid another 30% shave in our stock holdings.

metalman
05-04-10, 11:35 AM
It's important to bear in mind that iTulip is primarily about long-term asset allocation (the only site I know that does it so well).

We shouldn't forget that buy and hold gold in 2001 was the trade of the decade. It delivered you ~15% p.a. consistently, during a time when stocks have fallen about 20%.
Buying government bonds in 2000 was the second best buy-and-hold asset class decision.

(The possible exceptions are commodities and emerging markets, but these involved FAR more volatility.)

Of course, if you can effectively outperform the stock market or time your entrances, you could have beaten gold, but that's not what iTulip is about.

Not re-entering the stock market March 09 seems like a less serious mistake when viewed in this context. (More accurately, he said there would be a rally, leaving it open for readers to participate, but incorrectly forecasted that it would last for under a year).

I think where EJ went wrong is not only in underestimating the effect of govt stimulus on the market, but more importantly, he missed the observation that US markets tend to always rally for at least 2 years after the end of a 20%+ decline bear market (even more so after 40% declines). That's how the stockmarkets tend to go. I view this as a strong reason to re-enter the market last year, and a reason to stay in the market for another year or so, with caution increasing as time goes by.

However, I appreciate how EJ laid out his reasons for this belief:
1. The market never became cheap
2. In Japan, there was a significant correction after about 1 year
3. There's no sustainable recovery in the real economy. The market will head down again if stimulus is removed.
4. There are serious potential problems like inflation, the china bubble and sovereign default that could cause a sharp sell-off
These factors mean that it's reasonable to predict a renewed bear market sooner than ever before after the end of the last one (also, the sample size on these severe bear markets is pretty low, so it's difficult to know how good a guide history is in this case). Staying aware of these issues is going to help us avoid another 30% shave in our stock holdings.

thx for the summary. this is also my experience here... since 1999. the itulip 15%/85% gold & gov't bonds held since then have crushed stocks buy&hold. net of transaction fees/taxes, i wonder how many 'brilliant traders' beat this.

looks to me as if this article on the end of the first bounce & the next crash was posted 5 days after the end of the bounce.

Ben
05-04-10, 09:51 PM
The best 10-year record I can find for a mutual fund in the UK is 300% (Philip Gibb's Financials Fund and First State's Asia Pacific Fund) - from a list of "alpha" managers on trustnet.com

Gold made 400% in dollars (more like 500% in sterling).

It seems likely that not a single UK mutual fund manager beat gold since 2001. And gold was probably less volatile.

I can imagine if you joined iTulip recently and
1. Missed the rally
2. Have only seen a few percent on gold
You might be not be happy. But calling gold in 2001 and consistently supporting the trade is an impressive record.

And as I say, "wait and see" in the safest assets one can find seems like a respectable position when nothing is historically cheap and there are so many big risks.

c1ue
05-05-10, 09:04 AM
These factors mean that it's reasonable to predict a renewed bear market sooner than ever before after the end of the last one (also, the sample size on these severe bear markets is pretty low, so it's difficult to know how good a guide history is in this case). Staying aware of these issues is going to help us avoid another 30% shave in our stock holdings.

This is a key point.

Avoiding the initial 40% drop means not having to add on a 66% gain over and beyond the risk free rate to compensate.

All those who complain about iTulip not helping them participate in the last year's 'pump', would be well advised to consider how to avoid the upcoming 'dump'.

metalman
05-05-10, 11:10 AM
This is a key point.

Avoiding the initial 40% drop means not having to add on a 66% gain over and beyond the risk free rate to compensate.

All those who complain about iTulip not helping them participate in the last year's 'pump', would be well advised to consider how to avoid the upcoming 'dump'.

isn't that the point of this 'first bounce' article? q1 2009 the s&p was off 47%. to make it back the markets need to rise 94%. so far the S&P is only up 74%. we're still > 20% ahead. if the market re-crashes, we're even better off.

doesn't count for me... got out in mar 2000 at the original itulip 'gtfo' call... ahead > 50% in real terms, never mind the 'buy treas bonds' in 2000 and 'buy gold' in 2001 calls... icing on the cake. that said... now what?

thriftyandboringinohio
05-05-10, 01:02 PM
... that said... now what?

Ay, there's the rub

Crazyfingers
05-06-10, 12:56 AM
ITS GETTING DEEP IN HERE! warning warning Fanbois everywhere! Seems like alot of selective memory is goin on. The issue isnt that EJ didnt advise customers to get in the stock market. It is that he proclaimed in AUGUST that the stock market was going to crash by 40% by end of year. And kept confirming the call for 4 months. If the itulip way is wealth preservation, (gold/treasuries) then why bother telling his customers about a 40% crash in the stock market? Unless the itulip allocation was going to move gold or treasuries to BUY SHORTS, then WTF was the point of making such a call?
Folks be careful.

bart
05-06-10, 07:21 AM
ITS GETTING DEEP IN HERE! warning warning Fanbois everywhere! Seems like alot of selective memory is goin on. The issue isnt that EJ didnt advise customers to get in the stock market. It is that he proclaimed in AUGUST that the stock market was going to crash by 40% by end of year. And kept confirming the call for 4 months. If the itulip way is wealth preservation, (gold/treasuries) then why bother telling his customers about a 40% crash in the stock market? Unless the itulip allocation was going to move gold or treasuries to BUY SHORTS, then WTF was the point of making such a call?
Folks be careful.


*yawn*

ITS GETTING DEEP IN HERE! warning warning anti-Fanbois everywhere! Seems like a lot of short term memory is going on. The issue isn't that EJ didn't advise customers to get in the stock market. It is that he proclaimed in August that the stock market was going to crash by 40% by end of year and isn't perfect or angelic, just like every single trader or investor in the entire world. Part of the iTulip way is wealth preservation, (gold/treasuries) but some people are shorter term traders and want to know about his view of a 40% crash in the stock market? No one is required to follow his views and should be responsible for their own acceptance and choice to follow anyone's recommendation - and any trade carries with it the areas of risk and use of stops, etc. If "you" followed it and lost big, then who was it that didn't practice risk management, etc?

Folks, always be careful.




There is not one person in the entire trading and investing world that's anywhere near close to right 100% of the time.

Bitching or criticizing is fine, but things like the use of emotionally charged words like fanboys and without positive or alternate or similar suggestions doesn't help much, if any. I don't agree with some of EJ's work or views, but so what - overall he does good creative work that mostly doesn't appear anywhere else, at least without a time lag.

We're (hopefully) all here to learn and be exposed to alternate views that will hopefully help our individual trading or investing efforts, and in my opinion its one of the best boards on the intertubes for that. Is it perfect? Hell no... but its way above average and in my personal top ten.

Ben
05-06-10, 07:44 AM
Quoting my own post:


More accurately, he said there would be a rally, leaving it open for readers to participate, but incorrectly forecasted that it would last for under a year

harset
05-06-10, 07:59 AM
*yawn*........ Is it perfect? Hell no... but its way above average and in my personal top ten.Wats your other top 9.....

bart
05-06-10, 08:14 AM
Wats your other top 9.....

A few are Ritholtz' Big Picture, Jesse's Cafe Americain, Zero Hedge, Business Insider (and my own data & chart slut work ;-) - a very eclectic combination partially designed to help me avoid getting blindsided.

metalman
05-06-10, 02:09 PM
Quoting my own post:

brings us back to the topic of this article... right in the lead... 'bounce lasted 4 months longer then we expected'

most sites don't put the mistakes in the subhead for all to see.

then it goes on to say that the sovereign debt crisis etc will now... 4 months later... take down the markets but send gold up.

that was on apr 28. since then?

http://ichart.finance.yahoo.com/b?s=%5EDJI&lang=en-US&region=US

http://www.kitco.com/images/live/gold.gif

never too late to fix a mistake & get it right.

Camtender
05-06-10, 02:57 PM
Is this the Gold decoupling we have talked about?

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BACKGROUND-COLOR: black; BORDER-TOP-COLOR: #ece9d8; WIDTH: 48pt; HEIGHT: 41.25pt; BORDER-RIGHT-COLOR: #ece9d8; BORDER-LEFT-COLOR: #ece9d8" class=xl30 height=55 rowSpan=3 width=64></TD></TR></TBODY></TABLE></TD><TD style="BORDER-BOTTOM-COLOR: #ece9d8; PADDING-BOTTOM: 0in; BACKGROUND-COLOR: #ffffcc; BORDER-TOP-COLOR: #ece9d8; WIDTH: 48pt; BORDER-RIGHT-COLOR: #ece9d8; BORDER-LEFT-COLOR: #ece9d8; PADDING-TOP: 0in" class=xl26 width=64>GOLD (http://www.kitco.com/charts/livegoldnewyork.html)</TD><TD style="BORDER-BOTTOM-COLOR: #ece9d8; PADDING-BOTTOM: 0in; BACKGROUND-COLOR: #ffffcc; BORDER-TOP-COLOR: #ece9d8; WIDTH: 48pt; BORDER-RIGHT-COLOR: #ece9d8; BORDER-LEFT-COLOR: #ece9d8; PADDING-TOP: 0in" class=xl31 rowSpan=3 width=64 x:num="40304">5/6/2010</TD><TD style="BORDER-BOTTOM-COLOR: #ece9d8; PADDING-BOTTOM: 0in; BACKGROUND-COLOR: #ffffcc; BORDER-TOP-COLOR: #ece9d8; WIDTH: 48pt; BORDER-RIGHT-COLOR: #ece9d8; BORDER-LEFT-COLOR: #ece9d8; PADDING-TOP: 0in" class=xl32 rowSpan=3 width=64 x:num="0.62291666666666667">14:57</TD><TD style="BORDER-BOTTOM-COLOR: #ece9d8; 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http://money.cnn.com/2010/05/06/markets/markets_newyork/index.htm

NEW YORK (CNNMoney.com) -- Stocks selloff sharply Thursday, extending the recent downturn as investors continued to worry that Europe's debt problems will slow a bigger global economic recovery.
The Dow Jones industrial average (INDU (http://money.cnn.com/quote/quote.html?symb=INDU&source=story_quote_link)) lost as much as 997 points in volatile trading.

Slimprofits
05-06-10, 03:09 PM
that was incredible. total panic on CNBC. Erin Burnett almost lost control on the air.

Look at the yen!

Kadriana
05-06-10, 03:11 PM
Only down 330 now. What happened?

Slimprofits
05-06-10, 03:13 PM
Look at Proctor & Gamble

The Dow went down 500 points in about 15 seconds

steveaustin2006
05-06-10, 03:16 PM
How about commodities, in general, today ex-gold? Down across the board.

thriftyandboringinohio
05-06-10, 03:17 PM
http://ichart.finance.yahoo.com/b?s=%5EDJI&lang=en-US&region=US

Now THAT'S a chart.
The dry cleaners will do brisk business cleaning trousers on Wall St. tonight.
The barkeeps may sell a few extra martinis as well.

Slimprofits
05-06-10, 03:20 PM
edit: CNBC Jocks (EJ parlance) are blaming the nerds and fat people

Typical ain't it?

i.e. a "fatfinger error" or a "computer glitch"

RoTN!!!!

Camtender
05-06-10, 03:21 PM
Metals held their own today!!!

<TABLE border=0 cellSpacing=0 cellPadding=0 width=180 bgColor=#ffffff align=center><TBODY><TR align=middle><TD class=marketopen align=middle>SPOT PRICE IS OPEN</TD></TR><TR align=middle><TD class=smallT align=right>Price: US$/lb </TD></TR></TBODY></TABLE><TABLE border=0 cellSpacing=0 cellPadding=0 width=180 bgColor=#ffffff align=center dwcopytype="CopyTableRow"><TBODY><TR align=right><TD background=/images/line_horiz.jpg colSpan=2 align=middle>http://www.kitcometals.com/images/line_horiz.jpg</TD></TR><TR class=spot><TD style="COLOR: #003399" class=menuB>Copper</TD><TD class=marketstime align=right>May 06,14:27</TD></TR></TBODY></TABLE><TABLE border=0 cellSpacing=0 cellPadding=0 width=180 bgColor=#ffffff align=center dwcopytype="CopyTableRow"><TBODY><TR class=spot><TD bgColor=#f1f1f1>Bid/Ask</TD><TD bgColor=#f1f1f1 align=middle>3.1194</TD><TD bgColor=#f1f1f1 align=middle>-</TD><TD bgColor=#f1f1f1 align=middle>3.1240</TD></TR><TR class=spot><TD>Change</TD><TD style="COLOR: green" align=middle>+0.0000</TD><TD align=middle></TD><TD style="COLOR: green" align=middle>+0.00%</TD></TR><TR class=spot><TD bgColor=#f1f1f1>Low/High</TD><TD bgColor=#f1f1f1 align=middle>3.1194</TD><TD bgColor=#f1f1f1 align=middle>-</TD><TD bgColor=#f1f1f1 align=middle>3.1330</TD></TR><TR align=right><TD class=menuB colSpan=4>http://www.kitcometals.com/images/arrow.jpgCharts (http://www.kitcometals.com/charts/Copper.html)</TD></TR></TBODY></TABLE><TABLE border=0 cellSpacing=0 cellPadding=0 width=180 bgColor=#ffffff align=center dwcopytype="CopyTableRow"><TBODY><TR align=right><TD background=/images/line_horiz.jpg colSpan=2 align=middle>http://www.kitcometals.com/images/line_horiz.jpg</TD></TR><TR class=spot><TD style="COLOR: #003399" class=menuB>Nickel</TD><TD class=marketstime align=right>May 06,14:26</TD></TR></TBODY></TABLE><TABLE border=0 cellSpacing=0 cellPadding=0 width=180 bgColor=#ffffff align=center dwcopytype="CopyTableRow"><TBODY><TR class=spot><TD bgColor=#f1f1f1>Bid/Ask</TD><TD bgColor=#f1f1f1 align=middle>9.8006</TD><TD bgColor=#f1f1f1 align=middle>-</TD><TD bgColor=#f1f1f1 align=middle>9.8460</TD></TR><TR class=spot><TD>Change</TD><TD style="COLOR: green" align=middle>+0.0227</TD><TD align=middle></TD><TD style="COLOR: green" align=middle>+0.23%</TD></TR><TR class=spot><TD bgColor=#f1f1f1>Low/High</TD><TD bgColor=#f1f1f1 align=middle>9.7779</TD><TD bgColor=#f1f1f1 align=middle>-</TD><TD bgColor=#f1f1f1 align=middle>9.8573</TD></TR><TR align=right><TD class=menuB colSpan=4>http://www.kitcometals.com/images/arrow.jpgCharts (http://www.kitcometals.com/charts/Nickel.html)</TD></TR></TBODY></TABLE><TABLE border=0 cellSpacing=0 cellPadding=0 width=180 bgColor=#ffffff align=center dwcopytype="CopyTableRow"><TBODY><TR align=right><TD background=/images/line_horiz.jpg colSpan=2 align=middle>http://www.kitcometals.com/images/line_horiz.jpg</TD></TR><TR class=spot><TD style="COLOR: #003399" class=menuB>Aluminum</TD><TD class=marketstime align=right>May 06,14:28</TD></TR></TBODY></TABLE><TABLE border=0 cellSpacing=0 cellPadding=0 width=180 bgColor=#ffffff align=center dwcopytype="CopyTableRow"><TBODY><TR class=spot><TD bgColor=#f1f1f1>Bid/Ask</TD><TD bgColor=#f1f1f1 align=middle>0.9227</TD><TD bgColor=#f1f1f1 align=middle>-</TD><TD bgColor=#f1f1f1 align=middle>0.9272</TD></TR><TR class=spot><TD>Change</TD><TD style="COLOR: green" align=middle>+0.0000</TD><TD align=middle></TD><TD style="COLOR: green" align=middle>+0.00%</TD></TR><TR class=spot><TD bgColor=#f1f1f1>Low/High</TD><TD bgColor=#f1f1f1 align=middle>0.9204</TD><TD bgColor=#f1f1f1 align=middle>-</TD><TD bgColor=#f1f1f1 align=middle>0.9272</TD></TR><TR align=right><TD class=menuB colSpan=4>http://www.kitcometals.com/images/arrow.jpgCharts (http://www.kitcometals.com/charts/Aluminum.html)</TD></TR></TBODY></TABLE><TABLE border=0 cellSpacing=0 cellPadding=0 width=180 bgColor=#ffffff align=center dwcopytype="CopyTableRow"><TBODY><TR align=right><TD background=/images/line_horiz.jpg colSpan=2 align=middle>http://www.kitcometals.com/images/line_horiz.jpg</TD></TR><TR class=spot><TD style="COLOR: #003399" class=menuB>Zinc</TD><TD class=marketstime align=right>May 06,14:24</TD></TR></TBODY></TABLE><TABLE border=0 cellSpacing=0 cellPadding=0 width=180 bgColor=#ffffff align=center dwcopytype="CopyTableRow"><TBODY><TR class=spot><TD bgColor=#f1f1f1>Bid/Ask</TD><TD bgColor=#f1f1f1 align=middle>0.9415</TD><TD bgColor=#f1f1f1 align=middle>-</TD><TD bgColor=#f1f1f1 align=middle>0.9460</TD></TR><TR class=spot><TD>Change</TD><TD style="COLOR: green" align=middle>+0.0023</TD><TD align=middle></TD><TD style="COLOR: green" align=middle>+0.24%</TD></TR><TR class=spot><TD bgColor=#f1f1f1>Low/High</TD><TD bgColor=#f1f1f1 align=middle>0.9392</TD><TD bgColor=#f1f1f1 align=middle>-</TD><TD bgColor=#f1f1f1 align=middle>0.9460</TD></TR><TR align=right><TD class=menuB colSpan=4>http://www.kitcometals.com/images/arrow.jpgCharts (http://www.kitcometals.com/charts/Zinc.html)</TD></TR></TBODY></TABLE>

vinoveri
05-06-10, 03:23 PM
We do need that PPT to protect us americans ..... $%$#%#$%
this is why it is extremely dangerous to short anything anymore with any conviction ... free markets, no FW, get over it.

My cynical side tells me this is another one of Wall Street/Banking Cartel threats of "don't even consider regulating us Congree, or we'll show you who's the boss ... just watch us today for a sample"

Camtender
05-06-10, 03:24 PM
Look at Proctor & Gamble

The Dow went down 500 points in about 15 seconds
Proctor & Gamble
<TABLE class="wsod_dataTable wsod_dataTableBig" cellSpacing=0 jQuery1273174015757="78"><TBODY jQuery1273174015757="77"><TR><TD>Previous close</TD><TD class=wsod_quoteDataPoint>62.16</TD></TR><TR jQuery1273174015757="76"><TD>Today’s open</TD><TD class=wsod_quoteDataPoint>61.91</TD></TR><TR><TD>Day’s range</TD><TD class=wsod_quoteDataPoint>39.37 - 62.67</TD></TR><TR><TD>Volume</TD><TD class=wsod_quoteDataPoint>18,903,959</TD></TR></TBODY></TABLE>

Wow, just Wow.

I bet the Fed steped into this this market.

Slimprofits
05-06-10, 03:33 PM
NYSE says no system errors

Adeptus
05-06-10, 03:38 PM
Hedge Fund Quant formula gone wonky? How else do you explain 500 point drop in 15 seconds? There was no major authority (Bernanke, Geitner, etc) saying something bad around that time was there?

sishya
05-06-10, 03:38 PM
Today's S&P drop to 1066 and quick bounce made me scared a bit.
is Gerald Celente going to be right and crowned a prophet ? Speechless when I saw that.
I am not able to concentrate on my day job

stetts
05-06-10, 03:43 PM
Dear Vinoveri,
I believe you are correct.
Take care. Stetts

Adeptus
05-06-10, 03:43 PM
Ok, Ok, I figured out why the markets tanked!! Cramer put out a broad BUY signal on Tuesday night.... Check out the sea of red for all his BUY recommendations.. Too freggin' funny!



http://i39.tinypic.com/2mo7769.jpg

bpr
05-06-10, 03:48 PM
http://ichart.finance.yahoo.com/b?s=%5EDJI&lang=en-US&region=US

Now THAT'S a chart.

Interesting. Volume makes it look like everyone just took a break for a few minutes from 3:04 to 3:08 so the Feds could come in with 10x volume.



http://finance.yahoo.com/echarts?s=%5EDJI#symbol=%5EDJI;range=1d;compare=

Slimprofits
05-06-10, 03:54 PM
NYSE says the low for P&G in their system was 56, not 39


2 billion shares of down volume vs 115 million shares of up volume today wow!!!

jtabeb
05-06-10, 03:54 PM
Gee, Who could have know? Almost no one predicted this chain of events. (Almost, no one).

Slimprofits
05-06-10, 03:55 PM
Ok, Ok, I figured out why the markets tanked!! Cramer put out a broad BUY signal on Tuesday night.... Check out the sea of red for all his BUY recommendations.. Too freggin' funny!

lucky for him, cramer was on with Erin during the crash today.

radon
05-06-10, 03:55 PM
We do need that PPT to protect us americans ..... $%$#%#$%
this is why it is extremely dangerous to short anything anymore with any conviction ... free markets, no FW, get over it.


That is part of the problem. If there are no shorts this is exactly the kind of thing you should expect. Without the need to cover there is often no reason to buy at at all.

thriftyandboringinohio
05-06-10, 04:01 PM
Interesting. Volume makes it look like everyone just took a break for a few minutes from 3:04 to 3:08 so the Feds could come in with 10x volume.



http://finance.yahoo.com/echarts?s=%5EDJI#symbol=%5EDJI;range=1d;compare=

Funny, that.

Camtender
05-06-10, 04:01 PM
NYSE says no system errors


"Faulty Procter & Gamble stock quotes were major factor in markets' huge afternoon drop", Nasdaq says.

radon
05-06-10, 04:04 PM
Funny, that.

This too was pretty funny, I'm glad I closed most of my positions last week.


Market Activity and Order Delays
We are currently experiencing delayed reports from the exchanges about order executions and cancellations. As a result, some of your orders may show a pending status until the issue is resolved. We apologize for any inconvenience.

FRED
05-06-10, 04:08 PM
Dow falls almost 1000, recovers 600 (http://money.cnn.com/2010/05/06/markets/markets_newyork/)‎
CNNMoney
"Having said that, we also have to be cognizant that the market was due for a pullback at a minimum, and possibly a correction," he said... 53 minutes ago

Gold rises toward $1200 on contagion risk | Reuters (http://www.reuters.com/article/idUSTRE63P02520100506)
May 6, 2010 ... NEW YORK/LONDON (Reuters) - Gold rose toward $1200 an ounce on Thursday as investors sought a safe haven from the financial turmoil in... 56 minutes ago

Slimprofits
05-06-10, 04:10 PM
hold the phone - sources tell CNBC firm with questionable trade is CITI (SHITTY)

Adeptus
05-06-10, 04:20 PM
"Faulty Procter & Gamble stock quotes were major factor in markets' huge afternoon drop", Nasdaq says.

URL here: http://money.cnn.com/2010/05/06/markets/markets_newyork/index.htm?hpt=T1&iref=BN1

charliebrown
05-06-10, 04:26 PM
on zero hedge they just came out and said break-up-the-banks and full audit of the fed,
being supported by durbin, reid. Maybe someone said something then was escorted out of the room.

Munger
05-06-10, 04:27 PM
<object width="480" height="385"><param name="movie" value="http://www.youtube.com/v/K8mWod8xY80&hl=en_US&fs=1&"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/K8mWod8xY80&hl=en_US&fs=1&" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="480" height="385"></embed></object>

thriftyandboringinohio
05-06-10, 04:34 PM
"Faulty Procter & Gamble stock quotes were major factor in markets' huge afternoon drop", Nasdaq says.

Here's the chart. Maybe it really WAS faulty data. Why would P&G drop like a stone? They make soap and shampoo, paper towels and diapers, laundry detergent and toothpaste...


http://markets.money.cnn.com/cgi-bin/upload.dll/file.png?z018a0f0az9f57aca7bbc546ea894b0a2cf52d30f 8

Slimprofits
05-06-10, 04:36 PM
they are insisting it was a mistake, human error, CITI not acting shady

Slimprofits
05-06-10, 04:39 PM
Cramer is the king of "nothing to see here, move along"

He kept interrupting Erin's bouts of excitement.

steveaustin2006
05-06-10, 05:17 PM
84.895 +0.816 (+1.05%)
2010-05-06 14:40:07
http://quotes.ino.com/chart/history.gif?s=NYBOT_DX&t=l&w=15&a=50&v=dmax


<dl><dd class="extraclass">
</dd><dd class="current last">
</dd></dl><v:stroke joinstyle="miter"></v:stroke><v:formulas><v:f eqn="if lineDrawn pixelLineWidth 0"></v:f><v:f eqn="sum @0 1 0"></v:f><v:f eqn="sum 0 0 @1"></v:f><v:f eqn="prod @2 1 2"></v:f><v:f eqn="prod @3 21600 pixelWidth"></v:f><v:f eqn="prod @3 21600 pixelHeight"></v:f><v:f eqn="sum @0 0 1"></v:f><v:f eqn="prod @6 1 2"></v:f><v:f eqn="prod @7 21600 pixelWidth"></v:f><v:f eqn="sum @8 21600 0"></v:f><v:f eqn="prod @7 21600 pixelHeight"></v:f><v:f eqn="sum @10 21600 0"></v:f></v:formulas><v></v>

FRED
05-06-10, 05:21 PM
We own gold but no stocks and no "dollars" except as Treasury bonds.

aaron
05-06-10, 05:34 PM
We do need that PPT to protect us americans ..... $%$#%#$%
this is why it is extremely dangerous to short anything anymore with any conviction ... free markets, no FW, get over it.

My cynical side tells me this is another one of Wall Street/Banking Cartel threats of "don't even consider regulating us Congree, or we'll show you who's the boss ... just watch us today for a sample"

I have been thinking the same thing. But, I am in the camp of LET IT BURN.

charliebrown
05-06-10, 05:43 PM
Hmm just one question.

I know in the end fiat loses, but the largest buyers of gold are the CB's. Assuming there are some limits on QE, at least QE$ / time is bounded, and if QE2 will be used to buy sovereign debt, will this remove the foot off the gold pedal for awhile??

I want to buy more waiting for that dip. I did pick up some silver over the last several days.

D-Mack
05-06-10, 06:00 PM
Here's the chart. Maybe it really WAS faulty data. Why would P&G drop like a stone? They make soap and shampoo, paper towels and diapers, laundry detergent and toothpaste...


http://markets.money.cnn.com/cgi-bin/upload.dll/file.png?z018a0f0az9f57aca7bbc546ea894b0a2cf52d30f 8

<object width="640" height="385"><param name="movie" value="http://www.youtube.com/v/i4jotxBOhNI&color1=0xb1b1b1&color2=0xd0d0d0&hl=en_US&feature=player_embedded&fs=1"></param><param name="allowFullScreen" value="true"></param><param name="allowScriptAccess" value="always"></param><embed src="http://www.youtube.com/v/i4jotxBOhNI&color1=0xb1b1b1&color2=0xd0d0d0&hl=en_US&feature=player_embedded&fs=1" type="application/x-shockwave-flash" allowfullscreen="true" allowScriptAccess="always" width="640" height="385"></embed></object>

phinolerun
05-07-10, 08:13 PM
We own gold but no stocks and no "dollars" except as Treasury bonds.

So I take it you guys haven't moved into oil yet?

metalman
05-08-10, 01:56 AM
So I take it you guys haven't moved into oil yet?

under $80 is a good deal in my book. how about you?

harset
05-08-10, 03:49 AM
under $80 is a good deal in my book. how about you?

EJ recommended about $60....does he still feels it will go down to $60....

jiimbergin
05-08-10, 07:41 AM
under $80 is a good deal in my book. how about you?

under $80 is fine with me. EJ mentioned $60, but he never said it would definitely go to there.

we_are_toast
05-08-10, 08:22 AM
How are you doing oil? Stocks? USO? futures?

metalman
05-08-10, 02:51 PM
no further complaints about how itulip didn't get us out of the market in dec 2007 & also back in again in mar 2009... is that because since this article posted apr 28 we're now 23% vs 17% better off for cutting out in dec 2007 & never getting back in?

& gold is up while stocks are down... as this article forecasts.

& no more gold manipulation theories now that gold's back over $1200?

& whatever happened to mish/denniger & all the deflationists?

Ben
05-08-10, 08:02 PM
3-year futures ETF
- less volatility
- less downside in the event of pre-CPO economic booboo
- and the big one, only incurs roll over costs once every 3 years, so you don't lose all your money to contango a la USO

metalman
05-08-10, 08:55 PM
did someone say 'shit show'?


Greece forced to buy arms: MEP (http://www.dailytimes.com.pk/default.asp?page=2010%5C05%5C08%5Cstory_8-5-2010_pg4_9%5C%5C)
PARIS: France and Germany, while publicly urging Greece to make harsh public spending cuts, bullied its government to confirm billions of euros in arms deals, a leading Euro-MP alleged Friday.

Franco-German lawmaker Daniel Cohn-Bendit said that Paris and Berlin are seeking to force Prime Minister George Papandreou to spend Greece’s scarce cash on submarines, a fleet of warships, helicopters and war planes.

“I met Mr Papandreou last week. I was in Athens. I’ve known him for a long time,” Cohn-Bendit told reporters, accusing Germany’s Chancellor Angela Merkel and France’s President Nicolas Sarkozy of blackmailing his friend. Cohn-Bendit accused France and Germany of making their contributions to an IMF-led rescue package for the debt-ridden Greek economy contingent on Athens honouring massive arms deals signed by Papandreou’s predecessor. “It’s incredible the way the Merkels and Sarkozys of this world treat a Greek prime minister,” he declared, adding that Papandreou had recently met Sarkozy and French Prime Minister Francois Fillon in Paris. “Mr Fillon and Mr Sarkozy told Mr Papandreou: ‘We’re going to raise the money to help you, but you are going to have to continue to pay the arms contracts that we have with you’,” Cohn-Bendit said.

“In the past three months we have forced Greece to confirm several billion dollars in arms contracts. French frigates that the Greeks will have to buy for 2.5 billion euros. Helicopters, planes, German submarines.”

Cohn-Bendit, a former leader of the 1968 student revolt in Paris, is leader of the Green group in the European parliament. afp

metalman
05-08-10, 09:27 PM
...but you're paying for greece's purchase of french weapons like it or not...


Top German Court Denies Emergency Ruling on Greek Aid (Update1) (http://www.bloomberg.com/apps/news?pid=20601110&sid=aNoBaq8vvS9E)

By Angela Cullen and Karin Matussek

May 8 (Bloomberg) -- Germany’s highest constitutional court rejected an attempt by a group of economists and university professors to block the nation’s participation in a 110 billion- euro ($140 billion) aid package for Greece.

The court denied their request for an emergency ruling that would prevent the government from taking any steps as long as the case was pending, the Federal Constitutional Court in Karlsruhe said in an e-mailed statement today. An interim ruling would be more damaging to Germany if the rescue measures were later deemed to be constitutional, the court said.

German lawmakers approved yesterday loans of as much as 22.4 billion euros for Greece, with the lower house of parliament in Berlin voting 390 to 72 in favor of the country’s share of the financial lifeline from the euro region and the International Monetary Fund that will allow Greece to avoid default. The upper house, where Germany’s 16 states are represented, also backed the bill.

Unless the government acts now, the whole rescue attempt may be endangered, the court said.

The group of five economists and professors sought the emergency ruling as part of a complaint at Germany’s top court, arguing that the aid package violates the “no bailout-clause” in European Union governing treaties.

The plaintiffs, law professor Karl Schachtschneider, economists Joachim Starbatty, Wilhelm Hankel and Wilhelm Noelling, and former Thyssen AG Chief Executive Officer Dieter Spethmann, have previously tried to block German involvement in key EU measures.

Starbatty, Hankel, Noelling and Schachtschneider unsuccessfully sued to prevent the adoption of the Euro in 1998. Spethmann was among the plaintiffs who tried to block Germany’s adoption of the 27-nation bloc’s Lisbon treaty. The court dismissed that case last year.

Anon21456
05-09-10, 11:45 AM
That's fair game : the French give the money, they decide how it must be used.

BDS4
05-11-10, 03:34 PM
no further complaints about how itulip didn't get us out of the market in dec 2007 & also back in again in mar 2009... is that because since this article posted apr 28 we're now 23% vs 17% better off for cutting out in dec 2007 & never getting back in?

& gold is up while stocks are down... as this article forecasts.

& no more gold manipulation theories now that gold's back over $1200?

& whatever happened to mish/denniger & all the deflationists?
Could this all be part of the "plan" to solve the looming entitlements crisis? It seems to me that in order to solve SS and Medicare you need to get people to not retire without ordering it per law (this may cause rioting as in Greece or outright revolt). So how do you do that? House appreciation and 401k's are what allow the common man to retire since SS/Medicare benefits will not do on it's own. Crash the housing and stock markets and voila! problem goes away. No messy inflation or huge tax increases necessary. Everyone that can works until they drop. It's all due to the international debt crisis and not due to governments. Side benefit is the banks own all of the assets due to foreclosure/default and have a lot to share with their buddies - the politicians.

LargoWinch
05-15-10, 04:23 PM
So I take it you guys haven't moved into oil yet?

What have you moved into phinolerun?

You "talk the talk" but can you "walk the walk"?

metalman
05-20-10, 09:47 AM
What do you know? Do you subscribe to his newsletter? Other than regularly prattling "we told you to buy gold in 2001", what else do you say? I would have bet the ranch that the first assault in response to my criticism would come from you. Well, I had hoped we would get responses of a higher quality than this. Everyone who has criticised EJ on this site gets attacked by you first. Unfortunately, the attacks are never of good quality.

still whining about how ej didn't get you back into the market? 3 wks later "next crash" looks spot in.

metalman
05-20-10, 12:11 PM
stocks down 9% since 'next crash' posted...

http://chart.finance.yahoo.com/c/3m/_/_dji?lang=en-US&region=US

'I’m not ready to say “Time to short” it yet, but the fix is in.'

used my secret squirrel decoder ring to read into the cryptic message 'the fix is in.'

yeh, yeh... hard to tell what he meant by that. :cool:

my genius interpretation?

'the fix is in'.

Ben
05-20-10, 08:32 PM
Well that was nice but I think we can agree he got a little lucky

jk
05-20-10, 09:17 PM
i've been adding to my energy positions in the last 2 days. but i'm always very early.

Ben
05-21-10, 03:27 PM
I'm planning too on Monday.

I wonder when EJ is going to start...

My 3 years futures ETF is under 80. Only 20% higher than its low in 2008. Spot is around 70. Keep waiting for 60?

LargoWinch
05-21-10, 03:33 PM
I'm planning too on Monday.

I wonder when EJ is going to start...

My 3 years futures ETF is under 80. Only 20% higher than its low in 2008. Spot is around 70. Keep waiting for 60?

Ben, what 3-year ETF are you talking about OSB3? OSW3?

Ben
05-22-10, 09:12 AM
Osw3

Anon21456
05-23-10, 02:31 AM
stocks down 9% since 'next crash' posted...

'I’m not ready to say “Time to short” it yet, but the fix is in.'

used my secret squirrel decoder ring to read into the cryptic message 'the fix is in.'

yeh, yeh... hard to tell what he meant by that. :cool:

my genius interpretation?

'the fix is in'.

Hi Metal Man !

The golden cross is almost there. Wait for it. EJ will make his call around that time. Then wait for a retracement and short the whole market :) Then start laughing as people are panicking.

metalman
08-04-11, 11:29 AM
'The First Bounce of the Debt Deflation Bear Market has gone on for four months longer than we expected. Will it end with a down-for-the-count crash or a correction followed by quick recovery? What will end it? Rate hikes by the Fed? The escalating sovereign debt crisis in Europe? A banking and financial crisis in China’s credit bubble economy? The next Peak Cheap Oil recession? Our answer: All of them, and pretty much all at once. If you thought the 2008 crash was bad, wait until you see the next one.'

charliebrown
08-10-11, 08:43 PM
OK does anyone care to speculate on is this the one where we are not getting up?

2009 crash saw a terminal shiller PE of around 13. The 80's resession had a terminal PE of 8. That would mean S&P 500?
or is this going to be a mini crash before the big one, say shiller pe back to 14 (820) and the reflation again. I assume because this crash is about the sovereigns we will probe below 14.