Warren Buffett vesus iTulip

[Finster]

Is this the beginning of a new bull market? A rally kickoff? A dead cat bounce?

1) This is the beginning of a new bull market. Be fully invested in stocks.

2) This is the kickoff of a bear market rally that will take the averages up 20% or more and last at least a few weeks.

3) This is a great opportunity to sell stocks you haven't already sold. But hurry, because it will only last a day or few!

[FRED]

http://www.itulip.com/images/buffett.jpgWarren Buffett vesus iTulip

Is Warren Buffett bubble blind?

Warren Buffett is an investor in stocks of companies that lead industries, not political economy forecaster. He piled into stocks in 2007 when we were getting out. Now he sees the US economy has ”fallen off a cliff.” Is this the long awaited rally that breaks us out of the Beware Relief Rallies (http://www.itulip.com/forums/showthread.php?p=62889#post62889) mold?

May 2007 we noted:Buffett predicts more market turbulence (http://www.itulip.com/forums/showthread.php?p=10085#post10085)
May 5, 2007 (James P. Miller - Chicago Tribune)

Investor Warren Buffett expects periodic turbulence in the stock market in the future, and warned that such normal disruptions are likely to be amplified by the hair-trigger buy-and-sell proclivities of the "electronic herd" of investment managers around the world.

Still, the fabled investor told 27,000 stockholders of his Berkshire Hathaway Inc. investment company this morning that Berkshire plowed $5 billion into the stock market in the first quarter of 2007.

Buffett said that, if he had to choose, he and investing partner Charlie Munger would rather own stocks over the next two decades, rather than buy twenty-year bonds.
We said: (http://www.itulip.com/forums/showthread.php?p=10085#post10085) Buffett is methodical. He is also wise. Over the years, we find that most of his pet peeves are the same as ours. He knows the markets offer no free lunch. He doesn't like asset bubbles. He finds state gambling offensive. But he is not as focused on financial market and economic history as we, so there are areas where he comes to different conclusions.

Buffet is arguably the world's most capable investor, but he doesn't understand the long term implications of Credit Risk Pollution (http://www.itulip.com/riskpollution.htm). Credit toxins are oozing out of the financial system in the sub-prime segment of the mortgage market first, in its most vulnerable sector. Soon enough it will be oozing out everywhere.

Buffett needs to make the connection among the sub-prime mortgage market, derivatives, private equity, and the housing bubble. The impact and risks posed by the development of non-transparent derivatives has been known since at least 1999 when banking expert Martin Mayer wrote the article "Somebody Turn on the Lights," for Derivatives Strategy(Brookings Institution) on over-the-counter derivatives.
Yesterday Buffett said:Warren Buffett Says Economy Has ‘Fallen Off a Cliff’ (http://www.bloomberg.com/apps/news?pid=20601081&sid=akYoIqUfMfYY&refer=australia)
March 9, 2009 (Bloomberg)

Billionaire Warren Buffett, whose Berkshire Hathaway Inc. posted its worst results ever in 2008, said the economy “has fallen off a cliff” and that efforts to stimulate recovery may lead to inflation higher than the 1970s.
To iTulip readers, that’s Ka-Poom Theory and the collapse of the FIRE Economy rolled into one sentence. First recession then inflation? Who could have known?

Now the trillion dollar question, might the current rally be the start of a pricing in of rising inflation? With oil bouncing firmly off $40, can inflation be far behind? Will inflation be good or bad for stocks?

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

Is this the context for a sustained stock market rally? We doubt it.


If so, we may be at least nearing an entry point for selective stock buying. While we are as eager as anyone to get out of Treasury bonds and gold, before we go whole hog on stocks, we ponder what we heard on a client call put on by a large investment bank. It gives us pause, especially in the context of the ongoing collapse of the FIRE Economy. To be published shortly.

Meanwhile, vote in Finster's poll above!

iTulip Select (http://www.itulip.com/forums/showthread.php?t=1032): The Investment Thesis for the Next Cycle™
__________________________________________________

To receive the iTulip Newsletter or iTulip Alerts, Join our FREE Email Mailing List (http://ui.constantcontact.com/d.jsp?m=1101238839116&p=oi)

Copyright © iTulip, Inc. 1998 - 2007 All Rights Reserved

All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Nothing appearing on this website should be considered a recommendation to buy or to sell any security or related financial instrument. iTulip, Inc. is not liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. Full Disclaimer (http://www.itulip.com/GeneralDisclaimer.htm)

[goadam1]

One thing I know is people want stocks to go up. But I don't care about stocks compared to what everyone thinks will happen to the economy. The most pressing issue is not a difference of missing out on 20% in the market but keeping my business going.

[gwynedd1]

Until real estate bottoms what ever rallies there are will be shorter term and into a head wind of unraveling real estate. Most of new money at the current time comes from real estate financing. The other thing perhaps to watch is if they keep interest rates low to save the fire economy, is dollar carry trade and try to see where the dollars are headed.

[osmose]

EJ,

sounds like you are pondering getting into stocks now.. What happened to the Real Dow forecast and the 2:1 Dow/Gold ratio you were talking about all these years?? Sounds like you are even beginning to think about getting out of gold...What about the hyperinflation? Really confusing. I know the world is not black and white and that investment strategy needs to be adjusted as new facts become known but this is a bit too much.. Am I missing something or reading too much into your post??

[gasull]

Buffett needs to make the connection among the sub-prime mortgage market, derivatives, private equity, and the housing bubble.

iTulip is the best source for economic analysis, but for a moment I'm wondering if iTulip is missing some wider connections with some events, just like Buffett is doing. Gerald Celente has a record of right forecasting (http://www.trendsresearch.com/forecast.html) as impressive as iTulip's (http://itulip.com/forums/showthread.php?t=4381), and he is forecasting now a darker/doomer future than iTulip is:

Celente Predicts Revolution, Food Riots, Tax Rebellions By 2012 (http://www.prisonplanet.com/celente-predicts-revolution-food-riots-tax-rebellions-by-2012.html).

[jiimbergin]

EJ,

sounds like you are pondering getting into stocks now.. What happened to the Real Dow forecast and the 2:1 Dow/Gold ratio you were talking about all these years?? Sounds like you are even beginning to think about getting out of gold...What about the hyperinflation? Really confusing. I know the world is not black and white and that investment strategy needs to be adjusted as new facts become known but this is a bit too much.. Am I missing something or reading too much into your post??

I second that! Several of EJ's and/or Fred's recent posts seem to be causing confusion.

[goadam1]

All my doom for nothing? Harumph!!!

[goadam1]

iTulip is the best source for economic analysis, but for a moment I'm wondering if iTulip is missing some wider connections with some events, just like Buffett is doing. Gerald Celente has a record of right forecasting (http://www.trendsresearch.com/forecast.html) as impressive as iTulip's (http://itulip.com/forums/showthread.php?t=4381), and he is forecasting now a darker/doomer future than iTulip is:

Celente Predicts Revolution, Food Riots, Tax Rebellions By 2012 (http://www.prisonplanet.com/celente-predicts-revolution-food-riots-tax-rebellions-by-2012.html).


Only a super depressed person would live their life according to that dude.

[goadam1]

I second that! Several of EJ's and/or Fred's recent posts seem to be causing confusion.

Dude, he isn't Moses.

On the other hand no, maybe no post titled "The End" and then a poll on if we are buying stocks.

[metalman]

I second that! Several of EJ's and/or Fred's recent posts seem to be causing confusion.

if you're looking for contradiction, you can find it i suppose.

i hear 'selecting buying, maybe' not 'let's all go long stocks!'

given that itulip has waited 11 years and held out through the 'bottom' that everyone else called in nov. 2008, what's wrong with at least taking a look at a coupla stocks?

[osmose]

All I am saying is that you don't go from "Road to Ruin" to "let's think about selectively adding stocks" (with a potential for an all-in on the long side) in a space of 2 or 3 weeks. That's just bizarre a bit.
What confuses me is how a phenomenal body of work, going back a number of years, clear, logical and consistent in every way suddenly gets into this flip flop mode.

[goadam1]

if you're looking for contradiction, you can find it i suppose.

i hear 'selecting buying, maybe' not 'let's all go long stocks!'

given that itulip has waited 11 years and held out through the 'bottom' that everyone else called in nov. 2008, what's wrong with at least taking a look at a coupla stocks?

Partly because after some very doomish post that some of us go quoting to loved ones we seem stupid.

[goadam1]

I think we are sometimes lab rats for itulip. Throw some cheese and see what the rats say.

"Are you a man or a mouse," shouts the captain

"I like cheese," says I.

[osmose]

I bought canned fish in bulk, for crying out loud. Will my broker take it in now in exchange for 100 shares of the SPY?? Any thoughts? And what about the physical gold? I heard Saddam had gold plated toilets. Is it a good idea to gold plate the WC in my rented accomodation?

[goadam1]

Now I remember why people without stocks other than 401k and regular jobs just don't thing about stuff much. It all kind of works out unless you are trying to time a market (which is a lot of work).

So is it still 20% unemployment and Poom or are we really in 1983?

[orion]

I think you need to chill out and get FRED's sense of humor. If you read the first post he made promising this client call;

http://www.itulip.com/forums/showthread.php?t=8415&page=4

Where he said:

Later today in the Select area we cover a one hour client call by a major investment bank yesterday on the subject of the corporate credit market. A few highlights:


It's 1990 all over again, but worse. Like the 1998 - 2000 telco de-leveraging but writ large.
The period of de-leveraging is over and a period of rising defaults has begun
Credit can only be purchased selectively, there is no market investment opportunity
GE's problems are symptomatic of increasing default risk
At the same time default rates rise, recover rates will decline, valuations will decline
The corp. credit markets are more accurately forecasting the economy and the equity markets are lagging
Mortgage credit leads corp. credit leads equities -- all have further to go down
Equity markets may decline another 35%, slowly as has happened so far or in a day
Equities offer the only exit strategy, none for long term corp. debt investment. It's a trader's not an investor's market.
Investment grade corp. default recoveries will price at 20 to 40 cents on the dollar, high yield at zero
The corp. credit market will take many years to recover

I don't think he has the same glasses on that Buffet has.

[goadam1]

I get the humor. No one is having fun with this thread.

[goadam1]

I bought canned fish in bulk, for crying out loud. Will my broker take it in now in exchange for 100 shares of the SPY?? Any thoughts? And what about the physical gold? I heard Saddam had gold plated toilets. Is it a good idea to gold plate the WC in my rented accomodation?

Why didn't you buy something you like to eat?

[xela]

http://www.itulip.com/images/buffett.jpgWarren Buffett vesus iTulip

Is Warren Buffett bubble blind?

Warren Buffett is an investor in stocks of companies that lead industries, not political economy forecaster. He piled into stocks in 2007 when we were getting out. Now he sees the US economy has ”fallen off a cliff.” Is this the long awaited rally that breaks us out of the Beware Relief Rallies (http://www.itulip.com/forums/showthread.php?p=62889#post62889) mold?

May 2007 we noted:Buffett predicts more market turbulence (http://www.itulip.com/forums/showthread.php?p=10085#post10085)
May 5, 2007 (James P. Miller - Chicago Tribune)

Investor Warren Buffett expects periodic turbulence in the stock market in the future, and warned that such normal disruptions are likely to be amplified by the hair-trigger buy-and-sell proclivities of the "electronic herd" of investment managers around the world.

Still, the fabled investor told 27,000 stockholders of his Berkshire Hathaway Inc. investment company this morning that Berkshire plowed $5 billion into the stock market in the first quarter of 2007.

Buffett said that, if he had to choose, he and investing partner Charlie Munger would rather own stocks over the next two decades, rather than buy twenty-year bonds.
We said: (http://www.itulip.com/forums/showthread.php?p=10085#post10085) Buffett is methodical. He is also wise. Over the years, we find that most of his pet peeves are the same as ours. He knows the markets offer no free lunch. He doesn't like asset bubbles. He finds state gambling offensive. But he is not as focused on financial market and economic history as we, so there are areas where he comes to different conclusions.

Buffet is arguably the world's most capable investor, but he doesn't understand the long term implications of Credit Risk Pollution (http://www.itulip.com/riskpollution.htm). Credit toxins are oozing out of the financial system in the sub-prime segment of the mortgage market first, in its most vulnerable sector. Soon enough it will be oozing out everywhere.

Buffett needs to make the connection among the sub-prime mortgage market, derivatives, private equity, and the housing bubble. The impact and risks posed by the development of non-transparent derivatives has been known since at least 1999 when banking expert Martin Mayer wrote the article "Somebody Turn on the Lights," for Derivatives Strategy(Brookings Institution) on over-the-counter derivatives.
Yesterday Buffett said:Warren Buffett Says Economy Has ‘Fallen Off a Cliff’ (http://www.bloomberg.com/apps/news?pid=20601081&sid=akYoIqUfMfYY&refer=australia)
March 9, 2009 (Bloomberg)

Billionaire Warren Buffett, whose Berkshire Hathaway Inc. posted its worst results ever in 2008, said the economy “has fallen off a cliff” and that efforts to stimulate recovery may lead to inflation higher than the 1970s.
To iTulip readers, that’s Ka-Poom Theory and the collapse of the FIRE Economy rolled into one sentence. First recession then inflation? Who could have known?

Now the trillion dollar question, might the current rally be the start of a pricing in of rising inflation? With oil bouncing firmly off $40, can inflation be far behind? Will inflation be good or bad for stocks?

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

Is this the context for a sustained stock market rally? We doubt it.


If so, we may be at least nearing an entry point for selective stock buying. While we are as eager as anyone to get out of Treasury bonds and gold, before we go whole hog on stocks, we ponder what we heard on a client call put on by a large investment bank. It gives us pause, especially in the context of the ongoing collapse of the FIRE Economy. To be published shortly.

Meanwhile, vote in Finster's poll above!

iTulip Select (http://www.itulip.com/forums/showthread.php?t=1032): The Investment Thesis for the Next Cycle™
__________________________________________________

To receive the iTulip Newsletter or iTulip Alerts, Join our FREE Email Mailing List (http://ui.constantcontact.com/d.jsp?m=1101238839116&p=oi)

Copyright © iTulip, Inc. 1998 - 2007 All Rights Reserved

All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Nothing appearing on this website should be considered a recommendation to buy or to sell any security or related financial instrument. iTulip, Inc. is not liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. Full Disclaimer (http://www.itulip.com/GeneralDisclaimer.htm)

Filing this under 'Pimp my economy' ;)
Voted for sucker rally: first day up after new low and so many bottom calls already, it's like back to flipping houses in 3..2..1..poom :)

[osmose]

the stuff i like has limited shelf life :(

[goadam1]

the stuff i like has limited shelf life :(

beans are good.

[goadam1]

I think you need to chill out and get FRED's sense of humor. If you read the first post he made promising this client call;

http://www.itulip.com/forums/showthread.php?t=8415&page=4

Where he said:

I don't think he has the same glasses on that Buffet has.

I don't know what half of that means.

[sirbrian82]

All I am saying is that you don't go from "Road to Ruin" to "let's think about selectively adding stocks" (with a potential for an all-in on the long side) in a space of 2 or 3 weeks. That's just bizarre a bit.
What confuses me is how a phenomenal body of work, going back a number of years, clear, logical and consistent in every way suddenly gets into this flip flop mode.

What are you, a political analyst for a MSM tv station? This is what was said:

"Now the trillion dollar question, might the current rally be the start of a pricing in of rising inflation? With oil bouncing firmly off $40, can inflation be far behind? Will inflation be good or bad for stocks?"

"Is this the context for a sustained stock market rally? We doubt it."


"If so, we may be at least nearing an entry point for selective stock buying. While we are as eager as anyone to get out of Treasury bonds and gold, before we go whole hog on stocks, we ponder what we heard on a client call put on by a large investment bank. It gives us pause, especially in the context of the ongoing collapse of the FIRE Economy."



Red used for emphasis of non-committal, rhetorical aspects that promote discussion. To call these comments a flip-flop is pretty far off, even ridiculous. I'm all about analysis of the commentary, but where does it say sell off your insurance (gold), quit investing in treasuries, and buy stocks?

[osmose]

The point is, when someone says "double your gold allocation and switch to shortest maturity treasuries because the USD might cr*p out", you shouldn't even be discussing allocation to stocks. You should be taking some time off and taking up a new hobby or whatever to help you wait out the crisis. No way, no how should you even appear "to be anxious to sell gold and T's". And I don't like being a lab rat for an upcoming book!

[goadam1]

The real men are avoiding this thread and hanging out at 321..deflation.

[Quincy K]

The point is, when someone says "double your gold allocation and switch to shortest maturity treasuries because the USD might cr*p out", you shouldn't even be discussing allocation to stocks. You should be taking some time off and taking up a new hobby or whatever to help you wait out the crisis. No way, no how should you even appear "to be anxious to sell gold and T's". And I don't like being a lab rat for an upcoming book!

My thoughts exactly. And the aforementioned post was only about two weeks ago. So we have a six percent rally and all the negative fundamentals(unsustainable debt,collapsing asset bubbles,horrible consumer balance sheets,increasing unemployment and decreasing wages) have now changed?

This thing is far from over. We haven't even hit HALF of their forecast of 20 percent u-3 UE by 2010.

Sounds to me like EJ and Fred are getting a little antsy at the casino bar and about to make their way over to the craps table.

[BiscayneSunrise]

No need to go whole hog on stocks, true enough.

But time to ease up on the short positions, perhaps.

Full Disclosure: I voted for door number 2 in the survey.

Now we just need Mega to watch the markets in the east and give us an early morning market call. :p

[goadam1]

My thoughts exactly. And the aforementioned post was only about two weeks ago. So we have a six percent rally and all the negative fundamentals(unsustainable debt,collapsing asset bubbles,horrible consumer balance sheets,increasing unemployment and decreasing wages) have now changed?

This thing is far from over. We haven't even hit HALF of their forecast of 20 percent u-3 UE by 2010.

Sounds to me like EJ and Fred are getting a little antsy at the casino bar and about to make their way over to the craps table.

Seems to me that a couple of posts have hedged away from 20% u3 but I can't get an answer. Yes, I am obsessed and have an irrational fear of unemployment.


Also, I guess it's good I haven't opened that bullionvault account yet.

[Chris Coles]

3) This is a great opportunity to sell stocks you haven't already sold. But hurry, because it will only last a day or few!

My view is clear cut. I remind EJ that he recently suggested that the US will be the first country to rebound due to the resilience of the nations economy. But as I see it, the real problem is that the general toxicity is now deeply embedded. Banks are in deeper trouble than even we thought a few weeks ago. Barclay's, here in the UK, two weeks ago looked as though they were going to sail through without any real lasting problems. Now, they are beginning to look as vulnerable as everyone else in their sector. I believe that the systematic breakdown of the FIRE economy is travelling at a very much faster rate than anyone had predicted. Desperation has sparked a rally, but there are no fundamentals to support such. The rally will soon run out of steam and the chickens will continue to fall off their perches.

[goadam1]

The point is: do the opposite of Buffet.

[Chris Coles]

PS: Has anyone else noticed the £UK is back on the slide again. The "inflation" for the time being will be in currency value dropping through the floor.

[hoodoo]

Hang on there - "the road to ruin" and "what just happened" threads both contained veins of optimism. EJ has spoken several times that there are some companies and stocks that are just waiting for the fires to burn off leaving a fertile field.

Hoo




All I am saying is that you don't go from "Road to Ruin" to "let's think about selectively adding stocks" (with a potential for an all-in on the long side) in a space of 2 or 3 weeks. That's just bizarre a bit.
What confuses me is how a phenomenal body of work, going back a number of years, clear, logical and consistent in every way suddenly gets into this flip flop mode.

[goadam1]

Let's see. Did someone come out with a new and amazing product? A new energy? A large pool of oil? Good earnings? New hires? Inflation, maybe.

Lot of people in shorts and a bankstier said earnings (if you discount the bad stuff) are looking good? Bingo. Let's Day trade!

[Sharky]

The cheerleaders are out in force:

CNBC has called the bottom (again)
Obama has urged people to buy stocks
Buffet has announced that he's buying
Bernanke has predicted (again) an upswing in the economy later this year

Mix that brainwashing with a little good news (probably very heavily massaged), and surprise! You get a bear market rally. Whether it lasts days or weeks will depend on when the next bad news hits. My prediction: not long.

Is this the beginning of poom? Finster's FDI, which seems to be a pretty good broad-based leading indicator (my words, not his), says no.

[metalman]

The cheerleaders are out in force:

CNBC has called the bottom (again)
Obama has urged people to buy stocks
Buffet has announced that he's buying
Bernanke has predicted (again) an upswing in the economy later this year

Mix that brainwashing with a little good news (probably very heavily massaged), and surprise! You get a bear market rally. Whether it lasts days or weeks will depend on when the next bad news hits. My prediction: not long.

Is this the beginning of poom? Finster's FDI, which seems to be a pretty good broad-based leading indicator, says no.

and something tells me itulip is about to come out with one of those jaw dropping wtf posts that hits us like a bucket of ice cold cat piss.

[jpatter666]

IMO the market rallied because for once there wasn't bad news to kill it. Seems like every time the market wanted to rally another shoe dropped and we plunged again.

So we get a few days without a major shoe dropping, C announces that "hey we actually *earned* money for once" (considering they got a bunch of free government money I can guess how hard that was...) and the bulls take off.

Of course, not to say there isn't a whole flock of black swans waiting in the wings.

C can still go under
GM and Chrysler still to deal with
Commercial real estate is only beginning the swan dive
Credit cards

And let's not forget all the other stuff (mortgages, huge debt, eastern Europe, etc).

Not to mention just the *standard* nonsense (politics, oil, terrorism, etc) that causes market plunges.

There still may be a short-term bear rally and if EJ has advice on how to leverage and take advantage of it, I'll certainly lend an ear, but this game is still in the early innings.

I like Fleckenstein's description of it. This is a triple-header, three games in a row.

First game is the financial (liquidity) crisis -- this game is essentially over.
Second game is the economic crisis -- this game has begun, but we are in the early innings
Funding crisis (is this poom?) you can get some glimmer of the calendar date -- it's now on the schedule

[LargoWinch]

one of those jaw dropping wtf posts that hits us like a bucket of ice cold cat piss.

metalman, you have been quite active tonight and extra-funny too boot.

[LargoWinch]

Wait a minute here.

May the only soul who voted for this:
"This is the beginning of a new bull market. Be fully invested in stocks."

Step forward...

[orion]

Wait a minute here.

May the only soul who voted for this:
"This is the beginning of a new bull market. Be fully invested in stocks."

Step forward...

I vote for Lukester, he was calling for a big rally in another thread ...

[orion]

jpatter666,

Fleck also had another item that hits on this thread, he said;

Could we have a substantial bear market rally that might last for a while? Absolutely. These are markets and they can do what they want, especially when there are as many moving parts as now exist. But I think the probability that the worst has been seen is extraordinarily low. (Though perhaps some companies will not make new lows -- we will just have to see.) And, no matter how good the rally looks, it must be remembered that the very best ones always occur in bear markets.

Sounds like the "client call" summary to me.

[metalman]

I vote for Lukester, he was calling for a big rally in another thread ...

only for a bear market rally. of course we'll see one some day... but just how high does a bag is shit bounce, anyway?

[Down Under]

metalman, you have been quite active tonight and extra-funny too boot.


Yer, I gotta agree, ice cold cat piss, really made me laugh.

[Down Under]

Wait a minute here.

May the only soul who voted for this:
"This is the beginning of a new bull market. Be fully invested in stocks."

Step forward...

Yes, I'd like to know who voted for #1, as well. I voted for #3, but #2 is just as likely.

[goadam1]

and something tells me itulip is about to come out with one of those jaw dropping wtf posts that hits us like a bucket of ice cold cat piss.

You are a poet. Poetman

[goadam1]

Yes, I'd like to know who voted for #1, as well. I voted for #3, but #2 is just as likely.
I want to change my vote to 1 just to mess with people.

[Down Under]

You are a poet. Poetman

A poet for the times, eh.

[occdude]

Technically the market was oversold. They'll be a big rally at this point, and then a search for the bottom again. Fundamentals are still the same, bad. And until they get better, I wouldn't entertain a long play in stocks. But I agree with the "its a traders market" sentiment.

Oil is playing catch-up (or gold is playing catch-down) for a more reasonable ratio between the two, however deflation is still in control if not temporarily taking a nap. China was interesting today, up more than the Dow. Is this a trend? China and the emmerging markets have all been stronger relative to the Dow this year, but I think the market is just looking a wee bit too far into the future where, barring war over public indeciency of sailors, emmerging markets have emmerged and the US submerges.

In the meantime, I wouldn't get rid of the canned fish at least it holds its value for as long as it is still potable.

[Chris Coles]

The Times March 11, 2009

London stock market surges despite signs that recession is tightening its grip

London shares soared yesterday, registering their biggest gains for three months, despite news that Britain’s battered manufacturing sector is suffering its most brutal slump for four decades.

Official figures confirming that factory production is plummeting, sparked new warnings that the recession has sharply tightened its grip since the turn of the year. In the three months to the end of January, manufacturing output sank 6.4 per cent — the steepest plunge since 1968.

The news left economists voicing alarm that the economy as a whole is shrinking at an even faster pace than in the grim final quarter of last year.

http://business.timesonline.co.uk/tol/business/economics/article5884275.ece?&EMC-Bltn=OMS9CA

[GRG55]

if you're looking for contradiction, you can find it i suppose.

i hear 'selecting buying, maybe' not 'let's all go long stocks!'

given that itulip has waited 11 years and held out through the 'bottom' that everyone else called in nov. 2008, what's wrong with at least taking a look at a coupla stocks?

People seem to have forgotten that what one might do to scalp some folding money from the market can be quite different, and even contradictory to the core macro position.

A good bear market rally from a deeply oversold position may be [for some] a good time for the former, which doesn't require abandoning the latter.

[cobben]

"And what about the physical gold? I heard Saddam had gold plated toilets. Is it a good idea to gold plate the WC in my rented accomodation?"

That was Lenin's solution to the gold problem - gold plated public urinals.

Actually I made a similar suggestion on some other forum last fall, as a final solution for the goldbugs - put them in a public works program, let them gold plate public urinals using their own otherwise worthless gold. :D<!-- / message -->

[cobben]

Funnymentally, equities are down to the point where the corrupt OPM crowd (pension funds, etc.) is going to have serious problems. It is thus in TPTB's interest to push back from the edge of the cliff, if only for a few weeks.

What a coincidence, Hussman was predicting more "volatility" just this weekend:

Buckle Up.
http://www.hussmanfunds.com/wmc/wmc090309.htm

"I suspect that the markets are about to get volatile, possibly to an extent beyond what we observed in October and November.
. . .

While the stock market is extremely compressed, which invites the typical “fast, furious, prone-to-failure” rallies to clear this condition, my larger concern is that market action and credit spreads are demonstrating very little investor confidence, risk-tolerance or commitment to stocks. Value investors know that stocks have been much cheaper at the end of lesser crises, and traders are still sellers on advances. My impression is that only prices that allow no room for error (what Ben Graham used to call a “margin of safety”) will be sufficient to prompt robust, committed buying from value investors. This will be a fine thing for investors who keep their heads, are already defensive, and have the capacity to add to their investment exposure on price weakness, but other investors are likely to be shaken out of long-term investments at awful prices. This need not happen in one fell swoop, and we need not observe the “final lows” anytime soon. The problem is that even to get a sustainable “bear market rally,” somebody has to be convinced that stocks are desirable holdings for more than a quick bounce.
When I was working down at the Chicago Board of Trade as an options mathematician in the late 1980's, I learned that the best approach to volatility is to “widen your spread and lower your size.” For a trader, that means keeping a wide bid-ask spread so you get more “edge” for putting on a trade, and holding the number of contracts you trade to a small number so that your capital can tolerate a whole succession of moves against your position. As investors, the same advice amounts to establishing exposure to market fluctuations only very gradually, and on significant price weakness.
I've been asked when we are likely to move to a significantly constructive investment position. We do have some out-of-the-money call options (about 1% of assets) to slightly anti-hedge our otherwise strongly defensive position, but conditions have deteriorated significantly from even a few months ago. Late last year, I was far more optimistic that our leaders would respond correctly than I am now. Unfortunately, the growing revulsion of investors is palpable. Presently, we don't observe any “favorable divergences” from market action that would suggest that the under-structure of the market is holding up. Such divergences would be a sign that investors are becoming less risk averse. We just don't see it here. Moreover, we've lost the opportunity to address this problem without significant “add on” effects in the form of job losses and economic contraction.
. . . "

[GRG55]

Funnymentally, equities are down to the point where the corrupt OPM crowd (pension funds, etc.) is going to have serious problems. It is thus in TPTB's interest to push back from the edge of the cliff, if only for a few weeks.

What a coincidence, Hussman was predicting more "volatility" just this weekend:

Buckle Up.
http://www.hussmanfunds.com/wmc/wmc090309.htm

"I suspect that the markets are about to get volatile, possibly to an extent beyond what we observed in October and November.
. . .

While the stock market is extremely compressed, which invites the typical “fast, furious, prone-to-failure” rallies to clear this condition, my larger concern is that market action and credit spreads are demonstrating very little investor confidence, risk-tolerance or commitment to stocks. Value investors know that stocks have been much cheaper at the end of lesser crises, and traders are still sellers on advances. My impression is that only prices that allow no room for error (what Ben Graham used to call a “margin of safety”) will be sufficient to prompt robust, committed buying from value investors. This will be a fine thing for investors who keep their heads, are already defensive, and have the capacity to add to their investment exposure on price weakness, but other investors are likely to be shaken out of long-term investments at awful prices. This need not happen in one fell swoop, and we need not observe the “final lows” anytime soon. The problem is that even to get a sustainable “bear market rally,” somebody has to be convinced that stocks are desirable holdings for more than a quick bounce.
When I was working down at the Chicago Board of Trade as an options mathematician in the late 1980's, I learned that the best approach to volatility is to “widen your spread and lower your size.” For a trader, that means keeping a wide bid-ask spread so you get more “edge” for putting on a trade, and holding the number of contracts you trade to a small number so that your capital can tolerate a whole succession of moves against your position. As investors, the same advice amounts to establishing exposure to market fluctuations only very gradually, and on significant price weakness.
I've been asked when we are likely to move to a significantly constructive investment position. We do have some out-of-the-money call options (about 1% of assets) to slightly anti-hedge our otherwise strongly defensive position, but conditions have deteriorated significantly from even a few months ago. Late last year, I was far more optimistic that our leaders would respond correctly than I am now. Unfortunately, the growing revulsion of investors is palpable. Presently, we don't observe any “favorable divergences” from market action that would suggest that the under-structure of the market is holding up. Such divergences would be a sign that investors are becoming less risk averse. We just don't see it here. Moreover, we've lost the opportunity to address this problem without significant “add on” effects in the form of job losses and economic contraction.
. . . "

Revulsion is the key word. When the time comes to damn-the-torpedoes and jump wholesale into stocks with everything ya got, Finster's three poll choices will read something more like this:

Benjamin Graham and Warren Buffett were both wrong. Stocks are dead. I will never, ever, ever buy another equity for as long as I live..:p.
Stocks can be bought and safely held for the next 20 years, but only for the dividends because the New Efficient Market Theory** demonstrates that capital gains are against the laws of nature...:eek:
Stocks can be bought, but only for your grandchildren's college fund; it'll take that long...

**A New Efficient Market Theory emerged from research conducted by a team of out of work Nobel laureates and quants, during the Great Recession of the early 21st century.

[LargoWinch]

Revulsion is the key word. When the time comes to damn-the-torpedoes and jump wholesale into stocks with everything ya got, Finster's three poll choices will read something more like this:
Benjamin Graham and Warren Buffett were both wrong. Stocks are dead. I will never, ever, ever buy another equity for as long as I live..:p.
Stocks can be bought and safely held for the next 20 years, but only for the dividends because the New Efficient Market Theory** demonstrates that capital gains are against the laws of nature...:eek:
Stocks can be bought, but only for your grandchildren's college fund; it'll take that long...
**A New Efficient Market Theory emerged from research conducted by a team of out of work Nobel laureates and quants, during the Great Recession of the early 21st century.

A close relative asked me this week if he should buy GM now that the stock is so cheap. :eek:

He said: "surely that is a good buy at around one Loonie (dollar) per share? They will come out of this and I will make money."

When I said that a) they are already bankrupt for accepting government's money and b) a stock can and will go to 0 faster than you can say it, he dropped the idea.

This relative is retired and all in cash since December 2007 thanks to EJ (before that his "financial planner" advocated for a 60% Equity 30% bonds 10% cash strategy).

I have not been able to convince him to buy any gold whatsoever (that barbaric relic); even now after looking like a market guru (again thanks to EJ and iTulip).

When this person wants to move all his cash into gold, I guess it will be the time to sell mine and prevent him from buying any...

[dbarberic]

All I am saying is that you don't go from "Road to Ruin" to "let's think about selectively adding stocks" (with a potential for an all-in on the long side) in a space of 2 or 3 weeks. That's just bizarre a bit.
What confuses me is how a phenomenal body of work, going back a number of years, clear, logical and consistent in every way suddenly gets into this flip flop mode.
Yes.

For as much as I love iTulip, I find it also frustrating. Often the writing is interwoven with snippets of history, quotes, and other tid-bits. The writing is excellent, but I find myself often stepping back and asking myself, what does this all mean; what are the implications? I’m looking for the executive summary and what I’m getting is the history lesson and future predictions written in metaphor.
<O:p</O:p

In hindsight, when I read iTulip’s past writings they always make perfect sense. I pick up on the metaphors and the obscure references. Hindsight is 20/20.<O:p</O:p
<O:p</O:p

But these predictive writings usually leave me saying “huh?” and sometimes making multiple interpretations of the missive. I don’t like that. <O:p</O:p

[Finster]

Revulsion is the key word. When the time comes to damn-the-torpedoes and jump wholesale into stocks with everything ya got, Finster's three poll choices will read something more like this:

Benjamin Graham and Warren Buffett were both wrong. Stocks are dead. I will never, ever, ever buy another equity for as long as I live..:p.
Stocks can be bought and safely held for the next 20 years, but only for the dividends because the New Efficient Market Theory** demonstrates that capital gains are against the laws of nature...:eek:
Stocks can be bought, but only for your grandchildren's college fund; it'll take that long...

**A New Efficient Market Theory emerged from research conducted by a team of out of work Nobel laureates and quants, during the Great Recession of the early 21st century.

Ha!!! :D To take it a step further, I'd argue that revulsion would have to give way to apathy before we see the next secular bull market. A little less of "stocks stink" and a little more of "what the heck is "stocks?"".

That said, let's distinguish between a "secular" bull market and a "cyclical" bull market. I'd put that little thingy we saw from 2002 to 2007 in the latter category. An example of the former would be 1982-2000, give or take a few years.

Either one, however, would qualify as a "new bull market" for the purposes of the original poll question. We could easily have argued (and in fact did) back in 2002-2007 that the (secular) bear market that began in March 2000 was still in force, but the cyclical bull market of that period was nevertheless still something few investors could afford to ignore. Unless we are Methuselah, any multi-year event of that size just makes up too substantial a portion of our investing careers.

Just something to keep in mind re the context of this thread and poll questions. We do not require that a bull market be of a "secular" nature to select Door #1 in our poll. If a "cyclical" bull market intervenes, it is a "new bull market" even if we think lower lows are in the offing circa 2014.

[FRED]

Ha!!! :D To take it a step further, I'd argue that revulsion would have to give way to apathy before we see the next secular bull market. A little less of "stocks stink" and a little more of "what the heck is "stocks?"".

That said, let's distinguish between a "secular" bull market and a "cyclical" bull market. I'd put that little thingy we saw from 2002 to 2007 in the latter category. An example of the former would be 1982-2000, give or take a few years.

Either one, however, would qualify as a "new bull market" for the purposes of the original poll question. We could easily have argued (and in fact did) back in 2002-2007 that the (secular) bear market that began in March 2000 was still in force, but the cyclical bull market of that period was nevertheless still something few investors could afford to ignore. Unless we are Methuselah, any multi-year event of that size just makes up too substantial a portion of our investing careers.

Just something to keep in mind re the context of this thread and poll questions. We do not require that a bull market be of a "secular" nature to select Door #1 in our poll. If a "cyclical" bull market intervenes, it is a "new bull market" even if we think lower lows are in the offing circa 2014.

In the iTulip view of the world, the FIRE Economy must completely burn itself out and be replaced with a new structure before the stock market can recover. How long will that process take? Five years? Ten? Depends on the political response. For example, if the banks are nationalized then re-privatized back into the hands of the same crew that made this mess, this might go on for twenty years. That's the Argentina model. Or banks are maintained as zombies for 20 years as in Japan, where stocks are trading at 20% of peak prices 19 years ago.

[Master Shake]

While we are as eager as anyone to get out of Treasury bonds and gold, before we go whole hog on stocks, we ponder what we heard on a client call put on by a large investment bank. It gives us pause, especially in the context of the ongoing collapse of the FIRE Economy. To be published shortly.
FRED,

When may we expect this?

[osmose]

Who cares cyclical or secular?? Catching even one cyclical rally like 2002-2007 is plenty to be able to retire and never work again.

I guess it would be helpful if EJ could explain how he sees us getting to new lows - in a steady downtrend for many years (with occasional smallish countertrend rallies) or a rally to like 12,000 followed by a downtrend to 5,000 by 2014.

Bottom line, in March 2003 an old trader told me "this is a rally with sell tickets already written" . Shows how much these guys know. My personal feeling is we are now where we were in March 2003 but I am not backing up the truck cause I keep EJ's body of research in mind. What to do, what to do...

Confused in London....

[babbittd]

This is a great opportunity to sell stocks you haven't already sold. But hurry, because it will only last a day or few!

I chose this option yesterday, when the poll was tied and the Dow was up.

Haha, what did you all pile on today when you saw the Dow going down?

This is the kickoff of a bear market rally that will take the averages up 20% or more and last at least a few weeks. 69 43.95%
This is a great opportunity to sell stocks you haven't already sold. But hurry, because it will only last a day or few! 86 54.78%

[LargoWinch]

This is a great opportunity to sell stocks you haven't already sold. But hurry, because it will only last a day or few!

I chose this option yesterday, when the poll was tied and the Dow was up.

Haha, what did you all pile on today when you saw the Dow going down?

babbittd; I am still looking (note to other members: jockingly don't take me too seriously here) for the two who chose:

"This is the beginning of a new bull market. Be fully invested in stocks."

They are either the smartest one of the bunch or the ones who may end up being disapointed at this poker game.

[Finster]

Is this the beginning of a new bull market? A rally kickoff? A dead cat bounce?

1) This is the beginning of a new bull market. Be fully invested in stocks.

2) This is the kickoff of a bear market rally that will take the averages up 20% or more and last at least a few weeks.

3) This is a great opportunity to sell stocks you haven't already sold. But hurry, because it will only last a day or few!

Guess I haven't yet attemtped to respond to my own question. One could make rational arguments for any of the scenarios; I'd put the odds at 1) 15%, 2) 50%, & 3) 35%. This assumes of course they are interpreted as collectively exhaustive, since they add up to 100%. In short, I'll go with Door #2.

Based on what we've seen so far, the arguments for the last two are pretty well documented. Since no one else has attempted to defend 1), here goes: Yes, the market is still not at valuation levels consistent with durable market bottoms. And yes, we are slipping into a depression. But the monetary and fiscal action has been so aggressive that the dollar will out-depreciate stocks. Nominal stock prices will rise as they did in 2002-2007. So we get one more (nominal) cyclical bull market taking us somewhere into 2013-2014 before a third cyclical bear phase for this secular bear market puts in the final bottom.

[jk]

http://chart.finance.yahoo.com/c/my/_/_n225

here's another debt deflation bear market, 19 years of it. lots of big rallies along the way.

[Chris]

PS: Has anyone else noticed the £UK is back on the slide again. The "inflation" for the time being will be in currency value dropping through the floor.

Yes! It was a nice trade. :)

We seem to have a "relief rally" in the pound at the moment. That will last a few days then it's back down the rabbit hole I suspect.


As for stocks, why not a nominal bottom in some stocks that are selling at cash? I don't see the inconsistency with buying selectively and at the same time expecting further general stock market declines and high inflation. Perhaps I'm missing something?

[LargoWinch]

the monetary and fiscal action has been so aggressive that the dollar will out-depreciate stocks. Nominal stock prices will rise as they did in 2002-2007.

Thank you sir Finster for your forecast.

Is it fair to say that stocks indexes will be propelled by inflation-sensitive stocks just like in the 70s then?

Consequently, some stocks (I am thinking of companies who cannot past the increased input costs fast enough to their customers) will be very bad bets even in nominal terms?

[bart]

Guess I haven't yet attemtped to respond to my own question. One could make rational arguments for any of the scenarios; I'd put the odds at 1) 15%, 2) 50%, & 3) 35%. This assumes of course they are interpreted as collectively exhaustive, since they add up to 100%. In short, I'll go with Door #2.

Based on what we've seen so far, the arguments for the last two are pretty well documented. Since no one else has attempted to defend 1), here goes: Yes, the market is still not at valuation levels consistent with durable market bottoms. And yes, we are slipping into a depression. But the monetary and fiscal action has been so aggressive that the dollar will out-depreciate stocks. Nominal stock prices will rise as they did in 2002-2007. So we get one more (nominal) cyclical bull market taking us somewhere into 2013-2014 before a third cyclical bear phase for this secular bear market puts in the final bottom.


I'd flip the probabilities for #2 & #3 - it just doesn't look or feel like a decent bottom from here, especially given the rather anemic move today.

Even though we're in one of the date ranges during which my work shows we should have a tradeable bottom, I'm holding out for at least a day or two more... the ides of March will soon be upon us and you know what a cad both the markets can be and Brutus was.

[cjppjc]

I guess it would be helpful if EJ could explain how he sees us getting to new lows - in a steady downtrend for many years (with occasional smallish countertrend rallies) or a rally to like 12,000 followed by a downtrend to 5,000 by 2014.



Confused in London....


Yes, that would be helpful. Maybe Ed can tell us the dates and Dow levels to watch as well. While he's at it, I'm emailing my typical daily diet to see what he thinks.:rolleyes:

[cobben]

The EOQ is also soon upon us, and EOY in Japan, when the Japanese are said to do weird things.

The US EOQ I am suspecting should be frought with wild desperate attempts to hold up the equity averages as well as can be managed. There could be several wilder than usual swings as TPTB (the whole OPM crowd) fight reality during the next few weeks.

I recall may years ago someone explained to me what usually happened during the Japanese EOY, but lazy & ignorant & unsuspecting as I was, I just saw that as having only curiosity value at the time and never saved any of it. Perhaps someone here knows?

[goadam1]

Guess I haven't yet attemtped to respond to my own question. One could make rational arguments for any of the scenarios; I'd put the odds at 1) 15%, 2) 50%, & 3) 35%. This assumes of course they are interpreted as collectively exhaustive, since they add up to 100%. In short, I'll go with Door #2.

Based on what we've seen so far, the arguments for the last two are pretty well documented. Since no one else has attempted to defend 1), here goes: Yes, the market is still not at valuation levels consistent with durable market bottoms. And yes, we are slipping into a depression. But the monetary and fiscal action has been so aggressive that the dollar will out-depreciate stocks. Nominal stock prices will rise as they did in 2002-2007. So we get one more (nominal) cyclical bull market taking us somewhere into 2013-2014 before a third cyclical bear phase for this secular bear market puts in the final bottom.

Are we diving in? The water looks cold. Who is going first? I'll jump second.

[LargoWinch]

Are we diving in? The water looks cold. Who is going first? I'll jump second.

I have an idea: the two who voted for

"This is the beginning of a new bull market. Be fully invested in stocks."

go first?

[BK]

Warren Buffet began appearing on CNBC regularly - I wondered had he lost his focus or was just loving the public attention and this past year seemed to be Peak Warren Buffet time.

I think Warren is guilty of over confidence - he had a heck of a run and I wouldn't bet against him in the future.

Humans regularly fall victim of their own success and we convince our selves that we understand how MR MARKET is going to behave. You have a little success in making money on investments and your convinced that you can control any negative market events through your wise investing - you've fallen into the markets trap.

So, we all should have seen the Berkshire Hathaway was due for a HUGE correction when Warren traveled to China with Becky from CNBC.

[Finster]

Thank you sir Finster for your forecast.

Is it fair to say that stocks indexes will be propelled by inflation-sensitive stocks just like in the 70s then?

Consequently, some stocks (I am thinking of companies who cannot past the increased input costs fast enough to their customers) will be very bad bets even in nominal terms?

Thanks, Largo, I would say in that case, yes. But please read carefully! The "new bull market" scenario argued with these words was my "15%" probability, the lowest of the three. I only describe this rationale to support the suggestion that the probability is not zero.

[Finster]

I'd flip the probabilities for #2 & #3 - it just doesn't look or feel like a decent bottom from here, especially given the rather anemic move today.

Even though we're in one of the date ranges during which my work shows we should have a tradeable bottom, I'm holding out for at least a day or two more... the ides of March will soon be upon us and you know what a cad both the markets can be and Brutus was.

We are hard pressed to debate the point with an experienced trader! Just to add an observation, however, there is some space between the 2) and 3) scenarios, literally interpreted; it's possible to have a rally somewhat short of "at least a few weeks" and "20% or more" and still be in excess of "a day or few". If something were to happen in that "space", we won't attempt to parse the finer points of which category it belongs to... ;)

[goadam1]

Too much paper chasing too few assets is a recipe for a short term bull.

[stockman]

Whether one wants to try and trade a countertrend rally within an ongoing bear market is a personal choice. However, given extremes reached early this week I would not want to be short stocks here. Risk reward favors the bulls in the near term IMHO.


If the bears can't break the bottom of the channel the bulls have a shot at the top of the channel (roughly 25-30% upside from bottom).

1220

Insider buying vs selling now above 5:1 ratio-

1221

Rydex traders cash levels ABOVE 2002 levels-

1222

Assets in S&P 500 short (inverse) funds back near highs-

1223

Watch the debt market- BLV, AGG, CFT, PFF, LQD (fixed income ETFs). These need to hold (or even better-break to upside) to keep the equities moving IMO.

1224

I never want to get so attached to a position that I lose my objectivity. Too much company suggest a review of your position.

[LargoWinch]

Fascinating. Thanks Stockman. You should post more often.

[stockman]

Largo- Thanks. Busy year, I'll try to make it here more often-:). I sometimes think I come from too much of a trading perspective for the group at itulip.

[LargoWinch]

Largo- Thanks. Busy year, I'll try to make it here more often-:). I sometimes think I come from too much of a trading perspective for the group at itulip.

My understanding is that iTulip is a macro site.

However, every bits of info counts and chart like these are always appreciated and can generate some very interesting discussions to the benefit of us all.

[Finster]

Whether one wants to try and trade a countertrend rally within an ongoing bear market is a personal choice. However, given extremes reached early this week I would not want to be short stocks here. Risk reward favors the bulls in the near term IMHO....

Thanks, Stockman. Nice charts.

Much agreed on the trading and shorting points. For many of us, whether to trade a countertrend rally depends on what kind of rally we expect. A "Type 3)" rally (referring to the Poll option numbering) would be only for the most nimble traders. A "Type 2)" rally, however, would probably fit in the crosshairs of most of us iTulipers. A few folks will even sit out a "Type 1)" "rally", but they would be the rare exceptions.

Hence this poll.

[bart]

We are hard pressed to debate the point with an experienced trader! Just to add an observation, however, there is some space between the 2) and 3) scenarios, literally interpreted; it's possible to have a rally somewhat short of "at least a few weeks" and "20% or more" and still be in excess of "a day or few". If something were to happen in that "space", we won't attempt to parse the finer points of which category it belongs to... ;)

Naaah... you could easily be right. Even with all my experience and charts and hunches and whatever, I still blow it about 1/3 of the time.

And you took the words right out of my mouth on the hybrid option between #2 & #3. I almost mentioned it in my initial post but figured it wouldn't add much. I still haven't established any longs partially because it doesn't feel right and partially because there's plenty of other things to trade which I view as having lower risk - like metals or sugar or bellies, or even standing aside while things thrash themselves out.

And I will admit to noticing that both Tuesday's & today's moves were... ummm... quite... ummm... "smooth" in their up trends during the trading day. :eek: :rolleyes:

[Finster]

Naaah... you could easily be right. Even with all my experience and charts and hunches and whatever, I still blow it about 1/3 of the time.

And you took the words right out of my mouth on the hybrid option between #2 & #3. I almost mentioned it in my initial post but figured it wouldn't add much. I still haven't established any longs partially because it doesn't feel right and partially because there's plenty of other things to trade which I view as having lower risk - like metals or sugar or bellies, or even standing aside while things thrash themselves out.

And I will admit to noticing that both Tuesday's & today's moves were... ummm... quite... ummm... "smooth" in their up trends during the trading day. :eek: :rolleyes:

Worth noting is that the S&P is already more than 12% above its intraday low of 666 last Friday ... so even the 20% upside mark wouldn't mean a whole lot more...

[Lukester]

Metalman - seems like only a couple of weeks ago (before EJ put out tentative feelers for the idea of nibbling at a few stocks) you were deriding the idea of all the "bottom fishers" in the markets crawling out of the woodwork once again - suggesting it was self evident they were all going to get their fingers flattened by the steam roller all over again. It would be good if once in a while you ventured an idea of your own that ventured boldly out and away from the initiatives that iTulip proposes. Try being contrary to an iTulip viewpoint once in a while?


if you're looking for contradiction, you can find it i suppose.

i hear 'selecting buying, maybe' not 'let's all go long stocks!'

given that itulip has waited 11 years and held out through the 'bottom' that everyone else called in nov. 2008, what's wrong with at least taking a look at a coupla stocks?

[Lukester]

All I am saying is that you don't go from "Road to Ruin" to "let's think about selectively adding stocks" (with a potential for an all-in on the long side) in a space of 2 or 3 weeks. That's just bizarre a bit. What confuses me is how a phenomenal body of work, going back a number of years, clear, logical and consistent in every way suddenly gets into this flip flop mode.

I happen to agree that it's not necessarily a foregone conclusion that stocks are dead going forwards, but iTulip hardly seem to be diving into stocks with their mention of this above. We are quite likely still in an interval of the bear market, and it has some quite nasty washing out to do - but I for one doubt this is heading into a total meltdown in US equities below these levels. The intuition which (I think) iTulip is at least tentatively exploring is whether the equities have as huge a downside from here as the Gerald Celente's of this world have now ramped up into full trumpeting mode to proclaim.

Not a whole lot of people here will even give a second to this consideration, but the North American equities may have in their not too distant future an unebelievable new upleg, and that contains the uneasy corollary that between 6K and 7K they may have found their bottom for the DOW. By late 2009 I think the survivalist obssession and Gerald Celente inspired black doom embraced by so many iTuliper's recently in emotional response to the recent downturn, may begin to look overblown, as the US turns the corner into one more credit cycle BEFORE the final breakdown. Where exactly is it written in stone that this must occur right now? What if it arrives out in the mid teens of this century?

What if we have an appointment instead with a massive renewed leg up in the equities, sooner rather than later? Maybe EJ is discerning "something out there" and also that if stocks strengthen to anything short of the total armageddon everyone imagines now, then gold could be heading into a period when it's unquestioned superiority to the equity indexes can face a real challenge. It is also quite possible that a significant turn in the equity indexes can do a massive amount of mood changing in the country as a whole, bringing about some really large changes in mid 2009 which no one here even remotely considers today.

If the equity indexes start looking seriously oversold to people, and then their snapback rally after the final washout of this bear market looks to have legs to continue, beware of the extent of the bid underlying gold. Gold can become acutely vulnerable if a public perception shifts to regard the entire equities sector as providing a well valued refuge from future threats. Meanwhile, if only because they are so blasted out in price, both stocks AND petroleum can begin a significant rise any time now. It stocks stage a sharp comeback beware because Gold can fall another 20% in response. Remember in recent weeks people puzzling over the divergence between the oil price and the gold price?

There is your answer - if stocks firm, it is gold which will correct down to oil, to resolve this conundrum. Expressed in a six to ten month time frame, IMO stocks have less risk than gold today. And I am saying all this as someone who frankly loathes stock investing.

The point is, when someone says "double your gold allocation and switch to shortest maturity treasuries because the USD might cr*p out", you shouldn't even be discussing allocation to stocks. You should be taking some time off and taking up a new hobby or whatever to help you wait out the crisis. No way, no how should you even appear "to be anxious to sell gold and T's". And I don't like being a lab rat for an upcoming book!

You come to iTulip to gain market intelligence that is strategic. A change in the wind for devastated stocks represents a tactical change that's potentially upcoming and can shift a lot of perceptions fast. Notions that gold's "fundamentals" predicate it's overhelmingly likely to go up while stocks are more likely to go down from here, risk being flat, 180% WRONG. So if you find yourself looking at stocks with deep suspicion right now, take a moment to wonder if the smart money is beginning to hedge their bets at least in some part away from gold and into equities.

The gold bull market is almost certainly not over - but to consider that progression to be linear sufficient for us to hang on to large positions in all eventualities is a dangerous assumption. People think that because they are "fully informed on the fundamentals underpinning gold", that they can merely ignore tactical shifts in the present. That is a potentially dangerous bit of hubris right there.

Gold might "take a vacation" from it's "assured destination" for a long time. Stocks can take a vacation from where everyone here assumes they are supposed to be heading also. There is a good bit of complacency about gold up, stocks down in this community. Don't discount the possibility that we may be about to head into a period of really agonizing soul searching on that question.

<LABEL for=rb_optionnumber_1><INPUT id=rb_optionnumber_1 type=radio value=1 name=optionnumber>This is the beginning of a new bull market. Be fully invested in stocks.</LABEL>
<LABEL for=rb_optionnumber_1>__ No, but as absurd as this question sounds, at some point in 2009-2010 IMO it will be profoundly true. </LABEL>
<LABEL for=rb_optionnumber_1></LABEL><LABEL for=rb_optionnumber_1></LABEL>
<LABEL for=rb_optionnumber_2><INPUT id=rb_optionnumber_2 type=radio value=2 name=optionnumber>This is the kickoff of a bear market rally that will take the averages up 20% or more and last at least a few weeks.</LABEL>
<LABEL for=rb_optionnumber_2>__ Yes, that's right. This may well prove a bear market rally. But how you should read what comes afterwards is more important </LABEL>
<LABEL for=rb_optionnumber_2>__ i.e. another bear leg after this little rally, but potentially a much larger market rally thereafter.</LABEL>
<LABEL for=rb_optionnumber_2></LABEL>
<LABEL for=rb_optionnumber_3><INPUT id=rb_optionnumber_3 type=radio value=3 name=optionnumber>This is a great opportunity to sell stocks you haven't already sold. But hurry, because it will only last a day or few!</LABEL>
<LABEL for=rb_optionnumber_3>__ Yes, even this may be correct short term.</LABEL>
<LABEL for=rb_optionnumber_3></LABEL>
<LABEL for=rb_optionnumber_3></LABEL>
<LABEL for=rb_optionnumber_3></LABEL>
<LABEL for=rb_optionnumber_3>What's the main conclusion from these three options? Question number one is potentially the big insight nested within these questions. And if so, that is dangerous to gold's preeminence. Everything else has taken a beating. Gold may be money and all that, but it's looking a bit lonely high up there all by itself.</LABEL>

[xela]

I happen to agree that it's not necessarily a foregone conclusion that stocks are dead going forwards, but iTulip hardly seem to be diving into stocks with their mention of this above. We are quite likely still in an interval of the bear market, and it has some quite nasty washing out to do - but I for one doubt this is heading into a total meltdown in US equities below these levels. The intuition which (I think) iTulip is at least tentatively exploring is whether the equities have as huge a downside from here as the Gerald Celente's of this world have now ramped up into full trumpeting mode to proclaim.

Not a whole lot of people here will even give a second to this consideration, but the North American equities may have in their not too distant future an unebelievable new upleg, and that contains the uneasy corollary that between 6K and 7K they may have found their bottom for the DOW. By late 2009 I think the survivalist obssession and Gerald Celente inspired black doom embraced by so many iTuliper's recently in emotional response to the recent downturn, may begin to look overblown, as the US turns the corner into one more credit cycle BEFORE the final breakdown. Where exactly is it written in stone that this must occur right now? What if it arrives out in the mid teens of this century?

What if we have an appointment instead with a massive renewed leg up in the equities, sooner rather than later? Maybe EJ is discerning "something out there" and also that if stocks strengthen to anything short of the total armageddon everyone imagines now, then gold could be heading into a period when it's unquestioned superiority to the equity indexes can face a real challenge. It is also quite possible that a significant turn in the equity indexes can do a massive amount of mood changing in the country as a whole, bringing about some really large changes in mid 2009 which no one here even remotely considers today.

If the equity indexes start looking seriously oversold to people, and then their snapback rally after the final washout of this bear market looks to have legs to continue, beware of the extent of the bid underlying gold. Gold can become acutely vulnerable if a public perception shifts to regard the entire equities sector as providing a well valued refuge from future threats. Meanwhile, if only because they are so blasted out in price, both stocks AND petroleum can begin a significant rise any time now. It stocks stage a sharp comeback beware because Gold can fall another 20% in response. Remember in recent weeks people puzzling over the divergence between the oil price and the gold price?

There is your answer - if stocks firm, it is gold which will correct down to oil, to resolve this conundrum. Expressed in a six to ten month time frame, IMO stocks have less risk than gold today. And I am saying all this as someone who frankly loathes stock investing.



You come to iTulip to gain market intelligence that is strategic. A change in the wind for devastated stocks represents a tactical change that's potentially upcoming and can shift a lot of perceptions fast. Notions that gold's "fundamentals" predicate it's overhelmingly likely to go up while stocks are more likely to go down from here, risk being flat, 180% WRONG. So if you find yourself looking at stocks with deep suspicion right now, take a moment to wonder if the smart money is beginning to hedge their bets at least in some part away from gold and into equities.

The gold bull market is almost certainly not over - but to consider that progression to be linear sufficient for us to hang on to large positions in all eventualities is a dangerous assumption. People think that because they are "fully informed on the fundamentals underpinning gold", that they can merely ignore tactical shifts in the present. That is a potentially dangerous bit of hubris right there.

Gold might "take a vacation" from it's "assured destination" for a long time. Stocks can take a vacation from where everyone here assumes they are supposed to be heading also. There is a good bit of complacency about gold up, stocks down in this community. Don't discount the possibility that we may be about to head into a period of really agonizing soul searching on that question.

<LABEL for=rb_optionnumber_1><INPUT id=rb_optionnumber_1 type=radio value=1 name=optionnumber>This is the beginning of a new bull market. Be fully invested in stocks.</LABEL>
<LABEL for=rb_optionnumber_1>__ No, but as absurd as this question sounds, at some point in 2009-2010 IMO it will be profoundly true. </LABEL>
<LABEL for=rb_optionnumber_1></LABEL><LABEL for=rb_optionnumber_1></LABEL>
<LABEL for=rb_optionnumber_2><INPUT id=rb_optionnumber_2 type=radio value=2 name=optionnumber>This is the kickoff of a bear market rally that will take the averages up 20% or more and last at least a few weeks.</LABEL>
<LABEL for=rb_optionnumber_2>__ Yes, that's right. This may well prove a bear market rally. But how you should read what comes afterwards is more important </LABEL>
<LABEL for=rb_optionnumber_2>__ i.e. another bear leg after this little rally, but potentially a much larger market rally thereafter.</LABEL>
<LABEL for=rb_optionnumber_2></LABEL>
<LABEL for=rb_optionnumber_3><INPUT id=rb_optionnumber_3 type=radio value=3 name=optionnumber>This is a great opportunity to sell stocks you haven't already sold. But hurry, because it will only last a day or few!</LABEL>
<LABEL for=rb_optionnumber_3>__ Yes, even this may be correct short term.</LABEL>
<LABEL for=rb_optionnumber_3></LABEL>
<LABEL for=rb_optionnumber_3></LABEL>
<LABEL for=rb_optionnumber_3></LABEL>
<LABEL for=rb_optionnumber_3>What's the main conclusion from these three options? Question number one is potentially the big insight nested within these questions. And if so, that is dangerous to gold's preeminence. Everything else has taken a beating. Gold may be money and all that, but it's looking a bit lonely high up there all by itself.</LABEL>
You sure edited this one alot, inflated levelheadedness and deflated sophistry make it a much better read ;)

I notice (but please correct me if I'm wrong) that you no longer see this all happening with a strong dollar.

[jk]

In the iTulip view of the world, the FIRE Economy must completely burn itself out and be replaced with a new structure before the stock market can recover. How long will that process take? Five years? Ten? Depends on the political response. For example, if the banks are nationalized then re-privatized back into the hands of the same crew that made this mess, this might go on for twenty years. That's the Argentina model. Or banks are maintained as zombies for 20 years as in Japan, where stocks are trading at 20% of peak prices 19 years ago.

Guess I haven't yet attemtped to respond to my own question. One could make rational arguments for any of the scenarios; I'd put the odds at 1) 15%, 2) 50%, & 3) 35%. This assumes of course they are interpreted as collectively exhaustive, since they add up to 100%. In short, I'll go with Door #2.

Based on what we've seen so far, the arguments for the last two are pretty well documented. Since no one else has attempted to defend 1), here goes: Yes, the market is still not at valuation levels consistent with durable market bottoms. And yes, we are slipping into a depression. But the monetary and fiscal action has been so aggressive that the dollar will out-depreciate stocks. Nominal stock prices will rise as they did in 2002-2007. So we get one more (nominal) cyclical bull market taking us somewhere into 2013-2014 before a third cyclical bear phase for this secular bear market puts in the final bottom.
imagine we are back in 2002. itulip has made the same arguments it is still making, and hasn't conceived yet of the housing and cdo/cds bubble. someone puts forward finster's argument, above, for a cyclical bull market reaching up to match the year 2000 nominal highs of the dow and s&p. would you have bought it?

i'm trying to get my mind around the possibility that option #1 in the poll might indeed be correct - i voted for #2 btw. i remember in 2002 the argument that we had not reached traditional bear market valuations. and, indeed, we hadn't. so we had a bull leg on the back of the housing bubble; a leg strong enough that 88 year old richard russell began questioning his dow theory convictions. and now we have new lows that STILL don't fulfill traditional bear market low valuation metrics.

look at the chart of nikkei i posted earlier in this thread. there were a lot of cyclical bull markets along the way to the new lows.

for there to be a new bull market, however, there needs to be a new bubble or the functional equivalent to pump up the economy for a few years. it seems implausible that private sector debt can grow sufficiently to do the job. that means it must be public sector debt that does the heavy lifting. so i ask: can government spending and government debt somehow pump up the economy enough for us to have a multi-year, cyclical "recovery" along with a multi-year cyclical bull market without a fundamental restructuring of the economy?

[Lukester]

Xela -

OK, apologies for a very long post - I can't figure out how to put these ideas forward in a short condensed list - but as my arguments are considered absurd I wish to defend them. Most of this is just a repost of John Mauldin comments on accelerating global currency depreciations.

You sure edited this one alot, inflated levelheadedness and deflated sophistry make it a much better read ;) I notice (but please correct me if I'm wrong) that you no longer see this all happening with a strong dollar.

Dollar not only can stay strong while a stock market surge unfolds, IMO it will. Watch your dogmas and percieved wisdoms on USD and a possible *extended* rebound of US equities after the next big washout bear leg down concludes.

I guess he does not assign this a high probability, but I find Finster's "devil's advocate" comment here very interesting:

Quote:
<TABLE cellSpacing=0 cellPadding=6 width="100%" border=0><TBODY><TR><TD class=alt2 style="BORDER-RIGHT: 1px inset; BORDER-TOP: 1px inset; BORDER-LEFT: 1px inset; BORDER-BOTTOM: 1px inset">Originally Posted by Finster http://www.itulip.com/forums/images/buttons/viewpost.gif (http://www.itulip.com/forums/showthread.php?p=82803#post82803)
Guess I haven't yet attemtped to respond to my own question. One could make rational arguments for any of the scenarios; I'd put the odds at 1) 15%, 2) 50%, & 3) 35%. This assumes of course they are interpreted as collectively exhaustive, since they add up to 100%. In short, I'll go with Door #2.

Based on what we've seen so far, the arguments for the last two are pretty well documented. Since no one else has attempted to defend 1), here goes: Yes, the market is still not at valuation levels consistent with durable market bottoms. And yes, we are slipping into a depression. But the monetary and fiscal action has been so aggressive that the dollar will out-depreciate stocks. Nominal stock prices will rise as they did in 2002-2007. So we get one more (nominal) cyclical bull market taking us somewhere into 2013-2014 before a third cyclical bear phase for this secular bear market puts in the final bottom.

</TD></TR></TBODY></TABLE>

The corollary which everyone here does not want to digest is that this could occur with a USD that was indeed disintegrating fast, (to provide the "fuel" for such an equities rally), but was also at the same time even RISING against all other currencies, as the major alternative global currencies accelerate their debasement to outpace the USD. Talk about a backdrop of rocket fuel for equities.

To my understanding, we are living through the death throes of the first global experiment in unbacked fiat currencies - ever. Lot's of strange artifacts can happen while this plays out at an international level.

Meanwhile, this USD real decline can potentially be a very squirrely stat to pin down if every other major currency starts to accelerate to the downside in a desperate bid for global trade. I admit, soaring equities against this backdrop looks really peculiar but don't rule it out, as this disintegration of currency units worldwide has to find an outlet somewhere.

Competitive currency devaluation pressure cooker - the longer all assets stay depressed against this backdrop, the more one asset class will eventually have to explode to express the generalized fiat debasement going on!

The USD can go UP against a basket of other currencies for the next 2-3 years while still disintegrating in reality, all the time providing "fuel" for a stock market boom. The main objection I've read here is that US public and private debt begins to overwhelm as it's "real" burden increases, but in a world where the USD disintegration is giving all other currencies a "run for their money" to the downside (pun intended), maybe even this fearsome calculation can neutralised to some notable extent.

Obviously the US wants and requires a debasement of currency units to take pressure off the US domestic economy- but does this automatically mean they will get it? What if every other nation wants the same thing? After all, currency debasement is every nation's sovereign right [ :rolleyes: ]. This is one little area where US "preponderance" may not get it's way!

Meanwhile, the world "needs" a lifesaver in some (real or fictitious) category of value - as the only alternative is global depression, which is "unacceptable". Meanwhile, Mauldin makes a good case below as to why we are in for some shocking degree of competitive currency devaluations in the next couple of years.

And look at what a soaring stock market can do also, to function as a powerful macro-palliative - what can a renewed large equities boom do to mitigate US govt. tax receipts while they quietly embark on monetizing anyway? A nice little ersatz resuscitated "virtuous circle" to bail the US out of an impossible predicament - as long as ROW plays along with this new gambit.

Stock markets are two parts fundamentals, and eight parts collective sentiment / delusion. Let's just take Jesse Livermore's viewpoint on this provisionally for the sake of argument. How categorically positive is everyone here that stock's inflationary mechanism is well and truly broken for years to come, if the entire world gets to the point of quietly "requiring" some asset class to boom to serve as at least a provisional locomotive of a partial world recovery?

Cast your eye around the world today, at the mayhem occurring in all currencies ex-USD. Then imagine the slowly crystallizing self fulfilling trend where the current USD outperformance becomes crystallized in global perceptions as continuing outperformance. Couple that with firming US equities and firming oil prices, and you can see three or four years of a lot of bidding on US indexes from frightened pools of capital in less stable peripheral markets.

Or what do we propose as a more alluring alternative asset for a fiat currency depreciating world here - soaring treasuries perhaps or soverign bonds of some "more robust" other nations? Not hardly.

I don't generally read Mauldin but he's useful here to describe what we are most likely looking forward to - accelerating generalised currency debasement worldwide. Where exactly is your pressure valve for all the debasement, if the USD is being outpaced by even faster declining other major currencies? You guys think you have all the "fundamental" reasons why the equities must stay in the doghouse - not once have I seen the possibility of a large upmove in equities explored here since this bear market started.

_______________________

The Land of the Setting Sun

Japan has been in a malaise for 20 years. And just when it looked like the country might turn around, the bottom has seemingly fallen out. Japan's economy shrank a slightly revised 3.2% in the last quarter of last year, confirming the sharpest contraction since the oil crisis in 1974, and economists warn of further contraction in the next two quarters.

The Japanese economy, mired in its worst recession since World War II, is forecast to shrink a further 2.5% in the first quarter of this year and another 0.4% in the second quarter, a Reuters poll shows.

But if you look at the underlying data, it's even worse. Let's turn to a recent letter from my good friend and favorite data maven, Greg Weldon. (www.weldononline.com (http://www.weldononline.com))

Japanese exports have fallen 54% in the last 6 months, an average of $40 billion a month, or down over a quarter of a trillion dollars. Greg notes that past 6-month changes in exports in Japan were hardly ever up or down more than a trillion yen. This is four times that level, about 4 trillion yen. To get a visual view, look at the graph below. That is called falling off a cliff.

http://www.investorsinsight.com/cfs-file.ashx/__key/CommunityServer.Blogs.Components.WeblogFiles/thoughts_5F00_from_5F00_the_5F00_frontline/jmotb031309image001_5F00_5550E8B3.gif

The decline in exports is about 45% year over year. Japan is one of the countries that has run a very large trade surplus, allowing them to buy lots of dollars and lend a great deal of money. Their banks have been an engine for growth worldwide, but especially in Asia. And the graph below shows that trade surplus turning into a large trade deficit of 952 billion yen, or somewhere over 9 billion dollars.

http://www.investorsinsight.com/cfs-file.ashx/__key/CommunityServer.Blogs.Components.WeblogFiles/thoughts_5F00_from_5F00_the_5F00_frontline/jmotb031309image002_5F00_1BCDD8BC.gif

To give that some perspective, the US trade deficit came in today and was "only" $36 billion, the lowest level in six years, mainly due to lower oil prices, as our exports have been shrinking as well (more on that below). The US economy is roughly three times the size of Japan's (and Japan is the world's second largest economy); so $9 billion is no small sum of money, relatively speaking.

(Quick note - while looking for that number on the web, I came across this tidbit in the China Daily. They project that the GDP of China will surpass Japan's next year.)

Inventory-to-shipping ratios in Japan are rising by over 50%, as industrial production is down more than 10% and likely to fall much further. Japanese auto exports are down 63% in just four months. Auto exports have literally fallen off a cliff, as inventories have doubled.

No surprise, Japan is promising even more government support programs, and aid to industries of all sorts. This from a government that has over 140% of debt to GDP, about twice that of the US. And their rapidly rising credit default swap rate is not helping. Who would have thought of Japan as a credit risk? Three years ago, almost no one. Now, rates are 30 times higher.

Japan's economy is driven by exports. And those exports were crushed as the yen rose in buying power and Japan's exports became less competitive in the last quarter, with calls for intervention to bring the yen back to a level where their industries can be more competitive. Look at the chart below of the Japanese yen versus the US dollar. (The moving average is 90 days.)

http://www.investorsinsight.com/cfs-file.ashx/__key/CommunityServer.Blogs.Components.WeblogFiles/thoughts_5F00_from_5F00_the_5F00_frontline/jmotb031309image003_5F00_422FBC07.gif

Note that less than two years ago the yen was over 124 to the dollar, and fell last quarter to below 87, and has risen back to 98 today. Think about the Japanese auto manufacturer. Two years ago he could sell his car in the US (or wherever) for $30,000 and get 3,750,000 yen. Today, that $30k only gets him a little under 3,000,000 yen. Think his costs dropped 20%? Think he can raise prices 25%?

If you sell machinery, you are competing with companies, countries, and currencies all over the world. If your currency rises, you are less competitive, or your profits have to fall.

Japan has problems, and not just in manufacturing. The population of the country is now literally shrinking, as they have the highest proportion of elderly people and the lowest proportion of children. By 2050, 70% of the labor force will have disappeared. While Toyota is the world's largest car company, auto sales in Japan peaked 18 years ago.

Supermarket sales have fallen every year for the last 11 years. This is a country in a long-term decline, with massive debt. While there is still a lot of economic power there, it is not the country of the future. Unless they figure out how to grow their population, it will be a long slow slide.

The Swiss Start Their Engines

About five years ago Greg Weldon (mentioned above), a big NASCAR fan, introduced the idea of a competitive devaluation raceway among Asian countries trying to make sure they could compete against each other to produce "stuff" for the US consumer, with each "car" drafting the other as they went around the turns, trying to get a competitive advantage by manipulating their currencies.

Today, I heard a new engine roar, one that I have never heard before. It is a deep-throated and powerful new entry into the devaluation race, and one that will have large ramifications for world trade. Gentle reader, this is huge, and we visited Japan first to give you some idea of the problems all over the world, for indeed we could have picked any number of countries and told as sad a tale.

But who would have picked Switzerland? Yet we read this morning, "The Swiss franc posted its biggest weekly decline against the euro since 1999 after the country's central bank sold the currency to halt a 7.6 percent appreciation in the past six months.

"The franc was also near the lowest level versus the dollar in three months after the Swiss National Bank's (SNB) first solo intervention in foreign-exchange markets since 1992. The SNB also said yesterday it will buy corporate bonds as it cut the benchmark three-month Libor target rate to 0.25% from 0.5% to revive the economy."

This is tectonic. It is a game changer. First, they did it before the upcoming G-20 meeting. They clearly felt they could not wait. And they moved the currency big-time. Look at the chart below of the Swiss franc against the euro. The far right bar jumped 7 big "handles" in a few hours. (A handle is trader talk for a unit of movement.) Currency markets have been violent of late, but this is huge. Currencies are supposed to move at a glacial pace, not by 4-5% in a day!

http://www.investorsinsight.com/cfs-file.ashx/__key/CommunityServer.Blogs.Components.WeblogFiles/thoughts_5F00_from_5F00_the_5F00_frontline/jmotb031309image004_5F00_595DC736.gif

The Swiss economy will slump by as much as 3% this year, the most since at least 1975, the central bank said yesterday. Price pressures evaporated in recent months as oil prices sank, the franc strengthened, and domestic demand dropped. Prices will probably decline this year and inflation will be "very close to zero" in 2010 and 2011, the SNB said. The franc's appreciation made Swiss products less competitive in Europe and the US, where deepening recessions were already curbing demand. (Bloomberg)

The story goes on to talk about numerous Swiss businesses that simply were not competitive with the rise in the value of the franc against the euro. With their economy slumping, with deflation knocking at their door, they clearly felt the need to act. Note they plan to buy corporate bonds to inject money into their economy. The Swiss, being frugal, don't have that many bonds, so the central bank may have some trouble finding enough to stimulate their economy - thus they are clearly prepared to use the currency tool in the cabinet to help stimulate their economy.

The last time a G-10 nation intervened in its currency was in 2003 when Japan tried, and oddly failed, as their currency had risen about 6% a year later. That caused me to write back then that their central bank established a new level of central bank ineffectiveness, because they could not figure out how to destroy their own currency, even when they wanted to.

The point is that such interventions by major developed countries are rare. Whatever their reasons, the Swiss have opened Pandora's box. Do Senators Schumer and Graham now start talking about that major currency manipulator, Switzerland, and start to introduce bills to punish them? Will Secretary Geithner come before a Congressional committee and call the Swiss currency manipulators? If not, then how do we deal with China?

Because China can now say, with some justification, that if the Swiss can manipulate their currency to make themselves more competitive, then why is it wrong for us? And how long do you think it will be until Japan tries once again to push the yen lower, with its export industries in tatters? And Korea? Taiwan?

You can almost hear the announcement over the loudspeakers: "Gentlemen, start your engines!" [ END QUOTE ]

_______________________


So it seems (to me anyway) a very intriguing idea here - the imperative for the entire world, that a stock market be made to provide a boom somewhere to provide the world with a lifesaver from a blooming global depression. I can smell this thing lurking out there - the one "absurd" hypothesis that snookers the majority in six months - and meanwhile everyone's getting ever more bunkered and battened down like moles underground, to wait out a half decade of global depression. :rolleyes:

If it is materializing, then the single most treacherous moment may be after the washout of this very compressed, massive bear market decline when people place their bets as to whether the first leg up was another classic bear market rally. Meantime we should make careful note, that it has been the most COMPRESSED in time, as well as among the largest in size, of any bear market in 250 years (Gann Global has the minutely documented stats to prove it). The key point being that it is progressing FAST.

Whatever you people regard as the sequel to this "secular bear market" is being moved up in time because this bear is outdoing every other in modern history for it's compression in time.

To be quite frank, I enjoy being a flat out contrarian here at iTulip to call for this, as when or if it materialises the snarky comments will be required to subside to mumbles.

I'm keeping over 50% of my assets in USD as a conscious bet that the USD is going to tremendously outperform for the next 24 months at least - although this is likely to solicit no more than a yawn here - because it bears noting, that despite the rampant and dire dollar pessimism in this community, a large USD exposure via treasuries has in fact been iTulip's model positioning (and consequently one assumes also that of all it's readers) for the past 8 years .

Let me repeat this to drive the equivocation point home: iTulip, and a good part of it's readership, despite the fact that US dollar disintegration has been one of the largest and most frequently dissected topics on this website, has been heavily weighted towards USD, despite the core of their thesis being USD disintegration upcoming - for eight long years, and no-one seems to feel too uncomfortable with their large USD holdings. How do we spell : E Q U I V O C A L ?

The USD IMO is going to remain the sole currency in the world providing a measure of safety in the next two years as global currencies accelerate into their competitive debasements against a backdrop of credit fragility. But you sure won't read a lot of people on iTulip saying that with even a straight face. Thank your stars we've still got one or two flat-out contrarians here on iTulip else this entire community would be singing from the same hymnal on the tactical trade from here out to 2012.

Long gold, short dollar baby!! All the way! Back up the truck on gold at these prices!! :D :confused: :rolleyes: The consensus is so uniform here, any decent skeptic should get suspicious.

[Chris Coles]

My full lifetime of watching the German economy walk on water with a strong currency tells me that if there is one thing about your thesis, it is that the assumption that ALL currencies will tank has that one flaw, a misunderstanding of the German strength of mind and its effect upon the Euro. I do not accept that the Euro will tank.

[metalman]

one in a million get this. the usa is scared shitless of deflation, the germans of inflation. ej talks about this in road to ruin, as he has for 10 yrs... cultural influence on monetary policy. japan gets deflation, germany deflation, usa inflation... until the whole pile of crap goes down in flames, that is. the g20 mtg will be entertaining.

[Lukester]

Appreciate your point Chris, but keep in mind that the Euro-zone of today is a far larger entity than it was ten or fifteen years ago. That's piling an awful lot of expectations on the German capacity to underwrite 450 million and their assorted bad bets. Heavy load of bad bets to the south, and to the east. 80 million Germans underwriting 370 million Europeans, plus their own banks exposures? Sounds like a hail mary bet to me in this environment.

I bet you a fiver that within 24 months the Euro has cracked open like a ripe watermelon, and the USD is still chugging along showing comparative strength. Gentleman's bet?

My full lifetime of watching the German economy walk on water with a strong currency tells me that if there is one thing about your thesis, it is that the assumption that ALL currencies will tank has that one flaw, a misunderstanding of the German strength of mind and its effect upon the Euro. I do not accept that the Euro will tank.

[Lukester]

the g20 mtg will be entertaining.

Canapes and champagne on the deck of the Titanic. Nice work if you can get a ministerial job.

I'm curious to know who else (all two others here) voted for the start of an equities bull market. Actually I made a mistake to vote in there, because I don't think this is a start of the bull market right now. But I think the largest call within those three voting options will be the bull market in equities - if I have a ten month time window to fire off the starting gun. Fred can I have a do-over in the voting booth? I wanna withdraw all bets for the time being and be a safe fence sitter for the moment please.

[metalman]

Canapes and champagne on the deck of the Titanic. Nice work if you can get a ministerial job.

I'm curious to know who else (all two others here) voted for the start of an equities bull market. Actually I made a mistake to vote in there, because I don't think this is a start of the bull market right now. But I think the largest call within those three voting options will be the bull market in equities - if I have a ten month time window to fire off the starting gun. Fred can I have a do-over in the voting booth? I wanna withdraw all bets for the time being and be a safe fence sitter for the moment please.

too late. watch and learn.... fear
(http://static.howstuffworks.com/gif/fear-4.gif)

[cjppjc]

Canapes and champagne on the deck of the Titanic. Nice work if you can get a ministerial job.

I'm curious to know who else (all two others here) voted for the start of an equities bull market. Actually I made a mistake to vote in there, because I don't think this is a start of the bull market right now. But I think the largest call within those three voting options will be the bull market in equities - if I have a ten month time window to fire off the starting gun. Fred can I have a do-over in the voting booth? I wanna withdraw all bets for the time being and be a safe fence sitter for the moment please.


No do-overs. The bets are down. The wheel is spinning. The ball has been dropped.

[Chris Coles]

Appreciate your point Chris, but keep in mind that the Euro-zone of today is a far larger entity than it was ten or fifteen years ago. That's piling an awful lot of expectations on the German capacity to underwrite 450 million and their assorted bad bets. Heavy load of bad bets to the south, and to the east. 80 million Germans underwriting 370 million Europeans, plus their own banks exposures? Sounds like a hail mary bet to me in this environment.

I bet you a fiver that within 24 months the Euro has cracked open like a ripe watermelon, and the USD is still chugging along showing comparative strength. Gentleman's bet?

Luke, you might be in San Diego, but you are very obviously an Englishman, no one else would call it a "Fiver"....

Yes, I take on your wager, gentleman to gentleman.

You see, being "over there", you have not been keeping a close eye on what is happening here in Europe. There is a fierce argument going on because the European tiddlers are not being bailed out at all.

Germany inherited East Germany 1989 and discovered that no one had spent a penny on upgrading anything since the second World War. Over the last two decades they have re-built the telephone network, railway network, electricity grid, just to name three. Have you, any of you heard anyone saying much about that? No! Have you heard much about that from the French? No! Germany and France will come out of this as the leaders of by far the largest and strongest industrial and economic grouping on the planet. By holding their ground in these difficult times ahead, they, not the United States, Not China, will come out top dog for the next half century. So I take your bet. Like taking candy from a baby.

[Chris Coles]

No do-overs. The bets are down. The wheel is spinning. The ball has been dropped.

I very much agree. Boasting is one thing, but then trying to change the rules after laying the cards down is just not on. The wheel is very much spinning and he has placed his bet. Anyone could say, oh fellers! I did not meant right now, but some indefinite time in the future.... Come on!!!!

[xela]

Competitive currency devaluation pressure cooker - the longer all assets stay depressed against this backdrop, the more one asset class will eventually have to explode to express the generalized fiat debasement going on!


Since you changed your call, I guess its a mood point. But the original "plunge" in gold is now a (I reckon broadly expected) pullback, yes?
Because how gold/PMs in the next years are not the valve where some of the pressure escapes is something I have a hard time understandig.

Likewise why the € should inflate faster then the $ now (notwithstanding A. Prick's, of UK tabloid fame, call for the end of the currency-union :D).

Stocks, well I did some picking here (too?), solid companies that maintain their dividend (they promised! :rolleyes:) and trade less then 7 dividend-to-price ratio.
But that is something very different than a mood change back into broad equities, I'm prepared to see that even stockpicking is too early here..

[analog2000]

Hi EJ and others,
One comments that Warren Buffet made during the CNBC interview, when asked about US turning into Japan is he responded that US is not going to turn into Japan because of the population growth and I think he also implied the influx of immigrants into US.
Japan does not have this pop growth, according to him, and thus US won't turn into Japan.
Please comment about this angle that Warren Buffet pointed out ?
thanks
Best Regards
analog2000

[Ann]

Hi EJ and others,
One comments that Warren Buffet made during the CNBC interview, when asked about US turning into Japan is he responded that US is not going to turn into Japan because of the population growth and I think he also implied the influx of immigrants into US.
Japan does not have this pop growth, according to him, and thus US won't turn into Japan.
Please comment about this angle that Warren Buffet pointed out ?
thanks
Best Regards
analog2000

Japan economic policy has been anti-immigration at the same time the women don't want to marry boneheaded Japanese men. Result? The oldest population on earth. Old people don't consume. Japan has a demand deficit.

Japan plays its cards: the people work hard, are well educated, and are willing to sacrifice today for tomorrow. It runs a high tech neo-mercantile economy. To do that Japan needs an export market. That has dried up.

The the US cannot be Japan because: US citizens are not willing to sacrifice today for tomorrow, there is no one to export to in a world of over-capacity, and Americans are too poorly educated to run a high tech export economy. But we do have immigration, except that they are going home because jobs are drying up here. (http://www.abs-cbnnews.com/business/03/15/09/reverse-brain-drain-filipino-execs-return-home-amid-crisis)

In sum: Warren is a no clue old geezer who needs to be put to pasture before Berkshire's stock goes to zero.

[GRG55]

imagine we are back in 2002. itulip has made the same arguments it is still making, and hasn't conceived yet of the housing and cdo/cds bubble. someone puts forward finster's argument, above, for a cyclical bull market reaching up to match the year 2000 nominal highs of the dow and s&p. would you have bought it?

i'm trying to get my mind around the possibility that option #1 in the poll might indeed be correct - i voted for #2 btw. i remember in 2002 the argument that we had not reached traditional bear market valuations. and, indeed, we hadn't. so we had a bull leg on the back of the housing bubble; a leg strong enough that 88 year old richard russell began questioning his dow theory convictions. and now we have new lows that STILL don't fulfill traditional bear market low valuation metrics.

look at the chart of nikkei i posted earlier in this thread. there were a lot of cyclical bull markets along the way to the new lows.

for there to be a new bull market, however, there needs to be a new bubble or the functional equivalent to pump up the economy for a few years. it seems implausible that private sector debt can grow sufficiently to do the job. that means it must be public sector debt that does the heavy lifting. so i ask: can government spending and government debt somehow pump up the economy enough for us to have a multi-year, cyclical "recovery" along with a multi-year cyclical bull market without a fundamental restructuring of the economy?

I suppose anything is possible, especially in these times. But it raises the question Where does the excess public sector liquidity concentrate itself? In other words, after TMT and then property, what will be the next "object of desire"?

For many years Bill Fleckenstein contended that after the real estate bubble burst there was no asset catagory big enough to succeed it to create the next bubble. EJ wrote that the next bubble would be alternate energy and infrastructure, and the only thing worse than the next bubble was no bubble at all. However, I am under the impression that this next bubble won't happen within the context of the dying FIRE economy, but may instead be the first bubble of the next economy? Which could be a good some time away [especially at my advanced age], given current US Administration policy.

Using my early morning hours re-reading many of EJ's recent posts [gawd it's a bitch still being jet lagged after a week] it would appear that there has been a shift in that outlook, and that instead of alternate energy and infrastructure playing a key role, the next POOM could instead be triggered by the furious public sector liquidity creation now underway [and that the authorities assure us they can withdraw in a blink :rolleyes: ] smacking up against against the brick wall of a capacity destruction induced supply shock, perhaps in energy.

So perhaps we do not see a strong, broad-based and extended rise in equity markets, as we saw from 2003-2007, but instead something more like the 1970's? Will Don Coxe and Jim Rogers be proved right after all?

[GRG55]

Japan economic policy has been anti-immigration at the same time the women don't want to marry boneheaded Japanese men. Result? The oldest population on earth. Old people don't consume. Japan has a demand deficit.

Japan plays its cards: the people work hard, are well educated, and are willing to sacrifice today for tomorrow. It runs a high tech neo-mercantile economy. To do that Japan needs an export market. That has dried up.

The the US cannot be Japan because: US citizens are not willing to sacrifice today for tomorrow, there is no one to export to in a world of over-capacity, and Americans are too poorly educated to run a high tech export economy. But we do have immigration, except that they are going home because jobs are drying up here. (http://www.abs-cbnnews.com/business/03/15/09/reverse-brain-drain-filipino-execs-return-home-amid-crisis)

In sum: Warren is a no clue old geezer who needs to be put to pasture before Berkshire's stock goes to zero.

What???? Zero!!! :eek:

I heard they have a new advertizing strategy to prevent that..."A Dairy Queen sundae and a Diet Coke cancel each other out".

So let's go America. With such a guilt free consumption opportunity there's no reason to hold back...:D

[cjppjc]

Since you changed your call, I guess its a mood point. But the original "plunge" in gold is now a (I reckon broadly expected) pullback, yes?
Because how gold/PMs in the next years are not the valve where some of the pressure escapes is something I have a hard time understandig.

Likewise why the € should inflate faster then the $ now (notwithstanding A. Prick's, of UK tabloid fame, call for the end of the currency-union :D).

Stocks, well I did some picking here (too?), solid companies that maintain their dividend (they promised! :rolleyes:) and trade less then 7 dividend-to-price ratio.
But that is something very different than a mood change back into broad equities, I'm prepared to see that even stockpicking is too early here..


I knew it was only a matter of time till I heard "Solid companies with good dividends." Only I figured it would be on CNBC or Fox Business. xela, xela, xela.

[Chris Coles]

We need to recognise where the extra liquidity has been placed. Not into the hands of the ordinary punter at street level, but right back into the hands of the institutional infrastructure that brought about the original problem. So what do you do when you have new liquidity and you do not have any confidence in the external economy? You start to trade. So where? The obvious answer is that after all this debate, Lukester may be right on the button; that there will be a sudden and sustained rise in world stock markets.

No, not caused by any degree of confidence in the EXTERNAL ECONOMY, (Please excuse the shout, just for emphasis), But because the internal, inter-institutional economy, has extra liquidity and has an absolute imperative to trade as that is the only way they can gain any new prosperity.

It is no use trying to short the market, it is on its knees already, so as with a herd of sheep, once anyone starts to trade up the market, they all pile in for all it is worth.........

We are about to have an entirely unexpected bull market in equities for no other reason than the funds are there and they are sitting on them, (and their hands), so off they go, just like any stampede, triggered by nothing more than a desire to run...........

[xela]

I knew it was only a matter of time till I heard "Solid companies with good dividends." Only I figured it would be on CNBC or Fox Business. xela, xela, xela.
Well, it's a worldwide casino :) and to clarify, I'm in Europe and just don't think we, as a whole, and Asia for that matter, collapse (I guess the PC euphemism is "transform") in sympathy with the US.

[strittmatter]

What???? Zero!!! :eek:

I heard they have a new advertizing strategy to prevent that..."A Dairy Queen sundae and a Diet Coke cancel each other out".

So let's go America. With such a guilt free consumption opportunity there's no reason to hold back...:D

strategize this...

free dallas mavericks game ticket with every large cone...........

http://media.collegepublisher.com/media/paper207/stills/2nu98f54.jpg

[cobben]

"because the internal, inter-institutional economy, has extra liquidity and has an absolute imperative to trade as that is the only way they can gain any new prosperity."

They have moved en masse into the forex markets I read somewhere, the only place which can absorb the size of trades they now need to put on after their other free-money games dried up (MBS, etc.)

As international trade has dried up leaving the forex markets rather illiquid, the volatility has exploded with the big banks gunning for more profits.

I would thus not assume automatically that the "new free money" the banksters are blessed with will automatically support the equity markets.

[cobben]

"Germany and France will come out of this as the leaders of by far the largest and strongest industrial and economic grouping on the planet"

after Sweden, relatively speaking of course.

Note that the Swedish OMX was one of the few (the only?) markets not to put in a slightly lower low when the US markets did,

Gave of Gavekal was interviewed the other day in Dagens Industri, he maintained that Swedish Industry was better positioned than the eurozone to profit when the recovery arrives. I would tend to agree with him, but no hurry buying anything for now.

[aa]

I'm curious to know who else (all two others here) voted for the start of an equities bull market.

OK I'll own up to being the 2nd voter for option 1.
I thought ALL three options are possible, but option 1 wasn't getting a fair deal. It's definitely better than a 1% possibility that we have already seen the bottom. Even Finster gives option 1 a 15% chance.

Why are stocks constantly presented here as an 'all or nothing' situation, which doesn't seem to apply to other asset classes?

EJ has been advocating a 10% (now 30%) holding of gold as a hedge. Despite EJ forecasting falling property prices, I note that he has said he still owns his house. Others holding PMs have also spoken of owning property or planning to buy property. So you can own PMs and property and bonds, all at the same time - why not stocks as well ?

Benjamin Graham recommended varying your stock/bond mix between 25% and 75%, but always being at least 25% in each asset class - even if you expected that asset class to do badly - because you just might be wrong!

[cjppjc]

Even Finster gives option 1 a 15% chance.


EJ has been advocating a 10% (now 30%) holding of gold as a hedge. Despite EJ forecasting falling property prices, I note that he has said he still owns his house. !


Well if Finster says so. As far as EJ still owning his house. A house is a place to live. If you like your home you'll stay in it. A lot of people move not just for monetary reasons. Bad neighbors, commute to work, etc. People also stay in their homes for reasons such as; kids in school, friends in neighborhood, love their home, etc.

[stockman]

Anything is possible in the equity market but corporate debt is key if we want to see business fundamentals improve. We are in a DEBT CRISIS, so IMHO equity investors should be focused on what is happening in the corporate debt market to have any degree of confidence in the durability of any equity rally.

TIC data released 3/16/09 show foreign holders returned to the sell side- note downtrend continues. Will FED step in as buyer of last resort?

1250

We DON'T want to see these spreads extend that uptrend... but the trend for now remains up.

1251

Why worry? There has been a direct relationship between corporate bonds and equity markets since the crisis took hold. To believe in a real turn in the equity market I would like to see confirmation in the corporate debt market. Without corporations being able to access credit at better rates hard to see how business spending (and therefore jobs) would improve. Down trend in prices (rising yields) continues.


1252


So until we see these trends change in the debt market I'll be looking at all equity rallies as trading opportunities- not investment opportunities.

Fixed income ETFs on my monitor- LQD, AGG, CFT, BLV, PFF, HYG. A break from the current downtrend would be supportive for equities IMHO.

[xela]

Will FED step in as buyer of last resort?

"Bernanke May Need to Ramp Up Fed’s Asset Purchases" makes the news today (again), FOMC statement tomorrow; for them the time to do this is here and now, IMO.

[bart]

Worth noting is that the S&P is already more than 12% above its intraday low of 666 last Friday ... so even the 20% upside mark wouldn't mean a whole lot more...

Looks like you were right, at least so far, and the more than 12% profit so far is quite a nice return.

Next resistance level in my opinion, now that we've broken above the general 750 area, is the 800-810 area. Nothing like options expiration week with a lot of outstanding short positions to provide a target for option writers...

[we_are_toast]

Is Finster ready to declare that those who voted for the "dead cat bounce" in the poll must officially tear up their betting ticket and proceed to the next betting window?

[metalman]

Is Finster ready to declare that those who voted for the "dead cat bounce" in the poll must officially tear up their betting ticket and proceed to the next betting window?

not the first 'gov't to the rescue!' rally is it? this one on top of a relief rally.

obama's boys are destroying the banking system and economy... hardly the stuff of a long term rally.

[we_are_toast]

not the first 'gov't to the rescue!' rally is it? this one on top of a relief rally.

obama's boys are destroying the banking system and economy... hardly the stuff of a long term rally.

Nope, this is the, would the sheep please line up for shearing, rally.

And the Bushies already destroyed the banking system and economy, Obamas boys just don't know how to put humpty dumpty back together again.

[ThePythonicCow]

And the Bushies already destroyed the banking system and economy, Obamas boys just don't know how to put humpty dumpty back together again.With a little help from their good buddy Mr. Clinton.

Actually, I don't much blame our Presidents for this. The forces of financial corruption were enough to overpower all but the strongest, most financially astute President, and anyone such as that (Eric Janszen, for example) would have no chance of being elected.

The election process is sufficiently corrupted that only a willing pawn of the most powerful special interests has any chance.

[brucec42]

What are you, a political analyst for a MSM tv station? This is what was said:

"Now the trillion dollar question, might the current rally be the start of a pricing in of rising inflation? With oil bouncing firmly off $40, can inflation be far behind? Will inflation be good or bad for stocks?"

"Is this the context for a sustained stock market rally? We doubt it."


"If so, we may be at least nearing an entry point for selective stock buying. While we are as eager as anyone to get out of Treasury bonds and gold, before we go whole hog on stocks, we ponder what we heard on a client call put on by a large investment bank. It gives us pause, especially in the context of the ongoing collapse of the FIRE Economy."



Red used for emphasis of non-committal, rhetorical aspects that promote discussion. To call these comments a flip-flop is pretty far off, even ridiculous. I'm all about analysis of the commentary, but where does it say sell off your insurance (gold), quit investing in treasuries, and buy stocks?

You're right. They're not a flip flop. I would call it using weasel words so that no matter what path one takes based on this advisory, you can't come back and say they were wrong. Whichever way stocks go, they can come back and cite this for its CYA potential. "sorry you bought in and things fell 50%, we only said "selectively"!"

It's very common in the FIRE economy to phrase things in this way with ambiguous wording. "may, might, consider, potentially, etc". You know know iTulip is pure 100% FIRE economy too.

The idea is to remain CRYPTIC. And it's done on purpose to salvage one's reputation should things not go as predicted. So hiding the very prediction in a forest of words is part of the insurancy policy for their reputation. In financial advising being an oracle of the future and one's reputation for being one is everything. Get things wrong even a few times (see recent criticism of Schiff, etc) and that could get flushed. So it's always better to speak cryptically and avoid any plainspeak pronouncements of what you think will happen. Markets are very unpredictable, and people tend to avoid you after you've made a wrong call or gotten the timing wrong. So why not toss in a few magic words to let you off the hook later? iTulip has a better sense of the future than almost anyone else, but getting actionable strategies here is like panning for gold. You can make money, but you have to spend a lot of time at it to gather up enough to be useful. I prefer advice doled out in huge nuggets with a pickaxe in a more straight forward manner.

[FRED]

You're right. They're not a flip flop. I would call it using weasel words so that no matter what path one takes based on this advisory, you can't come back and say they were wrong. Whichever way stocks go, they can come back and cite this for its CYA potential. "sorry you bought in and things fell 50%, we only said "selectively"!"

It's very common in the FIRE economy to phrase things in this way with ambiguous wording. "may, might, consider, potentially, etc". You know know iTulip is pure 100% FIRE economy too.

The idea is to remain CRYPTIC. And it's done on purpose to salvage one's reputation should things not go as predicted. So hiding the very prediction in a forest of words is part of the insurancy policy for their reputation. In financial advising being an oracle of the future and one's reputation for being one is everything. Get things wrong even a few times (see recent criticism of Schiff, etc) and that could get flushed. So it's always better to speak cryptically and avoid any plainspeak pronouncements of what you think will happen. Markets are very unpredictable, and people tend to avoid you after you've made a wrong call or gotten the timing wrong. So why not toss in a few magic words to let you off the hook later? iTulip has a better sense of the future than almost anyone else, but getting actionable strategies here is like panning for gold. You can make money, but you have to spend a lot of time at it to gather up enough to be useful. I prefer advice doled out in huge nuggets with a pickaxe in a more straight forward manner.

That's one way to interpret it. The other is to note that before we issue a timing based call such as "Time, at last, to short the market (http://www.itulip.com/forums/showthread.php?t=2774)" (Dec. 27, 2007) or "Time at last to short commercial real estate (http://www.itulip.com/forums/showthread.php?t=4307) (June 16, 2008) we take a lot of time to make sure we are sure. We don't offer these in the free area, for obvious reasons.

[jtabeb]

Very long post, I'll keep my response short.

Do you think you will time your move back into PM's appropriately to get back your physical in time?

Is your big crash at the end of this major potential bull in 2013-14 inflationary or deflationary?

Does the housing market need a weak dollar to heal or a strong dollar to heal?

I do indeed know 1 person, who eschews itulip's 70% UST position, and who tries to hold as few USD as possible. (no hints on who that is).

If I may, there is a reason not to overanylize things. Ty Andros his articles on Von Mises' "Crack-up-boom" pont to a terminal Bull rally in everything that is not paper, due to competitive currency devaluation.

I personally think that this is the most likely terminal trajectory of the world economy before we see the inevetible "return to a world wide international gold standard" per EJ.

Fire or Ice, how does the world end? As long as politicians have a choice, I bank on fire.

You posit a very close look at the "trees", while the view of the forrest is (by your own admission) overwhelming. If that's not going against the trend, I don't know what is.

I like to make money the easy way:

1. Find the false premise and bet against it.
2. Don't diversify, it over exposes you to underperformance and underexposes you to outperformance.
3. Don't time constrain a winning strategy.

Luke can I ask you a question?

What PM allocation do you want in 2015? What dollar allocation do you want in 2015? What stock allocation do you want in 2015?

Different strokes for different folks, I guess.

I prefer position properly and wait for the inevidable than to play their game. When I play their game, I loose. So I choose to play my game, because it's one I can win.


I know my limitation ( I can't meaningfully impact the short, medium, or long term valuation of financial instruments, they can).

I know their limitations (by meaningfully impacting the short, medium and long term valuations of financial instruments, they endanger the very means the use to effect such changes, and thus their source of power).

So, I choose to play to my strengths and their weaknesses.

What else is a rational player supposed to do?

[ThePythonicCow]

2. Don't diversify, it over exposes you to underperformance and underexposes you to outperformance.That depends on the circumstances and goals.

If one is competing in some race, one goes all out with the best shot one has. If you're bringing crude oil across the oceans on vast quantities, one builds enormous tankers optimized for just that task.

If you're Lewis and Clark, hiking across the vast unknown wilderness, or Christopher Columbus or the Pilgrims, sailing across the vast unknown seas, then one prepares for a variety of outcomes. The goal is not the fastest, cheapest, biggest or best of anything. The goal is to survive a variety of unknown dangers and challenges.

A few will put all their financial poker chips on the one lucky series of big bets (perhaps with unfair inside knowledge) and come out enormously wealthy. Most who try that in these times will go bankrupt. Most of the "winners" will be those who stayed flexible, adapting to the unpredictable twists and turns the best.

Avoiding diversification worked well these last several decades, which was a period of great prosperity.

But for the next few years, I'd prefer to be exposed to underperformance, than be overly exposed to the risk of a complete wipeout if I get blindsided with all my eggs in the wrong basket.

[jtabeb]

That depends on the circumstances and goals.

If one is competing in some race, one goes all out with the best shot one has. If you're bringing crude oil across the oceans on vast quantities, one builds enormous tankers optimized for just that task.

If you're Lewis and Clark, hiking across the vast unknown wilderness, or Christopher Columbus or the Pilgrims, sailing across the vast unknown seas, then one prepares for a variety of outcomes. The goal is not the fastest, cheapest, biggest or best of anything. The goal is to survive a variety of unknown dangers and challenges.

A few will put all their financial poker chips on the one lucky series of big bets (perhaps with unfair inside knowledge) and come out enormously wealthy. Most who try that in these times will go bankrupt. Most of the "winners" will be those who stayed flexible, adapting to the unpredictable twists and turns the best.

Avoiding diversification worked well these last several decades, which was a period of great prosperity.

But for the next few years, I'd prefer to be exposed to underperformance, than be overly exposed to the risk of a complete wipeout if I get blindsided with all my eggs in the wrong basket.


I'll stick with the mentality of "looking for my keys where I lost them" vs. "under the streetlamp because the light is better".

[ThePythonicCow]

I'll stick with the mentality of "looking for my keys where I lost them" vs. "under the streetlamp because the light is better".
You lost me there, Jtabeb. I'd be willing to another of your good posts, if you'd be willing to explain what you meant :).

[jtabeb]

You lost me there, Jtabeb. I'd be willing to another of your good posts, if you'd be willing to explain what you meant :).


You know the story of the drunk guy who loses his keys in the alleyway behind a bar, but then decides to look for the lost keys in the street because the light is better.

Moral being you can't find what you are looking for if you are looking in the wrong place.

Most of the people reading this site are pretty well informed compared to their bretheren who dine at the MSM cafe. They also strike me as reasonablly intelligent too.

So I'm just saying, y'all got brains enough to reckon where this is going and what's gonna do well and what ain't. I think Luke is pitching a fool's errand, IMHO. (Go jump in for once last wave at high tide). I am saying that there are things that will do much better (again, IMHO) than the broad indices, and I can't for the life of me figure out why you would want to place loosing bets when there are so many winning bets you could place. (When all is said and done say by 2015 or so).

That strikes me as exposing yourself to an inordinate amount of risk on getting the timing correct. If you look at my rules, that is a big no-no.

I like bets where even if I'm wrong about how the goverment is going to meddle with the market, I still win long term because facts are facts, reality is real, I think and therefore I can determine what is true and what is false.

Lukester wants to profit from the false message/idea/construct presented by the powers that be. If he gets the timing wrong he, and ye, get fleeced. If he's right he gets in and out and then really out and into PMs and is done, then so much the better. I don't need the headache, nor do I desire to load myself up with unecessary risk (A TIME CONSTRAINT RISK, the worst one you can take IMHO).

So for me, I'm just happy to plod along in ag, low carbon foot print energy, commodities and PM's. Like I've said before, this ain't rocket science ( over say the 60 month time frame), and Lukester even agrees with that.

The fact is inflation is distributed UNEVENLY when it occurs. Do you think that this reflation is going to be DIFFERENT from all the preceeding ones in that the leaders in the last boom are also the leaders in this boom? I think not. I think that energy supply is declining faster that demand is being destroyed and that trust in currencies (ALL of them) is being destroyed faster than they are being printed. If you accept these two premises, then your course of action is pretty damn clear and pretty damn lucrative too.

Shucks, I'm a pilot AND I managed to figure this out. How long you think it's gonna take for everyone else to do so?

People may have been misled because they misplaced their trust, that doesn't make them stupid, it makes them honest. They place value on a persons promise or words. When they figure out that they have been had, yet again, what do you all reckon they are gonna do about it and where do you think they are gonna put their money this time?

Problem as I see it for the power that be is that they have to make this new false-reality lucrative enough to get everyone that knows better to play along and shut their damn mouths. The issue there is that there are enough people that want to live in an honest and just and reality based world, that they might run into problems implementing their plans and getting everyone to sign off on it.

Think they are gonna be fooled for a third and fourth and fifth time?

Maybe, but I happen to think that people are smarter than that. And with the internet available almost universally, I think that once that critical mass is reached it's gonna be wild-fire.

Maybe I mis-read the proles and their behavior. But if you ask the opinion of this resident of Texas , people are figuring this out faster than the powers that be, think they are, which is why all the really good guns and ammo are in short supply and fetch a mighty large premium right now.

The only thing that matches the scale of the financial crisis is the recent increase in the sales of firearms and ammunition, far and away above what you saw in the run up to the clinton assult rifle ban.

Who know's I could be wrong, but a life time studying the past leads me to conclude otherwise.

Lukester thinks we have one more economic cycle to go before the balloon pops, I don't think so.

There you have ladies and gentlemen. So get out there and PLACE YOUR BETS!

V/R

JT

[cjppjc]

You know the story of the drunk guy who loses his keys in the alleyway behind a bar, but then decides to look for the lost keys in the street because the light is better.

Moral being you can't find what you are looking for if you are looking in the wrong place.

Most of the people reading this site are pretty well informed compared to their bretheren who dine at the MSM cafe. They also strike me as reasonablly intelligent too.

So I'm just saying, y'all got brains enough to reckon where this is going and what's gonna do well and what ain't. I think Luke is pitching a fool's errand, IMHO. (Go jump in for once last wave at high tide). I am saying that there are things that will do much better (again, IMHO) than the broad indices, and I can't for the life of me figure out why you would want to place loosing bets when there are so many winning bets you could place. (When all is said and done say by 2015 or so).

That strikes me as exposing yourself to an inordinate amount of risk on getting the timing correct. If you look at my rules, that is a big no-no.

I like bets where even if I'm wrong about how the goverment is going to meddle with the market, I still win long term because facts are facts, reality is real, I think and therefore I can determine what is true and what is false.

Lukester wants to profit from the false message/idea/construct presented by the powers that be. If he gets the timing wrong he, and ye, get fleeced. If he's right he gets in and out and then really out and into PMs and is done, then so much the better. I don't need the headache, nor do I desire to load myself up with unecessary risk (A TIME CONSTRAINT RISK, the worst one you can take IMHO).

So for me, I'm just happy to plod along in ag, low carbon foot print energy, commodities and PM's. Like I've said before, this ain't rocket science ( over say the 60 month time frame), and Lukester even agrees with that.

The fact is inflation is distributed UNEVENLY when it occurs. Do you think that this reflation is going to be DIFFERENT from all the preceeding ones in that the leaders in the last boom are also the leaders in this boom? I think not. I think that energy supply is declining faster that demand is being destroyed and that trust in currencies (ALL of them) is being destroyed faster than they are being printed. If you accept these two premises, then your course of action is pretty damn clear and pretty damn lucrative too.

Shucks, I'm a pilot AND I managed to figure this out. How long you think it's gonna take for everyone else to do so?

People may have been misled because they misplaced their trust, that doesn't make them stupid, it makes them honest. They place value on a persons promise or words. When they figure out that they have been had, yet again, what do you all reckon they are gonna do about it and where do you think they are gonna put their money this time?

Problem as I see it for the power that be is that they have to make this new false-reality lucrative enough to get everyone that knows better to play along and shut their damn mouths. The issue there is that there are enough people that want to live in an honest and just and reality based world, that they might run into problems implementing their plans and getting everyone to sign off on it.

Think they are gonna be fooled for a third and fourth and fifth time?

Maybe, but I happen to think that people are smarter than that. And with the internet available almost universally, I think that once that critical mass is reached it's gonna be wild-fire.

Maybe I mis-read the proles and their behavior. But if you ask the opinion of this resident of Texas , people are figuring this out faster than the powers that be, think they are, which is why all the really good guns and ammo are in short supply and fetch a mighty large premium right now.

The only thing that matches the scale of the financial crisis is the recent increase in the sales of firearms and ammunition, far and away above what you saw in the run up to the clinton assult rifle ban.

Who know's I could be wrong, but a life time studying the past leads me to conclude otherwise.

Lukester thinks we have one more economic cycle to go before the balloon pops, I don't think so.

There you have ladies and gentlemen. So get out there and PLACE YOUR BETS!

V/R

JT

I have a friend who thinks we reflate, and don't do the big down until the unfundated madates crater the economy.

[jtabeb]

I have a friend who thinks we reflate, and don't do the big down until the unfundated madates crater the economy.

Okay, but what DO YOU THINK?

[ThePythonicCow]

I think Luke is pitching a fool's errand, IMHO. (Go jump in for once last wave at high tide). I am saying that there are things that will do much better (again, IMHO) than the broad indices, and I can't for the life of me figure out why you would want to place loosing bets when there are so many winning bets you could place.Aha - that's why I couldn't make sense of your previous response to me. You weren't really responding to me ;). I was a surrogate for Lukester. Ok.

Personally I am less interested right now in figuring out which investment street lamp to be looking under than I am in surviving in relative safety and modest comfort the major social and economic upheavals that I figure have significant (though not certain) risk of occurring in the next year or three.

[ThePythonicCow]

I have a friend who thinks we reflate, and don't do the big down until the unfundated mandates crater the economy.If we try to reflate and that pushes Russia, China and/or Saudi Arabia out of dollars and Treasuries, then the esteemed iTulip masters running this site will have scored another prediction success, with a Boom blowup resulting from dollars and treasuries being shipped back to our shores in those giant oil tankers whose oil we can no longer afford. In that case, the unfunded mandates of Social Security and Medicare will never have time to reach maturity.

[cjppjc]

Okay, but what DO YOU THINK?

In the 1970's I came across this idea in a Tavis McGree mystery. His friend was explaining the eventual outcome of debt. I would put it in quotes except I'm just guessing at the exact quote. Something like this:

In the world the are hundreds of billions of dollars owed. From banks to banks. Countries to counties. Banks to countries, and so on.
Well what happens?
Someone says pay up. Then the whole system falls begins to fall apart.

It made a stong impression on me at the time. I felt it was true. That the debts could not be paid off. Now here we are, and we're wishing it was only hundreds of billions. For myself the only physical I own is silver coins. I've always been a fan of gold. My choice is to invest in the miners. The market took 5-6 years of profits away in 6 months. I've always been a stock buyer. I like the action. I had some great zinc, silver, gold, nat gas, investments. Sold some just to take some profits. But mostly got me head handed to me.

I think we will try to inflate the debt away. I'm not sure we will have enough time.

As an aside. I think if this is the big one, (which I rate at 59%) or the big one comes later. It's comming. One thing, I think will result from the fallout is rebirth of spirituality. People will turn to God. Through churches, and non-traditional teachings. It would be nice to live in a world where people tried to live to the highest level of their spiritual belief.

[jtabeb]

I am in surviving in relative safety and modest comfort the major social and economic upheavals that I figure have significant (though not certain) risk of occurring in the next year or three.

Shit, why didn't you ask that? That's the simple ONE!

$10K in small bills in cash.
as much gold and silver coin (esp JUNK silver coin)
start a garden, store up a goodly supply of food, secure local sources.
Have some protection (recc firearm, but baseball bat works too)
Store up some good booze and tobacco products. ( a couple cases of scotch, wine, gin, what ever tips your boat.

Get a decent escape plan ready.

Then RELAX, YOU DONE EVERYTHING YOU CAN DO so DON'T WORRY about the things you can not control. You did all you could to prepare, be responsible, etc. After that DON'T sweat IT! It either works out, or it don't. But in either case, you did what you thought you could.

Man, don't make life harder than it is. ( I'm assuming you have a parter/significant other, that makes it MUCH more doable).

[jtabeb]

If we try to reflate and that pushes Russia, China and/or Saudi Arabia out of dollars and Treasuries, then the esteemed iTulip masters running this site will have scored another prediction success, with a Boom blowup resulting from dollars and treasuries being shipped back to our shores in those giant oil tankers whose oil we can no longer afford. In that case, the unfunded mandates of Social Security and Medicare will never have time to reach maturity.

Yeah, I just hope I'm correct that now is the time to buy a house, before the POOM hits.

[jtabeb]

If we try to reflate and that pushes Russia, China and/or Saudi Arabia out of dollars and Treasuries, then the esteemed iTulip masters running this site will have scored another prediction success, with a Boom blowup resulting from dollars and treasuries being shipped back to our shores in those giant oil tankers whose oil we can no longer afford. In that case, the unfunded mandates of Social Security and Medicare will never have time to reach maturity.

Seems like a good reason to make sure it happens (from a US gov perspective, that is)

[ThePythonicCow]

Shit, why didn't you ask that? That's the simple ONE!
Ah - but I wasn't asking - I'm doing, roughly as you suggest, as fits my situation.

My original point, back three posts ago, was ... eh nevermind what it was ... you seem to be posting some good rants, and I have no need to interrupt them with rehashes of my side comments.

Take care, and may your takeoffs and landings be equal in number.

[ThePythonicCow]

Yeah, I just hope I'm correct that now is the time to buy a house, before the POOM hits.
Ah - POOM - not "Boom" - thanks for the gentle correction. I'm still working on my iTulip (and Texan) accents.

[ThePythonicCow]

Seems like a good reason to make sure it happens (from a US gov perspective, that is)
If by that comment, you mean that the US gov seems to be backing itself into a corner where the best way out is to implicitly default on our debt and our unfunded mandates via inflation, then yeah, I'd agree.

It kinda sucks though. I guess the question is whether the United States (metaphorically) does a Chapter 7 (liquidation) or does a Chapter 11 (reorganization) bankruptcy.

For us old folks, it means the value of our savings falls, the value of our homes falls, our taxes go up, the value of our Social Security check falls and the likelihood of re-entering the work force falls.

It's a good thing I was raised dirt poor, and still remember how to live that way.

[jtabeb]

Ah - POOM - not "Boom" - thanks for the gentle correction. I'm still working on my iTulip (and Texan) accents.

Actually, I grew up in oregon, but people seem to like a little "drawl" to keep the posts a bit more "colorful";)

[Lukester]

Hey sorry guys I only just discovered this conversation this evening. Gotta study right now so I can't chime in. Its comforting to know I have a surrogate in Pythonic Cow. I'm sure he's taking all the ethical and progressive positions I'd fully agree with here. :D

Aha - that's why I couldn't make sense of your previous ... I was a surrogate for Lukester. Ok.