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  • Jim Nickerson
    replied
    If Ka = deflation, this is interesting perspective

    Originally posted by EJ
    Looks like it the "Ka" in "Ka-Poom" is starting.
    http;//www.safehaven.com/article-5389.htm

    I know nothing of the author Robert Blumen, but his article added to my understandings of the arguments regarding deflation and inflation as part of our futures.

    Leave a comment:


  • zmas28
    replied
    According to this article the 1987 dollar decline wasn't managed so smoothly. There seem to be some similarities in the underlying conditions in 1987 to waht we have now. The one exception I see (till now) is that the stock market may have been more over-valued at that time (going by a comparison to the Treasury yield of 10% at that time against about 5% now).
    Here's an excerpt from the Web article (link fllows):
    [blue] Blue [/blue]
    Once foreign investors sniffed that another dollar tumble was inevitable, they dumped U.S. stocks and bonds. Private bankers worldwide operating in the Eurodollar market smelt blood, and managed to get short the almost unbelievable total of $143.5 billion in the weeks before the Crash.

    Meanwhile, the U.S. Federal Reserve Board, now led by new Chairman Alan Greenspan, was pursuing an extremely tight money policy to try to defend the dollar and fight inflation. Central bankers abroad, faced with this concerted flight from the dollar, bought more than $100 billion, but they finally buckled in October. The private bankers were shorting the dollar, private investors were fleeing from it, and the Fed had stopped printing them.

    The greatest liquidity crisis in the dollar area in post-war history was thus inevitable. That crisis smashed the stock markets here, and set off aftershocks around the world.

    So the end of the Reagan bull market also marked the end of the post-war era, because no one, certainly not George Bush, believes that the U.S. could, or should, climb back to a lonely throne. The U.S. is now the primus inter pares of an international grouping that hasn't yet written its own operating rules. Why was there no economic collapse after the Crash? First, over-all global liquidity was adequate, because the Plaza Agreement had set off the biggest expansion in total liquidity ever seen. Therefore the dollar liquidity crisis was offset, in great measure, by liquidity in European and Asian currencies.
    [blue] Blue [/blue]

    Link: http://www.empireclubfoundation.com/...ID=1535&FT=yes

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  • zmas28
    replied
    EJ, I'm not an economist but am following this with great interest.

    I think back in the eighties there was a dollar scare also, but that was managed more smoothly, at least according to what I've read. Of course, the current accounts deficit was much smaller then. What would be the drivers of runaway inflation and interest rates? Is the poom phase predicated on an abrupt dollar crisis (as opposed to a gradual decline over time)?

    If the decline of the dollar were managed smoothly, not sure how price inflation would manifest itself. Would this be through commodities? However, I read that the US economy is not as vulnerable to oil pricing as it was during the seventies. Also have read that price of imports may not increase commensurately with the dollar drop because Asian vendors are more likely to absorb this in their margins. Although this would also seem to be unsustainable long-term.

    I see that several members of the Fed are going out of their way to emphasise the inflation threat. I wonder how much of this worry is about inflation, and how much of this is about defending the dollar through higher interest rates.

    Love your website!

    Leave a comment:


  • Pheyton
    replied
    Any new news?

    I am one of the 48,000,000 poor with no insurance, a bit of savings in the market and PM that I have been collecting over the years.

    Your discussions are fascinating, although I admit that at times it seems to me that you are speaking in tongues. Please keep posting with updates!

    Leave a comment:


  • Jim Nickerson
    replied
    Bill Gross at Pimco.com seems to post his Investment Outlook comments about the beginning of each month. Today I noticed he has comments for June/July.

    How what he said will strike readers will be based variably depending upon their understanding of all things financial and economic, so what I gleaned might be less that what others will gather.

    He stated Pimco have have not shifted our secular forecast from a disinflationary to a reflationary scenario just yet, and that global inflation will remain between 1-3% in most places. He also suggested a recession in the U.S. in the next several years, and a range on the 10 year treasury note of 4-5.5% between now and 2010.

    Were Pimco and Gross to be correct, as this pertains to EJ's Ka-Poom Theory, from the red arrow on his recent graph, it would mean to me that neither the Discount Rate nor the Annual CPI Inflation are about to take off from where we are presently.

    However, Gross acknowledged early on in his current comments that Pimco's projection in recent years of 3-4.5% 10 years turned out to be incorrect.

    Jim

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  • Jim Nickerson
    replied
    EJ;

    I am trying to understand more of what you have been proposing with Ka-Boom Therory.

    Were it to be possilbe to use the same format for dates on your latest chart of Ka-Poom that you used on the Original 1999 chart, it sure would aid my eyes.

    On the new graph, from 11/1981, as well as I can see the dates, until 03/2000 the slopes of the Discount Rate and the Annual CPI Inflation were down. Was that period of equity stock markets BOOM a deflationary period? If it wasn't, then why was the period 3/2000 to 11/2002 deflationary when the CPI was level except for an up blip and the Discount Rate was definitely down, and the equity markets were definitely down?

    From the periods you have boxed in Red as Deflation, the trends of Discount Rate and CPI are down as they were 1981-2000 (Markets up), and in the first Red box, the equity markets were down. Is there an explanation for these differences?

    I hope I have put all that down without error

    Jim

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  • Guest's Avatar
    Guest replied
    I get a lot of help.

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  • Jim Nickerson
    replied
    EJ:

    iTulip.com Daily News with AntiSpin: Don't say we didn't warn you.

    May I ask how do you come upon these new stories? Some sort of key word search? If you go to all the sites individually and just find them, what time do you get up every morning?

    Jim

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  • qwerty
    replied
    Some questions were posted above about how all those dollars held abroad could cause inflation in the US in future.

    How about this logic:

    If foreigners, sell USD assets to each other, they may drive down the price of those assets (e.g bonds) but they won't send any dollars back to the US.

    But if they as a whole reduced their USD assets, they will increase their USD cash.

    If the cash is held by foreigners, they will not keep it under the mattress but inject it into eurodollar or domestic US deposits, no? Thus increasing the money supply available within the US. Right? And hence prices.

    If they don't want to lend the cash, but want out of dollars, then - as someone posted above - they have to buy something with it, and since - on the whole - the foreigners are lightening up on their dollar cash and not just swapping it around amongst themselves, then they will have to buy something from Americans, or USD corporations. And what is going to happen to those dollars? - Again, they will enter the dollar money supply, I guess.

    As was asked - what will all those excess dollars buy from the US?

    Buying US equities or domestic businesses and other assets that produce USD cash flows wouldn't seem to meet the objective of getting out of dollars. Same real estate.

    I guess it would have to be US exports or US capital investments abroad.
    (US corporations' plants in Asia?) Patents?

    I remember reading a story of someone in the Weimar Republic buying a truckload of bedpans on their way home from work just to get rid of their marks before they fell any further in value ....

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  • Charles Mackay
    replied
    OK EJ, I understand the periodicity of the time scale now

    I notice that you and others are looking at inverse stock funds. I used the Rydex Tempest (RYTPX) for the 2000 - 2002 bear but rode it too long after the bottom, They're a little tricky due to leverage and compounding... not to mention fees and slippage. It didn't take much of a retracement in the S&P and most of my gain had disappeared.
    Charles, for a while I have used the Profunds of the ultra type--all of which move 200% of the assoicatied indices. I also keep track of the percentage changes of whichever Profund I am in compared to the underlying index, and all the ones based on the SPC, NDX and RUT whether the bet is the markets will rise or fall move right around the 200% mark. Sure they are dangerous if you are on the wrong side of the market, but I do not seem to have been stung by any factors that I can detect such as leverage and compounding errors.

    I trade these fund through Schwab and up until a few months ago, I was whacked with hefty fees when I sold, but now that has disappeared. I could buy one tomorrow and sell it Tuesday and there is NO fee.

    Jim

    I found the Rydex to be very close to 200% on a daily basis also. However, the S&P fell from 1175 to 775 from 3/02 - 9/02 and the 200% inverse fund Rydex Tempest went from 65 to 115. Guess how long it took to loose that gain... only a retracement in the S&P to 1000 ! You would have thought it would have to retrace back to 1175 to give back all your gain but no. That's what I mean.
    CM



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  • Charles Mackay
    replied
    is the definition of the mini-ka a severe correction in commodities? if so, anyone have any ideas about how/whether to try to "play" it? or is eveyone just planning to hang on?
    I'll second that!

    EJ, what kind of market phenomena do you expect in the "mini-ka" ? Let's start from a hypothetical vantage point.

    1) Gold is at $1600
    2) RICI is at 6000
    3) The DJIA is at 13,000
    4) 10 year bonds pay 10%



    Leave a comment:


  • Jim Nickerson
    replied
    jk, EJ

    The wsj online Asian quotes are closer to real time than Yahoo's

    The http://<a href="http://www2.barchart...mktcom.asp</a> is great and it shows the times of last update which I like, THANKS,





    Jim

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  • Guest's Avatar
    Guest replied
    http://finance.yahoo.com/intlindices?e=asia

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  • Jim Nickerson
    replied
    jim- i stopped trading mutual funds at schwab because of their transaction fees and short-term trading penalty fees up to 180 days post purchase. have they abolished these or did you complain and get a deal? [i now do all my mutual funds through tdwaterhouse, now tdameritrade.]

    equity indexes from around the world are free at:
    http://quote.yahoo.com/m2?u

    futures, incl currencies are at:
    http://www2.barchart.com/mktcom.asp
    or
    globex quotes at
    http://www.cme.com/trading/dta/del/globex.html
    jk:

    The profund fees were onerous, but in part because all other stock trading fees had come way done, I didn't complain, because it would have been a waste of my time. I just sold something--long profunds I think-- and few months ago, and there was no fee. I called and asked if there was a mistake, no, they changed how they do business. The only thing a bit troublesome is the Short RUT fund and the gold fund, UCPIX and PMPIX have cut off times at 3PM EDT, and that frustrates me at times.

    I believe the yahoo url is delayed more than the WSJ online quotes, thanks for the tip on the currencies.

    Jim

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  • jk
    replied
    jim- i stopped trading mutual funds at schwab because of their transaction fees and short-term trading penalty fees up to 180 days post purchase. have they abolished these or did you complain and get a deal? [i now do all my mutual funds through tdwaterhouse, now tdameritrade.]

    equity indexes from around the world are free at:
    http://quote.yahoo.com/m2?u

    futures, incl currencies are at:
    http://www2.barchart.com/mktcom.asp
    or
    globex quotes at
    http://www.cme.com/trading/dta/del/globex.html

    Leave a comment:

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