Deflation fare thee well – Part I: In search of real returns in an unreal world - Eric Janszen

[Sharky]

Re: Deflation fare thee well – Part I: In search of real returns in an unreal world - Eric Janszen

Obviously, the charts were displayed in US dollars. In that sense, they are correlated. Perhaps I was reading too much into his comment.

That's not what I meant.

The USD is a flexible yardstick. It's the international value of the dollar that's one of the major drivers of the markets. When the value of the USD with respect to other currencies goes down, stocks, commodities and other assets priced in USD go up, and vice versa. For example, if the market starts to look cheap in EUR or JPY as a result of a weaker dollar, then investors with their primary holdings in those currencies tend to buy.

[dummass]

Re: Deflation fare thee well – Part I: In search of real returns in an unreal world - Eric Janszen

Looks like your previous thread was hijacked!

It would appear that you have found new evidence to support your thesis here. The implications are dark. No money to be made on that bubble.

Short Treasuries, your right, then how do you get paid?

[Charles Mackay]

Re: Deflation fare thee well – Part I: In search of real returns in an unreal world - Eric Janszen

When EJ wrote "The Next Bubble" he certainly could not have possibly imagined that there would be a $14 Trillion dollar BANKSTER BAILOUT BUBBLE in front of it. We have been discussing this in the iTulip forums within the context of Gerald Celente's postulation that the BAILOUT BUBBLE is the bubble to end all bubbles. Any comments?

Here is that Celente article:

http://yonkerstribune.typepad.com/yo...l-bubbles.html

and the forum link:

http://itulip.com/forums/showthread.php?t=9903

[Charles Mackay]

Re: Deflation fare thee well – Part I: In search of real returns in an unreal world - Eric Janszen

There was no key to this table to explain the abbreviations or how this adds up to a $45 trillion dollar liability? Please explain. Thank you.

[dummass]

Re: Deflation fare thee well – Part I: In search of real returns in an unreal world - Eric Janszen

Obviously, the charts were displayed in US dollars. In that sense, they are correlated. Perhaps I was reading too much into his comment.

If we were to convert the US dollar to another currency, wouldn't the correlation still exist? Perhaps the answer is Fiat.

Or

Since all currency is based on debt, the answer is Debt.

[Sharky]

Re: Deflation fare thee well – Part I: In search of real returns in an unreal world - Eric Janszen

So...is there an answer: what are they correlated to? The Market? Investor sentiment? CDOs ?

One big correlation factor is certainly the value of the US dollar.

[dummass]

Re: Deflation fare thee well – Part I: In search of real returns in an unreal world - Eric Janszen

I have been pondering EJ's question posed under the 9 commodity indexes (animated) above. Paraphrasing, he said that there is a correlation among commodity indexes that are not normally correlated. Then he asks, what are they correlated to?

This is something that has been bothering me for some time; it seems as though everything is correlated (including gold, but to a lesser extent). When the stock market tanks, everything tanks with it. Then everything goes up in lock-step. As such, there are no contrary plays. Investors are all market timers now.

So...is there an answer: what are they correlated to? The Market? Investor sentiment? CDOs ?

Was this supposed to be a rhetorical question? Or is the answer obvious to everyone ells?

[Sharky]

Re: Deflation fare thee well – Part I: In search of real returns in an unreal world - Eric Janszen

I'm not sure I grasp this one. How excactly did the Fed backstop $45 trillion? As in off-balance-sheet vehicles? Or does this mean 95 out of 100 mortgages are passed on to the agencies, which the Fed now (and for a long time to come, I guess) monetizes?

The OAD (option adjusted duration) shown in the table is a measure of the economic weight of the debt.

Banks have basically been turned into GSEs (government sponsored enterprises) like Freddie and Fannie by way of FDIC guarantees on their debt.

Re: Deflation fare thee well – Part I: In search of real returns in an unreal world - Eric Janszen

If the nation’s mortgage debt is now 95% government backed, how much mortgage debt is that exactly? Here Boyce explains.

You read that right. That’s a $45 trillion mortgage liability to U.S. banks that the Fed has backstopped, up from $15.1 only 12 years ago.

I'm not sure I grasp this one. How excactly did the Fed backstop $45 trillion? As in off-balance-sheet vehicles? Or does this mean 95 out of 100 mortgages are passed on to the agencies, which the Fed now (and for a long time to come, I guess) monetizes?

[WildspitzE]

Re: Deflation fare thee well – Part I: In search of real returns in an unreal world - Eric Janszen

Lastly, is everyone around here an admin? Rajiv and now jimmy... :p

Didn't you hear? Itulip is going wiki!

[LargoWinch]

Re: Deflation fare thee well – Part I: In search of real returns in an unreal world - Eric Janszen

FRED, since:

FRED has exceeded their stored private messages quota and cannot accept further messages until they clear some space.

I will post this here, but please remove after.



Thanks for another very comprehensive, yet easy to grasp, article.

I am noting a small typo in the sentence just above the section "Markets up? What markets?" and believe the following:

[...up from $15.1 only 12 years ago.]

should read:

[...up from $15.2 only 12 years ago.]

Oh and thanks for the hat tip!


Lastly, is everyone around here an admin? Rajiv and now jimmy... :p

Last edited by jimmygu3; Yesterday at 05:24 PM.

Re: Deflation fare thee well – Part I: In search of real returns in an unreal world - Eric Janszen

That's a pretty good snapshot for Saville tweaking EJ.

Re: Deflation fare thee well – Part I: In search of real returns in an unreal world - Eric Janszen

Very lucid and easily readable update. Thanks EJ. And thanks for the advice posted directly above, Bart. One thing that comes to my mind is, if the US indexes end year 2009 on an up-turn as Bart suggests is still on the table - doesn't that leave on the table the possibility that their direction thereafter - heading into 2010 and beyond are still a "jump-ball"? Here we saw, at least "provisional" market bottoms in November 2008, and then a more definitive one in March 2009.

Then we saw a big uptrend corrective rally which either topping now, or working it's way up to a top.

Whenever these significant larger moves top out the drumbeat of macro-bearishness at iTulip rises a notch. Then when the larger rallies arrive, we get more mention of potential rises in "some sectors", and less open dismissal of the notion that anything can rise in a sustained way in this environment. Meanwhile, observers such as Bart suggest a rally into 2009 year end is not to be ruled out.

Well ... we have just had a pretty sharp rally this far since March! So adding in another rally into year end begins to describe a trendline disturbing to the macro bearish thesis.

And what if after the rally into the end of 2009, you see another non-cataclysmic decline, maybe retracing only part of the year end 2009 rise, and then the markets resumed another rise from there? If that occurred (another non trivial leg up somewhere in 2010) what we would have seen described, was a market gradually pulling UP, out of the March 2009 lows. Another significant rise occurring going into the end of 2009 leaves the notion that we really did execute a market bottom in March 2009 still on the table.

If so, here's a question - what exactly will we label this presumably continuing bear market, if we end 2009 on a rising note and it does not collapse further thereafter? I am looking for the point in which iTulip endorses, "sound or not", that some sort of cumulative up-legs are what is actually manifesting in the larger picture. We started with the rise from March until now. We may follow up with what Bart points out may be a rally into year-end. At what point might people here choose to acknowledge that successive "bear market rallies" were piling up to point in the "wrong" direction?

Rallies into the end of 2009? Rallies into mid 2010?

As a $.02 worth addition in the "next bubble" area, I put this chart together over a year ago... and so far so good. The main point is not the actual level of inflation but that the chart & algorithm is calling for another relative peak late this year. Time will tell if the algorithm needs any adjustment, but so far there has been no change in it and its been tracking fairly well (knock on tinfoil).

As for USD decay providing a strong backdraft to emerging inflation in any way that is visible or reflected openly on the currency exchanges, the thesis must contend with a EURO whose second half 2009 trend seems broadly hinted at in the chart below. If the EURO breaks down vs. the dollar (Soros is on board with this idea now), how is the USD going to stage a convincing breakdown here?

I think the EURO is going to absolutely crater vs. the USD going from here into 2010. And if Soros these days has much the same idea, the notion can't be entirely wacky.

[cjppjc]

Re: Deflation fare thee well – Part I: In search of real returns in an unreal world - Eric Janszen

I knew Alan fairly well.

Bio: http://www.prmia.org/Chapter_Pages/D...0Boyce_bio.pdf

He's not a dumb guy. That said, FYI, his business interest lies squarely in the selling of the third bullet above (which includes bullet four, through his Absalon venture).

He is the biggest proponent of the Danish mortgage system that I ever met. It's been a couple of years since I lost touch with him, but last I heard he was busy selling the Mexicans on this concept.

And he did: http://www.hito.com.mx/nosotros/

Now he has a chance to be heard here in the US, and it looks like he is:
http://www.aei.org/event/100028

The Danish model has interesting features. Last time I analyzed it, "people" told me that it was the "most capitalistic"...

Ironically (as I recall, fuzzy recollection of all the facts), what made that system possible in Denmark was the high level of socialism. As I recall, it worked if the perceived credit risk across all mortgages was the same.

Guess that's another reason why this time he will be heard in the US.

I had never heard of the Danish mortgage system. I checked it out and liked it. Then it occured to me, those guys can game any system. Just because I can't figure out how to do it, doesn't mean those guys can't.

[metalman]

Re: Deflation fare thee well – Part I: In search of real returns in an unreal world - Eric Janszen

We'll know their cages have been truly rattled when there's another piece like that one from Saville. ;)

saville fishing for a fight with ej...