Fed cuts dollar, Fire sales vs FIRE sales, Duh-flation, and Bezzle shrinks again - Eric Janszen

[LargoWinch]

Re: Fed cuts dollar, Fire sales vs FIRE sales, Duh-flation, and Bezzle shrinks again - Eric Janszen

I am glad you high-lighted that video on inflation as I finally watched it. I just wonder .... :rolleyes:

What happens if nobody is interested in more pipe?
What happens if nobody has money they are sitting on for that new car?
What happens if we are not a manufacturing society anymore?
It sounds so good, whatever happened to Weimar Germany? (too much fun?)

Finally I wonder if Uncle Ben is too quick on the draw right now and nobody reacts to inflation. Consequently he has to really print and whoops, off we go to high inflation (hopefully not hyper inflation, let's see that video! :eek

Orion, I pray I will never have to post a modern clip on hyperinflation. Things are sure not looking good.

The question I have is, how does one calculate or assess "velocity of money" in an economy? Can this even be achieved?

I may be off-base on this, but would inflation be represented somewhat by Money Supply (M3) x Velocity?

[jk]

Re: Fed cuts dollar, Fire sales vs FIRE sales, Duh-flation, and Bezzle shrinks again - Eric Janszen

largowinch. money supply * velocity = gdp =price level*quantity of production

demond. one thing i've come to appreciate is how long it takes for economic processes to occur. we were looking for deflation 2 years ago, we kept wondering if it had already passed in some subtle way, but it didn't come til the last few months, and it's not been subtle. now we're looking for inflation. be patient. it will come. oil prices too low for you to believe that? how about gassing up every bulldozer in the country to work on roads and bridges? consumption going down? bring mortgage rates to 4.5% and watch for a wave of refi's from those people who bought BEFORE the housing bubble, and so aren't underwater on their equity. these things take time.

[strittmatter]

Re: Fed cuts dollar, Fire sales vs FIRE sales, Duh-flation, and Bezzle shrinks again - Eric Janszen

Family, friends, work associates, community, savings. Protect yourself by giving of yourself. Although he couched it within financial circumstance, EJ made a great point in his post today, trust will have a high premium. If you're not building it now, it will come at a much higher premium later. We're not heading for Mad Max but we're done with Dude that's Cool!

No specific advice but I hope it helps.

I really appreciate itulip. A wise man once said, "In order to keep what you've got, you first have to give part of it away." I see a lot of that here.

The opportunity to be of service and the need for courage will be great. (A little levity, although fitting, never hurts either).

http://www.hulu.com/watch/4267/its-a...fe-lost-ending

[WDCRob]

Re: Fed cuts dollar, Fire sales vs FIRE sales, Duh-flation, and Bezzle shrinks again - Eric Janszen

one thing i've come to appreciate is how long it takes for economic processes to occur. we were looking for deflation 2 years ago, we kept wondering if it had already passed in some subtle way, but it didn't come til the last few months, and it's not been subtle. now we're looking for inflation. be patient. it will come.

It'd be crazy to try and single out a single thing I've learned as the most important since I started reading iTulip, but the idea you're expressing is way up there JK.

You just can't think in normal person time - you have to adjust to macro time. Things take years to wind up, and unwind (until they don't).

Galbraith's quote on markets being irrational longer than you can stay solvent resonates more and more the longer I watch. And Buffet has one along the lines of he often knows what will happen, but not when.

For whatever reason I don't have any skill in figuring this stuff out for myself. But I've had good luck in the past recognizing people who have skills I don't - which is why I latched onto EJ in 2006 when iTulip came back up. I scoured the Internet for explanations about what was happening and what might come next, and iTulip was the most persuasive.

iTulip could still be wrong of course. Which means that I could too. But I'm patient enough (or stubborn enough) to keep the courage of my convictions when I have a good framework underpinning my beliefs. I never considered buying back into stocks after getting out at 11,600 on the Dow (in 2006), and I never considered selling my gold when it dropped from $1000+ to under $700 this Fall.

If the theory EJ put forth had ever been undermined I probably would have made some changes to the portfolio, but nothing that's happened so far gave me any reason to change the underlying framework I was working with. And aside from that EJ's track record keeps getting better.

So unless you're Bart, and you're willing and able to put that kind of intelligent time and effort into reading the short-term tea leaves, I just don't see how you can do anything but try to get on the right side of big events ahead of their unfolding and then WAIT. Maybe a lot longer than you expect to.

[Quincy K]

Re: Fed cuts dollar, Fire sales vs FIRE sales, Duh-flation, and Bezzle shrinks again - Eric Janszen

I would also say that I definitely do not buy the low unemployment = deflation argument. Argentina, Mexico, and Latin American countries would be better examples than the extreme of Zimbabwe, who has a genocidal psychopath with virtually no check on his power as it's current head of state. To me unemployment has little place in the context of inflation/deflation debate.

Also, I know there are a lot of examples of severe economic contraction with high inflation.

"Is it possible to have consumer deflation with monetary supply inflation?"

My answer: Yes, it is possible.

My conclusion now that I feel like I've gotten my answer from the itulip community on this thread is that, while I still see you support ka-poom theory to the fullest, your answer is also "yes, it is possible."

Next post on deflation, I would recommend not using the word "duh-flation" - i know you try to keep it light, but that is pretty lowbrow without being that funny.

Mish referring to EJ as Humpty Dumpty is also pretty low. What I find somewhat alarming is that EJ is a self-proclaimed optimist and his
U-6 forecasts are very disturbing(20 percent in 2009?).

If his projections do come to fruition, many high-density, ethnically-challenged urban areas are about to become very violent, very quickly once UE benefits expire.

[Chris Coles]

Re: Fed cuts dollar, Fire sales vs FIRE sales, Duh-flation, and Bezzle shrinks again - Eric Janszen

If there is one thing that has struck me recently it is the way the price, (but not the value), of oil has dropped so fast while anyone with an ounce of nous cannot see the dollar staying at present levels now we can see the vast amounts of credit that have recently swamped the entire system. Thus "when" becomes particularly relevant and no one can say with any absolute certainty exactly "when" the system will change direction. Our only certainty is that, sometime soon, it will.

We live in exciting times.

[nathanhulick]

Re: Fed cuts dollar, Fire sales vs FIRE sales, Duh-flation, and Bezzle shrinks again - Eric Janszen

Mish referring to EJ as Humpty Dumpty is also pretty low. What I find somewhat alarming is that EJ is a self-proclaimed optimist and his
U-6 forecasts are very disturbing(20 percent in 2009?).

If his projections do come to fruition, many high-density, ethnically-challenged urban areas are about to become very violent, very quickly once UE benefits expire.

Buy guns and ammo now, while you can!

Buy em cheap and stack em deep!

[bart]

Re: Fed cuts dollar, Fire sales vs FIRE sales, Duh-flation, and Bezzle shrinks again - Eric Janszen

have people been forced to borrow in a deflationary environment?

I'm not sure what you're driving at, but ask yourself if deflation has ever ended or credit ever started growing?

[bart]

Re: Fed cuts dollar, Fire sales vs FIRE sales, Duh-flation, and Bezzle shrinks again - Eric Janszen

Mish referring to EJ as Humpty Dumpty is also pretty low.

That says quite a bit about Mish, and longer term Alexa results tell a similar story.

[goadam1]

Re: Fed cuts dollar, Fire sales vs FIRE sales, Duh-flation, and Bezzle shrinks again - Eric Janszen

America isn't Zimbabwe, yet. Cheap oil, cheap oil, optimism and cheerful stupidity have worked so far. I still wonder if you are going to get the poom you expect.

[BadJuju]

Re: Fed cuts dollar, Fire sales vs FIRE sales, Duh-flation, and Bezzle shrinks again - Eric Janszen

America isn't Zimbabwe, yet. Cheap oil, cheap oil, optimism and cheerful stupidity have worked so far. I still wonder if you are going to get the poom you expect.

Why do people try to compare America's situation to Zimbabwe's in the future? Janszen himself posted an unemployment graph of Zimbabwe prior to hyperinflation that shows it was already incredibly messed up before inflation took hold. A more fitting example is that of the Weimar Republic. Even then, you are still looking at a situation that is still remarkably different from the one we have now.

[FRED]

Re: Fed cuts dollar, Fire sales vs FIRE sales, Duh-flation, and Bezzle shrinks again - Eric Janszen

Why do people try to compare America's situation to Zimbabwe's in the future? Janszen himself posted an unemployment graph of Zimbabwe prior to hyperinflation that shows it was already incredibly messed up before inflation took hold. A more fitting example is that of the Weimar Republic. Even then, you are still looking at a situation that is still remarkably different from the one we have now.

We dismissed the hyperinflation case long ago. That is not going to happen.

Google: is hyperinflation possible?

[BadJuju]

Re: Fed cuts dollar, Fire sales vs FIRE sales, Duh-flation, and Bezzle shrinks again - Eric Janszen

We dismissed the hyperinflation case long ago. That is not going to happen.

Google: is hyperinflation possible?

Oh, I know it is stagflation now, good sir. I am just saying that a more fitting example of hyperinflation is the Weimar Republic, but even then, that comes with some pretty heavy strings attached to it.

[BadJuju]

Re: Fed cuts dollar, Fire sales vs FIRE sales, Duh-flation, and Bezzle shrinks again - Eric Janszen

How long do you guys think it will be before inflation begins to overwhelm the disinflation pressures? As a student on a fixed-income, I am definitely worried about my buying power being eroded over the next year. When do you guys see the shit hitting the proverbial fan? :p

[jtabeb]

Re: Fed cuts dollar, Fire sales vs FIRE sales, Duh-flation, and Bezzle shrinks again - Eric Janszen

How long do you guys think it will be before inflation begins to overwhelm the disinflation pressures? As a student on a fixed-income, I am definitely worried about my buying power being eroded over the next year. When do you guys see the shit hitting the proverbial fan? :p

You'll know it when you see it!

I was amazed when we were all discussing weather KA had already happened, "did we miss it", "too small", "not tradable" etc.

The KA phase was pretty easy to play (if you believed it, that is). 100% cash or t-bills worked rather well.

The problem as you so aptly point out is it is one thing to give up potential gains for only a currency risk during KA, it is quite another thing to hold assets that COULD produce severe losses still like stocks and commodities and other traditional inflation hedges.

I jumped in with 1/2 my cash because I though I saw an inflationary rush approaching, maybe we still are, but that's the rub. To play POOM you have to expose yourself to CAPTIAL RISK! BIG DIFFERENCE.

Note: I've been reading a lot from Jon Markman at MSN. A re-read of all of his commentary has convinced me that I was wrong and need to wait longer. (His best case is the market bottoms around the 1995 level, the year not the price. Mind you, that was the BEST CASE scenario.)

So what to do? (I'm not too worried about POOM as I will outline below)

CASH and T-BILLS rule in KA and as I said the right kind are free from capital risk (currency risk yes, capital risk no). 1-3 day t-bills is what I'm talking about or if you are a simple guy like me, that would be called "CASH" or short term CDs or something of the like.

Now for the POOM part. What asset would you be willing to hold that will do the best, or very well, during POOM and that you are also comfortable holding if KA proceeds further and you might have to eat a capital loss? BUT, that requirement to provide STAND-OUT performance during POOM is kind of a catch-22. How do you simultaneously hedge KA and POOM. Answer, you can't effectively do it (but I do have a solution, I think).

You have to find an asset class that works for BOTH conditions (stable to mild decline during KA, KICK ASS during POOM).

Stocks, could go up alot or could still fall 50%= Most likely not the best choice.

RE could go up alot but also could get alot worse and the holding costs could kill you.= if you live in it as YOUR PERSONAL HOME (and farm and garden and you have steady stable income or a pension, then I would say OK not bad, but for sure NOT talking commercial NOR investment property).

What does that leave you with? Not much, except for a couple of silvery and yellow metals. SO that is the only thing I can think of that is safe to hold for POOM. (The real stuff, physical in YOUR POSSESSION).

So I have about 20% cash for bargan hunting, food, and more guns and ammo.

Most of the rest is well, SOLID and METALLIC (75%) and a small amount (5%) is blued with a nice wood stock and a red dot sight. ( Don't laugh, you should see the ROI on guns and ammo over the past 18 months, Beat the DJIA by about 60%!) [+15-20% vs 40% decline]

Anyone else care to take a crack at this?