Let's cut the crap

[Guest jrmfl]

if one thing speeds up the process, it will be debt. ultimately, most debtors do not control their own destiny. i had been thinking that it will take a long time to unwind, but i vivdly remember CA's real estate depression of early-1990's... man, that went down the tubes seemingly overnight.  and 9/11 tipped the airlines over pretty quickly and w/o bailouts, most would be tummy up (maybe most are anyway)... the airlines are rather interesting, because many of us conduct our affairs along the lines of LUV (SW airlines), a profitable efficient concern, that is forced to compete against subsidized inefficent money holes.    

 

bottom line: i dont think extreme speculation, malinvestment  and deficeit spending is the road to prosperity.  the pendelum will swing back in favor of prudent specualtion (reasonable leverage-superadequate debt service coverage),  prosperous investing, living below your means and saving for the future and potential emergencies, which is the straight and narrow road to wealth and prosperity.... Sybil has us rutting along in a ditch off of the side of the road - whether we continue along as the ditch gets bumpier or he flips us over, ultimately we have to stop, reconsider and redirect our course.

it takes time and distance to turn a battleship... unless it's being sunk.

 

mexican default / peso... russia / rubX... japan / bank... ltcm / overlever'd....

 

staved off by a systemic bid put under them.

 

mexico, u.s. taxpayer bailout.

 

russia moentary flush... imf bailout.

 

japanese banks... internal shoreup by central bank.

 

ltcm counterparty defaults... fed proppage & bailout.

 

our central bank in conjunction with the bis & imf relieved the pressures.

 

now the very system responsible for bailing itself out, needs a bailout.

 

it is astonishing to think we added $3.5 trillion in debt just last year.

 

greenspan's gnp arguments for income are absurd and he knows it.

 

a another dime bag for the addict... strung out and strung along.

 

too big to fail?

 

dunno... but credit herion may have to go cold turkey, we've run out of prospects on the "riskier end" of that curve.

[Guest jrmfl]

echo bubbles...

 

 

the emails began the morning with a few choice comments from ol ddk (denver dave k.)

 

one in particular stuck out like a herpes sore on a cheerleader.

 

"the equity bubble burst in 2000 when greenspan began draining... he won't make that mistake again, at least as long as the dollar levitates...."

 

or something to that effect. i deleted it and chewed on it for a few minutes.

 

ddk tends to represent the very best of bi-polar trading tendencies.

 

is that a curse or a blessing? i'm not so sure anymore.

 

anyway...

 

the fed is certainly waving its magic wand over the markets today as the futures spike higher with widening spreads over cash.

 

back to this in a second.

 

another email suggested "options master of the 90's" bernie Schaeffer has it right... the comp is headed back to 2000. bubble be damned.

 

ok, whatever bernie... i guess your option chains prevent sellage.

 

here's my take on this mess, open for discussion...

 

the objective (fundamentals) are rarely represented in the charts. charts are merely a subjective probability of future events.

 

if historical norms for charting were present... this market would be much lower still.

 

the paradigms were broken for a reason. you can't inflate wealth w/o busting a few rules... at least out of thin air; you cannot.

 

bullishness is at a high for both bull & bear markets...

 

we have the lowest reading for bears since february of 1992. 17.2% bears occurred in 1987... prior to the crash in ocotber.

 

bullish sentiment is out of hand. and with good reason. the bulls here bernanke and uncle al speaking of "extraordinary measures" and they simply "believe".

 

the nitro test tube is be stirred not shaken...

 

the vix, vnx, & qqv all suggest we are mistiming bullishness.

 

if i hear the "wall of worry" bullshit again, i may hurl up a testicle.

 

there is no worry... period, the end. there is ONLY record complacency.

 

may 16th we hit a low for the vix... the continuing advance has only served to create an even greater sense of complacency when the wheels are clearly coming off this mess.

 

the aggregate money pump has gone parabolic, it is a tried and true moonshot.

 

the refi bubble part tres is well underway. the 10 year ust is taking it's time to the 2.90s... will we see 30 year fixes in the 4's? looks to be.

 

yields & p/e's historically approach parity and break it to "sub one" to signal the bottom is in for equities.

 

we are a long, long way from there.

 

a very long way... and the more uncle al intervenes in the treasury market... and bond market to collapse spreads... the greater the imbalance.

 

hence, the greater the decline.

 

history does not care. you can pretend you do... pose, primp & preen all you want.

 

history will whack your ass silly.

 

it always has and it always will. at least until the meek inherit this mess.

 

buyers beget buyers, which absorbs selling until buyers become sellers as the greater fool theory opens it's trap door.

 

is this the billionaire CT bailout?

 

sure quacks like that duck.

 

the fed isn't stoopid, just amoral.

 

ask yourself, are earnings going to improve in 2003?

 

we appear to be hemorrhaging operating earnings thru cost cutting.

 

so unemployment now expands the economy?

 

whoa!

 

these are truly new world disorder metrics.

 

we have cycles that have been manipulated to no end... are they valid? or have they begun to invert?

 

the us dollar now buys 29% less in euro terms than it did only one year ago.

 

massive central bank support in the forex market has failed dramatically. reality is u.s. growth is not sufficient to support itself let alone the global economy.

 

to combat this pending implosion the fed will keep interest rates low & flood the economy with money, credit & bits n bytes of securitization.

 

but when you approach the end of the available pool of subprime kinky borrowers...

 

the freshly minted debt levels will have an additional and suffocating effect on capital investments and personal consumption.

 

far too many traders, swami's and soothsayers are looking for this 20%+ bull market to run north of 50%... they cite the 1929 - 1930's market as the path of least resistance.

 

i could not disagree more.

 

we are about to visit real pain... a multimonth decline that will shock and awe all those in its path.

 

just my opinion, but this is what i see.

 

you can fool the investing public, but not the objective underlying fundamentals.

 

she's a bitch.

[Guest Icky Twerp]

If I mis-represent Dok's position, I'm sorry, it's my fault...

 

Doesn't the Good Doktor say over and over that everything is driven by liquidity?

Are we not swimming more than ever in liquidity, as per the MoGauge, etc?

 

So the liquidity provided by Sir Alan will drive all the market bubbles up, until they can't go up anymore. The sheeple will believe until they can't believe anymore. While we may think that will happen soon, those in the Government, including the Fed, are betting that it will not, maybe never.

 

IMVHO, the 10 Sigma will be that moment, not some external event that can be assuaged by more liquidity.

[ShitEatingGrinner]

jrfml, good post.

 

Been out of town...just looked at charts/VIX/Stochs/MACD/Trednlines. Too much bullishness.

 

It looks like a top to me. I have nothing vested in this opinion--other than gold/silver and gold stocks.

 

Also, I found out todat that my father in law is using me as a contrarian indicator As long as I'm bearish, he's happy, he said. Nevermind that I've been right for three years running. He sees the S up for the year and thinks the turn has come. He could be right, but I'll kiss my own ass if 2003 ends positive.

 

As far as liquidity...bring it on. Blow this crap pants economy up ASAP. I'm sick of the hypocrisy and seeing people like Froelich pushing stock. Cheaper dollars means my little bit of debt is paid off cheaper--by holding gold now and paying later. Inflate! Hell, Hyperinflate for all I care. We can all be rich!

[Guest jrmfl]

as the fed, with the double bubbles fannie and freddie, liquefies the economy and increases aggregates thru broad money meltup, those in money market funds and fixed income investments earn a negative rate of real return.

 

once the public latches onto the concept of diminished purchasing power (inflation), they will spend before inflation robs them of purchasing power.

 

there will be a rush into precious metals.

 

once the savings are spent, consumption will drop, and bankruptcies will increase, interest rates will rise and the real estate bubble will be broken. the impact will course thru-out the globe because foreign central banks hold 72% of reserves in dollar assets. only france, germany & italy have significant gold reserves left, their currencies have risen 22% and their dollar reserves have fallen 22%.

 

the more our central banks cranks up the presses, the further those reserves will decline.

 

we are appoaching the "tipping point" whereby it will be not only prudent to sell dollars, but necessary. eruoland & asia are is as bad a shape in a few areas.

 

borders will close and currencies will approach their fair value unless fractionally backed by gold.

 

gold is being supressed heavily in here as it's being accumulated for the coming rush.

[Guest jrmfl]

the long bong hit.....

 

our central pranksters want to fuel the economy & fight inflation / deflation simultaneously. this will be interesting to watch as these are not stoopid people, just arrogant to a fault.

 

their intervention in the ust market caused mortgage rates to hit a record lows:

 

Mortgage Rate APR

 

30-YEAR FIXED 4.875% 5.167%

 

15-YEAR FIXED 4.250% 4.742%

 

7-YEAR ARM 4.125% 4.357%

 

5-YEAR ARM 3.750% 3.955%

 

refinancing activity has surged by 22% from levels not seen in decades.

 

the proxy for fixed mortgage paper is the 10-year ust

 

Composite Bond Rates

U.S. Treasury Bonds

Last updated May 29, 2003 07:49 AM

 

Maturity Yield Yesterday Last Week Last Month

3 Month 1.00 0.97 0.97 1.04

6 Month 1.01 1.01 1.01 1.09

2 Year 1.29 1.29 1.34 1.57

5 Year 2.32 2.33 2.37 2.83

10 Year 3.41 3.41 3.39 3.90

30 Year 4.40 4.38 4.34 4.82

 

deflation or disinflation, take you pick... has been moved front and center while the fed presses run rampant. broad money supply is up $3.4 trillion year over year.

 

the senate raised the debt ceiling to $7.38 trillion, an increase of $980 billion.

 

budget deficits and credit expansion, as during the g william miller reign, will only put downward pressure on the dollar. during early 1987 the dollar began a steep decline, equity prices did not follow until many months later, october signaled the exit of asian capital.

 

only to return several months later... the globes banksters are now at that infection point whereby they can tilt the table or join in the frenzy of overprintage.

 

i'd bet on the former and not the latter.

 

debt is rapidly exceeding the value of capital goods and economic assets held globally.

 

the derivatives pyramid only serves to stave off the unsustainable. the fed has to cut interest rates and continue to turn up the heat and accelerate the flood of liquidity & credit.

 

the net effect is destruction of asset classes across the board.

 

debt is not the answer and every dollar printed is a promise to pay based in "faith".

 

we took on $3.4 trillion in promises last year... you can bet social security & medicare/medicaid trust funds will be robbed blind.

 

count on it.

 

the round robin nightmare continues:

 

prop equities

 

suppress gold & precious metals

 

ignore the dollar while pacifying those bagholders with more blizzards from our secretary of the treasury.

 

" strong dollar " .... " market values " .... " seek a level of exchange... " ... let the market decide.... "

 

yada, yada....

 

utter bullshit.

 

our trading partners and the g8 have been suggesting a 2nd half recovery for 3.5 years now...

 

the imf disagrees, the bis says don't think so... and russia's flat taxed economy has allowed a steve forbes idea to bloom tax receipts to buy more gold for external convertibility.

 

china's opening up their convertibility by allowing citizens to purchase gold.

 

opec and its members are quietly buying gold and pushing for oil to be traded in both the gold dinar as well as euro's.

 

dollar hegemony is slowly being beaten back.

 

the swiss still want their gold back, all 2000 tonnes... we don't have it. they know it, but they want it back...

 

wonder just how many counter party failures lay ahead.

 

quite a few i'd bet.

[joestool]

Snippet from today's daily reckoning at dailyreckoning.com:

 

Before he joined the unemployed, Paul O'Neill, then U.S. Treasury Secretary commissioned a study of how much it would cost for the government to keep its promises to the baby boomers. Now completed, the Financial Times, had this comment:

 

"The study's analysis of future deficits dwarfs previous estimates of the financial challenge facing Washington. It is roughly equivalent to 10 times the publicly held national debt, four years of US economic output or more than 94 per cent of all US household assets. Alan Greenspan, Federal Reserve chairman, last week bemoaned what he called Washington's "deafening" silence about the future crunch...."

 

The studiers concluded that an immediate tax increase of 66% is needed.

 

As I mentioned in my previous post on this thread, the faction in need of that extra 66% in taxes will also represent the largest voting block.

The modern practice of American Democracy which is basically made up of 2 opposing factions each trying to vote money away from the other is in for some interesting times ahead.

[Guest jrmfl]

quiet around stoolville today...

[Flaming Turds]

It is truly an amazing site to behold. So much stupidity. I got stopped out of all my shorts over this multi month process except for my AOL which is about a day or two from hitting. My golds are slowly bleeding me as well. I have been patiently waiting for a turn that hasnt come. Luckily I honor my stops or Id be toast. If I had switched long at my stops I would have made back my losses plus a bunch more.

 

I believe what the big picture charts are telling us is that we've entered the terminal phase on the liquidity bubble. As we all know you cant go straight up forever. Unfortunately it can go up for some time and since it is now obvious that the mania never ended, we could see the most extreme readings just ahead. This leg may be the death blow to finance as we know it. It appears to me that theyre determined to completely destroy us economically. Hypers projected dates are lining up better and better each day and that is quite scary folks.

 

Went and saw the matrix reloaded last night. Good flick. The part where he met the architect was really great. All I could think of while the old man was explaing the problem was our money sytem. Just like the matrix there is a mathematical flaw that causes us to have to reset over and over. It also produces its own set of anomalies one being a birth rate that gets lower and lower as you get closer to reset. This of course affects the abilty to grow the necessary debt to sustain the equation. Our dark days are coming. Its a mathematical certainty.

[Sigmoid Friend]

My guess is that things won't be as bad as most on this board think, at least for those who have some skills and other 'human capital' to draw upon. What will really upset people is the lowered standard of living and end of the culture of consumerism. If I'm wrong and it turns out to be a Mad Max future, I wouldn't want to hang around anyway.

[Guest yobob1]

QOUTE jrmfl

we took on $3.4 trillion in promises last year... you can bet social security & medicare/medicaid trust funds will be robbed blind.

 

There has never been a trust fund. Since day one it has been a pay as you go system with all of the excesses being diverted to the general fund. In place of these borrowed monies are IOU's that simply state that the remaining workers will be taxed into oblivion when the pay as you go system goes negative cash flow.

 

These morons think they can outrun reality. Wrong. They have the pedal to the metal, the oil pressure is dropping and the temperature is climbing. Hyper's right, when this thing let's go, the blow-up will be spectacular. Ole number '76 is going to cart-wheel right over the turn four wall. Over at the BOJ, Fukuanme (whatever) is jockeying for the inside line and may clear the wall first. All of their banks are insolvent with acurate mark to market accounting. Paper assets are in reality liabilities with no collateral.

 

The debt loads continue their vertical climb, but the real economy is slipping back. Yes they can reflate the casino on a temporary basis, but the mechanism to link that to the real economy is missing. Those who think this is going to end quietly, I think are going to be upleasantly surprised. Most of America is bankrupt when it is marked to market. Financial claims on grossly over-valued assets assure the end game.

[Bird D Durr]

Don't Cry For Us Argentina..................Even though the truth is We (i.e. The USA) are soon to follow you.....................

 

Something tells me that Lyric or something damn close to it.................will become real popular........real soon..............

[Guest jrmfl]

QOUTE jrmfl

 

 

There has never been a trust fund. Since day one it has been a pay as you go system with all of the excesses being diverted to the general fund. In place of these borrowed monies are IOU's that simply state that the remaining workers will be taxed into oblivion when the pay as you go system goes negative cash flow.

 

These morons think they can outrun reality. Wrong. They have the pedal to the metal, the oil pressure is dropping and the temperature is climbing. Hyper's right, when this thing let's go, the blow-up will be spectacular. Ole number '76 is going to cart-wheel right over the turn four wall. Over at the BOJ, Fukuanme (whatever) is jockeying for the inside line and may clear the wall first. All of their banks are insolvent with acurate mark to market accounting. Paper assets are in reality liabilities with no collateral.

 

The debt loads continue their vertical climb, but the real economy is slipping back. Yes they can reflate the casino on a temporary basis, but the mechanism to link that to the real economy is missing. Those who think this is going to end quietly, I think are going to be upleasantly surprised. Most of America is bankrupt when it is marked to market. Financial claims on grossly over-valued assets assure the end game.

the "bookeeping enteries" are referred to as "trusts"... but you are correct bob.

 

trust is clearly an oxymoron.

 

read noland this weekend, it's his best to date.

 

imo

 

relax and enjoy, the collapse is coming, uncle buck will lead the charge.

[Guest jrmfl]

My guess is that things won't be as bad as most on this board think, at least for those who have some skills and other 'human capital' to draw upon. What will really upset people is the lowered standard of living and end of the culture of consumerism. If I'm wrong and it turns out to be a Mad Max future, I wouldn't want to hang around anyway.

no, i believe they will be far worse...

[Sphinxter]

The debt loads continue their vertical climb, but the real economy is slipping back. Yes they can reflate the casino on a temporary basis, but the mechanism to link that to the real economy is missing. Those who think this is going to end quietly, I think are going to be upleasantly surprised. Most of America is bankrupt when it is marked to market. Financial claims on grossly over-valued assets assure the end game.

This quote lies at the heart of my investing dilema. Inflation or delfation or outright destruction?

 

Even using the Austrian view of the 'flations as measures of the increases or decreases in aggregate money supply, we are left with a problem.

 

That is the distribution of the money throughout the system. It is always uneven.

 

So the heart of the problem is that the CPI measures inflation at the consumer level. Note that consumer earning power declined this past reporting period. Yet aggregate money supply is going through the roof.

 

Hence, we have the stock market melt-up. I mean, it has to go somewhere, right?

 

The end game is that the ever increasing debt loads are not accompanied by any self-liquidating mechanisms. It's pure, unadulterated consumptive debt.

 

So debt destruction is a virtual guarantee. So is the transfer of real wealth upwards to a narrow few.

 

Loss in confidence in paper will result, if not the system itself, and that's why gold will do so well. Not beacuse of any overt inflation because people do not seem capable of recognizing inflation on anything but butter. Rather because of a flight to safety. 6,000 years of proven safety.

 

How does this all end? Let's abstract the entire US situation to that of a single family. A family with a 90% LTV mortgage on the house, $30k on the credit card bills, and flat to declining earnings. All it takes is a single shock and this family goes in bankruptcy. An illness. A bad car accident. A meritless but expensive suit. It doesn't amtter.

 

This is where the US is. Holding it's breath as Greenspew engineers the largest socialist human experiment ever hoping against hope that we don't have any national car accidents. Worse, hoping that any of our foriegn debt holders don't have any accidents of thies own requiring some repatriated liquidity.

 

I can't say 'when', but the outcome is 100% certain.