The Game - Part I: Queen of Hearts - Eric Janszen

[stumann]

Re: The Game - Part I: Queen of Hearts - Eric Janszen

"...if the U.S. does the currency devaluation, how long will it be before every country is doing the same thing?...so we can debase our currency faster than anyone else?"

and because the US is the reserve currency, exactly how can this occur???

I would more likely believe the US$ has been "decoupled" from the US economy (in the vein of Doug Noland's comments) and whether or not the US domestic economy works, it really doesn't effect the US$

could be a good time to jump ship from the com$'s once the AUS hits mid90s again. sorry, still not convinced the era of real commodity appreciation has begun. the real pain must be felt first

looking at the natural gas price over the past few weeks, it's actually more proof against inflation- deregulation leading to market manipulation hardly counts as "inflation"... such market run ups are one shot events. prices crash after the hot$$$ has been made


call me a fool, but I'm still not convinced the "inflation" since 2001 will take root and grow... (and as Mr. Prechter would say, this article could well call the top of the Fed's doomed reflationary efforts).

once pushing on a string has been found to be wanting, then what????

[Spartacus]

Re: The Game - Part I: Queen of Hearts - Eric Janszen

captive bids

social security "trust fund" has to buy treasuries
foreigners
US FED
probably a bunch of other entities are required to buy t-bills come hell or high water.

really good article, makes sense, but two questions?

In Alice in Wonderlan parlance ...

Why isn't the bond market confirming this? I know the tin-foil-hatters (as opposed to the mad hatter) will tell us that there is some central bank, fed -> comercial bank propping up of treas. prices. But if dollar devaluation is the game who doesn't know it?? Look at any long term $USD chart and it's as plain as day. And who is going to hold a ten year t-bond yielding 3.2% with inflation and currency devaluation a sure thing? Also if the t-bond market is make-believe, corp bond yields are believing the myth too.

Now the fed's game has been buying up MBS. Who is selling it, the banks? If so what is the price the fed is paying? Is there a nudge-nudge wink-wink going on here, that if fed buys your crappy MBS, you are obliged use the cash to buy treasuries? I'm sure the holder of the MBS would do this trade. Is the fed peeking into the MBS to see the quality of the loans inside?? Or are they just taking the AAA rating that was bestowed upon this junk in the past? If the fed has to do open market operations to withdrawl money, selling the MBS what price will this it fetch?

Second question, if the U.S. does the currency devaluation, how long will it be before every country is doing the same thing? Does the U.S. have a competive advantage in running the printing press? so we can debase our currency faster than anyone else?

[whitetower]

Re: The Game - Part I: Queen of Hearts - Eric Janszen

Just an observation about a "Sudden Stop" and currency flight.

I live in Arizona and a few times per year our family travels to Puerto Penasco, Mexico for a long weekend at the beach. This past weekend we were stopped leaving the United States at the U.S. border going south to Mexico by U.S. Customs. This has never happened before to us. There is always a back-up coming back to the U.S. at the border -- never have I seen a back-up of Americans leaving.

We were specifically asked 1.) are we American citizens and 2.) are we travelling with over $10,000 in currency.

I asked a co-worker who owns a home in Mexico and who goes 2-3 times every month if this was something new (we hadn't been since May). She said that if had been going on for a couple of months.

Very strange and very alarming.

[xela]

Re: The Game - Part I: Queen of Hearts - Eric Janszen

what if ej's right and the usa gov't pegged the dollar to oil... to fall at a controlled rate since 2001? the peg broke for a few months in 2008-2009... but they pulled it back fast!

That would beg the question why iTulip so far still has no oil in its portfolio. Not suited as a long term holding, expecting a re-crash of oil prices, some other reason, which one.. ?

[Slimprofits]

Re: The Game - Part I: Queen of Hearts - Eric Janszen

Just an observation about a "Sudden Stop" and currency flight.

I live in Arizona and a few times per year our family travels to Puerto Penasco, Mexico for a long weekend at the beach. This past weekend we were stopped leaving the United States at the U.S. border going south to Mexico by U.S. Customs. This has never happened before to us. There is always a back-up coming back to the U.S. at the border -- never have I seen a back-up of Americans leaving.

We were specifically asked 1.) are we American citizens and 2.) are we travelling with over $10,000 in currency.

I asked a co-worker who owns a home in Mexico and who goes 2-3 times every month if this was something new (we hadn't been since May). She said that if had been going on for a couple of months.

Very strange and very alarming.

capital controls will be done under the guise of stopping money laundering and terrorism.

[jk]

Re: The Game - Part I: Queen of Hearts - Eric Janszen

That would beg the question why iTulip so far still has no oil in its portfolio. Not suited as a long term holding, expecting a re-crash of oil prices, some other reason, which one.. ?

if ej's prediction of a big break in equities WITHIN THE NEXT 2.5 MONTHS [!] comes to pass, there will be an opportunity to buy oil much more cheaply. i'm currently about 10-11% in oil or oil-related investments because i'm less than sure that such an opportunity will come to pass. if it does, i'm going to deal with some painful temporary losses on my current positions, but i'm going to be a buyer.

[cobben]

Re: The Game - Part I: Queen of Hearts - Eric Janszen

"there will be an opportunity to buy oil much more cheaply"

Perhaps not oil itself, but oil stocks, including the trusts, which generally trade more like stocks than like the commodity.

A renewed credit / liquidity crunch for example would pull the debt leveraged stocks down, not necessarily the commodity.

[jk]

Re: The Game - Part I: Queen of Hearts - Eric Janszen

"there will be an opportunity to buy oil much more cheaply"

Perhaps not oil itself, but oil stocks, including the trusts, which generally trade more like stocks than like the commodity.

A renewed credit / liquidity crunch for example would pull the debt leveraged stocks down, not necessarily the commodity.

yes. actually whether oil itself sells off will be very telling, and the answer to a question i posed somewhere or other around here, " is oil being turned into money? has it become a store of value?"

[xela]

Re: The Game - Part I: Queen of Hearts - Eric Janszen

Will be interesting for sure. Oil re-crashing below 33.. might be just the trigger to terminate the petrodollar IMO.

[skyson]

Re: The Game - Part I: Queen of Hearts - Eric Janszen

As usual, great piece EJ. I like Peter Schiff's analogy on deflationists. He said that if you actually measure the cost of all assets, products, etc, in sound money (gold) then guys like Prechter are right on. We have been experiencing long-term (price) deflation since the tech bubble pop -- in sound-money terms:

http://stockcharts.com/h-sc/ui?s=$SP...36&a=180447066

I still believe we have at least one more deflationary event in our near future but, in the long run, the dollar is doomed to inflation.

exactly. we are going into a deflation spiral, for sure!

when you measure the size of something, you need to use a standard measurement tape, like 1 cm = 1 cm. if your measurement unit keeps changing everytime, then how could you determine something's correct size?

i found this argument of inflation/deflation not very helpful. shall we first determine what measurement unit to use? is it hopeless to determine the growth/shrinkage of economy and increase/decrease of price level with a unit($US) that subjected to manipulation of the US government?

if we use the real money(gold) to gauge the economic conditions, the "deflationist" arguments are indeed very convincing and fit the common sense of economic theory: shrinking consumer demand-->shrinking economy-->price decrease of everything.

by using a floating measurement unit($US), deflationists/inflationists are confusing a whole lot of people. shall we go back to the basics?

my last question is:if the argument of inflation/deflation is over, is the official itulip asset allocation of 30% PM/70% treasury bills a fence sitting position?

if deflation(in gold terms) is setting in, we shall see the trend line going down soon...

[jk]

Re: The Game - Part I: Queen of Hearts - Eric Janszen

if we use the real money(gold) to gauge the economic conditions, the "deflationist" arguments are indeed very convincing and fit the common sense of economic theory: shrinking consumer demand-->shrinking economy-->price decrease of everything.

by using a floating measurement unit($US), deflationists/inflationists are confusing a whole lot of people. shall we go back to the basics?

my last question is:if the argument of inflation/deflation is over, is the official itulip asset allocation of 30% PM/70% treasury bills a fence sitting position?

if deflation(in gold terms) is setting in, we shall see the trend line going down soon...

the problem with following this graph is that i think oil is becoming a form of money, too, i.e. it is increasingly being bought as a store of value instead of for use.

[skyson]

Re: The Game - Part I: Queen of Hearts - Eric Janszen

the problem with following this graph is that i think oil is becoming a form of money, too, i.e. it is increasingly being bought as a store of value instead of for use.

yes you are right. so what is your take on the most accurate "weather balloon(s)" to watch?

[jk]

Re: The Game - Part I: Queen of Hearts - Eric Janszen

yes you are right. so what is your take on the most accurate "weather balloon(s)" to watch?

we have no fixed frame of reference, as finster [and his avatar] points out, so we have to watch everything. earlier today i figured out my investment returns over the last 8years. over a double in dollars [2.24x], but down 40% in gold and down 38% in crude oil, up 36% in wheat and up 34% in euros. i don't usually use quite so many metrics, but every time i figure out what my portfolio is worth i also value it in gold and i multiply it by the dollar index to see what it might buy me abroad. overall, i figure i'm about even or up a little bit in terms of actually buying the things i want to buy. not so great for all the time i put in, but not too bad considering my biggest drawdown in 8 years was 15%, and my 2nd and 3rd biggest were only about 8%. we're all at sea, untethered.

[skyson]

Re: The Game - Part I: Queen of Hearts - Eric Janszen

we have no fixed frame of reference, as finster [and his avatar] points out, so we have to watch everything. earlier today i figured out my investment returns over the last 8years. over a double in dollars [2.24x], but down 40% in gold and down 38% in crude oil, up 36% in wheat and up 34% in euros. i don't usually use quite so many metrics, but every time i figure out what my portfolio is worth i also value it in gold and i multiply it by the dollar index to see what it might buy me abroad. overall, i figure i'm about even or up a little bit in terms of actually buying the things i want to buy. not so great for all the time i put in, but not too bad considering my biggest drawdown in 8 years was 15%, and my 2nd and 3rd biggest were only about 8%. we're all at sea, untethered.

thanks for sharing.

your result drive the point i raised at post #40 and a question constantly in my mind for the last few months: if we are so certain that inflation(aka deflation in gold), why it is still prudent to only allocate 30% of fund in gold, why not 70%? not to mention the huge risk of a sudden devaluation of $US and other paper currencies?

by leaving majority of fund out of gold, i assume people are trying to catch the last batch of fishes trapped between the rapid currents and swirls at the up stream of niagara falls. before they could celebrate the harvest, the boat load of fish and themselves would unexpectively fall into the bottomless abyss of the waterfall.

looking at finster's FDI index, is there any doubt where the dollar is heading? is it time to put down your anchor made of gold, steady yourself in this dangrous and rapid economic river?

[cobben]

Re: The Game - Part I: Queen of Hearts - Eric Janszen

"is there any doubt where the dollar is heading?"

In risk management you always have to take under consideration the fat-tail outliers, what if . . . Bernanke suddenly converts to Austrian economics, and precipitates the deflation spiral that EJ says "cannot" happen. It certainly can happen if TPTB go off their rocker, it's just not very likely.

Nice run up here, +8% in one week is not chicken feed, but no breakout yet. It does look like there might be one soon though, so Fed jawboning / rumour mongering should go orbital next week.

GLD:TLT
http://stockcharts.com/h-sc/ui?s=GLD...d=p03442735180