The American Output Gap Trap – Part I: We have three years to escape or we’re dead meat - Eric Janszen

[c1ue]

Re: The American Output Gap Trap – Part I: We have three years to escape or we’re dead meat - Eric Janszen

the global recession has kept oil demand in check, while production has remained essentially plateaued for several years, since about '05 iirc. i don't think anyone 5-10 years ago would have thought that we could be in the worst global recession since the 1930's, and have oil at $80/bbl. i think we could see a real price spike if global demand picks up. that's one scenario for triggering the next recession, perhaps.

Again, nothing you've said above is unreasonable - or is anything I would categorically object to.

However, I note that there is no path whatsoever for a recovery at this moment or for the next several years.

The global economy has been heavily dependent on the American consumer, and that engine is dead/broke/busted. There is no inheritor(s) in any way capable of taking up the slack.

Certainly some organic growth is still occurring in the BRIC and 3rd world, but even that is significantly being hampered by lowered growth prospects due to demand side shrinkage.

Thus while price spikes can and likely will occur, these are more likely going to be due to sector rotation due to worldwide interest rates at historic lows than due to demand increases. Or for the conspiracy minded, the investment banks/hedge funds/rogue traders playing with public perception and forward looking commodity option prices.

[jk]

Re: The American Output Gap Trap – Part I: We have three years to escape or we’re dead meat - Eric Janszen

Again, nothing you've said above is unreasonable - or is anything I would categorically object to.

However, I note that there is no path whatsoever for a recovery at this moment or for the next several years.

The global economy has been heavily dependent on the American consumer, and that engine is dead/broke/busted. There is no inheritor(s) in any way capable of taking up the slack.

Certainly some organic growth is still occurring in the BRIC and 3rd world, but even that is significantly being hampered by lowered growth prospects due to demand side shrinkage.

Thus while price spikes can and likely will occur, these are more likely going to be due to sector rotation due to worldwide interest rates at historic lows than due to demand increases. Or for the conspiracy minded, the investment banks/hedge funds/rogue traders playing with public perception and forward looking commodity option prices.

i think that over time oil is being turned into a form of money, at least as a store of value. [it's a very inconvenient medium of exchange.] thus we heard some time ago about tankers filled with oil riding at anchor, floating storage for someone's oil play. so we have rising baseline demand as developing countries persist in developing, along with growing investment demand. as qe sends waves of money outward from the fed to the primary dealers and onward, some of those ripples will add to the upward pressures.

[we_are_toast]

Re: The American Output Gap Trap – Part I: We have three years to escape or we’re dead meat - Eric Janszen

i think that over time oil is being turned into a form of money, at least as a store of value. [it's a very inconvenient medium of exchange.] thus we heard some time ago about tankers filled with oil riding at anchor, floating storage for someone's oil play. so we have rising baseline demand as developing countries persist in developing, along with growing investment demand. as qe sends waves of money outward from the fed to the primary dealers and onward, some of those ripples will add to the upward pressures.

As long as new discoveries of easily accessible oil continue to lag world usage, the upward pressure will continue, with the occasional recession and economic panics temporarily dropping the price in dollars. I wish it would drop back a bit so I can add to my positions.

[rogermexico]

Re: The American Output Gap Trap – Part I: We have three years to escape or we’re dead meat - Eric Janszen

I am overall a big fan of EJ and the site.

However, I have some sympathy with some of the complaints I see here.

My big complaint is that the site gets more complex, more difficult to navigate and more confusing as time goes by. This thread follows a post called Part I that is dated Oct 11. Huh?? Part II is dated Oct 8, and the content is partially subsumed into the (later?) Part I, which seems to differ mostly by the addition of interactive slide shows, which like much of what I hate about the internet, I find distracting and annoying.

Last month, there was post called part I section II or something, and it said that Twin Focus was going to offer some TECI specific investment vehicles. I emailed Twin Focus asking their fee structure and was instead solicited about family office style money management for my whole nut. Nothing wrong with that, but it seemed at odds with the description here. The post last month ended saying that next month (now this month) there would finally be a discussion of what we might invest in instead of treasuries. A post, no lie, we have been waiting for for over a year. Instead, there is mention of a new money management team that EJ advises, and an invitation to a webinar (I think). More waiting....

To be clear, the problem I have with this is waiting for Godot. I have no problem if there is actually nothing to recommend and I have no problem with not telling us if you don't want to. (I would still read the site for the macro view). I just hate waiting for promised things that keep not arriving.....

Why can't we just have one post that throws out a few ideas? Not expecting perfection, we are all adults and make our own decisions.

And some discussion of the FUTURE performance of PMs would be perfectly reasonable as well. What do I tell people who say should I buy gold now if I don't have any - without the handwringing about "don't be happy if it goes up"- just a coldly rational prediction of what the price will do from here?

I have some idea what some other members view as alternatives to treasuries right now. I have some of my own ideas. However, I pay to know what EJ's ideas are. I mean, EJ, if you are exactly 30% PMs and 70% 2 year treasuries RIGHT NOW, fine. But if you are not, why not let us know what else you have? Maybe this is what HV means by actionable. CURRENT info, not necessarily fast trading.

My own background is that I did very well with big wave surfing in the nineties and got out at the Peak of the tech bubble and then stayed out of stocks in favor of corporate bonds for the most part. I also heavily shorted the S and P in late 2007 and did very well with this. I even looked for ways to short residential real estate (in 2005 and 2006!) but was not motivated or smart enough to actually do it like the characters in Lewis' The Big Short. I did all of these things before I had ever heard of EJ. I had certainly listened to Marc Faber and many others. What I credit EJ with is convincing me to take a large Gold position (larger than his) and in helping me understand and put together all the macro pieces behind my own observations. Without EJs explanation of the big picture and the forces at work, I might not have had the courage to stick with some of these positions (like buying AU at 900 and hanging on when it went 680 intraday!)

EJ convinced me that that Gold should not be sold until 1) It is much higher AND 2) there is a viable alternative as a store of value (our "money" has never really served that particular function since 1914 has it?)

I feel that EJ's gentle temperament inhibits the transmission of this profound message - this should be repeated in table pounding fashion over and over! Going on TV and acting coy about gold if you really believe gold will at least double from here is doing no one any favors.

I would also like to plead for more simplicity on the site - fewer interactive graphics.

Finally, I am a blogger myself, and like EJ I prefer soundness of message to fecundity. If we have to wait to get quality, so be it. I'll keep subscribing for the macro view, but for energy investment ideas it is time to "shit or get off the pot". Tell us what you think or stop teasing us with it. Either one is OK.

[flintlock]

Re: Big thumbs up on content. Big thumbs down on format!

I don't think HV is literally worried about a refund, rather he said that to make an understated point.

I like the site and tried the pay section but found it didn't offer much for me, so I dropped it. Now I feel I get my money's worth so I can't complain!

[vinoveri]

Re: Big thumbs up on content. Big thumbs down on format!

Two years ago yes,
http://www.itulip.com/forums/showthr...he-Fed?p=46131

now a international political minefield.
http://www.ft.com/cms/s/0/bb3699c4-d...tml?ftcamp=rss

Thanks. I'm not sure I get the point though. Sure, there is more "awareness" that CB liquidity is blowing bubbles and talks now of currency controls, but we could be back here in Oct 2011 with more talk, more angst, QE III or IV on the horizon and the markets 30% higher. Yes, we are 1 year closer to any bubbles popping than we were 1 year ago (by definition of course).

2 years ago was the collapse and iTulip had warned to get out long before and stay out. Over a year ago this site asserted that the SPX would finish '09 at 600 or thereabouts if memory serves, AND after explaining gracefully the error of timing, at the beginning of this year predicted the market would be down 20-20% by years end. Does iTulip still believe that? Deja vous indeed.

[rogermexico]

Re: Big thumbs up on content. Big thumbs down on format!

One must subscribe in order to read EJs analyses, is that not true?

[flintlock]

Re: Big thumbs up on content. Big thumbs down on format!

Fred,

What makes itulip unique is not only its readers but its subscribers. As a new subscriber, I am constantly challenged to think outside of the quick fix economic sound bytes of today.
EJ has been cautious in making any "new idea" recommendations because he studies and formulates first before firing out fad ideas.
Communities like itulip understand we need a nation of producers and no longer consumers of products, information etc. That means subscribers & members become partners.
My compliments to all long term subscribers and of course EJ
Joe

I agree! I'm here for the subscribers . That is what makes Itulip unique. They drive the discussion. No offense meant to EJ by this either. Its just that most of what he says is over my head . But I can read the comments made about his articles and they fill in the blanks for me. At least most of the time.

[flintlock]

Re: Big thumbs up on content. Big thumbs down on format!

Thus to say that EJ adopted what Lukester proposed is true in a certain sense, but quite untrue in the overall sense.[/QUOTE]

Don't forget DOW 25,000!

[bill]

Re: Big thumbs up on content. Big thumbs down on format!

Thanks. I'm not sure I get the point though. Sure, there is more "awareness" that CB liquidity is blowing bubbles and talks now of currency controls, but we could be back here in Oct 2011 with more talk, more angst, QE III or IV on the horizon and the markets 30% higher. Yes, we are 1 year closer to any bubbles popping than we were 1 year ago (by definition of course).

2 years ago was the collapse and iTulip had warned to get out long before and stay out. Over a year ago this site asserted that the SPX would finish '09 at 600 or thereabouts if memory serves, AND after explaining gracefully the error of timing, at the beginning of this year predicted the market would be down 20-20% by years end. Does iTulip still believe that? Deja vous indeed.

I purchased resource companies in Australia, SE Asia, Brazil, South Africa, Mongolia and a few in Canada as markets turned down 08-09 using yen.
My target was resource companies that would supply Emerging Markets. Objective was to get in front of dollar reserve holders rushing for resource companies to purchase.
The period two years ago as markets turned down capital from China was accepted without much resistant’s, acquisitions took place and I benefited from those deals. Don’t get me wrong these deals don’t come easy, hours and hours of research, travel and on and on.
Now that said, to answer your question regarding asset purchases today as I did two years ago face many challenges.
1. Market has gone up and is not what I would call cheap.
2. Hot money flow is now finding resistance via government controls and if you are a politically incorrect as China is asset purchase approval will get denied, thus no exit for investments you acquire prior to China showing up, thus risk of national protectionism, investment tax, currency controls,ect ect.
3. Korea and Japan seem to be positioned well and are looking to acquire resource companies. I think they will have no problem acquiring assets. For example I know Japan is on the hunt to acquire rare earth deals.
Dollar will continue to sink and eventually make assets in USA very cheap. Who gets to purchase USA assets is what you should be researching and I do like Alaska.

BTW, What really rattled my ass to purchase these deals as described above was interviews EJ did with DR Hudson and the “Hot Potato” dollar problem.

[chr5648]

Re: Big thumbs up on content. Big thumbs down on format!

Hi Largo,

One thing that I think sets iTulip apart is the respectful conversation and sense of community that exists here. ZeroHedge obviously has more up-to-the-minute trading perspectives, but the "member" commentary is subadolescent on a good day. While I don't really think this site was meant to be ABOUT trading in the short term, this community is certainly a good place to discuss such subjects.

The AUDJPY-ES convergence trade will keep working until the underlying correlation pattern breaks down. Until then, it's as close to a sure deal as you can find. As to capital risk, it's all about the stops. When the divergence blows out to (say) 10 ES-points, you put the convergence trade on with a target of crossing the line (zero divergence) and a stop at whatever your judgment tells you. My approach was to stop the trade at a 50% excess over the initial divergence. I only got stopped out once that way, and of course the trade turned right around and converged right after I got stopped out. I ran the trade successfully without getting stopped out at least 10 times. When ZH announces the opportunity for the trade, it's usually over before you get there. But if you plot an AUDJPY overlay on your realtime ESZ0 screen, you can see the entry opportunities yourself in real time. Unless you are way better at fancy trading rules than I am, you have to watch the trade manually, since the stops are relative and not at hard price points. As to capital risk, it's contained in the stops and there's enough liquidity in both markets to almost eliminate slippage risk. The only real cost is available margin. I was trading 200 to 300 ES contracts against 10 - 15mm Euros on the FX leg. The risk is well contained but the margin requirement is non-trivial. But a 10 ES-point convergence on 250 contracts yields a $125k profit, usually in about an hour, with very low risk.

As for posting more in trader's corner, I have to confess that I find this site hard to navigate. I don't read all the posts all the time the way I do on some other sites. I read the Ask EJ stuff and the comments under the EJ commentaries, and other topics if they catch my eye. But following the whole thing is too much work for the benefit involved IMHO. That would be one criticism I would (respectfully) levy against this site: The forums are hard to follow.

xPat

People have been doing the JPY-equity trade for years, it was one of the first strategies that I implemented, zero hedge was one of the last to figure it out.

zerohedge = zerocred

[magicvent]

Re: The American Output Gap Trap – Part I: We have three years to escape or we’re dead meat - Eric Janszen

The one thing I find upsetting is that on more than one occasion, what EJ has written would lead a reader to believe he was selling Treasury bonds. When asked for clarification, none was provided. I hope that he is clearer in the future as to the actual steps he is taking.

[Chris Coles]

Re: The American Output Gap Trap – Part I: We have three years to escape or we’re dead meat - Eric Janszen

It is becoming clear that many today do not fully understand just how complex the rules of engagement with any form of finance have become. Take this debate back, say fifty or sixty years and all that was required was a handshake between two individuals, both of which understood the basic rule of the power of a reputation. The old fashioned idea of "His word is his bond" comes to mind. In those days, anyone could open a discussion about money and never have to even think about the consequences of what they said; whereas, today, there are whole shelves lengths of books of rules, all of which lead towards the likelihood of going to jail for simply using the wrong terminology. Just a quick glance at the Financial Services Act here in the UK will give an excellent example:

http://www.legislation.gov.uk/ukpga/...df?view=extent

Objectives of FSA etc

1 Financial stability objective
2 Enhancing public understanding of financial matters etc
3 Meeting FSA’s regulatory objectives

Remuneration of executives of authorised persons

4 Executives’ remuneration reports
5 Executives’ remuneration reports: supplementary
6 Rules made by FSA about remuneration

Recovery and resolution plans

7 Rules made by FSA about recovery and resolution plans

Short selling

8 Power of FSA to prohibit, or require disclosure of, short selling

FSA’s disciplinary powers

9 Suspending permission to carry on regulated activities etc
10 Removal of restriction on imposing a penalty and cancelling authorisation
11 Performance of controlled function without approval
12 Approved persons guilty of misconduct
13 Publication of decision notices

Measures to protect consumers

14 Consumer redress schemes
15 Restrictions on provision of credit card cheques

ii

Financial Services Act 2010 (c. 28)

Financial Services Compensation Scheme

16 Contribution to costs of special resolution regime
17 Power to require FSCS manager to act in relation to other schemes

Powers to require information

18 Information relating to financial stability
19 Asset protection scheme etc

Banking Act 2009

20 Services forming part of recognised inter-bank payment systems
21 Minor amendments of provision made by Banking Act 2009

Director of Savings

22 Administration of court funds by Director of Savings

General

23 Orders or regulations
24 Minor and consequential amendments
25 Extent
26 Commencement
27 Short title
Schedule 1 — Further provision about the consumer financial education
body
Schedule 2 — Minor and consequential amendments
Part 1 — Amendments of Financial Services and Markets Act 2000
Part 2 — Amendments of other legislation

Now place that into the context of someone, (EJ for example), with a business that tries to steer between the services of an accredited financial adviser and just someone that wants to promote a full discussion.

I suspect that, in looking at the fine detail of all the various regulations that he MIGHT trip over; EJ has, from time to time had to, shall we say; pause for thought?

We are in, what in meteorological terms is described as a classic Col; this time a dead zone between the past mistakes of the FIRE economy and what "might" come next. There are NO certainties and it is to be expected that everyone is going to suffer from confusion; certainly that applies to me right now. (Though in my case it comes from being repeatedly being presented with the idea that the only deal I can get is to sell IP for a couple of M when they might be worth at least several orders of magnitude more than that).

Turning back to previous debate about a decision to take a subscription and a request for a rebate; surely in business, (we all are in business, one way or another), the process ALWAYS involves the concept of risk, where we have to make a decision and then live with the consequences? If at every juncture, we make our play and then expect to be refunded if it does not work out, then surely that flies in the face of the whole idea of taking responsibility for our own decisions?

Over my business lifetime I have made plenty of mistakes; but am happy within myself that I have had the courage to live with the consequences. This, surely, is what being in business is all about?

[LargoWinch]

Re: Big thumbs up on content. Big thumbs down on format!

2 years ago was the collapse and iTulip had warned to get out long before and stay out. Over a year ago this site asserted that the SPX would finish '09 at 600 or thereabouts if memory serves, AND after explaining gracefully the error of timing, at the beginning of this year predicted the market would be down 20-20% by years end. Does iTulip still believe that? Deja vous indeed.

vinoveri, note that EJ call on the S&P were not in current dollars but in $ circa 2000.

I am too lazy to do the math now, but I feel we are at that level if not lower...

[LargoWinch]

Re: Big thumbs up on content. Big thumbs down on format!

I don't think HV is literally worried about a refund, rather he said that to make an understated point.

I am disapointed to note that HV has indeed obtained a refund by FRED in one day.

If you read HV title you will note that it is now: "iTulip Ambassador" instead of the previous "iTulip Select Premium Member".

Hopefully, HV after a killing in PMs will dare to spend $200 fast depreciating bonars to join iTulip in a not so distant future...