Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

[ThePythonicCow]

Re: Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

Pythonic Cow - I am heavily invested in your thesis, and so I'm effectively short Jack Crook's thesis in my posture - needless to say, the bulk of my investments would prosper mightily should you be correct - but with every passing month I conclude further that for the next two or three years, you won't be correct.

If by "my thesis" you mean the thesis that the Dollar will collapse sooner rather than later, then perhaps it is coming time to ask what happens after -both- the Euro and the Dollar have suffered severe damage. I was not so much disagreeing with Jack Crook as pointing out the rather predictable observer bias in his comments. He might still be right.

The time is coming to stock up on physical goods and property and to arrange ones life so as to minimize ones dependency on any currency.

For those of us, perhaps including you or me, who are fortunate enough to have modest unspent wealth (be it $10K or $10M) left over after making these arrangements, I'd advise keeping light on ones feet and dispersed, so that one can move ones uncommitted wealth quickly, and so that being blind sided by either of

1. a some sudden, inescapable turn of events or
2. a some stupid investment decision on ones own part

doesn't entirely wipe out ones stash.

One should avoid positioning ones liquid wealth so that one has to decide now the final outcome of the race to the bottom of the worlds currencies. Rather one should look to be more right than wrong on the intermediate changes in trends.

[ThePythonicCow]

Re: Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

with 1000 volts each time.

Ah - but we get to control the voltage.

I still play in the market with perhaps ten percent of my money just so that I keep some skin in the game. My reptilian brain simply doesn't learn at any school other than that of Hard Knocks. Fortunately, my cortex gets to set the price of tuition.

We're all crash test dummies on the maiden voyage and sinking of the worlds largest ever Financial SuperTanker. No one told us how this tanker was designed; we're having to reverse engineer it as it crashes and sinks, while we frantically search about for safer positions and life boats and sea rations.

The more one can learn about various parts of the Tanker, without getting killed in the process, the better ones chances should be.

[goadam1]

Re: Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

Look at the s and p 500. If it earns $70 and people want to pay a premium at 20x earnings then strap on the rockets. If it earns $60 and people feel bearish at 10x earnings then look out below. Your play. But I think you invest by paying a fair price in cash and risk for return. Cash feels pretty good to me right now. I will keep looking for what I think will make money at a fair price. Things feel a little expensive. For risk to reward: if we aren't in a full collapse then corporate bonds and senior debt are looking tasty.

[jtabeb]

Re: Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

you're being suckered into buying this rally... again. this is how the insiders always get out with their money out after the racket is over... and how they've been getting out of the usa stock market since dec. 2007. rally after rally through the debt deflation bear market, systematically they separate retail investors from their money. amazing how it keeps working! sucker them in, take their money. sucker them in, take their money. sucker them in, take their money. lab rats in cages learn faster than traders in this bear market... even rats don't keep hitting the 'feed' lever after it zaps 5 times with 1000 volts each time.

'maybe it won't zap me this time!' says the trader, now down 50%. 'ok, i was wrong about the bottom at 11000 and 10500 and 10000 and 9500 and 9000... but 7900... that was the bottom. now we're going to 9500 fast. yes, i can FEEL it! and i got these charts that show the dangle doo dah ratio to the intermediate whatnot. and this newsletter from joe genius guru trader dude. it's a sure thing!'

'don't do it', says the rat, watching from his cage.

ZZZZZZZZZAAAAAAPPPPPPP!

the rat shakes his heads in disbelief as the market tanks to 6500 on the news that the ultimate fire econ 'industrial' company ge is going out of business despite a previously unacknowledged $500billion infusion, and the usa airline industry will be nationalized, and so on.

you'll know when the markets hit bottom... all the online brokers will be out of business after all the retail investors' money that can be stolen is gone. you go to use your account you get a big message pops up... ACCOUNT CLOSED! THANKS FOR PLAYING!

Isn't the whole question "how bad do things have to get before the Gov ponies up with a truly MASSIVE inflationary PUSH?" Is that not why people are still paying for their "tuition". Do you think that the BIG ONE (inflation) is NOT coming?

All questions, wish I had answers for them.

[santafe2]

Re: Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

Wow! And it is a logarithmic scale. On the flip side, does it mean that shipping was a hugely profitable business just 6 months ago?

Baltic Dry Index is down from ~11,800 in mid May to 700 today. That's a drop of 94% but the actual daily shipping rate has dropped 99% according to this article. I'm going to file this one away so I can read it the next time I'm feeling put-out by our own business environment.

CAPESIZE and panamax indices are...$2,316 per day, less than 1% of the record high of $233,988 recorded on June 5.

“It’s difficult to see how much lower it can go. This is desperate stuff,” said a Baltic Exchange freight market representative. If the rates continue to plummet the index may approach its lowest recorded level of 554, in early August 1986.

The rates are falling off a cliff not just because there is so little demand for raw materials. That lack of demand is feeding on itself. Demand for raw materials has fallen to a point where it's not profitable for many producers to process and sell the materials that go in the tankers.

http://www.lloydslist.com/ll/news/ba...0017596233.htm

[Chris Coles]

Re: Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

Isn't the whole question "how bad do things have to get before the Gov ponies up with a truly MASSIVE inflationary PUSH?" Is that not why people are still paying for their "tuition". Do you think that the BIG ONE (inflation) is NOT coming?

All questions, wish I had answers for them.

Considering your location, by any chance you sit at the bottom of a deep concrete bunker with your finger on a red button?:eek:

[jtabeb]

Re: Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

Considering your location, by any chance you sit at the bottom of a deep concrete bunker with your finger on a red button?:eek:

I'm not a conehead if that's what you are refering to. (air force parlence for a missileer)

[Chris Coles]

Re: Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

I'm not a conehead if that's what you are refering to. (air force parlence for a missileer)

With a beard like that, I did think you were a retrograde geek with attitude and a penchant for the outdoor life.

[Rajiv]

Re: Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

With a beard like that, I did think you were a retrograde geek with attitude and a penchant for the outdoor life.

If I am not mistaken, that is a picture of "Karl Marx" during his days in London

[cjppjc]

Re: Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

Pythonic Cow - I am heavily invested in your thesis, and so I'm effectively short Jack Crook's thesis in my posture - needless to say, the bulk of my investments would prosper mightily should you be correct - but with every passing month I conclude further that for the next two or three years, you won't be correct.

Wow. Great thread. The strong dollar vs weak dollar is a facinatiing debate. All points of view resonate with me. It does seem however the the Euro is dommed. And like rats from a sinking ship capital will come to the U.S. dollar. Never mind the structural imbalances. The deficit spending. Maybe the Euro goes first then the dollar and the time frame is shorter than most would think.

[goadam1]

Re: Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

Remind me to never doubt you.

[metalman]

Re: Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

Remind me to never doubt you.

losing $$$ fading itulip is all the negative reinforcement i've ever needed.

[goadam1]

Re: Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

All the smart money guys I know, the ones who do their own trades and say this coming are gloomier than EJ. Of course, it is how they make a living so we shouldn't be surprised. Now I'm going to be in trouble warning people to set a little aside in case of dollar collapse.

[Me]

Re: Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

I have my own "relative" theory.
The 3 currency systems that exist.

Forget about currencies as we think of them. Euro, Pounds, Dollars, Yen and Peso’s etc.
These are more like derivatives of the same system. All have the same 3 currency systems involved.

First currency system
Hard cash.
This is something of physical value. Theoretically it could be cattle (it is with many African tribes), Steel, oil or gold. Gold has for many reasons we are familiar with, been the best choice for thousands of years.

Second currency system
Cash backed by a physical asset. These are the paper IOU’s in everyday circulation. Backed by this cash is the “full faith and credit” of the issuer. This is the cash we are more familiar with. This sort of cash carries a higher risk with it since it is not the real cash but a promise to pay the real cash on demand (or used to be). The risk is relative to the issuer of the IOU.

Third currency system
Credit.
This is the promise to pay the second currency type above.
Some may argue that this is not a currency and I would agree to an extent with that supposition. Credit is not cash, and the most distinctive feature as to what differentiates credit from cash, is that it is a promise to pay something. This is where things get murky as I have said that the 2nd currency type is also a promise to pay. Mmm.

Lets get back to credit for a minute though. Since this is a risky type of money it attracts a cost. The cost is the interest paid along with some form of collateral put up in the event of default.

In an environment where the second currency system (cash as we use it in everyday life) loses its value quickly (inflationary environment) this is a cost or risk to holding this currency form. If the rate of loss of value of this currency is say 5% annually and the cost of credit is for example 5% then there is no longer much difference between the two currency systems. That of credit and cash. The only risk difference is that between the collateral backing the issuance of each piece of paper. In the first instance the collateral of a government that issues paper bills (currency system 2) and the collateral behind the particular credit agreement. (real estate, motor vehicles, plant and machinery). This sort of environment will never last for a long period of time since credit is inherently riskier than cash so the 5% will be raised to compensate for the higher risk relative to holding cash……unless market participants are not left to determine the price of risk. In other words where central banks intervene to “price the risk” for the market. Times like now.

By keeping interest rates on credit at or below the level of inflation a situation is created where credit is actually money given to you and you are paid to take it. This you will do provided you are able to take the proceeds of the credit and achieve at least the inflation rate. Caveat here:
I am talking of monetary inflation and not consumer price inflation. As one is the cause, the other the symptom and just like a cancer can grow in your skull without causing noticeable effects immediately the effects are inescapable….at some point.

These two elements of credit being collateral and interest have both been dragged down to the level where they were close enough to cash IOU’s as to render them almost as good as cash. This is why I am calling them a currency system in their own right.

So we have a situation where credit is ridiculously mispriced due to government intervention in the economy. Currency system 3 is mispriced.
We also have a situation where currency system 2 is being inflated wildly far in excess % wise of the price of currency system 3 (credit). Cash therefore is mispriced.

Jack's argument seems to be that this is happening all over the world and the US is still the reserve currency and has the largest economy and the deepest capital markets and most transparent so wins by default.

I agree when viewing it relative to other derivatives of the same nature (EURO, SGD, GBP etc) but what if we view it relative to the first currency system?
Yes relative to the first currency system. The original currency system that the second system was meant to be created upon. IOU’s used to be backed by tangibles. That ceased with the closing of the gold window. Then we had a boom in the 3rd currency system, that of credit. Central banks are frantically attempting to keep this system afloat. It is currently on life support. In order to stem the implosion of this 3rd system they are pumping up the second system (IOU’s) which will cause the same sort of collapse in that system as the 3rd. The problem of course is that both the IOU system and the credit system rely on the faith of the issuer of those pieces of paper. The first system has no allegiance to any country, central bank or anyone. It pays no interest and does nothing but sit there. It too has been mispriced but not by governments.

The herd like citizen has gotten complacent and come to believe that “they will never let that happen”. I often hear people tell me this and it makes me laugh.
“They” don’t have any idea what they are doing and looking to the perpetrators of mess to solve the mess is simply stupid.

What if the market realizes that gold is not a commodity but money? What then?

[srivatsan]

Re: Beware Relief Rallies Update 1: DJIA 7552 the bottom? - Eric Janszen

We all know that EJ posted info about Singapore Shipping Industry end of '08.

Here is the latest News:

http://www.nytimes.com/2009/05/13/bu...13ship.html?em

Nothing new per se... reinforcing events....

Cheers.