Sell Everything

[bart]

Re: Sell Everything

You expect the Dow to go as low as $250 ??? ;)

Cage. You. Now. ;)

[grapejelly]

Re: Sell Everything

Cage. You. Now. ;)

:confused: :confused:

[bart]

Re: Sell Everything

:confused: :confused:

Sorry - "cage" as in "get back in your cage". It was a humor attempt.


Personally, I have a custom built one... and EJ approves of it too... ;)

[grapejelly]

Re: Sell Everything

Sorry - "cage" as in "get back in your cage". It was a humor attempt.


Personally, I have a custom built one... and EJ approves of it too... ;)

:eek::p.............

[raja]

Re: Sell Everything

Grapejelly . . . Regards Bart's "cage" post, he was making a joke about my "Dow at $250" joke. It took me a minute to get it.

So anyway . . . while in the cage , I took Bart's suggestion and did some homework, learning about the Argentine crisis.

What a mess it was!

I think there was a gold bubble or sorts, although I couldn't find anything specific on this.

Inflation was rampant at the time, so bad that the government closed the banks to stop people from exchanging their pesos for dollars. With the peso ravaged by inflation, the price of gold versus the peso must have soared, and I imagine everybody who could exchange pesos for gold was doing so.

Still, bubble or no, I'm not sure how looking at the Argentine situation sheds light on whether investing in gold ETFs is a good idea, or whether it's foolish. If the U.S. went down the same path as Argentina, would the PM ETFs survive?

No question that physical gold would have been good during the Argentine crisis . . . but so would investment in a gold ETF, had one existed at the time. (TIPS would have been good, too, as long as they weren't Argentine TIPS )

[bart]

Re: Sell Everything

No question that physical gold would have been good during the Argentine crisis . . . but so would investment in a gold ETF, had one existed at the time.

I'm not nearly as certain as you on an ETF, given all the foreign and local money controls - the corralito - and the general attitude of the government, etc..

[raja]

Re: Sell Everything

I ran across this in another forum . . . they are discussing the Argentine crisis:

The US now imports 80% of their manufactured goods and 70% of the energy products. That's not far off from Argentina. Big difference, however, the US debt is denominated in DOLLARS. All of it. Going forward a devaluation would have to pay Canada, Kuwait, China, etc more for goods, but their debt would be lifted, unlike in Argentina. Still ugly, but big difference.

Second, Argentina is a first-class country, but they are not the world's engine of obese consumption. If the US stops buying what do you think would happen to the world? To Chinese factories, to Saudi oil prices, to European car and tool manufacturers, to Canadan UAW and softwood prices, to Peruvean copper prices? Once you grasp that, imagine if they DID devalue and were competative, what if the US actually rebuilt factories (and how long would that take, ground-up????) and was EXPORTING, who would they export to? Argentina? China? I'm serious here. Even WITH American consumption we have goods overcapacity. Conclusion: there will be no wave of American exports to right the books. The law of large numbers says it cannot happen.

Third, given the above, what will US$ fall AGAINST? Will Europe volunteer to sacrifice Daimler and Bosch to have a nice, strong Euro? Or will China decide they no longer want to export? Or Japan, no longer needing income to pay for their complete lack of domestic oil? Maybe the Rand would like to get a little stronger? I don't think so. If the US$ falls, for quite a while the Euro, Yen, will follow it down. The USDX could hold at .80 Eur 1.40 and watch the prices of reality rise to $200 oil and $2000 gold. The Peso could fall because it's small, and although it made quite a dent in the ship, the world could suffer its collapse. Not so the US, at least not yet.

Not that the US is the center of the world--that's the myopia of economic and social Luddites--but unless you can come up with a new source of debt and consumption, the fall of the US=worldwide depression. That's why no one wants to shake the camel when he has so many straws aboard.

[jk]

Re: Sell Everything

Anyone know about this one?

Shorts junk bonds... AFBIX

i've been in this fund for some time, at some cost. via the fund you are [in arcane ways] short junk bonds. being short, you've got to pay the yield of the bonds you're short, so there is a constant drain. it's like being short a stock that is paying a significant dividend. so of course my purchase was way early. i'm still holding it, expecting spreads to widen. but i'm no longer holding my breath.

[grapejelly]

Re: Sell Everything

I'm not nearly as certain as you on an ETF, given all the foreign and local money controls - the corralito - and the general attitude of the government, etc..

the Argentine banks renegged on their promises to pay US$. Why wouldn't any ETF reneg on its promises (whatever those are)?

A gold ETF is wishful thinking. You have no real gold, merely a paper claim. The point of gold to me is *not* to have a paper claim, but rather an asset that is not someone else's liability.

[raja]

Re: Sell Everything

Why wouldn't any ETF reneg on its promises (whatever those are)?

Another question to ask is, why would the ETF reneg on its promises?

During a gold bubble, money is pouring in. Why would they reneg at that point?

Yes, when the bubble started to collapse, and everybody is trying to get out, there might be some problems, but I hope to be long gone at that point.

[jk]

Re: Sell Everything

I ran across this in another forum . . . they are discussing the Argentine crisis:

the likelihood, imo, is that if the u.s. dollar drops dramatically in terms of buying power [more rapidly than it is already dropping], other fiat currencies will be dropping too, just not quite as much. as pointed out in the piece lifted from the other forum, no country or region will want a superstrong currency. so the dollar can go down markedly against real goods and pms, and down substantially but not as much versus the euro, yuan, yen, krona, won, ringitt, baht, zloty.....

[grapejelly]

Re: Sell Everything

I did sell most of my stocks today. I kept some of the very illiquid juniors as I think they are reasonable lottery tickets for the future.

But I liquidated my major holdings and took profits. I'll do some coupon clipping in the meantime and hopefully dive back in in about six months.

I have to admit that iTulip info was helpful in this regard. I also subscribe to Steve Saville's speculative-investor.com and think the world of Steve. He has progressively become more bearish on the short-term and intermediate-term prospects of stocks, namely precious metal stocks like I liquidated. And I have carefully considered his arguments and bought into them.

Saville expects that if gold rallies, the Fed will increase rates one more time. They must appear tough on inflation at any cost. Appearances above everything else. And that would cut any gold rally short. If the economy weakens quickly, that would temporarily bring down gold. So nothing now is particularly bullish for gold stocks.

And the Grantham thread showing a negative risk premium for bonds really got my attention.

The bubble could go on for a lot longer but I think there will be some type of "shot across the bow" as EJ called it, and it will be much messier than February 27.

The thing that is lacking in the world wide bubble is the parabolic increase in values, and the wide spread public participation. But but but...there is remarkable complacency in the world about financial stuff in generaly. Remarkable Goldilocks talk just continues. And hey, I lived through the Seventies and I know that things can really turn around quickly. Goldilocks is a fictitious character, ultimately. I judge a lot by social mood and I think things are ripe for a "panic".

I'm not saying the whole thing will pop. I'm just thinking it will correct for awhile.

The CB printing presses are very busy these days and I expect that after the dust settles, by Fall 2007 the stocks 'n' bonds will be back up there because of ballooning money supply.

But I also think long rates will be much higher than they are today. Risk premia will be much higher. Reversion to the mean.

I think the US$ is bottoming and will be rallying for at least a few months. Perhaps longer. There is nothing particularly so wonderful about Yen and Euros and Pounds. The dollar is way "oversold" to use a term I hate.

I already have physical precious metals in the safe deposit box so I'm covered there.

[Finster]

Re: Sell Everything

Just a mild observation...

In a thread entitled Sell Everything, there has been no mention made of shorting or using any of the shorting funds or ETFs designed for it or even the use of put options.

Reasonably so. If you're shorting something, you still have the question of what you're going long. There is no such thing as being long nothing.

Say you short a stock. To do this, you sell the stock in advance of buying it. While you are short, you are long cash. It's just the opposite of if you had borrowed cash to go long the stock.

So when you short something else, you're going long USD.

Do you really want to go long USD?

Leveraged, no less?

[bart]

Re: Sell Everything

Reasonably so. If you're shorting something, you still have the question of what you're going long. There is no such thing as being long nothing.

Say you short a stock. To do this, you sell the stock in advance of buying it. While you are short, you are long cash. It's just the opposite of if you had borrowed cash to go long the stock.

So when you short something else, you're going long USD.

Do you really want to go long USD?

Leveraged, no less?

Cool!... another *Fin* in progress? ;)

I'm surprised... nay shocked... that an esteemed relativist like thine self would miss that (an example only) if a short gains 10% while the USD loses 2% then one would be 8% ahead on a global purchasing power basis.

[Finster]

Re: Sell Everything

Cool!... another *Fin* in progress? ;)

I'm surprised... nay shocked... that an esteemed relativist like thine self would miss that (an example only) if a short gains 10% while the USD loses 2% then one would be 8% ahead on a global purchasing power basis.

As another famous bart once said, "eat my shorts". What do you mean by "global purchasing power"? I dare you. Just try ... try and short "global purchasing power". Or for that matter, go long the same. In the world of investing, we are stuck with a limited menu. If we buy stock on margin, we are shorting USD and going long stock. If we short stock, we are shorting stock and going long USD. Whether you admit to being a relativist or not, you can't escape the fact that every trade that involves shorting something also involves going long something else, and that you are implicitly taking a position on the relative merits of two assets.

So if you short a stock, you can just as properly say you are making a bet that cash (the dollar) will outperform the stock as you are that the stock will underperform cash. And if you are advocating shorting a bunch of stuff - as you suggested above - that you are expressing a view that cash will outperform a bunch of stuff.

Consequently, you are a dollar bull.

Q.E.D., ipso facto, and all that jazz.