Credit Crisis and Recession Deepen

[Andreuccio]

Re: Credit Crisis and Recession Deepen

I posted something similar to this in the News section. While a lot of people might be struggling financially, we're not at the point where we are shutting down schools and fire stations and whatnot. I'm wondering if this week is going to be a real hall mark of the current downturn.

Well, not many schools, yet.

Schwarzenegger's budget plan triggers trims in programs and plans for layoffs in L.A. County and elsewhere.

By Jason Song, Los Angeles Times Staff Writer
February 21, 2008
The Long Beach school board voted to close an elementary school this week. The Rialto Unified School District, in what is believed to be the first such action in the state this year, sent notices to 305 employees including teachers, informing them that they may not have a job next fall. The San Francisco school district may take city "rainy day" money to help balance its budget.

School districts across California have begun trimming services and preparing to lay off teachers in response to Gov. Arnold Schwarzenegger's proposed budget, which could cut about $4.8 billion in education funding this year and next year. Educators say it's the worst financial crisis they can remember.

http://www.latimes.com/news/local/la...,3850513.story

[Slimprofits]

Re: Credit Crisis and Recession Deepen

Well, not many schools, yet.

http://www.latimes.com/news/local/la...,3850513.story

Some CA. districts have announced that schools will close beginning in 2009.

a quick scan of newswires reveals the following closures all for budget shortfalls:

Brady school closing - Montana

Volusia County, Florida school closings

Upstate New York - two elementary schools

Baltimore county elementary schools

Waterloo, Iowa elementary schools

School-closing plan draws opposition - Pennsylvania

Chandler, Arizona elementary schools

There are many more articles covering the same subject, around the country.

And if police and fire department budget woes are subjects that depress you, do not click to view these google news search results.

The map says, "we're fucked!"

[DemonD]

Re: Credit Crisis and Recession Deepen

What do you mean "real hall mark[sic] of the current downturn?

Are you saying this is the beginning of the end on the way further down, or the end of the way down and now things will turn up, or something else?

I guess hallmark was poor word to use. It's a fair question. I meant it to mean milestone, where this event marks that milestone onto the next phase down where cities, counties, and states either start severely cutting services, severely raise taxes, and/or declare bankruptcy.

babbittd's post confirms, although even before the bond auction failures those things were in the works, but what I feel this is is just like when last spring when mortgage companies and banks stopped giving subprime loans, this stopped all the real estate specuvestors and home borrowers from continuing the credit orgy; now that has spread to the city level, no more malinvestment with the backing of a credit expansion. One of EJ's great contributions to the thought process of this was the idea of risk pollution, and as we can see this is definitely a spread of the toxicity into government, currently due to the credit deflation, but also due to the fact that many governments were acting just like subprime borrowers and going overbudget on superfluous projects and benefits.

there was one milestone day last year where subprime loans went away almost overnight. This auction failure is analogous to that, this time affecting government. A real SHTF moment.

[jtabeb]

Re: Credit Crisis and Recession Deepen

The map says, "we're fucked!"

Of Course we are fucked!, Duh! It's the trajectory that the economy follows on the road to getting fucked that's of interest.

(Let's take a poll, does anyone out there believe we are NOT Fucked?!)

I hate to bring this up but if you want a great primer on how this all goes down (SHTF) go read "Atlas Shrugged". I know you won't but you are stupid not to. It provides keen insight on how the mechanisms of finance will play out.

I think all of the evidence, peak oil, busted credit bubble, risk pollution, are all consistent with INCREASED governmental intervention in ALL markets.

Most previously successful vehicles of asset inflation die out and burn, food and energy and "produced" required survival items become very expensive, local and state governments and their services start to breakdown and fail until...

...until, a new boom is born and money supply creation goes insane.

You are all very smart folks. Can't you see that as credit is destroyed, this gives the government MASSIVE ability to inflate the money supply? This is the red queen's race right now.

Can the Gov inflate the supply of currency faster than the credit bubble deflates.

I don't think so, BUT this doesn't mean a boom can't happen in areas with the right fundamental pre-conditions, like say a supply constrained area like ENERGY!!!!

The pace of monetary creation is set to Ex-*******-plode. Good fundamentals (constrained supply) + a fire hose of monetary growth, plus government intervention (tax advantage investment treatment, gov funds etc.) set the stage for a CRACK-UP boom of HISTORIC GINORMOUS proportion.

I think Ty Andros' "crack-up-boom" series is insightful. But due to the deflationary overtones, one has to be aware of which balloon(s) will get mated up to the firehose.

Local Gov's will have to get some firehose, the alt-e market will have to get the firehose. We can't make enough of a difference by spraying the firehose at existing conventional supplies of liquid energy (cause we can't freaking make any more than we got). That's why the firehose has to go to Alt-E, where we CAN MAKE MORE than we've got in the ground.

It's coming, the bad times, that's a given. That it will require a HUGE amount of GOV money to make LESS BAD is also a given. That the Money has to Go into these area's (Local Gov, infrastructure, and Alt_E) is also a GIVEN.

None of the Evidence from this post or ANYTHING ELSE I've read for the last FIVE YEARS contradicts the above in anyway, shape or form.

The "Big Picture" is entirely consistent with all the anecdotal evidence and other observations and reports.

I had to get my disaster portfolio prepped first (Gold, PM stocks, Silver, Personal Ordnance, food, water etc.) But that is complete now. Everything else I am pouring into this bet because: 1. the masses are asleep, 2. the fundamentals are SO OUTSTANDING, and 3. monetary policy is SUPPORTING it all.

You know why this will be so freaking large. All the above and one more thing LACK OF COMPETITION!!!!!!!!!

As most everything else is going to do shitty, how long do you think it will take for these area's to attract the Lion's Share of available capital?

Sheeple are dumb, they are asleep.

Just the other day my neighbor came to me complaining that here broker couldn't tell her how to buy gold bullion in physical form!!!!!!!!! I had to show her and tell her how.

The Sheeple are JUST NOW WAKING UP, when they do, EVERYTHING THEY HAVE WILL GO Into PM's, Alt-E. Infrastructure, Local gov funding.

IMAGINE the capital reallocation of investments that will take place (remember NO COMPETITION!!)


I am LONG everything I can find that makes sense given the above.

Have some freaking vision folks, or you are about to be left in the dust if you don't.

The faster FIRE(ROME) burns, the faster and higher the next bubble will inflate. (counterintuitive, but correct vis-a-vis tech bubble to housing bubble transition)

As Mr. T would say " I pity the fool who ain't got no vision 'bout global credit deflation and the resultant monetary inflation that will ensue and the global boom in supply constrained areas that these monetary flows will be directed into"

[c1ue]

Re: Credit Crisis and Recession Deepen

JT,

I agree with your prognosis on the extent of how bad things are going to get.

However, I don't agree that the government will be able to reflate.

Given the net debtor position of the US at this point, the substance of my lack of agreement with the iTulip reflation thesis is that the various foreign repositories of money will not agree to continue to lend their accumulated (and depreciating) stacks of dollars towards a next bubble.

Sure, this pile of dollars has no other use at present.

But the problem isn't the existing stack of dollars, it is the continuing outflow of production (credit for exported commodities, services, manufactured goods, etc) from said countries towards the US.

That the US is also simultaneously causing inflation in the supply countries is another nail in the coffin.

My view is basically that while some of the ex-USA dollars will come home as political gestures, that the rest of the world is busy putting its present and future production towards other and better uses.

This in turn will cause the reflation to fall short of what is necessary to eclipse the real estate bubble. Sure, there will be some alt-energy/infrastructure beneficiaries, but the rabbit is not coming out of the hat this time around.

This does not mean, however, that it is Mad Max time.

The US is still the most wealthy nation in the world - both in sum and per capita.

Even a 50% drop in absolute purchasing power just means the US falls to top 10 status - as the other top 9 will also suffer similar but not equal losses.

It does mean, however, that those who believe that all will be well - will be not just wrong but will have crippled their economic future for the next 20 years.

I might be wrong, but I prefer not to be wrong and screwed for 20 years.

Then there are the gold bugs.

It is absolutely true that gold does well in inflationary times.

My problem with gold is this: at some point, any monetary unit must represent either past, present, or future production.

Investing in gold may gain you a hedge against inflation, it may also gain you growth in assets vs. existing purchasing power+inflation due to overcorrection, but it does not in any way help you tap into future production.

At some point it will be necessary to do so in order to continue to gain relative purchasing power.

Thus those who put all their faith in gold are betting that they will both be able to time the exit point for gold, and also that this exit will more or less simultaneously mark an entry point into future production.

I don't agree.

My strategy is about moving into those countries, currencies, and businesses where future production will prosper and I'm perfectly willing to 'lose' relative gains in gold in the process.

[jk]

Re: Credit Crisis and Recession Deepen

Thus those who put all their faith in gold are betting that they will both be able to time the exit point for gold, and also that this exit will more or less simultaneously mark an entry point into future production.

this is an important point. I, for one, don’t assume that I can time things that well, nor do I assume that the exit for gold will coincide with the best entry for other investments. [btw, I don’t know that jtabeb implicitly made such an assertion – I don’t think so.] I’m heavily invested in gold, and beginning to nibble at other investments, though I think that a general downdraft in equities will lead to a better buy point – an ebbing tide lowers all boats. I think that gold may sell off, too, at that point, but I just don’t know, so I’m also holding cash and some swiss francs and japanese yen. I view the whole matter as probabilistic, and don’t think we can rely on any one scenario.

As Mr. T would say " I pity the fool who ain't got no vision 'bout global credit deflation and the resultant monetary inflation that will ensue and the global boom in supply constrained areas that these monetary flows will be directed into"

be careful in using mr. T on the subject of gold. It is well known that the popularity of mr. T is a contrary indicator for gold.




1.About the Mr. T Gold Indicator

• What is the Mr. T Gold Indicator?
  The Mr. T Gold Indicator is a proprietary technical indicator created by Minyanville to identify and anticipate prospective exhaustion points in the price data for gold. Some technical indicators rely on formulas applied to the price data of a security, but these types of indicators can be very subjective, requiring an analyst to view the signals that are generated within the context of still more indicators! The Mr. T Gold indicator, on the other hand, is completely objective and easy to use. All you have to do is look at Mr. T. What could be easier than that?
  
  
• How Does the Mr. T Gold Indicator Work?
  Good question. The Mr. T Gold Indicator is based on the five squares series of price points using .9444 for downside trend factors and .0556 for upside trend factors, multiplying either .9444 or .5556 by the close of the high (or low) that is referenced by the first series of price objective within the oscillating trend channels. Hahaha! Just kidding (although it would be cool if that really was the Mr. T Gold Indicator formula). The truth, however, is the Mr. T Gold Indicator is simply based on the appearance and popularity of... Mr. T. We have discovered that over the years Mr. T's appearance and popularity is simply a subconscious reminder telling us when the yellow metal has reached an important peak.
  
  
• Surely, you cannot be serious. Do you think I am a fool?
  Look, this morning we awoke pitying the fool; not a specific fool mind you, but just pitying the fool in general; the very idea of foolishness. You know that thing which makes one a fool? We pity it. Whatever it is. And we are not alone. Someone else pities the fool. Do you know who? That's right. Mr. T. pities the fool.
  
  The reason Mr. T pities the fool is because Mr. T knows his gold. In fact, Mr. T developed his gold-wearing ability during his days as a bouncer, confiscating the gold jewelry of those he kicked out of nightclubs as a symbol of his toughness and virility.
  
  Mr. T knows human behavior, and he knows gold. So who are you going to believe? Some pinhead precious metals analyst at Bigwig, Doofus and Booyah Securities? Or Mr. T? Shut up fool! You're going to believe first name "Mister", middle name "period", last name "T"!

2. Mr. T Gold Indicator in Action (1982 - 1994)
At this point you are probably thinking, "Quit your jibba jabba." Does the Mr. T Gold Indicator work? How good is the Mr. T Gold Indicator?
Rest assured, the Mr. T Gold Indicator has been weighted, smoothed, eyeballed and thoroughly back-tested for generalish accuracy using both the Internet Movie Database (IMDb) and Wikipedia (the free, somewhat accurate encyclopedia that anyone can edit, even that guy who works in your building with the weird comb-over and Charlie's Angels lunch box... and the more we think about it, probably especially him!). Let's take a look at the historical accuracy of the Mr. T Gold Indicator.
Gold 1981 -1994



3. Mr. T Gold Indicator in Action (1995 - Present)
Gold 1995 - 2005



4. A Fractal-Based Look at the Mr. T Gold Indicator
As you can see, the Mr. T Gold Indicator is a robust tool for identifying high-probability price exhaustion points in gold, both on the upside and the downside. In the above charts we took a long-term view of gold, using the Mr. T Gold Indicator to identify price exhaustion points on a long-term monthly chart.
But what about weekly, daily, even hourly and minute-by-minute charts? Don't give me no back talk, sucka! Naturally, it stands to reason that if the Mr. T Gold Indicator is indeed a robust price exhaustion tool then it should apply to smaller time frames of gold price data. That is, because the gold market is a self-organizing complex system with self-similarity on different time scales, the Mr. T Gold Indicator should be just as useful in these self-similar and subdivided minute time frames as it is on a larger scale. But this must be tested!
As you can see from the chart below, on February 22, 1983 Gold opened very strong as the opening title sequence to the A-Team television show rolled. However, in this episode "Bad Day at Black Rock" (see A on the chart below) Mr. T's character, Sgt. Bosco "B.A." Baracus, is seriously wounded by gunfire. About 15 minutes later after the first commercial break (see B on the chart below) gold begins a brief rebound as The A-Team finds medical attention for B.A. from a small town doctor. However, in the next few minutes, it becomes clear the small-town doctor suspects B.A. may be part of a biker gang returning to rescue their jailed leader. Gold collapses intra-day (see C on the chart below) as the doctor warns the local sheriff of his suspicions. It appears B.A. may be done for, but about 22 minutes later (See D on the chart below) Hannibal is able to convince the sheriff that B.A. is one of the good guys. Gold rebounds by the end of the episode as B.A. recovers and the A-Team helps the sheriff protect the town.

Gold, five-minute intra-day chart, February 22, 1983



5. Updated Mr. T Gold Indicator: NEGATIVE
This brings us to the present. The Mr. T Gold Indicator has now given its second consecutive sell signal since the beginning of the year. Why? How could this happen? Quit your jibba jabba and we'll tell you.
Take a look at this screen shot from the Web site (this is totally serious... we are not making this up) Getsomenuts.tv. Recognize that face popping out of the Snickers tank? That's right. It's Mr. T, telling us to "Get some nuts!"


Yes, according to New Media Age, Snickers has signed Mr. T to reprise his role as the A-Team's B.A. Baracus in a new advertising campaign. The campaign features a video spot, along with desktop wallpapers and even ringtones. The TV spot can be seen on the web site Getsomenuts.tv, and on May 7 visitors will be able to register on the site and ask Mr. T questions.
This double dip of popularity, a Snickers ad campaign along with Mr. T's TV Land network television show, "I Pity the Fool," adds up to just one thing: A strong sell signal for the Mr. T Gold Indicator.
Mr. T Gold Indicator flashing Sell Signal




http://www.minyanville.com/articles/.../index/a/12701

you'll note that the mr. t indicator was negative in late april 07, following which gold dropped 4.5%

[JoeSixpack]

Re: Credit Crisis and Recession Deepen

Jim, sentiment indicators fail at major turning points.(Short-term trading is a whole different story of course.)

Im surprised that anyone on these boards is expecting the trend for 2008 in *major* indices to be up to new highs.
Because that is the ONLY reason to be "significantly" long and bear the risks of increased volatility in the face of a major recession, earnings contraction, spread increase, consumer defaults, and whatnot.

But im curious for opinions - whats going to save the day ?

[jtabeb]

Re: Credit Crisis and Recession Deepen

JT,



However, I don't agree that the government will be able to reflate.

You are too conventional, yes the credit bubble is dead (until it isn't) <----- KEY FREAKING POINT!!!!!! Money is not credit (although credit can act as money). So the effects of a big INFLUX of actual money are much lessened while credit is being destroyed.

[jtabeb]

Re: Credit Crisis and Recession Deepen

JT,


This in turn will cause the reflation to fall



My problem with gold is this: at some point, any monetary unit must represent either past, present, or future production.


...does not in any way help you tap into future production.

Thus those who put all their faith in gold are betting that they will both be able to time the exit point for gold,


I'm perfectly willing to 'lose' relative gains in gold in the process.

This in turn will cause the reflation to fall

oh yeah, what if the fed gov goes into debt for $100 Trillion and monetizes the debt, think reflation will fail then?

My problem with gold is this: at some point, any monetary unit must represent either past, present, or future production.


...does not in any way help you tap into future production.

Thus those who put all their faith in gold are betting that they will both be able to time the exit point for gold,

Funny, I though Capital was the means to "acquire means of production", I guess I'm wrong on that. You'd think that if "Captial" was the ability to acquire the means of production, then you might want to "secure" your capital as safely as possible in credit deflation. Hmmm, where could YOU POSSIBLY put your capital (saving it for future use) at times like these that would be absolutely safe from anyone else's meddling hands. Hmmmm, maybe some one could clue me in here "cough Gold, cough Silver, cough Plat, foot stomp, cough"

I'm perfectly willing to 'lose' relative gains in gold in the process

I guess you never hear of "infaltion adjusted gains" or "real" gains, too bad.
I have a great deal for you on some zimbabweian bonds, they are yielding 60,000%!! Let me know, I'll hook you up.

Lose you shall

I wouldn't say " hey I'll take a capital loss in real terms as long as the nominal return is high".

That's a mug's game.

Don't be a Mug!!! (don't get mugged?!) Both are correct.

[Jim Nickerson]

Re: Credit Crisis and Recession Deepen

Jim, sentiment indicators fail at major turning points.(Short-term trading is a whole different story of course.)

Jose, do you mind putting up some reference(s) to support the first part of that contention?

Im surprised that anyone on these boards is expecting the trend for 2008 in *major* indices to be up to new highs.

Of all people here, I probably am the least capable of seeing what tomorrow and on down the line has in store for us. However, I don't recollect, memory is poor, anyone suggesting that any equity indices are headed to new highs. I don't know where or when the mothers are headed. Personally if I had to bet, I would bet at some point seeing lower lows before ever seeing last years highs being bettered in the equity indices. But I would not bet hundreds of thousands of dollars on that right now and be capable of sitting it out until and if it happened.

Because that is the ONLY reason to be "significantly" long and bear the risks of increased volatility in the face of a major recession, earnings contraction, spread increase, consumer defaults, and whatnot.

I think you left out "IMO." On one hand you say sentiment indicators fail, but then you qualify that regarding short-term moves represent a different story. So how do you know whether Friday, just passed, at 3:30PM (as an example) was the beginning of a major turning point, a blip in a sideways to down market, or the beginning of a short-term trend up? In my opinion NO one knows.

But im curious for opinions - whats going to save the day ?

I guess the answers depend on whether one is long or short. When I try to think of anything that might make the equity indices go up, shit, I cannot name a goddammed thing. But perhaps the guy below could turn out to be correct. Make no mistake, I am not wed to the notion of the markets having to do anything either up or down.

http://www.investmentpostcards.com/2...2008/#more-486

Jeffrey Saut (Raymond James): Stock market outlook turning favorable
“… we are treating the January lows of 11 971.19 (DJIA), and 4 140.29 (DJTA) as ‘internal lows’ until proven wrong. Additionally, we would view a breakout above the Dow’s recent reaction high of 12 750 as very constructive action.
“Meanwhile: 1) it’s been six months since the Fed began cutting interest rates, which is the typical time lag when rate cuts start to be impactful; 2) the economic stimulus package passed; 3) income tax refunds have started to flow and the stimulus packages’ rebate checks will start in 12 weeks; 4) conforming ‘mortgage caps’ will be raised from $417 000 to $730 000 in eight weeks (the refi application index has already soared); 5) money supply (M2) has increased $90 billion over the last two weeks; and don’t look now, but Ben Bernanke allowed the Federal Funds rate to dip from 3.00% to 2.75% for a day last week before snapping it right back to 3.00% in what we consider to be a signal short-term interest rates will be lowered again at the March FOMC meeting … causing one old Wall Street wag to lament, ‘Every government sponsored economic stimulus program since 1948 has worked, so I am inclined to give this one the benefit of the doubt!’”
Source: Jeffrey Saut, Raymond James, February 19, 2008.

[Guest]

Re: Credit Crisis and Recession Deepen

... I thought Capital was the means to "acquire means of production" ... you might want to "secure" your capital as safely as possible in credit deflation ... where could YOU POSSIBLY put your capital ... at times like these ... great deal for you on some zimbabweian bonds yielding 60,000%

C1ue -

I also had this discussion with you months ago (when gold was still pricing at $665 as I recall). I was struck by the sophistication of your arguments, yet also how they seemed to miss what appeared to me to be the largest point, without which many smaller points are un-moored.

A) What underpins gold is absolutely not only US FED and US Treasury based. There are some global factors potentially intruding which may in the next 10-15 years be much larger than even the US financial woes.

B) Even just within the context of US FED and Treasury woes, there are glimmerings today, that the quality of the FED's own asset backing is now taking the first steps towards transitioning into the same overtly compromised (much worse even than just fiat paper) asset classes as the very banks it is presumably bailing out. I refer you to the following extracts from another thread. Others far more schooled in economic terms than I have posted about this on these pages also quite clearly, and you even replied to them, and acknowledged those issues.

I am at a loss to understand how anyone can read and digest these developing aspects of FED monetization and reliquification - and consider themselves astute to be regarding gold as an asset with suspicion.

I notice JK has some of the same reflexive suspicion of this asset as you do. I marvel at this. JK openly surmises that he'll go along with the "gold has intrinsic value" thesis "only as long as he observes the popular street believing in it" as well! What's not noted is those who first bought gold in 2000 exhibited by far the most independence from the confirming views of the popular street, as gold was hated then - and those same people are considered today to be those of us who had the most "wisdom and foresight"!

With much respect for what you all post, which is very sophisticated indeed, my sense is, what you guys take to be "healthy skepticism" about the emerging international consensus for gold in this quagmire seems to me to verge at times upon the obtuse. I hasten to note that I must extend this critique to JK with utmost respect as he's offered up some kind remarks in my regard recently. Nothing personal here guys - I just find your views on gold in the present environment somewhat "whimsical"!

Read Mr. Szabo's summary of the emerging "US FED "highly unorthodox and adventurous experiments" and wonder, even if you persist in regarding the intrinsic capital-protective value of Gold to be a popular delusion - are you also of the opinion the vast majority of global capital will agree with you in that view in present and considerably worsening future circumstances??

C1ue, you are thinking like an entrepreneur - that's fine, but it is not the same thinking adopted by large pools of existing CAPITAL whose sole mandate will be to seek a vehicle for it's preservation against any and all claims! This capital is the antithesis of the bold adventuresome entrepreneur who wants to go far afield to places not yet commercially fully developed and start new businesses. That is absolutely NOT what old money does. Old money goes straight into things like bonds and gold. When the bonds are manifestly compromised as is the case today, that old money flees straight into Gold.

All your skepticism and adventurousness in other entreprenurial directions is quixotic when there is a force-twelve global financial hurricane blowing in. Gold will get by far the largest bid, when bonds become heavily compromised. Property liquidity grinds to a halt worldwide - but all the money in the world is chasing after "the bottom of Exter's Pyramid", which is secured gold and silver bullions. Even the ETF's are for the birds if the hurricane really hits. You are being handed not only an opportunity for rock solid protection - from today's price levels you are even being handed the opportunity for a decently performing investment.

Anyone who insists on looking askance at it is taking some decidedly quixotic directions in pursuit of safety in my view.

______________


Szabo - Fed removing US Treas backing on portion FR notes a break of 100 yr tradition

http://www.itulip.com/forums/showthr...8368#post28368

Yet there is an important distinction to be drawn. A central bank is expected to monetize a government stimulus by acquiring government debt regardless of how reckless the stimulus might be, because failure to monetize as necessary would be even more reckless. It is an entirely different matter for a central bank to abandon fiscal prudence by changing its reserve policy from one of risk-free collateralization to one where collateral is provided by the very entities (banks) in need of rescue.

This is precisely what happened last December when the Fed removed direct U.S. Treasury backing for a portion of the FRNs in circulation and substituted whatever mish-mash of banking assets that have been pledged to secure the term auction credits. These banking assets may be performing today, but they are down the rung in terms of risk compared to U.S. Treasuries, and they expose the Fed to the same spectre of deteriorating balance sheets as faced by the banks that the Fed is supposed to be safeguarding.

.........................................

The bottom line is this. As the guarantor of liquidity to the banking system, the central bank can arguably survive and alleviate a default crisis in the private sector by holding government debt as its key reserve asset. By contrast, a central bank that holds increasing amounts of private sector debt as its reserve asset is not only incapable of surviving and alleviating a default crisis in the private sector, but may ultimately bring about a crisis of confidence in the government itself that leads to a default on government debt and a wholesale financial collapse. I believe this is the reason why the Fed has survived for almost 100 years, and also why it may not survive a handful more.

[jk]

Re: Credit Crisis and Recession Deepen

lukester, since you mention my views of gold, i'll try to clarify. the great masses are as yet ignorant of the potential value of owning gold. my expectation is that as inflation persists and monetary chaos grows, there will be a growing interest in precious metals and a concomitant rise in pm prices. beneath the layer of ignorant masses is a small cadre of gold investors [and perhaps i should add gold speculators], who see the pm's as useful inflation hedges and stores of value. within this cadre is a subgroup who talk about the "intrinsic value" of the metal and its "5000 year history as real money." now, i know that real men use real money, [and don't buy quiche with it either], but although i am among the cadre of gold investors, i am not among the subgroup of true believers. you can't eat gold, you can't smoke it, you can't heat your house with it, and it is an altogether too heavy and malleable a metal to use for structural purposes. [though i have had the thought, when people say you can't finance it with a small down payment and tax deduct the interest, and then deduct the capital gain when you sell it, that you could build a gold house.....] so i think people's attachment to gold is essentially irrational. nonetheless i'm over 31% in pm's at this very moment. is that clearer?

[Guest]

Re: Credit Crisis and Recession Deepen

JK -

Of course we all subscribe to many different views. I respect your right to hold your own, but I will offer arguments why those views seem to me incorrect.

I do find your exposition on the uselessness of Gold metal ahistorical, insofar as the periods of history governed by non-Gold backed money are very sparse and short, and the periods governed by some form of Gold backing money are very long and apparently stable.

I think consequently, based upon the manifest evidence of 2000-3000 years of global economies recorded in history (often in high detail) that you are missing something quite large here. Try forgetting the socio-political attributes of one group or another in present or recent times, (admittedly gold bugs can easily be made to look sillly during the long fiat money era we've just traversed), nd merely cast a broad eye across how many long civilizations achieved economic longevity using this metal, Vs. those whose slide into decline seems always accompanied by debasement of that gold standard.

To claim otherwise would require some heavy spadework to build the historical case. If it requires heavy spadework, it's probably not an argument which history favors.

lukester, since you mention my views of gold, i'll try to clarify. the great masses are as yet ignorant of the potential value of owning gold. my expectation is that as inflation persists and monetary chaos grows, there will be a growing interest in precious metals and a concomitant rise in pm prices. beneath the layer of ignorant masses is a small cadre of gold investors [and perhaps i should add gold speculators], who see the pm's as useful inflation hedges and stores of value. within this cadre is a subgroup who talk about the "intrinsic value" of the metal and its "5000 year history as real money." now, i know that real men use real money, [and don't buy quiche with it either], but although i am among the cadre of gold investors, i am not among the subgroup of true believers. you can't eat gold, you can't smoke it, you can't heat your house with it, and it is an altogether too heavy and malleable a metal to use for structural purposes. [though i have had the thought, when people say you can't finance it with a small down payment and tax deduct the interest, and then deduct the capital gain when you sell it, that you could build a gold house.....] so i think people's attachment to gold is essentially irrational. nonetheless i'm over 31% in pm's at this very moment. is that clearer?

[jk]

Re: Credit Crisis and Recession Deepen

JK -

Of course we all subscribe to many different views. I respect your right to hold your own, but I will offer arguments why those views seem to me incorrect.

I do find your exposition on the uselessness of Gold metal ahistorical, insofar as the periods of history governed by non-Gold backed money are very sparse and short, and the periods governed by some form of Gold backing money are very long and apparently stable.

I think consequently, based upon the manifest evidence of 2000-3000 years of global economies recorded in history (often in high detail) that you are missing something quite large here. Try forgetting the socio-political attributes of one group or another in present or recent times, (admittedly gold bugs can easily be made to look sillly during the long fiat money era we've just traversed), nd merely cast a broad eye across how many long civilizations achieved economic longevity using this metal, Vs. those whose slide into decline seems always accompanied by debasement of that gold standard.

To claim otherwise would require some heavy spadework to build the historical case. If it requires heavy spadework, it's probably not an argument which history favors.

i agree that history is on the side of gold as a monetary metal. i just think we are still in many respects a primitive species, governed by atavistic instincts. for example, i just read an article on kenyans' interest in the u.s. presidential race. while you might think that all kenyans would be rooting for obama, it turns out that he's descended from the luo minority, so the gikuyu are all rooting for hillary! people are bizarre and primitive, and in this is rooted their attachment to shiny metals. i do not expect to live long enough to see this change.

[JoeSixpack]

Re: Credit Crisis and Recession Deepen

Jim,

Yes. Its all IMO, sorry but i thought that was obvious.

Unfortunately i dont have data from 2000s, but i recall very good that extreme sentiment readings at that time were unrealiable regarding the medium-term (monthly+) trend. I refer to this and longer periods as investing.

I should have defined short-term in that respect: several days maybe up to 1-2 weeks.

For even shorter periods down to intraday we talk of tradig and the only measure i respect there is technical analysis and nothing else, no matter what the news or the big picture might be.

As said, IMO to stay invested substantially long in 2008, you have to expect much higher prices or the risk/reward tradeoff is just too low.