Deflation Not Done -- Then ???

[metalman]

Re: Deflation Not Done -- Then ???

I've been adding physical gold, would like to add physical silver, but waiting for a pullback for that.

I've puts on FXI and SPY (I set those up soon after the EJ calls because as stated before I think the starting event might be a BOOM type -- for example EJ's sovereign defaults or liquidity crisis). I've taken a bit of a bath on those so far, but they were close enough to where even a small pullback will put them in the black.

I'm mulling following them up with serious out-of-the-money puts for March 2010. You can get those really cheap now and they could pay in spades if the 600 call comes to pass.

I'm also mulling GLD/SLV calls (yeah, I know about them -- most of my *real* PM holdings are GTU/CEF/GoldMoney/physical) but those would be more for a cash play than real PM holdings.

Same theory with GDX -- not really holding for PM value as much as a PM panic. I'd expect it to drop in a crash and hopefully pick up some then.

anyone but me worried that every 'in the know' investor who's onto the game is 'waiting for a pullback in commodities to buy more' ??? :eek:

[Mashuri]

Re: Deflation Not Done -- Then ???

anyone but me worried that every 'in the know' investor who's onto the game is 'waiting for a pullback in commodities to buy more' ??? :eek:

If everyone is waiting then that is reduced demand that will put downward pressure on prices. If, however, they're actually shorting commodities, then the price managers can squeeze them and move the market up.

[metalman]

Re: Deflation Not Done -- Then ???

If everyone is waiting then that is reduced demand that will put downward pressure on prices.

bingo! been on since 2001!

If, however, they're actually shorting commodities, then the price managers can squeeze them and move the market up.

if you short you think you can time it. not shorting... waiting for the 'inevitable' collapse.

[Mashuri]

Re: Deflation Not Done -- Then ???

if you short you think you can time it. not shorting... waiting for the 'inevitable' collapse.

Or just another pullback. I added nicely to my core position on that little one we had last year.

[jpatter666]

Re: Deflation Not Done -- Then ???

Or just another pullback. I added nicely to my core position on that little one we had last year.

Agreed. I've got a nice core position, I add to it as we go. Sure there is risk not buying hand-over-fist now and I may yet regret it.

Lots of people waiting true, but still IMO very minor compared to the masses.

[Mashuri]

Re: Deflation Not Done -- Then ???

Agreed. I've got a nice core position, I add to it as we go. Sure there is risk not buying hand-over-fist now and I may yet regret it.

Lots of people waiting true, but still IMO very minor compared to the masses.

I'm not seeing the mass hysteria yet as gold is testing its highs only in USD. In other currencies it's well below those highs. I was more excited earlier this year when gold was testing (and breaking) highs in all major currencies and thought for sure it was going to take off like a rocket. It still may in this rally but it just doesn't seem to have the same weight behind it.

[jiimbergin]

Re: Deflation Not Done -- Then ???

I've been adding physical gold, would like to add physical silver, but waiting for a pullback for that.

I've puts on FXI and SPY (I set those up soon after the EJ calls because as stated before I think the starting event might be a BOOM type -- for example EJ's sovereign defaults or liquidity crisis). I've taken a bit of a bath on those so far, but they were close enough to where even a small pullback will put them in the black.

I'm mulling following them up with serious out-of-the-money puts for March 2010. You can get those really cheap now and they could pay in spades if the 600 call comes to pass.

I keep adding physical gold, although I have finally gotten to the 30% level including CEF and GTU and some GLD. I too would like some more silver but haven't because the premium always seems too high, although I bought some buffalo rounds earlier this year when APMEX had sort of a sale.

I also have puts on FXI and SPY. I try not to look at them very often The March 10 puts do look interesting.

jim

[ThePythonicCow]

Re: Deflation Not Done -- Then ???

I too would like some more silver but haven't because the premium always seems too high,

APMEX just sent me an email enticement today to purchase silver from them, saying they have a bunch they want to unload in the next week, so have lowered the premium a little.

[touchring]

Re: Deflation Not Done -- Then ???

Ha! Indeed, the idea that Chinese demand, sua sponte, is behind the scorching inflation that's been showing up in commodity prices is one of the biggest canards ever floated by the Washington-Wall Street economics crowd. The idea that somehow the Chinese just woke up after all these years and decided they'd like some of the finer things in life is patently vacuous. The Chinese - or anybody else for that matter - can hold their breath until they turn blue, stomp their feet, and 'demand' commodities all they want, and it won't do a damn thing to commodity prices.

For 'demand' to affect prices, it has to be backed up by more than desire. There has to be money behind it. And if you're talking about prices in US dollars, that means US dollars. Where did the Chinese get all these US dollars? Pull one out of your wallet ... it says right on them where they come from. That's where to look for the explanation for this price inflation.

The commodity companies that China buys using the phony money are real and not fake.

Therefore, free money is just an illusion. The US is wasting away real money.

China’s SWF deepens holdings in commodities
http://www.ft.com/cms/s/0/dd18d350-a...44feabdc0.html

[MulaMan]

Re: Deflation Not Done -- Then ???

hey, that gives me an idea...

5. Wage-Inflation / Wage-Deflation

Why no talk about wage-inflation / wage-deflation?

I believe we (in the USA) are in a significant wage-deflation currently.

It does not seem that the Fed / Treasury can control - turn wage-deflation into wage-inflation.

Seems like only congress can turn wage-deflation around through legislation to slow "globalization" - inequality between capital and labor.

So, I do no see asset inflation in American unless there is some potential for wage inflation as well.

This seems like common sense to me: house prices are not going up again until wages stop going down and start going up, as long as wages are going down, house prices will continue to go down.

[touchring]

Re: Deflation Not Done -- Then ???

So, I do no see asset inflation in American unless there is some potential for wage inflation as well.

This seems like common sense to me: house prices are not going up again until wages stop going down and start going up, as long as wages are going down, house prices will continue to go down.

Asset inflation can happen when there's wage deflation, HK is a good example. But it may not apply to a larger economy.

http://www.channelnewsasia.com/stori...005595/1/.html

Experts warn bubble brewing in HK property market

HONG KONG : Hong Kong's residential property prices have rebounded this year by up to 30 per cent, despite continued economic uncertainty.

Consultants said the property market is disconnected from the wider economic reality, while economists warned that a property bubble has formed.

[jiimbergin]

Re: Deflation Not Done -- Then ???

APMEX just sent me an email enticement today to purchase silver from them, saying they have a bunch they want to unload in the next week, so have lowered the premium a little.

Thanks, I just saw that also. Markup on coins still seems high, but some of the rounds have a much more reasonable premium.

jim

[jpatter666]

Re: Deflation Not Done -- Then ???

Thanks, I just saw that also. Markup on coins still seems high, but some of the rounds have a much more reasonable premium.

jim

Yeah, got that as well. I keep hearing silver is due for a pullback, guess they are getting worried.

Question: I haven't really acquired much physical silver. Anyone have a preference -- and why?

[jiimbergin]

Re: Deflation Not Done -- Then ???

Yeah, got that as well. I keep hearing silver is due for a pullback, guess they are getting worried.

Question: I haven't really acquired much physical silver. Anyone have a preference -- and why?

I would like to know that also. I have some 90% "junk" silver that I bought back in the late 70s and some old silver dollars that I have had forever. I also bought Buffalo rounds earlier this year when APMEX had another sale, but I really don't know what is best to buy.

jim

[danielmc999]

Re: Deflation Not Done -- Then ???

Thanks for the links. I had read both parts of the 1st but not the 2nd. EJ is an insightful son of a gun.

I had ended the last note with the following. Allow me then to provide the answers you infer to the 4 questions posed in red.

1. Do you not think that as fiscal and monetary policy peaks in Q3 2009, in the absence of new programs and a bond dislocation, that the unwind of private debt will *not* be greater than the sum total of public debt growth and new money printing? - No, private debt unwind and economic weakness are the stronger forces
2. If we do see an array of new programs unleashed (say, if the S&P falls to 700), do you not think we are at very high risk of a currency dislocation? - Yes, high risk.
3. If we do see a currency dislocation that raises long term Treasury rates to, say, 9%, what do you think is the probability, realistically speaking, that Bernanke continues to go whole hog with printing? - Low probability, perhaps capital controls and bank holiday instead, might not matter.
4. If we do see a currency dislocation with higher long term Treasury rates, and we do not see Bernanke decide to print his way out of the problem, do you really see private debt declining at a rate slower than the whatever happens to public debt, money printing, and a move out of our currency? - Effectively yes, as the balance of payments crisis will drive the dollar down faster than debt unwind will push it up.

Is this fair to say?

I am most interested in the intersection of a balance of payments crisis with a historic debt and asset bubble. Argentina's market slumped hard, but they had 4x less debt fortifying (asset) prices (perhaps 8-16x less if you consider some of the factors mentioned in my last note). The mark to market effect of a 9% long term interest rate could create a stock market crash that is like Argentina's on steroids... no? Then at some point the debt washing itself out becomes less and less relevant relative to whatever money printing we might see in conjunction with the capital outflow's impact on the dollar.

Prechter seems to play down deficits and external debt. He hardly ever mentions those words. He also greatly underestimated the Fed. At the same time, I am not sure I have ever heard EJ very explicitly discuss exactly how debt unwind in a bond dislocation would interact with the capital outflow component in their effects on the dollar, other than to implicitly downplay the former relative to the latter.

I am grasping for a valid analytical methodology with which to evaluate the dynamics of debt unwind and capital flows in the event of a bond dislocation.