Ka

[rabot10]

Is this the start of the ka cycle or a head fack?

[Jim Nickerson]

Re: Ka

Is this the start of the ka cycle or a head fack?

Rick,

I don't think anyone will step and seriously call it the beginning. Perhaps it is, maybe it isn't. I guess though this is at least a taste of what Ka- will be like.

[FRED]

Re: Ka

Ka-Poom is a long process. We aren't going to see 25 years of building imbalances correct in a day or a week. It will take years. But we can say unequivocally that the process has started.

[Guest]

Re: Ka

Rick,

I took 40% of my equity positions off the table four months ago and although I probably should have left it in cash, I put it into bullion.

Are you sitting tight with all equities?

Depending on what you hold (if it's not super-volatile) my sense is even if your positions may be down 10% - 15%, as long as these stocks are not more than 50% of your overall investments, one can't finesse the moment during which one rigs the sails for a storm - so you might consider looking for a relief rally here and chop a good chunk down and convert it to either cash or bullion.

My sense is, this is NOT KA yet - but getting closer. There should be room for a decent rally between now and November, with prices back where they were a few weeks ago, i.e. not bad. The US markets look really shaky in the fundamentals, but the global economy is booming, and I personally do not believe all of it is merely inflationary hot air.

There's a genuine boom afoot in industrialising countries - and when those booms get under way they have a powerful natural momentum. It's the pent-up desires of 3 billion people. This is not just talk - it's been building up highly visibile momentum for several years and is in full swing now. Once they get the bit in their teeth, they will not be denied that upward mobility.

I've never been reluctant to take a moderate loss if I thought my fundamental position was seriously out of tune with the markets. I've only got 23% of my assets in shares, but I'm in a carefully selected but very aggressive portfolio - the kind that can routinely jink 25% up or down in any two weeks period. Right now it's jinking down hard - 25% in one week. I own practically no precious metals shares, except Seabridge Gold, as I think you can do nearly as well with 95% less speculation holding the metal. Most people on this website seem to be of that view also.

I put all the speculative investments into commodities (energy) - zero in tech stocks, zero consumer staples for 'pseudo-safety', zero international large caps with Chindia exposure (although they are probably good bets), zero in drilling services (although that area looks excellent). I wouldn't mind owning some BHP Billiton and Schlumberger for the long haul but haven't gotten around to buying it and anyway I **have no cash** :eek:

Don't need any of that stuff - as we cruise into hyperinflation (is anyone debating that likelihood?). This is one of those peculiar investing times - the next five years - when you have a quite high probability to make the same money you'd normally make in the presumably riskier equities markets by simply owning 'hard money' itself. Gold and Silver. That's a risk / reward setup I like, and I'm not greedily piling into metals equities, and not paper gold and silver (absolutely positively NOT paper Silver!).

15% a year minimum return for a five year term sounds just fine to me. It'll probably be a lot more, but that's what I'm conservatively pegging it as. Pile in, be patient, and double your net worth in a brief four or five years. Look - I'm only planning on a 75% return on my money, in a raging gold bull market ! How conservative is that?

You are a former hedge fund guy, and I'm just Joe Citizen Investor - so I hope you'll accept my discussion for what it is, open, uncomplicated and sincere. From the few comments you've posted, I figure you've been around the block and know a few moves of your own.

So speaking as Joe Citizen Investor - If I had 75% of my assets in any kind of stocks, even commodities, I'd certainly trim back to less than 50% just on the assumption I'm not smart enough to know whether KA is now or is even still 2 years away. If I had 50% of my assets in stocks, I'd have less of a loss right now, and take the opportunity to trim the portfolio down to a 'sleep good at night' 25% ratio. Then if you figure you can make 15% a year (not hedge fund returns, that's for sure) and it's a minimum return you like, why be greedy about foregoing future gains? Leave those to the mo-mo guys. It's like finding an easy climbing gear on your bike that allows you to cliimb all day at a nice easy pace.

Betting on commodities via EQUITIES, rather than the commodity itself during any KA is a risk factor many investors greatly underestimate, IMO. But there are a few commodities who's prospects in the next five years are so good, that the risk in the commodity itself is very low, IMO.

And finally, what if you could make 15% a year minimum just holding precious metals - and even when they go down hard you just don't have the same kind of concern holding precious metals as you do in the global stock markets?

Their medium term prospects are about the best of any asset, looking forward from 2007 - even if one were totally flat-footed and bought them at just exactly the wrong moment in the near term scheme of things. I mean, having read the countless analyses on this website of how the world is on a railroad track to permanent currency manipulations and devaluations, why would one have any remaining doubt about this thesis?

If one reads all the posts on this website with fascination about the inflationary implications, but then one loses that conviction on the way to actually carrying out the corresponding investments, then reading I-Tulip was merely an academic exercise!

If it's really a long term inflation coming, this historically has presented opportunities for the moderately well informed investor. A few simple investment classes can yield results more robust when adjusted for risk, than would be available in more ordinary times. The scale of the opportunity may be 'hiding in broad daylight'.

I figure a plain, dumb, precious metals portfolio your granny would be pleased to hold will double your money in five years, in inflation adjusted terms - probably at the very LATEST, with no bad nights sleep. That's simply because it will gain a market premium as an inflation hedge class - Real Estate already has, TIPS' have, Art & Collectibles already have, base metals have, Oil has, but plain old bullion has only moved very moderately so far!

Why then stress for the next five years over one's net worth in the stock market when "Granny's Way" works fine too? What does a hedge fund guy think about this logic? Do they react with amusement because it sounds like a simpleton's idea?

Working in hedge funds you must have a lot of experience the rest of us don't. You should share your views with the community more often, as we all could probably benefit from your input or at very least enjoy some stories about the more obscure parts of that industry. I hope you'll pardon my straight ahead discussion style, as I know that I tend to be a little blunt.

These remarks are from an unschooled layman investor - but there may be something of value in it, or at least it may serve to add another perspective on today's nasty roller coaster market.

[rabot10]

Re: Ka

Rick,

I took 40% of my equity positions off the table four months ago and although I probably should have left it in cash, I put it into bullion.

Are you sitting tight with all equities?

Depending on what you hold (if it's not super-volatile) my sense is even if your positions may be down 10% - 15%, as long as these stocks are not more than 50% of your overall investments, one can't finesse the moment during which one rigs the sails for a storm - so you might consider looking for a relief rally here and chop a good chunk down and convert it to either cash or bullion.

My sense is, this is NOT KA yet - but getting closer. There should be room for a decent rally between now and November, with prices back where they were a few weeks ago, i.e. not bad. The US markets look really shaky in the fundamentals, but the global economy is booming, and I personally do not believe all of it is merely inflationary hot air.

There's a genuine boom afoot in industrialising countries - and when those booms get under way they have a powerful natural momentum. It's the pent-up desires of 3 billion people. This is not just talk - it's been building up highly visibile momentum for several years and is in full swing now. Once they get the bit in their teeth, they will not be denied that upward mobility.

I've never been reluctant to take a moderate loss if I thought my fundamental position was seriously out of tune with the markets. I've only got 23% of my assets in shares, but I'm in a carefully selected but very aggressive portfolio - the kind that can routinely jink 25% up or down in any two weeks period. Right now it's jinking down hard - 25% in one week. I own practically no precious metals shares, except Seabridge Gold, as I think you can do nearly as well with 95% less speculation holding the metal. Most people on this website seem to be of that view also.

I put all the speculative investments into commodities (energy) - zero in tech stocks, zero consumer staples for 'pseudo-safety', zero international large caps with Chindia exposure (although they are probably good bets), zero in drilling services (although that area looks excellent). I wouldn't mind owning some BHP Billiton and Schlumberger for the long haul but haven't gotten around to buying it and anyway I **have no cash** :eek:

Don't need any of that stuff - as we cruise into hyperinflation (is anyone debating that likelihood?). This is one of those peculiar investing times - the next five years - when you have a quite high probability to make the same money you'd normally make in the presumably riskier equities markets by simply owning 'hard money' itself. Gold and Silver. That's a risk / reward setup I like, and I'm not greedily piling into metals equities, and not paper gold and silver (absolutely positively NOT paper Silver!).

15% a year minimum return for a five year term sounds just fine to me. It'll probably be a lot more, but that's what I'm conservatively pegging it as. Pile in, be patient, and double your net worth in a brief four or five years. Look - I'm only planning on a 75% return on my money, in a raging gold bull market ! How conservative is that?

You are a former hedge fund guy, and I'm just Joe Citizen Investor - so I hope you'll accept my discussion for what it is, open, uncomplicated and sincere. From the few comments you've posted, I figure you've been around the block and know a few moves of your own.

So speaking as Joe Citizen Investor - If I had 75% of my assets in any kind of stocks, even commodities, I'd certainly trim back to less than 50% just on the assumption I'm not smart enough to know whether KA is now or is even still 2 years away. If I had 50% of my assets in stocks, I'd have less of a loss right now, and take the opportunity to trim the portfolio down to a 'sleep good at night' 25% ratio. Then if you figure you can make 15% a year (not hedge fund returns, that's for sure) and it's a minimum return you like, why be greedy about foregoing future gains? Leave those to the mo-mo guys. It's like finding an easy climbing gear on your bike that allows you to cliimb all day at a nice easy pace.

Betting on commodities via EQUITIES, rather than the commodity itself during any KA is a risk factor many investors greatly underestimate, IMO. But there are a few commodities who's prospects in the next five years are so good, that the risk in the commodity itself is very low, IMO.

And finally, what if you could make 15% a year minimum just holding precious metals - and even when they go down hard you just don't have the same kind of concern holding precious metals as you do in the global stock markets?

Their medium term prospects are about the best of any asset, looking forward from 2007 - even if one were totally flat-footed and bought them at just exactly the wrong moment in the near term scheme of things. I mean, having read the countless analyses on this website of how the world is on a railroad track to permanent currency manipulations and devaluations, why would one have any remaining doubt about this thesis?

If one reads all the posts on this website with fascination about the inflationary implications, but then one loses that conviction on the way to actually carrying out the corresponding investments, then reading I-Tulip was merely an academic exercise!

If it's really a long term inflation coming, this historically has presented opportunities for the moderately well informed investor. A few simple investment classes can yield results more robust when adjusted for risk, than would be available in more ordinary times. The scale of the opportunity may be 'hiding in broad daylight'.

I figure a plain, dumb, precious metals portfolio your granny would be pleased to hold will double your money in five years, in inflation adjusted terms - probably at the very LATEST, with no bad nights sleep. That's simply because it will gain a market premium as an inflation hedge class - Real Estate already has, TIPS' have, Art & Collectibles already have, base metals have, Oil has, but plain old bullion has only moved very moderately so far!

Why then stress for the next five years over one's net worth in the stock market when "Granny's Way" works fine too? What does a hedge fund guy think about this logic? Do they react with amusement because it sounds like a simpleton's idea?

Working in hedge funds you must have a lot of experience the rest of us don't. You should share your views with the community more often, as we all could probably benefit from your input or at very least enjoy some stories about the more obscure parts of that industry. I hope you'll pardon my straight ahead discussion style, as I know that I tend to be a little blunt.

These remarks are from an unschooled layman investor - but there may be something of value in it, or at least it may serve to add another perspective on today's nasty roller coaster market.

Lol any idiot can run a Hedge Fund, I worked in a very mathematically precise options model fund that worked very well until 9/11 when I lost 45%, if they had just left the market closed for one more week lol. I feel I have a very good understanding of how the economy works and from that view point the markets as I see them should have already cratered. So I will be the first to say I don’t have a clue in the short term, I am sure about the long term but just don’t want to lose too much in between.

[jk]

Re: Ka

Is this the start of the ka cycle or a head fack?

i think the blackstone ipo may well have marked the peak of the liquidity cycle.

[Guest]

Re: Ka

You are very understated, and you've probably got a lot of experience Rick. That's admirable.

[zoog]

Re: Ka

i think the blackstone ipo may well have marked the peak of the liquidity cycle.

http://www.marketwatch.com/news/story/past-gate-barbarians-look-each/

Barbarians face to face
Commentary: Blackstone's fall makes it a perfect target for a buyout

By David Weidner, MarketWatch


Henry Kravis of Kohlberg Kravis Roberts & Co. faces a tough decision.

He can forge ahead and try to out do rival Blackstone Group L.P.'s Steven Schwarzman by pushing through his own $1.25 billion initial public offering, or he can fold up his tent and call it a bubble.

Or he can follow Plan T: Take Blackstone private.

Milken, in his prime, would have loved teaming up with Kravis to buy Blackstone. And wouldn't that have been something to see: Milken and Kravis versus Schwarzman and Lee, unsolicited bids and everyone aligning against one another. The orgy could put off the end of the private equity bubble for a month or two.

And then maybe Goldman could buy them all.

I think Weidner has been playing too much fantasy football.

[rabot10]

Re: Ka

You are very understated, and you've probably got a lot of experience Rick. That's admirable.

My opinion of U just went down a notch lol. I may have to reevaluate myself I may be the God my kids think I am.

[Guest]

Re: Ka

Yessir, I'm hardly worth the paper I'm written on (although I try to avoid as much paper as I can) - Meanwhile we've presumably have all gained another grain of wisdom, as the markets have just given us a really sound thrashing.

[c1ue]

Re: Ka

Lukester,

I'm not going to give any advice - I've already mentioned many times what my strategy is.

However, from reading your post I do suspect you are confusing several items:

1) Cash vs. credit

This distinction is important because while credit is crunching down, cash still can buy stuff. More importantly, cash can buy businesses that generate cash. The stock, bond, and commodity markets are absolutely one good way to invest, but they are not the only way. My concern with any and all of these markets are that they are all being distorted by a profusion of credit.

With the credit crunch possibly beginning, the availability of ready cash does potentially give you the opportunity to buy into something which has pricing power.

2) Money growth vs. purchasing power growth

If you subscribe to the inflation idea, surely you see that 15%/year gain is potentially only keeping even or even losing? Those unfortunately enough to live through a hyperinflationary episode - ranging from Weimar to Mexico in the 80s to Argentina a few years ago, with any number of other examples, could tell you about gaining 12% a month but not being able to buy food or toilet paper.

BTW paper money makes really bad toilet paper - talk about not taking any s**t from anyone!

[Guest]

Re: Ka

C1ue,

You wrote:

<< Weimar to Mexico in the 80s to Argentina a few years ago, with any number of other examples, could tell you about gaining 12% a month but not being able to buy food or toilet paper. >>

My 15% annual retrun from a portfolion of gold and silver in high inflation is a totally synthetic supposition, and BTW note I mentioned "net of inflation".

What you and I should agree on, is whether in an environment of runaway 12% monthly inflation, gold and silver continue to do the same job they have done with good predictability in every other high inflation spanning the millennia.

Your business cash streams become somewhat uncertain projections in this type of environment. How do you take today's SEVEN ELEVEN (great franchise BTW) and project it's sales volume when a cup of coffee costs $20.00 ? ...

See what I mean? Yes, cash flow businesses can be bought at a discount as a country's assets become dirt cheap due to currency devaluation. But meantime, what do you estimate is happening to the premium on highly compressed forms of wealth (AKA "hard money") when everyone is dumping paper as fast as they receive it?

I'll make you a friendly bet, that in your 12% monthly inflation environment my bullion is performing just as well as your locally denominated, discounted cash flow business, without the management heartburn - in fact it's performing as well precisely because it's not tethered to any cash flow denominated in a wildly bucking currency.

Please note, that cheap business's 'discounted cash flow" is denominated in that same local currency. The time to buy those discounted businesses will be the same time as it's advisable to sell gold and silver. When the currency is finally stabilised, but all businesses have been rendered supremely cheap by inflation.

That's why buying a discounted business in Argentina a few years ago only made sense when the hyperinflation stopped.

I'll end up buying your silver bar yet (if your are still a seller then!). I'm quite partial to silver right now, due to it's extreme cheapness.