Did we get it wrong?

[Brooks Gracie]

Re: Looks like we got it wrong

I have been a little slow today, so initially I didn't get this..Judas, very cool post below:

"This is all easily explained by a feline which has recently acquired room temperature and is accelerating in a 180 degree vector to previous vertical travel after an impact with a horizontal surface which is both rigid and running perpendicular to the gravitic plane of the celestial body we use as a reference."

I had to actually think of the geometry involved to get the above Dead Cat Bounce reference.

[FRED]

Re: Looks like we got it wrong

Yeah Mega, please stop all this nonsense about an Oil Bubble, the price of oil will keep increasing ... Read more about the Cheap Peak Oil theory, it's a well researched theory back up by facts and credible opinions.

Stop believing all that nonsense backed by random nothing... you know like that imbecile called Nymex, who said today that the price of crude light should be as low as $118/bbl

Have you ever answered the questions:

1. What is the mean oil price that the market is supposed to revert to after the "oil bubble" pops?
2. When did the "oil bubble" start and at what price?

Did the "oil bubble" start in 2003 when the price of oil began a steady 300% climb from $20 to $60 in 2006? Many commentators called it a bubble then.

Or did the "oil bubble" start in 2007 after a plunge from $60 to $45 in 2006? Many commentators called that the end of the "oil bubble" at the time. Instead after the correction oil shot up to over $110. A similar decline today would take oil down to $110 from the $147 peak. Looks like we're almost there, and of course we have the inevitable "oil bubble is over" announcements from the usual suspects.

Well, so much for a future of $200 oil
August 7, 2008 (Forbes)

With new production coming on-line, crude could be in double-digits soon

Oil prices fell below $120 a barrel this week, touching levels last seen in May, as investors began to rethink the idea that crude is on an inevitable march to $200.

Funny, but today's Forbes story about the end of the "oil bubble" doesn't mention the August 2005 Forbes story about the end of the "oil bubble" three years ago.

Oil price bubble about to burst, says business guru Forbes
August 30, 2006 (Forbes)

SYDNEY (AFX) - Oil prices are set to crash from this week's record highs as a speculative market bubble bursts with an impact that could make the hi-tech bust of 2000 'look like a picnic', business publisher Steve Forbes has predicted.

Forbes said the high oil prices currently dampening the US economy, which peaked at more than 70 usd a barrel yesterday as Hurricane Katrina headed for the US Gulf Coast, would fall to 30-35 usd a barrel within a year.

They must have forgotten. We haven't. Just because they have amnesia doesn't mean we have to.

What happened in 2001 to launch this oil price rise process? The secular dollar decline began. What happened in 2003 to launch the first sharp oil price increase? The Iraq War, an oil price rise two-fer: war is bad for the host country's currency and a war in an oil producing area isn't so good for oil production, either.

Here's a new question. If oil is a bubble, how are all commodities not also a bubble? How about platinum, for example? Platinum is consumed in the process of making catalytic converters. Surely as the auto industry goes into recession, demand for cars and platinum will fall.

As a matter of fact it has. More striking is the similarity of the timing and extent of platinum price moves and oil; they are pretty much simultaneous. The big difference is that the Iraq war didn't impact platinum prices.

Remember, oil is an input cost while platinum is both effected by oil prices and is itself an input cost to auto prices. Platinum prices sure have fallen fast, from $2,200 in May to an average of $1,600 in July. Did the "platinum bubble" pop?

How about the "gold bubble"?

The gold price action sure looks close to platinum's. Could that be because they be driven by the same factors?

We have our theories that we explain in an article that is a follow-up to Gold Update: The small trade within the big trade, posted after gold hit $976 after languishing around $650 for a year. The article stated, "Within the current rapid speculative trade, we are watching for short term price volatility much as occurred at the end of the previous similar period C (H1 2006): a 20% correction from $720 to $580. A similar correction today would take gold prices down $200. We are also on the lookout for volatility that will portend the end of the currency depreciation and inflation trade that began in 2001."

Indeed gold did plunge soon after, but has not reached $800 yet. When it does will the "gold bubble" be over? Again?

Stay tuned for our article on the Dollar Ratchet.

[metalman]

Re: Looks like we got it wrong

don't hold your breath waiting for $#* to answer the questions. he uses his own definition of 'bubble'... a stock/commodity that has gone up in price... that he didn't buy when it was cheap. :eek:

[magicvent]

Re: Looks like we got it wrong

It appears the dollar may have bottomed and may have a leg up. If so, what will be the impact on gold?

[metalman]

Re: Looks like we got it wrong

It appears the dollar may have bottomed and may have a leg up. If so, what will be the impact on gold?

i think we're seeing it now...

gold flat until the next 'event' that drives the dollar down another leg.

[tombat1913]

Re: Looks like we got it wrong

I just can't comprehend the possibility of the dollar bottoming right now, what happens when all of that Fannie/Freddie money makes it's way out into the economy? I don't imagine they're just going to hide it under a giant mattress. Have we really even seen the results of what money has already been created thus far? When the SEC runs out of money, which isn't far off, I can't imagine that they won't fire up the printing presses and refill the coffers. We have a war to fund, and Obama wants his $1000 stimulus plan.

[metalman]

Re: Looks like we got it wrong

I just can't comprehend the possibility of the dollar bottoming right now, what happens when all of that Fannie/Freddie money makes it's way out into the economy? I don't imagine they're just going to hide it under a giant mattress. Have we really even seen the results of what money has already been created thus far? When the SEC runs out of money, which isn't far off, I can't imagine that they won't fire up the printing presses and refill the coffers. We have a war to fund, and Obama wants his $1000 stimulus plan.

you got it. trading these bounces in the bonar is entertaining, but i won't be caught out without my metals when the phase goes down.

[Jim Nickerson]

Re: Looks like we got it wrong

I just can't comprehend the possibility of the dollar bottoming right now, what happens when all of that Fannie/Freddie money makes it's way out into the economy? I don't imagine they're just going to hide it under a giant mattress. Have we really even seen the results of what money has already been created thus far? When the SEC runs out of money, which isn't far off, I can't imagine that they won't fire up the printing presses and refill the coffers. We have a war to fund, and Obama wants his $1000 stimulus plan.

I don't know whether there is something more to the move in the US$ index than just a bounce here, but I'd suggest, tombat, that the markets may not do what you think they should, so one should not allow oneself to get hung up in a trade that should be happening in the direction one thinks it must, but it is not.

Of course, I never done anything like that.:rolleyes:

[BrianL]

Re: Looks like we got it wrong

What do we know about the amount Fannie/Freddie has borrowed from the Fed at this point? I know the gov has guarenteed backing for stability reasons, but I seen anything concrete about actual borrowing. Or are we speculating that they will be bailed out in the future?

I'm still new at this, so I'm sure I am missing plenty here.

[touchring]

Re: Looks like we got it wrong

I just can't comprehend the possibility of the dollar bottoming right now, what happens when all of that Fannie/Freddie money makes it's way out into the economy? I don't imagine they're just going to hide it under a giant mattress. Have we really even seen the results of what money has already been created thus far? When the SEC runs out of money, which isn't far off, I can't imagine that they won't fire up the printing presses and refill the coffers. We have a war to fund, and Obama wants his $1000 stimulus plan.

how many times must a person cry wolf before people stops believing in him? 20 times?

[phirang]

Re: Looks like we got it wrong

how many times must a person cry wolf before people stops believing in him? 20 times?

Read fannie mae's 2Q08 report:

http://www.freddiemac.com/investors/...esentation.pdf

We have just started to see the housing bust... this is GOING to be nationalized: there is no other way out, save a great depression.

Compliments of a Princeton historian:

http://washingtonindependent.com/view/us-economy-looks

[EJ]

Re: Did we get it wrong?

Ok, folks. It's time to close off the topics of the dollar, inflation, and commodity prices. I've been hearing these arguments since 2001. In the words of George Jackson: "Patience has its limits. Take it too far, and it's cowardice."

Arguments that the dollar is due to rebound to its year 2000 bubble peak never mind its 1983 post Volcker rate hike peak are bankrupt. We do not want our readers chasing their tails around every time the dollar rallies and commodities correct. New threads posted here that attempt to make the totally discredited case, on each dollar rally since 2001, that a new era of secular dollar strength has begun, will be moved to a new forum called Case Closed. We may choose to re-open the discussion later, in five or ten years, after the conditions that have created the trend have reversed.

Also, after ten years the argument about commodities deflation versus inflation as fallout from debt deflation is also settled. We may have periods of disinflation but no run-away deflation, not unless the US government decides that wiping out creditors, and over-indebted households and firms, and creating 25% unemployment to preserve the dollar is politically more advantageous than deflating the dollar. We put the probability of that at close to zero.

I understand that no one likes to admit they are wrong but new events are coming at us fast and furious and we don't have time and energy to waste re-hashing old arguments that have been settled by events long ago. I also understand that if a reader waited until commodity prices doubled then doubled twice again before investing in the negative dollar trend that the corrections are painful because they take the investor underwater, unlike readers who have been here since 2001. But we cannot adjust our thesis for late comers. Facts are stubborn things.

1. Oil and commodities are not a bubble. They will rise, with occasional corrections as other currencies are depreciated in kind, until the US regains its position as a net creditor with a positive trade balance and energy independence. That day is a long way off, and the process of re-adjustment will be extended and arduous.

2. No deflation. Through the expedient of double entry book keeping, a negative rate of inflation can and will be avoided. The more relevant question is what will happen to inflation in the the US as the trade-weighted dollar index declines to the area of 40, down another 40% to 50% from here. Once again, deflation is the least of our worries. How global central banks will tackle a combination of debt deflation and monetary inflation is the topic we will debate here going forward.

[Spartacus]

Re: Did we get it wrong?

to keep this argument from rearing its head again IMHO you need to re-cast the wording, block a few escape routes or entry points to "new" arguments

2. No deflation. Through the expedient of double entry book keeping, a negative rate of inflation can and will be avoided. The more relevant question is what will happen to inflation in the the US as the trade-weighted dollar index declines to the area of 40, down another 40% to 50% from here. Once again, deflation is the least of our worries. How global central banks will tackle a combination of debt deflation and monetary inflation is the topic we will debate here going forward.

there will be no generalized deflation across the entire economy. Nail salons and Outback Steakhouse dropping prices (you know who I'm talking to / about here) does not qualify as generalized deflation across the economy.

Lots of people paying off loans does not qualify as deflation across the entire economy because in the normal course of events paid off funds are re-lent immediately if not sooner. paying off loans is deflationary if the regulatory environment changes and banks must add to reserve requirements, or if lots of banks go bust together. Even here, the government has powers to prevent generalized economy-wide deflation, keeping smaller deflations isolated.

[Starving Steve]

Re: Did we get it wrong?

I am a complete moron, so take my remark here for what it's worth:

My understanding is that the Federal Reserve Bank has been buying dollars worldwide and issuing bonds to other central banks. This began around the time Octillo, or whatever his name is in Mexico City?, posted here that the Bank of Mexico was buying dollars para aumentar sus divisas.....Remember his post?

A bit more of the story from Bloomberg is that the Fed is buying dollars apparently to bail-out Fannie-Mae and Freddie Mac, plus all the banks lining-up at the begging-bowl window for 2% loans from the Fed.

I am filling-in the lines here because I don't have the whole story. So this is a moron's speculation. But if I am correct, i.e, that this is to re-capitalize the banks and the GSEs, then this is not as deflationary as it would first appear to be.

The deflation is that the dollars are being bought. But the kicker is that the dollars are being lent back to the gang that squandered their banking capital on deadbeats who should have never been allowed to buy homes.

So this is inflationary because the bankers get rewarded for bad loans, and the deadbeats may even be allowed to stay in their McMansions.

If I am right, this is a long-term buying opportunity for hard assets such as gold and oil.

[Guest]

Re: Did we get it wrong?

Ok, folks. It's time to close off the topics of the dollar, inflation, and commodity prices. I've been hearing these arguments since 2001. In the words of George Jackson: "Patience has its limits. Take it too far, and it's cowardice."

Arguments that the dollar is due to rebound to its year 2000 bubble peak never mind its 1983 post Volcker rate hike peak are bankrupt. We do not want our readers chasing their tails around every time the dollar rallies and commodities correct. New threads posted here that attempt to make the totally discredited case, on each dollar rally since 2001, that a new era of secular dollar strength has begun, will be moved to a new forum called Case Closed. We may choose to re-open the discussion later, in five or ten years, after the conditions that have created the trend have reversed.

Also, after ten years the argument about commodities deflation versus inflation as fallout from debt deflation is also settled. We may have periods of disinflation but no run-away deflation, not unless the US government decides that wiping out creditors, and over-indebted households and firms, and creating 25% unemployment to preserve the dollar is politically more advantageous than deflating the dollar. We put the probability of that at close to zero.

I understand that no one likes to admit they are wrong but new events are coming at us fast and furious and we don't have time and energy to waste re-hashing old arguments that have been settled by events long ago. I also understand that if a reader waited until commodity prices doubled then doubled twice again before investing in the negative dollar trend that the corrections are painful because they take the investor underwater, unlike readers who have been here since 2001. But we cannot adjust our thesis for late comers. Facts are stubborn things.

1. Oil and commodities are not a bubble. They will rise, with occasional corrections as other currencies are depreciated in kind, until the US regains its position as a net creditor with a positive trade balance and energy independence. That day is a long way off, and the process of re-adjustment will be extended and arduous.

2. No deflation. Through the expedient of double entry book keeping, a negative rate of inflation can and will be avoided. The more relevant question is what will happen to inflation in the the US as the trade-weighted dollar index declines to the area of 40, down another 40% to 50% from here. Once again, deflation is the least of our worries. How global central banks will tackle a combination of debt deflation and monetary inflation is the topic we will debate here going forward.

Mega did have a point about it being somewhat dry at times.

I've been critical of the way iTulip's forum has been handled and how presentations of the facts have been made. After a bad few weeks (gold and oil down) I decided to give iTulip a check to see its opinion on why. I was happy to see some forceful opinion and moderation of the forum by its founder and chief. Like I've said here before, I prefer to come here to learn, not to pontificate or listen to others who are sometimes sans credentials do so. And like many, I don't have all day to do it. So this was welcome.

A couple of to-the-point paragraphs gave me more confidence in what my logic has told me than dozens of charts/graphs. I hope to see more of this. (ie "sum it up, spare me the details of how the sausage is made, I trust you not to lie about it and trust your abilities to believe what you say is right most of the time, you can always footnote me to the gory details if you wish")