Any news on when KA transitions to POOM?

[Guest]

Re: Any news on when KA transitions to POOM?

GRG55 - It's a good question though, which iTulip have not yet directly addressed?

[GRG55]

Re: Any news on when KA transitions to POOM?

GRG55 - It's a good question though, which iTulip have not yet directly addressed?

Well I have had the impression all along that the portion of EJ's net worth that is not in gold bullion [and his personal residence] is in US$ cash. He said cash looked good several times, including that short CNBC intereview earlier this year, and it would be logical for anyone who lives in the US, and whos living expenses are denominated in US$ to hold a reasonable allocation of same.

I don't fit that catagory, so have held most of my cash in what phirang calls "the crushed Japanese yen", some Singapore Dollars, and some Canadian $ [since that is what my living expenses are denominated in]. I bailed on the Euro and Swissie earlier this year and moved to yen and more Loonies [to pay for the bunker construction costs].

[Guest]

Re: Any news on when KA transitions to POOM?

BTW - I stand (considerably) corrected regarding the Swiss franc. It has one of the highest gold backings of any currency (33%) but due to Switzerland being such a large money center their largest banks liabilities are indeed gargantuan relative to their GDP. I could not have been more flat wrong. I'd still guess they were comparatively quite well managed, other than being stuffed to the gills with bad US mortgage paper (which conversely is not a bad definition of gross mismanagement!).

So yes, Swiss franc does indeed appear to be entering this currency mayhem with serious issues. One note I came across in recent days is that the IMF (for what it's worth declares Canadian banks presently among the soundest in the world.

I can imagine Canadians turn a weary cynical eye to this assertion but that is what they contend.

With regard to EJ keeping substantial assets in USD denominated areas I don't doubt it, but that is not directly an answer to the question. Where do fleeing USD denominated global pools of capital actually go? It's entirely possible that all currencies will acellerate downwards with an eventual "flight from the USD". Seems therefore this would be that unique moment in time which creates a pressure cooker environment for gold? We could see the USD really crashing as the inflation goes hyperbolic, while only behaving much more mutedly on the USD index?

I'd be interested to read a direct examination of what may occur if no currency directly presents itself as a "way out" for pools of global capital when the USD takes the long jump.

Well I have had the impression all along that the portion of EJ's net worth that is not in gold bullion [and his personal residence] is in US$ cash. He said cash looked good several times, including that short CNBC intereview earlier this year, and it would be logical for anyone who lives in the US, and whos living expenses are denominated in US$ to hold a reasonable allocation of same.

I don't fit that catagory, so have held most of my cash in what phirang calls "the crushed Japanese yen", some Singapore Dollars, and some Canadian $ [since that is what my living expenses are denominated in]. I bailed on the Euro and Swissie earlier this year and moved to yen and more Loonies [to pay for the bunker construction costs].

[labasta]

Re: Any news on when KA transitions to POOM?

Good question Phirang.

I imagine the only place it would go is gold and the creditors' own currency.



I suspect the creditors will still play ball though, as they are in this globalisation thing as much as the US. Maybe not, who knows what they are really thinking or what the deal is. If they do run though, it's all over, including the future alt bubble.

I think the alt bubble is a great idea. It would be demand driven as it would create jobs. It's a much better way of using the creditors' (China etc.) money than simply mortgages. With the increase in jobs, there would also be an increase demand for mortgages. It's what should have been done in 2001. Using the creditors' money for both demand and supply. Perfect.
Of course, what happens after that, I don't know. They will try everything to keep the Empire going. They wont let it go quitely.


Before that happens though, the banking system has to be sorted out. Trust has to come back, which means there has to be an immediate return to honesty and transparency which seems a million worlds away from their current state. If the "Dark side of the looking glass" is correct then, it just seems that yet another part of the financial industry is a scam. Is there any honesty left in the money world? Guess not. First, the crooks don't trust each other, then when they go insolvent after lying through their teeth before going insolvent, the people don't trust them (which is far far worse).

I suspect money attracts crooks, or less honest people, which means that this industry has to be the most carefully regulated out of all industries. There seems to be too many and easy ways of making money out of thin air (thanks to electronics). It has gotten completely out of control, I mean: naked shorts, FTDs, CDSs, derivatives, fractional reserve lending, it's all funny money. It's DISHONEST. It all (or most of it) has to disappear before the United States can move on. The longer it takes, the more likely that globalisation will fail. We are now relying on the integrity of our politicians. If they love their own money before the greater good, then the system is over. This is a test of morality. If they fail, kiss it all goodbye.

This crisis has made me realise the necessity of morals in every day relationships, especially business. Can you imagine if nobody trusted each other in business (not just in finance). There would be no trade. The economy would stop over night. Every man for himself. It would be the closest thing to Hell on Earth.

Whereas, if everyone trusted each other completely, a complete sense of unity, then we can't imagine that, as the world would be too different as it is today. I believe it would the closest thing to Heaven on Earth.

Metaphysics meets reality in a spectacular way.

Where is the wisdom? Where is the compassion? Are we all little children?


Another question: Can globalisation co-exist with honesty and transparency or is it inherently dishonest?

I thnk it's the latter. It is this reason, that if not now, then eventually it must die.

Wow, that was a long thought rant!

[labasta]

Re: Any news on when KA transitions to POOM?

I just realised that the real estate bubble is also demand driven in a sense that it produces jobs (construction) as well. I hadn't really thought that through. I don't know what the answer is. I just think that the current system is not it.

[gobears]

Re: Any news on when KA transitions to POOM?

I agree that its a good question, and the biggest question I have had with regards to Itulip analysis (which I very much agree with and admire). Where would all the capital flee to? Swiss Franc, Euro, Yen are all saddled with enormous debts and problems as well. China will restrict capital inflows. I guess these countries will face the same problem as the US. Bottom line, the living standard of the western world is in freefall. I don't think there is any escape.

[marvenger]

Re: Any news on when KA transitions to POOM?

Are we all little children?

This is the paradox at the root of the problem I think. To be a capitalist in our society is to be an adult but under the current capitalist system childish behaviour is rewarded; aggressive, me first me first, bugger the consequences( or, why bother thinking about the consequences) behaviour is rewarded. And if you're not behaving like this you are looked upon by society as the child, trust me I know.

So I like the idea of these neutral forms of money, we have to legislate usury out of the system and change the education and culture to value more long term thinking, not baboon chest beating....we've got a long way to go!

[marvenger]

Re: Any news on when KA transitions to POOM?

As for how this crisis pans out, i'm not sure, i'm positioned fairly much along itulip lines, and while still trying to figure it out I am probably more waitng for EJ or someone else smart on this site to tell me whats happening next.

[marvenger]

Re: Any news on when KA transitions to POOM?

the living standard of the western world is in freefall. I don't think there is any escape.

Agree, we were living beyond our means anyway we just have to make sure we don't overshoot downwards too far. It's a very small percentage of people will benefit from this and it won't be buy holding gold bars, that'll just help dull the pain...hopefully its not the next stalin and his cronies that benefit.

[Guest]

Re: Any news on when KA transitions to POOM?

Hi Steve -

Sorry I missed your comment yesterday. This looks like the largest general market collapse (all assets down) since 1929. We might conclude from this that cash is a highly desirable asset. I'd sit tightly on it and reject all temptations to get involved in the most alluring and robust rebounds. Next April, as markets soften going into the summer, should provide strong clues as to whether the future beyond that date will be inflationary or deflationary. That is the lowest risk point at which to look at getting into any longer term investments.

I unfortunately am the complete opposite. This horrific decline caught me largely committed to inflation hedges, and my task will be to not break discipline and sell at very low levels.

Everything suggests that the "hangover" to this global recession will be an avalanche of inflation. Hence those who by accident or design have been caught in inflation hedges in this downturn are tasked with sitting tight until the inflationary aftermath arrives. If you are unleveraged, then you sit tight and you will have the opportunity to exit either with minimal damage, or exit whole, or exit with significant net profits, in perhaps 14-16 months. That's my view and I will either get a reprieve, get grandly rewarded, or get summarily executed by this call.

Just kidding. It's actually a better set of options than that. If one is wrong, and holding inert metals as inflation hedges, one simply waits for inflation to come to you. With peak oil somewhere in the mid part of the next decade, the wait may be a little long, but the inflationary result is a "high probability event". This is why this positioning was essentially conservative in terms of ultimate risk. Trade another five years of your life, and you get your desired result. Takes patience though. :p

So the correct position in that scenario Lukester for a U.S. investor is to sit on cash, perhaps short virtually broad market or commodities, and look for a bottom in commodities in first quarter -how to determine when the bottom comes?

i.e. how to determine whether capital re-flows into commodities earlier than expected (as broader equities fall) or without that clear transition or are you looking for a bearish event such as the CDS related losses to come out (?) into the open and take virtually all except classes minus dollar down.

[Verrocchio]

Re: Any news on when KA transitions to POOM?

Agree, we were living beyond our means anyway we just have to make sure we don't overshoot downwards too far. It's a very small percentage of people will benefit from this and it won't be buy holding gold bars, that'll just help dull the pain...hopefully its not the next stalin and his cronies that benefit.

Yes, living beyond our means is a phrase that will likely be written in the economic history that chronicles this era. You'll also be able to find the phrase misallocation of resources in the chronicles. There will be profound regret that so little has resulted from the massive amounts of capital, labor, and energy that were so foolishly expended.

[friendly_jacek]

Re: Any news on when KA transitions to POOM?

capital flight to where? I'd like to hear some suggestions?

To me, the capital flight is the unwind of the currency carry trades. Not just the yen carry trade but also USD carry trade. I believe huge yen and USD denominated credits were deployed in commodities/oil speculation since 2007. When that "oil bubble" burst in mid July 2008, the carry trade unwind started. That would explain the recent actions in yen and USD.
I don't remember if EJ considered this in his analysis, did he?

[The Outback Oracle]

Re: Any news on when KA transitions to POOM?

Australia

Maybe more resources per head of population than anywhere else in the world.

Been CAD's continuously for 50 years except for one year about 1971. Culmulative total $703B) Currently CAD (BEFORE the commodities crash) about 5-6% GDP
International debt $600B for 20M population (GDP about $1.04T)

Estimated About 80% of mineral resources and miners now foreign owned. Interest and dividend repatriation now more than 4% GDP and accelerating rapidly.
Food chain between the farm and the supermarket almost entirely foreign owned
Most industry of any size foreign owned

Negative savings rate until this year...even with compulsory superannuation

Bloated government

Real Estate really the only industry
About 60% of GDP is consumption...

In 1979 A$1.00 would buy 400Yen, today 68

Hmmmmm yeah i'd store my money here! Trouble is most of mine is here!

[The Outback Oracle]

Re: Any news on when KA transitions to POOM?

Now, I'm sure i heard this right but I tried to check it and the end of the clip was CUT!!!
Rick Santelli on CNBC
1) Rates moving higher for the longer term
2) "I don't think we need worry about deflation in the future" iow...inflation is on its way!

As I said I ran the clip of this to check EXACTLY what he said and his last remarks had been cut from it.

[ST]

Re: Any news on when KA transitions to POOM?

Thanks for the response Lukester. Actually, I am fully vested still as well, and I am almost certainly much worse off than you since I am in junior miners and have watched my tremendous profits of three years vanishing. However, I am also of the same opinion that there is no reason to sell at this point.

My mistake, among others, was that I expected a reflation to come after the news started trickling out and I thought we'd largely avoid any disinflation / deleveraging - no such luck. Obviously that was a tremendously bad call on my part.

I am glad to have found iTulip, better late than never and the most intelligent posters I've seen anywhere.

Yep, I can't justify selling companies in strong positions sitting on tremendous assets as small and under appreciated as they might be at present. I do have some other major energy, ags, metals for a family member that I manage that I bought about a month ago and it's those that I am thinking I would exit if there is a bull run over the next 2 months, then look at buying in perhaps an april low or around there if that all magically transpires or deploy more into gold.

I am, however, counting on a prediction that the worst doesn't happen - in which case only gold bullion, like EJ seems to be saying, works.

I am getting the feeling that some posters other than me, like perhaps you believe that inflation hedge equities will thrive though that seems to be in conflict with EJ's thinking (?)