Any news on when KA transitions to POOM?

[marvenger]

Re: Any news on when KA transitions to POOM?

scary stuff...I've been hearing rumours our future fund/SWF has been rolling over our banks wholesale international borrowing.

[marvenger]

Re: Any news on when KA transitions to POOM?

bush finally got it right, we were all drunk!

[The Outback Oracle]

Re: Any news on when KA transitions to POOM?

scary stuff...I've been hearing rumours our future fund/SWF has been rolling over our banks wholesale international borrowing.

Marv...you just made me cringe...makes sense....I was wondering why everyone was being so sanguine

Also...every time I hear the term "Future fund" I kick the dog! It covers about 1/4 of the Liabilities they have already incurred in the PAST!!!! (As I understand it)

I have had a bit of a programne lately ringing ABC radio programnes trying to get a bit of attention to this CAD and International debt situation. Now whether it is just me but they can't get rid of me quickly enough. Noone wants to talk about it. I guess it is a bit over the head of the average listener. The average Joe Blow just thinks everything is peachy

I saw John Stewart of NAB interviewed ...when asked if there were any more derivative explosions waiting to go off in NAB...he rubbed his nose!!!!!! and said he didn't know! I don't know about body language but my immediate thought on seeing it was "bloody hell...we're all for the high jump" and sold my ANZ in the rally!:eek:

[The Outback Oracle]

Re: Any news on when KA transitions to POOM?

Marv...we need an Aus Itulip! Steve's blog is the nearest thing I guess but it cannot function like this! I guess it only happens because respect has been built up for your (EJ's) opinions! Noone listens to me!!!!! :p Understandably I guess. I have little in common with the Delphic Oracle who was paid for opinions! Well a few have taken a bit of notice and been somewhat cautious as a result, but it has been bloody hard going...I get everything from being called "negative all the time' to angry retorts 'f....g smart arse' to looks of benign amusement from friends!
Cheers

[marvenger]

Re: Any news on when KA transitions to POOM?

this is so incredibly f@$%^d up I don't know where to begin or end. Burying gold is gaining more appeal by the day, but I've also been looking at HFA asset management as a possible buy. They are fund of fund hedge fund manager that has been holding up well and has actually been having fund inflows. PE about 4, over 10% fully franked yield, they recently made a big aquisition of the american hedge fund Lighthouse partners whom they've had a long association with and they took on aboout $100m in debt to do this, this debt along with murkiness of aquisition is why I think their share price has been extra smashed compared with platinum for example which has had significant falls in FUM....I dunno I think this could be a screaming buy. Problem with these hedge funds is they can lose mandates very quickly although HFA does have a large retail base which should be more sticky. They'll be able to pay off the debt fairly quickly though and if they keep performing their FUM may keep going up significantly, so there's significant upside as long as the world doesn't become a fascist state like naomi wolf is suggesting....but hey if that happens we're screwed anyway.

[GRG55]

Re: Any news on when KA transitions to POOM?

Marv...we need an Aus Itulip! Steve's blog is the nearest thing I guess but it cannot function like this! I guess it only happens because respect has been built up for your (EJ's) opinions! Noone listens to me!!!!! :p Understandably I guess. I have little in common with the Delphic Oracle who was paid for opinions! Well a few have taken a bit of notice and been somewhat cautious as a result, but it has been bloody hard going...I get everything from being called "negative all the time' to angry retorts 'f....g smart arse' to looks of benign amusement from friends!
Cheers

Well this won't make either of you feel any better, although I doubt there's anything in here that will be of any surprise to you.

Being in one of the other colonies [Canada] with a lot of parallels to the Aussie situation [resource dependent economy, financial power concentrated in one city far away, political power concentrated in another city also far away, and the same housing bubble denial] I take particular interest in your perspectives gentlemen.

Interview with Marc Faber:
Australian Broadcasting Corporation
Broadcast: 13/10/2008
Reporter: Tony Jones

Excerpt:

TONY JONES: Do you think Australia is going to get swept up to the same degree, or are we insulated?

MARC FABER: No, I think probably even worse, because don't overlook the fact the US is in very bad shape, but very simply put ... here, I oversimplify, the US doesn't produce anything, it consumes. So if consumption goes down in the US, Okay, Americans become a bit slimmer, that's very good if the obesity rate drops in America and they consume less electronics, they drive around a little bit less, it's not the end of the world. But the translation mechanism goes then into the producers for America. Notably, China and other Asian countries that then have falling industrial production and diminishing exports to the United States. And, therefore, their demand for raw material goes down and so the Asian economies are like a warrant on the US economy. When the US does well they do particularly well, and when the US does badly they're hit very hard and that then goes through to the resource producers, to OPEC, to Russia, to Australia and these countries in my opinion are actually quite vulnerable, especially given the large foreign debt of Australia.

TONY JONES: We're also already, in fact, hearing that some steel mills in China are cutting demand for iron ore. They're actually calling on smaller miners in Australia to actually postpone delivery of orders. Do you think that will spiral, get worse?

MARC FABER: Yeah, I think so, because if you look at the global synchronised boom 2001 2007 it began in the US and then it led to strong growth in China and as China was growing strongly, the industrial production went up, exports went up and then capital spending went up very substantially. And when capital spending picks up, then obviously the demand for commodities does not only go up because of local consumption and industrial production, but because of the capacity expansion. And when the recession comes the expansion is cut down and that leads to a slump in the demand for commodities. We've seen the Baltic Dry Index collapse, oil prices drop from close to $150 a barrel to around 80. Of course it will hit Australia, and very badly so.

TONY JONES: You've also pointed, and I'd mentioned this before to the asset bubble in housing prices in Australia. Are we, in this country, do you think, due for a major correction?

MARC FABER: Yes, I think so, major correction. Because if you look back at Australia we always had booms and busted and they tended actually to be more pronounced than in the United States. So I think we had a colossal boom in home prices and to some extent, also in commercial real estate in shopping malls and so forth and that will go in reverse. It is very difficult to call the bottom, but I think these things take time and if you look at Japan, we peaked out in 1989 on the Nikkei at 39,000. We're now at 9,000 or so. So it can take a very long time and I think this crisis will be a crisis, a milestone in economic history. The way people used to ask, "Are you born before 1929 or after 1929, or before the World War II, or after World War II?" People will ask in future, "Were you born before 2007, or after 2007?"

[bill]

Re: Any news on when KA transitions to POOM?

Well this won't make either of you feel any better, although I doubt there's anything in here that will be of any surprise to you.

Being in one of the other colonies [Canada] with a lot of parallels to the Aussie situation [resource dependent economy, financial power concentrated in one city far away, political power concentrated in another city also far away, and the same housing bubble denial] I take particular interest in your perspectives gentlemen.

Interview with Marc Faber:
Australian Broadcasting Corporation
Broadcast: 13/10/2008
Reporter: Tony Jones

Excerpt:

TONY JONES: Do you think Australia is going to get swept up to the same degree, or are we insulated?

MARC FABER: No, I think probably even worse, because don't overlook the fact the US is in very bad shape, but very simply put ... here, I oversimplify, the US doesn't produce anything, it consumes. So if consumption goes down in the US, Okay, Americans become a bit slimmer, that's very good if the obesity rate drops in America and they consume less electronics, they drive around a little bit less, it's not the end of the world. But the translation mechanism goes then into the producers for America. Notably, China and other Asian countries that then have falling industrial production and diminishing exports to the United States. And, therefore, their demand for raw material goes down and so the Asian economies are like a warrant on the US economy. When the US does well they do particularly well, and when the US does badly they're hit very hard and that then goes through to the resource producers, to OPEC, to Russia, to Australia and these countries in my opinion are actually quite vulnerable, especially given the large foreign debt of Australia.

TONY JONES: We're also already, in fact, hearing that some steel mills in China are cutting demand for iron ore. They're actually calling on smaller miners in Australia to actually postpone delivery of orders. Do you think that will spiral, get worse?

MARC FABER: Yeah, I think so, because if you look at the global synchronised boom 2001 2007 it began in the US and then it led to strong growth in China and as China was growing strongly, the industrial production went up, exports went up and then capital spending went up very substantially. And when capital spending picks up, then obviously the demand for commodities does not only go up because of local consumption and industrial production, but because of the capacity expansion. And when the recession comes the expansion is cut down and that leads to a slump in the demand for commodities. We've seen the Baltic Dry Index collapse, oil prices drop from close to $150 a barrel to around 80. Of course it will hit Australia, and very badly so.

TONY JONES: You've also pointed, and I'd mentioned this before to the asset bubble in housing prices in Australia. Are we, in this country, do you think, due for a major correction?

MARC FABER: Yes, I think so, major correction. Because if you look back at Australia we always had booms and busted and they tended actually to be more pronounced than in the United States. So I think we had a colossal boom in home prices and to some extent, also in commercial real estate in shopping malls and so forth and that will go in reverse. It is very difficult to call the bottom, but I think these things take time and if you look at Japan, we peaked out in 1989 on the Nikkei at 39,000. We're now at 9,000 or so. So it can take a very long time and I think this crisis will be a crisis, a milestone in economic history. The way people used to ask, "Are you born before 1929 or after 1929, or before the World War II, or after World War II?" People will ask in future, "Were you born before 2007, or after 2007?"

more of this
I said this would happen,,,,
japs liquidate!!!
http://www.theglobeandmail.com/servlet/story/LAC.20081016.RWILLIS16/TPStory/Business

STREETWISE: JOINT VENTURES

Uranium deal a sign of things to come

ANDREW WILLIS

October 16, 2008
A new normal is emerging at resource companies, as mine operators such as Uranium One opt to partner up in order to bring Australian mines into production.


Uranium One struck a deal yesterday that will see Mitsui & Co., Japan's second-largest trading company, pay $72-million for a 49-per-cent stake in the Canadian company's six Australian properties.
This deal concludes a process that began last May, when Uranium One hired investment bank Rothschild to find partners that could share in the risk of developing a mine with a relatively short life span of six years. The first of the Australian sites, which include the Honeymoon mine, are expected to be operational in 2010. Uranium One has access to capital, as it recently struck a $100-million revolving credit facility with Bank of Montreal and Bank of Nova Scotia. But company executives decided sharing development risks with a deep-pocketed partner was a better strategy.

[marvenger]

Re: Any news on when KA transitions to POOM?

haha, well EJ has a lot of patience with us ranters, that and a track record of theories being able to describe past and future events are the key I guess. Australia being small and slightly irrelevant, although we do have a shit load of resources, makes trying to predict what happens subject to far more randomness I think. Its funny and sad watching Rudd(aka the milkybar kid) trying to throw his weight around on the international stage, kind of makes you feel the ROW could decide our fate with the wave of a hand.

[FRED]

Re: Any news on when KA transitions to POOM?

Since the US trashed the international gold standard in 1971, a strong correlation developed between the MZM Own Rate and CPI inflation, with a nine month to one year lag. CPI inflation increased or decreased about a year after changes in MZM.

An divergence between the MZM Own Rate and CPI inflation developed in 2006.

As MZM continued to increase, inflation fell then increased. Even as MZM continued to decline, inflation continued to rise.

We are not entirely sure what to make of the disconnect between MZM and inflation. We are digging into it as it is central to Ka-Poom Theory.

But the mystery of the Big Crash is not hard to explain. Don't forget that the US economy runs on foreign borrowing. When capital inflows not only slow but reverse... watch out!

The last major US stock market crash occurred when foreign capital flows reversed trend and later briefly turned negative.

This occurred recently in a big way as global central banks baled on the dying FIRE Economy.

As we forecast years ago, when the going got tough in the next global recession, foreign governments would need their money at home; no more "excess savings" to send to the US.

So why is the dollar strengthening if capital flows are reversing? Shouldn't we be "Poom" ing?

In a word: de-leveraging. Dollars are being purchased in Europe. At the same time leveraged commodity positions are being unwound.

If the Ka-Poom Thesis holds up, eventually weak dollar demand overwhelms the impact of falling commodity demand.

We think it is safe to say that we are in a major "Ka" disinflationary period, if not THE biggest "Ka" disinflation period of them all.

[we_are_toast]

Re: Any news on when KA transitions to POOM?

In a word: de-leveraging. Dollars are being purchased in Europe. At the same time leveraged commodity positions are being unwound.

I'm sorry, but my non economist mind is having some trouble grasping this concept. Could someone possibly give an example of a commodity position that is being unwound that would require the purchase of dollars? Then where is the path of those dollars after the dewinding?

[GRG55]

Re: Any news on when KA transitions to POOM?

more of this
I said this would happen,,,,
japs liquidate!!!
http://www.theglobeandmail.com/servlet/story/LAC.20081016.RWILLIS16/TPStory/Business

STREETWISE: JOINT VENTURES

Uranium deal a sign of things to come

ANDREW WILLIS

October 16, 2008
A new normal is emerging at resource companies, as mine operators such as Uranium One opt to partner up in order to bring Australian mines into production.


Uranium One struck a deal yesterday that will see Mitsui & Co., Japan's second-largest trading company, pay $72-million for a 49-per-cent stake in the Canadian company's six Australian properties.
This deal concludes a process that began last May, when Uranium One hired investment bank Rothschild to find partners that could share in the risk of developing a mine with a relatively short life span of six years. The first of the Australian sites, which include the Honeymoon mine, are expected to be operational in 2010. Uranium One has access to capital, as it recently struck a $100-million revolving credit facility with Bank of Montreal and Bank of Nova Scotia. But company executives decided sharing development risks with a deep-pocketed partner was a better strategy.

And the same thing will happen in the other resource jurisdictions, like Canada. Having sold off, for very little money, 100-year old firms like Inco [and other major firms like Alcan and Falconbridge] with assets that cannot be replicated at any price by any management team anywhere, earlier this decade, I now fully expect that companies like Suncor that are similarly positioned will also be sold off for a song during this deflation scare.

[GRG55]

Re: Any news on when KA transitions to POOM?

I'm sorry, but my non economist mind is having some trouble grasping this concept. Could someone possibly give an example of a commodity position that is being unwound that would require the purchase of dollars? Then where is the path of those dollars after the dewinding?

The dollar and yen [and to a lesser degrees the Swissie] have been the most popular "carry trade" currencies.

Whether currency crosses, long/short hedge funds, etc. the trade has been short [borrow against] the US$/yen and use the funds to go long [pick any of Aussie$, NZ$, housing in Eastern Europe (a favourite cross with the Swissie), commodity futures, junior mining companies, and even the precious metals themselves].

Unwind the trade [any of those trades, commodity or otherwise] and the effect is the opposite. That's why the Aussie and NZ dollars have collapsed against the US$ and yen this year. That's why the US$ and yen are continuing to increase relative to most everything else.

imo the reason this Ka is going to be much "worse/greater" than previous disinflations is because every Central Banker and government in the world is busily shovelling money into the absolute worst part of their economies...the financial system. And this is coming at the expense of every other sector of the economy, everywhere.

The US Treasury, Federal Reserve, Administration, Congress and the Senate and their counterparts worldwide have made it clear that they are going to save their precious banking systems [or die trying] no matter what it costs, even if they take down the rest of the global economy in the process. And that is exactly what is happening.

The best performing parts of the US economy...exports, agriculture and resources...are systematically being wiped out. Where these sectors were seeing increasing employment as the FIRE economy rolled over, starving them of capital in a futile effort to entrench politically influencial banking interests is going to exact a severe cost on the US and global economies. We should expect farmers to have difficulty financing crop inputs next spring, natural gas producers to lay off technical and operating staff this winter, and exporters like Boeing to approach the government for a GM-like bailout.

For those that read this as a mea culpa, you are correct. For some time I have been more optimistic than others, particularly jk, but the events of this past weekend and this week-so-far have been stunningly disappointing. Instead of using the strongest sectors of the US economy as a foundation to rebuild it, political interests have effectively smashed what is left of "Main Street" because they simply cannot imagine a universe without banking at its epicentre. The two Presidential candidates are completely clueless as to the consequences of what is happening around them, and that doesn't bode well for the US or the ROW, regardless of how the vote goes in November.

[bill]

Re: Any news on when KA transitions to POOM?

And the same thing will happen in the other resource jurisdictions, like Canada. Having sold off, for very little money, 100-year old firms like Inco [and other major firms like Alcan and Falconbridge] with assets that cannot be replicated at any price by any management team anywhere, earlier this decade, I now fully expect that companies like Suncor that are similarly positioned will also be sold off for a song during this deflation scare.

…and when you purchase stock in such resource co. at attractive pricing, along comes a big fish and takes you out.:mad:

[GRG55]

Re: Any news on when KA transitions to POOM?

…and when you purchase stock in such resource co. at attractive pricing, along comes a big fish and takes you out.:mad:

Exactly right.

I got taken out of long held positions [all purchased in 1999/2000 when "old economy" stocks were being tossed in the garbage] in Inco, Falconbridge and Alcan at good profits, but the problem is that it was impossible to replace those positions in the portfolio.

Now I expect to pick up some truly beaten down assets when this rout finally ends, and will again be forced to part with them prematurely.

[labasta]

Re: Any news on when KA transitions to POOM?

Just had another quick thought as to where the capital would go regarding the capital flight question.

It'll be the funny money into real money transfer. Where "paper" and "electronic" money (assets) will be out, and gold, land (agricultural), infrastructure (maybe) and anything tangible will be in.

Of course, the tangible will get caught in an depression scenario such as commodities, but if paper dies, then the inflationary price of the commoditiy should outweigh the reduced demand for it.

Well, look here. Grapejelly posted this on another thread:

Originally Posted by grapejelly
"If I am correct in assuming that we are still in a secular inflationary environment as well as a secular bear market, then the trends in place will continue until roughly 2014-2015. Looking at the 1970s secular inflation episode showed that commodities were not immune to the sell off in the 73-74 bear market, though they outperformed paper assets by a significant margin until the secular inflationary environment peaked later in the decade. We can thus expect hard assets to continue to outperform paper assets once reflation takes hold, while some more pain may still be in the cards in the short run." [bolding mine]



So Phirang, I hope that answers your question (from a complete non-expert such as myself)