George Soros seems to agree with iTulip thesis

[World Traveler]

Short video interview at link.

Soros Says Fed in a Bind: Beware Stagflation, Bursting of Bond Bubble

Posted Apr 07, 2009 11:27am EDT by Aaron Task in Investing, Newsmakers Related: dia, spy, GDX, GLD, TLT, TLB, TIP

After the financial market collapsed last fall, the Fed responded with a massive injection of liquidity and expansion of the monetary base.Eventually, Ben Bernanke & Co. will face the challenge of having to remove that liquidity from the system. "That's a big and difficult task and probably the authorities will not be able to do it well," says legendary financier George Soros, chairman of Soros Fund Management. "That's the fear that drives people into gold."

Soros wouldn't say whether he's actively trading gold but certainly implied it's a good bet; more explicitly, he agreed with the view there's a "bubble" in Treasuries that's likely to burst sooner rather than later.

"The moment this fear of deflation turns into a fear of inflation, you'll find interest rates rise in the long end which is going to choke off the recovery," he says. "If we are successful [in reviving the economy] we are heading from the prospect of deflation to stagflation."


http://finance.yahoo.com/tech-ticker...LD,TLT,TLB,TIP

[nero3]

Re: George Soros seems to agree with iTulip thesis

Short video interview at link.

Soros Says Fed in a Bind: Beware Stagflation, Bursting of Bond Bubble

Posted Apr 07, 2009 11:27am EDT by Aaron Task in Investing, Newsmakers Related: dia, spy, GDX, GLD, TLT, TLB, TIP

After the financial market collapsed last fall, the Fed responded with a massive injection of liquidity and expansion of the monetary base.Eventually, Ben Bernanke & Co. will face the challenge of having to remove that liquidity from the system. "That's a big and difficult task and probably the authorities will not be able to do it well," says legendary financier George Soros, chairman of Soros Fund Management. "That's the fear that drives people into gold."

Soros wouldn't say whether he's actively trading gold but certainly implied it's a good bet; more explicitly, he agreed with the view there's a "bubble" in Treasuries that's likely to burst sooner rather than later.

"The moment this fear of deflation turns into a fear of inflation, you'll find interest rates rise in the long end which is going to choke off the recovery," he says. "If we are successful [in reviving the economy] we are heading from the prospect of deflation to stagflation."


http://finance.yahoo.com/tech-ticker...LD,TLT,TLB,TIP

It's good to have some authority agree there is a bond bubble, not only Warren, but also Soros. It's almost certain I think, that the bursting of a treasury bond bubble (in the sense of a nasdaq like decline) would inflate a bubble in gold.

[metalman]

Re: George Soros seems to agree with iTulip thesis

It's good to have some authority agree there is a bond bubble, not only Warren, but also Soros. It's almost certain I think, that the bursting of a treasury bond bubble (in the sense of a nasdaq like decline) would inflate a bubble in gold.

bond and gold prices have been rising together... why won't they fall together?

[jtabeb]

Re: George Soros seems to agree with iTulip thesis

bond and gold prices have been rising together... why won't they fall together?

Inflation adjusted returns?

[nero3]

Re: George Soros seems to agree with iTulip thesis

bond and gold prices have been rising together... why won't they fall together?

If that bubble burst, really bad,, not like over a 10 year period like in the seventies, or a move back into the 4-5 % range causing an inflationary boom due to the steep yield curve, but like a bubble should, down 80-90 %, then it's pretty much the same as if the US are bankrupt like argentina or iceland. That will be pretty good for gold. In his book Soros is writing about runaway inflation for the US.

http://finance.yahoo.com/echarts?s=TIP#chart25:symbol=tip;range=5y;compare= ief+abx;indicator=ema(250)+sma+volume;charttype=li ne;crosshair=on;ohlcvalues=0;logscale=on;source=un defined

TIPS will do fine, so will gold, but regular treasury bonds will tank, or if the US government steps in as the only bid, the dollar will tank, and to get 3 % a year will become meaningless when inflation is in the 10-20 % range, to gold it really don't mean any difference, if interest rates are raised to the very high range to defend the dollar, I don't even think the US will be able to achieve this without defaulting, or if they print to keep rates down, as it will gold will go up in both scenarios.

[metalman]

Re: George Soros seems to agree with iTulip thesis

If that bubble burst, really bad,, not like over a 10 year period like in the seventies, or a move back into the 4-5 % range causing an inflationary boom due to the steep yield curve, but like a bubble should, down 80-90 %, then it's pretty much the same as if the US are bankrupt like argentina or iceland. That will be pretty good for gold.

http://finance.yahoo.com/echarts?s=TIP#chart25:symbol=tip;range=5y;compare= ief+abx;indicator=ema(250)+sma+volume;charttype=li ne;crosshair=on;ohlcvalues=0;logscale=on;source=un defined

TIPS will do fine, so will gold, but regular treasury bonds will tank, or if the US government steps in as the only bid, the dollar will tank, to gold it really don't mean any difference.

i'm confused. thought you said gold was due for a massive correction and to get into stocks. how can that be so and also a treasury bond bubble that will pop and cause the gov't to be the only buyer... sending the dollar into the toilet. how can that help stocks? which is it?

[nero3]

Re: George Soros seems to agree with iTulip thesis

i'm confused. thought you said gold was due for a massive correction and to get into stocks. how can that be so and also a treasury bond bubble that will pop and cause the gov't to be the only buyer... sending the dollar into the toilet. how can that help stocks? which is it?

What I get from you is that you misinterpret what I write, make faulty assumptions, then ask a questions. That's very stressful, makes me want to so please stop doing it. It's like I write A, you read B and ask me to comment something I never wrote. Stop replying to my posts. Thank you.

[karim0028]

Re: George Soros seems to agree with iTulip thesis

What I get from you is that you misinterpret what I write, make faulty assumptions, then ask a questions. That's very stressful, makes me want to so please stop doing it. It's like I write A, you read B and ask me to comment something I never wrote. Stop replying to my posts. Thank you.

Nero, honestly your writing confuses me as well.. You just gave a summary (above) that seems to be almost exactly opposite the position you took in the "gold is dead" thread....

Not trying to stir anything up, honestly, i'm just confused; your two comments seem to be exact opposites.... I would like to understand your perspective, as i like to hear different opinions in order to make my own decision...

[nero3]

Re: George Soros seems to agree with iTulip thesis

Nero, honestly your writing confuses me as well.. You just gave a summary (above) that seems to be almost exactly opposite the position you took in the "gold is dead" thread....

Not trying to stir anything up, honestly, i'm just confused; your two comments seem to be exact opposites.... I would like to understand your perspective, as i like to hear different opinions in order to make my own decision...

I think the yield curve will steepen, yields maybe hit 4-5 % on the 10 year, and that we will get an inflationary boom, not that different from the one from 2003, however probably more inflationary. In that initial gain phase in the stock market, At least the first 1 year, I think the metals, that have a fear premium will recede, while stocks will gain, later in the cycle when you get stagflation, and an inflation problem the dow will flatten, and gold will really decouple.

That other scenario I outlined was just to present what could happen if treasuries really tanked, and how it would be good, not bad for gold.

[jdv]

Re: George Soros seems to agree with iTulip thesis

TIPS will do fine, so will gold, but regular treasury bonds will tank, or if the US government steps in as the only bid, the dollar will tank, and to get 3 % a year will become meaningless when inflation is in the 10-20 % range, to gold it really don't mean any difference, if interest rates are raised to the very high range to defend the dollar, I don't even think the US will be able to achieve this without defaulting, or if they print to keep rates down, as it will gold will go up in both scenarios.

My problem with TIPS is - who figures the inflation rate? Can you trust them to give a real number, or do they have infinite reasons to understate the real rate of inflation?

[charliebrown]

Re: George Soros seems to agree with iTulip thesis

I think gold serves two purpuses. One is an inflation hedge the other is a credit hedge. You have no counterparty risk if you own physical gold.
If the treasury market or dollar collapses where are people going to park their money just to hold value? Oil? Gold? Lumber?

I do realize that currently gold is not money, but an asset. I cant pay my phone bill with gold (yet). so if i need to exist in the modern economy i need to convert my gold to money then transact. If everyone's money has gone poof there will be no one to buy my gold. Any unfortunate person who was going to buy gold by selling their stocks only has half their value left to buy, additionally it the Treas. market goes poof, there goes a whole lot more assets that might find its way into the gold market gone. Of course anyone who lost their job, isnt going to run out an buy gold either.

[nero3]

Re: George Soros seems to agree with iTulip thesis

My problem with TIPS is - who figures the inflation rate? Can you trust them to give a real number, or do they have infinite reasons to understate the real rate of inflation?

Good point.

[nero3]

Re: George Soros seems to agree with iTulip thesis

I think gold serves two purpuses. One is an inflation hedge the other is a credit hedge. You have no counterparty risk if you own physical gold.

.

I agree on this. Golds rising on the increasing cost to insure against a US default, other states are on rather thin ice as well, Paul Volcker wrote about it several years ago, now it's reality. Of course, buying insurance like CDS swap on US treasuries, would be like buying insurance against the titanic going down, from someone on the titanic, as Taleb say. That makes gold attractive as a way to insure against sovereign default as Roubini says. Even in a 1930-1932 type of scenario where inflation is low, as long as the economic "news" are horrible. I think gold will do well. If credit risk goes away, and the market recover, in sort of a 1975-1976 fashion, gold will retrace, so will the Swiss Franc as well, the stock market will recover, and probably later stagnate, while gold again will rise away from the stock market, when stagflation arrive.

[raja]

Re: George Soros seems to agree with iTulip thesis

I do realize that currently gold is not money, but an asset. I cant pay my phone bill with gold (yet). so if i need to exist in the modern economy i need to convert my gold to money then transact. If everyone's money has gone poof there will be no one to buy my gold. Any unfortunate person who was going to buy gold by selling their stocks only has half their value left to buy, additionally it the Treas. market goes poof, there goes a whole lot more assets that might find its way into the gold market gone. Of course anyone who lost their job, isnt going to run out an buy gold either.

I see three uses for gold:

1. Cash it out at the top of the inflation-driven gold mania, then buy something else with the profits . . . hoping that whatever that something is will hold its value. Of course, if you cash it out at what you think is the peak of the mania and keep it in cash, and inflation continues, you lose some. If you keep it in cash, and then there's a hyperinflation, you lose everything.

2. Hold onto the gold until after inflation or hyperinflation passes, then hope that there are people who want to buy it. Hopefully, with the inflation disaster fresh in their minds, people will want to have some gold for insurance in case it happens again.

3. In the case of global economic meltdown, in which fiat currencies become useless, gold could probably be traded for anything. I don't know if there'd be phone service at that point, so you wouldn't need it for your phone bill ;) :eek:

[cobben]

Re: George Soros seems to agree with iTulip thesis

"I think the yield curve will steepen, yields maybe hit 4-5 % on the 10 year, and that we will get an inflationary boom, not that different from the one from 2003, however probably more inflationary. In that initial gain phase in the stock market, At least the first 1 year, I think the metals, that have a fear premium will recede, while stocks will gain, later in the cycle when you get stagflation, and an inflation problem the dow will flatten, and gold will really decouple.

That other scenario I outlined was just to present what could happen if treasuries really tanked, and how it would be good, not bad for gold."

I can see this scenario, as a repeat of the 2002 - 2006 reflation is what TPTB want, and may be able to force or simulate - for a while.

Timing is the problem here, for those who want to play the equity markets during the reflation attempt(s) rather than just sit it out in gold, how to determine when it's failing in time to get out.