Ian Gordon and his Dow 1000 forecast

[Guest]

Re: Ian Gordon and his Dow 1000 forecast

OK, here's a puzzle for you Chomsky. Why isn't the USD "behaving" according to the iTulip script? I know all the reasons, from six months ago. But why is it **still** not behaving according to script? You maybe need to substantiate your position on that, because you keep implying it's coming down tomorrow. See how it gets turned around? You are sitting on a pile of assumptions yourself which have yet to materialize. Now what are you going to do in six months if the stock market simply decides not to follow your planned script?

Nah man, it's Nero who should show respect and answer some questions if he's going to stand by his calls. His take is welcome, but so far, when challenged on salient points about the iTulip thesis, he's ducked. Why come to iTulip to post contrary views without the balls to back them up?

[Chomsky]

Re: Ian Gordon and his Dow 1000 forecast

OK, here's a puzzle for you Chomsky. Why isn't the USD "behaving" according to the iTulip script? I know all the reasons, from six months ago. But why is it **still** not behaving according to script? You maybe need to substantiate your position on that, because you keep implying it's coming down tomorrow. See how it gets turned around? You are sitting on a pile of assumptions yourself which have yet to materialize. Now what are you going to do in six months if the stock market simply decides not to follow your planned script?

Um, what? I've never asserted anything. I have no (original) idea of what is going to happen and I'm not afraid to say it. I also certainly don't go around dropping provocative contrary IEDs on another person's macro-econ site without the guts to back up my position.

By the way, I admire your valiant attempt to cut against the grain and heroically, if perhaps tragically, become the one-man bullhorn for the USD. You always take the time to explain your position when challenged, something Nero ought to try to do.

[Guest]

Re: Ian Gordon and his Dow 1000 forecast

I've picked up a lot of Nero3's explanation in his posts here. But maybe it's because I'm favorable to this idea. The main point I think is that those waiting to see normal valuations out of most asset classes here may just be employing some rear-view-mirror parameters as we move into a quite singularly high inflation next decade. When the average inflation level is doubled or tripled relative to ten years before, that has a way of making "80 year long established valuation metrics" sound just a little bit ponderous.

I admit the chart LargoWinch posted with the ballooning PE ratio is a very hard piece of evidence that this market is not going to go anywhere substantively, but that's a "trauma spike", based on the 4QTR 2008 S&P sales. I've seen some falling out of bed astonishing deals on real property in the past just few weeks here in SD, and I am open to the idea that similar things exist among equities.

I back Nero's call. I think he's going to be right within 12 months - we'll see clear signs of a sustained reemergence then - and this is at variance with the standard iTulip call that we have several years of depression ahead. Whoop de do.

Meanwhile, Xela wrote me a snarky post in the select pages this morning - he thinks I'm filling these pages with spam too!

What are ya gonna do? This place is just going to the dogs. Do you think spammers like us should be sent off to a reformatory maybe?

[media][/media]

Um, what? I've never asserted anything. I have no (original) idea of what is going to happen and I'm not afraid to say it. I also certainly don't go around dropping provocative contrary IEDs on another person's macro-econ site without the guts to back up my position.

By the way, I admire your valiant attempt to cut against the grain and heroically, if perhaps tragically, become the one-man bullhorn for the USD. You always take the time to explain your position when challenged, something Nero ought to try to do.

[metalman]

Re: Ian Gordon and his Dow 1000 forecast

OK, here's a puzzle for you Chomsky. Why isn't the USD "behaving" according to the iTulip script? I know all the reasons, from six months ago. But why is it **still** not behaving according to script? You maybe need to substantiate your position on that, because you keep implying it's coming down tomorrow. See how it gets turned around? You are sitting on a pile of assumptions yourself which have yet to materialize. Now what are you going to do in six months if the stock market simply decides not to follow your planned script?

can't answer for chomsky but if memory serves the 'imminent death of the dollar' doomers stuck investors in commodity funds thru 2008, right? and/or mining stocks? itulip recommend either? nope.

the itulip script on the dollar is it'll be managed down... 'dollar ratchet'. i'd like to see an update on the dollar ratchet theory...

hope it's ok to post these here from FIRE Economy and the Dollar Ratchet...

Dollar Ratchet price of platinum


Dollar Ratchet price of gold

these charts show the dollar leveling off, not plummeting. platinum leveling off around $1600... that's a bit rich... tho i'm mystefied why it's still over $1000 after car sales fell off a cliff. gold leveling off around $850 then rising... close.

the long range gold forecast is holding up... dollar rises 2009/2010 then gradually falls to 40... you have to buy into the fire econ idea to get this.


Dollar versus gold across four major economic epochs

[Guest]

Re: Ian Gordon and his Dow 1000 forecast

I gotta run out Metalguy. Maybe someone else will answer here pointing out that the USD seems to be getting "managed" UP rather, and quite startlingly well these days, and in perhaps a more sustained fashion than the "dollar ratchet managers" intended. :rolleyes:

[thousandmilemargin]

Re: Ian Gordon and his Dow 1000 forecast

This is really one for the ultra bearish. He sounds like he suffer from chronic depression, from listening to his voice, so his forecast does not surprise me.

The Dow falling to 1000 would be a plausible prediction if the USA had never abandoned the gold standard. But given the inflation of the last 5, 10,40 years, you really need to look at inflation-adjusted charts before making any wild predictions.

I'm all for the idea that the Dow will lose 90% of its real value before the bear market ends. But the bottom could be at 3000, or 5000, or 10,000 (in 2015) depending on how much the market anticipates Fed-created inflation.

It is possible that 6600 was the nominal bottom on the Dow, with the real bottom in 2017, because the market will start pricing in massive inflation as soon as the current relief rally wears off.

It is also possible that we will see a low of 5000 later this year, with the market then rising based on strong inflationary expectations, and going sideways 1970's style after that for the rest of the bear market.

A low of 3000 some time next year is possible if Fed money printing efforts are half-hearted during the next 12 months.

It all depends on when the public starts pricing in multi-trillion dollar moneratization efforts. I think another leg down is likely before we reach a nominal bottom, because it will take further Fed money printing over the next 6 months to demonstrate that they really will do whatever it takes.

In regard to Lukester's comments about the US dollar - it will likely be strong as long as deleveraging continues. Which means it may not decline until after a nominal bottom is reached.

If we were to reach a nominal bottom around 5000 later in the year, and stocks then rose gradually thereafter, the deleveraging pressure would end, the dollar may then start to slide, and you might see a cycle whereby a gradually sliding dollar supported stock prices, and the stable stock prices removed deleveraging pressure that would otherwise hold up the dollar.

In other words, stocks will rise in nominal terms as the dollar slides. But the dollar may hold up until a nominal bottom is reached.

I can imagine a scenario where the Dow makes a nominal bottom at 5000 around October 2009, and this is widely and plausible seen as the bottom because it agrees with many bearish forecasts. At the same time, further Fed money printing has convinced people that inflation is about to kick in, so there is a move back into stocks because nominal prices are about to rise. With deleveraging pressures removed, the dollar starts to slide, which supports the idea that stocks will continue to rise in nominal terms.
Stocks then gradually rise to year 2000 levels over the next 7 years, with the dollar declining, and strong inflation, until valuations reach levels typical of the end of a bear market. The inflation-adjusted bottom occurs around 2017 with the Dow at 10,000. In retrospect the 2000 - 2017 period is seen as similar to 1965 - 1982.

At the moment, a lot of people are comparing this bear market to the 1930s, but once the actions of the Fed create inflationary expectations it will look more like the 1970s. To me, 2009 looks a lot like 1974.

[metalman]

Re: Ian Gordon and his Dow 1000 forecast

The Dow falling to 1000 would be a plausible prediction if the USA had never abandoned the gold standard. But given the inflation of the last 5, 10,40 years, you really need to look at inflation-adjusted charts before making any wild predictions.

I'm all for the idea that the Dow will lose 90% of its real value before the bear market ends. But the bottom could be at 3000, or 5000, or 10,000 (in 2015) depending on how much the market anticipates Fed-created inflation.

It is possible that 6600 was the nominal bottom on the Dow, with the real bottom in 2017, because the market will start pricing in massive inflation as soon as the current relief rally wears off.

It is also possible that we will see a low of 5000 later this year, with the market then rising based on strong inflationary expectations, and going sideways 1970's style after that for the rest of the bear market.

A low of 3000 some time next year is possible if Fed money printing efforts are half-hearted during the next 12 months.

It all depends on when the public starts pricing in multi-trillion dollar moneratization efforts. I think another leg down is likely before we reach a nominal bottom, because it will take further Fed money printing over the next 6 months to demonstrate that they really will do whatever it takes.

In regard to Lukester's comments about the US dollar - it will likely be strong as long as deleveraging continues. Which means it may not decline until after a nominal bottom is reached.

If we were to reach a nominal bottom around 5000 later in the year, and stocks then rose gradually thereafter, the deleveraging pressure would end, the dollar may then start to slide, and you might see a cycle whereby a gradually sliding dollar supported stock prices, and the stable stock prices removed deleveraging pressure that would otherwise hold up the dollar.

In other words, stocks will rise in nominal terms as the dollar slides. But the dollar may hold up until a nominal bottom is reached.

I can imagine a scenario where the Dow makes a nominal bottom at 5000 around October 2009, and this is widely and plausible seen as the bottom because it agrees with many bearish forecasts. At the same time, further Fed money printing has convinced people that inflation is about to kick in, so there is a move back into stocks because nominal prices are about to rise. With deleveraging pressures removed, the dollar starts to slide, which supports the idea that stocks will continue to rise in nominal terms.
Stocks then gradually rise to year 2000 levels over the next 7 years, with the dollar declining, and strong inflation, until valuations reach levels typical of the end of a bear market. The inflation-adjusted bottom occurs around 2017 with the Dow at 10,000. In retrospect the 2000 - 2017 period is seen as similar to 1965 - 1982.

At the moment, a lot of people are comparing this bear market to the 1930s, but once the actions of the Fed create inflationary expectations it will look more like the 1970s. To me, 2009 looks a lot like 1974.

i like this line of reasoning. remember tho that stocks did horribly even in nominal terms during a big stretch of the 1975 - 1980 inflation.

s&p500 started 1975 at 69 and peaked at 102 sept 1976, up 49%, then traded mostly sideways until summer 1980 when the market figured out volcker wasn't friggin kidding.

gold started off 1975 at $175 ($700 in 2009 dollars) and by sept 1976 fell to $115 ($430). while stocks traded sideways, gold went to $850 jan 21, 1980 ($2190). here's cpi inflation during all that...

1972-08-01 2.94118
1972-09-01 3.18627
1972-10-01 3.42298
1972-11-01 3.66748
1972-12-01 3.40633
1973-01-01 3.64964
1973-02-01 3.87409
1973-03-01 4.58937
1973-04-01 5.06024
1973-05-01 5.52885
1973-06-01 5.9952
1973-07-01 5.72792
1973-08-01 7.38095
1973-09-01 7.36342
1973-10-01 7.80142
1973-11-01 8.25472
1973-12-01 8.70588
1974-01-01 9.38967
1974-02-01 10.02331
1974-03-01 10.39261
1974-04-01 10.09174
1974-05-01 10.70615
1974-06-01 10.85973
1974-07-01 11.51242
1974-08-01 10.86475
1974-09-01 11.9469
1974-10-01 12.0614
1974-11-01 12.20044
1974-12-01 12.33766
1975-01-01 11.80258 <- stocks take off 2 years into high inflation
1975-02-01 11.22881
1975-03-01 10.25105
1975-04-01 10.20833
1975-05-01 9.46502
1975-06-01 9.38776
1975-07-01 9.7166
1975-08-01 8.6
1975-09-01 7.90514
1975-10-01 7.4364
1975-11-01 7.37864
1975-12-01 6.93642
1976-01-01 6.71785
1976-02-01 6.28571
1976-03-01 6.07211
1976-04-01 6.04915
1976-05-01 6.20301
1976-06-01 5.97015
1976-07-01 5.35055
1976-08-01 5.70902
1976-09-01 5.49451 <- stocks level off, gold takes off
1976-10-01 5.46448
1976-11-01 4.88246
1976-12-01 4.86486
1977-01-01 5.21583
1977-02-01 5.91398
1977-03-01 6.44007
1977-04-01 6.95187
1977-05-01 6.72566
1977-06-01 6.8662
1977-07-01 6.83012
1977-08-01 6.62021
1977-09-01 6.59722
1977-10-01 6.39033
1977-11-01 6.72414
1977-12-01 6.70103
1978-01-01 6.83761
1978-02-01 6.42978
1978-03-01 6.55462
1978-04-01 6.5
1978-05-01 6.96517
1978-06-01 7.41351
1978-07-01 7.70492
1978-08-01 7.84314
1978-09-01 8.30619
1978-10-01 8.92857
1978-11-01 8.8853
1978-12-01 9.01771
1979-01-01 9.28
1979-02-01 9.85692
1979-03-01 10.09464
1979-04-01 10.48513
1979-05-01 10.85271
1979-06-01 10.88957
1979-07-01 11.26332
1979-08-01 11.81818
1979-09-01 12.18045
1979-10-01 12.07154
1979-11-01 12.61128
1979-12-01 13.29394
1980-01-01 13.90922
1980-02-01 14.18234
1980-03-01 14.75645
1980-04-01 14.73088
1980-05-01 14.40559
1980-06-01 14.38451
1980-07-01 13.13269
1980-08-01 12.87263
1980-09-01 12.60054
1980-10-01 12.76596
1980-11-01 12.64822
1980-12-01 12.5163 <- gold peaks with cpi inflation
1981-01-01 11.82519
1981-02-01 11.40684
1981-03-01 10.48689
1981-04-01 10
1981-05-01 9.77995
1981-06-01 9.5526
1981-07-01 10.76179
1981-08-01 10.80432
1981-09-01 10.95238
1981-10-01 10.14151
1981-11-01 9.59064
1981-12-01 8.92236
1982-01-01 8.3908
1982-02-01 7.6223

stocks went up over the whole inflation episode but gold went up more. so if one is expecting high inflation, why own stocks?

the trick is to sell gold when the fed acts... not talks... about stopping inflation.

[vanvaley1]

Re: Ian Gordon and his Dow 1000 forecast

What is a reasonable and/or historic legitmate percentage of GDP that the FIRE economy should strive to gain and/or maintain? 5% 10% 15%?

[raja]

Re: Ian Gordon and his Dow 1000 forecast

i have no way of knowing when you're going to start being right and ej wrong so i know when to stop listening to ej and start listening to you.

since you are not willing to share your past record of practical and non-academic forecasts then depending on the outcome of your bull market call your record here will consist of a single accurate forecast over, what, six months? vs itulip's dozen or so over 10+ yrs. hard to be lucky that many times over such a long period. nothing to keep you from building a comparable track record. it will take five or ten years but you won't find anyone here who's not open to it.

Personally, I would rather see the discussion focus on what nero3 is presenting rather than how successful or not he has been in the past. After all, "past performance is no guarantee of future results."

When I don't know the answers for myself, I rely on someone else's track record to help know where I should place my bets. For nero3's critics, demanding to know his track record suggests that his comments cannot be defeated solely on what he is presenting. It's like saying, "Well, I can't refute what your saying, but you've failed in the past so I won't believe you." Surely, we can do better than that . . . .

[metalman]

Re: Ian Gordon and his Dow 1000 forecast

Personally, I would rather see the discussion focus on what nero3 is presenting rather than how successful or not he has been in the past. After all, "past performance is no guarantee of future results."

that's not so. when you hire someone, don't you look at track record? who'd you rather hire, someone who has performed consistently well or someone with either no track record or a bad one? past performance is the only way to predict future results, as long as the results were not due to chance.

When I don't know the answers for myself, I rely on someone else's track record to help know where I should place my bets. For nero3's critics, demanding to know his track record suggests that his comments cannot be defeated solely on what he is presenting. It's like saying, "Well, I can't refute what your saying, but you've failed in the past so I won't believe you." Surely, we can do better than that . . . .

nero says the stock market did such and such in the past for x, y, z reason so it will do likewise now. 'a market full of pessimists goes up, climb a wall of worry'... and other shallow truisms you can find on 1000 financial sites. he/she discounts the dynamics of asset bubbles, discounts the fact of the fire economy, discounts debt deflation, as if these concepts were irrelevant. on the contrary, analysis that does not take these into account is irrelevant. these ideas allowed itulip make solid forecasts... we're not going to unlearn them.

[rogermexico]

Re: Ian Gordon and his Dow 1000 forecast

Hudson, Gross, Phillips, Janszen: The U.S. economy is based on finance.

+

Paul Volcker: “We’re in a government-dependent financial system; I never thought I would live to see the day… We’ve got to fight to get away from that.” – Paul Volcker, March 24, 2009

=

The U.S. economy is government dependent.

Didn't work for the Soviet Union. Won't work for us, either.

Absolutely. Might add, won't work for China or other fascist regimes either.

Central Planning, to pervert the cliche from the 1960's poster is "not healthy for children and other living things"

Central planning for interest rates and money supply is failing permanently just like it failed for wheat in Stalinist Russia, resulting in mass starvation.

It will also fail and is failing for education, and health care, the other parts of the FIRE economy.

Government-set prices work no better for money or health care than they do for the prices for orange juice and prime rib.

Holding prices down is artificial scarcity.

Subsidies result in artificial surplus.

All resources are scarce. There are no free lunches. Market forces are like gravity. They can be defied for a while (even decades) but only at the cost of bigger dislocations when gravity can no longer be overcome.

The only upside is that the utter lack of any willingness to adjust the rapaciousness of or even admit to the corruption of the FIRE economy guarantees that all this administration's socialist (fascist, actually) and magical keynesian garbage will be as permanently discredited as the FIRE economy itself when they all fail spectacularly together.

Wait until the fear has ebbed maximally and we are bathed in the light of this 15 trillion dollar Bollywood spectacular false dawn "recovery". Hopefully we can then buy some more Gold at $700/oz. Then wait patiently for the Jerry Bruckheimer explosions or the Wim Wenders slow plan across a dead landscape with tumblweeds to come.

The fourth currency is your only insurance against goverments and their centrally planned theft.

[rogermexico]

Re: Ian Gordon and his Dow 1000 forecast

i like this line of reasoning. remember tho that stocks did horribly even in nominal terms during a big stretch of the 1975 - 1980 inflation.


stocks went up over the whole inflation episode but gold went up more. so if one is expecting high inflation, why own stocks?

the trick is to sell gold when the fed acts... not talks... about stopping inflation.

Exactly. I for one am only interested in real returns. With the FIRE economy dead, how do stocks outperform other asset classes in real terms. I've seen no evidence they will, and if they won't, why are we talking about them.

Sadly, I have friends and relatives who are contrary indicators. Right now, I get the most questions about stocks from the same folks that thought I was crazy and did not listen when I told them to sell their orange county and san diego real estate in the summer of 2006.

[metalman]

Re: Ian Gordon and his Dow 1000 forecast

Exactly. I for one am only interested in real returns. With the FIRE economy dead, how do stocks outperform other asset classes in real terms. I've seen no evidence they will, and if they won't, why are we talking about them.

Sadly, I have friends and relatives who are contrary indicators. Right now, I get the most questions about stocks from the same folks that thought I was crazy and did not listen when I told them to sell their orange county and san diego real estate in the summer of 2006.

how many times do folks have to go through the same trauma before they learn? a nation of reloaders... no wonder the fire econ boyz like cramer are so arrogant... they know they can play the game over and over with the same morons.

[rogermexico]

Re: Ian Gordon and his Dow 1000 forecast

I see the more realistic graph here:

You have accused Metalman of relying on EJ to do his thinking. I cannot speak for Metalman, but some of us are here because the itulip thesis confirms what we have discovered on our own long before itulip was known to us. EJ has given theoretical structure to own empirical results and less well-formed hypotheses and lemmas.

I for one was out of shares since 2000 and short shares starting in the Fall of 2007. This was before I discovered itulip, but was based on many of the same sources and data points EJ has used in his analysis. In fact, I agree with you that, ceteris paribus, Tobin's Q is a good metric for valuation. This is what supported my decision to go short and one metric I now rely on to stay out! An up to date calculation of Q will show you that Q adjusted to its mean (which is based on govt statistics) is nowhere near a typical secular bear market low, to say nothing of what it might do during a "transformational depression" that we are now undergoing. Of course, you seem to be discounting this and other major portions of the itulip thesis, and that is why some of us are challenging your reasoning.

The questioning of your own investment performance/results is perfectly legitimate, in my mind. Past performance indeed does not guarantee future results. But it's sure a heck of good way to start your evaluation when someone is proposing what to do with your money.

You have come to a website that is by definition, organized around the itulip thesis with ideas that contradict the central thesis. Those of us that have made money or avoided losing money over more than a decade using itulip or similar ideas can be forgiven if we would like to know how we would have performed if we had listened to you instead of ourselves or EJ.

I may have been impolite to you on a previous post, but I will put it to you again less snarkily, please give me a rank ordered list of the following assets and where they will be one year and 5 years from now in terms of real return: S&P 500, GLD, WTI, Copper, Ag Commodities (WHeat, Corn Soy etc) Dollar index. You can throw in some other currencies if you wish. The point is, nominal price levels are not interesting, we need to know how to protect our wealth

[ThePythonicCow]

Re: Ian Gordon and his Dow 1000 forecast

... past performance is the only way to predict future results ...

Well, my literal reading of that statement, metalman, seems incorrect to me, but I think I know what you saying.

Contrary to my literal reading of what you wrote, there are many ways to formulate predictions of future results, including Tarot cards, Ouija boards, coin flips, listening to Jim Cramer, asking my second cousins next door neighbors stock broker, ... Most of these are crap.

So perhaps what you are saying is "past performance is the only way to select the good predictors (models or people) of future results."

I'm not sure I agree with that. There is at least one other way, necessary in times of great flux or when current theories are failing. That way is to concoct new theories. Most of us have only enough genius and energy to attempt it in the most critical arenas of our life.

Sometimes we have to make critical decisions based on our new theories, even before we have had time to validate them with a series of prior successful predictions. Sometimes our economic or even physical survival depends on doing this successfully.

I just received Taleb's "Black Swan" book in the mail today. Perhaps it will provide me with a better vocabulary to state the above.