Topic: Recession Imminent - page 3. (Read 11410 times)

I also joined this game with such kind of hope, BTC have the potential, the bubble could be 100 times bigger than real world economy bubble, who knows

great investments are never seen by the masses.  poor ones are often too obvious.

I have read such a rule and agreed with it:

Any kind of bubble, if it want to be very successful, must have 2 criteria:

1. It should be very simple outside that everyone on the street can immediately understand and accept it
2. It should have enough complex pricing model, and most of the scholars can not prove it is a bubble

Just like someone posted, anyone on the planet, from a chinese factory worker to an indian farmer will all accept a gold bar, not a usb flash drive with a wallet.dat stored 

why couldn't that new bubble be Bitcoin?

Although I have some gold short position, I hope gold not going down, otherwise we really could not find the next bubble to save the world

one of the things i follow is investor sentiment.  at the bottom of 3/09 we were at 2% bulls.  both at the 2007 top and May of 2011 we were at 98% bulls.  when conditions get this extreme with P/E's in the mid 20's (never did to single digits like at most recession bottoms) it becomes extremely difficult for the primary dealers to book profits and indeed we saw a horrendous earnings season for the financials.  they have been in decline since February.  that by itself is a HUGE red flag.  most of their profits the last 2 yrs have been from TRADING.  meaning to me that they were using Fed pomo money to destroy the shorts on an unprecedented ramp to May.  believe me, i know.  progressively more shorts closed their position and went long to "not fight the Fed".  so now we're in a situation where the primary dealers can't make money anymore being long.  so whats the next logical step from their standpoint?  go short and ramp volatility.  traders always say they love volatility.  well, here you go.  we've seen the VIX go to the high 30's this last week and probably higher.  everyone's on the inflation side of the boat and i'm alone on the other side altho i'd bet the primary dealers are over here with me just waiting for the panic as am i.

as i write this gold is up modestly, stock futures are down BIG and Bitcoin has just SOARED  to 8.5.  two out of 3 i'll take and i bet gold will soon plunge.

Kind've like Joseph Kennedy, who managed to avoid the stock crash.  He knew it was time to bail when the shoe-shine boy started giving him stock tips.  Gold is certainly talked about and invested in by the average investor a lot more now than just a few years ago, I just don't know if we're at the "shoe-shine" stage quite yet.  One of the things I've learned over the years is you can be right about a trend but being wrong about the timing can still wipe you out.

I'm still struggling with the inflation/deflation argument.  Mish and the other deflationists make great points but I just wonder if their timing is right.  Bernanke is a monetarist.  He believes the Great Depression was caused by a shrinkage in the money supply.  With him steering the ship, I think a period of hyper-inflation before deflation is a likely outcome.  They don't call him "helicopter" Ben for nothing.  But your posts have certainly given me pause to reflect on that position.

When a bubble burst, we always need another bigger bubble to get out of the problem, but the housing bubble is too big, difficult to imagin a new bubble that is even bigger, maybe that's the reason Japan stayed put for about 20 years

Not refuse, just reluctant. Most of the people will dislike a careful and monk-like life. Many things in the social are so complex, people seldom have insight about the consequence of their action 10 or 20 years later, they just follow the majority

If you have billions of dollar like those bankers, I think you will consider how to help the average person

What FED can do is monitoring the economy development and support with needed cash. In a recession, many people will unavoidably start to borrow money (Governement need them most in today's system, they need to pay the unemployment benefit and social security), so keep plenty of money supply is necessary. These money can only help to hold the situation and will increase the future burden, but still better than killing lot's of businesses rightaway

Of course some of these money pushed commodity price, but I think most of them transfered into some type of saving

I have a simple model can prove: Suppose that normal business trasaction need 1 million dollar, if people start to save, then at least 10 million dollar or even 100 million dollar of money supply is needed

i believe Austrian economics has been quite predictive about what has happened the last 11 yrs.  Its been quite useful for me since 2005 when i started buying gold, silver and as well in 2007 when i shorted stocks.

i did quite well during those times but did get hurt in my portfolio of mining stocks and energy.  i used a stagflationary approach except that the -flationary part got hurt quite badly with the gold/silver/energy stocks getting literally destroyed.  i went back and studied very hard as to why and came across Robert Prechters theories as well as Mish's whose theories played out extraordinarily well.  that is, one of absolute deflationary forces imposed on the market at that time.

since then we've not had the washout we should have had.  according to Prechter he thinks the Dow goes to 400.  extraordinary call i admit.  but with the greater distortions that the gov't/banks have created since 3/09 and the increasingly bold corruption of the banks enabled by crooks/criminals like Geithner, Bernanke, and Paulson (these guys should go down in history as traitors and should be jailed) we've entered an extremely dangerous phase of the crisis.  the forces for a great deflationary washout feel large to me.  

i'm not necessarily a believer in Elliott Wave Theory technical analysis but it does provide a fascinating potentially useful predictive framework on which to see what might happen.  its based on psychology and wave formation.  Prechter is calling for entry into a devastating wave 3 down right about now.  he's been off on his timing but overall i think he might be proven correct.  the fundamentals certainly support it.  i am a believer in cycle theory and we've just had the most powerful stock rally since 1932 with about a 79-80% retrace from the bottom exceeding all Fibonacci levels to the upside.  extraordinary.  i've been getting hurt short alot of the way up but its payback time.

ultimately i do believe Austrian Theory will be proven wrong in its position on gold/silver.  maybe it had a chance before Bitcoin came along but i'm also a big believer in the Internet and Bitcoin fits extraordinarily well into a high technology age.  too many ppl are on one side of the boat on this one and central banks are no exception.  i view their position as a negative surprisingly; Gordon Brown of the Bank of England sold tons of gold at the bottom in 2000.  yet another stupid criminal.  all of them did on the way up and smart guys like Eric Sprott would say that private investors like me were happy to take the gold off their hands.  so i've made extraordinary profits since and i decided to cash them all in this year and exchange into Bitcoin.  could be the stupidest move of my life but i think i'll be fine at the least or extraordinarily rich if i'm right.

+1

and all that speculation in commodities actually hurts the avg person.  look at the Middle East explosion.  its over food and financial repression.

i just had dinner with a highly successful multimillion dollar hedge fund manager and i picked his brain about the economy and the future of our country.  he actually is as pessimistic as i am and said whats happening is typical for a empire starting a long decline.  he thinks the youth in our country will have a great burden to bear and won't have our lifestyles.  he said our administration is doing all the wrong things with Obama being 3x worse than Bush.  and Bush was bad.  he has a crapload of CDS against all PIGS, Japan, and US debt.  he is VERY bearish on CMBS and has CDS against them as well.  he says commercial RE is heading into the crapper and will suffer greatly in the coming decline.  he said we should have let the system implode in 2001 and 2008 but our admins wouldn't allow it.  and now we have to pay.  we disagreed in that he thinks the gov't and Fed will continue to inflate and he holds a large portfolio of gold mining stocks.  i pointed out they'd been getting killed but he said the fund has had them for many years so i guess he means since back in 2002 b/c thats the only way they'd still be up.  they also have a small holding of bullion.  they are buying farmland and select residential and strip malls but only if he can get them for cents on the dollar.  he thinks they should buy guns too.  i asked him about the gov't losing control and deflation setting in and he said no one knows for sure whats going to happen.  couldn't argue about that.

Is the takeaway message here that austrian economics is correct in theory, but lacks predictive power because market participants refuse to behave according to its tenants?

Not far away before they start taking risks?  That's ALL they're doing with the Fed's cash is taking risks.  Why do you think commodities are so high?  If QE is supposed to help the average person, then why is unemployment and leverage still so high?  QE is a free pass for banks to take risks with the house's money.  Who can blame them, I'd be doing it too if I could.

I don't think they will repeat what happened in 1930s, and QE2 really increased many institution/corporation's cash reserve, it's not far away before they start to actively invest/take risk

Keynes had pointed out: People will spend less when their income decrease, but not as much as income decreased. So the total consumption is actually higher even if income drops to the previous level

Another thing, like Telecom/IT/housing, those bubbles always can bring some years of boom, since they will bring easy/quick profit and generate lots of new job. We need another bubble to bring some easy/quick profit, and gold is very likely to be such a bubble,
BTC have the potential but just technically too complex for the majorities

When gold is selling at 10000$/ounce, there will be many jobs/products created around gold: Gold mining equipment manufacture, gold research scientists, gold certificate issuer, gold sales manager, gold derivatives, gold CDS/CDO, and many new invented gold related concepts... 

forgot that one Curbside.  yes, pay off debt!  i personally am debt free and loving it.  and i do have a lot of assets.  i use cash to play the markets in stocks, PM's, and btc.  Its way too dangerous IMO to play the debt game assuming Ben will inflate it away.  why would you depend on that criminal?  also, why would the bankers allow him to do that to their assets=loans?

Shed debt and save.

In a true deflationary environment, credit contracts and prices decline.  Cash is king in deflationary times.  Or maybe purchasing power is king would be a better way to put it if you've lost confidence in the USD or whatever fiat currency your country uses.  Purchasing power of course is the number of goods or services you can buy with a unit of currency.  What unit of currency you should be saving, will be up for debate and depends on how bad you think things will get.  If you believe the US will endure then cash will serve you well in deflation.  If you believe there will be a global collapse, well then things get a little harder to predict.  Currency in this situation would have to be something more intrinsically useful but still portable.  Bullets perhaps?  I don't know.  I'm not of the opinion that this is the end of the world as we know it so I haven't really thought it through to that extreme. 

Edit:  Looks like Cypher beat me to the punch while I was typing.

yes, if my scenario above plays out.  i'm not your financial advisor and you have to realize mine is a contrarian view.  but at least its logical IMO.

http://www.youtube.com/watch?feature=player_embedded&v=xSLIDJ3HZHA

the safest way to prepare for deflation is to go to cash and then wait.   if we have the Great Depression 2, assets will be selling for pennies on the dollar at the bottom.  this could be the opportunity of a lifetime.  the other way, more risky, is to go short the stock market.  a tremendous amount of fast money can be made to the downside.  WAY more risky.  but if you don't use leverage you should be fine.

So what's the best way to prepare for deflation?  I have small amounts of silver as a hedge against the dollar because QE1 and QE2 made me think the dollar was going to decline significantly in the near future.  If the Fed contracts the money supply though that will drive up the dollar and probably have the inverse effect on PMs? 

look what inflationary Fed policies have done to the Middle East.  soaring costs of food and financial inequities are what drove the revolutions in these countries IMO.  i followed the Egyptian revolt realtime via Twitter and AlJazeera and there is no question in my mind these were the tenets behind the younger generations revolt. 

central banks cannot continue on the same path of monetizing debt.  the markets are screaming for a correction via deflation.