Eye of the Storm

[boz]

Good thread. This is why I really enjoy reading somersoft.

Now here is a voice that has proven right to date
http://www.marketoracle.co.uk/Article7218.html
and comments on this current phase in a decades view.

from Nov 10 2008



So in the face of lots of doom and gloom readings, this commentator (correct in a few calls in the article btw) says onward and upward.

There is a lot of forecasters like that around and this one got the big picture wrong and if you would invest in the dow or S&P500 at the time he write the report you would have lost heaps of money. This is because at that time in buying US shares you would have bought the US$ at around 65 cents and the S&P500 at around 950. So, for 1000AU$:
1000 X 0.65=650 US$
650/950= 0.68 (that is number of quotes in the S&P500
now the S&P500 is at 1090 so:
1090 X 0.68= 741 (so you would have made money in US$)
but then when you get it back into AU$ at 0.90:
741/0.90= 823 AU$ so you are short around 177$ that is a loss of 17.7%

 

[keithj]

Where are you getting this 10-20 year figure from? I don't believe I've mentioned any such timeframe.

Back here you said....

...how exactly do you think the US will make it through the next 10 years?

... and I generously gave you an extra 10 years for the D&G to happen.

2007-2008 was wave 1, 2009 is the eye of the storm, 2010-2012+ is wave 2

Expect lower stock markets next year, expect the start of a property correction/slump, expect the talk of recovery to reduce, expect the positive economic indicators to turn down again, expect further US banking issues...

...and the end is nigh . It'd be reasonable to expect a stabilisation, or a small downturn of economic indicators & stock markets after the exuberance that we've avoided a v. bad outcome (so far).

So to summarise ....

• you feel that stock markets will fall below their March lows sometime in 2010-12
• you agree that Option ARM resets are unlikely to cause the next leg down but may be a contributory factor
• you think that a known known will cause it
• you can't give a probability of this 'bad stuff' happening
• you feel the US can't survive the next 10 yrs
• you don't feel that anything has changed or been learnt since 2008
• you think that US policy is wrong & they should allow banks to fail, with the risk of consequences like the 1930s
• you focus largely on insider selling and US debt, and ignore the bigger picture
• you only mention the US, rarely Australia and never China

You may be right & we are in the eye of the storm, but if you are then IMO you'll be right for the wrong reasons.

Insider selling started to outpace buying around June/July this year and has been increasing.

The graph on the same URL shows that the stock market has been rising while they've been selling... so they have been wrong 5 months now and you continue to feel they are an important leading indicator ?

....and there's something not quite right about that article...

Silverman said the "orgy of selling" is noteworthy because corporate insiders were aggressive buyers of the market's spring dip. The S&P 500 dropped as low as 666 in early March before the recent rally took it back above 1,000.

...but the graph shows there were twice as many sells as buys during that spring dip . So either the graph (from known permabear Biderman) is wrong (or wrongly captioned), or else the insiders were also selling (& not buying) at the market bottom, and were therefore wrong to do so.

 

[devo76]

Hobo-jo

You give the usual stats and facts and put them fowardin the usual future predictions format. This all smells of the ( forum that must not be mentioned) and there massive push on this site some time back. When it didnt happen as they predicted they all dissapeared. Well most did. I feel the same applies here. As you said dig this post up again in a few years if you feel your predictions were right. Or dissapear as i suspect may happen when the predictions are found to be wrong.

 

[depreciator]

I'd say it's okay to mention that forum now, devo, because it has closed.

 

[GreatPig]

this one got the big picture wrong and if you would invest in the dow or S&P500 at the time he write the report you would have lost heaps of money

And why would you do that based on his report when he said the US had been in a bear market since 2000 and that it may not bottom until March 2009?

Surely being in a bear market that hasn't bottomed yet is an indication not to go long the market at that point?

GP

 

[devo76]

I'd say it's okay to mention that forum now, devo, because it has closed.

Ha ha. Yeah i know but i was going to let it slip by.

 

[Witzl]

I'd say it's okay to mention that forum now, devo, because it has closed.

lol.

10char.

 

[hobo-jo]

Back here you said....
... and I generously gave you an extra 10 years for the D&G to happen.


...and the end is nigh . It'd be reasonable to expect a stabilisation, or a small downturn of economic indicators & stock markets after the exuberance that we've avoided a v. bad outcome (so far).

So to summarise ....

• you feel that stock markets will fall below their March lows sometime in 2010-12
  There is the potential for it, I believe we will test March lows, potentially drop below them IF we don't see signficant further stimulus packages (e.g. would probably need $1t+ in the US)
• you agree that Option ARM resets are unlikely to cause the next leg down but may be a contributory factor
  That's right, would say there are other more likely triggers.
• you think that a known known will cause it
  Correct. Just like the last 18 months issues were caused by a known known. Plenty of economists/commentators were warning of the collapse, search "Peter Schiff 2006 mortgage bankers speech" on google for the youtube clip (at work, can't link)
• you can't give a probability of this 'bad stuff' happening
  Is there worse to come, 100% yes. Timeframe,exactly how it all plays out are dependent on a lot of things including what further government intervention we see, but as I've stated I expect a majority to playout in the next 2 years
• you feel the US can't survive the next 10 yrs
  They will survive, they will need to deal with their debt problem within this timeframe, I suspect they will need to replace the USD with a new currency or back the USD with something
• you don't feel that anything has changed or been learnt since 2008
  There have been changes, just not ones that will support a long term sustainable system
• you think that US policy is wrong & they should allow banks to fail, with the risk of consequences like the 1930s
  Need to be able to go through the cycles, allow the businesses to fail that don't do things the right way. Where to the bailouts stop? By pumping 'stimulus' into the problems it just draws them out longer, it doesn't solve the problems. Yes they need to be allowed to fail. Someone will come in pick up the pieces for cheap and rebuild a sustainable model.
• you focus largely on insider selling and US debt, and ignore the bigger picture
  Expand...I have views on other areas. What "bigger picture" are you talking about. Many of your posts are very vague without specifics...
• you only mention the US, rarely Australia and never China
  Australia is unimportant on the global scale. You're right I haven't touched on China because I am not as confident about what will happen in that area. Have read articles showing continued growth will continue, others think their property and markets are in a bubble also and will suffer short term, haven't looked far enough into it.

You may be right & we are in the eye of the storm, but if you are then IMO you'll be right for the wrong reasons.

What do you think are the right reasons?

You've also given no indication after twice being prompted how you believe the US will work their way out of the mountain of debt and obligations they face...c'mon give us a 10 year breakdown on how you see it playing out. How will they repay their debt? Will they replace/devalue their currency? Print more? Increase taxes? Go to war?

You give the usual stats and facts and put them fowardin the usual future predictions format. This all smells of the ( forum that must not be mentioned) and there massive push on this site some time back. When it didnt happen as they predicted they all dissapeared. Well most did. I feel the same applies here. As you said dig this post up again in a few years if you feel your predictions were right. Or dissapear as i suspect may happen when the predictions are found to be wrong.

I'm not a fly by nighter/troll. I notice I've been on this forum for 12 months longer than you have even. I have been using this nickname for 9 years already (since dalnet days on IRC), including on Overclockers Australia, Hot Copper, Somersoft, **** (when it was up), Simple & Sustainable, Aussie Stock Forums, Top Stocks, Sharescene, Credit Crunch UK, Whirlpool and a whole host of other smaller forums. I'm not going anywhere

I don't have any problems being wrong and facing the facts if/when the time comes...hope everyone here is the same

 

[keithj]

you think that a known known will cause it
Correct. Just like the last 18 months issues were caused by a known known. Plenty of economists/commentators were warning of the collapse, search "Peter Schiff 2006 mortgage bankers speech" on google for the youtube clip (at work, can't link)

Ask your friends if they had heard of Mr Schiff back in 2006 (had you ?). Was it a known known then ? Sure, a couple of people thought it was a possibility, but only in 2008 did it actually become known to people like you & me.

you can't give a probability of this 'bad stuff' happening
Is there worse to come, 100% yes. Timeframe,exactly how it all plays out are dependent on a lot of things including what further government intervention we see, but as I've stated I expect a majority to playout in the next 2 years

I didn't realise you were serious when you said 100% guaranteed .

you feel the US can't survive the next 10 yrs
They will survive, they will need to deal with their debt problem within this timeframe, I suspect they will need to replace the USD with a new currency or back the USD with something

When they've had this problem in the past, they've always printed more $$$. Govts know how to deal with inflation, they're no so good with deflation (a la Japan today, or 30s depression).

you don't feel that anything has changed or been learnt since 2008
There have been changes, just not ones that will support a long term sustainable system

This is another area where we differ. You appear to be expecting a silver bullet to fix everything. I expect govts to flounder from one quick fix to another band aid solution - our world is changing constantly, govts are elected for 3-4 yr terms, thats how long the fixes need to last for (apologies for the sweeping generalisation ).

Govts & central banks are there to help moderate the booms & busts, in the US they didn't moderate the boom sufficiently, and are now having to stimulate (to moderate the bust).... Australia's high IRs of 18 months ago, moderated the boom sufficiently, so less stimulus is needed today.

you think that US policy is wrong & they should allow banks to fail, with the risk of consequences like the 1930s
Need to be able to go through the cycles, allow the businesses to fail that don't do things the right way. Where to the bailouts stop? By pumping 'stimulus' into the problems it just draws them out longer, it doesn't solve the problems. Yes they need to be allowed to fail. Someone will come in pick up the pieces for cheap and rebuild a sustainable model.

See above, there is no silver bullet. If they were allowed to fail, then there's a likelihood that we would have had a 10 yr depression & deflation..... and who would buy cheap, if they knew they could buy cheaper tomorrow. The US has chosen a fix that it will keep its head above water till 'normal' economics takes over, however long that may be.

Booms & busts are normal. This is a bust, they'll have to do the hard yards to dig their way out of it.... just like they did the last dozen times.

you focus largely on insider selling and US debt, and ignore the bigger picture
Expand...I have views on other areas. What "bigger picture" are you talking about. Many of your posts are very vague without specifics...

Reread post #101 - where I mentioned some big picture specifics that are todays reality....

How do you support your view of D&G in the face of mounting evidence to the contrary - rising IRs, rising business & consumer confidence, rising house prices, rising stocks markets, rising commod prices, rising oil prices, rising job ads, stabilising unemployment, withdrawal of govt stimulus ?

you only mention the US, rarely Australia and never China
Australia is unimportant on the global scale. You're right I haven't touched on China because I am not as confident about what will happen in that area. Have read articles showing continued growth will continue, others think their property and markets are in a bubble also and will suffer short term, haven't looked far enough into it.

It's important.... probably as important to Australia as the US it.

What do you think are the right reasons?

You believe a known known will cause the 2nd leg down. I'm saying the known knowns are priced in, and that if things get worse than last March then it will be something from left field - something unknown. So I don't know the reasons why it will collapse, I don't really think it will collapse.

You've also given no indication after twice being prompted how you believe the US will work their way out of the mountain of debt and obligations they face...c'mon give us a 10 year breakdown on how you see it playing out. How will they repay their debt? Will they replace/devalue their currency? Print more? Increase taxes? Go to war?

What they're doing at the moment is printing money, causing inflation, devaluing their currency & consequently gold is rising. And they'll repay their debt with deflated $, just like they have always done.

 

[Aaron Sice]

funny you talk about the USD "being replaced" hobo-jo.

i've got my eye out for the mother of all devaluations and the introduction of the amero.

i think only this can save the US economy now - it will move from a stagnant / deflationary environment and then a hyper-inflationary environment when the trickle of money comes full circle in the economy.

 

[JulieW]

Ahh finally. Discussion here of Conspiracies, Bildebergers, Illuminati and the plans for one world government financed by a carbon tax with a euro, an amero, a peso and I suppose an asio!

http://www.marketoracle.co.uk/Article15412.html

"Major and semi-major banks are being told to obtain secure storage for new currency-dollars. They expect official devaluation by the end of the year."

This, from no less than an 'intel source highly placed in banking circles'.

"as we have stated previously we expect three old dollars to be traded for one new dollar. The alternative is gold and silver coins and shares. For those with substantial sums that do not want to be in gold and silver related assets completely you can use Canadian and Swiss Treasuries. If you need brokers for these investments we can supply them."

Nice to see that someone can help us all!
(actually better not use Canada, they're marked for the amero too).

When I was young and stupid I was convinced that Nostradamus was right and the seventies was the heralding period for the final days. Even moved out to a commune to weather the storm and ride into the thousand years of peace and lollipops.

Now I find the same sort of prophecies, world events, conspiracies and government complicity with the financial powers happenng almost 40 years later and my massage person has bought a farm to build a house to store the grain to feed the family. There's a certain comfort in the cycles of history.

I expect to be around for my third End of Days after this one settles too. And no doubt get just as much enjoyment considering the next bunch of conspiracies too. lol

I think this
http://www.silverbearcafe.com/private/10.08/tshtf1.html
is much more the scenario for America

As for Australia, all I can say is that the economists are right. All of them.

 

[hobo-jo]

Ask your friends if they had heard of Mr Schiff back in 2006 (had you ?). Was it a known known then ? Sure, a couple of people thought it was a possibility, but only in 2008 did it actually become known to people like you & me.

Translation = it's only a known known if the mainstream prints it for the masses?

Watch the speech, he doesn't consider it a "possibility" and neither did many other economists that saw the problems coming. It was a known known to them.

I was barely out of school in 2006, I will admit that I had not heard of Schiff in 2006, but I did not take up a serious interest in the markets/finance until early 2008 and have been reading furiously ever since.

When they've had this problem in the past, they've always printed more $$$. Govts know how to deal with inflation, they're no so good with deflation (a la Japan today, or 30s depression).

So Germany, Zimbabwe, Argentina, they all dealt with their hyperinflation appropriately?

There has never been a credit bubble of this magnitude. You can't compare today to times past.

Some would argue the production from World War 2 pulled the US out of the Great Depression, do you expect war to do the same today? If not what will it be...you are oversimplifying past events.

It's important.... probably as important to Australia as the US it.

You're probably right. The US is very important to China as well...

funny you talk about the USD "being replaced" hobo-jo.
i've got my eye out for the mother of all devaluations and the introduction of the amero.
i think only this can save the US economy now - it will move from a stagnant / deflationary environment and then a hyper-inflationary environment when the trickle of money comes full circle in the economy.

Yes I expect any currency events will be quick and without warning. I wouldn't be surprised to see the Amero introduced in the next few years (but would think more likely just a replacement of the USD for the US, not sure Americans would be ready to merge in that way with Mexico or the Canadians with Americans ). The middle east is working towards a joint currency and maybe something will be put together in South East Asia also...

Was interesting to see North Korea devalue their currency recently:
http://www.independent.co.uk/news/w...as-devaluation-wipes-out-savings-1833156.html

Can't even begin to imagine what would happen if the US did something similar to replace their currency. Perhaps introduce the Amero, value the USD at 10 to 1 Amero and then pay off all their debts with the new currency? Doubt it would be that easy.

Could sovereign debt be the new subprime?

Could sovereign debt be the next trigger/subprime? Certainly wouldn't rule it out with Greece and Dubai looking to go the way of Iceland...

 

[Sunfish]

Quote:
Originally Posted by keithj
Ask your friends if they had heard of Mr Schiff back in 2006 (had you ?). Was it a known known then ? Sure, a couple of people thought it was a possibility, but only in 2008 did it actually become known to people like you & me.
Translation = it's only a known known if the mainstream prints it for the masses?

Watch the speech, he doesn't consider it a "possibility" and neither did many other economists that saw the problems coming. It was a known known to them.

it's only a known known if the mainstream prints it for the masses? Well put Hobo.

Not only did I know about Peter et al I was posting warnings on this site. Keith will know my old nicks.

 

[willair]

it's only a known known if the mainstream prints it for the masses? Well put Hobo.

Not only did I know about Peter et al I was posting warnings on this site. Keith will know my old nicks.

Mr. Schiff: I think it's a safe haven. A lot of people are seeking safety right now in the US dollar, but that makes no sense to me. That's like jumping out of the frying pan into the fire. I think the dollar is a fundamentally flawed currency that is doomed to collapse, and temporarily it's benefiting from the fact that it's seen as the alternative to everything else. People are worried about all asset classes, nobody wants to own anything and somehow by default, the dollar is the opposite of owning other things. People are keeping score in terms of dollars and I'd certainly think that some of the most impaired financial institutions are in the United States. I think some of the losses are very heavy here and that has made a lot of American institutions — investment banks, hedge funds, mutual funds —liquidate assets all around the world, many assets in other countries; those institutions require the liquidation of those currencies to repatriate the dollars necessary to meet their margin calls, to fund their redemptions, and so that might also be temporarily propping ..

That's from about one year ago give or take a week,well worth the time
to read..willair..

http://seekingalpha.com/article/111857-peter-schiff-outlook-for-the-gold-market

 

[economist]

Interesting thread.

I have a couple of questions for both sides.

KiethJ, if HJ is correct and the US defaults on debt in the coming years what would be the impact on Australia Property markets? and why.

Hobo jo, we have spoken before I believe. I would like to follow your arguement back to the source. Money. Funny thing isn't it, money. Most people want as much of it as they can lay their hands on, but they don't take the time to understand what it is and how it works.

My first question to you is ....name one fiat currency that has collasped whilst the guarantor was the largest superpower. The answer is really easy as there has only really been one example of this I know but just humor me as I have a follow up question.

Could they have avoided the collaspe and how?

I look forward to this discussion.

 

[plusnq]

it's only a known known if the mainstream prints it for the masses? Well put Hobo.

Not only did I know about Peter et al I was posting warnings on this site. Keith will know my old nicks.

Hi All

Been a while since posting. Bit busy with No4 and wife planning No5.

For SF.Too true. I called the technical pattern plus fundamentals but as you know SF, prophets are not always well received in the holy land The thing that surprised me was the extent and depth the cdo problem was.

http://www.somersoft.com/forums/showthread.php?t=33570&highlight=wedge

The USD looks set for a bounce willair and will that cause issues for other asset classes in the short term?

Cheers

Shane

 

[Nommy]

Interesting thread.

I have a couple of questions for both sides.

KiethJ, if HJ is correct and the US defaults on debt in the coming years what would be the impact on Australia Property markets? and why.

Hobo jo, we have spoken before I believe. I would like to follow your arguement back to the source. Money. Funny thing isn't it, money. Most people want as much of it as they can lay their hands on, but they don't take the time to understand what it is and how it works.

My first question to you is ....name one fiat currency that has collasped whilst the guarantor was the largest superpower. The answer is really easy as there has only really been one example of this I know but just humor me as I have a follow up question.

Could they have avoided the collaspe and how?

I look forward to this discussion.

Roman Denarius, poor cashflow management.

http://www.youtube.com/watch?v=ctzfkJsHqVA&feature=related

Could have been avoided by having better cash flow management

 

[keithj]

Translation = it's only a known known if the mainstream prints it for the masses?

It's the probability that is important. If everyone knows about a problem, then it's unlikely to be a problem. If a tiny minority know about a problem, then there's a much larger chance of everyone else being unprepared.

We're all aware of the issues you listed, we can asses how likely they are & take steps to avert the problem if we think it's worthwhile. You think there's 100% chance of a known known occurring & have taken steps to prepare for that eventuality.

I think there's a low probability of a known known happening in the short term. However I am aware of the issues, and if any of them look like getting significantly more probable then I'll adjust accordingly.

So Germany, Zimbabwe, Argentina, they all dealt with their hyperinflation appropriately?

Again, it's a probabilities thing. Deflation is v. difficult to escape from. 95% of inflation problems have been fixed relatively easily - Germany, Zimbabwe, Argentina were in the 5%.

There has never been a credit bubble of this magnitude. You can't compare today to times past.

Some would argue the production from World War 2 pulled the US out of the Great Depression, do you expect war to do the same today? If not what will it be...

I'll repeat..... I don't know. They're all currently low probability events IMO. If they become more likely, then I'll adapt.

 

[keithj]

... if HJ is correct and the US defaults on debt in the coming years what would be the impact on Australia Property markets? and why.

Hard to know with any degree of certainty.....

• Historically the US$ has been where people put their $$ for safety, then gold.
• ATM gold is rising mostly because of the US$ printing, not because of any imminent D&G.
• The 'Amero' is currently not seriously on anyones radar, except for a few 'whacko consipacy theories' (apologies to some here ).
• Copenhagen Treaty forcing a world govt & currency is another.
• IMFs Special Drawing Rights may become the reserve currency
• Would commodity currencies become place to fly for safety ?
• Equities would be hammered, as would bonds.
• Owning real estate & gold (& having debt?) would be one of the safest options.
• 6 months ago there was an even chance of inflation or deflation - impossible to plan for both.
• If things got really bad & world trade collapsed, a veggie garden,a bicycle & an AK47 would be more useful than gold.

I don't think that really answered the question, did it ?

I think there's way to many possibilities to plan for..... adapting to reality is the only way to go, planning for all the different low probability events is impossible.

Money. Funny thing isn't it, money. Most people want as much of it as they can lay their hands on, but they don't take the time to understand what it is and how it works.

Money is based on trust, if enough people (Chinese?) don't trust it, then a veggie garden is the way to go.

 

[willair]

http://www.somersoft.com/forums/showthread.php?t=33570&highlight=wedge

The USD looks set for a bounce willair and will that cause issues for other asset classes in the short term?

Cheers

Shane

Shane.it's always good to look back at those old posts and see the way people were thinking back then,i went with the risk factor when everyone was thinking the world was going to end and bought several ASX top 20 bluechips,during that downward slide ,when everyone thought this is it and semi-auto's and rice and a bunker out bush,would be the way to go and sold everything off three weeks ago,paided the ATO their slice and now waiting for the re-entry phase buy back,i just plead ignorance..

The media with their attention grabbing punch lines were wrong 2 years ago,and they will be wrong again,i'm just waiting for the next big slide when at 3 in the morning the dow drops 500 points in one day,the ASX does the same over several weeks buy back in ride it up again,sell and do it all over again,and that is without any distortions of reality..

Not sure on the USD,people underestimate the power that it still has and always will,i only follow the price of Oil everything trends of that..
willair..