85 replies to this topic

[tunt01]

I was just thinking for housing that if you were paying a mortgage, and suddenly there was hyperinflation, then you would be paying back the bank with inflated dollars at a fixed interest rate. Seems to be a good position to be in, as long as you have the dollars.

you would be, and in that sense it's great. but what you've bought is also declining in value at the same rate -- on a real basis. the value of your house vs. a house in brazil is changing alongside the currency drop. you personally aren't going to see a higher increase in income when inflation comes. if that were the case (say you worked in the Oil & Gas business and your bonus was tied to the price of oil) then it would be a super idea.

this is why i used the rental analogy-- because the purchasing power of the average american is declining at a similar rate. so you aren't really getting ahead all that much. it does make sense to take on debt though, but more ideally to buy assets that aren't tied to the same inflation phenomenon.

hence, leverage up your stock portfolio into gold and non-US dollar assets.

Edited by prophets, 28 April 2009 - 07:02 PM.

[lunarsolarpower]

I went ahead and put half of what I took out recently into UCO, a double long oil ETF and will double down if oil drops below $40 again. Many here may like UCO since I have heard a lot of pro oil talk on the forum.

BTW, this is an IRA account. I don't think double long ETFs work the same in a taxed account, so you may want to check on the taxes you would be responsible for before buying in a taxed account.

I'd be careful investing in those oil ETFs. Do a quick comparison chart between USO or OIL vs. DBO or USL. Some of them seem to be consistent underperformers. I am not able to find any period of time where UCO has made money although it seems to outperform on the downside (which is the more recent trend).

[index.dat]

The big thing in Japan right now is the foreign exchange market. Big busted models, actors, etc, they all show up on TV advertising the latest "how to get rich" books and DVD and whatnot. I can`t help but cringe when I hear them talk about "predicting market conditions" and such...I get all my money sent to me from Europe so I know all too well how unpredictable the FX market really is. Sure there are times when you can more or less tell what`s going to happen, but that`s rare. Take the following example: the euro started plunging against the yen and was at 127 when I read the ECB would be making an official statement at a press conference. I thought "Here we go again! This thing is going down to 124 or maybe even 123..." The reasoning behind that was the fact they`d obviously be forced to announce bad results. Anyway, my predictions did come true and it did go down to 124. Later, though, Chrysler kicked the bucket and now we`re at 132.

Things were really shaky in late January when the euro went down to 112 yen from an all time high of 170 just 4 months prior. It had gone up from 121 in November 21st to almost 129 around New Year`s eve and then, crap, it skydived to 117 on Jan 15....

My dad invests in the stock market. He actually made a lot of money in the past few months, but it`s not an easy job. It must be a terrible job, actually.

[eternaltraveler]

i appreciate the discussion and do not want to end on a note of animosity

there is no animosity. Ideas are always open to be freely assailed. This is one of the prime methods through which we learn. A bruised ego as a result is like a peacock having it's feathers ruffled; if it wasn't for female peacocks happening to like unruffled feathers it would be an entirely useless and harmful evolutionary accessory.

[eternaltraveler]

but what you've bought is also declining in value at the same rate -- on a real basis

What you are describing is not inflation, but devaluation of most real assets in the country. What reason is there that would result in this happening at exactly the same rate as inflation as the two are somewhat independent (though not entirely)?

[Athanasios]

I went ahead and put half of what I took out recently into UCO, a double long oil ETF and will double down if oil drops below $40 again. Many here may like UCO since I have heard a lot of pro oil talk on the forum.

BTW, this is an IRA account. I don't think double long ETFs work the same in a taxed account, so you may want to check on the taxes you would be responsible for before buying in a taxed account.

I'd be careful investing in those oil ETFs. Do a quick comparison chart between USO or OIL vs. DBO or USL. Some of them seem to be consistent underperformers. I am not able to find any period of time where UCO has made money although it seems to outperform on the downside (which is the more recent trend).

I think it is USO that has 1 year futures so do not get affected by turnover like the others (one out there had this property), which caused a lot of the decoupling. I went ahead and sold my UCO for a double and am looking to possibly buy back in heavier this fall if we see the dip I am hoping for. It also has the problem of monthly turnover, but I plan on making the bets where it is worth it even when contango is taken into account. Recently, I went heavier into Chinese medical stocks and diagnostics with the cash from the sale.

[Athanasios]

Im going into September with 50% in cash. With the large run-up and no improvement in credit availability to speak of, I think we should see a correction. Capital preservation is higher on my list than holding for another possible 10%.

[tunt01]

generally speaking, i think the market is definitely fully valued, but not necessarily materially overvalued.

may have a slight correction, but my best guess is that we just muddle along...

[Athanasios]

I moved to all cash today. I can afford to trade since there are no tax consequences in my IRA.

I will buy back if nothing scary happens within a week or two.

Just being a Nervous-Nellie:
http://www.screencas...71-ed30a172af40

Edited by cnorwood, 14 September 2009 - 11:57 PM.

[forever freedom]

I moved to all cash today. I can afford to trade since there are no tax consequences in my IRA.

I will buy back if nothing scary happens within a week or two.

Just being a Nervous-Nellie:
http://www.screencas...71-ed30a172af40

Ah if the technicals worked as well as they seem when we look at past data..

[tunt01]

i'd be shocked if the S&P500 dropped as low as that graph implies. I do back of the envelope calculation on what is fair value, and I got 700-900 depending on different outlooks of growth, with a possibility up to 1000. But down to 400-500 is insanely cheap. It could only happen if we had a hard double dip recession or outrageous inflation, neither of which seem likely to me -- especially in the short run.

Edited by prophets, 15 September 2009 - 04:27 AM.

[Athanasios]

Yeah, I had to post a dramatic one, didnt I? Some are looking at a bear wedge that will take us back to March lows:
http://tinyurl.com/bearchart09

Others are looking for a 20% correction.

I have no idea on the amount but I am going to bet on a correction until proven wrong. The pro bulls are using options as hedges because they dont trust the run enough theselves. Sentiment is so crazy bullish that yesterday I heard a Dow to 14,000 prediction. Just one of those things, upside is smaller than downside.

Usually, I don't pay attention to macro environment but this is a market that paints them all the same and asks questions later.

[tunt01]

the market exists to make as many people wrong as possible. it will not give people a chance to so easily buy in at a level comparable to the March lows.

most likely we meander around.

[Athanasios]

most likely we meander around.

I sure do hope so.

[forever freedom]

Is anyone keeping a close eye on cloud computing related businesses? Mainly small caps, to find some bargains. Me as a believer in the Kurzweil gospel, i think that cloud computing is going to get only bigger and bigger, with many new behemoth companies still to be made. I've been keeping a close eye at Akamai and VMWare lately, but i'm sure there are many more i'm missing.

[Athanasios]

Went ahead and went long on some march SPY puts and a dec 11 leap. I am betting this market will correct hard soon. I am getting stock tips from my cab driver at this point.

[forever freedom]

Went ahead and went long on some march SPY puts and a dec 11 leap. I am betting this market will correct hard soon. I am getting stock tips from my cab driver at this point.

lol yes. i agree that the market can't go that much higher at this point. it could just stay sideways, though.

Edited by forever freedom, 23 September 2009 - 07:31 PM.

[Mind]

I am perplexed as well about the 10,000 Dow level. Based on the fundamentals of the U.S. economy (=sucks donkeys) you would think a correction of some sort would have hit by now. I moved well more than 50% into cash recently. My theory as to the disconnect between stock valuations and U.S. economy is that the DOW components are NOT U.S. companies anymore. They are truly international. International markets are recovering a little better than the U.S. and are thus buoying profits. Couple that with productivity growth at 6% (less people producing more GDP) and the company bottom lines are pretty solid. However, I don't know how long this can continue with U.S. unemployment expected to rise a bit more in coming months (the real rate getting close to 20%). After all, the U.S. market is a big market.

[Athanasios]

I am now 20% short the S&P with a good amount of 2011 puts. I am looking to buy gold at $600oz in 2011, too. Obviously, I am in the 'deflationist' camp. Good luck all.

[niner]

I am now 20% short the S&P with a good amount of 2011 puts. I am looking to buy gold at $600oz in 2011, too. Obviously, I am in the 'deflationist' camp. Good luck all.

Interesting. What's the story behind commodity deflation? Is it a consequence of a global double-dip phenomenon? Or is it a general contrarian sense that you have? Thanks for the insight you've been providing here.

[Athanasios]

Interesting. What's the story behind commodity deflation? Is it a consequence of a global double-dip phenomenon? Or is it a general contrarian sense that you have? Thanks for the insight you've been providing here.

I think we will have debt deflation. I also think that a lot of the jobs lost will take a very long time to come back, if ever.

http://globaleconomi...-beginning.html

BTW, I am not a basher of Keyensian theory, yet. Maybe I am still too ignorant and/or inexperienced to dismiss it. I think it may work if there is smart spending that creates wealth by positive ROI. I do recognize that giving this government that task is unlikely to produce good results.

On deflation, I will revisit my hypothesis mid-year.

[DairyProducts]

I also think that a lot of the jobs lost will take a very long time to come back, if ever.

Yup, thankfully people in prison aren't counted in U1, let alone U6 measure of employment. The most discouraging sign is that long-term unemployment is the highest its been since it has started being measured in 1948, http://www.bls.gov/o...ed_20100114.htm. The longer people are unemployed the more likely they are to become discouraged workers

BTW, I am not a basher of Keyensian theory, yet.

There are many schools of Keyensian theory, including New Keyensian, post-keyensian, neo-keyensian. So you can (eventually) bash on the old man's principles, but many people have updated his theories since the Great Depression.

[stock-guy]

Hope the things get to normal soon

[Athanasios]

I have been 50% short since 1126 on the last S&P run up. If we get a bounce here I will go 100% short. Be careful out there people.

[bobdrake12]

I have been 50% short since 1126 on the last S&P run up. If we get a bounce here I will go 100% short. Be careful out there people.

Soon after the "Bank Bailout" was implemented, I began selling all of my stocks except for commodities and what is my 401K (about 20% of all my portfolios).

I've been buying gold and silver mining stocks since then and have doubled the value of my portfolios (exerpt for my 401K) over the last 12 months. This is because gold and silver mining shares fluctuate more than the value of the commodities themselves, and I buy on the dips.

I still plan to buy gold and silver mining shares and am currently just holding the other mining and oil stocks.

Even so, shorting U.S. stocks seem to be a good idea.

http://www.csmonitor...rd-a-double-dip

Slouching toward a double dip (excerpts)

By Robert Reich, Guest blogger / July 5, 2010

The economy is still in the gravitational pull of the Great Recession and all the booster rockets for getting us beyond it are failing. The odds of a double dip are increasing.

In June the nation added fewer jobs than necessary merely to keep up with population growth (private hiring rose by 83,000 after adding only 33,000 jobs in May). The typical workweek declined. Average earnings dropped. Home sales are down. Retail sales are down. Factory orders in May suffered their biggest tumble since March of last year.

So what are we doing about it? Less than nothing. The states are running an anti-stimulus program (raising taxes, cutting services, laying off teachers, firefighters, police and other employees) that’s now bigger than the federal stimulus program. That federal stimulus is 75 percent gone anyway. And the House and Senate refuse to pass another one. (The Senate left Washington for the July 4th weekend without even extending unemployment benefits for millions of jobless Americans now running out.)

The second booster rocket – the Fed’s rock-bottom short-term interest rates – are having almost no effect. That’s because jobs and wages are so lousy that consumers don’t have enough money to buy much of anything, making small businesses bad credit risks and causing big ones to sit on the huge pile of cash they’ve accumulated.

Wall Street and the other biggest global banks, meanwhile, are making piles of money betting against government debt all over the world. These were the same banks and financiers, remember, that were bailed out by government not long ago. But now they’re demanding fiscal austerity, and politicians are once again doing their bidding – cutting deficits in every rich economy that should now be doing the reverse.

Edited by bobdrake12, 05 July 2010 - 07:27 PM.

[MathewBracken]

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Thanks