Financial topics

[jcsok]

In response to OLD1053's calculation of calories of grain, the vast majority of coarse grain is "feed corn". There is a significant difference in feed corn and "sweet corn", which is the type of corn people eat. A hungry person would certainly eat feed corn, but its not nearly as palatable as sweet corn. I don't know the acres or production of sweet corn, but its a small fraction of the total corn produced on which you base your calculations.

[freddyv]

Just out of curiosity, anyone besides me expecting a crash of 30 to 50% before the first of November? This last few days look awfully like the start of the final runup to a major drop.

Could be wrong, but this sure feels like the crap is about to hit the fan.

No, just a typical 15% decline followed by a 10% bounce followed by a 20% decline followed by a 15% bounce followed by a 12% decline....

Almost every smart trader is hedged going into the fall this time. There has been a huge move to safety and while there are plenty of sheep left to fleece many are not as exposed as they were in 2008.

The secular bear market has shown us exactly what it's going to do, IMO, and then it goes ahead and does it and everyone is surprised. It seems to me that everyone is slowly but surely dividing into three camps: the doomsayers who can only envision huge crashes; the lemmings who keep running back to the market to try and make back what they lost previously; and then the camp I want to be in, the smart money who keep their heads about them and trade based on the data at hand.

Looking at the data from Consumer Metrics Institute a steep decline is due, and this is backed up by all the less-leading indicators and will finally will show up in GDP. But even with all that there is no reason to think that the stock market will perform even worse than it did in 2008-2009. Likely, such steep declines, percentage wise, will come towards the end of the bear market, which Will likely be several years in the future, given the problems we face.

[OLD1953]

JCSOK, I'm quite aware of that, however, any field that will raise feed corn will raise sweet corn. And there isn't much difference in corn ground for meal. There are preferred types, but it isn't nearly as much difference as in sweet corn, which is the kind of corn you get on the cob or in a can.

The intent was just to show that the USA isn't in danger of not feeding itself, sans some collapse in the agricultural infrastructure.

[freddyv]

John,

You may be interested in reading the following article title, "Seven More Years of Hard Times?" at

http://www.project-syndicate.org/commen ... 73/English

This is by the renowned Robert Schiller of Yale, who apparently is not familiar with "The Fourth Turning" or Generational Dynamics.

Schiller has always struck me as a smart man who isn't overly out-of-touch but of course, he is a Yale professor.

Fred
http://www.acclaiminvesting.com

[John]

John,

You may be interested in reading the following article title, "Seven More Years of Hard Times?" at

http://www.project-syndicate.org/commen ... 73/English

This is by the renowned Robert Schiller of Yale, who apparently is not familiar with "The Fourth Turning" or Generational Dynamics.

Schiller has always struck me as a smart man who isn't overly out-of-touch but of course, he is a Yale professor.

I used to think that Shiller understood what's going on, but I've heard
him on TV saying truly ridiculous things. The following paragraph
from his article is garbage:

Moreover, there are reasons to suggest that this time really might be
different. I hate to say so, not wanting to commit the sin defined by
their “syndrome,” but this time might be different because all of the
modern examples of past crises came during a time when many economists
worldwide were extolling the virtues of the “rational expectations”
model of the economy. This model suggested that a market economy
should be left alone as much as possible, so that is what governments
tended to do.

According to “rational expectations,” bubbles simply did not exist –
which meant that actual bubbles were allowed to grow. But that mindset
is waning, and government and business leaders now routinely warn of
bubbles and adopt policies to counter them. So, this time really is at
least a little different.

John

[freddyv]

An excellent post by Mish today of an email from one of his readers:

Investment banks knew the cash flows from these loans wouldn't be there, but they went ahead anyway. Thus, they are responsible for widespread securities fraud. To keep it going, they created more complex securitizations and got more people involved to cover up the mounting losses that were coming down the pike. This was all known and knowable in advance.

I didn't "forsee" anything. I have no psychic ability. I'm not prescient. I am, however, an analyst, and I know my stuff. So did they. It was fraud.

So, just what sort of "civilization" is Munger trying to preserve?

...read more at http://globaleconomicanalysis.blogspot. ... ebtor.html

That quote is in regards to the recent remarks of Charlie Munger of Berkshire Hathaway. I once thought that Berkshire Hathaway, especially Warren Buffet was a bit above the average Joe on Wall Street but now I see that while they may be, the average Joe on Wall Street is just as much lower than I thought and as corrupt as they have to be to keep the money rolling in.

Fred
http://www.acclaiminvesting.com/

[freddyv]

Congratulations, John, on the award from Computer Sciences Corp.

Also, I impressed with your analysis of Abby Joseph Cohen's recent shilling of the stock market. I had written about this as well but I really appreciated your view from the Generational Dynamics POV. It is truly amazing that even after all that we have gone through in the past couple of years that these people continue to lie to us and the media almost always fails to so much as question their obviously faulty numbers. We have a long ways to go....

Fred
http://www.acclaiminvesting.com/

[shoshin]

China meltdown n the way?...

http://www.foreignpolicy.com/articles/2 ... ?page=full

[JonLaw]

John:

I don't know if you participated on the old Longwaves forum with Mike Alexander or talked to Bob Bronson back when he was actually arguing with people. I didn't.

However, what you keep talking about with your ongoing predictions of the "financial crisis" is Bob Bronson's old "Mass-Correlation, Hyper-Volatility, Illiquidity Event, or MCHVIE (pronounced “mac-vee”)". Basically, that's when everything fails and the financial past finally dies. Bob isn't good with market prices, but he's on target with respect to his MCHVIE, which is where you are in agreement with him.

That hasn't happened yet, which is why things still feel somewhat stable and which is why you keep telling everyone "the financial crisis is coming".

Perhaps if you incorporated that into your discussions, you could gain some additional traction on the Internet. I know that Doug Short is liking to Bob Bronson at dshort.com. Doug is often cited on Calculated Risk.

- Jon

[vincecate]

I would caution all but the most sophisticated readers to stay away from buying gold or silver, as metal prices appear to be in a bubble.

In 1486 the Germans started using a 1 oz silver coin. It was very popular as the other types of coins had been debased and people no longer liked using them. In 1497 Spain defined their silver "pieces of eight" to match the German "thaler". After America's independence they defined the US dollar as 1 oz of silver to match the "Spanish dollar". Today silver is about $23/oz. So compared to silver the dollar has only gone down by a factor of 23 in more than 500 years. But really all of this drop is in the last 75 years. The Fed is printing paper dollars a thousand times faster than they did 75 years ago (printing a trillion per year instead of a billion per year). Paper money is being debased a thousand times faster and silver is only 23 times as expensive. Hum.

Lets try Occam's razor, "the simplest explanation is usually the correct one". It could be the value of the dollar is going down. Or it could be there are simultaneous bubbles in copper, wheat, cotton, oil, gold, iron, rice, silver, etc. etc. etc. Which explanation is simpler?

All these things look like they are in bubbles because the value of the dollar is going down. The dollar is going down because they are printing too many and because it is becoming less loved as an international reserve currency (in large part because it is being debased). Remember, China reduced their holdings by $100 billion over the last year.

Also, we could be getting closer to a "crack up boom" where people bail out of paper money into commodities and other real things.

http://en.wikipedia.org/wiki/Pieces_of_eight
http://en.wikipedia.org/wiki/Thaler
http://en.wikipedia.org/wiki/Dollar
http://mises.org/daily/4016