I've received the following e-mail message from long-time contributor Aedens:
Aedens wrote:
I have been unable to log in since the verisign icon does not appear
for me in the forum area to log in.
I had surgery on my bad ankle so have been reading topical works in
relationship to how the monetization has , and now has affected our
community and the abroad ramifications of current ETF instabilities
from HFT issues. The only way to reestablish the dominance of
fundamentally driven stock prices is to have money flow into
investment products that feature human decision making at the core of
the investment process. No one has a clear idea when this event of
amplification of credit policy that is a certitude will ensue but I
opine this trigger http://farmlandgrab.org/17031 may contribute sooner
than later. We should tell the Foreign nations to paddle their own
canoes at last and to take full responsibility for their own
actions. In fact, adoption of a true isolationist program would
finally end, once and for all, the blackmail of foreign countries that
they will go Communist since we will not come across with a suitable
bribe.
Again, no one does the work you do and thanks for the effort.
Is anyone else having this "Verisign logo" problem? I believe the
Verisign logo issue has to do with e-commerce sites, but other than
that, I have no idea what this is all about.
John wrote:I've received the following e-mail message from long-time contributor Aedens:
Is anyone else having this "Verisign logo" problem? I believe the
Verisign logo issue has to do with e-commerce sites, but other than
that, I have no idea what this is all about.
John
John, this may be an issue with the browser he is using and the security setting being too strict.
Freddyv wrote:
You sound like a trader who has developed the skills needed to trade successfully.
No, I'm afraid I'm a failed trader. I'm practically always right on the long trends, but I think I'm smart enough to jump in and out during the trend - and I'm not. My advice is to NOT try to become a trader and rather just get into a LEAP put or call when you believe you know the long trend and then go do something else with your life for a year. The market is like quicksand. The more you move around in it the faster you sink.
Steve, I have found more ways to screw myself trading than I can count, but I think the best way to screw yourself is to ever tell anyone you are doing it. I was killing commodities though I was making one mistake after another last winter. I talked to a guy about it who did a little scalping and nothing else and he screwed my mentality up. I think normal for most of us is a 50/50 success/failure and the success is making more on the successes than the failures and trading to your normal mental state. I tried to put into action some of this guys ideas and my entire rhythm blew up. My other problem was trying to trade 2 commodities at the same time and attempting to trade on the other side of my opinion for scalps. There is nothing more terrifying than being on the wrong side of copper when it wants to move in a direction. It is like being in quicksand and needing to watch a trade in oil at the same time is like playing Russian Roulette with 5 bullets in the chamber. The e-mini's lead you to believe you can play this stuff quite often, but the stock market is so controlled right now that nothing moves for long except for the insiders to rip off the traders on the outside. The robot traders in the copper and oil markets are fascinating to watch and if you can figure out what they are doing and have patience, you can make some short term money. A copper trade entails a minimum $600 risk, which is 12 points on the e-mini. The price runs away from you if you are on the wrong side. Once you take a side, the strategy is nothing more than how do you catch a ride to the other side. I think the logic of how that is done is more important than market analysis. If you have the software for a company like Interactive Brokers, watch copper a few nights. The action starts around 9 PM Eastern and it looks like a chess game, as bids line up then move against each other. The entire design has little to do with buying and selling and a lot to do with merely moving the price. Remember, real buyers want to buy cheap and real sellers want to sell high, but market manipulators merely want to move the price.
I wrote this on the gold, inflation and deflation page. I think I am somewhat incomplete here in my thoughts, but the idea is this is a poker game and the cards are debts and the chips are dollars. As the chips go from one side to the other, the relative betting activity slows. If the chips themselves are dependent on the debts, both could shrink and the number of makable hands also shrink, like a missing ace diminishes the chance for 3 aces and eliminates 4 aces. Gold can get you more chips, but you can't get in the game with gold. The guys that owe the debts are the missing cards and the bankers are getting dealt the hands that need the missing cards. Only the banker can prop up the price of assets outside of the game and he is playing hands that have a greater chance of losing as time goes on. The game is played with dollars, not Euro or yen.
Those betting on the death of the dollar are going to find out differently. We are in a deflation and in a deflation, anything that looks like money is going to pass. What else can they use? Has the world been collateralized by Euros?. What about Yen?. Then we have the yuan? You couldn't use the yuan for toilet paper if not for the store of dollars they have in China.
Bernanke may be onto something, but nothing is going to work until they resolve the big banks. It isn't just the big banks in the US that need to be resolved, but all over the world. There is going to have to be enough money to replace the bad debt on the balance sheet. So, in part he is doing it backwards.
Those that believe the US is finished and China is the king of the world have been reading too many headlines and not looking under the hood. China is a pissants go cart against a Harley. This might not be the case in 50 years, but it is today and China is not only tied to the dollar, but if the flow slowed it would collapse. Little is said about the flow of hot investment money into China and everything focuses on trade. Whereas the US has its debt issue and its QE to use against its creditors, China has what amounts to trillions in foreign investment and most likely capital controls in both directions. What does China use to buy oil and all the other minerals they import in huge quantities?
Lysander Spooner, a very intelligent man of his time and an early anarchist in his old age pointed out something I have believed, but never had confirmed until I read his quote. He said that the value of everything in the form of commodities fluctuated, but the value of money was in the payment of debt. Note the term in the Constitution that "No State shall make anything but gold and silver a tender in payment of debt". Many think this means that gold and silver were to be the only money, but Spooner said that it was to maintain value in contracts and little else. Thus, "This note is Legal Tender for all debts public and private" means something.
There are several debt out there. I believe the most important debts aren't those owed to the banks, but those owed by the banks, including debts owed from one bank to another. Banks have been using their own IOU's disguised by phony bank capital. Once a few big banks appeared to be impaired, the system froze up. Bernanke gave them something to pay, then had to make the temporary actions permanent in QE1. Most of the Federal Reserve money in the banking system was gone, in the form of Federal Reserve currency in hoards around the world.
The Fed isn't going to solve anything with QE2 because when they produce money, they take an asset out of the system and replace it with a money asset. I suspect the Fed is moving out on the yield curve to produce income, an idea which is foreign to most folks, but in essense what they are doing is the same as the Chinese are doing. If trade is such a problem with China, why is China hoarding our money and producing currency with it, while at the same time building excess steel capacity when they could buy steel from the US? Could it be they need safety from the excessive financing they are doing themselves?
As for gold? Gold is going to be great if the worlds currencies totally blow up, but food and guns might be much better. There is a squeeze going on few people understand. In the realm of CPI, gold is a $300 to $600 asset. In terms of delusion, it is a $5000 asset. People and entities are going to need cash and being cash isn't earning much income, people are going to be forced to either hoard their money or spend it. If your pockets aren't deep as a holder of gold, you are likely going to find yourself liquidating your gold in a weak market. Capital gains are another term for inflation over time in most assets. The only other reasons are proper timing and good judgment, both of which are a good portion skill and a roughly equal portion luck. A marginal amount is real return which is effective inflation. Credit and debt are going to be more deflationary and income destroying than most realize. Converting assets to cash isn't going to change the result much. When time comes to liquidate gold in order to live, you won't find too many buyers, as the entire economy of the world will be caught in a strangle of debt (bankers will be caught on both sides, owning their depositors and being owed by those that can't pay) and low demand.
mannfm11 wrote: I think I am somewhat incomplete here in my thoughts, but the idea is this is a poker game and the cards are debts and the chips are dollars.
In 1971 the house stopped redeeming those types of chips.
California municipal bonds gave up a years worth of gains in the last 2 weeks. I think too many people underestimate the risks of betting on bonds. I think we are headed for a lesson that will be remembered for a generation.
vincecate wrote:California municipal bonds gave up a years worth of gains in the last 2 weeks. I think too many people underestimate the risks of betting on bonds. I think we are headed for a lesson that will be remembered for a generation.
I wouldn't look at a fund except as an indicator of direction. Funds do all kinds of goofy things.
As the risky assets have been sold off here, we knew MBS, munis and corporates would be sold.
The big questions were what would happen to the 30 year treasuries, gold/silver and the dollar.
30 year treasuries are getting hammered, as I figured they might but I wasn't really so sure. Gold is getting hammered and silver is getting absolutely destroyed. Silver is down 15% in the past few days. Meanwhile, the only thing that is up is the dollar.
I wasn't sure gold would be sold off on this go round. It could happen that the levered players are getting taken out and if a crisis deepens that gold could find buyers. We'll see on that one. I'm skeptical due to the fact that so many are so rabid about gold, and that indicates there could be a lot of leverage in that market too.
Anyway, the direction of all markets in past 2 weeks is saying "deflation" loud and clear. The markets are speaking and they will usually tell you just about everything you need to know.
The Americans like to point fingers at other countries and criticize the way they handle their financial affairs. I don't see what's so unique about our fiscal condition if we compare, for example, California to Ireland. With the 30 year treasuries getting hammered, I don't see the US having any leeway to bail out the states. If the US is to have a future as a union, the future of the states is going to have to be austerity and no different than the EU.
Bernanke is taking heat from more and more fronts. I guess there's a full page ad published yesterday in the New York TImes and The Wall Street Journal saying that it's time to curb Bernanke and his QE2 program. My guess is if the stock market crashes, Bernanke is done.
mannfm11 wrote: I think I am somewhat incomplete here in my thoughts, but the idea is this is a poker game and the cards are debts and the chips are dollars.
In 1971 the house stopped redeeming those types of chips.
If someone went into a casino and the casino said you can't leave this casino unless you renounce your "casinoship" but we have beds and meals here that can be paid for in chips, then I see a lot of similarity. In order to get chips, you have to do what - gamble. To get dollars, you can work at Wal-Mart or a lot of other low paying jobs, but to really get the dollars you need to buy a nice place to sleep and a good meal, you will need (in most cases unless you have the smarts to work in high tech, which even that doesn't pay all that well) to work for the casino or figure out how to gamble.
I forgot to mention that of all the press and commentary recently about QE2 and Bernanke, perhaps the most cogent case for curbing and/or removing Bernanke can be found on fellow poster mannfm11's recent blog entry on his site. Why somebody like Taleb can't spit that out is beyond me. But the point of posting his interview above is that well known economists are finally coming out of the woodwork and making a concerted effort to discredit Bernanke and his policies. It's what I term "revulsion of the bubble." Whether what they say is coherent or not doesn't really matter because it's mainly a generational or emotional reaction. It indicates a phase change.
While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.
So now the time is approaching when Germany may be asked to help bail out Ireland -- and Greece and Portugal as well. This has led Merkel to take a tough stance on euro bailouts, according to Spiegel.
Merkel is demanding that the rules change so that profligate nations should not be bailed out by other nations; instead, they should be bailed out by the investors who hold the nation's debt. In other words, Merkel is saying that Ireland and Greece should go into default, and restructure the debt so that investors get only a fraction on the dollar.
Greek Prime Minister George Papandreou accused Merkel on Monday of worsening the crisis, because her remarks had pushed up bond yields. "This could create a self-fulfilling prophecy ... This could break backs. This could force economies towards bankruptcy," he said. Others joined in the criticism of Merkel.
...sounds just like a book I am reading...
I started reading 'A Bubble That Broke The World', a book that John has long recommended, probably 3 years ago but didn't get very far. A few days ago I found out it was available on the Kindle and started reading it again...
This time it smacked me in the face and has me feeling like I am in a time-warp. The book is written just after the worst of the debt contagion of The Great Depression and spells out in detail how the debt issue slowly imploded, bringing about the conditions that would lead to World War II, the death of tens of millions of people and the realignment of global power to the benefit (?) of America.
Everyone should read this! I feel as if I'm gaining an amazingly clear view of the future through the past, or some such thing.
'A Bubble That Broke The World' is available for the Kindle from Amazon. Read it if you haven't.