Financial topics

[mosullivan]

Doug is a good read and a great source for data. One of the things I realize; I am too loaded on PMs and I bit on the anti-USD theme too hard. I recently watched Roubini's presentation from last week (on U Tube) where he explains the unwinding step by step. I believe he recommends parking $ in short term sovereign paper.

Speaking of Noland, I have an allocation in the Prudent Income fund. Yes, this credit unwinding is recoiling abruptly. I am challenging my thought process for positioning. Aside from US Treasury's and short equity markets, I am trying to see if there is a place for holding ex-US Short term Sovereign paper. I am thinking 60% laddered US Treasury, 25% short and 15% Gold. I'd welcome any comments agree or not. I see many advisors absolutely refusing to come off their strong PM/anti-Dollar stance because they have married the ideology. It sounds great and I still challenge myself and keep an open mind. I've given up trying to convince anyone. This sell off seems to be lacking much counter trend strength.

Thanks again for the comments, MOS

[John]

Dear Matt,

> If a financial panic was a necessity, then the generational cycle
> could not continue without one. I don't see this as being the
> case.

> A financial panic is very likely since all the ingredients are in
> place, but the only thing inherent to the saeculum is some sort of
> panic/shock/whatever occurring in a 4T. It doesn't have to be
> financial. Nevertheless, it's hard to see how a panic is avoidable
> when everything is about fall down.

We've had this conversation before. The financial crisis timeline is
different from the crisis war timeline. The two timelines do tend to
reinforce each other, but they're still separate.

Furthermore, the characteristics of the two timelines are very
different. The crisis war timeline is highly regional; even two
countries that are fighting in the same crisis wars are fighting
completely distinct wars, with two completely different points of
view.

The financial crisis timeline are far less regional. Bubbles
resulting from abusive use of credit tend to encompass multi-nation
regions.

For example, the 1930s were a Great Depression for Mexico, even
though Mexico was in an Awakening era.

Is it possible to avoid a generational panic and crash, in the same
way that it's possible (though very rare) to avoid a crisis war
during a crisis era? I believe not. For one thing, a crisis war
requires a partner (belligerent), but huge bubbles spring up during
(post-) unraveling periods, and bubbles must pop.

Sincerely,

John

[John]

Dear Barry,

> I don't know how to quote John, though I made an attempt once.

The easiest way is to do the following: (*) FIRST, log in with your
user name and password. (*) NEXT, find the message you want to
quote. (*) Then click the "QUOTE" button.

> In any case, you responded to my post from Friday the 24th. I
> think you pretty much agreed with me.

Not entirely. The main point of disagreement is that we're still
going to have a generational panic and crash, a major event that will
be remembered forever. Most people have no idea that the stock
market crashed from 1929-33. What is remembered is a particular
event, the "crash of 1929." It's the "crash of 2008" that has yet to
occur.

> The Nasdaq lost 40% in 2 weeks (Prechter said that was the fastest
> crash of that degree of any major market in history). That is a
> crash by any method I know.

Yes, it is a "crash," but it's not memorable, and it's not a
"generational panic and crash."

When it finally happens, you'll see the difference.

Sincerely,

John

[Matt1989]

We've had this conversation before. The financial crisis timeline is
different from the crisis war timeline. The two timelines do tend to
reinforce each other, but they're still separate.

Furthermore, the characteristics of the two timelines are very
different. The crisis war timeline is highly regional; even two
countries that are fighting in the same crisis wars are fighting
completely distinct wars, with two completely different points of
view.

The financial crisis timeline are far less regional. Bubbles
resulting from abusive use of credit tend to encompass multi-nation
regions.

For example, the 1930s were a Great Depression for Mexico, even
though Mexico was in an Awakening era.

Is it possible to avoid a generational panic and crash, in the same
way that it's possible (though very rare) to avoid a crisis war
during a crisis era? I believe not. For one thing, a crisis war
requires a partner (belligerent), but huge bubbles spring up during
(post-) unraveling periods, and bubbles must pop.

I'm not sure I'm sold on the separation of financial and crisis timelines. Why does one produce generational archetypes that encompass all aspects of society, and the other creates only risk-averse and risk-seeking generations in matters of finance? If the panic occurs in the 2T, there would have to be financially risk-seeking Civics and Adaptives and risk-averse Idealists and Reactives. This is counter to their archetypal tendencies. Furthermore, global financial crises in the past seem to not affect some regions of the world who practice the insanity visible by the time the next one comes around. It appears to me that this mechanism is more nuanced than you indicate, if it exists at all.

Right now, I'm leaning towards "no." Devastating financial panics preceded by massive speculative bubbles in several areas of the economy (see the generational crash thread) have occurred independently of the proposed cycle. Furthermore, we only have two cases (Tulip Mania, South Sea Bubble) where the epicenter of the generational financial crisis occurred independently of the fourth turning, and I posted someone who argues that the impact of the Tulip Mania crash was vastly overstated by sensationalist writers in the 19th century.

If I'm right, I'd argue that a financial panic is not necessary to get the cycle moving.

[John]

Dear Matt,

> I'm not sure I'm sold on the separation of financial and crisis
> timelines. Why does one produce generational archetypes that
> encompass all aspects of society, and the other creates only
> risk-averse and risk-seeking generations in matters of finance?

Only because this analysis hasn't been performed yet. Exactly the
same kind of "recovery," "awakening/rebellion," "unraveling," and
"crisis" attitudes could be uncovered for a financial crisis
timeline as for a war crisis timeline. Furthermore, it's possible
that Strauss and Howe actually mixed the two sets of attitudes and
behaviors in together, and they would have to be separated out.

> I posted someone who argues that the impact of the Tulip Mania
> crash was vastly overstated by sensationalist writers in the 19th
> century.

That article would belong right alongside the article that says that
the Nasa moon walk was actually filmed in the Nevada desert.
http://www.freakingnews.com/NASA-loses- ... --1115.asp

Sincerely,

John

[Matt1989]

That article would belong right alongside the article that says that
the Nasa moon walk was actually filmed in the Nevada desert.
http://www.freakingnews.com/NASA-loses- ... --1115.asp

Except there is no axe to grind as it occurred nearly 400 years ago. I don't know if the two articles I recently posted are true or not, but they deserve some consideration.

[John]

Dear Matt,

> Except there is no axe to grind as it occurred nearly 400 years
> ago. I don't know if the two articles I recently posted are true
> or not, but they deserve some consideration.

There's always an ideological ax to grind. Talking about Tulipomania
can bring accusations of "trying to scare people." Denying
Tulipomania is part of denying that bubbles exist at all, which means
denying that there's been a real estate bubble or credit bubble
today.

Sincerely,

John

[stevendeklerck]

Dear John,

I also read the article by Ambrose Evans-Pritchard.

The most important sentence to me was the following:

I’m afraid this is going to have a very deflationary effect on the economy of Western Europe. It is almost guaranteed that euroland money supply is about to implode.

If the money supply is about to implode, doesn't that imply that the euro in real terms will become more valuable?

Thanks,

Best regards,

Steven
Belgium

[John]

An amusing situation. On Bloomberg tv this morning, former NYSE CEO
Dick Grasso was being interviewed. He was all bubbly about the
future, making the standard capitulation argument, which has become
the ingrained common wisdom these days.

In the middle of this interview, they inserted a "Bloomberg Edge"
segment, where they talked about P/E ratios in the 1970s.

I was absolutely stunned that they were doing this at all. P/E
ratios prior to 1995 are completely forbidden territory on Bloomberg
tv and CNBC. Talking about them is the pundit equivalent of starting
a Thanksgiving dinner conversation about your aunt who was jailed for
sexually abusing her son.

The segment was short, but it hit the high points. It said that P/E
ratios in the 1970s were in the single digit range, which is true,
and that P/E ratios today are very high in comparison, which is also
true.

When the segment ended, Dick Grasso had what looked like to me a
guilty, nervous smile on his face, as if he feared being asked about
the jailed aunt ... I mean, the 1970s P/E ratios.

Instead, the subject was dropped, and he went back to his bubbly,
Pollyannish comments.

The great new bailout hope today is that the Fed is going to start
using some of the $700 billion bailout money to purchase stocks and
commercial paper from corporations. The hope is that this will
unfreeze the credit crisis, lowering commercial paper rates.

Is there any way I can get into this deal? Xenakis Consulting
Services Corp. is an old, staid, 23-year-old Corporation. Of course,
I'm the only employee, and I own 100% of the stock, but I'd be happy
to spread the wealth. Can I sell some of this stock to the Fed? I'd
love to know.

Well, forget that. Just get back to your previous conversations
about capitulation. Tell us about YOUR favorite capitulation
fantasy.

Sincerely,

John

[stevendeklerck]

Dear John,

The Austrian School doesn't rule out a deflationary spiral.

People like Peter Schiff are a little bit obsessed by hyperinflation.

Best regards,

Steven
Belgium