HEDGING FOR ARMADEGGON

[Brant Gaede]

For the next three months the DOW has the potential of 1000 down and 3000 up. After that be out of equities except in special particular cases you like out of your research and analysis. SELL all but the shortest to maturity T-Bills NOW! Bubble! Except for a possible very little window in late winter and early spring, real estate will be worse than ever. It's going to absolutely locked up by summer if not immediately. Gold is a buy through the GLD ETF, not physical unless you can pay no more than 5% over spot for bullion coins and no sales tax. It's best not to be in equities now unless you know how to pick and choose. There are great bargains right now, like Altria yielding 8.5%. No, a big dividend isn't enough but is needed. A huge dividend can reflect huge trouble. Remember diversification. No company's stock should be more than 10% of a portfolio. Gold 20%. Cash a lot but gold is cash too. Some Japanese yen can be a good idea. Extra food in the house. Medicine too. Extra bullets for an extra gun. Don't let the gas tank get less than half fun. Keep beating your wife so when it all goes bad she'll know her place. Don't do this if she has a gun. (Be really nice. Show your love.)

--Brant

[BaalChatzaf]

. Keep beating your wife so when it all goes bad she'll know her place. Don't do this if she has a gun. (Be really nice. Show your love.)

--Brant

Shame! You are a cad and a bounder! God counts a woman's tears.

Ba'al Chatzaf

[Brant Gaede]

. Keep beating your wife so when it all goes bad she'll know her place. Don't do this if she has a gun. (Be really nice. Show your love.)

--Brant

Shame! You are a cad and a bounder! God counts a woman's tears.

Damn! Found out! Actually, I'm a psychopath.

--Brant

[Brant Gaede]

I just learned that the Feds under Obama may put a dollar a pack tax on smokes which, if true, will hurt sales and stock prices of the tobacco companies. So I'd limit my exposure to the sector to 5% and write covered calls continuously against the common. Ask your broker how to do it.

--Brant

[Brant Gaede]

If these US equity markets don't significantly ramp up in the next two weeks it's all over for that possibility and probqbly for next year. China is more likely to power up.

--Brant

[Brant Gaede]

A major scandal is hitting Wall Street right now. 17 billion dollars are missing from a hedge fund run by a guy nmaed Madoff. The money belonged to charities and many wealthy families. As much as 50 billion dollars in investments may be gone or affected in a giant Ponzi scheme. This almost certainly kills any real prospect for a year-end rally, especially because a 50 basis point cut in the Federal funds rate is already discounted. General Motors is preparing for bankruptcy. Dow futures are down 150 points. If I had any stocks I was planning to sell late this winter--I don't--I'd sell them on the open tomorrow. This doesn't seem to be a quick crash scenario, but I don't want to stand under a tree that might be full of rotten fruit. Ironically, T-Bills may now ramp up some more from here consequentially. Still sell them.

--Brant

Long GLD and MDR and relatively lotsa cash.

Edited December 12, 2008 by Brant Gaede

[Brant Gaede]

Dow futures are now down over 300 points. I'd personally still sell on the open unless the futures are down even more. If they are there should be a snapback of sorts, maybe the same day. Long-term investors have been too horribly damaged so far this past year and they aren't going to have the strength to keep digesting this kind of absolute shit without cashing out and demanding their hedge funds cash them out. Markets also don't like the idea of no bailout for the auto companies. Ironically, that'd be best for the economy. 2009 will, I think, be good to be long China and short US if one has any interest in equities at all.

--Brant

edit: It's possible the Bush Administration will step in to provide funding for GM and Chrysler with already appropriated funds. It may even do this before markets open. If so, wait 30 minutes and sell the news.

Edited December 12, 2008 by Brant Gaede

[Michael Stuart Kelly]

Brant,

Here is an aside.

Years ago I thought about doing a screenplay for a movie on the life of Ponzi. I read up on him and I think the movie would be a hoot. For instance, the contrast between the people who joined the postage stamp scheme and their obnoxious sanctimonious put-downs of people "not in the know" and incessant bragging, then all those same guys in early 1900's attire and Model T cars lining up in front of the his office in Boston, screaming bloody murder and being appeased by some dramatically orchestrated payments, bullshit and coffee and donuts, then going away happy without their money. There are so many such scenes that I have no doubt a movie, if done as comedy, would be very successful.

Incidentally, Ponzi died in Brazil living off of the equivalent of Brazilian welfare while dreaming of a way to scam Russia (if I remember correctly).

Here is the Wikipedia on Ponzi: Charles Ponzi.

Michael

[Brant Gaede]

Well, markets fought off the bad news and closed somewhat up. It's time to close up shop and go away for the rest of the year. GM will be saved from bankruptcy for now. I think the desire to keep equity prices up the rest of the year for fund performance sake will trump tax loss-selling and general investing fears and we might still get a year-end bounce which will be easier to do with declining volume made possible by vacations and the holidays.

--Brant

[Brant Gaede]

Inflation probably won't start seriously manifesting itself this year, which makes gold investments short-term problematic. Gold can be bought using dollar-cost averaging but it is conservative not to let it exceed 10% of investable assets. The price of gold will probably continue to go up and down with equity markets for now. The most rational way I know to buy it is through the ETF GLD. The premium on physical gold coins is very high.

If the price of gold goes down to 500-600 dollars an ounce then in additional to GLD buy the ETF for the major gold companies. Then you will get a large upside in excess of inflation. I'm not putting up the symbol because it is too dangerous to buy it now. If GLD goes down 20% the other could easily go down +40%.

Do not buy any US Treasuries with a maturity greater than a year. Treasuries are grossly overpriced and while they could go even higher they will eventually collapse.

The smart money may be buying high quality corporate debt instead of equities this year, but you can find value in equities with generous dividends above 3% from good companies with little or no debt you can write covered calls against. Because of high volatility in equity markets call options are expensive so they should only be bought, generally speaking, by real experts. Put options too, buy or sell, should be avoided except by these experts of whom I am not one.

If one wants to play "the Obama bounce" be aware it's already happened, sort of. One can buy a low cost Vanguard fund for either the top 500 stocks in the S&P or top 2000. Whether the value goes up 20% in the next six months or stays flat these funds should be sold after four-six months. I don't recommend doing this. I prefer cash for now. It's possible but unlikely equity markets will go down much before May-June.

Home ownership will be a good way to preserve wealth these next ten years if one has a fixed-rate mortgage, equity, no need to move. This assumes a massive inflation which will literally destroy that debt. This only applies to a primary residence. Short-term, expect up to a further 20% price decline and a lock-up in real estate markets. There does appear to be a window of opportunity to sell this coming Spring. Don't list more than 90% of appraisal unless it doesn't matter that much to sell. In California, Nevada, Arizona and Florida one will need to match or not greatly exceed foreclosure prices. A $350,000 house in Tucson needs to go for 250,000 to 270,000 or be at serious risk of not selling. However, there are still some foolish buyers and lenders out there. It might just go for the high price, but most agents will high-ball to get the listing and produce the necessary comps too boot. Therefore get the top agent available; she won't likely be bothered to take an overpriced listing and just toss it into the Multiple Listing Service.

The consumer economy was the last ace-in-the-hole for the US economy. Because of taxes and regulations and bailouts and the destruction of the American industrial base over 40 years going, the future will belong to SE Asia and China and commodities. In ten years I expect a de facto fascist dictatorship here. Foreigners don't like to visit this country any more because of egregious, sometimes bullying behavior, of Homeland Security agents. I haven't gotten on an airplane in years.

--Brant

Edited January 5, 2009 by Brant Gaede

[Brant Gaede]

Short-term contraction of asset prices does not mean deflation. Inflation is the increase in the amount of money in circulation. Deflation is its contraction. This can even apply to gold. When New World gold hit Spain, prices went up because of additional money in circulation. But prices are only a symptom of inflation and deflation and may contradict what is actually going on. If people need cash they might sell assets to get cash which may drive down prices of the assets generally. If rich people are afraid to invest in equities they might rush to park their money in seemingly safe US Treasuries driving up the prices of those assets and lowering the interest available from them. They don't want to put ten million, say, into an FDIC bank because they are only protected to 250,000 per bank per depositor. If the FDIC would guarantee all deposits it would immediately break the back of the T-Bill market as money flooded out at first calmly, rationally, then in a rational panic.

To illustrate how clueless the Department of the Treasury is, it should be selling all the long-term debt it can right now while it can lock in these high prices and lower the obligations of future generations. Not happening.

I don't expect there is going to be any Obama bounce because he is not respected and government stimulus is not respected for anything except avoiding an outright collapse of markets and the economy generally. 2008 was a crisis in equity markets. 2009 will be a crisis in the economy generally with gross economic contraction and bankruptcies. This is the unfolding consequence of Alan Greenspan not having enough will and gumption and knowledge to take away the punch bowl when the party got going. The world-wide hangover hasn't even begun. The world is still getting sicker. This is the negative triumph of central banking. Logical, for this is socialism controlling the money blood supply of all serious economic activity. The socialists inherently don't know how to price anything correctly, but they price the money, ultimately, which they ruin the value of with deficit spending, debt and money creation.

Paycheck to paycheck and debt living means people are going to start suffering horribly this year with loss of their jobs. While real estate prices may hit bottom this June a la James Cramer of CNBC, June marks the end of the juicy part of the real estate market year. Meaning: Prices in June won't be any better the following spring absent hyper-inflation. It is too soon for that kind of inflation. (I hope.)

Owners of the Japanese yen should sell it. The yen may likely now be devalued in an attempt to help exports which the Japanese economy is so dependent on. This also means selling Japanese stocks.

Citigroup is in big trouble.

While we may get a bear market rally over the next several months, there will be no basis for a true bull market in equities and probably commodities too until the economy hits bottom, no earlier than this summer. Real estate must hit bottom. The financials must hit bottom. Everybody needs to scream bloody murder. Hasn't happened yet. Then government spending and regulations and taxes will ruin the economy for a decade as capital is sopped up by the government and inflation. The capital structure of the country is being destroyed. One might hope that there won't be any more spending/stimulus legislation coming out of Congress--that Obama gets choked up and stopped. He might well be stopped. He's no Lyndon B Johnson.

--Brant

Edited January 12, 2009 by Brant Gaede

[Brant Gaede]

ASSETS

In a recession economy people with no monetary savings but some other assets sell those assets to get cash to pay their bills. As of right now the major equity markets are down 9% over six straight trading sessions. There may be no massive amount of money waiting to flood back into these markets. Any stimulus may take a year to have much if any real general effect. Gold in such an environment will be sold for the same reason as a stock. This is why I keep saying buy gold using dollar-cost averaging with a five-year hold time horizon and avoid gold company stocks until gold goes down significantly from here.

It is slowly dawning on people how bad this world-wide recession will be. It will keep dawning on them for at least another year. The creation of more debt by the government to help the economy ignores the fact that debt first must be destroyed and makes everything exponentially worse.

I don't know where the S&P 500 or the Dow or the price of gold will be a year from now. They might be 1/2 or 1/3 today's price or gold might have taken off for the moon for geo-political reasons or be at $500/ounce.

Then the real threat of the manifestation of gross inflation reflected in asset prices and consumables.

--Brant

[Brant Gaede]

Assumption: A sudden, unexpected hypothetical collapse in the value of the dollar. Since this is possible--it's just a piece of paper or electronic entry afterall.

Solutions: Own your own home with some serious but not great mortgage debt. The debt will be eviserated. Own gold. Buy some Canadian dollars. Own a six-month supply of food. Some of it can be kept in a freezer, but this should include a lot of canned food, rice, pasta, powdered potatoes. Pet food. Even paper goods if you have room. Remember, this is an inflation hedge. I'm not talking about classical survivalist mode here. Buy a new car or truck or SUV if you can finance it in single digits. That debt, too, will be eviserated and if not, it won't be a burden. I'm assuming one isn't living paycheck to paycheck and employment or retirement seems secure. Retirement is another problem. One typically owns bonds. They will be destroyed. However, if the dollar doesn't collapse, high-grade corporate bonds represent the single-best investment category out there right now. TIPS may offer some protection. It won't be complete, though. That's because of the way inflation is calculated. There is a chance panic buying of TIPS will cancel that out. I understand Bill Gross of PIMCO is buying them hand over fist. You can even buy stocks of solid companies that pay at least 3-5% dividends. These companies must be carefully chosen. Their price value may go down 20-30% but if not owned on margin they will rebound appropriately and higher prices will wash out the inflation. Do NOT buy GE. It has upwards of 3/4 trillion in debt it has to service and a huge financial arm. Wait until there is a gross, hyperinflation and its dividend is suspended and it loses its AAA credit rating and it's selling for half its current price in today's dollars, THEN you might buy it for a huge snapback. It's debt will be wiped out, you see. Its core industrial businesses will save its financial businesses. I do not see bankruptcy in its future. Banks may go bankrupt, not GE.

--Brant

[Brant Gaede]

The government is still blowing massive amounts of air (money) into the ruptured banks' balloons. Even I had thought that at least their situation had been stabilized. The futility of fighting the business cycle is becoming ever more manifest. One wonders just what happened to all that money. New banks can't be formed because of all these zombies that should have gone bankrupt and out of business still walking around looking for even more money to eat. I no longer think there will be much opportunity to sell and buy real estate this spring. I think it's going to lock down. Prices are still way too high; financing too hard to get. No bottom in real estate means no hope yet for a bottom in financials means not much hope for investable equities and the recession is going to become the Great Recession and that doesn't mean even worse won't follow. Just because massive amounts of debt needs to be destroyed as fast as free markets dictate doesn't mean ALL debt needs to be, but the Federales are making that nightmare possibility more and more the approaching reality.

--Brant

[Brant Gaede]

What to do now? Turn things into cash. Put cash into FDIC banks or high quality corporate debt. High quality corporate debt does not include bonds from such companies as General Electric, burdened with heavy debt and a huge financial division. Buy gold using dollar-cost averaging. Sit tight. Wait. Let the market go up; let it come down. Shorting equities is too difficult, buying them too soon. Financial implosions continue. Interesting that gold went up while stocks went down. Europe is jumping into the crapper. Go eat out.

--Brant

[Brant Gaede]

There isn't a major bank that isn't shaky. While one's money is safe IN the bank right now because of FDIC, it would be wise to have accounts at different banks so if one closes down and you can't get your money out for a week or even a month or two you can immediately jerk your funds out of another bank. It might be wise to take significant cash out now and put some but not all into a safe deposit box. Also, I'd have no brokerage accounts with TD AmeriTrade, Merrill Lynch or Charles Schwab. If you own equities held by a brokerage in a margin account, I believe converting the account to a cash account will prevent the brokerage from lending them out either to short sellers or to re-enforce its capital base. This is something I am not clear about. However, I don't know why anyone would rationally invest in equities now. They may pop up a little, but I suspect equity markets and housing prices could easily be down another 20-30% in the next 12 months. Housing prices will probably bottom in 18 months then stay bottomed for quite a long time. You can still buy certain stocks and write covered calls against them, though, as I indicated previously. If you don't want to write calls, don't own the stock. If you own some Chevron, you might make a little money. It has to do with refinery margins.

The famous investor Jim Rogers is saying buy China and commodities. Don't. He'll be right in the long run, but China is only half-way into the crapper going down. We are inexorably moving into a world-wide recession that may easily become a depression. The reason is government and taxes and regulations and possibly protectionism. Capital and wealth is being destroyed. Eventually the US dollar will be down in value 90% from here--in less than a generation, maybe only 5-10 years.

Buy gold using dollar-cost averaging. You can use the ETF GLD, but do not use any double ETF under any circumstances. They will probably destroy you, especially if used for shorting. They are being revealed to be frauds. Aside from that the volatility is horrible. Buy physical gold also.

A danger in owning your own home for the next ten years so matter how solid you are in that home is property taxes will probably be going through the roof. Another is you can't pack up and get out quickly. Yet another is in your running afoul of the law it may be confiscated. In the last case high mortgage debt is protection. So is owing a lot of money on that Wombat 12 in your driveway which might be even better leased. Be aware that using your Social Security number the government can seize all your assets tied to that number and freeze your credit cards.

Have a nice day.

--Brant

[Brant Gaede]

Please understand that the economy will get continually worse for the next year or two. If you don't lose your job you'll be luckier, by chance or rational action, than your friends, family and neighbors. Bums, thieves and supplicants will come to your door and accost you in half-deserted shopping malls. Relatives will beg for aid. Are you ready? Buy a van, so if you have to you can live "down by the river." People won't believe they are going into the wood chipper feet first because of because of credit they will feel no pain until they are too dead to do anything at all--or care. A "stimulus" is destruction of capital, so when the economy gets whacked down it won't be able to get back up.

China's American consumerist-based economy will suffer even more, even though in a hundred years it will economically rule the world. Just don't try to make money off it too soon or you will swoon. In two years you'll be able to buy GE for $5 a share or less. That'll be the time--or if it scares you too much, there will be similar cheap plays that won't--but you'll need money then to invest so save now--accumulate gold.

What to do for the next year or two, aside from gold? High quality diversified corporate debt. Not government bonds, though. You can hedge the corporate debt by shorting the long-term Treasuries. If the later goes bad you'll make much more money than you'll lose if the former does too. If the former is good, the latter will probably go bad (good for you) anyway. You see, the Feds have to borrow money but in the new world nobody will have any to lend. Ergo,Treasuries will go down in price as interest rates go up but the corporate debt now perceived as more risky will hold up because that risk is NOW in its price. The yields out there are JUICY! Plus, you'll have the gold hedge against inflation--the massive inflation coming down as paper money gets more and more valued as paper. That's why I wouldn't hold the corporate bonds more than another year and would sell them to buy more gold at that time--plus the ongoing dollar-cost averaging purchase of gold.

Also, now you can buy coffee, sugar, wheat and corn futures to augment gold and hedge against a collapsing dollar (just don't use margin). The British pound has lost 30% of its price-value in six months because the pound's problems are basically similar to the dollar's problems but much worse. Investors right now are fleeing the euro and the pound for the dollar, yen and gold. Not too far off they'll be fleeing the dollar for the yen and gold then the yen for gold. Note that I'm only referring to the major paper currencies, not the Norway what is it? or the Swiss-used-to-be-it. As I warned previously, the yen is not to be bought now because it may be effectively and massively devalued by the Japanese government to encourage exports, upon which the Japanese economy is so dependent.

--Brant

Edited January 24, 2009 by Brant Gaede

[Brant Gaede]

GE is likely to cut its dividend this year. This is extant expert opinion I agree with. GE affirms it can maintain its $1.24 dividend, but earnings are going to be inadequate.

--Brant

[Brant Gaede]

The President is now incapable of injecting anything positive into equity values. Ditto for Congress. Double ditto on both for helping the economy which is going to have a most horrible year, still even worse than is generally imagined. With the Dow only a little above 8000 and the S&P at 835 equity markets are not basing for any significant upswing. Stimulus has turned into pork--of course that already actually happened a few months ago--but pork doesn't make things go. I'm talking about perceptions of investors. Gold is moving contrary to equities. I have no idea how long that will last. Short term I expect a significant breakdown in equity prices with little rebound. We will be lucky to only lose 20% in the next 12 months. The country cannot be led by a nothing President.

--Brant

[Brant Gaede]

In five years we can anticipate a DOW 3500 priced in today's dollars. This journey will likely be punctuated by sharp Bear Market rallies even up to DOW 9 or 10,000. More than likely we'll see DOW 6500 first then rallies up to 7500, collapses to 5200 rallies to 6000, etc.--that sort of thing. One reason, not the basic one, will be boomers selling equities to pay for food and rent. (Addendum to previous post today.)

--Brant

[galtgulch]

In five years we can anticipate a DOW 3500 priced in today's dollars. This journey will likely be punctuated by sharp Bear Market rallies even up to DOW 9 or 10,000. More than likely we'll see DOW 6500 first then rallies up to 7500, collapses to 5200 rallies to 6000, etc.--that sort of thing. One reason, not the basic one, will be boomers selling equities to pay for food and rent. (Addendum to previous post today.)

--Brant

The dealer at Eldorado Gold recommended by Devvy Kidd suggests that certain forms of gold will not be confiscated and does not require filling out 1099 forms when buying or selling. He is rec. French Napoleans a gold coin from the days of the Revolution. Asks for a ten percent commission.

gulch

[Michael Stuart Kelly]

At Brant's request, I have copied these posts over to here. I only copied them instead of moving them (less fuss), so the originals can be seen by clicking the tiny arrow next to the name and info in the quote boxes.

Michael

I found the thread about Ruth mentioning her success in buying US financials. She's up a lot more since. It's true they could easily double again. In any case, no one should own these after mid-summer, or maybe then short Citigroup as a hedge using put options

--Brant

She (?) is banking on :-) no nationalization while she owns the stock. If she is wrong, say "bye-bye $."

She's not wrong. The Feds are choosing the fascist not the communist route. This doesn't mean her investments won't turn on her. If the banks need money going forward they'll need it nationalized or not. The Feds will just click their mouses and inject whatever liquidity is needed. That's why the dollar is getting weaker and gold is getting stronger. We may get an avalanche out of the dollar in a de facto devaluation. Even the horrible euro is up as well as stocks. Oil is up over three dollars today so far. There are a lot of dollars out there waiting to go--somewhere. If they are in Treasuries and leave, interest rates will go up or the Feds will buy them (the Treasuries) which may result in almost instant inflation. The Feds won't let interest rates go up for now. Eventually they will go up but until then the Feds are going to use inflation to amortize the huge public debt. We could see DOW 9-10,000 by mid-summer. Regardless, after that equity averages will seek out new lows. Now can be an excellent time to buy a home with a fixed rate mortgage. Inflation will pay for it. But watch out for those property taxes! Just pay no more than 2/3rds the appraisal using at least 20% down on a foreclosure.

--Brant

[edit] PS: Ayn Rand was never worried about a communist America. She warned about fascism. She was right.

PPS: It is dangerous to own stocks now for investment purposes. The DOW doesn't have to go up any further; one doesn't know what the Feds will do next aside from injecting liquidity. Bank stocks can easily go down from here, way back down.

Agree with most of your previous post. There will be no nationalisation and gov will exit their bank position in due course.

I do believe austrian economics will end up rather discredited as the gov will take credit for the coming recovery. It's worth reminding people that mises org are permabears - everything is a catastrophy of biblical proportions be it High dollar, low dollar, deficits, surpluses - if you go back though the archives you will find they have a permanent forecasting position and nothing has ever turned out as bad as they predicted. In fact a friend of mine lost his house, boat, wife, and ended up in a trailer park about 6 years ago after investing on the basis of their forecasts. And if one had invested with Peter Schiff (who is being feted all over the place) over the past year they would have lost 75% of their money.

The market is always right, and as Buffett says no one ever made money in the long run by betting against America.

I disagree that it is a dangerous time to own stocks for investment - I am looking to the long term and average 150% return so far is serious money. It is not a strategy for the risk averse - maybe I should have made that clear, but there is nothing to fear as long as one has firm stops in place.

As I have said before, I most certainly do not feel guilty about making money on the market. George Cordero wrote once that under-achieving objectivists are fond of lecturing those of genuine achievement. Certainly the pit-bull like aggression of some has been disgraceful.

Go in peace.

If you're in NZ you should have a natural US dollar buffer in your local currency. Still, everybody should have some gold in some form as an insurance policy. In 10 years the US dollar could easily be worth two-bits but gold will likely have the same buying power. It will not increase one's wealth.

--Brant

We are now getting the real Obama rally with the DOW up nearly 500 points today. Everybody wants to believe in equity investing but fewer realize it's become speculation and trading only. The rally could last until the end of August although I think end of July is more likely. Buying gold using dollar-cost averaging is not investing, speculation or trading if it's physical gold (buy the GLD ETF then sell it to pay for the physical to smooth out buying difficulties of the physical) but just savings. If you pay $1000 for an ounce of gold and in ten years the dollar is only worth 25 of today's cents the gold could easily be worth $4000 albeit with the same buying power. Of course, when you sell that ounce for $4000 you will report the $3000 capital gains to the IRS.

--Brant

I would advise against buying gold for medium to long term hold -historically metals are one of the worst performing asset classes - they yield no dividend and are highly volatile. Most big US banks closed their gold books long ago.

We are currently looking at one of the most impressive rallies in history! I'm trying to gauge the strength of this last rally... DOW closed up 500 at 7776 this morning breaking through the 7450 (7500) resistance. The next barrier for the upward DOW is that massive resistance band 7900-8500.

Is the DOW strong enough to break through this 7900-8500...My initial thought is "no way", but with this massive 500 leap through the 7500 resistance area I'm now in doubt.

It's very exciting for me here in NZ - I've been scratching around finding every last cent to invest in the hugely oversold US market over the last 2 months. Our market here is way too small and too easily manipulated.

She's a big ship in the US - reminds me of the saying " Be careful sitting in a small boat with an elephant".

Ruth:

Thanks for your insights.

Additionally, I am apologizing for the way I greeted you a few days ago. I have had no problem with a strike since 1965 to 1969. Therefore, I reacted emotionally whereas I should have employed patience.

My understanding is that New Zealand has no extradition treaty with the US. I find that hard to believe.

Finally, a number of folks that I speak with amongst my clients/friends are quite split on the real power of this economy and the idea that Armageddon is right around the corner.

Glad you are profiting from this "situation".

Adam

The proper comparison is gold to dollar savings, not equities. The CPI under-estimates inflation in the US and the interest (taxable) is very low. For an equity alternative I'd have to pick large, integrated oil companies. It's not a good thing to put more than 20% of investable assets into any one sector or idea except, perhaps, short-term. Above all, eschew leverage.

--Brant

Michael, could you attach these posts to my Hedging For Armageddon II thread?

[Brant Gaede]

Thanks, Michael. While you added these to the wrong thread this one will work just fine.

The decline of 115 Dow points today is insignificant. While I think averages can go much higher on this Bear Market rally, once investors figure out these bailout plans won't work they will head for new lows, as low as DOW 3-4000 in the next two-three years. What's important is not how low they will go but the time needed. It's going to take up to twice the time to halve the averages again as the first time--17 months. If they don't go down as low as I fear that'll still probably be a bottom. This decline will be punctuated by violent rallies of considerable strength. I'd be very scared if this rally isn't good for at least another 1000 DOW points, for that'd mean in this information age that many investing professionals have figured out that Washington these days just produces crap and that stimulus significantly subsidizes consumption only.

--Brant

[syrakusos]

The decline of 115 Dow points today is insignificant. While I think averages can go much higher on this Bear Market ... I'd be very scared if this rally isn't good for at least another 1000 DOW points ..

All of that is intuitive conjecture, Brant. I do not doubt that there is money to be made in equities. What "most" people seem to want is a guaranteed buy and hold strategy so that they can buy anything at any time and always sell for a profit. As the character of Lou Mannheim said in Wall Street, everyone looks smart in a bull market. Whether "the" market is generally up or down can be irrelevant if you are buying and selling specific items. Warren Buffett said in a recent interview that he loves people who short Berkshire Hathaway because he considers that a commitment to buy it. So, if you buy and sell all the time, as an enterprise of your own, watching the markets, gathering and evaluating information, managing your funds, and profiting thereby, then congratulations to you.

The wider problem, of course, is what you have, really, is the soda fountain concession on the Titanic. Reality is not to be cheated. You said that investors might figure out that press releases from the federal government lack substance. If economics is a real science and not just tea leaves, then it does not matter at all what "investors" might "figure out" because the physical consequences will be obvious to all.

That said, see below.

Agree with most of your previous post. There will be no nationalisation and gov will exit their bank position in due course. I do believe austrian economics will end up rather discredited as the gov will take credit for the coming recovery. ... mises org are permabears - everything is a catastrophy of biblical proportions ...

I agree that there is a product in the Doom and Gloom that Mises.Org and others sell to a willing marketplace. I confess to having been part of that. I "went Galt" over 40 years ago. While the success of the Reagan Revolution brought me back, I never invested in the mainstream in any sense of the word, not materially or spiritually. If I could employ 20/20 hindsight ... but, then, of course, if everyone could, we'd all be better off. That's the challenge isn't it? Knowing the best course of action in a world with no guarantees.

I agree also, that much of what they sell is an "enemies of the future" stance that meets the needs of what Cordero correctly identifies in your first essay. It is not so much the incessant jeremiads as it is the lack of anything to replace the problem. Yet, when you consider the monumental creations of Fred Smith, Ed Snider, Peter O'Malley, Mark Cuban, and T. J. Rodgers, you have to wonder about the rest of us who did so little. I did the least necessary to make mysefl happy, following Ayn Rand's dictate not to share the fullest of my ability with a world that regards me as a sacrificial victim. So, I guess I called that wrong, eh?... and yet... of hthe five men mentioned, three made their money in professional sports. As valuable as entertainment is to a rich and full life, even the Dodgers cannot compete against the lightbulb, the railroad and the telegraph. And that's what we are talking about here, riding on the diminishing wave of the 19th century. The computer revolution might have been the last of it, the last unregulated (unregulatable??) market into which the brains of our generation put their best efforts. (Certainly what little I did was done there.) ... or maybe not...

The thing is though that Austrian economics is not The Von Mises Institute any more than chemistry is Dow Chemical. You can find people for whom science is discredited. They teach in universities that science is merely a "scientistic narrative" to employ scientists. Even those who argue strongly against this post-modern nonsense -- Alan Sokal and Jean Bricmont -- accept the premise that there is no objective knowledge, only approximately better understandings. So, too, with the Austrians at VMI. Whether they are "discredited" with some undefined groups of persons - and whether their Bear Market position is profitable -- is irrelevant to the validity of their science.

Edited March 25, 2009 by Michael E. Marotta

[Brant Gaede]

The decline of 115 Dow points today is insignificant. While I think averages can go much higher on this Bear Market ... I'd be very scared if this rally isn't good for at least another 1000 DOW points ..

All of that is intuitive conjecture, Brant. I do not doubt that there is money to be made in equities. What "most" people seem to want is a guaranteed buy and hold strategy so that they can buy anything at any time and always sell for a profit. As the character of Lou Mannheim said in Wall Street, everyone looks smart in a bull market. Whether "the" market is generally up or down can be irrelevant if you are buying and selling specific items. Warren Buffett said in a recent interview that he loves people who short Berkshire Hathaway because he considers that a commitment to buy it. So, if you buy and sell all the time, as an enterprise of your own, watching the markets, gathering and evaluating information, managing your funds, and profiting thereby, then congratulations to you.

The wider problem, of course, is what you have, really, is the soda fountain concession on the Titanic. Reality is not to be cheated. You said that investors might figure out that press releases from the federal government lack substance. If economics is a real science and not just tea leaves, then it does not matter at all what "investors" might "figure out" because the physical consequences will be obvious to all.

That said, see below.

Agree with most of your previous post. There will be no nationalisation and gov will exit their bank position in due course. I do believe austrian economics will end up rather discredited as the gov will take credit for the coming recovery. ... mises org are permabears - everything is a catastrophy of biblical proportions ...

I agree that there is a product in the Doom and Gloom that Mises.Org and others sell to a willing marketplace. I confess to having been part of that. I "went Galt" over 40 years ago. While the success of the Reagan Revolution brought me back, I never invested in the mainstream in any sense of the word, not materially or spiritually. If I could employ 20/20 hindsight ... but, then, of course, if everyone could, we'd all be better off. That's the challenge isn't it? Knowing the best course of action in a world with no guarantees.

I agree also, that much of what they sell is an "enemies of the future" stance that meets the needs of what Cordero correctly identifies in your first essay. It is not so much the incessant jeremiads as it is the lack of anything to replace the problem. Yet, when you consider the monumental creations of Fred Smith, Ed Snider, Peter O'Malley, Mark Cuban, and T. J. Rodgers, you have to wonder about the rest of us who did so little. I did the least necessary to make mysefl happy, following Ayn Rand's dictate not to share the fullest of my ability with a world that regards me as a sacrificial victim. So, I guess I called that wrong, eh?... and yet... of hthe five men mentioned, three made their money in professional sports. As valuable as entertainment is to a rich and full life, even the Dodgers cannot compete against the lightbulb, the railroad and the telegraph. And that's what we are talking about here, riding on the diminishing wave of the 19th century. The computer revolution might have been the last of it, the last unregulated (unregulatable??) market into which the brains of our generation put their best efforts. (Certainly what little I did was done there.) ... or maybe not...

The thing is though that Austrian economics is not The Von Mises Institute any more than chemistry is Dow Chemical. You can find people for whom science is discredited. They teach in universities that science is merely a "scientistic narrative" to employ scientists. Even those who argue strongly against this post-modern nonsense -- Alan Sokal and Jean Bricmont -- accept the premise that there is no objective knowledge, only approximately better understandings. So, too, with the Austrians at VMI. Whether they are "discredited" with some undefined groups of persons - and whether their Bear Market position is profitable -- is irrelevant to the validity of their science.

It's not exactly intuitive, Michael. I've been watching this country going wronger and wronger for over 50 years, as government got bigger and bigger with more and more regulations, etc. Because of this we're collectively much poorer than we would otherwise be, never mind the recent goings-on. I think Ayn Rand missed the boat by under-emphasizing the role of envy in self-made human stupidity and evil. The ruling elite, not so smart but a survivor par excellence, panders to all. Not you and me. Overall, things are getting better and better and should be even better hundreds of years from now, but life is too short to take much comfort outside from what one can do for oneself. Sometime in the next 25 years New York City is going to be blown up. Go and enjoy it while you can.

The problem is time. I'd like to live for 3-400 years, assuming the Viagra keeps working.

--Brant

Edited March 25, 2009 by Brant Gaede