HEDGING FOR ARMADEGGON

[Brant Gaede]

I just found this Web site. If financial economic disaster comes as I fervently believe it will follwing its investing information now will keep your head above water when you are out of work and the value of the dollar eviscerated. If there is no disaster hedging against it won't hurt you much and you'll probably make money.

http://www.thomasnogales.com/monthly_emails.htm

--Brant

Edited October 1, 2008 by Brant Gaede

[Brant Gaede]

Warren Buffett is investing in GE. He did a somewhat similar deal with Goldman Sacs. Berkshire Hathaway owns 9% of Wells Fargo. He should have sold Wells Fargo instead. Berkshire is a SELL, but so is virtually the entire stock market. Buffett is too old. His brain is as good as it ever was, but when you get serious intimations of your own mortality you forget your business will live after you. He has the added problem of being seduced by how perfectly his investing meshed with the great bull market that started in 1982. That's over. BRK will perform like the equity markets generally world-wide--badly. It will have good potential for a rebound starting in a few years assuming Buffett doesn't keep putting money to work on the way down, which is precisely what he has been doing for a year now only it seems to be getting worse. A quick crash would be best for him before he spends any more money.

--Brant

[tjohnson]

I must say I do enjoy your posts about the economy. Not the situation, but the analysis of it.

[Brant Gaede]

I must say I do enjoy your posts about the economy. Not the situation, but the analysis of it.

Thank you, but most of what I post is not original. My primary reference is Mr. Mortgage who is constantly dealing with current California real estate data from multiple sources as part of his day job. He then analyzes what's going on on his Web site. Also Bill Fleckenstein. Thomas Nogales is very interesting. He has the best overall understanding I've read so far about what is going on.

--Brant

[Brant Gaede]

Thankfully I went modestly short yesterday and today.

I'm afraid the bailout legislation has been completely discounted by the markets and when the House acts, probably on Friday, and passes the damn thing they will totter on the brink of a real panic sell off. I'm most concerned about what is going to happen Monday. While I may be more short then than I am now it won't be as much as I wanted. Psychologically I need a pop-up to set up a significantly larger short position.

--Brant

11:30 ET DOW -275 Nasdaq - 59

[Brant Gaede]

The Federal government is about to waste multiples of hundreds of billions of ultimately taxpayer dollars trying to save banks that can't be saved or do much more than re-enforce their horrible balance sheets. This is becoming generally recognized as true information by professionals and the investing public. This will leave the government with virtually no ammo to prop up the economy or equities. This bear market cannot be stopped or reversed anytime soon. There will probably be a crash on Monday if the bailout bill fails to pass--or even tomorrow if the vote in the House fails while markets are still open. If it is passed, it's almost guaranteed to, the crash will simply take three months as the best case scenario. After that the big grind down will continue. There is no refuge in any foreign market I can think of.

--Brant

Bonds except for short-term T-bills are the most dangerous things you can own. They can destroy you. They will not protect your income stream.

Edited October 2, 2008 by Brant Gaede

[Brant Gaede]

Gold is down big today. Its price can crash just like any other as people flee to desperately needed cash. As I've said, it should be purchased if you want to by using dollar cost averaging. Another way is to buy one bullion coin every month or every two months depending on what you can afford. If gold goes to $500/ounce buy 2 coins. This is for a plus 5 year hold. To buy more when the price goes up and less when down is asking for really big trouble.

--Brant

no gold

Edited October 2, 2008 by Brant Gaede

[L W HALL]

The Federal government is about to waste multiples of hundreds of billions of ultimately taxpayer dollars trying to save banks that can't be saved or do much more than re-enforce their horrible balance sheets. This is becoming generally recognized as true information by professionals and the investing public. This will leave the government with virtually no ammo to prop up the economy or equities. This bear market cannot be stopped or reversed anytime soon. There will probably be a crash on Monday if the bailout bill fails to pass--or even tomorrow if the vote in the House fails while markets are still open. If it is passed, it's almost guaranteed to, the crash will simply take three months as the best case scenario. After that the big grind down will continue. There is no refuge in any foreign market I can think of.

--Brant

Bonds except for short-term T-bills are the most dangerous things you can own. They can destroy you. They will not protect your income stream.

I'm not an economist nor do I claim any great knowledge of it. What I can do though is read and I have read a lot of different takes on this bailout and I am no more convinced it should be done now than I was when they first started talking about it. Rewarding poor business practices is not what I understand a free-market economy is all about.

Here's how I see it and it's part of what you wrote about above:

If we don't do the bailout then there's a good chance the market will take a big hit. However we will still have the money in reserve(maybe not a good way to put it) that they are going to use to shore up what you yourself said was businesses that very well may fail anyway. If we wait this thing out then we still have this money and it can be applied in the areas which are shaky but able to pull themselves out. I don't believe it gambling everything you have on one roll of the dice when there are other options available.

Don't know if this has been posted, but I like the take this guy has on it from Lew Rockwell site:

Bailout Truth

[Brant Gaede]

Thank you for your comment and valuable link, LW.

I won't have any major short positions until very early November and since they will be major they will be hedged.

--Brant

Edited October 3, 2008 by Brant Gaede

[Brant Gaede]

Right now, just one hour into market open, the Dow is down over 400 and the Nasdaq is down over 100.

The bailout bill has been discounted as worthless.

The possibility of worldwide interest rate cuts is now in equity prices.

There is now nothing except money on the side that can stop markets from going down, but that is the smart money. Short-term I am still expecting a snap back rally--hoping for it--so I can sell it short. Unfortunately too many people have the same idea.

Eventually, short-term, equities will stabilize. But company and outright bond failure is coming and equities will continue to come down especially next year. Real estate will get even worse. There is an even bigger wave of foreclosures coming than has already happened as a class of beyond equity loans on top of primary drives people out of their homes and people lose their jobs and can't make any mortgage payments any longer.

(Now the DOW is down nearly 600 and Nasdaq down nearly 140.)

A great inflation is coming. The bailout has to be paid for and there is no other way. The government has caused this mess and all its efforts are making it worse. The six year war in Iraq has cost at least one trillon dollars. The Feds are throwing at least that into the black hole of the bottomless pits of the big financial institutions.

(Now markets have reversed a little. This is not a crash so far today because it is not high volume.)

Deleveraging continues. Gold up, oil down.

--Brant

Edited October 6, 2008 by Brant Gaede

[BaalChatzaf]

A great inflation is coming. The bailout has to be paid for and there is no other way. The government has caused this mess and all its efforts are making it worse. The six year war in Iraq has cost at least one trillon dollars. The Feds are throwing at least that into the black hole of the bottomless pits of the big financial institutions.

(Now markets have reversed a little. This is not a crash so far today because it is not high volume.)

Deleveraging continues. Gold up, oil down.

--Brant

Buck, Buck, Buck. That is the sound of the chickens coming home to roost.

Is says in Proverbs - those who sow the wind, shall reap the whirlwind-. Ain't it the truth?

Unfortunately innocent folks will be blown about with the guilty.

I weep for the Republic.

Ba'al Chatzaf

Edited October 6, 2008 by BaalChatzaf

[Brant Gaede]

Crash.

I think of a crash as equity prices going down massively on high volume over a two-day period forming a strong bottom for a rally that can go on for years. What is happening today is not something like that. But the big grind down that has been going on for a year almost to the day is continuing. That's another kind of crash.

--Brant

[Brant Gaede]

After a slight rebound the equities markets are new their daily lows again. This is so sad. A year ago the Dow hit its all-time high of 14,100. At this instant it is 9762 and will go much lower over time. Even with a DOW still at its all-time high, ten years in an S&P fund would have yielded you little or nothing adjusted for inflation.

I'm all cash except 60 shares of one stock owned by my Mother which was in the 60s last summer and is now well below 20. We don't trade this. When I saw a quote earlier today it was under 18 down 3.72. My worry is that the company is so cheap that another will buy it up at say no more than 30 a share. I'd like to keep it because it'd be trading at over a hundred in five years. So we feel a little pain on this one stock, ___, but that is insignificant to the pain millions are experiencing who are being clobbered by real estate and equities and will soon be clobbered by bonds' prices going down if not out-right defaulting.

The economy is like a piano falling that is only 1/4 of the way down. Until it hits the ground there will be little basis for a hope of a stock market investible bottom. Equity prices can easily go down another 50% as reflected in the value of the S&P 500, now at 1031. No one can know just how bad it will get and when in time it will get to be the worst it will be. All I know is that that piano is still falling. Don't stand underneath it.

--Brant

Edited October 6, 2008 by Brant Gaede

[Brant Gaede]

The price of oil is now down $60 from its all time high of just under $150. This will be disastrous for Russia, but no where near as disastrous as its gas fields drying up. This will help make the world even more dangerous in a general way because of its vast inventory of nuclear weapons.

While I own firearms, I am seriously considering buying a pump-action 12-guage shotgun, more fencing and more dogs. I am also buying canned food as it comes on serious sale. While I don't think water will ever be a problem, I'l be stocking up a little on that.

The one and only time I packed heat walking my Lab was last summer at night during that crazy time just before the fourth of July. My neighborhood is not high crime, but I was threatened by a slow moving car. I'll soon be packing my .357 in broad daylight. Nobody is going to mug me for my dog. About six-months from now I'll probably be taking it grocery shopping with me.

The DOW is now down 700 and the Nasdaq 155. It's likely to be down 1000 and 200 into the close in an hour and a half. Though it could go the other way today it'll get there and beyond eventually.

True panic has not yet hit the markets. The true panic comes from individual investors not forced hedge fund liquidations consequent to redemptions and deleveraging. The latter will evenually panic the former.

--Brant

Edited October 6, 2008 by Brant Gaede

[Brant Gaede]

Equities have strongly reversed. We may be setting up for a significant snap-back rally even as early as tomorrow. I am not trading this market; I am watching it. I think markets may be thinking that interest rates will be lowered soon in a world-wide coordinated effort.

I'm making this post in case anybody is buying or selling trying to game this market based on anything I've been posting here. If you are such a person, the mere fact that you are reading me while markets are open means you are not a competent trader. This gives you a little time to adjust before the closing if you want to.

--Brant

Edited October 6, 2008 by Brant Gaede

[Brant Gaede]

We cannot call what happened today a snap-back rally and still close 300 down on the DOW. However, it might be described as part of one depending on what happens tomorrow. I've been looking for the damn snap-back for quite a few trading days now so I can sell it. If the DOW goes up 800 from here I'll start thinking about actually doing that in a modest way. I don't want to start acting like a pig until the election at least. Traders are making scads of money off this incredible volatility. It is tempting to join them but I am stopped by my inability not to leave my screen for more than a minute or two.

--Brant

[Brant Gaede]

Too many people are thinking "market bottom!"

If the market snaps back or grinds up say 1500 DOW points, which I doubt, that'd be no foundation for a new Bull Market. The required massive destruction of debt hasn't yet got a full head of steam. The government jumping into this situation trying to prevent it will only mean ten or more years of stagflation. Another ten years of stock prices not going anywhere or going down, especially adjusted for inflation.

Since all this going to the resue Federal (taxpayer) money is flowing, now or soon, into financials and not coming out, little will be available to support equity prices. After the election if not already there will be a big grind-down in equity prices, especially growth stocks. After the major deflationary pulse that this will be a symptom of, the necessary monetization of Federal debt will expose the currency to gross inflation with stock prices still going down as interest rates go up and the price of surviving long bonds grossly deteriorate.

We are now going to be ruled by an intelligent ignoramus, Obama, which might be better than John McCain, impervious to new ideas and understanding but willing to act in a calamitous way regardless.

--Brant

Edited October 7, 2008 by Brant Gaede

[Brant Gaede]

I'm still waiting for and hoping for a big rally, but the DOW volatility so far today is 500 points down 330. Holding unhedged short positions over night is extremely dangerous.

--Brant

Edited October 7, 2008 by Brant Gaede

[Brant Gaede]

The DOW closed down 508 to 9447. The S&P is below 1000. Nasdaq down 108.

Markets have no vitality.

The country is economically imploding.

Our President has wasted at least 3 trillion dollars on wars and pork and now bad debt coming on plus Medicare Part D and bloated sundry expenditure bills as in agriculture. Where is his "compassionate conservatism" now? How many years has it been since he's even uttered those words?

Americans have used debt to maintain their standard of living exporting gross amounts of it abroad, especially to China whose coal-fired electrical plants are polluting the skies of the world, especially Korea and Japan with the crap drifting west to the United States.

--Brant

[Lukon]

Doom and gloom. This is especially scary for me. I already live in poverty. If this stuff goes down, I won't survive it. I'll die of starvation, failing health and exposure to the elements. My wisest investment at this point is probably a gun by which I can quickly terminate my own suffering. So I've likely got no more than 3 years to live. I guess I spend as much of that time as possible having ideological discussions on forums like OL.

-Luke-

[BaalChatzaf]

The DOW closed down 508 to 9447. The S&P is below 1000. Nasdaq down 108.

Markets have no vitality.

The country is economically imploding.

Our President has wasted at least 3 trillion dollars on wars and pork and now bad debt coming on plus Medicare Part D and bloated sundry expenditure bills as in agriculture. Where is his "compassionate conservatism" now? How many years has it been since he's even uttered those words?

Americans have used debt to maintain their standard of living exporting gross amounts of it abroad, especially to China whose coal-fired electrical plants are polluting the skies of the world, especially Korea and Japan with the crap drifting west to the United States.

--Brant

Have the factories disappeared? Have the technical people lost their skills? Have natural resources vanished? Are the computers ready to run? The -real economy- is still there. Only the symbol manipulating phony baloney economy is in distress.

Ba'al Chatzaf

[BaalChatzaf]

Americans have used debt to maintain their standard of living exporting gross amounts of it abroad, especially to China whose coal-fired electrical plants are polluting the skies of the world, especially Korea and Japan with the crap drifting west to the United States.

--Brant

Then let us fart in their direction.

Ba'al Chatzaf

[Brant Gaede]

Asian markets have sort of crashed. Indonesia and Japan down 10% and an hysteric is calling it "capitulation."

At this time US markets will open with the DOW down about 200. In six hours just before the open it may be worse or better. Not very likely better. Doesn't matter; it won't be "capitulation." Considering that the S&P is down about a third from its year ago high even another 1000 off the DOW wouldn't qualify.

If I remember 1987 correctly, the famous crash/capitulation lasted one or two days and the market was only off a little prior. I think equities lost about a third. This was a bull market "V" crash and recovery. Down fast, then up fairly fast. What's happening now is a slow motion crash now a year old in a bear market and looming systemic world-wide recession. We are still on the left side of the "V" which is actually going to be a "U." What is happening right now is only another chapter of the big grind-down. However, because it is all happening faster than I anticipated albeit still slow, I now think even a DOW 3000 is possible in a few years (denominated in constant 2008 dollars). When Warren Buffett started buying stocks hand over fist in the 1970s he was too early as they kept on going down--and he kept buying--50% more overall. He didn't wait for the capitulation, he waited for value. In the context of what is happening right now I want to see another 1500 off the DOW right away so I can buy some Altria (MO) with a huge dividend. Best sector to sell short is probably technology, but shorting is so difficult.

--Brant

Edited October 8, 2008 by Brant Gaede

[syrakusos]

What's happening now is a slow motion crash now a year old in a bear market and looming systemic world-wide recession.

I read about it two years ago in American Banker. Everyone who matters in this saw it coming a long time ago and what we are reading as "news" is merely the roll-calls of ducks in a row. In fact, it's kind of funny, but back in 1965, I found this book about Cycles in a library sell-off.

According to this theory, we are currently at the turning-point of the 5th Kondratiev. -- Wikiepedia "Kondratiev wave"

As for "Armageddon" or whatever, all that matters is what happens to you. That is the experiential world. The idea that the world is coming to an end or this is the end of times or the start of a new age is just mystical malarky. Even Objectivists are given to it because of Atlas Shrugged, that whole ragnarok theme. Myself, I tend to see this in the same light as Virginia Postrel in The Future and Its Enemies.

The years 1873-1896 have been called "the long depression" (see the Wikipedia, again, for the common understanding). But they were decades of vibrant change, new technologies, scientific discovery and improving lifestyles. That was the Gilded Age of Capitalism as we Objectivists all love to glorify it.

Let us keep our rational-empirical worldview and not succumb to mystical eschatology.

Edited October 8, 2008 by Michael E. Marotta

[Brant Gaede]

This cycle demands debt destruction, but for political reasons the government is trying to preserve it.

In the late 19th Century they were building steel mills and the like--railroads, oil refineries, the introduction of electric power, etc. Today it's fast food and health service.

--Brant