HEDGING FOR ARMADEGGON


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Hedging for Armadeggon is a way to invest on a trend. You don't need to get there to profit or just to effectively protect your assets. Nobody I want to know wants to actually get there. The concept of Armadeggon will be experienced differently by different people depending on varying human circumstances including age, health, current source of income, prospects, wealth, etc.

--Brant

Edited by Brant Gaede
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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.

Actually it was the time when corporate welfare permanently established itself in the country.

I prefer to glorify the period of Jacksonian political economy in the North. No period has had the growth that this period had, and the growth was very stable. The country also managed to absorb a large percentage of immigrants. It started in 1837 when the Bank died and ended in 1861 when Lincoln entered office with the goal of destroying Jacksonian political economy.

Note that I don't include the South because of slavery. Slavery held the South back. It actually makes it all the more remarkable because most of the immigrants were absorbed in the Northern half of the country.

Of course, it was also during this time that the most powerful seed of destruction was planted. I'm, of course, referring to the establishment of socialist schools.

Edited by Chris Baker
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With markets closing in 1/2 hr the DOW is approaching 8900.

I suspect tomorrow will end significantly down too as investors and hedge funds don't want long exposure going into any possible bad news weekend.

Yes, we could crash tomorrow and Monday, even Tuesday. We don't have to. A crash, in the context of what is going on which includes a completely rotted financial system and oncoming major recession and taking into account markets are already down by 1/3 over the past year, means a 5-6000 DOW. I'd buy that for a trade, but not before Tuesday. Whatever happens Monday needs to keep happening Tuesday or it won't be bad enough wherever the DOW is then. Caveat: What is going on now may only be shorts re-establishing their positions and instead of a crash we may see some short-term stability.

--Brant

long gold (GLD) as of yesterday afternoon after hours

Edited by Brant Gaede
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With the DOW down 650 with 11 minutes to go we are getting intimations of real panic. You can trade panic for a short-term rebound but as part of the big grind down it is rational for equities to continue to deteriorate.

--Brant

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Ah. The DOW improved 200 to about 450 then started going bad again. All in a few minutes. The most interesting thing about tomorrow will be Yom Kippur is over, but I'd bet many Jews will make it a four-day weekend.

The DOW is closing down 635. There will be some adjustment in that for the next 5 minutes.

--Brant

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The DOW ended down nearly 679. It took nearly 10 minutes for the specialists on the floor of the NYSE to clear their orders.

Foreign markets are now going down similarly. They are playing follow the US leader. It is already their Friday. Ours to come. What is happening with them doesn't mean it will happen to us on our Friday. If we are up tomorrow that will encourage foreign markets to open up on their Monday, all else being equal, which is unlikely and not just because it is unlikely we won't go down more on Friday; too many I think will be too wary about going long into the weekend. Right now the DOW futures are down 255. Doesn't mean anything for we are the end of the equity trading week.

The more the government tries to fight the business cycle by flushing away American wealth the poorer we will be collectively be and the longer Americans will ineffectively trash around like beached fish.

Young people can find refuge in the military or in college. Borrow money to go to college; that debt will be destroyed by inflation. Joining the military first might be the best choice, before everyone else who might be eligible tries to get in. Then get the "higher education." Avoid combat arms. In the navy submarine service will probably be safer than on, say, an aircraft carrier, which is much more likely to be sunk in a probable war. All American aircraft carriers and major surface vessels can be blown out of the water by Russia and, ever more likely, China. War, however, isn't likely during the next five years, though one never knows. You don't want to lay down your life for the President of the United States.

Stock market crash will be followed by economic collapse which in turn will preclude significant near-term stock market recovery. People with money in retirement accounts should learn how to hedge those accounts without cashing them in for the penalties can be onerous. Learn about puts on the S&P 500 going out at least a year.

People should start stocking up on medicine, especially if diabetic. Food too. My house is not connected to a sewer system. This means that if the sewers fail I won't be affected. Many homes are improperly constructed. A valve is missing in their homes to prevent sewage from backing up into their basements. Flashlights, candles and a lot of batteries? Hand-cranked radios? Do you get your TV by cable or dish? Dish is better for the cable might go out. The cable gets its stuff from a dish too--and then distributes it. So, have a good antenna and one of those converter boxes too. How about a generator? Got one?

Own a home? It is likely it won't be saleable next year, but a window seems to exist because of the Federal "bailout" to get rid of it right now and rent before the real estate market just completely freezes up. Yeah, you may get a good comp price, but will the buyer be able to get financing?

Sell things now you won't need tomorrow and get cash to save your posterior now. When the real bad stuff comes down next year and the year after you'll be able to buy what you need on Craigslist, cheap.

Are you ready to be unemployed? What will you do then? Anybody can be a Wal-Mart "greeter," but those jobs are hard to get in many parts of the country right now. One might try to get certified to take care of people in nursing homes. The pay's not much, but you won't starve.

Enjoy your evening.

--Brant

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Why are equity markets going down? There are more people who need money than there are people who have money who are willing to give it up. "I own one (1) share of IBM. Please give me $100." "I have $50 for that. Take it or leave it."

--Brant

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The DOW was down over 600 and reversed after the opening panic. It was quite startling to see the DOW below 8000.

Equity markets might be shut down Monday since it's already a bank holiday. Bad idea, especially for foreign markets hopelessly enthralled with what is happening in the US.

The time has come to have some serious cash on hand in case you go to the ATM and it doesn't work or shopping for food and your credit card doesn't work. Keep the gas tank full. If any of this happens it's not likely to last for long but--who knows?

There has been a complete reversal with averages trading up. My remarks about cash on hand still stand and will stand for at least six months.

--Brant

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It's extremely important markets not close down big today, because if the general public panics over the weekend then there might be real panic. But my guess, and it's only a guess, is the markets will significantly sell off. Soon our great leader will speak. The guy who went to Yale and didn't bother getting an education. Of course, an Ivy League "education" has been over-rated since the German model took over our educational system in the 19th century.

--Brant

Edited by Brant Gaede
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What the President is saying is not helpful. What needs to be annouced is a specific program to guarantee interbank lending. If one bank won't lend to another you have a massive credit freeze.

Markets are selling off from his nothing oil-on-the waters yak.

--Brant

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Yes, we could crash tomorrow and Monday, even Tuesday. We don't have to. A crash, in the context of what is going on which includes a completely rotted financial system and oncoming major recession and taking into account markets are already down by 1/3 over the past year, means a 5-6000 DOW. I'd buy that for a trade, but not before Tuesday. Whatever happens Monday needs to keep happening Tuesday or it won't be bad enough wherever the DOW is then. Caveat: What is going on now may only be shorts re-establishing their positions and instead of a crash we may see some short-term stability.

How did you arrive at these DOW numbers? Gut feel? Some calculations? If so, what sort of calculations?

If you don't want to say, I understand.

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Yes, we could crash tomorrow and Monday, even Tuesday. We don't have to. A crash, in the context of what is going on which includes a completely rotted financial system and oncoming major recession and taking into account markets are already down by 1/3 over the past year, means a 5-6000 DOW. I'd buy that for a trade, but not before Tuesday. Whatever happens Monday needs to keep happening Tuesday or it won't be bad enough wherever the DOW is then. Caveat: What is going on now may only be shorts re-establishing their positions and instead of a crash we may see some short-term stability.

How did you arrive at these DOW numbers? Gut feel? Some calculations? If so, what sort of calculations?

If you don't want to say, I understand.

I'm referring to how bad things might be not what they will be. This is not short to a 6000 DOW post. I am only saying that if it gets that way two trading days into next week I'd seriously think about going long on some equities. After a bounce back up I'd sell that. That's working panic. The real problem is what will happen to equities in the coming year. I don't see anything good because all this Federal money is being sucked up by disfunctional financials. When I talk about a "crash" I'm talking about something much worse than anything that has happened any one day so far into this mess. We don't have to have it. Instead just more of the big grind-down.

--Brant

Edited by Brant Gaede
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I'm referring to how bad things might be not what they will be. This is not short to a 6000 DOW post.

--Brant

Thanks, but you didn't answer my questions. Maybe this will help you.

___ date _____ S&P 500 ____ drop ____ months

31-Aug-00 ____ 1517.68

30-Sep-02 _____ 815.28 __ -46.28% ____ 25

31-Oct-07 ____ 1549.38

10-Oct-08 _____ 870.94 __ -43.79% ____ 12

The first set is the bursting of the tech bubble, 9/11 and accounting scandals.

The 870.94 is from a few minutes ago. The underscores are to improve the layout.

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I'm referring to how bad things might be not what they will be. This is not short to a 6000 DOW post.

--Brant

Thanks, but you didn't answer my questions. Maybe this will help you.

___ date _____ S&P 500 ____ drop ____ months

31-Aug-00 ____ 1517.68

30-Sep-02 _____ 815.28 __ -46.28% ____ 25

31-Oct-07 ____ 1549.38

10-Oct-08 _____ 870.94 __ -43.79% ____ 12

The first set is the bursting of the tech bubble, 9/11 and accounting scandals.

The 870.94 is from a few minutes ago. The underscores are to improve the layout.

This time it's going to be worse because Greenspan's liquidity inflated the housing bubble which replaced the tech. bubble. What's being inflated now are bad bank balance sheets, which is like pumping air into a tire with a hole in it.

I think it'd be more instructive to compare the 1970s to what is going on now regarding how bad things can get in equity markets. Unfortunately, it looks like it's going to be even worse.

The most important aspect of your data is the comparative time frames. (You should have started with just before the initial collapse which would give you 31-32 months, not 25.) It took 2 1/2 years to get going again and the Nasdaq only recovered half its loses. I think it will take up to ten years to base out for a new bull market. A tidal wave of company bankruptcies is coming next year.

--Brant

Edited by Brant Gaede
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Economic collapse means the collapse of the US service economy. Most of it's not needed so it'll be gone. Who has to go out to eat? Cook at home. Need your pool serviced? Do it yourself. You'll have the time; you lost your job.

--Brant

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I think it'd be more instructive to compare the 1970s to what is going on now regarding how bad things can get in equity markets. Unfortunately, it looks like it's going to be even worse.

Okey-dokey.

__ date ______ S&P 500 _____ drop ____ months

1-Oct-68 ______ 103.41

1-May-70 ______ 76.55 _____ -25.97% ___ 19

1-Dec-72 ______ 118.05

3-Oct-74 _______ 73.90 ____ -37.40% ____ 22

The most important aspect of your data is the comparative time frames. (You should have started with just before the initial collapse which would give you 31-32 months, not 25.)

That's a quibble based on the Nasdaq. The S&P 500 peaked at 1527.46 on 3/24/2000 (using closing prices). It closed at 1517.68 on 8/31/2000.

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Roughly the big bear market of 1966-1982 was followed by the big bull that ended in early April 2000. The worst things about that bear market were probably how long it lasted, stagflation and the"Nifty-Fifty." By using high interest rates to break the back of inflation, Paul Volcker set up the bull market. 2000 seems to be crudely analogous to 1966.

--Brant

Edited by Brant Gaede
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Economic collapse means the collapse of the US service economy. Most of it's not needed so it'll be gone. Who has to go out to eat? Cook at home. Need your pool serviced? Do it yourself. You'll have the time; you lost your job.

Back during the late 60's and early 70's, we still had a sector of the economy that actually produced stuff. We had glass factories, a strong auto industry, chemical plants, and steel mills. Over time, this all went away. High tech was supposedly going to replace it--yet, they shipped it overseas as fast at they had built it up.

A lot of the supposed growth has been what I call superficial wealth. It's not just people going out to eat more often. It is stupid stuff like power windows in cars, electric pencil sharpeners, and other baloney. I specifically mentioned these things because I happen to hate them. We survived just fine without them and would do just fine without them again.

You also can not discount how much environmentalism has taken away our capacity to produce wealth. They are partially responsible for driving the factories away.

Edited by Chris Baker
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The DOW closed down 128. Today is the first day ever that the very high very low spread was over 1000 DOW points. In the first half hour the DOW was down 621 then reversed about 700. Etc. The real big boys were bowling.

--Brant

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Let's say that deflation is more of a threat than inflation. This might mean the price of gold will go down over time, not up. What to do?

Buy some Japanese Yen and Swiss Franks, not just gold.

Deflation means bonds will generally hold up or go up. What to do? Buy some Altria (MO), right now yielding 7%. Buy some General Mills (GIS) yielding 6%. Not much downside to these monsters. Ask your broker how to write covered calls against them. I suggest writing the calls when the yield drops a couple of percentage points because the price of the equity has gone up. (No more than 20-30% of a portfolio.) Better than and safer than bonds. They aren't going belly up. A non-government bond might. Inflation? Much better than bonds.

--Brant

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