Financial topics

[Higgenbotham]

It would be a bad idea to be nail right now as historical economics is a latent record as you can see know in my thought how the politcal economy pulled the nails and walked into the construct as linked above.

What I see here is somewhat the inverse of the historical record. Had the free market played out, the market could be approximately at a Depression bottom now. That was also true in 2007 on many long term cycles.

I'll post some examples of the inverse of the historical record as time permits. I'm noticing many, many important long term inversions at this time. Some go all the way back to the fall of the Roman Empire but of course those are only good within a few years. I have some decades long cycle inversions coming up soon that appear they may hit to the exact day. An example of one that has (so far) follows.

After the 1929 bubble, the stock market made a Great Depression low on July 8, 1932.

70 years, 3 months and 1 day later, after the 2000 Internet bubble, the stock market made a low on October 9, 2002.

Almost 10 years after the Great Depression low, the stock market made its low for the 1940s decade, where the PE also reached one of its lowest levels of the 20th century, on June 13, 1942. I was under the impression that the June 13, 1942 PE was the lowest of the 20th Century, but, depending on how it is calculated, there is not universal agreement on this, so it's just "one of the lowest".

After exactly the same amount of time elapsed to the day, that being 70 years, 3 months and 1 day after the 1942 low, the Nasdaq composite index reached its highest point since the 2002 low on September 14, 2012. On a closing basis, the September 14, 2012 high has not been exceeded since. The data works for all the major US indexes but it's most strking when the Nasdaq is viewed, probably because the Internet bubble peaked in 2000, whereas the real estate bubble took some of the other indexes higher and lower than their 2000 high and 2002 low later in the decade.

The recent data can be seen on this chart:
http://bigcharts.marketwatch.com/advcha ... &x=54&y=15

And the old data on this chart:
http://www.socionomics.net/images/charts/fig23-01x.gif

[aedens]

They are far from being done looting this economy. They want it dead. I still suggest a target of 2015 of the sdr wet dreams of these stone worshippers
of Molekh. I would suffice to suggest all the natural gas infra structure should already be done. They do not want it done period. If the true democrats
would rip the green mask off on what they truly want this would stop on a dime. We are beyond red coke cans and blue pepsi can politics with these lunatics. When Egypt fails we will talk on these matters later.

http://www.wto.org/
The special interest groups on K street understand the host is on life support and are the problem. They put it there point blank.
Multilateral institutions provide the global framework for peace and stability. But the difficulty governments face in reaching global agreements on trade, climate change and other issues has led many to question whether this model can still succeed. Is multilateralism in crisis? Anabel González, Costa Rica’s Minister of Foreign Trade, and Eduardo Pérez Motta, Chairman of Mexico’s Federal Commission on Competition, discuss this topic with Keith Rockwell, WTO spokesperson. Anabel González and Eduardo Pérez Motta

[OLD1953]

Where is all this money to buy gold going to come from? If all you are managing is to meet the bills, then gold is a long way from top of the list. We are not at a stage where people are saving for three months to buy one gold coin. Very few of the wealthy will buy a large quantity of gold, they might buy gold futures but they won't take delivery. Depending on the middle class of the USA to run up the gold price simply won't work, they do not have the money. Foreign holders don't seem to be hugely interested in gold, if the Chinese really wanted gold they'd simply buy a few of the large companies and divert a percentage of the production. While China has bid for stakes in a couple of gold miners, if they are doing so to divert production it hasn't made the news.

Now a question, is there any means by which the futures market could disconnect from the price of real gold? If such could happen, I could believe in any price you'd care to name, as long as it was nearly impossible to cash in for gold. IMHO, if there was no futures market in gold, gold prices would be much lower today. The dollar was once a paper contract for gold, and then suddenly it wasn't. Could a large enough MFGlobal scandal cause a crash in gold if people lost faith in futures contracts? IOW, I see paper inflation in the gold market, and expect it to get very hard to cash in paper for physical. The futures contracts are essentially the same promise of paper for gold that a gold backed dollar is, and are subject to the same economic pressures.

A point of interest here, tons of gold to ounces, since most mining reports deal in ounces of reserves.

http://www.traditionaloven.com/metal/pr ... imenu.html

Given that nobody says which ton or ounce they are using, it's a trifle blurry reading most of these enthused reports. Simply running the numbers shows nobody is using the same figures, by me it should be troy all the way with short tons, but that is absolutely not what you get if you check the articles against each other. Do the math, they are all over the place. And in any discussion of prices over a period longer than five or six years, it is necessary to use a constant dollar, else price increases by inflation start masking real price increases - except for the last decade or so, when inflation is a good deal less than from 1960 to 2000.

[aedens]

The kill switch was already activated on those segments Old. We conveyed this, and the void was filled by K street already as I noted to H.
I was lets say, cut apart by a few so I moved to nice to see you get your face handed to you and by the way your hair is on fire.
I would tread carefully in equity land about now also.
http://generationaldynamics.com/forum/v ... 204#p10208 Timely repost from H
http://chartistfriendfrompittsburgh.blogspot.com/
Feels like 1973
http://en.wikipedia.org/wiki/1973_oil_crisis

[Higgenbotham]

http://chartistfriendfrompittsburgh.blogspot.com/

http://chartistfriendfrompittsburgh.blo ... ecade.html
This does a good job of showing what the drunk on the high wire has done. I have no comment about the inversion I mentioned except that it's there. It doesn't provide any actionable information anymore that I can see, or give any clues as to what the future will hold. Someone could have gone short on September 14 and covered on September 26 and been OK. I don't post this kind of thing in real time anymore because it will just attract parasites. I'll post more after the fact because it's of historical GD interest. The analogy is they have the patient on the operating table and have pulled his heart out and are playing with it while they are drunk and giggling. This has been going on for some time and the patient is damn near dead. They are refusing to let the patient recover, absolutely refusing. It's like Bernanke is holding the heart, stomping his feet, and like a spoiled 2 year old screaming, "I am NOT going to let this economy recover, mommy," while the rest of the clowns laugh and talk about how cute it is.

http://blog.markdcook.com/?p=545

[vincecate]

Where is all this money to buy gold going to come from? If all you are managing is to meet the bills, then gold is a long way from top of the list. We are not at a stage where people are saving for three months to buy one gold coin. Very few of the wealthy will buy a large quantity of gold, they might buy gold futures but they won't take delivery. Depending on the middle class of the USA to run up the gold price simply won't work, they do not have the money.

In Iran the price of gold in the local currency has shot up recently. Where did the money to buy gold come from?

For the US dollar I think people will want to get out of Treasuries as they pay less than the inflation rate and move into gold. There is something like $8 trillion that come due in the next 12 months. So if people stopped rolling over their government bonds there would be lots of money to buy gold and all sorts of other things.

[OLD1953]

The Iranian currency inflated 80% in less than two weeks. That's a totally different situation.

Higgs, those charts simply confirm what I already knew, that Greenspan / Bernake had managed to create a monetary inflation after the tech stock crash BUT managed something with that inflation that nobody every managed before, AFAIK, which was to place almost all of the money created in the stock and bond markets - and I believe that was their intention. Since the collapse of that bubble, all parts of the real economy are acting in a recessionary environment, while the derivative economy is acting as if nothing happened and there's been a full recovery. This dichtomy cannot and will not continue, the peculiar event I see forthcoming is the crash of the derivative economy which will primarily have two major effects, it will crush tens of thousands of paper millionaires and it will create an emotional gloom over the US economy that will last for decades far longer than the actual situation will warrant. This was also the case after the Great Depression, many people were terrified to put a dollar in a bank years after the structural problems with the banks of that era had been fixed and the FDIC had insured every account.

How much longer can the USA afford our current open trade? Our trade deficit is a direct charge off against growth in the US economy. I'm shocked that neither party is saying a word about NAFTA this year.

[aedens]

I agree on your call H to keep it under the hood. Tyler has a view I hold in context but I cannot, or lets say will
not take a haircut since this year was very positive. Baskets have been sorted so the 20 percent can foster
enough flow for the year. On the NAFTA issue the coke and pepsi debaters are not insane. They need to pander to the
inept base for that last few percentages to push the decrepid road show alive. I have nothing but disdain for them
being led by the nose. I feel the base as noted are captured by FUD so the Demoncrats will pull it off. Retardacans
let Wall Street run riot and decadent over decent folks. Gramm's legacy desease is still viral in many minds.
Both need a severe trip to the wood shed and are out of any rhetoric to the people as such.
As for the Banks they could not even begin to care about you or me since Truman.

[Higgenbotham]

OLD, a lot of the inflation has gone into the stock and bond markets, I agree with that, and the fact that the inflation can come out in a hurry. Some of the inflation has gone into raw materials. In theory, it can be argued that will stimulate production of raw materials. I suspect that is Bernake's belief, but also suspect that the result will be the economy gets crushed with the added drag of raw material costs being higher than otherwise, followed by raw material prices reaching a lower low than otherwise once the whole thing is done unraveling. Your comment about gloom reminds me of John's comments about mean reversion.

[vincecate]

The Iranian currency inflated 80% in less than two weeks. That's a totally different situation.

It seemed you were trying to argue "where is the money going to come from to drive up prices". It sometimes helps to try out an argument on a real historical case. So I suggest looking at Iran. Where did all the money come from to drive up the prices in Iran? The truth is the value of a currency can drop by 20% over a weekend without any new money printed over the weekend. So there is something wrong with your argument. The US dollar could drop 20% over a weekend without any new money printed over the weekend. Prices can just go up. The price of gold in Iranian money went up fast. You may be thinking of the value of the money as a constant and wondering how the prices of things can go up. But really the value of paper money is not a constant. The value of gold is much more constant than the value of paper money. So you should look at it as the paper money going down, not so much gold going up. That gold costs far more in Iranian money now than a month ago does not mean the value of gold has gone up, it means the value of Iranian money has gone down. With fiat money the value can just go down, nothing stopping it.