Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: 4figureau who wrote (19136)	9/18/2002 2:19:21 PM
From: Jim Willie CB	Read Replies (4) \| Respond to of 36161

nobody seems to ponder effect of RealEstate faltering the leverage as you point out is huge with RE even larger recently since 0% down deals are prevalent imagine how many walk away from their equity as the broker did the key data point I have read in recent weeks is that increased cashouts from REFI's has added to debt loads, but simultaneous econ data shows consumer spending and business spending is down !!! with individual retailers reporting poor topline, poor earnings, and poor guidance, the USGovt (for shit) retail numbers are left to be doubted check the seasonalizing chicanery, dear reader that is the Usual Suspect in Statistical Deception (I am a professional statistician, although an gnome-like unattractive one, and was in charge of Staples seasonality analysis for sales forecasting) so what happens when RE-based money creation reverses? a lot of badass shit it seems to me that a great many bad signals are coming at once: mortbacked bonds are turning down consumer spending is slowing business spending is extinct durable good purchases are slowing fast (not sznalized data) leading econ indicators heading south treasury yields looking like Japan, yet another bubble mortgage delinquencies and defaults higher than last recession personal bankruptcies rising dangerously coporate bankruptcies rising dangerously IPO business a virtual desert jobless claims rising well past 400,000 weekly trade gap of $34B monthly regarded as good now imports and energy leading to rising inflation (slightly) did I miss anything?????? we have a recession coming, plain as the perfect nose on my face it may look like a stall at first but because of internal financing dynamics, the weakest link being the consumer, and the biggest threat of RE turning over soon... THIS COULD BECOME ONE MATHAH OF A RECESSION !!! with stocks down & out, Treasurys and Real Estate are carrying the ball into BubbleEndZone soon only GOLD will attract investment capital / jim

To: 4figureau who wrote (19136)	9/18/2002 5:19:40 PM
From: isopatch	Read Replies (4) \| Respond to of 36161

4fig. A few thoughts on inflation/deflation, debt, derivatives, and commodity indices. It's the 6 mile high mountain of debt the Clinton/Rubin/Greenspan bubble boys gave us, PLUS the staggering derivative nightmare of JPM & friends that predisposes us to a secular deflation. Not a prolonged inflationary period such as was seen in the 1970s. The 1930s deflation was a good example of how paper currencies can be debased vs gold without inflation taking off. More than one author in my bookcase points to the merry-go-round of <competitive devaluations> the major industrial nations undertook during the 30s. The idea was to try to protect domestic business, employment (and, perish the thought, votes<g>) by grabbing as much of the shrinking pie of world trade as possible. The only way they could do so was with a parade of tit for tat devaluations jockying for a competitive trade advantage. And with the devaluation derby that ran round and round the globe, in the midst of rapidly declining demand for goods, the only real asset to revalue up relative to all that paper was...the real monetary asset: Gold. In 1933, FDR did it with the stroke of the pen. This time, golds upward trend is unfolding gradually. ===================================================== One thing I've not talked about before, but think is worth emphasizing: Almost everyone seems to misunderstand the strength in commodity indices like the CRB and Goldman Sachs Commodity Index. Most think it's signaling across the board inflation, ala the 1970s. I've concluded not only is this is not the case, but I'd like to take a stab at explaining why it's not. (Steve Roach, hope you're paying attention, my friend. Expect to see you expand on this idea in future one of your future commentaries. Will expect your check in the mail<G>) Seriously guys, in deflations, it's necessities that hold their price or in some cases even appreciate, particularly in the early stages of disinflation into deflation. The luxury items and other non-essentials are the things that crash. If you take a look at how the CRB is constructed, you'll discover it's heavily weighted toward grains and other food related commodities. Most of this falls into the catagory of necessities. So, it's understandable that some of the battered bucks fleeing the "non-essential"<g> of still overvalued stock sectors would seek a safe harbor in food commodities. I'd only expect the CRB to decline during the later stages of this LT deflationary cycle. We're still only in the early stages of it. And if you look at the composition of the the Goldman Sachs Commodity Index, you'll discover that energy related commodities overwhelmingly dominate that index. Although we can drive less, heating AND cooling is a prime necessity. As with the CRB, don't expect to see a big decline in the GSCI until we get deeper into this LT deflationary cycle. International commerce has only begun to contract. And unemployment has to get a lot higher before the price of necessity commodities are going to feel much impact. Think about it for a moment and you'll see the logic of this sequence within an economic mega trend like deflation is simple, but compelling. By contrast, look at luxuries. Joked the other day about Mrs Patch being peeved at me for window shopping classic Ferraris.<g> There was quite a bit more to it than that. A little seat of the pants price discovery, actually. And whodathunkit?! Ferrari prices have been declining and continue to do so. Likewise with high priced colored Gems. Diamonds don't fluctuate freely in price - as do colored stones like rubies and sapphires - due to De Beers. So colored gems are a better anecdotal source for divining price trends in the luxury gemstone market. Likewise, many, still overpriced, stock sectors continue to dive downward. And the list goes on.... I'm not an academic or a market analyst. So, not interested in putting together a more comprehensive presentation of the above ideas. As a professional investor/trader there's ample evidence and anecdotal data to indicate prices of luxuries continue to drop sharply while necessity items are doing quite nicely in the early phase of this secular deflation that has years to run. And the verdict has to be deflation with of the astronomical debt and derivatives nightmare yet to really hit the fan. But once again, this very long term process has only begun. And, in that context, gold is going much much higher. Isopatch