good stuff today from Heinz
@Saudi Arabia's stock market -- trotsky, 15:27:29 12/06/06 Wed
please note that the Saudi stock market has recently continued to collapse. it has now lost 12,000 points of its 20,000 points February 2006 high. this is now one of the swiftest and most brutal bubble implosions in history.
imo it's the road map for the other emerging market bubbles, all of which by now sport a very "Nasdaqui' look (i.e., their charts look almost exactly like that of the NAZ bubble, with the most recent upleg looking suspiciously like the early 2000 Nasdaq blow-off).
no way will those bubbles implode in isolation. the Saudi market is relatively isolated, but the rest of the world's bubbles are clearly interconnected. the Saudi market seems to lead, as it also presaged the May-June hicc-up. no-one knows when exactly the point of exhaustion will be reached, but it must be close, as the recent near-vertical climb is clearly unsustainable.
Hambone@the future -- trotsky, 15:17:07 12/06/06 Wed
i'm not claiming to know that this is what all this suddenly coming-out-of-nowhere repressive legislation is intended for. i only find it suspicious, and even you will have to admit that if there was no time to read the law, then there was certainly no time to write it (not in the period that it was allegedly devised in). thus it must have been lying in wait - and that in and of itself is extremely suspicious.
the subsequent additions such as a the recent torture / let's forget habeas corpus act only deepen those suspicions.
now, if there's really nothing to worry about , fine. there can hardly be any harm in pointing out the dangers. imo one should prepare for the worst case - the very one that you think is 'hardly in the cards' (ask any German who was alive in 1925 what he thought at the time was in the cards 10 years further on). if nothing untoward happens, we can all be glad and carry on as before. if it does, the difference between being prepared and not being prepared could well be of supreme importance.
i give you this much: there have been several instances in the past when it looked like things could take a turn toward dictatorship or something akin to it in the US. it never happened, cooler heads have always prevailed in the end. the European view of history and its implications may be more guarded because over here, the turn for the worse DID happen. the Russians would probably also deem you a bit too trusting, from bitter experience. well, the past offers no guarantees for the future unfortunately. when you see that ominous developments take place, the lesson of history is this: you must act against them and/or prepare while you still can. by the time the worst case has arrived, it is most often too late to do anything about it.
don't forget that the polite and civilized mask of our society is only a thin veneer. how thin usually becomes clear as soon as extreme circumstances alight. my speculations are about what could bring extreme circumstances on - and i note that there is a suspicious urge to put all the mechanisms into place that would allow the State to suspend even the most basic rights of the citizenry. it is more than legitimate to ask why, and engage in above mentioned speculations. by our very nature we 'gold bugs' don't trust the government. history is replete with examples that show that this is a very healthy attitude.
delta-au@the XOI -- trotsky, 14:27:54 12/06/06 Wed
you should look at a long term overlay of the XOI with crude. the XOI frequently rallies long after crude has topped out (usually it tops out several months LATER). iow, this recent run-up in the XOI does not tell us what will happen with crude.
# Big Bob @ dollar -- trotsky, 14:19:03 12/06/06 Wed
you clearly underestimate the eerie power of Economist covers.
besides, why should the dollar really fall much against the Euro? (which makes up over 50% of the DXY). European money supply growth has been far faster than US money supply growth in the past two years, and the long term relative value of fiat currencies is largely determined by this factor (short term, rate differentials and the resulting carry trades exert pressure sometimes, but even that factor favors the dollar here).
my question is basically, what makes you think one fiat money is better than another? imo it makes more sense to expect that they will ALL devalue against gold, regardless of how the relative value between them develops.
@what is coming, where we are going -- trotsky, 11:41:49 12/06/06 Wed
i often reflect on the social implications of the eventual bust of the grand-daddy of all credit and asset bubbles that has unfolded over the past 25 years (i wonder if in hindsight, Volcker's 'rescue of the dollar' won't be seen as the starting point of an enormous calamity). one of the things that seems rather obvious to me is that the liquidation phase will lead to a drastic widening of the so-called 'gini coefficient' as the major victim of the unwinding of the bubble will no doubt be the middle class. the middle class is what guarantees the political stability of the semi-capitalist industrialized democracies of the West. it is currently as far from revolting as it could possibly be, contented with its material well-being, and numbed by the State's propaganda apparatus. however, this could easily change if economic conditions were to alter dramatically and the phantom wealth epitomized by the incredible growth of the financial economy were to disappear to where it came from (i.e., thin air).
naturally, the elites have to worry about that possibility, and i have always felt that the quick implemetation of reams of quasi-dictatorial legislation in the wake of the 9-11 attack should be viewed through this prism. after all, any halfway awake observer must have noticed that an act (the misnomed 'Patriot Act' in this case) that not one legislator even found the time to READ before voting for it, had to have been written far in advance of its implementation. in short, it was ready and waiting just for the kind of event that would frighten the populace enough that it would not even dare to question it. ever since, more and more efforts have been expended on expanding the State's powers to deal with future social upheaval as brutally and swiftly as possible, usually in the name of 'fighting turrsm'.
the most recent gem in this collection of efforts is this one:
"Fine Print in Defense Bill Opens Door to Martial Law"
public.cq.com
“Use of the Armed Forces in Major Public Emergencies.”
i conclude that TPTB know full well that something unpleasant is coming down the pike.
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# Gurk@gold/dollar -- trotsky, 11:16:05 12/06/06 Wed
i should actually have phrased it a bit differently - gold has been slightly leading the dollar (in the form of the DXY) since the most recent major low in the gold contract. it's true it has correlated well with commodity currencies, but those are also a mirror of the dollar's moves.
re.: "a cursory visit to the dotcom.bust or the Japan.deflation era should illustrate that there is zero or little confluence between money supply and market sentiment."
there is actually more historical evidence to that effect. as i've mentioned before, the gold bear market from 1980 to 2000 curiously coincided with the biggest 20-year increase in money supply and national debt in mankind's entire history. the connection between market moves and fundamentals is in short a very tenuous one (in this context, note that stock bull markets more often than not coincide with meagre corporate earnings growth for example). i've always held that both market moves and the fundamentals that usually show up AFTER the market move discounting them has occurred, are an effect of collective psychology, or the 'social mood' as Prechter calls it.
looking at the dotcom bust, the blow-off into the March 2000 high was without a doubt egged on by the ample liquidity that the Fed provided when it fell for the Y2K hoax. however, if one looks at the meat of the bust in 2001-2, in that period, broad money supply growth practically went off the charts, and stock prices fell anyway. this is however not to say that the money supply growth wasn't having an effect anyway - only, the money went somewhere else (in this case, the budding commodities bull market).
Japan was a bit different. the bust began when the BoJ finally stepped on the brakes in late '89 to bring run-away speculation to heel. however, the subsequent bust revealed such a vast vista of malinvestments in need of liquidation that the entire banking system almost went under. this led to an involuntary slowdown in money supply growth (money supply growth NEVER went negative, but it slowed to a crawl), as banks began to shrink their asset base instead of expanding it, in spite of zero short term rates. note that the government went on an insane Keynesian deficit spending spree to counter the credit contraction, and built lots of bridges to nowhere. this didn't change the deflationary psychology, but it sure lengthened and deepened the bust by keeping a lot of malinvestmented capital on artificial life support.
in any event, what is at work is an observer-participant feedback loop. increases in money supply and credit as well as subsequent credit contractions always will have an effect on asset prices in the end. however, the shape and size as well as the timing of the effect (i.e., which assets will be subject to price change, and when) depends on market psychology - the willingness or lack thereof of market participants to take on risk, and where their risk taking is being channelled.
a note on the Weimar inflation: in its final stages, the devaluation of the currency was MUCH faster than the actual money supply growth. the previously widely accepted cause-effect vector had completely reversed. Schacht's Reichsbank actually argued it had to print even more money because the speed of the devaluation outran its printing capacities, and it feared there would 'not be enough money to allow economic transactions to function smoothly '. this was a fairly clear-cut case of mass psychology creating its own fundamentals.
frustrated@M3 substitute -- trotsky, 09:58:50 12/06/06 Wed
sorry, i only saw your post about this now. first of all, i think this substitute reflects the vast increase in outstanding credit rather than actual money printing (in this, i agree with Mish who has recently mentioned similar ideas). if you look at narrower measures such as the monetary base , or M2, or even better,the Austrian money supply measure AMS (unfortunately there is no publicly available chart of that measure, but you can take my word for it. those interested in the chart will need to subscribe to Mr. Shostak's service), you will see that US money and liquidity growth rates have just suffered their biggest plunge since 2000. similarly, Japan's monetary base has plummeted by 22% year-on-year, which is a historically unprecedented decline.
still, my point was not about what the money supply measures are actually doing at the moment, it was only about the disingeniousness of the propaganda issued by the monetary bureaucracy. the constant yammering about how 'rising wages' or 'rising oil prices' or whatever make them 'worry about inflation'. this is simply a lie. inflation is a purely monetary phenomenon, in short what THEY THEMSELVES are doing determines its path. what they REALLY worry about is 'inflation expectations'. in order to be able to inflate at will, they need inflation expectations to be low. in short, they need a docile populace of sheep that isn't noticing that they are busy devaluing the currency toward the zero-boundary. the moment people were to start taking note and doing something about it, the devaluation of the currency would accelerate markedly, and they would lose their power to influence events. this is what all this false propaganda is about. i only take the opportunity now and then to point it out, since the bureaucrats are so often quoted uncritically.
@gold technicals, ctd. -- trotsky (), 09:40:10 12/06/06 Wed
however, i would also like to point out that the dollar's moves against other fiat currencies are not necessarily an impediment to its continued long term devaluation against gold, the only REAL money out there.
so far, the dollar's devaluation against gold amounts to slightly less than 97% over a span of 73 years, and we have absolutely no reason to expect it not to give those final 3 percent up as well. every fiat currency is ultimately on its way to utter worthlessness, it is only the speed at which this happens that is occasionally in question.
those final three percent, the last lap in the fall into the black hole that awaits every fiat currency at the end of its life are going to be a sight to see imo.
@gold technicals -- trotsky, 09:28:55 12/06/06 Wed
a break below 640 can't be good near term. unfortunately, public bearishness on the dollar is at a fever pitch again. a recent Economist cover is particularly concerning. they also put in the low for the dollar LAST time around (an Economist cover announcing a 'disappearing dollar' coincided perfectly with a 2 year low). the Economist is by now famous for spotting trends just as they end, and has become one of the most reliable contrary indicators magazine-cover-wise anywhere on the planet. their classic 'drowning in oil' cover that promised $5 oil within days of oil making a historic low in the $10/bbl. region that was followed by a 700% price rally forever stands as a stark reminder of this fact.
so yet ANOTHER bearish cover story on the dollar is quite disturbing here, as gold has lately taken its cues from the moves in the dollar. |
