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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (30998)	3/15/2008 8:15:46 PM
From: prosperous	Read Replies (2) \| Respond to of 217570

If we consider fed/govt, consumer, corporations as three legs of a stool each one with its own discretionary spending/production/creation ability, they feed into each other in terms of impact they have on resources that allow them to spend. If all these three entities behave fiscally irresponsibly and spend/produce we have the type of asset price increases across the board we have seen over the years. The moment one of these legs starts to be responsible and/or chokes either because they are forced to or because circumstances make it worth while, the monotonic asset price uptrend has to cease and start reverting to the mean, which with current prices means a synchronous downtrend. Of the three entities the fed/govt has most independence in terms of discretion to spend/create while the consumer is most dependent in terms of their income stream on other entities yet has the most impact on economy and asset prices sheerly because of their total size. In the current cycle we have started a synchronous asset price downtrend; we need to ignore day-to-day fluctuations for a moment and focus on larger picture so as to understand what one might invest in. The real question now is how we get to an equilibrium price point. The fed/govt would like to stabilize this process at the highest asset prices possible so that it causes the least amount of pain for everyone. However, once this triangle has started tightening we see that the corporations are more likely to become fiscally responsible on their own and consumer most likely to be forced into being fiscally responsible in terms of spending which will eventually accelerate the price downtrend. For those arguing for hyperinflation, we need all the three entities to be hallucinating for a long while and even then at the end will come a thud which brings back the prices with a reset. At this point I don't see how we can avoid asset prices gravitating to a mean, the question is how long it will take. The more the entities try to stay on current spending/production/creation trend more inflation we may see in the system before we get back to mean and longer it will take. That brings the next question on how do we invest? At this time it seems the best way to invest for a conservative investor :-) is through mix of short term govt bonds (domestic+foreign), gold, oil, and short on the market, foreign currency, longs on selected stocks with multinationals (this value does not exceed that is protected by the short position), and domestic cash. At this point all US indices look like potential short candidates; I would use NASDAQ for a short since S&P and DOW Jones have higher quality companies in them, the ultrashorts are excellent vehicle for shorting. I think this mix would work for a while. If we eventually correct significantly in asset prices either gradually or forced through recession/deflation, I am not sure gold will do well at that time and any position larger than a token position should best be closed. Once the asset prices have gravitated to a mean, there is no reason to be holding gold since the prevalent currency would do equally well. In the earlier deflation gold did well because dollar was pegged to it, even if we find a need to back the dollar by a tangible asset at a later point (when we realize that unlimited printed can cause indigestion for economy) its unclear we would resort to gold for this purpose and other alternatives are equally likely (just for grins in the modern world we could back the currency with a human made entity say amount of computing power a country possesses :-) or some consumable natural resource but other alternatives are possible). Time to sell gold would be closer to either rate increases or if the economy starts falling through the floor whichever comes first (by that time we would have ample proof that rate cuts, bale outs, helicopter drops are not working). I think the fed/govt should now accept the fact that assets values will revert to a mean and find the smoothest way of getting there rather than fighting to stabilize them at the highest possible level, that effort will not work well and cause more pain in the longer runs; the stock market has its days numbered in terms of valuations and the excesses in the market will be wrung out one way or the other.

To: TobagoJack who wrote (30998)	3/15/2008 8:32:04 PM
From: Rolla Coasta	Read Replies (1) \| Respond to of 217570

The liars continue to win but they can't go alone with their own proposal without any objection from other countries ... Will they let the whole world to crumble with worldwide disorder ??? They can't finance their own war machine by cutting rate forever. How do they get the money from in the new monetary order ??? When the FED suddenly changes his mind by raising rates, you guys are toasted. Someone may dump their gold core holding in a big way. The power of paper remains supreme, but I still maintain a bit portion of gold holding in case the craze goes wild.