China, Collapse Already bubbles $GLD $BOM $SLV $CZI $DUST $DZZ $BRIS etc.
http://ftalphaville.ft.com/blog/2011/05/11/565696/chinese-commodity-imports-are-falling/
Gosh, just do it already. Here are some leaders for bubble ideas:
gold, iron ore, zinc, lead, cotton, soybeans
all bubbles.
if you bought the ETN BOM (2x short base metals) in the middle of 2008 and sold into the market crash, you made 300%.
it’s tied to aluminum, zinc, and copper
But as China goes, commodities go. China’s share of world demand for leading metals like aluminium, copper, zinc, lead, nickel, and crude steel is about 40 percent, according to research obtained from Goldman Sachs. For steel, China commands nearly half the global market. (In 2000, its share of global demand for those metals was between 6 and 16%.)
Even these numbers understate the breadth of China’s impact. “Think how much steel is sold to Caterpillar or John Deere for capital goods that are sent to China,” Mansharamani says. “Or how much is sent to Brazil to mine iron for China. Think of the countries that get dragged down with a commodities slow-down — South Africa, Brazil, Peru. The world shipping sector.”
If China slows down even to 5% growth a year, that will take a booming commodities market down with it.
here are some more ETFs/ETN’s to consider owning as china / commodities crash:
zsl
gll
sij
smn
dzz
dust
czi
bris
Silver, Commodities, Cycles
yep, silver is looking as volatile as ever.
what else is not looking good? base metals…
generally speaking, volatility precedes declines..
i never know much of anything, but it appears to me that silver should be heading much lower, bottom line is you never know much of anything and it’s all a big bet.
if you take all the gold in the world, you have about a cubic centimeter of gold for each person, and you have around 30 of those per person in silver.
in china, we are seeing real, legitimate inflation.
in the usa, however, i think we saw stagflation for the last 2 years, and finally home prices have turned south again, and if we are lucky we’ll see deflation. if china starts faltering, deflation will be locked in.
usually, i’m good at picking out bottoms in things and identifying opportunity looking up, i have little to no experience calling crashes… but i am looking around and everything doesnt make sense… everything looks unsustainable… i’ve identified in the past that when global economies sputter and industrial demand slumps as i expect it to in the next 6 months, that commodity prices come down. the great news about this is that commodity prices have been treated like an asset class… so if we see a pullback, it should be bigger..
over time, things have continued to get more and more intertwined and bubbles have been redeployed. generally what you’d expect to see is the lack of setting new highs, we’ve seen this. then this would be followed by drooping commodity prices, by a closely followed stronger dollar, again, seen. and then you’d just expect to see this cycle lower….
just my musings… thought i’d share.
Would you buy an investment that was absolutely guaranteed to lose money?
Commentary: Millions hold an investment guaranteed to lose money
Would you buy an investment that was absolutely guaranteed to lose money?
| More fromMarketWatch.com:
• Get Ready for Another Flash Crash |
No ifs, ands or buts: This sucker will make you poorer! How’s that sound?
You might think this is a crazy question. You’re probably thinking, who would choose to own an investment that is guaranteed to lose money?
The answer is lots of people. Millions. And most of them have no idea what’s happening.
You may be among them.
You wouldn’t believe what’s going on in the bond market right now. If I hadn’t seen it with my own eyes, I wouldn’t either.
I’m talking about short-term Treasury Inflation-Protected Securities, known as TIPS. These are U.S. government bonds that are increasingly popular with investors. They offer a guaranteed rate of return on top of the official inflation rate.
A TIPS bond that has a “real” yield of say, 2%, will guarantee you the Consumer Price Index plus 2% over the life of the bond. If the CPI works out at 3% a year, you’ll get 5%. If the CPI is 10%, you’ll get 12% and so on.
Most of the time, TIPS have been a pretty good investment, especially for retirees and for conservative investors. They’ve earned you 2% to 3% a year above inflation, with no worry or fuss.
Right now?
These yields have collapsed. TIPS bonds are booming in price, and bonds work like a seesaw: When the price goes up, the yield goes down.
Ten-year TIPS are offering real yields below 1%. It’s pitiful. The short-term TIPS are even worse.
As you can see from our chart, the “real” or after-inflation yield on 5-year TIPS bonds has plunged into the red. It’s minus almost half a percentage point a year. That’s right: negative.
In other words, under almost any possible scenario, these bonds are guaranteed to lose you nearly half a percent of your purchasing power, each year, for the next five years — a total loss of 2.5%, guaranteed.
It’s crazy. Totally nuts.
Some investment losses are unavoidable, but not this one. This one is a lock. Just take some money from your pocket and throw it away. In football terms, this isn’t playing defense. This is taking a safety. Give up points.
Tom Atteberry, manager of the FPA New Income (FPNIX - News) bond fund, thinks it’s absurd. “I struggle with why someone would accept a negative real return on their money,” he told me. “If you look at history, owning a 5-year Treasury, my real return should be somewhere in the 2% to 2.5% range.”
The real story on TIPS may be even worse. “That real yield is based on a manipulated statistic, the CPI,” according to Josh Strauss, co-manager of the Appleseed Fund (APPLX - News). For most people, day-to-day costs are rising faster than the official Consumer Price Index.
The CPI today is just 2.7%. But costs for food are rising much faster. Milk is up 7% in a year, beef 14%, citrus fruits 8.5%. (Sure, iPads are getting cheaper, but how many can you eat?) Airline tickets are up 14%, hospital services 5.5%, gasoline 28%.
The only possible scenario in which any of these short-term TIPS bonds can avoid a loss is if we get persistent price deflation — in other words, widespread price falls. There are technical reasons why a small number of TIPS bonds might do OK. But the chances are extremely remote. Look around you. Do you see prices falling?
You can still get a positive “real” yield if you buy long-term TIPS bonds. The 20-year TIPS yield 1.4% over the CPI, the 30-year 1.7%. But even these are meager returns by historical measures.
Of course, these low yields are great news for Uncle Sam. He’s borrowing your money really cheaply; your loss is his gain. But this is one tax that nobody is screaming about — maybe because they haven’t noticed.
Some of the factors driving down TIPS yields are well known. The Federal Reserve has been driving down the yields on all bonds, including TIPS bonds, through the repurchase program known as Quantitative Easing II. Low growth expectations also have brought down yields. Investors worried about inflation have piled into TIPS bonds.
But why are people buying short-term TIPS bonds that will actually lose them money?
I suspect you can blame the usual Wall Street culprits, like investor ignorance, unscrupulous brokers and, of course, the “dumb money” fund industry.
Most fund managers are forbidden to hold cash. They also have to stick to their “mandates,” no matter what. Bond managers have to buy bonds, and TIPS managers, TIPS. They are told to stick close to standard industry benchmarks. Even if they guarantee a loss
Chances are, these people are managing your money. You couldn’t make it up.
Brett Arends is a senior columnist for MarketWatch and a personal-finance columnist for
Andy Xie – I can’t say it better than him $FXI $$
It’s a policy that’s compounding the nation’s inefficient allocation of capital. It’s also contributing to slower growth potential in China at a time when the nation’s inflation rate is surging. Nominal gross domestic product in China has been increasing at a 20% rate, and much of that is tied to inflation.
ABOUT CAIXINCaixin is a Beijing-based media group dedicated to providing high-quality and authoritative financial and business news and information through periodicals, online and TV/video programs.• Get the Caixin e-newsletterInflation expectations have been rising even as policy makers raise interest rates: The People’s Bank of China in early April raised the interest rate 25 basis points. It was the fourth rate hike in the current tightening cycle.
But the aggregate increase for interest rates has been small. A 25-basis-point rate hike hardly makes a dent in what’s actually a negative interest rate for the real economy.
Indeed, at this point, China’s monetary-policy makers are too far behind the curve. Inflation is entering crisis territory, as consumer prices for many products and services rise at double-digit rates. Signs of panic have appeared along with hoarding which, when it spreads, could trigger a social crisis.
Yet something else is happening. By shifting capital to inefficient users against the backdrop of negative real interest rates, China’s economy is being pushed toward stagflation. Meanwhile, the public is afraid that the government wants to inflate away the value of their money.
What’s prevented a full-blown crisis so far is a belief that the yuan will appreciate. If not for this assumption, capital flight from China would be rampant.
To change course, policy tightening must shift away from credit rationing and toward market mechanisms. Moreover, the interest rate must be lifted out of the negative column: It should be raised at least three percentage points to allay public fears. These changes are needed as soon as possible.
No one’s fool
Too many people in China’s officialdom believe in the power of psychology, particularly in its ability to fight inflation. But inflation is not a psychological phenomenon; it’s a monetary phenomenon. Excessive money supply leads to inflation. To contain inflation is to contain money supply at a growth rate in line with production.
Even when psychology succeeds by, for example, convincing people that there’s no inflation when in fact there is, the impact of these mind games does not last long. No one can fool all of the people all of the time.
Indeed, psychological tricks can backfire. People who suddenly realize they’ve been fooled can stop believing in other things. Hence, they might refuse to believe their eyes if inflation starts to cool. Policy makers would then have to react with monetary tightening that overshoots goals to calm public fears. An unavoidable consequence of interest-rate overshooting is a recession, which is certainly not a desirable outcome.
Neither will administrative power cure inflation. Even the most powerful government is not more powerful than the market. Yet administrative-power worship is pervasive in China, so many think the government can fight inflation by forcing businesses and merchants to hold down prices.
There have been recent examples of such price intervention. But forcing businesses to hold down prices is only a temporary fix. Input costs are rising 20% per annum for some businesses, and these companies will not survive unless they raise prices. Businesses pressured by the government to hold down prices might have to halt production or find other ways to increase revenues. For example, they might shrink portions or repackage old products, selling them as new.
State-owned enterprises can use subsidies and borrowing to slow price increases. For example, bank loans have been covering losses posted by thermal-power-plant companies, which have been forced to depress prices. Virtually every power company in China is losing money but survives on loans, basically shifting the inflation burden to banks.
This tactic has many side effects, including human health damage. Power companies limit costs by burning low-quality coal or switching off smokestack scrubbers, forcing people to breathe harmful coal smoke. True, the administrative approach to power-company price control keeps headline inflation rates in check, but is this good policy for the country overall?
Administrative-control worship is likewise manifest by credit rationing, which has been resurrected with a vengeance. Few private companies can get any credit from banks these days, forcing them to turn to the gray market for financing at interest rates often above 20%. Many, if not most, will not survive if these high financing costs continue.
Optimistically, most private company borrowers think the current credit situation is temporary. However, if inflation persists and the government’s credit-tightening approach remains unchanged, the private sector will see an increasing number of bankruptcies.
China’s capital allocation mechanism is likewise working against the private sector, with increasing bias toward state-owned enterprises. Banks have been lending to underperforming SOEs simply because they’re owned by the government. Most funds raised on the Hong Kong and Shanghai stock markets are for SOEs. Local governments have been raising massive amounts of money by auctioning land and taxing property purchases.
By Andy Xie
As a result, government expenditures have risen as a share of GDP. Indeed, government and SOE expenditures may have reached half of GDP. This is by far the highest in the world. And China does not follow the model common in Europe, where sizeable levels of government revenue are redistributed.
History shows that government and SOE spending tends toward inefficiency. There’s plenty of evidence of this in China, where image projects have been sprouting across the country like bamboo shoots in spring.
Inflation is a byproduct of inefficiency. Money spent on activities with low productivity levels lack products or services to absorb the money, leading to inflation.
Credit rationing is making the situation worse. While the public sector wastes money and fuels inflation, efficient small- and medium-sized enterprises are being starved of cash.
Stagflation risk
As capital efficiency declines in a climate of persistent negative real interest rates, stagflation emerges. Stagflation eventually leads to currency devaluation, and devaluations in emerging economies in the past has led to financial crises.
But the forces that favor low interest rates are powerful. For example, China’s local governments are so indebted — with debts now averaging three times revenues, and some extended by 10 times revenues — that they could not possibly survive positive real interest rates. Their survival hopes rest with sales of land at high prices, and higher interest rates would burst the real-estate price bubble.
State-owned enterprises are in similar shape and thus favor low interest rates. They reported 2 trillion yuan ($305 billion) in combined profits last year but were still cash-flow negative. The SOE sector has never been cash-positive, and last year’s negative cash flow was the worst in years.
Accounting for profits is always difficult, and it’s doubly so in China with its vast SOE sector. Government companies are so cash-flow negative and so leveraged that one cannot help worrying about financial-health issues. Big problems could be impossible to hide if interest rates turn positive.
The force is with credit rationing and negative real interest rates, even though this combination of policy tools makes stagflation inevitable. But is stagflation really so bad? Many would love an economic equilibrium that lasts a few years because it would effectively wipe away debt for those unable to repay. Indeed, stagflation benefits debtors. At the same time, however, savers pay a high price. No one expects savers to sit idly by while their savings are wiped away. Thus, stagflation never creates a stable equilibrium but instead breeds social instability.
In an emerging economy, serious stagflation always leads to currency devaluation, which always triggers a financial crisis. China has vast foreign-exchange reserves and capital control. Devaluation risks are still low, but not zero. China’s money supply is about four times its foreign-exchange reserves. And the effective money supply may be much larger.
A massive amount of credit has been extended outside the official system. The nation’s vast trust sector, for example, is effectively arbitraging related interest rates, with a risk profile and thin capitalization that pose a risk to financial stability.
Changing speed
To control the money supply, China’s policy makers need to move away from credit rationing and focus on interest rates. Each interest rate hike should double to 50 basis points at minimum to signal a new approach. In this way, the interest rate should rise three percentage points as soon as possible.
To move away from credit rationing, lending rates should be liberalized further. For example, the band for lending rate flexibility around the official rate can be widened. At present, banks charge fees to increase the effective lending rate, but this system is neither transparent nor efficient.
Imbalance is no longer an issue just for the macroeconomy, since it’s affecting microeconomic efficiency, which in turn is leading to a macro consequence — inflation. China’s economic difficulties are caused by problems in the system. Unless the root causes are addressed, these difficulties cannot be resolved.
At the root of China’s problems is the rising level of inefficient public-sector spending. The system is biased toward supporting public-sector income growth. And as public-sector demand for funding exceeds what the economy can bear, money-printing is inevitable.
Tools for shifting money to the public sector are taxes and land sales. Unless these fall, all the talk about economic rebalancing will be no more than talk. So China should cut taxes, as soon as possible, to signal a new approach to economic growth. The top personal income tax rate should be slashed to 25% and the value-added tax reduced to 12%.
Until that happens, China’s growth model will be suppressing the middle class. A successful white-collar worker who has worked 10 years in a first-tier city cannot afford to buy an average piece of property in China. Suppressing middle-class growth is not in the country’s interest, since social stability in modern society is linked to a large, content middle class.
Many local governments have come out with property-price targets that seem to limit price appreciation but ignore what are now unaffordable levels. The system seems to have become incapable of addressing the public’s fundamental concerns. The average price for a square meter of property in a city should be less than two months of average, after-tax wages.
China’s prices are already high by international standards, and already take into consideration the high cost of building a city from scratch. Actually, current price levels are two to three times higher than this cost and can only be sustained by speculative demand. No wonder property sales collapsed after local governments started restricting multiple-property owners and non-resident buyers.
A turnaround for real interest rates is not only necessary for containing inflation but vital if China is going to shift its growth model to household spending from government spending and speculation. Savers who lose wealth to inflation are unlikely to be strong consumers but, instead, may speculate to recoup losses, trapping the economy in an inflation-speculation cycle.
China’s economic difficulties are interlinked and cannot be addressed separately. The root cause is the political economy that gives public spending the leading role in driving economic growth. A fundamental solution must involve limiting the government’s means for raising funds.
Containing inflation and controlling bubbles must be viewed in this context, as the current growth model is pushing the economy toward stagflation and currency devaluation risks loom large. China could see a devaluation-triggered financial crisis similar to what the United States has already experienced. The difference, however, is that China’s system is not robust enough to maintain stability during such a crisis. It’s easy to see why fundamental economic reforms are urgently needed. See this commentary at Caixin Online.
Altucher – on losing millions, and $SLV
http://www.jamesaltucher.com/2011/01/what-it-feels-like-to-be-rich/
I gotta hand it to him. That’s exactly what it’s like.
Maybe one day I’ll commit to this blog enough to write out full sentences and make it something that the average person can follow. Gold is way overvalued, Buffett is right. Lots of bubbles out there right now, gold, housing, but you make the most money finding the ones that crash the hardest and go up the fastest. Right now that’s Silver. i’m short silver, have been for a day now, i’m long ZSL and will sit on it for a while, maybe i’ll sell tomorrow, i dont know.
seems to me like anything could happen. but it also looks like there is a lot of trading that happened above the current price on silver. that usually leads to lower prices. the counter to this is that silver is a really small market and even if the entire silver market and all the participants start crashing, perhaps global governments will come in and buy up silver to avoid the dollar? a dollar rally, oil falling, gold falling — all help my silver short.
China, Silver etc $SLV $AGQ $ZSL
China — looks very familiar now as it did 50 years ago, when they instituted policy that starved pretty much everyone
http://en.wikipedia.org/wiki/Great_Leap_Forward
Silver? I went short.
Industrial commodities? Be afraid.
Greece continues to lie
Greece says debt ‘absolutely sustainable’
Greece says debt ‘absolutely sustainable,’ insists market access possible in 2012
This reminds me of my friend Steven Stante in 7th grade. I lent him a dollar at 10% interest daily so that he could buy cookies from a vending machine. I figure since I made that loan, he owes me billions. That debt is also absolutely sustainable — meaning that it will never be paid off, much like Greece’s debt. The problem with the Euro is that accountable nations are forced to continuously bail out the unaccountable nations (greece and eastern europe mostly). Eventually, the accountable nations will figure out that their promises to pay are more valuable than the promises of the unaccountable nations.
The same thing is happening globally with so many countries having pegged their currency to the dollar. Now they wonder why they are experiencing high inflation rates? Well, we are very good at printing the dollar and exporting our inflation, for now.
To think that that it is a possibility that the euro will fall apart is rational. So, too, is it rational to consider that the US dollar won’t be the world’s reserve currency. In my opinion, it already isn’t.
I can’t quite figure out why it seems that everyone wants to buy US treasuries, and then I look at it, and wait, it’s only really one person, and it’s Helicopter Ben, who is monetizing the deficit, exporting inflation, and implementing the invisible tax that hurts the people at the bottom of the world’s economic pyramid the most, inflation.
Mostly everyone else who can is selling us treasuries. What we are seeing is fairly interesting. There is a lot of opportunity. Eventually, you’d think that housing prices in the USA would bottom as they print more money. This unfortunately isn’t the case. Interest rates will rise, which should make you willing to pay less for a home. Also, the value of the dollar slips, which decreases the future rental value of a home. Throw in what will likely be higher property taxes (something has to happen as several states are insolvent, as a whole, the US economic system has been levering up for 20 years or so, and the cost of doing business (oil) is rising). Overall, given my perspective that inflation is actually a real threat, stocks are overvalued regardless of their relatively cheapness in terms of earnings multiple.
In an environment of 10% inflation, I’d be willing to pay less for a discounted stream of cash flows than I would in 5% inflation. Stocks are said to be a good hedge against inflation. Well, the truth is there just not as bad as bonds. Even TIPS are probably not safe if you’re looking to hedge against inflation.
Anyway, as inflation threats start heating up (which you’d almost think that they’d have to), I’d expect to see funds out there allocate a little more than they do into gold. Right now, their holdings are meaningless. If policy changes, things could escalate. But, you never know. I never do. Right now the trend is up. In something like this, it truly is a situation that could just keep going and going. And then, you could have radical changes happen. It’s unfortunate that I consider a radical change for governments to spend less than they make, but that’s reality. If they change their policy, maybe gold wont be worth as much, and maybe silver should fall. As things are however, it is easier for politicians to get elected if they promote the idea of feeding entitlement programs (at the expense of the dollar), and so, the trend is still your friend.
Anyway, back to Greece. I think the Euro is mostly a liability for the countries that are responsible. When you have a system that takes from the responsible and gives to the irresponsible, it’s not a sustainable system. That said, people don’t always make decisions that are best for everyone. They tend to make decisions that are best for them. Life isn’t fair for Germany.
$GLD $SLV – The news that no one is telling you.
Game over for the US dollar. At least for being the reserve currency of the world.
$CYB – The Yuan is perhaps overvalued
I am thinking that overall, the yuan is overvalued.
They own a lot of us treasuries, and the dollar is losing value through monetization and in china they are experiencing high inflation. Inflation is the erosion of purchasing power. I think that there is a real estate bubble in china. I think that the ignorance of that real estate bubble is part of the hypothesis that the yuan is undervalued. When you have a real estate bubble collapse, people are going to realize that the chinese growth story of this century isn’t all it is cracked up to be. Home prices will fall. Lots of “wealth” will be destroyed, in my opinion, it never really existed… it’s all perceived wealth, it’s on paper, and it’s unsustainably overvalued. Anyway, there should be a cash crunch.. inflation in china should be greater than in the usa, as the people at the bottom of the totem pole of life in china watch their marginal purchasing power erode away due to inflation, the demand for real estate that they will never live in because it is in a 100% vacant city that is poorly built and falling apart should diminish. Since prices in the free market are a function of supply and demand, note that in china this is not the case.. price is whatever you want it to be. example, see lotus pharmaceutical’s argument that they have a 0.25^2 mile of farm ground worth $80M USD apparently.. and then they are building a poorly engineered piece of real estate in beijing and are marking it up to the prices that you’d see luxury condos sell for (which are also overvalued by the way). anyway, in this economy where prices are not a function of supply and demand, and there is a highly suspect shadow banking system… a collapse has to happen. you can only build things that dont produce future cash flows for so long before things start breaking down. hate to break it to you, but vacant residential real estate is a non-cash producing liability. so, whenever the government decides that prices are simply retarded, maybe they’ll start a panic selling paragdym. I’ve already advised all of the people I work with to sell any real estate they have in china.
Then again, find me a currency that is going to rise in value… maybe that of oil exporting nations, but they’re crazy too. saudi arabia just gave the green light to build a building 1 mile high, which … frankly is going to bankrupt them if oil prices crash back to $50. over leveraging in good times… good news for saudi arabia is that the dollar is doomed anyway in all liklihood.. politicians will play their games and hopefully soon they stop raising the debt ceiling. who knows… but frankly it seems that global monetary policy is playing a game of chicken. sure, they could veer off and be hated for turning before the other entity did… but odds are in favor of the global governments continuing to grow, continuing to spend more of whatever currency they are printing. budget cuts aren’t cool. cutting programs like medicare, medicaid, social security — impossible.
frankly, if the US government was a business… management is incentivized to spend more and take in less. the company already isn’t making money. the way things are is obviously not sustainable.
if the chinese government was a company, they’d be lying on their income statement by artificially marking up their assets and faking it till they make it.. but the question is … where are they making it? what’s the objective? also, not sustainable here.
so, who benefits, who gets the short end of the stick? the poor. inflation/hyperinflation is the ultimate tax on the poor, anyone who has fixed income investments (the elderly usually), the middle class (their wages dont rise as fast as inflation rises, same goes for government employees)..
well, that leaves the rich. if you have assets, they all get marked up. if you have liabilities, you owe less back in the future than you borrow now (the purchasing power of currencies erodes).
so what do you do? you leverage up and buy liquid hard assets. maybe that’s why gold and silver and commodities are soaring.
us real estate would be doing really well, but when you levy the ultimate tax on the poor, that takes the concept of home affordability and beats it in the back yard. discount cash flows from homes that people cant afford.
anyway, hopefully china crashes first, bringing down the price of commodities, but who knows.. i certainly dont. things are going to trend.. the stock market could drop more than 50% in conditions like this, and in terms of purchasing power, it will drop more you just wont see it. I take the S&P500 and divide it by the price of gold, myself. If you compare gold and paper currencies, it’s a lot easier to make the paper.
in terms of explaining the concept of what china is doing to a young child, the story would go like this: imagine that you have a family of 1 and starting in 2000, you make 1 sandwitch a day and every year you add 1 sandwitch to your daily production.. so now you’re making 11 sandwitches a day for yourself. eventually, you’ll find that you’re making sandwitches you don’t want to eat anymore. sure, we can store them in the freezer, and buy more freezers to store them in, but after a certain point, you’ll run out of the ability to make sandwitches and store them, because you’ll run out of time or money, or both — especially when the cost of making the sandwitch goes up (inflation). and that’s where china is. they’ve built so many homes that they started building them and storing them, vacant. they are running out of money to perpetuate the bubble and the timing is right now. this is my warning: get out.
Inflation – It’s happening $GLD $SLV $AGQ $TBT
http://thenewsunit.blogspot.com/2011/04/warren-buffet-paper-money-is-not-good.html
George soros’s largest holdings are in gold.
His think tank suggests that the “too big to fail” banks have put options on the US government and the US government wont let them fail.
marc faber agrees.
anyway, a lot of our inflation has been exported to emerging markets. i am anticipating an overall abandoning of the dollar, the american way of life should be cut at least 25% (in terms of lifestyle) — the price we pay at the pump should go up a few bucks…
that’s what i’m looking at, also looking at a chinese real estate bubble, us real estate has been crashing, wont turn around, but the more inflation you cause, there will be a bottom in prices.. just imagine, if a home is worth $100,000 and it is valued at $500,000, normally you’d lose 80%. but if you start printing money, you’re perceived loss is less.
short us treasuries, interest rates are going up baby! and if they don’t own commodities.
frankly, we are due for a crash. bidu could be a fraud. who knows. look to chanos, he’s shorting commodity companies, good man.
that’s the problem, there is likely going to be a crash because the demand out there is artificial at this point, during a crash, commodity prices tend to come down… but… i’m not so sure what happens when the crash happens due to hyperinflation. still trying to figure it out myself
http://prestowitz.foreignpolicy.com/posts/2011/04/13/bretton_woods_outlook_dark_for_america
If you study banks, they do poorly when the yield curve is flattening, inverting, interest rates are going up, economies sour, etc.
I’m pretty confident we’ll see at least 1 of those 4 in the next 12 months.
It looks to me like the US financial system is heading for collapse potentially. I agree with Soros that the “too big to fail banks” essentially are short The US Government — because if they start to fail, the government has to bail them out. These same banks have the upper hand with low interest rates compared to the smaller regional banks. I expect that at this point in time, it is impossible for the US government to ever balance the budget unless they cut social security, medicare, and Medicaid. Interest rates are as low as they will ever be here in the USA.
In my opinion, there is 1 chart out there that you absolutely need to see if you haven’t already if you invest in dollars, have dollars, or use dollars:
http://research.stlouisfed.org/fred2/series/AMBNS
Summary:
There is a lot of information below, mostly excerpts/summaries. Overall Goldman is better off than all the other banks out there. That said, given my perception of where things are likely heading — I’d still question whether I want to own it or not. For the most part, however, I don’t believe that owning companies in general at this point in time is a good bet. If I was allocating, I’d be 33% Gold/Silver/Commodities, 33% Cash, and I’d be looking for companies to short. I do believe that commodities would get a lot cheaper if markets crash, that’s the kicker. One thing I would emphasize is liquidity and diversification into things that aren’t “terrible.” For example, holding bonds for the next 5 years will likely be terrible if you buy them at today’s prices. One thing I would consider if I had access to it would be to take out full lines of credit, and to let the cash sit in the bank, a bank that isn’t Citigroup, JP Morgan, Bank of America. It may cost you a little bit a year, but I really think that having cash available to put to use at some point in the next 5 years (probably a lot sooner) will prove as a very wise use of capital if you have a cost of capital less than 10%. If I had a lot of dollars sitting in the bank, I’d be very concerned about the erosion of purchasing power.