We have a wave count that is interesting, to say the least. It boils down to this: we sit at one of nature's fractal EW branching points, and some branches have the potential for extreme ugliness:
1) One possible branch is a short-term dip to 7500, followed by a delicate month's-long medium-term rally probably into the high 9Ks, followed by a long-term breakdown (fast or slow).(2) and (3) are "once in a millennium" ugly, so be prepared if you aren't already. (1) is bad too, but in the longer term and it's probably slower to develop down the road. Some insurance here is not a dumb idea: a year or two of cash in-home, some gold and silver coins, some way out of the money options, etc, and the other obvious things you can do.
2) Another possible branch is a short-term dip to 7500, followed by a climb to around 8.1K (c of 2 of 5 of A), followed by an acute extended 5 of A that moves down fast.
3) Another possible branch is that we are starting 3 of C now. This has the potential to be devastating in the near term.
Whoah man, that's kinda scary :/ I thought we might still have a few months of more or less muddling through and then a heat-up of things by the end of summer. As much as i think your deflation and global cooling forecasts are spot on, i hope to see you're wrong on this one. Yes, the Obama administration won't reset the system. I just wish it could still hang on a while and not totally break up. A lot of people are still way up in debt, little to no savings, let alone "a year or two of cash in-home, some gold and silver coins" :(
ReplyDeleteAnyways, kudos for keeping the posting up, love the blog.
Thanks again FDR. Please update us on which option you think is unfolding as time passes.
ReplyDeleteThanks a lot for the update.
ReplyDeleteCould you please present some charts / graphics on these options? Specially, #2 and #3?
I got lost on that "c of 2 of 5 of A".
Thanks.
FDR---
ReplyDelete"a year or two of cash in-home, some gold and silver coins, some way out of the money options, etc, and the other obvious things you can do."
Did you just say BUY gold/silver and hoarde it with a supply of cash?
"Did you just say BUY gold/silver and hoarde it with a supply of cash?"
ReplyDeleteNo, I've been saying it for years. It's called a hedge, or insurance. You should never buy hedge or insurance to make money, or you aren't insured and you aren't hedged.
I know but you said that gold and silver were the best shorts on the market.
ReplyDeleteWhy would you hedge with something that you believe is on the verge of collapse?
Isn't that like buying an insurance policy you don't think will pay out?
How many times I have to post the same thing?
ReplyDeleteRead the blog.
It's hard to imagine a dumber trade than setting up a hedge you hope will pay out.
"Why would you hedge with something that you believe is on the verge of collapse?
ReplyDeleteIsn't that like buying an insurance policy you don't think will pay out?"
It's called diversification. It's not about making money. It's called protecting yourself (hedging) against all possible scenarios. Again, it's not about return.
I have read the blog. Not sure which post you want me to read.
ReplyDeleteI've read most of them and particularly the "Trading Mania" post states categorically to stay away from gold. Here you say buy gold.
Buy gold or short gold? If both how much of each?
This is the first time since this blog was created that you said buy gold. So I am just curious.
"Buy gold or short gold? If both how much of each?"
ReplyDeleteBuy a small amount of physical Gold. Short the paper gold like GLD or IAU. A little physical gold will go along way. Just pray you never need it...or your mattress cash.
To Anonymous @ 10:46....This is FDR's financial blog, not FDR's babysitting service. Some level of sense is required.
ReplyDeleteIf you are waiting for someone else to tell you exactly where to look and what to do at all times without you exerting any effort, you don't really deserve the rewards of successful investing / trading. Think about it.
"This is the first time since this blog was created that you said buy gold. So I am just curious."
ReplyDeletehttp://fdralloveragain.blogspot.com/2009/01/gold-money-or-currency.html
http://fdralloveragain.blogspot.com/2009/01/almighty-dead-dollar.html
I'm not going to put words in FDRAOA's mouth, but I think it's pretty clear from multiple posts he has made here and earlier on MW, he is saying keep *some* gold and silver in the event of a currency collapse (i.e. 'they' find a black-swan way to hyperinflate overnight vs. the current deflation going on now).
ReplyDeleteIn a deflation environment, holding gold/silver is a losing proposition as their value goes up, but their price in dollars goes down.
I don't think he is saying 'invest' in gold/silver...he's saying keep some in a safe just in case, while understanding you are praying you never have to resort to buying a loaf of bread with a Morgan.
-TK
"In a deflation environment, holding gold/silver is a losing proposition as their value goes up, but their price in dollars goes down."
ReplyDeleteGold and silver will not be losing propositions if the deflation you are talking about is severe enough to destroy the bank you have your deposits in and the government agency that insures those deposits.
Gold and silver cannot default on you, lie to you or steal from you. They are assets which are no one else's liabilities. In other words they are REAL.
Anonymous at 5:10PM
ReplyDeleteI think you are right from the safety perspective of holding physical PM's.
But buying gold at $900 an ounce today, and selling it for $450 an ounce a few years later after deflation has run it's course is not a losing proposition?
Is it not better to hold the $900 in paper notes and buy two ounces of gold later with those same pieces of green paper?
"Gold and silver cannot default on you, lie to you or steal from you."
ReplyDeleteSame is true for a house or a handgun. All of these things are money, as is gold, traditionally.
As you can see from my quick list in: Stocks vs. Gold, some money does better than others during deflations and inflations, but for the most part, monetary VALUEs really don't change much, including gold. Prices change a lot.
That is because the only really liquid variable in day-to-day trading is the paper the supply, so prices are very easily universally manipulated. That affects all things priced by paper, not just some things.
For VALUEs to change, you really need a sea change, some a long term shift in industrialization, etc.
For simple deflation, the best thing to hold is the last thing you want to hold during inflation: cash.
In fact, cash is up 100% in buying power since Oct 2007.
Gold comes close as it is only off 10-20% from highs, but as money priced in tremendously strengthening (deflating) paper dollars, it has some catching up on the downside.
So do I have this right? The options are
ReplyDelete1) fall to 7500 and bounce up followed by economic collapse
2) fall to 7500 and bounce up followed by economic collapse
3) fall below 7500 followed by economic collapse
Right?