Wednesday, June 30, 2010
Required Listening
Delivered in 1994, I think this concise, one hour speech by Ed Griffin remains the single best primer to understand the macro business environment in modern America:
http://video.google.com/videoplay?docid=638447372044116845#docid=-8484911570371055528
Subscribe to:
Post Comments (Atom)
FDR,is the dollar movement inline with your fractals coz it seems to be moving down and down since the last few weeks.You still think we will see a vertical movement in it going forward in the near term?
ReplyDeleteYes, the USD is going to continue its 2 year long mega bull market for years to come. The accute surge is unfolding now.
ReplyDeleteRemember that the fractal model is from 1 lower degree so there will be an additiona1 degree of fluctuation as the larger degree movement unfolds, but the overall trend is known.
It is my understanding that all public sector debt is private sector savings. There was an article that spoke of this and that all the private sector savings were sitting on corporate balance sheets. If this is true, corporations are wealthier than they have ever been. It also states that there really is no debt, as it is equal to private sector savings. Being that we hold the ability to coin our own money and back it with anything the FED would like to hold, like all the worthless assets it can acquire, are we really worried about a whole lot of nothing? It seems that the corporate cash flow will pour into the public coffer soon enough and thus the private sector savings will come down and the public sector debt will come down as well, which in turn will devalue the dollar and increase the equity markets.
ReplyDeleteSorry for the OT but I read a lot of very assured sounding commentary that gold is in a bull market. The debate is around buying this "dip" to 1200 or waiting for 1160ish. Charts are regularly trotted out backing this "thesis" with projections onwards and upwards for the forseeable future. As this runs counter to your analysis I am wondering what everyone (it seems) is missing? Perhaps gold was but no longer is in a bull market? Again very little critical analysis (apart from your own) in support of an imminent gold failure. Also wondering if gold is being supported because of a) inflation (and dollar risk) fears, b) deflation fears, c) systemic risk fears. I've had the feeling it's mostly (a) but am starting to wonder if I might be missing something now that deflation is so out of the closet and gold continues to hold its gains relatively well.
ReplyDeleteWhat do you think about Griffin's comment on the fed controlling interest rates? (approx at the 48min mark)
ReplyDelete"Sorry for the OT but I read a lot of very assured sounding commentary that gold is in a bull market. The debate is around buying this "dip" to 1200 or waiting for 1160ish. Charts are regularly trotted out backing this "thesis" with projections onwards and upwards for the forseeable future. As this runs counter to your analysis I am wondering what everyone (it seems) is missing? Perhaps gold was but no longer is in a bull market? Again very little critical analysis (apart from your own) in support of an imminent gold failure. Also wondering if gold is being supported because of a) inflation (and dollar risk) fears, b) deflation fears, c) systemic risk fears. I've had the feeling it's mostly (a) but am starting to wonder if I might be missing something now that deflation is so out of the closet and gold continues to hold its gains relatively well. "
ReplyDeleteI've posted my rationale quite a but, but the bottomline is that gold simply reflects the amount of liquidity in the form of printed cash. Since the cash supply has been plummeting for a couple of years (contrary to peopular belief) due to a collapse in leveraged bank lending, the dollar will continue to surge and the gold price will fall.
Gold has always been "priced" by liquidity while its value rarely changes. That's why it follows stocks and real estate in the macro (and usually in the micro). I have no idea why people think gold is a hedge against stock crashes, gold price and stocks have always moved in lock step in the macro view.
There are a few years, here and there, where one end of the liquidity balloon expands more than the other, but in general gold and stocks are price by the same macro expansion (or contraction) of the same balloon.
What could possibly price gold but the amount of cash in people's pockets? It doesn't do anything, which is why it essentially never changes in value.
FROM ZEROHEDGE.COM Care to comment on "RED MONEY" - you have never rebutted this.
ReplyDeleteRed Money - (Conspiracy Theory #11)
http://www.zerohedge.com/article/red-money-conspiracy-theory-11
It seems if you look under the surface of all the economic data out there you get a decent recovery taking hold. Couple that with all the negativity in the news and you have the making for a new bull market. If you are into EW analysis you can count the move lower thus far off the highs as clearly 3 waves of consolidation. I know that EWI sees it as 5 waves, but you really have to squint stretch and bend to make the case for that. I can look across the room and see that it is clearly 3 waves. Also, if it were the start of wave 3 down, the volume should be much higher all together than what we are seeing, just seems much more corrective in nature. Also, looking outside where reality lies, I see everyone pretty comfortable with the economy. All the unfilled business spots are getting filled and new construction is starting to take off. There is a lot of confusing data but everyone I know is back to work and feels much better than last year. Outside of energy, where stocks have been crushed by the gulf oil spill and you see that most companies stock is hanging near the highs and corporate balance sheets and profits are higher than the peak in 2007. At some point all that matters is profits and the people laid off are the most unskilled and did not contribute enough to spending to really hurt corporate profits, at least not enough to make up for all the gains in revenue from overseas. Not sure what will happen but it seems that the economy is doing pretty good all things considered. If this is P3 it is a real snoozer and has to be making the Prechters of the world a bit out of touch.
ReplyDelete"FROM ZEROHEDGE.COM Care to comment on "RED MONEY" - you have never rebutted this.
ReplyDeleteRed Money - (Conspiracy Theory #11)
http://www.zerohedge.com/article/red-money-conspiracy-theory-11 "
Pleeease. Why would any central bank destroy their currency in a time where it's the most sought after asset class? You dollar haters never get it do you? During the Great Depression banks collapsed taking people's dollars (read savings) and did the dollar collapse? was it replaced with something else? No, it wasn't. It only got stronger because dollars were rare and people still needed them to pay their bills. Your type has been screaming about the death of the dollar throughout this crisis and yet the demand for it keeps going up. Keep screaming. You'll be right someday but not anytime soon. Bank on it.
"What could possibly price gold but the amount of cash in people's pockets? It doesn't do anything, which is why it essentially never changes in value."
ReplyDeleteFrom the european point of view, if the euro
will fall to +/- 1Euro=0.30USD,
and even if gold falls to 600USD,
will the value of 1Krugger (in Europe) be the same
in deflationary (falling prices is euro?)
cycle?
FDR - How come when discussing the fall the value of the dollar since 1913, no one factors in wage growth? When accounting for wage growth there has been very little inflation and the standard of living has steadily increased since 1913. It makes sense now to see prices come down with wages, it is a wash. As a matter of fact, things are looking better now than they ever have. Prices are falling faster than wage declines, which are actually still moving slightly higher. Since debt does not matter and only helps the value of the dollar in your case, we should hope the government keeps borrowing, as it improves all our lives.
ReplyDeletehttp://1.bp.blogspot.com/_sL6ril9lDkw/TDyR6BpWW2I/AAAAAAAACVI/Zh3w5KCDzmw/s1600/100713+1215+pm.jpg
ReplyDeletewith INTC showing revenues and profits like that, how can this market possibly stay down? It looks as though analysts and the media are way too bearish here and we are in a perfect climate to see monster gains in the S&P in the 3rd quarter. I love the negative concept based on the past, but you cannot deny that corporate profits are exploding and the unemployed will soon be employed or there employment is not necessary for profits to continue. Since the market only cares about profits, i would say we are on the cusp of the a new bull market in equities indeed. I do agree that gold will go lower as it will prove overcrowded and unnecessarily hedging fear that is not showing up in reality. Just look at INTC and try to explain how that is not impressive and will get a lot of perma bears wondering where they went wrong. The short covering will begin tomorrow and continue through the old highs until we pause heading into Q4, but then everyone will have to ramp up earnings guidance for the seasonally strongest quarter, as they got caught with there pants down underestimating INTC, which is a powerhouse barometer of the American republic.
ReplyDeleteAny comments about intel?
ReplyDeleteFDR it been quite some time since we have heard from you.I adore ur views and everything makes sense.Coming to the dollar do you think the dollar bottoms out now or it may fall somemore?Are we at the cusp of cashzilla now?
ReplyDeleteWe are witnessing a great unwinding.
ReplyDeletePeople today are and have been expanding their capacity to consume this was not sustainable. It was fueled by the greedy leaders / contollers at the expense of many.
Money is power. Too many people have to much power. This money is and will be concentrated into the hands of the few. The balance of power most people thought they had in their life was part illusion and part real. Now, both are being destroyed. The animal is now discovering the chains that bind.
Times are a changing...
FDR
ReplyDeleteCould you please explain in detali and update the additional one degree of fluctuation and a general time frame for playing out with your fractuals?
The dollar that is.
Look how scared the market was today of AAPL earnings. Tech is driving this market to new highs next year. How do you reconcile profits this large with plummeting stocks, you can't. AAPL will pass 300 as we take out the highs recent highs in the SPX in the next couple of weeks. Just too much money being made in this low interest rate environment. Mortgage refinance is putting thousands of extra dollars into the pockets of the employed, which still account for more than 85% of the US population. Dont fight the trend, buying the dips is free money, especially in high beta tech. Go AAPL!
ReplyDeleteThese profits are staggering. the entire market is caught short and we could blow through all time highs. How are these companies recording such high profits? You have to admit, who would have thought that the S&P earnings $90 would end up being conservative. We may have some macro debt issues, but it certainly is not affecting the stock market and the companies that fuel it. We should see tax receipts soar in the next 6 months as these profits work through. We should also see massive hiring as these companies try to keep up with demand. We have UPS,MMM,CAT all raising guidance and profits up 90%. We have Airlines adding flights and Hotels raising rates because they are over booked. So we see inflation starting to pick up with higher prices sticking. The housing market sucks, but it is over priced. Those in there homes still could care less about the price,even if it is underwater, because you stay in your home for a very long time. i could care less what the current market price is. I could care less if my home fell 30% from here and I bought it 50% higher. Why would that make a difference? My income is higher and I keep getting raises every year because business is booming. This will feed through as always. Watch the S&P take out 1100 here soon and EWI change all there counts.....again. We are on the cusp of the biggest moment we will see in this bull market. You can feel all the bearish blogs and depression talk building to a crescendo. Then all of a sudden, nothing happens. CAT beats, UPS beats, MMM beats, CAL beats, AAPL beats.....etc. They all raise guidance, putting off the reckoning until 2011, then they beat again and again. I dont know why people try to guess where the market is going, just follow the profits and the stock prices follow. EWI is wrong about that, just look at a chart
ReplyDeleteGM buying AmeriCredit for $3.5 billion is very bullish for the market. We should see a good rally through August on this. The tide is turning for the better. I like a pickup in inflation and we should see lending start to pickup here in the 2nd half. I think the shift is now from deflation worries to hyper inflation worries into the back half of 2011. We should see equities start to run on this theme. If we get through 1100 here we should see 1160 quickly, then we will have to assume we are watching the fed for there ability to withdraw reserves before the banks go hog wild. There is no way companies can keep up with demand at current levels of employment, so we should see the unemployment rate drop much faster than people have factored in. The FED has caused this mess but they have done a masterful job thus far of containing this mess. the trick is not hyper inflating the exit. the depression was easy to stave off as we had a playbook of what to do. Getting out of this is unchartered waters, but so far so good. Can equity prices keep up with rising prices everywhere else, that is the question. We will need to see 14000 taken out on the DOW in 2012 to be the case. Get long some beta and hang on, should be another wild ride higher. The good news is that profits are so high from the record advance in the market that there are no sellers down below. Every time we sell off, it starts on high volume from above then just shuts off. This is indicative of a sold out market full of fear and why you climb that wall. every rally is sold into then halts. You grind higher all the while. Just step back and look at a longer chart, you will see this pattern. The next advance should be a degree higher than the previous, so we have a long way to go on the upside
ReplyDeleteHello FDR,
ReplyDeleteI found this article. It is absolutely full of BS and it is the type of economic information that only confuses people.
Could you please write some comments on all of the lies and misconceptions presented??
Thanks
"4 Reasons to Fear Deflation"
http://money.usnews.com/money/blogs/flowchart/2010/07/20/4-reasons-to-fear-deflation.html
FDR I know its taxing for you but your views matter a lot and much appreciated.Your views provide a respite especially when one is bombarded with a plethora of information and is unable to comprehend what comes next especially on the dollar front.Could you please explain the additional one degree of fluctuation in the dollar or have your views on the market changed? Since the dollar has fallen fast and is almost nearing 80 on the dollar index , your thoughts on it going forward is much appreciated.
ReplyDeleteFDR- We are started to see higher prices stick and result in improved profits this earnings season. Has deflation been destroyed by the Fed? It appears the market is cheap here if inflation keeps picking up. I went long equities when I saw local banks in Chicago pouring loans back into local neighborhoods and hotels raising rates. So far so good, we are up 7% this month. The contrarian position is to be long here to challenge the 14k high in the DOW. I know this seems far off but corporate profits are exploding and the economy is much more streamlined for profits here. It is as if the 2008 crash was the best thing to happen to these companies, it allowed them to lay off unproductive workers and move forward leaner and stronger. The only thing I see that can derail this economy now is if we see China slow down. We are picking up lost profits in the US and Europe in Asia and beyond. Net net, the corporations are making more money now than they were at the height of the market peak. With banks starting to open up, do you believe the infection can be contained enough not to destroy future profits? Tricky time, but it appears the perfect climate fir a bull market in equities. At least it feels like the contrarion move to be long and that almost always works, al be it difficult to go against the pundits and there focus on data from the past.
ReplyDeleteAre rising dividends and higher prices for autos and hotels indicative of deflation?
ReplyDeleteOutright deflation over an extended period of time is almost impossible under a fiat government run monetary system. Things could not be worse than they are now and we still have 1% inflation, even home prices are stable in this environment. Losses need not be counted as the fed can simply purchase them to maturity and sweep them under the rug if need be. Deflation would destroy the Fed while inflation would merely upset the Fed. I predict we continue to see stable to higher prices, al be it a slow climb. There is no evidence that deflation exists today outside of theory, but this theory is getting old. One need only walk outside to see stable to rising prices. The fact is, even with higher state and local taxes coming through, prices are still stable. This is a very strong sign that the consumer has repaired their balance sheet and is starting to spend again. Housing in Chicago is starting to rebound and prices are still 50% higher than in 2006. In 2006 you could purchase a new home in Chicago for about 700k, these home went to about 1.3 million in the peak and fell to about 1 million at the bottom, they are now starting to move higher into the 1.1 million range. The average time on market here is about 90 days, not great but not bad either, as it was 14 months in 2008. With rates at 4.5% on a 30 year, everyone can afford a lot more house and has finally put a floor under real estate. People telling you the banks are not lending are crazy. My door gets knocked down with lenders pushing me with anything I need. I twill them to screw off, but money is easy to come by again and this is not deflationary. I am not sure about the good market, I think as long as there is a strong debate on this issue, the price will stay elevated or trend higher. I predict the equity market to be the safest place to be as cash loses value here at a nice clip. The easiest way for the Fed to get money back in peoples pockets is to continue buying equities through there member banks accounts. I see very large buying through GS and JPM on the floor that is clearly not institutional or private client money, it's just too big.
ReplyDeleteThe more I think about the action that is taking place in the social / economic environment suggests much forethought based on the previous depression.
ReplyDeleteThis one is being managed like surgeons and markets and people are in total control of the masters. They know how far it can be pushed and will do everything to maintain the current power structure.
Not much resistance in the big industrials back to the 2007 highs. Do you think stocks like DE could be set up for a big move back to the old highs here into the November elections? In the EW count I have the move off the 2007 highs down to the 666 lows as a clear A B C down move and we are in wave 3 of 1 back up of 1 of 3 higher. You can see wave 1 and 2 clear. This 3rd wave should be larger than wave 1 and take us above 1600 in the SPX. judging by time, we should eclipse the 2007 highs in 19 months, with 18 months left. So sometime around January of 2012 we should be breaking to new highs. If you see this count in another way, could you post a detailed count. I look at the count in EWI but it breaks so many rules that it I wonder what there motives are other than fear to sell subscriptions. Anyone that knows EW can see the count from the 2007 highs as an ABC and the current move up as impulsive breaking in 5 waves. Granted we need to take out the 1200 area to confirm we are in fact in a new bull market phase of this monster advance
ReplyDeleteAnother sign that things are not so bad, Fedex
ReplyDeleteFDR any change in your outlook on DOW? Its been long time no see so some update are much appreciated.Thanks
ReplyDeleteFDRAOA,
ReplyDeleteI agree. It is high time for an update. So far the S&P 500 remains over 1100. Not much weakness there. You could loose your shirt shorting this maket.
GDP up, Confidence up, Chicago PMI blowing the doors off. Market heading higher, follow the profits. Long and strong the industrials. 3 of 3 up to new highs into the November elections.
ReplyDelete