muses of the moment

October 28, 2008

Deflation or Inflation

Filed under: Inflation — totallygroovygirlfriday @ 9:30 pm

It’s hard to know what to plan for. Are we in a deflationary period or an inflationary period? Or as Nouriel suggests….stagflation.

If we look at just the numbers in macro-economic terms….I would say Nouriel is correct, stagflation.

But for the man on the street, I would say deflation and then inflation. Use this knowledge to your advantage.

In observing how things went down in Iceland, they experienced deflation and then rapid inflation moving to hyper inflation. All of this within a 2 year period.

Use the current deflationary period to pay debt, save cash, and buy gold and buy silver.

In the next 12 months when the press says, the US is over the crisis and the deflationary period is over and the economy is growing, that is your signal. It is only growing from inflationary pressures from printing so much money for the bailouts, not from true growth. Within 6 months the hyperinflation will hit the US seemingly without warning. That is the time to have gold and silver not US dollars, as the world will be dumping US dollars by that time and gold will be through the roof.

This will happen with the same lighting speed of the crash this year.

The DOW is up 1000 points, only 5000 more to go….

October 24, 2008

Real trading story today

Filed under: The Financial Crisis — totallygroovygirlfriday @ 11:36 pm

The DOW hit it’s “down limit” in pre-open trading this Friday morning. The DOW was shut down until open.

From RGE website (they have been spot on since 2005, predicting this crisis):

Early Friday Morning Update: Yesterday Thursday I gave a speech in London (see video below) arguing that markets were in sheer panic and becoming literally dysfunctional and unhinged. I also made the point that policy makers may soon be forced to close financial markets as the panic selling accelerates.

Indeed, we have now reached a point where fundamentals and long term valuation considerations do not matter any more for financial markets. There is a free fall as most investors are rapidly deleveraging and we are on the verge of a a capitulation collapse. What matters now is only flows – rather than stocks and fundamentals – and flows are unidirectional as everyone is selling and no one is buying as trying to buy equities is like catching a falling knife. There are no buyers in these dysfunctional markets, only sellers and panic is the ugly state of this destabilizing game.

http://www.rgemonitor.com/roubini-monitor

Why did the DOW not go below 8200 all day?

Jim Sinclair’s Commentary

Today it was the Federal Reserve providing funds to the US Treasury which in turn provided the funds to the Exchange Stabilization Fund. The ESF then used the funds to buy key Dow stocks when the US Equity Index open was limit down at minus 550 points. The Exchange Stabilization Fund is legally able to do that.

http://www.jsmineset.com

All the commentaries this afternoon are saying a 3% drop is not bad, it could have been worse. Yes, it could have been much worse, it was artificially propped up.

I highly recommend both of the websites cited in this article.

Iceland

Filed under: Inflation — totallygroovygirlfriday @ 11:36 pm

Hyperinflation is hitting Iceland right now. This article is about Iceland, but it describes what will happen in the US in the next 9-24 months. The graph in this article clearly shows how hyperinflation hit within 6 months with little warning. Inflation went up 12% in one year with 8% of that 12% in a 6-month timeframe.

Financially speaking, Iceland thought of itself as UK (1), in the same way as, financially speaking, UK thought of itself as the US and the US thought of themselves as the entire world. It is therefore quite useful to study the case of Iceland (2) in order to understand the course of events that London and Washington will follow in the next 12 months (3).

Link to full article:

http://www.leap2020.eu/GEAB-N-28-is-available!-Global-systemic-crisis-Alert-Summer-2009-The-US-government-defaults-on-its-debt_a2250.html

Implosion update

Filed under: Long term investing, Odds 'n ends — totallygroovygirlfriday @ 10:48 pm
There is growing concern from the websites I read that a major financial implode is going to take place in the next 5 to 88 days. Some think the Admin will do everything they can to hold it off until after the election, but most economists think the Admin has run out of options and this is something they can not stop or time anymore.
Possibilities:
  • Complete collapse of the corporate credit market (money market and other funds) that I have been telling you is frozen
  • Implosion of several large hedge funds, where they are forced to liquidate at the same time
  • 25% more drop in DOW and drop in all international markets
  • As a result shutdown of the US Stock Markets (maybe worldwide) for more than a day, maybe 2 weeks or more
  • This could cause the bank holiday I was speaking of. (Bank holiday probably will not be as long as a closing of the markets, maybe only specific banks.)

October 22, 2008

Shadow Banking still in deep freeze

Filed under: Inflation — totallygroovygirlfriday @ 9:36 pm

As I stated in the last post, hold onto our hats. The Dow dropped 5.6%. I prefer to measure in percentages, as it helps compare current stats to historical stats. The Dow, which is only a few stocks, was not alone, last night every major international index tanked as the next wave of CDOs unwind. Even Ben’s announcement of unlimited cash into money market funds didn’t help.

Since no bank or corporation knows how many creative financial arrangements anyone has on their books, no one trusts his neighbor. Throwing money at the problem does not seem to be helping.

Big Ben is still battling a complete systemic financial breakdown. Nothing has changed, so make sure you are prepared.

October 20, 2008

Winner of the most humorous headline

Filed under: Inflation, Odds 'n ends — totallygroovygirlfriday @ 7:37 pm
So, the humorous headline for the day was:
“Bush, Bernake open to new stimulus package”
Now before you rush right out to the mall, we, the people, will not be getting the checks this time. (Just paying for them.)
The article goes on to say that the White House and Federal Reserve say the best place to inject this stimulus is in banks, brokers, and home mortgage companies. Apparently the $750 billion didn’t do the trick. That’s because the $750 billion went to foreign banks, who just kept it. Wise decision, the gig is up and they won’t see a penny of their derivative investments.
Bernake and Paulsonhave learned their lesson…never call it a bailout again, it’s a stimulus package from now on, baby. And make sure it looks like this stimulus is Congress’ idea, not the White House.
Bernake and Paulson have also learned that nothing they have done so far has stopped the financial implosion, just slowed it down. They know that when the next wave of derivatives come due for payment and are unable to roll over or sell, all hell will break loose again as it sends ripples throughout the world. Guess what, a large batch of derivatives come due Tuesday and Wednesday of this week.
Hold onto your hats. Which companies will be bankrupt from this wave?
Resoucres:
http://news.yahoo.com/s/ap/20081020/ap_on_bi_ge/financial_meltdown

October 16, 2008

Simple Rules of Investing

Filed under: Long term investing — totallygroovygirlfriday @ 3:18 am

I have been studying and experimenting with investing for the last five years. No matter how much money you have…$100 or $1,000,000, the principles are the same.

  • Give away some of your money. It is your decision how much and where.
  • Never invest more than 10% of your net worth in one place. One exception might be your home, but your home should never be your only place of savings. You can have all your investments in a general area of investment such as real estate or precious metals, but don’t have all your investments in one building, or all coins. Every area of investment (such as real estate) has more than one way to invest (investment property, REITs, etc) or more than one place to invest (brokerage house, physical building, 401K, etc).
  • Educate yourself in financial matters, don’t rely on brokers or bankers to guide you. They have a vested interest in doing what is best for them with your money, not what is best for you with your money. Know enough to discern if their advice is true or not. Financial media is paid by investment companies, their advice should be taken with that point of view in mind.
  • When deciding on an investment or when judging the success or failure of an investment, focus on the percentage of return, not on the dollar amount gained/lost. An investment of $100 that returns $30 in a year is a 30% annual return (well above the rate of inflation), although $30 may not seem a lot to most people.
  • Don’t spend gains, reinvest. Compounding is a wonderful thing. But don’t forget to give some away.
  • When examining an investment, don’t forget to factor in taxes and fees. They may impact the true percentage of gain.
  • If it is too good to be true, it is.
  • Save money every month and set aside for investing. Even if it is only ten dollars a month, in a year you will have $120 more than you had. If you purchase several silver coins at $15 each and silver doubles in price in two years, you now have an investment worth $240. $240 is more than $0 (if you didn’t invest at all) and more than a 2% or $5 return (if you put $120 in a bank account).
  • Pick one area of investing, such as real estate or stocks or precious metals or commodities, and understand that area well.
  • Learn about business cycles, so you may ride waves instead of paddling against them or get caught in the undertow of a crashing wave. Business cycles usually run at least 10 years, usually much longer, so there is plenty of time to learn where you are.
  • When you enter an investment, know exactly when you are exiting the investment.

Implosion of World-wide Banking

Filed under: Inflation — totallygroovygirlfriday @ 12:21 am

Jim Sinclair quote: “THIS IS IT!”

The Issue: Implosion of World-wide Banking

If you have not been under a rock for the last 30 days, you probably know that the worldwide banking system has imploded and is on life support. It’s touch and go. Perhaps, you want to hide under a rock at the news. But, most of the US under the age of 95 does not understand how this might affect them on a personal level and what to do to prepare for the unknown.

We are heading into a hyper-inflationary depression within the next two years. I will go more into detail in future blogs. (Check out the resource links below.) You probably understand inflation, prices rise. And you remember from history, depression is little or no economic growth. These are extremely simple definitions.

Since the government is “printing” money on daily basis to “bailout” or stabilize the banks and other financial entities, a tidal wave of US dollars will soon drown the world. When the government creates money, it always ends up creating higher prices later. The more money, the higher the prices. The inflation will be so extreme that it will choke any growth and cause a depression in the US, maybe worldwide.

What to do? Do not be afraid, be prepared.

Here are some things that could happen on the day to day level:

  • Banks close for an extended “holiday” either because they have no cash or there is a run on the banks by the American people. Have some cash at home.
  • Store shelves are empty or bare because the supply chain is choked by high prices. Start using this two-year window to stock up on canned goods, toilet paper, pet food, medications, batteries, etc. Pretend you would not be able to get these items in a consistent manner for 3 months.
  • Gas is rationed or too high to purchase. We had a taste this year with gas at $4.00 to $5.00 per gallon. Can’t really stock pile gas long term, but you can have things to barter for gas like food, cash, and silver coins. Purchase a bike.
  • Violence rises. Secure your home as much as possible.
  • High unemployment. Reduce debt, have six months of expenses saved, and save money in gold or silver coins with some cash.
  • Rolling brown outs or utilities are really expensive. Buy a generator (or two and sell one during the emergency for a profit), buy a solar generator or other solar-related products, batteries, candles, flash lights.
  • Water is scare or not purified. Store water in jugs now or purchase a solar-powered water purifier. Purchase or install a rain barrel water conservation system for your house for non-cooking/drinking water needs.

Suggestion: pool your resources with other people in your family, friends, or neighborhood.

It could be that these provisions will not be necessary. It could be that only two or three of these things will happen. However, I believe they will be necessary for at least a short period of time. When you really need these things, the shelves will be empty. Just as the implosion of the economy seemed to broad-side us this year, so this hyperinflationary period will seem to do the same. People will be surprised, unprepared, and therefore will panic.

The government will, of course, step in during this type of emergency, but we all have seen from other national disasters that it takes a few weeks for the government to get its act together.

You could really go overboard in this survival mode, be prepared, not manic.

Resources:

www.shadowstats.com (check out the report titled Hyperinflation Special Report)

www.jsmineset.com (best economic educational website for free)

October 15, 2008

Visionary Investing

Filed under: Long term investing — totallygroovygirlfriday @ 11:41 pm

Mark Twain quote: “I am more concerned with the return of my money rather than the return on my money.”

The Issue: Visionary Investing

I have been following the economic breakdown of the US financial system since 2005. Did you stay in until 2007 and hit 14,000 high? As Jim Sinclair of jsmineset.com says, leave 10-20% to the market on the high or low side. You may have missed the 14,000, but you also missed the past 8,000 of last week. A far better trade for the investor looking to keep money rather than lose it.

I am not a day trader; I am a long term investor. I read and study macro-economic experts, cycles, and visionaries. If you want day trading advice, turn on CBNC.

The implosion of the US economy and the US Dollar is upon us. Most people in the US do not realize that their 401K is toast for the long term. Even if it does come back to its original number of 2006 and 2007, if it’s still in US dollars, the ability for it to purchase anything of value will be greatly diminished. Inflation and the dollar’s decline in purchasing power since 2001 have been slowing eating away any savings.

What to do? Being ahead of the herd

Since the herd has not yet realized the inevitability of the dollar’s situation, real currency is still cheap, if you can find it. In these times, the goal is not a huge return on your investment. The goal is to preserve the buying power of your investment against inflation. Gold and silver is the best way to do that in this environment. Holding physical gold and silver is the best alternative, whether through an IRA or a personal account. Some IRAs will not hold physical coin, so an exchanged traded fund is the next best thing. More detail on these two options in future blogs.

Here are a few details on ETF from Jim Sinclair’s site dated October 15, 2008:

Dear Jim,

I have had many people ask me about how ETF’s work. They often ask detailed questions about what happens to their ETF in scenario A, or scenario B. The answer is that all ETF’s work differently, and how they work is laid out in the legal language in the individual prospectus for each ETF.

Therefore, if JSMineset readers are interested in investing in ETF’s, they should read the prospectus closely and think about the implications of the legal structure. If they do not understand the consequences of the legal structure, they should hire a good securities lawyer to read and analyze the documents for them. We are not lawyers, and we do not want to get into the business of dispensing free legal advice to people. In our opinion, if you buy an ETF instrument you should know what you are buying.

Respectfully yours,
Monty Guild
www.GuildInvestment.com

Resources:

www.goldandsilver.com

http://www.jsmineset.com -the best economic educational website available for free

 

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