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Speaking of "Manic Swings" for CW Radio


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#1 DrBubb

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Posted 18 September 2009 - 09:54 PM

Speaking of "Manic Swings" for CW Radio
Is a new Deflationary Swing starting ?
==========================================

I have done a 25 minute interview with Dominic Frisby today for CW Radio, and I will be putting some charts up here to go with that interview

CWR Interview: http://commoditywatc...i-polar-swings/

I have four different "Manic Swing indices", three which rise with Inflation, and one that rises with deflation.

They all look as if they have reached important "lines in the sand" and are ready to turn.

MSI#1: WTI-to-USD Ratio ... http://tinyurl.com/MSI1-d3y


MSI#2: Copper-to-Libor Ratio ... http://tinyurl.com/MSI2-d3y


MSI#3: WTI-to-Libor Ratio ... http://tinyurl.com/MSI3-d3y
xx

...and then the one that rises with deflation:

MSI#4 : US Dollar-to-XED ... http://tinyurl.com/MSI4-d3y


The Guillotine and the Sandpaper

Japan's Nikkei


More "Lines in the Sand"

WTI Crude / WTIC ... update


Hong Kong's Hang Seng Index ... update


Copper ... update


Comments follow
============

Not only above, but various other indicators suggest that Inflation is reaching natural limits, and
the next DEFLATIONARY SWING is just about to begin.

If true,
The following will rise: the US Dollar, Libor rates

And these will fall: Stocks, commodities, property


The downswing may last 6-18 months, I am guessing. But that expected timeframe can shrink or expand,
depending on the speed of fall, and how investor sentiment behaves

== ==

Combust this weekend, says Larry P:
(possible major turn in markets)

Manic Swings on FS :: http://TinyUrl.com/ManicXfs
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#2 DrBubb

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Posted 18 September 2009 - 09:58 PM

THE FED HAS BEEN CONSERVATIVE - Prechter is right

Bob Prechter's interview:

== ==

Fed Repairing Its Balance Sheet: Not Inflationary
A lot of pundits expect inflation due to the Fed's moves to provide liquidity. Since banks aren't lending, this potential high-power money does not come into the money supply. In addition, velocity of money has been slowing. No surprise that we have been in a deflationary environment for a year.



Today the Fed released data on what reserves they hold. As you can see, the overall level of reserves has been flat for a year. Bernanke applied the Bagehot Remedy a year ago to stem the crisis, and in the process swapped solid reserves (Treasuries mostly) for all sorts of questionable paper held in the Maiden Lane structure. Since QE was announced, the Fed has been swapping out of those poor reserves and back into solid reserves (Treasuries again and govt-backed mortgages and agency paper). This chart shows how substantial the reduction has been in the Maiden Lane stuff. But the Monetary Base has remained flat for a year, and you can check out M1 and other money indexes as well. Not inflationary.

Rather than being inflationary, this should have the impact of solidifying the quality of the reserves and therefore (eventually) the USD. The DX has bounced for the past two days on increasing volume, which might mark the Dollar Bottom, but it is too soon to confirm that.

Providing liquidity after the secondary crisis after a credit bubble ("secondary" means not the stock market crash, but the inevitable banking crisis which comes after, which came in 2008 after the 2007 peak, and in 1931 after the late 1929 peak) is not inflationary; it is necessary to ameliorate the damage of the credit collapse.

/YELNICK; http://yelnick.typep...flationary.html
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#3 DrBubb

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Posted 18 September 2009 - 10:13 PM

WARNING: Deflationary Collapse Dead Ahead
Karl Denninger

EXCERPT
Geithner, Paulson, Bernanke, Bush, Obama: all have emphasized that "we must get more credit to consumers and businesses" as their primary mantra ever since this crisis began.

They are pressing this position because if we do not expand credit further the existing banks and other institutions that have bad debt on their books will collapse - and they know it.

The correct action to take in 2000 was to force the bad credit from the system and accept the impact on GDP. It would have caused about a 10% contraction in GDP at that time - a mild Depression (or a really nasty recession, depending on how you count it.)

Now, having instead blown another credit bubble, we essentially doubled the debt in the system over the last ten years, while GDP grew by about 40%.

The result of this was a horrible stock market crash, 6.7 million jobs lost (and underreported), personal income tax receipts are down 21%, corporate tax receipts are down 58%, the deficit is tracking at $1.8 trillion this year alone (and $9 trillion more predicted over the next decade), government is now spending nearly 200% of taxes taken in, 13% of mortgages are either delinquent or in foreclosure, more than 20% of all FHA loans are delinquent or in foreclosure, home prices have fallen by half in many places and are not done declining and the rest of the world is wondering if we're going to try to hyperinflate and destroy our currency.

If we try to double our debt once again over the next ten years we won't make it there. The available free cash flow cannot support the interest payments now, and won't be able to if we add more debt to the system.

I understand the political difficulty of closing all the major banks in the United States, selling off their assets and making good on their deposits when required. I recognize the damage this will do to pension funds and bond investors. I am fully cognizant of the fact that this means taking an intentional depression here and now.

But if we don't it will in fact be worse later.

Not "might" be worse.

WILL be worse.

/MORE: http://www.321gold.c...nger091709.html
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#4 G0ldfinger

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Posted 18 September 2009 - 10:14 PM

QUOTE (DrBubb @ Sep 18 2009, 10:58 PM) <{POST_SNAPBACK}>
THE FED HAS BEEN CONSERVATIVE - Prechter is right
...

They could be it, because the 'green $h1tes' have been flying big time. What when the next implosions come - with Alt-A, commercial mortgages? Do we really believe that Citi is fixed? Do we believe that the Treasuries market is doing alright?
You can't tax deflation.
“Currency Induced Cost-Push Hyperinflation” vs “Demand-Pull (non-hyper) Inflation.”
The "no income --> no inflation"-thesis is as wrong as the "price control --> inflation control"-thesis.
Don't TRADE gold! You might lose your shirt in the biggest bull run ever. That would be embarassing. © possibly by Swampy
Posted Image
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#5 DrBubb

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Posted 18 September 2009 - 10:14 PM

FUNDAMENTALISTS see trouble ahead...

VALUE LINE HASN’T BEEN THIS BEARISH SINCE 2000
22 August 2009

Value Line, the well known stock picking digest, has turned more bearish on U.S. equities than at any point in the last 10 years. The company is telling subscribers to pare back equity exposure to just 60%-70%. That’s a low figure for most Wall Street research firms. MarketWatch reports:

“according to one top-performing newsletter, there’s been too much of a good thing in the stock market since this rally began last March.The newsletter is the Value Line Investment Survey, which is in a tie for first place for risk-adjusted performance over the three decades the Hulbert Financial Digest has been monitoring the investment newsletter industry.

In its Aug. 21 issue, which was emailed to subscribers early Monday, Value Line reduced its recommended equity allocation to the range of 60% to 70%.

This reflects a cautious to outright bearish posture on Value Line’s part, since the firm has never lowered its recommended allocation to below 50%. The last time it was lower than it is now was October 2000.

/more: http://pragcap.com/v...rish-since-2000

The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#6 G0ldfinger

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Posted 18 September 2009 - 10:15 PM

QUOTE (DrBubb @ Sep 18 2009, 11:13 PM) <{POST_SNAPBACK}>
WARNING: Deflationary Collapse Dead Ahead
...

That's exactly why the next major Fed balance sheet explosion is dead ahead.
You can't tax deflation.
“Currency Induced Cost-Push Hyperinflation” vs “Demand-Pull (non-hyper) Inflation.”
The "no income --> no inflation"-thesis is as wrong as the "price control --> inflation control"-thesis.
Don't TRADE gold! You might lose your shirt in the biggest bull run ever. That would be embarassing. © possibly by Swampy
Posted Image
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#7 G0ldfinger

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Posted 18 September 2009 - 10:16 PM

QUOTE (DrBubb @ Sep 18 2009, 11:14 PM) <{POST_SNAPBACK}>
...
Value Line, the well known stock picking digest, has turned more bearish on U.S. equities than at any point in the last 10 years. The company is telling subscribers to pare back equity exposure to just 60%-70%. That’s a low figure for most Wall Street research firms. ....

laugh.gif laugh.gif
You can't tax deflation.
“Currency Induced Cost-Push Hyperinflation” vs “Demand-Pull (non-hyper) Inflation.”
The "no income --> no inflation"-thesis is as wrong as the "price control --> inflation control"-thesis.
Don't TRADE gold! You might lose your shirt in the biggest bull run ever. That would be embarassing. © possibly by Swampy
Posted Image
Gold, silver, property, currencies, commodities charts.

#8 DrBubb

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Posted 18 September 2009 - 10:34 PM

QUOTE (G0ldfinger @ Sep 19 2009, 06:15 AM) <{POST_SNAPBACK}>
That's exactly why the next major Fed balance sheet explosion is dead ahead.


my view is... we will see another deflationary downswing OR TWO before the Fed really panics,
and takes wild and reckless actions that will trigger a move to hyperinflation

A question that I ask and keep asking is:

HOW will the Fed and Treasury act to get money into people's hands to trigger a rapid rise in inflation?

If they do something like had out a milliuon dollar check to every citizen, that would do it,
but we are miles away from that so far

The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#9 G0ldfinger

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Posted 18 September 2009 - 10:51 PM

QUOTE (DrBubb @ Sep 18 2009, 11:34 PM) <{POST_SNAPBACK}>
...
HOW will the Fed and Treasury act to get money into people's hands to trigger a rapid rise in inflation?
...

What if they don't have to hand out anything? What if it comes just because what Denninger describes will cause a further major downturn in the Dollar, driving import prices (oil, gadgets) up?
You can't tax deflation.
“Currency Induced Cost-Push Hyperinflation” vs “Demand-Pull (non-hyper) Inflation.”
The "no income --> no inflation"-thesis is as wrong as the "price control --> inflation control"-thesis.
Don't TRADE gold! You might lose your shirt in the biggest bull run ever. That would be embarassing. © possibly by Swampy
Posted Image
Gold, silver, property, currencies, commodities charts.

#10 DrBubb

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Posted 18 September 2009 - 10:58 PM

QUOTE (G0ldfinger @ Sep 19 2009, 06:51 AM) <{POST_SNAPBACK}>
What if they don't have to hand out anything? What if it comes just because what Denninger describes will cause a further major downturn in the Dollar, driving import prices (oil, gadgets) up?


Higher food and energy prices will just force property and stocks lower,
unless more spending money somehow comes into people's hands. But how?

The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#11 G0ldfinger

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Posted 18 September 2009 - 11:03 PM

QUOTE (DrBubb @ Sep 18 2009, 11:58 PM) <{POST_SNAPBACK}>
Higher food and energy prices will just force property and stocks lower,

At the beginning.

QUOTE (DrBubb @ Sep 18 2009, 11:58 PM) <{POST_SNAPBACK}>
unless more spending money somehow comes into people's hands. But how?

The Dollar goes down, prices go up. Obama decides tax cuts to help the consumer. More Treasuries issued, Dollar goes further down. Inflation takes hold, public sector wages must be increased. And so on.
You can't tax deflation.
“Currency Induced Cost-Push Hyperinflation” vs “Demand-Pull (non-hyper) Inflation.”
The "no income --> no inflation"-thesis is as wrong as the "price control --> inflation control"-thesis.
Don't TRADE gold! You might lose your shirt in the biggest bull run ever. That would be embarassing. © possibly by Swampy
Posted Image
Gold, silver, property, currencies, commodities charts.

#12 Pixel8r

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Posted 19 September 2009 - 12:07 AM

QUOTE (DrBubb @ Sep 18 2009, 11:58 PM) <{POST_SNAPBACK}>
Higher food and energy prices will just force property and stocks lower,
unless more spending money somehow comes into people's hands. But how?

Property and stocks will be kept higher by the monetization of debt, more dollars will be printed to buy the treasuries. Who in your mind is going to be buying the additional $2 trillion (or more?) required this year, the chinese? More dollars printed will lead to higher priced assets, some more than others. They can't keep printing and expect prices to go down. America has been living off the rest of the world, they are still increasing their deficits at an ever greater speed. The world is getting sick of their debt, so they are having to buy it themselves now (QE).

Seems simple to me, but maybe I am missing something. Precther does not address the monetization of debt, or how it will be paid. If everything gets cheaper, cash becomes more valuable which makes the debt even harder to pay. How can prices of assets go down when they need to QE their own debt?





#13 Pixel8r

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Posted 19 September 2009 - 12:33 AM

QUOTE (DrBubb @ Sep 18 2009, 10:58 PM) <{POST_SNAPBACK}>
Fed Repairing Its Balance Sheet: Not Inflationary
A lot of pundits expect inflation due to the Fed's moves to provide liquidity. Since banks aren't lending, this potential high-power money does not come into the money supply. In addition, velocity of money has been slowing. No surprise that we have been in a deflationary environment for a year.

The banks may not be lending now, but they have lent far too much in the past already, the money is in the system. The fed are keeping that money there by propping up the banks, not allowing them to fail for their irresponsible lending.



#14 Newbear

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Posted 19 September 2009 - 01:45 AM

QUOTE (DrBubb @ Sep 18 2009, 10:58 PM) <{POST_SNAPBACK}>
THE FED HAS BEEN CONSERVATIVE - Prechter is right

Bob Prechter's interview:

== ==

Fed Repairing Its Balance Sheet: Not Inflationary
A lot of pundits expect inflation due to the Fed's moves to provide liquidity. Since banks aren't lending, this potential high-power money does not come into the money supply. In addition, velocity of money has been slowing. No surprise that we have been in a deflationary environment for a year.



Today the Fed released data on what reserves they hold. As you can see, the overall level of reserves has been flat for a year. Bernanke applied the Bagehot Remedy a year ago to stem the crisis, and in the process swapped solid reserves (Treasuries mostly) for all sorts of questionable paper held in the Maiden Lane structure. Since QE was announced, the Fed has been swapping out of those poor reserves and back into solid reserves (Treasuries again and govt-backed mortgages and agency paper). This chart shows how substantial the reduction has been in the Maiden Lane stuff. But the Monetary Base has remained flat for a year, and you can check out M1 and other money indexes as well. Not inflationary.

Rather than being inflationary, this should have the impact of solidifying the quality of the reserves and therefore (eventually) the USD. The DX has bounced for the past two days on increasing volume, which might mark the Dollar Bottom, but it is too soon to confirm that.

Providing liquidity after the secondary crisis after a credit bubble ("secondary" means not the stock market crash, but the inevitable banking crisis which comes after, which came in 2008 after the 2007 peak, and in 1931 after the late 1929 peak) is not inflationary; it is necessary to ameliorate the damage of the credit collapse.

/YELNICK; http://yelnick.typep...flationary.html


Or put another way, the possibility of a sudden and unexpected outbreak of sound money. What could be worse? Or better? ...depending on how you are positioned.

Edit: looking forward to what you say on CW raddio.
"No man has been shattered by the blows of Fortune unless he was first deceived by her favours."

#15 DrBubb

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Posted 19 September 2009 - 05:54 AM

QUOTE (Pixel8r @ Sep 19 2009, 09:33 AM) <{POST_SNAPBACK}>
The banks may not be lending now, but they have lent far too much in the past already, the money is in the system. The fed are keeping that money there by propping up the banks, not allowing them to fail for their irresponsible lending.


I think it can be argued that the money pumped into the system has simply replaced the money and credit
that was destroyed through writedowns and impairments AT THE PRESENT LEVEL OF VELOCITY, but if money
velocity picks up, and leverage expands back towrds where it was, then there will be more money in general
circulation.

I reckon that velocity is now picking up (any one have some data?), but credit will be needed to allow
leverage to expand. Will the Fed provide that? Or will the various deflationary forces that about to undermine
the economy take hold first? I am talking about problems in commercial real estate, continuing job losses,
and enforced shrinking of public jobs at the state and local level, reflecting the shrinking tax base. And at
the national level in the UK, there is already talk about severe cuts in government jobs. The cuts are needed,
since the government is overspending its way into a severe bind, bvut they will certainly have a noticeable
deflationary impact.

== ==
The Guillotine and the Sandpaper


More "Lines in the Sand"

WTI Crude / WTIC ... update


Hong Kong's Hang Seng Index ... update


Copper ... update

The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#16 DrBubb

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Posted 19 September 2009 - 05:58 AM

QUOTE (G0ldfinger @ Sep 19 2009, 08:03 AM) <{POST_SNAPBACK}>
Inflation takes hold, public sector wages must be increased. And so on.


I think that pushing up Public sector salaries, while the Private sector implodes would be very unpopular.
Bailouts may happen, but the public will not want to see the bailed out companies getting big wage rises

The real point of my artticle is that certain areas of the economy need to be allowed to shrink:
Banking and auto manufacturing are two

The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#17 Steve Netwriter

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Posted 19 September 2009 - 06:54 AM

DrBubb,
I wonder whether you've seen this re oil:

http://www.321energy...irby091609.html

and

http://www.321energy...irby021409.html


Fiat: What starts becoming worth less eventually becomes worthless.

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#18 Pixel8r

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Posted 19 September 2009 - 07:11 AM

QUOTE (DrBubb @ Sep 19 2009, 06:54 AM) <{POST_SNAPBACK}>
I think it can be argued that the money pumped into the system has simply replaced the money and credit
that was destroyed through writedowns and impairments AT THE PRESENT LEVEL OF VELOCITY, but if money
velocity picks up, and leverage expands back towrds where it was, then there will be more money in general
circulation.

I reckon that velocity is now picking up (any one have some data?), but credit will be needed to allow
leverage to expand. Will the Fed provide that? Or will the various deflationary forces that about to undermine
the economy take hold first? I am talking about problems in commercial real estate, continuing job losses,
and enforced shrinking of public jobs at the state and local level, reflecting the shrinking tax base. And at
the national level in the UK, there is already talk about severe cuts in government jobs. The cuts are needed,
since the government is overspending its way into a severe bind, bvut they will certainly have a noticeable
deflationary impact.

Leverage will never expand back to previous levels, no more consumers being lent ever higher 125% mortgages or investments banking at 40:1.

Hyper inflation is a monetary phenomenon as the US has to monetize more and more of it's debt, not issue even more credit. The solution will be gold being allowed to go a lot higher and a return to sound money.



#19 hotairmail

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Posted 19 September 2009 - 09:02 AM


I'm not listening to any more nutters.

There are massive and growing deflationary forces on produced goods arising from China resulting in excessively loose monetary policy in the West. We are destined to continue suffering deflation of the general price level in manufactures and serial bubbles and busts in stocks, commodities and property until the average Chinese has the purchasing power of a Westerner.
Be prepared for currency volatility and trade wars.

There is an elephant in the room pretending to be a black swan. Can you see it?

#20 romans holiday

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Posted 19 September 2009 - 09:49 AM

QUOTE (hotairmail @ Sep 19 2009, 06:02 PM) <{POST_SNAPBACK}>

Cor blimey. That hardly bodes well for the recovery program.
Modern money "shorts" the currency, and is backed by debt. The debt is real. A debt deflation will lead to a prolonged period of deleveraging, where the short-covering of currencies will strengthen currencies relative to asset prices. At the global level, in the FX market, central currencies will benefit from deleveraging at the expense of peripheral currencies. Due to instability and uncertainty, gold will benefit against all currencies as it continues to be re-monetized.

Hold on to your hats for hyper-deflation, where cash is king, and gold the King of cash.
[Silver? A Volatile Queen].




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