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Is the next bubble going to be commodities??
2manycoins2fewfunds
Posts: 3,081 ✭✭✭
The housing bubble is continuing to collapse and the Fed. is dumping massive amounts of liquidity into the system.
Dollar is down 45% against the Euro since 1999.
If fed cuts rates 75-100 basis points on Tuesday will a run on the dollar spark further gains and possible bubble in commodities??
Oil-grains-metals??
Dollar is down 45% against the Euro since 1999.
If fed cuts rates 75-100 basis points on Tuesday will a run on the dollar spark further gains and possible bubble in commodities??
Oil-grains-metals??
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roadrunner
60 years into this hobby and I'm still working on my Lincoln set!
<< <i>The housing bubble is continuing to collapse and the Fed. is dumping massive amounts of liquidity into the system.
Dollar is down 45% against the Euro since 1999.
If fed cuts rates 75-100 basis points on Tuesday will a run on the dollar spark further gains and possible bubble in commodities??
Oil-grains-metals?? >>
Well, I can tell you farmers here can't meet demand now thank to biofuels, and to make things worse herbicde resistant weeds are becomes a big issue. The once forgotten custom of walking the beans is coming back in a big way in Illinois.
"I am sorry you are unhappy with the care you recieved, is their anything I can do for you right now, how about some high speed lead therapy?" - A qoute from my wife's nursing forum
"I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them." – Thomas Jefferson
<< <i>
<< <i>The housing bubble is continuing to collapse and the Fed. is dumping massive amounts of liquidity into the system.
Dollar is down 45% against the Euro since 1999.
If fed cuts rates 75-100 basis points on Tuesday will a run on the dollar spark further gains and possible bubble in commodities??
Oil-grains-metals?? >>
Well, I can tell you farmers here can't meet demand now thank to biofuels, and to make things worse herbicde resistant weeds are becomes a big issue. The once forgotten custom of walking the beans is coming back in a big way in Illinois. >>
What is the meaning of "walking the beans?" I have never heard that used, but then, I don't live on a farm.
"I am sorry you are unhappy with the care you recieved, is their anything I can do for you right now, how about some high speed lead therapy?" - A qoute from my wife's nursing forum
"I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them." – Thomas Jefferson
<< <i>The once forgotten custom of walking the beans is coming back in a big way in Illinois. >>
My cousins own a bean farm in the Christian County area. They've always been bean walkers, gotta give the kids something to do!
60 years into this hobby and I'm still working on my Lincoln set!
Housing is needed too it just everyone went crazy and want more than one and now there's a glut.
<< <i>literially walking the fields and weeding by hand.. well actually you use a beanhook. For alot of kids grewing up here in the past it was their summer job like mowwing a yard. I grew up in Kentucky.. there we cut tobacco and hualed hay. But my wife grew up here on a farm, and for her it was her summer job in her youth. >>
Wow - I swear I learn more things on these forums!
Thank you for sharing that in your post!
-DCB
History of the US Constitution Coin Set
When the bond bubble bursts, say goodnight Gracie.
siliconvalleycoins.com
By bonds I'm assuming you mean derivatives basically, whatever form they may be in. $350 TRILL of those derivatives are OTC-types mainly interest rate related. That's the biggest bomb out there.
Since it takes only a Trilion or so dollar bomb to have a big effect on the economy, any of the existing landmines out there can cause a chain-event. Look at LTCM back in 1998. With only $2 BILLION at stake, they nearly took down the entire financial daisy chain. Today we are 10X beyond the size that was dealt with back then. What do they say now about Bear Sterns? "Too Big To Fail." Why not, "Too Big Not To Fail" or "Too Big To Save."
From the dicussions around the forum the past week, most people tend to feel that anything whose price has gone up a lot in a fairly short period, even years, is a "bubble." The real issue is separating those items that should be rising in value from those that never had business going up in the first place.
When inflation becomes a major problem (it's getting there, but it isn't the problem that we had in the early 80s yet), expect to see sharply rising interest rates, a sharply rising dollar, and commodity markets in free-fall. We've seen it before and this sort of thing runs in cycles.
"Seu cabra da peste,
"Sou Mangueira......."
I actually dont mean derivatives. Derivatives will of course be the unlucky second domino of the collapse of the bond market, but the bond market will be the first to fall.
The bond market (treasuries) will collapse based on inflationary pressures that continue to build. When bond buyers, who are currently fleeing from the equity markets looking for quality and "safe" investments, figure out that they are making a negative 4-5% percent real yield on their investments, they will pull out in droves. This will drive yields on treasuries to new heights...probably in the 5.5 to 6% range for the 10 year note. When the yield goes up, so do 30 year mortgages. If the housing market is on life support at 5.5% 30 year paper, what do you think will happen at 8% 30 year mortgages? Stick a fork in her.
This will force more and more people into default...there will be no lending because so few people will actually qualify to a standard 20% down, 36% DTI ratio...banks will further feel the pinch and MBS/SIV derivatives will unravel further. THEN we get to your 350 trillion dollar bomb.
For those that are expecting a bailout and government intervention to prevent this, keep in mind that the assumption of bad MBS's and other derivative vehicles on the governments books will price in risk on their own. You cant have crap on the books in assets and expect other countries to want to buy treasuries. Especially now that Ben has more than showed his hand that inflation is only cards that he is holding. And at this point, that is akin to having a pair of deuces in hand while you just flopped Ace, King, Queen. This will further drive down demand for treasuries...and will further drive the yield up. The risk premium finds its way into the books somehow.
John
siliconvalleycoins.com
<< <i>When inflation becomes a major problem (it's getting there, but it isn't the problem that we had in the early 80s yet), expect to see sharply rising interest rates, a sharply rising dollar, and commodity markets in free-fall. We've seen it before and this sort of thing runs in cycles. >>
This happened in the early 70's...but today is different in many ways. I agree that a rising dollar will do what you said it will do. However, what are the fundamentals behind a rising dollar? We were still PRODUCING in the 70's and 80's. Not any more. We are a debtor and CONSUMING nation now. Additionally, much of the commodity rundown in the early 80's was due to the fact that WE WERE the world economy. Not any more. We are only 300 million or so people. Chindia has round 3 billion...and they are all wanting to live like Westerners.
We have to get rid of our US centric way of thinking economically. We are just part of this whole affair...and the tide is turning.
IF we are going to pull out of this whole thing, we have to start producing....and we have to start saving and we have to stop consuming like it is going out of style. The standard of living in this country has been crazy for too long. When you have lower middle class people living like millionaires did 40 years ago, and the lifestyle is driven by consumption and cheap debt, it cannot be sustained.
John
siliconvalleycoins.com
If the speculators have moved into commodities then you can be sure the top is near.
Here is a part of FDR's inaugural address from March 4, 1933:
(This quote starts at the end of the 4th paragraph.)
"Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.
True, they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by the failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.
The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of restoration lies in the extent to which we apply social values more noble than mere monetary profit."
The dollars decline right now is probably good for this country ----in the long run, (the savers are paying the bill for this) -----provided we can survive the move.
The REAL opportunity RIGHT NOW may be in MUNI'S.
Housing cannot.
The influx of money into a bull market comes in three waves. First the smart money comes in. These are the few people that have read the tea leaves correctly from a macroeconomic standpoint. Next comes the wall street money, the hedge funds, the big investment banks. A couple years after that or so, the public comes in and catches the last few percentage and usually the inevitable downturn while all the smart money and much of wall street is gone.
That being said, Goldman Sachs in Nov 2007 was saying to short gold. They have since changed their tune significantly and seem to constantly be changing their forecast for gold as it surpasses their previous expectations.
Does ANYONE realize that we were one fed intervention away from a great depression yesterday???? What was the weapon of choice? Weaken the dollar, bail out the bank, keep the derivative beast at bay. THIS IS INFLATIONARY!!!!
Dont be late to the game on this one folks.
siliconvalleycoins.com
<< <i>I don't know about a lot of the issues discussed here, but I can tell you pizza has sure climbed. I personally consider pizza a commodity. I can buy one, trade it for work/ errands, etc. that would cost me more, by offering it to my son. There has to be a market in there somewhere waiting to be exploited. Maybe raises to employees can be pizza futures, or so many pizza slices per $10.00 raise, etc. Respectfully, John Curlis >>
Speaking of pizza, I saw a news segment not long ago about how the rising price of flour is starting to put a major hurt on the
profit margins of pizza places, so far most places are holding the line on prices but they don't expect that to last for long as at
some point they will have to pass the increase onto their customers.
Italian food and Mexican food are the highest profit margin restaurants with both at or below 25% cost of goods sold. That is why you can get a lousy take and bake for 5 bucks or spend $20 for a little better one that stays down.
That sounds way high for the USA.
What's frightening about the prospects for this is that silver is coming to be seen
as a monetary metal as it was in the distant past. There is less than 1% of the
amount of silver available to make a orderly transition to a higher price.
A commodity bubble is not a foregone conclusion and there is still some chance
that silver will not perform a role as a monetary bubble. It should also be remem-
bered that if silver were to soar from this point that it might cause a collapse of
some of the major silver shorts. This could be disruptive to further advances.
siliconvalleycoins.com
<< <i>A bubble CAN form in anything clad. I just dont think that we are in one right now. >>
I agree entirely.
At this point only a small part of the price moves in commodities is attributable to speculation and it's highest in oil.
I think there will be a bubble and silver will be on the xpanding face of it.
That folks is what we call a death sprial.
The only way out at this point IMO is to RAISE interest rates. Encourage savings. It will be painful but not as painful as the current course of action. What they are doing now is saving the banks. They may or may not think that they are helping the little guy as well....but even if they do, they are still wrong.
siliconvalleycoins.com
<< <i>I don't know about a lot of the issues discussed here, but I can tell you pizza has sure climbed. >>
Recent article in New York Daily News
And in Business Week
60 years into this hobby and I'm still working on my Lincoln set!
<< <i>
The only way out at this point IMO is to RAISE interest rates. Encourage savings. It will be painful but not as painful as the current course of action. What they are doing now is saving the banks. They may or may not think that they are helping the little guy as well....but even if they do, they are still wrong. >>
I know some really sharp people who agree with you but
it seems likely that higher rates would strangle the economy
leading to a total collapse. Don't forget that there might be
enormous derivitive losses that will need to be monetized.
They're probably manageable. Higher rates are probably
deflationary which would be fatal to a modern economy.
Market Panic Forces Governments Into Action
Author: Monty Guild
Dear CIGAS;
We are watching the biggest panic in global financial markets that has occurred in my 65 years of life and 50 years of stock, bond and commodities investing.
It’s the Saint Patrick’s Day weekend and old Saint Patrick would probably be fascinated to see all the rich and worldly people running around in a panic.
Yesterday, JP Morgan and the U.S. Federal Reserve began a credit lifeline to Bear Stearns. This is a long and complicated story but I will attempt to summarize.
Bear Stearns had a run much like the bank runs of the late 19th and early 20th centuries. It had something to do with Bear Stearns itself but not as much as you would think if you were an average, fairly sophisticated citizen with some understanding of how the financial markets work.
I believe that most financial professionals may not completely understand what is happening. The lifeline and financing was done not to protect Bear Stearns alone but to protect the entire global banking system.
Bear Stearns is a PRIMARY DEALER IN U.S. GOVERNMENT BONDS. This is a very small and very important club. They have also been a leader in the business of prime brokerage and in the field of trade settlement and clearing - two very profitable mostly fee-based businesses that have been the envy of many other financial institutions. These have been their cash cows and very attractive businesses that have long been sought by other buyers.
Although Bear Stearns is quite large, it is the smallest of the top U.S. government bond dealers. So if someone wants to attack the system they will attack the smallest of the truly powerful bond houses. Bear Stearns, like all major mostly bond dealers and traders, also trades in mortgage bonds and derivatives and this is where its problems arose.
Bear Stearns' CEO said on Wednesday that the company was well capitalized and that its balance sheet is strong. I believe he was telling the truth. However, they are not immune to a run on the bank. IN FACT, NEITHER IS ANY OTHER MAJOR BANK OR INVESTMENT BANK IN THE ENTIRE WORLD.
BEAR STEARNS AS A PRIMARY DEALER CANNOT BE ALLOWED TO FAIL WITHOUT UNDERMIINING THE CONFIDENCE IN THE U.S. AND THE WORLD FINANCIAL SYSTEM.
BEAR STEARNS WAS PROTECTED FROM FAILING TO MEET ITS COMMITMENTS TO COUNTERPARTIES BECAUSE TO LET A PRIMARY DEALER FAIL WOULD MEAN A RUN ON EVERY MAJOR BANKING AND INVESTMENT BANKING INSTITUTION IN THE DEVELOPED WORLD. AND THAT WOULD ALMOST CERTAINLY LEAD TO A MASSIVE GLOBAL DEPRESSION. THIS IS MY CONSIDERED AND FIRM OPINION.
CONCLUSION
Events seem to be validating the opinion that Jim Sinclair and I have been propounding on these pages for a long time.
NO MAJOR U.S. BANKING INSTITUITON WILL BE ALLOWED TO FAIL TO MEET ITS COMMITMENTS TO DEPOSITORS AND COUNTERPARTIES. To do so would be an admission of defeat by the governmental agencies and institutions that exist to prevent events like these from happening including the Great Depression of the 1930’s.
CENTRAL BANKS EVERYWHERE HAVE NO OPTION BUT TO REFLATE AND SUPPLY LIQUIDITY TO THE WORLD FINANCIAL SYSTEM. FURTHERMORE, THEY HAVE BEEN DOING THAT SINCE THE CRISIS BECAME OBVIOUS ABOUT 6 MONTHS AGO.
All of the themes that I said had to be fulfilled to solve the problem are not yet finalized. But congress is working to create an agency to buy bad loans and the U.S. Federal Reserve has been doing it for months now.
Some countries have been slower than others to recognize the problem. But now all do and they will make haste with liquidity, government bail out programs for banks, bank nationalizations if necessary, government aid to mortgage holders and many other programs designed to get the problem behind us as soon as possible and to buy votes in the process.
WHAT LIES AHEAD?
THE SHORT ANSWER TO WHAT THE FUTURE HOLDS IS MORE INFLATION, HIGHER GOLD PRICES, HIGHER COMMODITY PRICES AND A LOT LOWER PRICES FOR BONDS.
If you review the statements by Jim and by myself in the past several years all of the events currently taking place have been predicted and explained.
I wouldnt put out a warning like this if I werent serious...but let me say, as he says...you've been warned.
Edited to correct poor grammar.
siliconvalleycoins.com
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
<< <i>Although they are different to a certain extent, Jim Sinclair and this gentleman are two of the most brilliant and accurate at predicting what has happened and what will happen.
I wouldnt put out a warning like this if I werent serious...but let me say, as he says...you've been warned.
Edited to correct poor grammar.
Bullion is conspicuously absent from the list....any ideas why?? I would have thought it would be on top of the list
I think deflation is the overall result...but inflation will be the means that we get there.
siliconvalleycoins.com
This is it in a nutshell.
But as I've said many times, this is not going to happen all at once. It's going to
be more a process than a trend perhaps, but it will take time. When it's complete
the stock market will explode higher, in the meantime there will be large shifts of
capital and wealth.
siliconvalleycoins.com
<< <i>We're a long way from any bubble in precious metals . >>
But are we at the start of a bubble??
Many including Warren Buffett have been betting on a dollar decline for sometime now. The fear is we could see a collapse in the dollar rather than a gradual decline. We have seen in last 3 months an appox. 8% decline in the dollar vs. the Euro. Thats a rate of 32% per annum!
http://finance.yahoo.com/q/bc?s=USDEUR=X&t=3m
Elcontador, this is the same scenario from the late 1970's. In fact with rising interest rates, commodities and gold in particular, continued to rise. It finally took a 20% interest rate to stem the tide.
We're a long ways from 20%. Gold will continue to rise even with many months or years of rising interest rates....at least once the FED finally turns that corner. Not so sure about the free-fall in gold
vs USDollars once it peaks. In 1980 there was a basically sound economy to fall back on, and a resilient dollar that was the only currency choice at the time..... that is not the case today. It cannot be assumed that gold will come crashing down, esp. if it were to play a role in resurrecting shattered global currencies. If not gold then what? Another fiat substitute so we can go through the same scenario again down the road when new loopholes are found?
Nice link to Denninger CoinLt. That was a nice read and the first time for me. Still, most are not buying what Denninger, Sinclair, Puplava, Monty Guild, and others are offering up, sad to say but true. The blinders are still firmly in place. It's hard to erase the euphoria of 25 years of brainwashing the sheeple towards infinite credit and lack of fiscal responsibility.
Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.
I considered FDR's policies and Keynes' economic theories to be the starting point for our problems today. FDR in the end was the same fraudulent money changer he made others out to be...but he spoke a mean game that the sheeple loved. If anything, his policies expanded the depression. Yup, the same FDR who took 40% from his people overnight by devaluing the dollar vs. gold in 1933.
The dollar is being managed downward to prevent a massive drop that leads to complete chaos. The FED is acting in small steps to make this drop towards USDX 0.5 more palatable to the masses.
And the slower drop allows his banker buddies more time to unwind their illiquid bets, treat their wounds, and try to remain solvent (if only on paper). With the amount of liquidity the banks have created over the past 10 yrs, there is really no option but to have bubble after bubble after bubble. Each market will go bubblistic as the ship lists to one side, then the other. These swings are characteristic of a pure fiat and goldilocks economy. We've been experiencing these ever-widening cycles since the 1970's. The biggest swings are yet to come.
roadrunner
I think deflation is the overall result...but inflation will be the means that we get there.
Correct me if I am wrong, how can deflation occur while the FED is creating a flood of money? Even in the face of a credit contraction, the dollars will still be out there.
Does it mean that the petrodollars overseas will then own the U.S. without even coming back home? Think Dubai Ports.
I knew it would happen.
<< <i>It is going to take a long while clad. What time frame are you thinking? >>
...42 to 48 months. The stock market could begin its move much sooner. My best guess now is a couple years for stocks to move.
Deflation is the beast that the fed is fighting right now.
They are putting money back in the system that housing is taking out.
This causes inflation in other areas. It always causes energy inflation because we rely so much on imports.
Strangely enough though, this is going to lead to deflation.
If you make the necessities so expensive that people revert back to spending only on food/energy/water, then you will kill the american consumer. That will stunt growth. No growth equals the value of inflated equities will have to come down.
Here are the solutions:
Encourage savings by not taxing savings.
Regulation of leverage in the banks, hedge funds etc.
Leave the free market alone.
Encourage growth with low taxes on business.
Government and individuals need to stop spending like a drunken sailor.
Balance the budget.
These will be very very painful to start out.
Once we get the credit crunch under control, then we can begin to worry about the REALLY big issues....SS, MEDICARE.
I dont think that the gov will do much of anything but the opposite of the beginning recomendations. If it doesnt put us under, then SS and Medicare will.
siliconvalleycoins.com
If this was an attempt to provide reassurancer and comfort to the country, this was a disaster. The poor man couldn't answer a question, was stumbling, hemming and hawing....
All it did was draw attention to the stuff he obviously was trying not to tell us.
Here's a warning parable for coin collectors...
Stuart
Collect 18th & 19th Century US Type Coins, Silver Dollars, $20 Gold Double Eagles and World Crowns & Talers with High Eye Appeal
"Luck is what happens when Preparation meets Opportunity"
roadrunner
<< <i> Correct me if I am wrong, how can deflation occur while the FED is creating a flood of money? Even in the face of a credit contraction, the dollars will still be out there.
Does it mean that the petrodollars overseas will then own the U.S. without even coming back home? Think Dubai Ports. >>
As Milton Friedman famously said, "inflation is always and everywhere a monetary phenomenon." In other words inflation occurs when the money supply increases. That usually shows up in the form of higher prices. However, higher prices alone do not mean we are seeing inflation. Higher prices can also be caused by increases in real demand or caused by speculation. The higher prices for oil and PMs seem to me largely to be a speculative bubble.
To simplify, money is only 5% coins and bank notes and 95% credit. Right now we are seeing the destruction of huge amounts of credit in the form of massive debt write-offs. That is deflationary. This will eventually spill over into PMs, I believe, and knock down their prices, as well as the prices of other commodities like gold.
The Fed has not been "creating a flood of money" because all it can do it provide liquidity - not capital. explanatory link. The problem we are facing is a lack of solvency (debts larger than the ability to repay them) rather than a lack of liquidity. The Fed can provide liquidity (through loaning it out in exchange for collateral) but that doesn't help in this scenario where borrowers (banks, individuals, down the line) are overextended/ insolvent. The Fed is not going to be able to solve these problems, I'm afraid.
Also, most of the petrodollars are already back in the US - sitting in US government treasuries and other investments (most recently the sovereign wealth fund investment into Citibank, etc.).
Not having been a 40 year professional currency, bond, and metals trader extraordinare, CEO of an up and coming metal's exploration company, and a short list choice for US Treasury Secretary, I'll defer to Sinclair's explanation of where we are headed. At this point, Bernanke, Paulson, academics and loyal friends of GW seem to have no clue how to proceed from here.
A cheery pick-me up from Bob Moriarty via 321 gold
roadrunner