Hva skjer i 2010?

[blaavass]

Ingar,

Did you notice the following quote in the article you linked?:

"If we do see a pretty serious correction in the property market, banks' balance sheets will likely be severely impacted and this could at some point, necessitate bailouts," Charlene Chu, a senior director at Fitch's financial institutions ratings team in Beijing, said on a conference call.

"The problem is there is a very high indirect exposure to the property market, mainly through corporates who have taken out loans and used that money for property investments or developments of their own," Chu said.

You should normally not listen to officials. The article sounds much like USA in 2005, 2006 and 2007:-)

You Tube

You Tube

You Tube

You Tube

You Tube

[blaavass]

You Tube

[blaavass]

It sounds like Romania is one of the few countries doing the right thing for the longer term.

http://www.nettavisen.no/nyheter/article2899451.ece

The article says that instead of increasing taxes (mva, etc), Romania is cutting spending drastically. I guess they will experience larger short term pain, but they'll reduce the burden on their economy such that it can more easily grow in the future.

Romania is also cutting wages for government workers. Most likely, the wage cuts will replace a lot of layoff. Again, they are doing the right thing for the longer term and not avoiding the short term pain.

I guess more or less all countries in the world will increase taxes in coming years instead of cutting costs enough, ref Australia which has recently put in place an extra profit tax on natural resource companies.

[blaavass]

Interesting events are going on in the markets these days and it seems like the turmoil has started to unfold.

Value of currencies shows how capital is flowing in the world. The dollar index has been surging sharply, and stock markets have corrected sharply. That means that money is flowing from the stock market into cash and it means money is flowing from Euro to Dollar.

Dollar index:
http://quotes.ino.com/chart/index.ht...=&a=&w=&v=dmax

However, gold is rising sharply in dollar terms and might even start skyrocketing upwards. This means that also the Dollar is going down in value, it’s just that the Euro goes down even faster.

Gold price:
http://quotes.ino.com/chart/index.ht...=&a=&w=&v=dmax

At the same time gold stocks seems to get hit by the sell-off in the stock markets despite the gold price going up. However, if the gold price stays strong, the gold stocks will have to follow after a while.

Lappland Goldminers:
http://norma.netfonds.no//analysis.p...LUME-PERIOD=14


The money supply has tightened lately, but it will be interesting to follow the money supply to see if the FED starts throwing even more money at the problems. As long as the money supply continues to go down, stock markets are in for difficult times.
http://research.stlouisfed.org/fred2...1;range]=10yrs

It is also interesting to follow the inter bank interest rates, which have gone up significantly during the last day. If they continue to rise, money will be tight and stock markets will be in even more trouble.
http://www.norges-bank.no/templates/...____55480.aspx

[Ingar]

Blaavass said:

: "If we do see a pretty serious correction in the property market,
: banks' balance sheets will likely be severely impacted and this could at
: some point, necessitate bailouts," Charlene Chu, a senior director at
: Fitch's financial institutions ratings team in Beijing, said on a conference
: call.
:
: "The problem is there is a very high indirect exposure to the
: property market, mainly through corporates who have taken out loans
: and used that money for property investments or developments of
: their own," Chu said.

Yeah, I saw that. I disagree. My fundamental belief is that there is a shortage of housing in China and will be for the next two or three generations. I believe the present Chinese real estate market and infrastructure development sector is a healthy, sustainable one, and allowing for the odd up and down of any free market, property prices in Mainland China is going to increase steadily for as long as we dare to peep into the future. I think prices should double each three to five years from now on for quite som time ahead.

I think the corrections that will come will largely manifest themselves as increased _diversifications_, i.e. that modest dwellings in suburbia will drop slightly before raising again or stabilize momentarily, while the hot spots will continue their frantic ascension, also for as long into the future as we dare to peep.

Ingar

[blaavass]

I've repeatedly referenced Niall Ferguson in this thread. Yesterday, he spoke at a conference in Norway and his message was quite pessimistic.

In essence, he thinks/fears that Greece will default on its debt payments and that will trigger a banking crisis in Europe much like the American banking crisis in 2008. He thinks the collapse is just around the corner, maybe not more than 2 weeks away. (I'm referring information from the article in the Saturday paper version of the newpaper Dagens Næringsliv, which was more extensive than the article on Internet.)

http://www.dn.no/forsiden/borsMarked/article1895296.ece

Translated to English:
http://translate.google.no/translate...cle1895296.ece

[blaavass]

Bankrupt and indebted countries are borrowing more money as a rescue? How can that be a successful strategy?:

"- No one have money available to put into the new fund. Money must be borrowed in the bond market and will likely be invested through government bonds. Thus, we have very little more than a paper transaction, writes Handelsbanken Capital Markets in its morning report.

The European Central Bank ECB will also purchase both government and private bonds when it will be necessary, but purchases will not increase the money supply. The ECB also resume temporary swap lines with the Federal Reserve and the dollar liquidity measures, so that first occurred in the financial crisis.

- We shall protect the euro by any means, "said the Finnish EU Commissioner Olli Rehn."

http://www.na24.no/article2901005.ece

I guess EU is now playing poker with the currency markets through the enormous bailout and has now gone "all in". I'm not sure they can afford to loose that bet.

You Tube

But can they really succeed in bluffing the market?

http://www.zerohedge.com/article/jim...an-print-money

Together with the dollar index the gold price is telling its own story by setting all-time-high...

http://quotes.ino.com/chart/index.ht...t=&a=&w=&v=d12

[borte_vekk]

@blaavass
I agree with many things you are saying and are also worried that not many people are aware (or dont care) about what is happening. We are throwing good money at bad BIG time.
In the past 10 years uptil now,all the people that were saving money, not borrowing through the roof, thinking ahead of a rainy day are now bailing out the ones that did the opposite. You are being punished for doing the right thing and rewarded for being reckless. Even in yesterdays news the prime minister states that there might be need of more bailouts in Norway if need be. I dont have words for this but my first reactions are shocked, furious and pissed off (pardon my french). Spending tax payers money (i.e. my money) on rewarding speculators that failed big time is beyond me. To say the least im disgusted by it. And this is going to keep on until all the gunpowder is used. How long I have no idea, I thought in 2009/2010 it was going to bust but here is the problem, we are totally underestimating the will and determination of the governments and central banks to keep this going ( or keep it floating) at any prize. We see this in the latest €900 Billion bailout package from EU. They are blaming capitalism and speculators for this mess but when in reality it is their own mess. In basic they have spent alot more money then they had, and now they cant pay it back, simple as that. But for politicians it is alot easier to blame someone else.

That is why I am only in gold at the moment, started buying over a year ago in Lappland Goldminers. Silently buying more these days just below 7SEK.

I saw you mentioned astrocycles earlier. have you had a look at Merriman (www.mmacycles.com). Its really an interesting supplement to other Technical analysis. Here is something he wrote in his weekly column on the 24th April : "here is something else to watch for. Mercury is retrograde April 19-May 11. The middle of that period can also coincide with a market reversal, +/- 2 trading days. That equates to Thursday, April 30. The rule is that any market that did not reverse around the time of the retrograde date will usually have a sudden turn around the middle of the retrograde period. It is very rare that a market makes it all the way through Mercury retrograde without a reversal of some importance."

And we now what happened the following week.

In his weekly preview on the 1st of May : "Another geocosmic factor to watch for this week is the entrance of heliocentric (not geocentric) Mercury into Sagittarius, May 6-17. This is a signature of sharp price moves, especially in precious metals, and usually upwards, for at least 3-9 trading days. Usually it is not so bullish for stocks."

Gold price reaching all time high yesterday

He writes a book every year forecasting the following year, and in every book since the early nineties
he has written about "the cardinal climax" that was goin to unfold in 2008 and lasting 2015-2018.
This a special planet configuration that happens not very often, last time was in 1929.
Anyway its an interesting book and recommended.

Observing $ and goldprice going the same way, interesting times indeed we are living in
Keep up the good work and please keep this thread alive.

[blaavass]

Thanks for the tip, I'll check out Merriman:-)

Here is a great speech/lecture by Peter Schiff now in May:

You Tube

[blaavass]

By the way, here are some great speeches/lectures by Peter Schiff over some years. I'm quite impressed on how consistent his message is over such a long period.

Money Show in February 2006:

You Tube

Money Show debate in May 2007:

You Tube

Mortgage Bankers speech in November 2006:

You Tube

Mieses Institute in March 2009:

You Tube

The Authors@Google program April 2009:

You Tube

[blaavass]

Ayn Rand wrote the book "Atlas Shrugged" in 1957. The book is a story integrating her philosophy emphasizing individual rights and laissez-faire capitalism, enforced by a constitutionally limited government. Individual business entrepreneurs are the heroes in the book, and the positive effects from rational self-interest might be the purest essence of the book.

Her background/experience is from Russia where she observed the effects of communism.

http://en.wikipedia.org/wiki/Ayn_rand

http://en.wikipedia.org/wiki/Atlas_Shrugged


Here are some fascinating quotes:

“Do you wish to know whether that day is coming? Watch money. Money is the barometer of a society’s virtue. When you see that trading is done, not by consent, but by compulsion–when you see that in order to produce, you need to obtain permission from men who produce nothing–when you see that money is flowing to those who deal, not in goods, but in favors–when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you–when you see corruption being rewarded and honesty becoming a self-sacrifice–you may know that your society is doomed.”

--Ayn Rand in "Atlas Shrugged"


“Government ‘help’ to business is just as disastrous as government persecution… the only way a government can be of service to national prosperity is by keeping its hands off.”
--Ayn Rand

[blaavass]

I believe we are now experiencing some very important psychologically shifts in the markets.

1. Through the situation in Greece the bond market has woken up to the real possibility of government defaults. The effect is that lenders are demanding higher interest rates. In April 2010 the yields on Greek government two-year bonds rose to 15.3% following the downgrading to “junk” status by Standards & Poor’s.

2. The market has woken up to gold being a currency of its own, instead of just being an asset with no yield. A monetary premium has started to be included in the price and focus is more on the safety of owning physical gold.

http://www.dn.no/forsiden/borsMarked/article1899246.ece

3. After EU launched the rescue package, the market has woken up to the danger of inflation due to debasement of currencies and money-printing. Weakening currencies compared to the Chinese Yuan will result in higher import prices of consumer goods, which might show up quite fast in the CPI of western countries. If the CPI starts to rise under the condition of high unemployment, this could further shift the market’s understanding of inflation and the inflation can start to feed on itself.

http://www.dn.no/forsiden/utenriks/article1895894.ece


These three forces are interrelated and can feed on themselves for quite some time. A rising gold price strengthens the impression of weaker currencies and makes the market expect higher prices (price inflation). Price inflation strengthens the demand for higher interest rates and higher gold price. Higher interest rates on government bonds forces countries to either default or print money, which is strengthening the gold price and contributing to price inflation through debasement of currencies, etc, etc.

All this can take some time, but I think there is a real possibility of things happening quite fast. Just imagine what would happen if USA defaults on debt payments, or if it is revealed that the FED is secretly buying large amounts of government debt, or if debt auctions starts to fail, or if long term interest rates starts to rise sharply...?

[blaavass]

Ron Paul also impresses me on his understanding of economics and consistent message over soooo many years.

http://www.zerohedge.com/article/ron...oldman-and-fed

You Tube

[blaavass]

Nice documentary "Meltup" summing up the financial situation in US:

You Tube

By the way, the same guys made this documentary "The dollar bubble" in 2009:

You Tube

[blaavass]

Here is a good commentary by Kevin Hasseton on the government debt crisis and the EU rescue package:

http://www.aei.org/article/102053

[blaavass]

To me, it seems like the coming correction is under way now.

Hang Seng seems to be likely to break down.
http://finance.yahoo.com/echarts?s=%...urce=undefined

Note that the ascent has come with lower volume, while the rolling over seems to have been on increasing volume.

In post #8 I forecasted S&P500 to reach approximately 1220 based on technical analysis. On 19th April it reached 1217 and it seems to have started to roll over. You can see the same tendency of lower volume of the ascent and higher volume in the roll-over.
http://finance.yahoo.com/echarts?s=%...urce=undefined

OSEBX seems to be rolling over too and I guess 150MA will be finally broken very soon and the support level of 340 is the next to go. The 340 level can become the neckline of a double-top formation and will provide great opportunities for shorting the market through a BEAR ETF.
http://norma.netfonds.no//analysis.p...MEAN-CENTERED=

The dollar index has risen dramatically since December 2009, which means that money is tight and is putting pressure on equities.
http://quotes.ino.com/chart/index.ht...=&a=&w=&v=dmax

Crude oil seems to be breaking down too.
http://quotes.ino.com/chart/index.ht...=&a=&w=&v=dmax

Inter bank interest rates have risen, which also indicates that money is tight.
http://www.norges-bank.no/templates/...____55480.aspx

The money supply has been contracting lately, which is putting downward pressure on equities.
http://research.stlouisfed.org/fred2...1;range]=10yrs

All-in-all, things seems to be rolling over and shorting becomes an opportunity for the coming weeks and months. It will be interesting to see if the gold stocks will be taken down by a sell-off or if this now will be the time where all gold stocks starts to make bigger moves upwards along with the gold price.

When the fall gets going I will look for bottom formations and I will keep an eye on the money supply. If the money supply starts to balloon again I will get more cautious about not staying too long in the shorts.

[blaavass]

How did Ben Bernanke get things so wrong?

Well, I’ve read that he has been a student of the great depression and I think he has to be understood through that. In the great depression of the 30ties, money supply contracted, price level decreased, GDP contracted and unemployment rose.

I can understand that the great depression can be understood as a liquidity crisis. Remember that the US economy was quite sound back then with production, exports and I believe they had a trade surplus. The debt levels were high, which is similar to these days, but I believe the government were much smaller and government debt likewise.

Even George Soros advocates that it was the lack of liquidity being the main problem in the 30ties. He states that to avoid a depression, one has to avoid a banking crisis to unfold. He therefore applauds the extension of money supply to prevent the banking crisis, but admits that stagflation might become the result instead. However, he believes that stagflation is a much more desirable outcome than a depression.

I guess the following became Bernanke’s line of thought:
- To avoid a depression I need to avoid a banking crisis
- To avoid a banking crisis I need to provide liquidity and take bad debt temporarily off the hands of the banks. I can achieve both by buying their debt with newly printed money.
- When the economy recovers, the valuation of the debt will come back and the FED can sell the debt back into the market and at the same time contract the money supply again before inflation becomes a problem.
- In the course of the crisis there will be a large contraction in the money supply by private sector. This will prevent the FED extension of money supply to cause inflation. When the economy recovers the money supply will extract again and the FED can contract their contribution to the money supply along with the strengthening economy.

Of course, this medicine does not really include a solution to the main problem, which is too much debt in the system.

However, the main issues for disaster in the coming years, I believe lies in a set of misconceptions by the FED.
- This time more or less all governments in the western world are severely indebted when entering the crisis.
- A financial crisis normally generates huge further increases of the government debt due to Keynesian policies of spending and reduced income for the government.
- This time the whole world participated in the boom and they are feeling the bust together.
- For the government bond market it is not the same thing if Greece and US have a 100% level of debt to GDP. US and other large economies will have a totally different effect on saturating the market and causing interest rates to rise. At the same time creditor countries are likely to slow down their lending to spend more money at home to soften their own crisis. At these large debt levels, rises in interest rates significantly increases the risk for government defaults.

In summary, Ben Bernanke didn’t understand the dynamics between the high level of government debts when entering the financial crisis, the increases of government debt during the crisis, how the bond market will be saturated and its response to bankrupt nations. Finally he will have to realise that he has problems related to insolvency and not just about liquidity. That means that his exit strategy is no longer available without crashing the markets. Also, the valuation of the debt purchased by the FED is not coming back. I guess Bernanke has discovered this already, or he will so very soon.

Faced with the problem of crashing the markets and taking huge losses on purchased debt, it is easy to just extend the easy money policy further as long as inflation is not a visible problem. Of course, when inflation starts to pick up it is already too late and the ketchup is coming rapidly out of the bottle….

This way, it is not expected that the stock markets will decline as much as in the 30ties. After bottoming it should rise quite much due to the inflation. The worst part of the deflation will not come before the money system more or less breaks down and a harder money system is reintroduced.

The historical chart for the Dow-to-gold ratio shows that this crisis is of proportions with the crisis in the 1930ies, but the change in response from the FED makes sure it will not be identical.

Same, same, but different...!

[blaavass]

Hugh Hendry is a fascinating hedge fund manager with very independent thinking. It is not always easy to understand his thinking, but he is undoubtedly a smart guy:-)

Now he is betting big time on crash in China causing crash in the world economy.

"Hendry joins hedge fund manager James Chanos and Harvard University professor Kenneth Rogoff in warning of a potential crash in China. The nation’s 13 trillion yuan ($1.9 trillion) of new lending in the past 16 months, bigger than the economies of South Korea, Taiwan and Hong Kong combined, is spurring industrial capacity expansion in the same way Japanese credit built inventory during and after World War I, Hendry said."

http://www.businessweek.com/news/201...ike-crash.html

[blaavass]

Here is a really good summary about monetary policy and rather controlling the money supply instead of the interest rates based on the CPI. It is written by Anne Siri Koksrud, who is an engineer (not economist) and a member of the political party Venstre (liberal party).

http://www.minerva.as/2009/12/17/sta...bil-inflasjon/

[blaavass]

This long-term graph for the S&P500 index is interesting to follow.
http://finance.yahoo.com/echarts?s=%...urce=undefined

I've mentioned earlier in this thread that the index has formed a huge double top with neckline at 800. The last bounce up is starting to look like a perfect shoulder which is turning down again right now...

If this graph breaks down through the 800-level, I believe it will signal the start of the depression in the US...

[blaavass]

New presentation by Niall Ferguson:

http://financetrends.blogspot.com/20...rises-and.html

[blaavass]

A comment to the previous post. This presentation by Niall Ferguson is really narrowing in on conclusions to what will happen due to the government debt crisis.

I will also recomment the Q&A session after his presentation:
http://www.iie.com/events/event_deta...ntID=152&Media

[blaavass]

Here is a great presentation by Marc Faber at "Austrian Economics and the Financial Markets," the Mises Circle in Manhattan on 22 May 2010 in New York.

You Tube

[blaavass]

Originally Posted by blaavass

Lappland Goldminers (GOLD) is looking good technically. I mentioned the buying point when breaking up through 8 SEK. Next buying point will be if it turns up again after testing 8 SEK from the upside, which can happen already in the coming day. Then further buying can be done on breaking up through 150 MA and on corrections back to 150 MA.

http://norma.netfonds.no//analysis.p...LUME-PERIOD=14

I have several times commented positively about the GOLD stock. I have to admit that I didn't think it would fall this low. As I commented in post 18 as quoted above, I was watching for a break-out through SEK 8 to buy more. By waiting for this breakout I didn't buy at that level of consolidation, which is good considering the following fall.

I've always expected high volatility, so I'm very cautious with leverage and the amount of money allocated. This way it is easy to sit through declines.

However, now I'm buying and here is why:
1. The stock price is now very much below 150 MA and looking back on history of the graph, this has alway resulted in at least a bounce back to about 150 MA.

http://norma.netfonds.no//analysis.p...LUME-PERIOD=14

The recent sell-off can of course be that insiders know that there is something wrong and are selling, but I believe that the stock is mainly hit by the general market sell-off. If there are something fundamentally wrong about the company, it would be unlikely that the company could issue shares at SEK 11 just recently.

2. The current graph might prove to have completed the first wave in a multi-year elliot wave pattern, with wave 1 and 2 from November 2008 to May 2010.
http://en.wikipedia.org/wiki/Elliot_wave

"Wave 1: Wave one is rarely obvious at its inception. When the first wave of a new bull market begins, the fundamental news is almost universally negative. The previous trend is considered still strongly in force. Fundamental analysts continue to revise their earnings estimates lower; the economy probably does not look strong. Sentiment surveys are decidedly bearish, put options are in vogue, and implied volatility in the options market is high. Volume might increase a bit as prices rise, but not by enough to alert many technical analysts."

"Wave 2: Wave two corrects wave one, but can never extend beyond the starting point of wave one. Typically, the news is still bad. As prices retest the prior low, bearish sentiment quickly builds, and "the crowd" haughtily reminds all that the bear market is still deeply ensconced. Still, some positive signs appear for those who are looking: volume should be lower during wave two than during wave one, prices usually do not retrace more than 61.8% (see Fibonacci section below) of the wave one gains, and prices should fall in a three wave pattern."

If this is actually the completion of wave 1 and 2, this will be an excellent time for buying. The stock price should however not break below the low of November 2008, which came at a major market sell-off...

Danger signal would be if the stock price breaks below the low of November 2008... However, I'd be very surprised if that happened.

3. I still believe in the fundamental story for gold and gold companies. If stock markets, commodity markets, commercial real estate, property markets in China, government bonds all falls this year including turmoils in the currency markets and bank problems, I believe capital can get really desperate for safety. That might end in a massive run for gold and the steepest part of the climb can get kick-started.

In sum, the odds are now good enough for me to buy:-) We'll see if it can turn into a profit within year end.

[blaavass]

A very interesting interview with Felix Zulauf:

http://kingworldnews.com/kingworldne...ix_Zulauf.html

[blaavass]

Resources on understanding the money system and fractional reserve banking:

1. Fiat empire
http://www.dailypaul.com/node/351

2. Mises Institute
http://mises.org:88/Fed

3. The Money Masters
http://video.google.com/videoplay?do...9560256183936#

[blaavass]

www.themoneymasters.com

The Money Masters are quite focused on conspiracy by elite bankers, but it is quite interesting that they have suggested a specific solution for getting back to sound money over a one-year transition period.

http://www.themoneymasters.com/monetary-reform-act/

The Two Step Plan to National Economic Reform and Recovery
1. Directs the Treasury Department to issue U.S. Notes (like Lincoln’s Greenbacks; can also be in electronic deposit format) to pay off the National debt.

2. Increases the reserve ratio private banks are required to maintain from 10% to 100%, thereby terminating their ability to create money, while simultaneously absorbing the funds created to retire the national debt.

[blaavass]

The Duch documentary "The day the dollar falls" from 2005 is trying to describe how a scenario of dollar collapse will unfold.

You Tube

You Tube

You Tube

You Tube

You Tube

You Tube

[blaavass]

In the interview mentioned in post #125 above, Felix Zulauf describes the following scenario as most likely:
1. There will be strong deflationary forces and countries will use inflationary actions as antidote.
2. Central banks will keep interest rates low.
3. Finally there will be a banking crisis much bigger than what has been experienced until now.
4. Central banks will then create enormous amounts of money in trying to save the system by injecting liquidity.
5. The unprecedented amount of money created will make the currencies worthless in just a few weeks time. Seems to me that he is quite aligned with the documentary "The day the dollar falls" mentioned above. He doesn't believe in a development of large inflation or hyperinflation over many years like in the 70ies.
6. Then there will be a currency reform eliminating a lot of debt and a lot of wealth.
7. His advice is to keep your assets out of the credit- and banking system.

[blaavass]

Here's a speculation on how things actually can/will unfold:

- I don't think the moneymasters' solution will ever be fully implemented. The printed dollars would have to be sent to foreigners in China, etc, while credit within USA would become extremely scarce and causing a huge amount of bankruptcies. Politicians will never prioritise foreigners over of their own voters.

- An alternative way might be to print money and let the FED buy US debt in the market, but keep the fractional reserve banking system, i.e. this will be a monetisation of the debt. I guess that the FED would try to conceal such buying as long as possible. They would print money for so long as possible to reduce the debt as much as possible before the currency gets into trouble for real, i.e. shifting the bonds from China, etc, to the FED.
Remember that such an elimination of debt will reduce the US' interest payments, since this will mean that much of the interest payments will be paid to the FED instead of to China.

The market will finally collapse the currency and it will stop working, i.e. the market will not acccept dollars as payment because they no longer can value the dollar compared to other currencies. Then a currency reform will be implementet (Amero?) with effectively a huge devaluation of the currency. This will eliminate much of the remaining debt and it will eliminate much wealth related to value of money.

To stabilise the new currency and to mitigate any further currency collapse and hyperinflation, the money printing would be stopped, interest rates would be rised significantly and maybe the new currency would be backed with gold or commodities.

Note that this is a scenario where there can be low price inflation right up to the currency collapse.

Do anyone agree or disagree for such a scenario to be possible?

[blaavass]

What would actually trigger a dollar currency reform?

- Interest rates on US government debt icreases so much that interest payments become unbearable. A devaluation will have to bring interest payment levels down to bearable levels.

- The value of the dollar collapses and the foreign market stops accepting payment in dollar because they are no longer able to value it relative to other currencies or goods. This dollar collapse will be preceeded by an unprecedented money printing to rescue the banking system, or that it becomes obvious for the market that the FED is buying huge amounts of US debt with printed money (quantitative easing).
A plunge in the value of the dollar can also happen if the US defaults on their payments on the debt, but I think they'd rather print up enough for the payments.

I would think that the US will have to implement specific measures to stabilise the new currency. Otherwise it will be Zimbabwe all over again with no end in sight.
Those measures would be rised interest rates (like Iceland), full stop in further money printing and a backing of the new currency with commodities or gold.

[blaavass]

How to preserve your wealth through such a scenario of currency collapses/devaluation?
- The ultimate store of wealth will be physical gold and this will always be liquid in some ways.
- Paper gold or ETFs can be risky. Your gold certificate might get settled in currency or not at all due to bankruptcy. The institution behind the ETF might get wiped out in a banking crisis. At least it might get illiquid for long times.
- Gold stocks should become a fantastic investment, but could experience tremendous volatility and maybe illiquidity for some periods. Some gold companies can go bankrupt due to credit problems, but in general the gold prices should spike up and cost go down in real terms making their margins soar.
- Some property can be ok, but I would expect property markets to take severe hits due to lower demand and credit problems.
- Commodities like oil and metals can be ok, but I would expect these markets to take severe hits due to lower demand.
- Cash of the soundest currencies like NOK can be good. I think it can experience some weakness as long as there are big currencies that the market rather escape into during turmoil. A plunge in the oil price might affect the value of NOK negatively. When there is finally no big currencies left as safe havens, the NOK can become extremely strong.
However, I guess even NOK can be dangerous too. If the international banking system goes down, all the banks in the countries with sound money will have funding problems. The central bank might be forced to print money to keep the banking system afloat. Even if the country has a lot of money like the Norwegian government, it might take severe hits in terms of value on their assets and it might get illiquid. The only option left becomes printing money. On longer term it can also be difficult. When "all" your neighbours have devalued their currency, you are in a situation where you have a superstrong currency and your export industry get wiped out. The country might find itself forced to devalue to align wages/cost with the other countries to be able to save its industry. Even the soundest currencies can be dangerous both on short and longer term.
- Long term bonds will not be any good investment, since it will take hits from both devaluations and higher interest rates.
- Short term bonds can be ok related to not loosing value when interest rates go up. However, it will not be protected against a currency reform.
- Your own debt should be with fixed interest rate. Your principal will be devalued and you will escape the higher interest rates following:-)

When it comes to timing, I think gold and cash of the soundest currencies will be good in the short term. Asset markets will take hits and it might be smart to switch from cash and into real asset or equity markets after they have plunged. When devaluations happen it can cause tremendous upwards realignment of assets and equity. Even gold can take some initial hits. That will be a great opportunity for shifting from cash and increasing your amount of gold.

[blaavass]

Here's an update on the US debt and some predictions about the markets:

http://www.zerohedge.com/article/3-d...-debt-redeemed

[blaavass]

Here's an interesting read from Martin Armstrong. He seems to also forecast troubles in the markets this year. The big question is if new lows will be taken out like happened on Dow Jones in 1931. His opinion is that new lows will not be taken out. That will be one of the great questions to ponder about in the coming time.

http://www.scribd.com/doc/32234380/T...sion-5-27-2010

[blaavass]

Another good presentation by Niall Ferguson in May this year. It is much of the same as previous presentations on government debt. He makes one very interesting comment about the Euro (from 42:13). He don't think the Euro will break up, but it will become a weak currency because the ECB will print money to avoid a defaulting banking system.

I believe this mechanism, printing as the last resort to avoid defaults, is the mechanism that will run its course in deciding the economic future. Central bankers will be too afraid of the consequences of total breakdown of the financial system, which they believe will result in depression. As George Soros they believe stagflation will be a much better outcome. What is more difficult to say, is if the consequence will be strong inflation throughout this decade or if it will be currency collapses ending in currency reforms with large devaluations. My best guess is that the world will experience both. Where capital outflow concentrates, there will be collapses, and for the other countries there will be strong inflation.

You Tube

[blaavass]

Here is an article about IMF having already committed more resources to Europe than they have available.

The article states that much of the resources of IMF are based on credit lines from the member countries. Well, that means that if the member countries are bust, so are the IMF. They might be able to sell gold, but this is how crisis spreads with cascading effects from a specific event or default - through the credit lines!

http://www.na24.no/article2918923.ece

[blaavass]

Inflation explained by Donald Duck & Co:

You Tube

[blaavass]

The Donald Duck cartoon about inflation belongs to the Disney animated series "Duck Tales", and this film were aired in 1989 (season 3 of Duck Tales).

You Tube

You Tube

[blaavass]

here's a good interview with Bill Laggner, an hedge fund manager with exceptionally results over several years. 134% gain in 2008 is quite good...

http://www.kingworldnews.com/kingwor...l_Laggner.html

[blaavass]

I've linked to several videos by Dr. Berninger. Now he's been interviewed by Max Keiser on television.

http://maxkeiser.com/watch/the-keise...ern-berninger/

[blaavass]

Letting the Yuan appreciate IS the decoupling between China and US.

http://www.hegnar.no/okonomi/article433351.ece

You Tube

[blaavass]

Shorting opportunities might happen during this summer, watch out during your holiday. Technical analysis seems to indicate a major turning point with a head-and-shoulder forming.

http://www.hegnar.no/personlig_okono...icle433352.ece

The S&P500 also looks like working on a head-and-shoulder formation.

http://quotes.ino.com/chart/index.ht...=&a=&w=&v=dmax

[blaavass]

Good comments by Peter Schiff about the consequences of the Yuan appreciation.
- Chinese purchasing power will increase and drive commodity prices higher.
- The Chinese don't have to buy as many treasury bills, which will drive interest rates higher.

You Tube

I would add that the Chinese consumer goods will become more expensive, which will export inflation instead of deflation as earlier. Together with rising commodity prices I would think that price inflation in consumer goods is likely and that will finally make the CPI start to go up.

[blaavass]

It seems like some politicians are waking up and is starting to understand where the borrow-and-spend policies will end.

http://www.zerohedge.com/article/wom...eithner-chorus

[blaavass]

Hugh Hendry with some great comments on George Soros, etc.

http://www.zerohedge.com/article/hug...rge-soros-down

[blaavass]

Media is now starting to pick up on the potential technical turning point forming:
http://www.hegnar.no/personlig_okono...icle434619.ece

It is also interesting to observe that both OSEBX and S&P500 has turned down after not being able to break through 150MA:
http://norma.netfonds.no//analysis.p...MEAN-CENTERED=
http://finance.yahoo.com/echarts?s=%...urce=undefined

I'm keeping an eye on the Hang Seng to see if that also turns down again after testing the 150MA:
http://finance.yahoo.com/echarts?s=%...urce=undefined

[blaavass]

Interview with good perspectives on the American debt situation.

You Tube

[blaavass]

This week the head-and-shoulder formation might get completed in OSEBX:
http://www.hegnar.no/personlig_okono...icle435544.ece

[blaavass]

Hm, today the 340 level was taken out downwards on OSEBX. A pull-back closer to the 340 level will be a perfect time for shorting the index.

http://norma.netfonds.no//analysis.p...MEAN-CENTERED=

[blaavass]

That so many stock indexes in the world are showing the same technical signals now, makes the probability higher and the consequence more severe compared with only one stock index showing a technical signal.

Watch out!

http://www.hegnar.no/personlig_okono...icle436369.ece