Reverse Liquidity Can It Be?

[billdick]

Quote from Pa(b)st Prime:...
I expect stagflation. I also anticipate higher rates being the ultimate catalyst for lower stocks. ...[/B]

I also expect "stagflation" but point out that the Dow etc are indicies expressed in dollars.

I expect that interest rates are going higher, for reasons given in post I just made, but also to attract the needed capital to finance the current and growing deficits. If correct, part of this deficit will be the interest on the old debt at higher rates. There may be a standoff that moderates this as dollars come out of mattresses and buy things in US. There are many more outside of US than in it, so this may takes some time, help the productive economy, but in the long run, the printing presses will run to make more dollars and inflation will win.

SUMMARY yes the true value (measured in almost anything but dollars) of Dow is going down but in dollars it will be going up. Dow nearing 15000 by end of 2007 as the "mattresses money" stimulates exports. - The recession comes later when there is no more mattresses money to return, no central bank wants reserves in dollars, oil is sold for Euros, etc. and soon most of the western world, (not selling raw material and/or food stocks to China) is in global depression.

 

[kowboy]

Thanks for the posts Guys. This is a really excellent thread.

Just started reading Peter Schiff's new book, "Crash Proof". Somewhat of a misleading title in that he's not espousing doom and gloom or necessarily a Crash. But gives sound economic reasons why dollar based assets cannot escape a decline in the future. Expands in detail most of the points discussed in the above posts.

If you extrapolate the premise that the dollar and dollar based assets will not preserve/conserve wealth in the future, the question is what should the investor do for future capital preservation.

 

[billdick]

Quote from kowboy:

...If you extrapolate the premise that the dollar and dollar based assets will not preserve/conserve wealth in the future, the question is what should the investor do for future capital preservation.

I'll tell what I have done: (1) I saw this coming five years ago (expect the global depression, caused by a run on the dollar to be still about five years from now), So I but all I could cash in of my retirement (without too serious tax consequences) into ADRs. that worked well.
(2)Starting about 2 years ago I took about 2/3 of what remained in US dollars into about 30 different early stage drug development stocks. Was a lot of fun learning how their "almost magic cures" are expected to work. It took a lot of hours (You can hear and see their presentations via the internet.) and a year to make my 30 investments. My thinking on this was that their business is so risky, and "priced in" that the dollar risk is only a small addition. (my KOSP and SRAi have been bought by "big pharma" already at >100% profits; two others have lost more than 50% when their main drug failed to work etc., but in the last year I am up over all about 25%)
(3)The final 1/3 went into TIPs - everyone here surely thinks that is crazy, and thus far is has been a slight loss (compare to an Index fund, etc.) but when foreigners will not finance the debt and BoP problem remains unsolved, Bernache will first raise rates hurting regular bonds more than TIPS, but as US economy groans under double digit rates, resign (or be fired) and then the mints presses will run 24/7 and everyone holding dollars will want TIPs.
My objective is only to keep my purchasing power, not increase it.

As I live in Brazil, I bought the Real back when you got 4 for the dollar instead of two. Just last month I bought about 40k (US $) of sugar and alcohol producer San Martinho (SMTO3) with part of those funds as the interest rates (still the highest real rates in the world) in Brazil are coming down.

 

[zdreg]

Quote from Sponger:

I love your cynicism and pessimism aimed at Wall Street Stoney A man after my own heart!

It smacks of conspiracy theory, and I love that stuff. The machine just keeps moving the money around. They always find a way to put it in their pockets.

My favorite quote:

"XYZ firm neither confirmed nor denied any wrongdoing"

Translation:

"Here, let me put these millions of dollars in your front pocket Mr. Regulator/Bureaucrat/Agencyetc there for you my good man....say, isn't that some other firm performing some sort of thievery over there in that sector of the market??? Best we just forget about all of our unpleasantness, and you go look over in THAT corner now while I go back to the money presses"

conspiracy to bail out the big boy? you must be joking laddie.

see below.

 

[zdreg]

GOLD & GATA

Sunday Times - Brown lost £2bn selling UK's gold

by Eric Hommelberg
April 15, 2007

GATA got another tremendous credibility boost today by a devastating article in the Sunday Times on the controversial gold sales announced by the Bank of England on May 7, 1999.

It was believed by GATA at that time that the timing of the announcement of these gold sales only had to serve one single purpose which was to drive the gold price down.

The price of gold had to be taken down since gold was at the verge of a significant break-out above the $290 mark which would hurt the commercial gold traders and banks which were heavily short at that time tremendously.

The funny thing is that two of the of the big short players at that time (JP-Morgan and Deutsche bank) informed their clients the day before the BOE gold sale announcement that gold was NOT GOING ABOVE $290. Now how did they know that? (source: Bill Murphy, LeMetropleCafe, May 10, 1999)

Well, the very next day we all knew why gold was not going above $290.

So from that perspective Gordon Brownâ?Ts decision to sell off half of Britainâ?Ts gold reserves and to announce the gold sale in advance could be considered as a great success since he got what he wanted, a crashing gold price which made it possible for the short players to cover at more convenient price levels.

Sure enough Blair and Brown came under heavy pressure since selling gold at rock bottom prices is about the most foolish thing one can do and has cost the British tax payer already more than 2 billion pounds and is likely to increase dramatically the years ahead.

You think these remarks re gold price manipulation/bailing out shorts are exaggerated?

Well, read onâ?¦

Suspicion on the announced gold sales ran so high that chief executives and chairmen of Placer Dome, Newmont Mining, Ashanti Goldfields, Homestake Mining, Gold Fields, and Anglogold wrote an open letter to Tony Blair. This letter included:

On 16 June 1999, in the House of Commons, Mr. Quentin Davies, from the Opposition Front Bench, speaking in the debate on gold sales, said that there is a persistent rumour concerning the position of international investment banks.

Mr. Davies said:

"...We cannot allow the rumors to grow, because they are extremely dangerous to public confidence. It has been suggested that the market is very short of gold, that the short positions may be a substantial multiple of the total amount of gold currently held by the Bank of England, and that the Bank's real motive is to save the bacon of firms that are running those short positions. ...Has the Government's whole plan been simply to drive down the gold price by whatever means, fair or foul, to save the position of certain figures in the city which apparently, are so short and potentially in such trouble?"

END.

 

[zdreg]

Sure enough these allegations were denied by Blair and Brown but as John Embry (Sprott Asset Management) noted in his excellent report â?~Not Free, Not Fair, The Long Term Manipulation of the Gold Priceâ?T it seemed the decision to sell half of Britainâ?Ts gold was ordered by British government over the objection of BOE officials.

Nevertheless the British government has maintained all these years that the gold sale decision was made consulting with the Bank of England. On July 14, 1999, Prime Minister Tony Blair said the following in the House of Commons:

"We sold gold on the technical advice of the Bank of England, and other countries have also sold gold."

Now this statement â?~we sold gold on the technical advice of the Bank of Englandâ?T contradicts what The Sunday Times found out and published today.

Sunday Times - Brown lost £2bn selling UK's gold
April 15, 2007-04-15

From interviews with key Treasury, B