The Credit Crisis Financial Stocks Short Journal

[Daal]

From the Reinhardt paper
"Another important driver of the cycle is the leverage of the private sector. In the decade prior to a crisis, domestic credit/GDP climbs about 38 percent and external indebtedness soars. 5 Credit/GDP declines by an amount comparable to the surge (38 percent) after the crisis. However, deleveraging is often delayed and is a lengthy process lasting about seven years"

This will put significant pressure on private M2 creation and likely prevent the Fed from exiting its current balance sheet

 

[Martinghoul]

Montier's blog has a really nice piece on bond valuations:
http://behaviouralinvesting.blogspot.com/2010/08/bond-bubble-sterile-debate-on-semantics.html

Finally, someone looking at the issue exactly the right way, IMHO. Even though I disagree with his conclusions, his method is absolutely 100% sehr gut.

 

[Debaser82]

Gold is about 1% away from it's all time high... Although the USD index was a tad higher back then.

 

[Martinghoul]

This is pretty good too (on the subject of bonds and/or Japan):
http://brontecapital.blogspot.com/2009/01/lessons-from-shorting-jgbs-credible.html

 

[Daal]

Quote from Martinghoul:

This is pretty good too (on the subject of bonds and/or Japan):
http://brontecapital.blogspot.com/2009/01/lessons-from-shorting-jgbs-credible.html

Arent you in the camp that says dont short USTs?The author is agreeing with my position that because its Bernanke who is in charge and not the BOJ the US might be a difference experience

 

[Martinghoul]

Quote from Daal:
Arent you in the camp that says dont short USTs?The author is agreeing with my position that because its Bernanke who is in charge and not the BOJ the US might be a difference experience

I am in the camp that thinks that outright shorting USTs is a poor risk/reward trade. I like other ways to be short.

 

[Daal]

Krugman is correct here
http://krugman.blogs.nytimes.com/2010/08/31/things-we-know-about-inflation-wonkish/

But I also believe the Fed is correct in publishing fantasy forecasts. If they told the truth they would create chaos and self-fulfilling prophecies

 

[ralph00]

If Krugman said 2+2 = 4, he would still be wrong.

I do agree though about the importance of government officials lying to the people.

Actually, the Fed is too fucking stupid to pull off a lie. The truth is that they haven't got a clue.

 

[Daal]

ECRI member now calling for 50% chance of recession
http://pragcap.com/ecri-chance-of-recession-greater-than-50

Next will be barry ritholdz, when he comes out and says double dip is likely I bet the economy will be in recession already

 

[Daal]

Quote from ralph00:

If Krugman said 2+2 = 4, he would still be wrong.

I do agree though about the importance of government officials lying to the people.

Actually, the Fed is too fucking stupid to pull off a lie. The truth is that they haven't got a clue.

He is correct again
http://krugman.blogs.nytimes.com/2010/09/02/inflation-deflation-debt/

This where some free marketeers go wrong when they think deflation is not bad. There is a difference between 19th century deflation and 20th(or 21) century deflation and that difference is debt levels

Certain growth rates of nominal GDP will result in higher or lower real GDP growth rates(at least for a certain period), thats counter-intuitive because one would think that inflation or money printing has nothing to do productivity and population growth which are supposed to be the drivers of real GDP

At the same time they need to ask themselves how can be possibly true that dramatic changes in inflation rates(or deflation rates) not cause changes in real GDP given that most market participants are not expecting it and contracts weren't written with that in mind?
The US has had about 3-4% inflation since the 30's, you change that to -1% and everything wont be ok because the entire foundation of society was built for decades with that expectation in mind

Clearly a adjustment period would be needed and some of these adjustments might trigger negative feedback loops(debt liquidation), therefore the correct adjustment might never arrive(now until the Dow is at 1000 and GDP is down by half or something)