bearfund

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497 Comments

    • Wed Oct 8th 23:52 PM | Rating: 0 0
      Commented on:
      How Bad Is the Fed's Balance Sheet?
      constructe, actually given that "everyone knows" the Fed will eventually reverse their actions (I disagree), it would be a lot better for them to just do that now. Right now I, and I know many of you, have piles of gold bullion sitting in vaults and safes. Because the prevailing interest rates on currency are negative, and the government in its wisdom has decided that gold and silver will no longer circulate, that wealth is going to stay right where it is, helping no one and contributing nothing to growth. However, had the Fed raised interest rates this morning to 15% instead of cutting them to 1.5%, I would have been happy to buy some dollars and start lending at interest rates ranging from 17 to 30%. That captive wealth could be put to work. The Fed underestimates the extent to which lowering interest rates actually hinders growth in exactly this manner. It should be prohibited by law from lending money at an interest rate below the 24-month moving average of CPI increases - calculated in the original way (i.e., right now it would be about 9%).
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    • Wed Oct 8th 10:18 AM | Rating: 0 0
      Commented on:
      Four Ways to Protect Money During the Fallout
      How about a new rule on SA: no one is allowed to post an "OMGZ it's DEFLATION!!!111one&quo... post or article unless he or she has at least 50% of his or her net worth in gold puts dated no earlier than 2010. If "deflation" is such a slam dunk you should turn at least a 5x profit on such a position without taking any risk at all.

      In fact all of you deflationistas are committing both of the cardinal sins: you are arguing with the tape and you are fighting the Fed. So put your money where your mouth is or shut up. The author is largely correct although I would not bother with stocks at all and would instead short the Long Bond for the perfect hyperinflationary duo.
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    • Wed Oct 8th 09:32 AM | Rating: 0 0
      Commented on:
      How Bad Is the Fed's Balance Sheet?
      First you say that "[w]hen markets settle down, the Fed can and will absorb those reserves back in with sterilizing sales of Treasury securities...". Well, that would seem sensible enough. Then you show the composition of the Fed's balance sheet, demonstrating that you see, but you do not see. The Fed doesn't have much left in the way of Treasuries. If it sold enough to sterilize all that money, it would have none at all. Now, surely, the Treasury will be borrowing a lot more, and the Fed can certainly buy as many of those securities as it wants. That would both grow and start repairing the balance sheet, and would make possible some eventual sterilization efforts. Frankly, I doubt that this will ever happen. Instead the Fed will just continue growing its balance sheet until it is certain the tide has turned, by which time hyperinflation will be unavoidable. As usual, the central banks are 90 degrees out of phase and their "countercyclical&... efforts are actually reinforcing the business cycle and fanning the flames.
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    • Mon Oct 6th 11:45 AM | Rating: 0 0
      Commented on:
      Will GE Drop Below $30?
      Just picked up a bundle of GE at $19.96. Thanks for the debate, guys; it was fun. The only question that's left is whether I paid too much.
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    • Mon Oct 6th 11:41 AM | Rating: 0 0
      Commented on:
      Bailout Bill Passes; What Happens Now?
      one blue shoe, I don't trust Canada to act as a sovereign. When capital controls come to the US, I expect that Canada not only will be an enthusiastic participant in enforcing those controls but will also impose similar controls of its own.

      The best evidence for this I can offer is Switzerland. Thanks to international pressure over everything from Nazi gold to money laundering to tax evasion, anyone with a Swiss bank account might as well open accounts with the IRS, the DEA, and the FBI at the same time since they'll be getting daily updates on all your activities. If you can't trust Swiss banks to look after your interests, how can you possibly trust Canadian banks?
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    • Sun Oct 5th 15:50 PM | Rating: 0 0
      Commented on:
      The Bailout Pork Effect: Short Term Rally, Long Term Disaster
      StateofConfusion, sure, that may be. But all that will cause is further economic contraction: the makers of such goods will find their margins squeezed by higher input costs and lower selling prices, and their employees will demand higher pay to compensate them for their higher cost of living. In short, employees will demand more just as employers offer less, and the net result will be fewer people working and fewer productive enterprises. All those ex-Apple employees will still need to eat ever more expensive bread, and they will get the money to pay for it from the government. But no one will be working or turning a profit, so no one will be paying taxes, and the printing presses will rev ever faster even as the basic underpinnings of the economy collapse. The inevitable result is a blowout in Treasury yields and a run on the dollar.

      The real-economy effect will be that the essentials become ever more expensive while everything else becomes relatively cheaper but also dramatically scarcer. The logical conclusion of this process is an economy in which the sole employment available is work on a government-owned farm, and the only pay one receives is a daily ration. This should be quite familiar to economic historians; it's the essence of the global economy circa 800, and of the Russian and Chinese economies as recently as 1980.
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    • Sun Oct 5th 15:33 PM | Rating: 0 0
      Commented on:
      Bailout Bill Passes; What Happens Now?
      James, gold is most certainly NOT a good investment. It's not an investment at all. It will not produce income and it will not make you wealthier. What it will do is retain its value across the rise and fall of empires, the wasting effects of time, and the thievery and conniving of foul kings. It is money accepted always and everywhere, and its basic value changes little over time.

      Your main goal today has to be consolidating your wealth in physical gold held on your person and properly defended, and in remote and inaccessible locations known only to you. You want to trade in other stuff, go for it. Maybe you'll make money. But don't hesitate to convert your profits to gold and get them far, far away from here, and be sure you're ready to leave yourself when the time comes. No one can predict the outcome once the forces of evil (the lying, thieving government) and the other forces of evil (the lazy, self-entitled underclass) decide to kill off the working/saving middle class for good before turning on one another in a sadistic orgy of violence and destruction, but it's a safe bet you won't want to be around when it happens.

      As for how best to get one's gold out of the US, that really depends on how much you have. For me, a 400 oz bar or two and a handful of smaller coins and bars in a very heavy backpack will do the job. The United States has thousands of miles of unguarded border, much of it in wild country, to say nothing of the thousands more miles of unguarded coastline. Suffice it to say that when I wish to leave, I will do so and my gold will go with me. A similar plan will work for anyone in reasonable health with a little common sense and basic survival knowledge. If you have too much gold to carry, I suggest you hire someone to figure out how best to get it out of here. You can certainly afford it.
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    • Sun Oct 5th 14:55 PM | Rating: 0 0
      Commented on:
      America Needs a Turnaround Plan
      If you want a real turnaround plan, how about starting with the elimination of all entitlement spending and set-asides. Combine that with elimination of income and payroll taxes, repudiation of existing debt, and closure of the Federal Reserve Bank, and add immediate transition from paper money to circulating gold and silver as coin of the realm. That's a real turnaround plan. Everything else is lies, gimmicks, and stalling for time.
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    • Sun Oct 5th 12:56 PM | Rating: 0 0
      Commented on:
      5 Reasons Why the $700B Bailout Could Translate to $250 Oil
      bugmenot, it depends. I might lend to them under the right circumstances. For starters, my claims would have to be senior to all others, including secured creditors and the IRS. I would have to have the right to claim principal and interest payments directly from his or her pay packet, and I would demand the right to force him or her into bankruptcy after a single missed payment. Finally, I would lend only in gold and would require repayment in the same form.

      With those safeguards in place, I would gladly lend 5 ounces of gold for 1 year at 36% interest to any employed adult who is not a resident of Texas and has a credit score of at least 700 (these last three requirements actually encompass more than half of American adults). I guarantee you I would clean up lending on such terms - I would have no interest rate risk or inflation risk, and my ultra-senior claims would be certain to be paid by anyone who remains employed. About the only debtor I could lose on is the one who gambles the money away and then loses his job - and that would have to happen to 1/3 of them before I'd be in any danger of losing money.

      You see, it's all about the terms. There will be plenty of lending when the terms compensate lenders for the risks they are taking. Today's "consumer" is not prepared to offer such terms, so he does not receive credit. Seems simple enough, no?
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    • Sun Oct 5th 12:36 PM | Rating: 0 0
      Commented on:
      Bailout 1.1 Passed. Will We Have to Go Back to the Well for v2.0?
      WAKEUP, give me a break. Any politician who gets voted out will take up a cushy prearranged lobbying gig, and will be replaced by an identical drone from his party's freezer full of hacks. In the unlikely event that his seat is one of a couple dozen or so that the two largest parties (and no others) actually fight over, there's a slim chance he'll be replaced by an identical hack with a different logo on his party membership card.

      Wow. I bet they're quivering in their boots over your "retaliation"... Way to shake things up.

      If you want real change, demand that your state legislature ratify the Permanent Strength Amendment - foobazco.org/~psa/psa.html - and put a stop to the never-ending series of financial crises that paper money, fractional reserve banking, and excessive leverage have brought us. No one can stop the business cycle, but the Permanent Strength Amendment would limit the amplitude of its oscillations and provide the basis for a healthy economy and slow, steady growth.
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    • Sat Oct 4th 21:17 PM | Rating: 0 0
      Commented on:
      Iceland: When Too Big to Fail Becomes Too Big to Rescue
      DCM, I at first read your post as a disparagement of "In Gold We Trust" and was ready with a rejoinder. Instead I see that you will be one of the survivors. After all, as the saying goes, the so-called American Triumvirate of god, gold, and guns is redundant: if you have gold and guns, what more could god do for you?

      The real question we must face is what becomes of the penniless billions once fiat paper collapses.
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    • Sat Oct 4th 12:48 PM | Rating: 0 0
      Commented on:
      Bailout Bill Passes; What Happens Now?
      PastTense, gold. Nothing else. No bond on the market today offers a yield that can compensate you for inflation, much less credit risk. Inflation kills growth, so most stocks will continue to tank. Cash is just another kind of bond, one with zero maturity; it too pays nothing. If you need income, buy bank preferreds and dividend-paying resource stocks, preferably in non-US companies with non-US operations. Otherwise, gold, gold, and gold, with perhaps some silver to jazz things up a bit (it's silly cheap). And get out of the US. Your money's not safe here, whatever form it's in.
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    • Sat Oct 4th 12:37 PM | Rating: 0 0
      Commented on:
      Bailout Bill Passes; What Happens Now?
      You don't seem to understand what "Helicopter Ben" really means. Yes, the Fed can print, but it takes a government to give away money. If no one will borrow or lend, then your conclusion that the banking system will not support inflation is correct. So other channels will have to be found to support it, and those channels will involve the Fed lending to the Treasury, which will in turn give away money. Don't believe for an instant that they won't do it. TPTB are determined not to allow deflation, and there is extensive precedent for varying forms of "fiscal stimulus", many of which amount to nothing more complicated than borrowing money and using it to cut checks to some subset of the citizenry. It's remarkable that you can't see past your academic biases about how the market works to the obvious conclusion.
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    • Sat Oct 4th 11:31 AM | Rating: 0 0
      Commented on:
      The Bailout Pork Effect: Short Term Rally, Long Term Disaster
      Those of you insisting that long-term deflation is a certainty and commodities are headed to zero are committing one of the cardinal sins: you are fighting the Fed.

      Interest rates will go lower, for starters. Even the futures market finally agrees with me, though no one can be certain of the exact timing. Multiple pundits are now predicting 1% or even 0% as the cycle low. Then there's another little item in the bailout. The real reason the Fed wants to pay interest on reserves isn't that it will help manage the Fed Funds Rate during liquidity crises (though it will) but rather that the interest paid is a direct and immediate increase in the money supply. There is no way the Fed can sell Treasuries to offset the interest they pay; they don't have any left. So right there you have a nice source of monetization. The real channel for money creation, however, will now be from the Fed through the Treasury and thence out multiple channels: the multiple bailout funds, new bailout loans, and especially more "fiscal stimulus" which will amount to nothing more complicated than printing money and dropping it out of helicopters (minus the physical printing and the helicopters). They will continue to hand out money to those whose finances and/or behaviours match those they favour; it may take the form of free medical care (money flows from the Fed to the Treasury to hospitals through their staff and out into the economy while the money that used to go there now remains with corporations and individuals who no longer need to pay for medical care). It may take the form of more "rebates" which work in obvious enough ways. We already have extended unemployment benefits; there may be more of that. And it would not surprise me if widespread "infrastructure investment", once discussed widely before the crisis stole the headlines, gets under way. Some of the projects might even be good investments, though the real purpose will be to reward loyal contractors and Congressmen with porky deals and get money flowing into the economy, not make a long-term improvement in American competitiveness (and that's a shame, because if done properly such investment not only sterilizes the money but also delivers real returns - see WPA).

      The bottom line is that Helicopter Ben was dead-right. There will be no deflation. However deep the recession, you can be certain that more money will be printed and that prices will rise. Whether it will help to end the recession will be a topic for argument in economic history papers, but that it will cause prices of basic goods to rise is unquestionable. The market for such goods is global, and price controls are ineffective. If you are printing money and other governments are not, you will have to offer more of your currency to outbid the rest of the world for commodities. And if everyone is printing, the price will simply rise with the money supply: the supply of the commodity is only so great, it changes slowly, and demand for life essentials has a clear floor. There is no way to avoid this fate when you print money.
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    • Sat Oct 4th 11:06 AM | Rating: 0 0
      Commented on:
      Iceland: When Too Big to Fail Becomes Too Big to Rescue
      Many of us are applying the same thesis to our US speculation: long the banks, short the sovereign. As in Iceland, the credit of one is as good as the other, and the implications for the currency and the sovereign debt are extremely negative. Same story, same reasons, different scale. It's amazing that so many bright people can look at Iceland, shake their heads, and say "tsk, tsk" and then run to Treasuries for "safety." Talk about lack of introspection.
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