“Deleverage!” -- after six shots of 86pf Bourbon, all turned fearless

How dependent the housing market is on jobs? The Case-Shiller findings that U.S. housing prices had risen by 74 percent between 2000 and 2006. Over that time, "median household income rose just 15 percent," a discrepancy that "made housing unaffordable for many Americans." Perhaps the worst set of recent statistics is the little discussed size of total residential housing debt, which is in the midst of a massive financial 'deleveraging'. Management of this process debt will easily overwhelm the relatively modest financial resources of the U.S. government. Unless this enormous disparity is appreciated, investors are vulnerable to being suckered into 'dead cat' bounce rallies. Professor Robert Shiller has determined that house prices rose in line with inflation, between 1900 and 1995, at 3.3 percent per annum. Beginning in 1996, the Greenspan property bubble drove average house prices to a position where, by 2007, they were some 40 percent above their aggregate century-long 'trend' value. To "deleverage", as Treasury Secretary Paulson so soothingly describes it, will require the squeezing out of this 40 percent of price inflation; or some $12 trillion! This figure, which excludes the deleveraging of other debt-ridden areas such as commercial real estate, credit cards and auto loans, is just $2 trillion short of our entire annual GDP! It is a gigantic figure, of which there is understandably little or no mention. When note also is taken of the $436 billion the Fed has recently injected into our economy and the fact that it represents some 50 percent of the Fed's balance sheet, a massive problem of relative size is manifest. It begs the question of whether the Fed has the resources to do anything but make a dent in the crisis. Faced with these realities, it is unlikely that the Fed has much chance of averting a serious recession. If Congress fails to act soon, depression will threaten. The earnings of many corporations can then be expected to plummet, leading to a serious erosion of stock prices. Congress now needs to find a 'cause', that is politically attractive, in order to stall a depression, by boosting it into a recovery bubble. Green alternative energy, for example, would provide an attractive political cause, justifying the authorization of massive government spending on an unprecedented scale. The Fed will have to reduce interest rates still further and stand ready to fund many troubled banks to justify even a nominal rally in U.S. stock markets. In short, if we are to stall a depression, we must necessarily experience both far greater inflation and lower interest rates. The result will be renewed downward pressure on the U.S. dollar and the unseen erosion of U.S. dollar based wealth. Many dollar assets can be expected to fall in price, even in depreciating dollars. Investors should be skeptical of any intermediate dollar-based market rallies. Instead they should arm themselves with advice as to how to avert the serious dollar erosion of their portfolios.

Who wrote this?

Who wrote this?

Good question. I knew you'd be interested, as my original topic has "HELP! RogerD, decengr and milbank" as sub-title.

I did not write it, just caught my eyes with that astonishing 40% deleveraging total that seemed more solidly pointed out, somewhere in the net. What do you think? Is it for real?

Who wrote this?

you can find anything on the net
what about this?

Sinclair's take cassius

NEW 3/30/2008 8:53:57 PM
Post Your Reply

I saw something today that I need to show you guys.

One of the message boards I frequent had an interesting post today. It's from a guy on there ("tallydynasty") that is into the gold game . He went to Jim Sinclair's meeting in Toronto this past weekend and brought back some startling info from the man himself. I will emphasize some key points:

"Reduce Financial Intermediaries between you and your assets. You will know why later. So many companies will fail and you will want to have immediate access to capital.

I am Not in the conspriacy business....I have friends that fight that battle. I only provide facts that I know through contacts, research, and years of experience.

I don't believe....I KNOW and I have for a long time that Gold would go to at least $1650. (More on why in a bit)

Once we get to $1650 I will take you one step at a time beyond that.

2011 is when this WILL happen based on hard market basics....not pulling from hat.

My suggestions are conservative, no pressure. Please get your house in order.

Unlike 1980 after gold finishes it's great move - it will NOT go down. When many gold mining companies hedge their gold who is taking the other side of the deal??? - it's pretty much the same group Each time. When Ashanti Gold blew up do to their gold hedges a few years ago the details showed that Goldman Sachs was first adivsor....but was just acting on behalf of another entity...."The Carlyle Group"....[Bush Family] (It is mentioned in fine print on many details of this company in the Grand Caymans). This is the company (or Carlyle acting for another group?) that is literally acquiring the world's future gold production through contracts with mining companies. This is NOT a conspiracy, it's not only legal, it's Brilliant !

(My join the dots is that likely another person/family/group who resides in the Caymans is using Carlyle as their front to do this both corporately and personally)

This group is so powerful (possibly the most wealthy company in the world but not mentioned in rankings as it's private) that they will NOT allow 1980 Gold drop to occur this time. They have so much at stake already, it won't be a replay. Gold won't crater. US Dollar won't tank completely as this company has and will have the majority of their wealth denominated in it.

This is why I say that Silver is a game. Though it will probably outpace gold on a percentage basis - it will drop and gold with stay high. However, a lot can be made in Silver but it's not the same situation as gold.

A new Vehicle will be introduced into financial markets ["Amero"?].....just as Gold hits it's peak in early 2011. It will probably dip just a tad from there but this new vehicle will be financial instruments attaching the US Dollar to the gold price. The currency will IMMEDIATELY be strengthened and bad perception changed overnight. US Dollar collapse stopped and bull created. (Major impact on pysche). THIS WILL COME TO FRUITION.


Price is Preceding Time (Gold rocking to almost a 1000 now) .......so this would say that my $1650 is conservative as my target is based more on the time of the event in 2011. ---- I will take you through it all and tell you within 50-100 dollars of the peak of Gold.


No particular gov't admin set this up, they have just been chapters that have been in the works for a long time.


How do I know this? I have connections in the highest places that have told me and have now allowed me to talk about it. (Few will actually believe or understand).......IT IS COMING - it matters not who knows now.

Weimar Republic Experience is the closest thing to what we are in. The Germans purposefully devauled their currency but it got out of hand and they couldn't control it. Their currency went to zilch. The USD decline could also get out of control........BUT that is exactly why they have the new mechanisim in place !!!!!!

From Q & A Session:

There will come a point where dissent could be / will be put down in a very harsh way. Kent State type incident potential in the future.

Take for example the US/Canada military co-operation to deal with future civil disobedience that was just announced last week. This is but insight for what they are expecting in terms of cival unrest due to potential food shortages, rising costs, economic problems, etc.

The key is that the United States isn't going to fall completely apart - but it is going to go through some major change...prepare now.


Here is the thread in its entirety. If you're into gold stocks, look over it thoroughly:

http://floridastate....amp;style=2link

The first three paragaraphs are correct although I am not 100% sure of the 40% above trend conclusion. It is above trend for sure. The fourth paragraph is drawing a wacked out conclusion in that the 12 trillion is all of the housing debt. Believe it or not, there are a lot of people out there that can pay their mortgages so, I would say at minimum, 90+% of that number will be paid off by home owners. That being said, the 10-% is a killer. Even just 5% defaulting is a killer.

I have always said this fire was going to be too big for the Fed or congress to control. It will eventually go out on it's own just like its bubble collapsed on itself. The extent of the damage is hard to say. It will be bad, worse for some, and will take years to unwind and recover. Obvously, interest rate drops by the Fed haven't done much and they don't have much more to go before zero anyaway.

While having "a cause," everyone can get behind might jump start the economy some, I doubt that congress or the citizens are going to embrace "going green" with the passion they had attacking the Axis powers in WWII.

Those who saw their houses as investments instead of places to live are definitely going to be poorer. Those who bought houses to live in may lose value on them but, so will everyone else so for them, it's a wash...that is unless their value loss puts them "upside down" and they try to sell while they are still in that situation.

In short, the government having to cover the 12 trillion part is faulty logic. I think the rest of it is pretty right-on.

Edited by milbank, 31 March 2008 - 12:04 AM.

Who wrote this?

you can find anything on the net

Yeah, I know I just figured I'd ask first to save me the trouble.

Goflow, you don't copy all that you copied and not remember where you copied it from.

Here is the original source: LINK


Can This Rally Last?

by John Browne, Senior Market Strategist, Euro Pacific Capital | March 27, 2008
Print As the markets closed on Friday, March 14th, the $50 billion hedge fund, Carlyle Group, had collapsed, and questions were being asked about the viability of Bear Stearns. Having realized that Bear was close to insolvency, the Treasury and Fed worked overtime during the ensuing weekend to cobble together a bail out scheme that has since calmed the markets and encouraged a tepid rally. The salient question now is whether the rally can last.

With a counter-party involvement in a significant amount of the $43 trillion derivatives market, the collapse of Bear Stearns would have been the financial equivalent of an atom bomb. Its failure threatened not only the U.S. financial system, but also sophisticated financial markets in most of the world.

On March 17th, the Fed’s emergency action to rescue Bear Stearns took most people by surprise. It gave rise to a sigh of relief from Wall Street and other financial markets, which expected a full one-percentage point drop in Fed rates the next day. Apparently, the foundations of a market rally were laid. The Fed cut its rates by 75 basis points to 2.25 percent and announced massive new financing arrangements. Although the measures were temporary, they nonetheless placated shattered nerves. But was that any justification for a real rally?

The feeling of relief extended to mild euphoria. For example, three major Wall Street investment banks reported earnings falls of between 42 and 57 percent…and the news was greeted as positive! The falls, after all, were less than fanciful Wall Street “estimates”. Since then, possibly led by the mythical “Plunge Protection Team”, stock markets around the world began to rise in thin trading. But the underlying issues remain extremely troubling.

It is true that markets had fallen significantly and under normal conditions a rally should be expected. The S&P 500 put in what appeared to be a convincing technical bottom. However, technical analysts forecast a volatile sideways trading band for the S&P 500, between 1,270 and 1,400, with a downward breakout being a cause for alarm.

Some two weeks into the rally, a series of statistics are emerging that point to increasing signs of economic recession in the United States.

On Monday, March 24th, the market welcomed the news that sales of existing homes had risen by 2.9 percent in February, on an annualized (forecast?) basis, which was the first gain since July. Given lesser play was that the factual year-on-year figure, which showed a drop in existing home sales of some 24 percent. House prices also fell. But it appeared that Wall Street was unwilling to focus on the truth, apparently preferring to cling to straws of seemingly bullish information, even if grossly misleading.

The next day, The Wall Street Journal reported on how dependant the housing market is on jobs. It highlighted the Case-Shiller findings that U.S. housing prices had risen by 74 percent between 2000 and 2006. Over that time, “median household income rose just 15 percent,” a discrepancy that “made housing unaffordable for many Americans.”

That same day, it was reported that American consumer confidence was far weaker than expected, falling to the lowest levels since 1973, adding yet more fuel to the forces of recession.

Perhaps the worst set of recent statistics is the little discussed size of total residential housing debt, which is in the midst of a massive financial ‘deleveraging’. Management of this process debt will easily overwhelm the relatively modest financial resources of the U.S. government. Unless this enormous disparity is appreciated, investors are vulnerable to being suckered into ‘dead cat’ bounce rallies.

Professor Robert Shiller has determined that house prices rose in line with inflation, between 1900 and 1995, at 3.3 percent per annum. Beginning in 1996, the Greenspan property bubble drove average house prices to a position where, by 2007, they were some 40 percent above their aggregate century-long ‘trend’ value.

To “deleverage”, as Treasury Secretary Paulson so soothingly describes it, will require the squeezing out of this 40 percent of price inflation; or some $12 trillion! This figure, which excludes the deleveraging of other debt-ridden areas such as commercial real estate, credit cards and auto loans, is just $2 trillion short of our entire annual GDP! It is a gigantic figure, of which there is understandably little or no mention.

When note also is taken of the $436 billion the Fed has recently injected into our economy and the fact that it represents some 50 percent of the Fed’s balance sheet, a massive problem of relative size is manifest. It begs the question of whether the Fed has the resources to do anything but make a dent in the crisis.

Faced with these realities, it is unlikely that the Fed has much chance of averting a serious recession. If Congress fails to act soon, depression will threaten. The earnings of many corporations can then be expected to plummet, leading to a serious erosion of stock prices.

Congress now needs to find a ‘cause’, that is politically attractive, in order to stall a depression, by boosting it into a recovery bubble. Green alternative energy, for example, would provide an attractive political cause, justifying the authorization of massive government spending on an unprecedented scale.

The Fed will have to reduce interest rates still further and stand ready to fund many troubled banks to justify even a nominal rally in U.S. stock markets.

In short, if we are to stall a depression, we must necessarily experience both far greater inflation and lower interest rates. The result will be renewed downward pressure on the U.S. dollar and the unseen erosion of U.S. dollar based wealth.

Many dollar assets can be expected to fall in price, even in depreciating dollars. Investors should be skeptical of any intermediate dollar-based market rallies. Instead they should arm themselves with advice as to how to avert the serious dollar erosion of their portfolios.

addthis_url = location.href; addthis_title = document.title; addthis_pub = 'financialsense'; Copyright © 2008 John Browne
Editorial Archive

John Browne is the Senior Market Strategist for Euro Pacific Capital, Inc. Mr. Brown is a distinguished

Yeah, I know I just figured I'd ask first to save me the trouble.

...of getting Roger our of bed to do it for me.

Edited by milbank, 31 March 2008 - 12:30 AM.

Yeah, I know I just figured I'd ask first to save me the trouble.

...of getting Roger our of bed to do it for me.

milbank, really, your thoughts are more important than your question of who wrote it, isn't it? Hence I posted it asking for opinion, I have no better way judging the writer than reading FF vets everyday, I feel closer to I know who. yup, bed time even for PST fella, sweet dream all.

Yeah, I know I just figured I'd ask first to save me the trouble.

...of getting Roger our of bed to do it for me.

milbank, really, your thoughts are more important than your question of who wrote it, isn't it? Hence I posted it asking for opinion, I have no better way judging the writer than reading FF vets everyday, I feel closer to I know who. yup, bed time even for PST fella, sweet dream all.

Here's why I asked....

Copyright © 2008 John Browne

If you want Traders Talk to continue, you need to acknowledge copywritten material.
It keeps Mark and the gang out of lawsuits.

Edited by milbank, 31 March 2008 - 10:56 AM.