19 replies to this topic

[dcengr]

Now many are expecting the fed to cut at least .25% in next fed meeting, and some are clamoring for .50% cut. Will that ignite the stock market? Perhaps. It will certainly help the debt market as corporate bonds once again look attractive compared to government bonds and CDs. But lets look at the inflow into the stockmarket. Do americans really have enough disposable income to shove into the stock market? With savings rates low, debt really high, I tend to think a lot of the money is coming from overseas where they're actually saving money by making it off of consumer buying frenzy in the US. So what will happen if rates are cut. Dollar will drop most likely. Question is, have foreigners already bought in, and this drop in dollar will make their existing investment drop in value, causing them to pull out? Or will they see this as a buying opportunity since they can buy more with their currency? In 1987, the drop in the dollar was definately not seen as bullish short term. Neither was a drop in the dollar bullish for the market in 2000 peak. Lately, its been touted as being bullish for the markets. I'm going to look more into this, but perhaps that'll be the theme going into this supposed Fed cut. If the market continues to drop regardless of an anticipated fed cut, then this might be whats in people's minds. Personally, I believe they'll cut .25% in september, and that'll spark a rally that will fail. Another .5% cut in october, and that'll spark a longer lasting rally that will go on for 3-4 months, then fail. Then Fed will keep cutting rates and that will not stop the market from tanking, ala 2001, until rates are in the gutters again and a new asset bubble emerges.. in something, I know not.

[Tor]

to my way of thinking the answer is yes. hedge funds and property less attractive, simple "direct equities" are the inflationary hedge and the choice of preference. lower rates minimise the attraction of cash. who knows, but it is my view here, despite expeting some st weakness.

[ogm]

Here is the question... There is a lot of positive cash flow being generated in the world with the booming economy. Where would you invest that money ? CDO's, CMO's and other crap were a huge sponge for that liquidity over the past few years. Now you won't find too many people willing to commit new capital to that market. US treasuries aren't particulary attractive, especcialy considering that the rates will most likely be coming down. Real estate investments are also looking iffy to say the least. Though I think the RE market will bottom out within the next few years, and probably already bottoming in most of the country. Excluding CA, FL, NV, AZ and Midwest. Now.. falling dollar. Lets say dollar will be falling. That means increase in exports on one hand, on the other hand it will mean that US cash flow producing assets will be more attractive for foreign companies. So what do you buy, if you don't want RE, Treasuries, or Collateralized crap obligations ? .... Stocks.

Edited by ogm, 08 September 2007 - 11:45 AM.

[dcengr]

So what do you buy, if you don't want RE, Treasuries, or Collateralized crap obligations ?

.... Stocks.

The question is, do you buy stocks in the US or Europe/Asia?

Also, you forgot the other bloated asset, commodities.

Btw, in a credit boom economy, you CAN have deflation of all asset prices at the same time. History is full of examples of this. The bubbles are not because we have x amount of dollars sloshing about. It is x dollars inflated by y times the credit. Hence you can have deflation with the credit portion disappearing even with x dollars increasing.

This is simple economics, and you only need to look at year 2000-2002 to see how everything, including stocks, commodities, realestate, all dropped at the same time while the dollar was getting weaker.

[ogm]

So what do you buy, if you don't want RE, Treasuries, or Collateralized crap obligations ?

.... Stocks.

The question is, do you buy stocks in the US or Europe/Asia?

Also, you forgot the other bloated asset, commodities.

Btw, in a credit boom economy, you CAN have deflation of all asset prices at the same time. History is full of examples of this. The bubbles are not because we have x amount of dollars sloshing about. It is x dollars inflated by y times the credit. Hence you can have deflation with the credit portion disappearing even with x dollars increasing.

This is simple economics, and you only need to look at year 2000-2002 to see how everything, including stocks, commodities, realestate, all dropped at the same time while the dollar was getting weaker.

Commodities = commodity stocks going up.

Yes, you can have deflation, but not for long when half of the world population are itcihng to load up on merchandize and improve their standards of living.

Destruction of credit is deflationary, so right now we're in deflationary environment. But it gives excuse to inflate once again. And US has no choice but to inflate itself out of debt.

What about 9 tril. in national debt ? How is that going to be ever repaid ? Only with cheaper dollars at lower interest rates. Must turn economy from imports to exports. Falling dollar is the way it will be done. Interest rates will drop, dollar will drop, trading deficit will shrink, jobs will be created. Must inflate. No other way.

Fortunately there is a great global opportunity, since half of the world is waking up to the market economy and capitalism.

Inflation = asset prices will go up, including stocks and real estate. That will fix real estate problem, lift the stock market, rebalance the economy with the rest of the world.

Fed will be scaring the crap out of everyone with inflation talk, and pumping at the same time, like it has been doing for the past few years.

People think that gold is inflation hedge.. its not... stocks are.

Gold is a non-producing asset with limited speculative value. Capital and cash flow producing assets like stocks are much better bet. You have to be long stocks. No other choice here. And especcialy US stocks.

Edited by ogm, 08 September 2007 - 12:33 PM.

[ogm]

Actually I'm pretty bullish on all stocks all over the world I think UK and German stocks look very attractive. And Chineese stocks look great too. just a few examples. I'm long EWU .. with almost 4% dividend thats a great deal. And a bunch of Chineese stuff. And in German stocks .. DAI and BAY. With the growth of middle class in the world DAI will do great, since its the status symbol brand. Its already up 10 points from where I bought it last week, while we're still talking about the end of the world BAY looks very good too at 15 P/E and good pipleline. Look at their drug with ONXX showing great results. Picked up BCS here on the dip.. while the whole world is concerned about it, its a great company, largest player in many markets, like ETFs ( its like a big toll booth collecting cash from money flowing into ETF's) and pays 6+% dividend. Here are some US examples: TNH.. Fertilizer MLP , 10+% dividned, huge growth on pricing and agriculture boom. ATH ... hotels REIT, owns a bunch of Marriots, Hiltons, Starwoods... almost 8% dividend, trading under book value. FMO ... Oil/gas MLP's Closed end fund. 6+% dividend. Why speculate on oil stocks, when you can sit there and collect income from pipelines. Trading at about 5% discount to NAV. Beats the crap out of bond yields. Tonns of opportunites all over the world. Have to beat inflation.

Edited by ogm, 08 September 2007 - 12:52 PM.

[dcengr]

If you're not going to capitulate on a possible retest which may go slightly lower, I think you'll be in fine shape

Actually I'm pretty bullish on all stocks all over the world

I think UK and German stocks look very attractive. And Chineese stocks look great too.

just a few examples.

I'm long EWU .. with almost 4% dividend thats a great deal. And a bunch of Chineese stuff.
And in German stocks .. DAI and BAY.

With the growth of middle class in the world DAI will do great, since its the status symbol brand. Its already up 10 points from where I bought it last week, while we're still talking about the end of the world

BAY looks very good too at 15 P/E and good pipleline. Look at their drug with ONXX showing great results.

Picked up BCS here on the dip.. while the whole world is concerned about it, its a great company, largest player in many markets, like ETFs ( its like a big toll booth collecting cash from money flowing into ETF's) and pays 6+% dividend.

Here are some US examples:

TNH.. Fertilizer MLP , 10+% dividned, huge growth on pricing and agriculture boom.

ATH ... hotels REIT, owns a bunch of Marriots, Hiltons, Starwoods... almost 8% dividend, trading under book value.

FMO ... Oil/gas MLP's Closed end fund. 6+% dividend. Why speculate on oil stocks, when you can sit there and collect income from pipelines. Trading at about 5% discount to NAV.

Beats the crap out of bond yields.

Tonns of opportunites all over the world. Have to beat inflation.

This stuff has to be bought. These are opportunities.

[ogm]

Look at what Buffet is doing for example... Short dollar, long railroads. Railroads = access to ports from fly-over land. Its a play on transition to export economy, IMO. ......... Edit to previous post.. that was AHT, not ATH.

Edited by ogm, 08 September 2007 - 01:07 PM.

[SandStorm]

So what do you buy, if you don't want RE, Treasuries, or Collateralized crap obligations ?

.... Stocks.

The question is, do you buy stocks in the US or Europe/Asia?

Also, you forgot the other bloated asset, commodities.

Btw, in a credit boom economy, you CAN have deflation of all asset prices at the same time. History is full of examples of this. The bubbles are not because we have x amount of dollars sloshing about. It is x dollars inflated by y times the credit. Hence you can have deflation with the credit portion disappearing even with x dollars increasing.

This is simple economics, and you only need to look at year 2000-2002 to see how everything, including stocks, commodities, realestate, all dropped at the same time while the dollar was getting weaker.

Commodities = commodity stocks going up.

Yes, you can have deflation, but not for long when half of the world population are itcihng to load up on merchandize and improve their standards of living.

Destruction of credit is deflationary, so right now we're in deflationary environment. But it gives excuse to inflate once again. And US has no choice but to inflate itself out of debt.

What about 9 tril. in national debt ? How is that going to be ever repaid ? Only with cheaper dollars at lower interest rates. Must turn economy from imports to exports. Falling dollar is the way it will be done. Interest rates will drop, dollar will drop, trading deficit will shrink, jobs will be created. Must inflate. No other way.

Fortunately there is a great global opportunity, since half of the world is waking up to the market economy and capitalism.

Inflation = asset prices will go up, including stocks and real estate. That will fix real estate problem, lift the stock market, rebalance the economy with the rest of the world.

Fed will be scaring the crap out of everyone with inflation talk, and pumping at the same time, like it has been doing for the past few years.

People think that gold is inflation hedge.. its not... stocks are.

Gold is a non-producing asset with limited speculative value. Capital and cash flow producing assets like stocks are much better bet. You have to be long stocks. No other choice here. And especcialy US stocks.

Now I see where your bullishness comes from. Correct me, by all means, if I have misunderstood.

Essentially you are proposing a bankcruptcy option. We might lose credibility near term but at least we will be starting again with a clean sleigh. A second chance sort of speak to reassert our financial dominance, to better compete with "new wealth," esp. China that has been coming on STRONG. It's a gutsy move but plausible. As long as we still have the most and biggest bombs, credibility, reserve currency status, and financial dominance can eventually be ours once again.

Keep in mind though that's long-term speaking. In the near term, the destruction of greenback and our credibility WILL scare all risky US assets into oblivion. It makes perfect sense. We will get worse before we can be better. A phoenix will have to burn to ashes before it can rise again with glory.

[OEXCHAOS]

But lets look at the inflow into the stockmarket. Do americans really have enough disposable income to shove into the stock market? With savings rates low, debt really high, I tend to think a lot of the money is coming from overseas where they're actually saving money by making it off of consumer buying frenzy in the US.

I had to offer this.

Individuals are barely worth considering when it comes to this market. The big money is institutional, insurance and pension fund. Some of it is ALWAYS earmarked for the US market. Period. Some can shift from Europe to Asia and back to the US, or whatever, but the lion's share is required to be here in the most liquid, most transparent, most secure market in the world.

I'd NEVER put much of my clients money into markets in pseudo-socialist, communist, or thug-run countries. A little speculation? Sure. Serious money? No way in hades. I don't think that I'm inordinately conservative, either.

Mark