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The setup for the big trade

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Mon, Oct 15, 2018 - 10:39am (Reply to #11470)
Pete
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eclectic wrote:

"It seems to me that nobody KNOWS the outcome because events may occur which can tip the balance one way or another; and these are multifactorial and fluid."

EXACTLY!

Hope all here (and elsewhere) have enough ounces now to see them through.

Mon, Oct 15, 2018 - 3:18pm (Reply to #11470)
zman
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eclectic wrote: Jim/Bill, The

eclectic wrote:

Jim/Bill,

The problem is that asset values will fall when you get an implosion of your asset values, though your debt values don¹t fall, they stay nominally the same! This might seem logical, until you take a couple of minutes to think it through.

So, on the way up the values of assets and debt (in terms of size) go up in tandem, whilst on the way down — NOT! Hence why you get huge deflation and wealth destruction! And don¹t forget that because of these year long ultra low interest rates, companies that wouldn¹t be financeable with normal interest rates of say 4%-6% got loans, and thus will be destroyed with much higher interest rates (because of their weak financials).

And this time it will not be the real estate market it will be all industry groups that go under. And all the rescue measures have been used up, so guess what there will be left in the toolbox in the next crisis to rescue the system?

Only gold and silver! No counter party risk, and it stands for value on its own and is real, not fake like most valuations and representations these days.

A lot of the BRICS are already severely correcting and since everybody loans to everybody the western banking system is doomed to go under for several years especially considering the traditional fractional (not backed by 100% collateral — in fact it is more likely backed by only 10% or less) banking system. Remember in the end it is about the purchasing power of the money you use: paper currencies or physical (ounces) of gold and silver.

GG

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Copied this from the public blog: J.S. Mindset. This is mostly for Zman; but I'm sure a lot of us would welcome his thoughts. It seems to me that nobody KNOWS the outcome because events may occur which can tip the balance one way or another; and these are multifactorial and fluid. It's the first time Iv'e seen the opinion that RE will not deflate. Thanks for everyone's feedback.

Yeah, it's a great question for sure. I have always stated that the central banks will step in and buy whatever assets needed to reinflate ASSET prices, but that doesn't reinflate the real economy.

This isn't about MONETARY policy at this point, we all know central banks buying assets with freshly printed money has really no effect on the real economy because none of that printed money ever enters the real world. 

Since the assets are mainly owned by the very few across the globe, what difference does it make it they owned stocks and now cash? It doesn't, it just sits on a computer screen and that's it. IF those assets were owned by the general population, then that's a whole different story.

As far as corporations that have so much debt that can't function? Well, my guess is the Fed will buy trillions of corporate debt and then have the taxpayer bailout the insolvent companies. Yes, Joe Six-Pack will be on the hook for the companies that borrowed too much money to buy shares back in the open market.

Again, what will the elite do to help Main Street with FISCAL POLICY?? Will they try to stimulate the real economy? I have my doubts and I would state that considering the amount of debt- the answer is NO.

In fact, to give investors around the world more confidence in paper currencies, all governments around the world are going to "cut spending!!", or in other words Joe Six-Pack is going to be cut off big time.

Yes, IF governments around the world were to flood the global economy with UBI and massive infrastructure spending, gold and silver would go to the moon if not higher. But the elite aren't going to do it, they're not going to let Joe Six-Pack off the hook with inflating their debt away, not gonna happen.

The goal is preservation of debt and maintaining debt slavery. The more the debt grows the more desperate the measures will be to maintain those goals. The elite aren't nice people, push them into a debt corner and the push back will be very extreme. 

Mon, Oct 15, 2018 - 3:33pm (Reply to #11473)
silver66
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zman

With this thesis of yours 

How are you suggesting assets be positioned to profit from this scenario ?

inquiring minds want to know :-)

silver66

Silver66 Rage against the dying of the light

Mon, Oct 15, 2018 - 4:38pm (Reply to #11474)
eclectic
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silver66

I think he's already said that joesixpack is not going to be able to protect himself. They will be forced to become paper lovers just like all the stock market traders. Force them to also love all their secure 401ks and iras.

e

Mon, Oct 15, 2018 - 5:11pm (Reply to #11474)
zman
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silver66 wrote: With this

silver66 wrote:

With this thesis of yours 

How are you suggesting assets be positioned to profit from this scenario ?

inquiring minds want to know :-)

silver66

I know everyone and their brother are calling for HIGHER bond yields, I would like to take the opposite side of that trade. I think any move higher from here in yields is very limited and the move lower is huge. Could the 10 year hit 3.75%? Yes, but the move lower in yields IF the economy slows down would be extreme. We're talking about capped interest rates, maybe even negative.

Of course, wouldn't it be fun to be on the short side of the stock market before the Fed comes in to buy trillions of index funds? So that's a possible trade.

Cash or the US Dollar might just make the most sense going forward, I don't see inflation being a problem.

I think gold is the hedge not for inflation, but for when the elite cut off the peasants. How will Joe Six-Pack react when the Fed buys 10's of trillions of assets for the elite while they're loaded up with student, mortgage, auto and credit card debt? How will they react when the government racks up trillions of more debt to bailout the companies they work for and they get laid off?

How will they react when their food stamps, SS and Medicare get reduced by a third or more?

So far the peasants just take it and don't do a dam thing. They remained silent as Corporate America shipped tens of millions of their jobs to third world nations. They remained silent as the elite allowed tens of millions of illegal and legal immigrants to destroy their wages and jobs. They remained silent during the last downturn as the elite bailed themselves out with trillions of taxpayer dollars. They remained silent as the largest corporate tax cut was made and 99% of the money went into share buy backs. I don't have much hope for the peasants, they have proven to be brain dead.

This is another reason why I say deflation will survive, the population is hopeless. Hell, Trump supporters don't even know they have been betrayed since day one. 

Mon, Oct 15, 2018 - 5:47pm (Reply to #11476)
silver66
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how to position zman

IF and I do say If, you think bonds have capped and they will be forced to cut rates and the scenario plays out like you posit.

The first asset is long treasuries ( hard to say but true)

If they companies of the elite get their corporate debt bought as you suggest, then the benefactor would be stocks ??

helicopter money for the companies could be in the form of a infrastructure spend, so as to sell to the masses, then it would be an allocation to stocks in infrastructure companies 

finally, gold for liquidity and with no counter party risk and a hedge against the stupidity of governments.

Have I surmised your position correctly even thought you did not come out and say it like this ??

Silver66

Silver66 Rage against the dying of the light

Mon, Oct 15, 2018 - 11:19pm
silver66
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record income taxes

https://www.cnsnews.com/news/article/terence-p-jeffrey/feds-collect-reco...

The beast must be fed in nominal terms.

inflation allows for growing tax revenue and deflation reduces what the beast gets. What do the bankers want ??

Silver66

Silver66 Rage against the dying of the light

Tue, Oct 16, 2018 - 6:18am (Reply to #11478)
eclectic
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Zman Portfolio Positioning

75% fixed income (bonds, munies, cd's et al) 25% physical only. But,....but.....how about negative interest rates? Consequences?

Tue, Oct 16, 2018 - 8:48am (Reply to #11479)
eclectic
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ZMAN'S COMMENTS ARE RIGHT ON:

So far the peasants just take it and don't do a dam thing. They remained silent as Corporate America shipped tens of millions of their jobs to third world nations. They remained silent as the elite allowed tens of millions of illegal and legal immigrants to destroy their wages and jobs. They remained silent during the last downturn as the elite bailed themselves out with trillions of taxpayer dollars. They remained silent as the largest corporate tax cut was made and 99% of the money went into share buy backs. I don't have much hope for the peasants, they have proven to be brain dead.

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Wish the events Zman cites would be displayed on Utube as a visual. For example, a pic of the elite bankers and wall street laughing their asses off saying "I can't believe we continue to get away with this shit". At best, bankers view us as nothing more than a nuisance: like a gum rapper stuck to the bottom of one's shoe. God please give me your forgiveness: I can't forgive them. If one of the elites were on fire and I passed by: I wouldn't stop to piss on them. 

Tue, Oct 16, 2018 - 11:24am (Reply to #11478)
zman
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silver66

silver66 wrote:

https://www.cnsnews.com/news/article/terence-p-jeffrey/feds-collect-reco...

The beast must be fed in nominal terms.

inflation allows for growing tax revenue and deflation reduces what the beast gets. What do the bankers want ??

Silver66

From the link- "Despite the record amount collected in individual income taxes in fiscal 2018, overall federal revenues in fiscal 2018 were lower than any of the previous three years"

https://www.bloomberg.com/view/articles/2018-09-14/tax-cuts-are-costing-...

Yes, assets values and tax revenues are totally correlated today. So if the stock and housing markets go lower, tax revenues will crash lower just like 2008-09.

People have to understand, the elite refuse to pay the amount of taxes they should considering the massive inequality taking place today. Instead of paying the tax, they choose to buy the debt with the money. What would you rather do? Pay the tax and never see the money again or buy the T-bonds and collect interest payments on the peasants?

With that being said, since the elite own the vast majority of local, state and Federal debt, do you really think they're going to allow higher interest rates to destroy the value of that debt? No chance in hell, there's no inflating their money away.

They don't care if we have $2 trillion deficits and $30 trillion of debt if revenues start to dry up, as long rates stay low it's not a problem for the owners of that debt. 

We had a chance to inflate the debt away after the 2008 meltdown, the elite decided to double the debt and keep rates down. My bet is they'll do the same in the next downturn. 

Tue, Oct 16, 2018 - 12:56pm
zman
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interest payments on the debt

https://www.zerohedge.com/news/2018-10-15/us-spending-interest-hits-all-...

Yeah, here's the problem for the bond bears. The US had to pay $523 billion on interest payments on the debt. Do they really think we're going to afford $900 billion if interest rates "normalize" at just 4%?? No chance in hell.

This is basic math the bond bears refuse to even think about. The bond bears are HUGE bulls on the US and global economy, but they're all wrong. 

So the solution to payments on the massive debt? Slow down the economy and get interest rates back down to 0% if not -%. Just think of the mess on Main Street in order to do this. Don't forget about the "cutting spending" stuff that comes with it. 

Can someone please tell me how any developed economy can live with interest rates a little higher than we have today? I'm all ears bond bears!!

Tue, Oct 16, 2018 - 2:56pm
Solsson
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With that being said zman, I

With that being said zman, I had a quick look at the US 30y T-bond and to be honest it ain't looking that great imo.

with all the points you were making, maybe you/we are not that developed anymore? Look at rates in Argentina, Venezuela, Turkey etc. There is nothing they can do about it when faith and confidence in the system are lost. 

Tue, Oct 16, 2018 - 5:00pm
zman
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Chart

As bad as that chart might look, it only reinforces my thesis. It can't go much lower without the whole system going to poop. The elite can pull the plug on the economy any day if wants to force investors into US bonds. 

What do you think would happen to the 2 year US bond if the Dow corrects just -12% from here? The yield would start trading LOWER and the whole "4 more rate hikes in 2019" would disappear in a matter of weeks.

The elite are just going to hike until nature takes its course and then they'll have the excuse to do what they always wanted to do in the first place. Nobody knows the breaking point of going too high on the Fed hikes, my guess is not much higher. 

This bond shorting is a suckers trade based on the hopes of higher inflation, strong economic growth and Trump MAGA nonsense. The CRB commodity index is still in the dumps, IF it were to make a decent 30% move higher from these very low levels, there MIGHT be a case for higher yields, but NONE of that has happened after all of this "booming economy" nonsense. 

I believe the bankers are at an all-time high LONG US bonds, they're taking the other side of the trade because their friends at the Fed told them the plan- pull the plug and let deflation takeover the whole economy.

Tue, Oct 16, 2018 - 9:13pm
Pete
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Dec ES

If anyone is thinking of taking a short position or hedge (such as SH, put option, or other instrument/ETF) in stocks, a rebound to the circled area in Dec ES (Friday-Monday) is a good setup. Go short on an hourly reversal from the confluence of 3 important lines.

When price zooms the median line, it often comes back to it. The crossing of two such mls is an even stronger turning point area. Returns to passed R lines are often turning points too.

The best short/put position re risk/reward was on the daily close under the mpl trendline (on Oct 4).

Tue, Oct 16, 2018 - 9:33pm
zman
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Cuts

https://www.bloomberg.com/news/articles/2018-10-16/mcconnell-blames-enti...

Well isn't this interesting, instead of blaming the massive corporate tax cuts and huge increase for military spending for the rising deficits, the social programs are now the problem!!!

"Mitch McConnell blamed rising federal deficits and debt on a bipartisan unwillingness to contain spending on Medicare, Medicaid and Social Security"

Guys, they're already mentally preparing the peasants for the big cuts for social programs. If they're spewing this stuff now with the "best US economy in history" and the "Trump boom", what are they going to say when it all turns down?

This isn't a joke guys, to save the bond market and bring rates down to near 0% they're going to cut off the peasants.

Mitch didn't just get into a bad mood today, he was ordered to start sending out the message. Yes, he's going to be the bad guy for saying this. This isn't rocket science, it's all too highly predictable. I been calling it for months now, we haven't seen anything yet. 

Tue, Oct 16, 2018 - 9:56pm
HappyNow
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zman yes you called it (the

zman yes you called it (the cuts to social programs) and yes this looks like prepping the peasants.

where does this leave all the ‘blame the immigrants’ memers?

Sounds like you believe there will yet be a rate hike or two, small, before it goes for a dive.

Swing trade indexed ETFs. Long physical gold, silver, and 1 miner.
Wed, Oct 17, 2018 - 3:16am
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A study of trends - very very

A study of trends - very very many trends in very many assets - shows that as a trend endures and progresses, there often comes a time when reactions and counter trend moves become more swift and after that these counter swings also become larger in size.

These are "normal" signs that a trend is soon to ends, and price will reverse.

Why would gold hit a critical threshold end 2018? Possibly because that's when this rally in US bonds makes a high. There is an approximate inflection, I have not fully tied this down yet, in Q2 2019. There is a period about May to June next year which has a nice symmetry, and which could choose to locate the current yields rally high.

What the world, and in particular the US wants, has nothing to do with this. If it did, rates would not be where they already have gotten to. The markets must fluctuate! Prevention of that is an extremely expensive action, and they simply don't have the required resources for that.

I think to make judgments that the bonds uptrend/yields decline since 1981 is still in force is optimism. The breakout in yields is observable. The new world is already here. But it's a wide range with room for huge fluctuations as required. Trendlines of yields on log charts are worth a look at the moment.

The above is price generated, therefore market generated; with not even a tiny bit of the retail product called "news". I expect long term Setup readers understand. Price and news, two trains on two tracks, that sometimes appear to be moving towards the same destination, but actually aren't.

argentus maximus Rhythm and Price https://www.greenhobbymodel.com/rhythmnprice.html This analysis - global markets
Wed, Oct 17, 2018 - 3:29am (Reply to #11486)
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A certain amount of inflation

A certain amount of inflation appears to be required for a democracy. The more authority is brought to bear, the less inflation may be required by circumstance.

The curtailment of human rights, freedom of speech, and public ability to protest, even to make direct contact with leadership are inextricably linked to future deflection of inflation from it's long term mean.

So in a way, looking around at the state of society with open eyes should give an approximate idea of how far things can go in the short to medium term.

There is another demographic angle to this discussion. When the boomer population "bulge" are reduced by end of lifespan to electoral "normality", their voting bloc will become less relevant, that of younger generations more so, and a hammer of sorts will fall upon assumed comforts of "late" boomers.

From a wealth confiscation point of view, stagflation (the sovereigns), Wall St, and Medicine are fighting over acquisition of the greatest treasure currently not yet seized, the boomers' pensions. I don't know how that age groups' bell curve looks right now, but it's moving constantly to the right as the years pass. Politicians are undoubtedly hyper aware of such coming change.

argentus maximus Rhythm and Price https://www.greenhobbymodel.com/rhythmnprice.html This analysis - global markets
Wed, Oct 17, 2018 - 3:58am
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Readers of the DOTS

Readers of the DOTS forum:

A) DOTS 1 - DOTS 2 = 134 weeks / 30.8 months

B) DOTS 2 - DOTS 3 (ABTGC forum started recently) = 71 weeks / 16.3 months

Observation 1 is that A = 2 x B to within 7%

Observation 2 is that the number 72 has been discussed here before.

Observation 3 is that, if the above are real and not imagined, and if also the universe and markets are fractal, then 72 has other interesting qualities. Like eg if 72 weeks resounds (approximately) with sentiment fluctuations (intra member (who all consider themselves free of action) disagreement) within the TFMR DOTS forum on this website, then possibly 7.2 years could also represent a larger fractal with similar qualities for precious metals investors on a wider scale.

The gold price high was Sept 2011.

Some might prefer to emphasize the Presidential Cycle of 4 years, of which two would be eight years and I do watch that also. For a later time late next year. But if 7.2 years "wants" to be the end of this gold bear, "soon" would be when that arrives. It's like cracks in the pavement. They get stepped over until a misjudgment occurs. But it doesn't "have to" be crucial, it might.

Didn't I mention that an Austrian hunting lodge owned by a large European banking family for 144 years was sold earlier this year. 2 x 72 .....

Coincidences surely.

argentus maximus Rhythm and Price https://www.greenhobbymodel.com/rhythmnprice.html This analysis - global markets
Wed, Oct 17, 2018 - 4:16am (Reply to #11490)
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Bretton Woods ...... 1944. +

Bretton Woods ...... 1944.

+ 72 years would have been 2016.

When did those bonds make top?

Let's see .....

argentus maximus Rhythm and Price https://www.greenhobbymodel.com/rhythmnprice.html This analysis - global markets

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