Monday, September 6, 2010

Open Discussion

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168 comments:

Gerard said...

The previous discussion got too long so I closed it and archived it

http://cfcsux.blogspot.com/2010/04/open-discussion.html

Gerard said...

Some one asked about inflation linked treasurys (TiPS). The only problem is the inflation adjustment will lag actual inflation because it's adjusted semi-annually. It's also based on government consumer price index numbers which are heavily fudged. Interestingly, the government is cutting back on issuing them, indeed the Fed is buying them on the open market to remove them from circulation, even though that goes against their stated purpose of lowering interest rates.

Anonymous said...

Tron, When do you think WFC will take it's dive. I shorted it and now its all over the place.

Gerard said...

I don't know when WFCs bullshit will be called. I hope it's before massive inflation makes short positions untenable. If not . . . I'll take the loss and short more treasurys.

Triple D said...

Tron, how do you like your Euro Pac gold account? I'm considering rolling my IRA into one.

Gerard said...

So far, so good. I'll let you know how I like it when I try to get my gold out :-) I wouldn't put all my eggs in that basket, 'cause you never know ...

Anonymous said...

The Price of Recovery: Are You Inflation Ready?

Posted: 05/22/2009

USAA's investing team discusses what investment vehicles you need in your arsenal to manage inflation risk.
By Cliff Gladson
Senior Vice President, Fixed Income Investments
In the first quarter of 2009, consumer prices, as measured by the Consumer Price Index, decreased by 2.4%. The Personal Consumption Expenditures Price Index, the Fed's preferred inflation gauge, was down 1%. The most recent data shows there is no evidence of inflation in the U.S. economy.
The government is spending trillions of dollars using a broad swathe of initiatives to fight deflation, which is the opposite of inflation. And therein lies the rub. Should the government's efforts succeed, and there are some signs that they may, the huge new debt issuance that's supporting them could lead to a spike in inflation that we have not experienced since the 1970s.
The deftness and agility that will be required in the pivot from fighting deflation to fighting inflation is tremendous. In essence, the government has to provide enough monetary stimuli to get the economy firmly on the growth path, while standing ready to reverse course without stepping on the recovery. At USAA, our view is that the government will err on the side of letting inflation run a while, rather than risk a double-dip recession.

While inflation is not likely in the next few months, it is the likeliest outcome over the mid- to long-term.
U.S. Treasury-backed securities without inflation protection are probably in a bubble, and will suffer price declines amid all of the new issuance when the Treasury and the Fed take their foot off the monetary gas.

john said...

Tron, what do you think is a good selling price for GLD?

Gerard said...

My target is for the Gold to be one-half of the DOW. (so if the DOW is at 7000, GOLD would be 3500 and GLD would be around 350)

Anonymous said...

Tron, what do you think about USAGX?

Gerard said...

If it hits the fan people will want the metal not the miners. Also, some mines sell their gold production forward so they hedge away any benefit from gold prices increasing.

Anonymous said...

Tron,

My accountant buddy has been getting pretty worked up over the subject of the following article (talking about "TAF maturation, if it does not roll, is a big deal.."
I don't understand it. Can you explain it in laymans terms if able (and is it a big deal)?

http://market-ticker.denninger.net/

Genius

Gerard said...

No biggie, Genius. Karl Denninger is more focused on politics than investing.

Anonymous said...

Voltron, this is Buss' buddy D-train. I just sold DXO at about a 50% return and was considering shorting USO. What do you think about that? Also, I've heard some grumblings about taking a long position in USG. My brother in law is talking about taking those positions but buying K's with exp dates of early fall. I think it's a little short but wanted to get a third opinion.

Gerard said...

I'm long oil via options (bought puts on SCO. I took a small position, just to force me to watch oil, and before I knew it, it doubled . . . I'm going to hold the position, at least it's hedging my gasoline bill! I still have not developed a strong opinion on oil. It's tough because on one hand you have inflation, on the other you have demand destruction, so I'd rather just play the inflation straight up by shorting treasuries.

I'm not sure what USG is . . .

Triple D said...

This is from an email from a real estate investor group that I am a member of here in San Diego: "What's about to hit California will be very damaging. There are 240,000 properties currently in some stage of foreclosure process, 900,000 owners have stopped making their payments and 3 million California homeowners are under water. The next 18 months will see the sale of a lifetime on California real estate." Funny, the papers' are still talking about the bottom being here.

Gerard said...

This was totally expected. There was going to be a dip in foreclosures this year then the wave of adjustable rate mortgages hits in 2010. I think this time the government's response will be hyper-inflationary.

Anonymous said...

Tron,

Just another blurb on the whole deflation/inflation subject...

http://finance.yahoo.com/tech-ticker/article/273753/Americans-Under-Squeeze-Higher-Credit-Card-Rates-Taxes-Have-%22Devastating%22-Effect?tickers=C,BAC,JPM,AXP,MA,V,%5EDJI

I understand your arguement regarding the Gov't printing our way out of this... but even the Fed is starting to balk at all the borrowing. Seems more and more like we're sowing the seeds for another 1932 - 'Raise taxes [a lot] during a severe recession' - just aweful.

Genius

Anonymous said...

Tron,

What did you think about Meredith Whitney's comments today regarding the banks.

Gerard said...

Meredith Whitney is still short Wells Fargo. I think there is way too much shady stuff going on at Goldman Sachs, and with Paulson out of the Treasury, I'm not sure they'll be able to get away with financial murder forever. I was concerned for a moment that if CIT collapsed that it would cause deflation . . . nope . . . BAILOUT! Hello, inflation.

Anonymous said...

Tron,

Where is a good place to buy actual gold and silver without paying huge fees?

Anonymous said...

Oh well... losing my ass on WFC short. This market damn sure isn't for the faint of heart.

Gerard said...

I buy gold from kitco. I just bought some Austrian coins that are 100 euro legal tender.

I'm patient with wfc. That's why I didn't buy options. I was short wfc for about a year before it plunged. Might take a year again, that's O.K.

Anonymous said...

Tron,

What symbol are you using to short WFC?

Anonymous said...

Hey Voltron... Suppose I'm short WFC and it suddenly goes into receivership (over a weekend for example) . What happens to my short sale? Would I be able to cover somehow or would I lose it for some reason?

Genius

Gerard said...

If WFC goes broke, either the stock will trade on the "pink sheets" over the counter (OTC) exchange or the stock exchange will allow trades to close positions. Don't worry. I pray for this to happen!

Anonymous said...

I'm so confused about how to make money in todays market. So this week I started doing the opposite of what I thought I should. On Monday I went long and bought four of the shitiest stocks I could think of...SIRI, CAT, WFC, C. Sold today for almost a 20% gain overall. Not even kidding.
Genius

Gerard said...

Ahhh, the "Opposite George" method of investing . . .

Anonymous said...

Right...but only as a result of total frustration. Back to shorting and leveraged inverse ETFs. My buddy's broker dude is convinced a 9500 DOW is out of site and completely out of step with reality. Expecting a correction.
We have some economic issues methinks that the FED, Treasury and Wall Street have managed to hide and/or delay. Also, I think that with the summer coming to an end, the jobless numbers will begin to go up again (more).

Anonymous said...

BTW Tron...

It's articles like this that I read every week that have me confused.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aVM_oxkI3Qkw

All this tells me is that I know Jack and sh*t about how the economy works. Banks are failing, but by god FAS is booming! "Everything is fine America...go buy a new car!"

Genius

Gerard said...

Small banks in Georgia are dropping like flies too.

I'd stay away from leverage of any kind . . . I don't want to get burned again. I'm thinking about shorting IYR and possibly the S&P 500.

Gerard said...

Also unemployment went down because the number of "discouraged workers" went up. Discouraged workers are people who have been unemployed so long, they are no longer counted as unemployed.

Market goes up despite a clearly distorted unemployment figure . . . that's typical.

Anonymous said...

Tron, what is the deal with FNM and FRE? They shot up like a New York junky.

Gerard said...

Fannie is a penny stock. They double and halve for no reason. GM was trading for $3 in bankruptsy!! That's why I don't trade stocks below about $7

Anonymous said...

Maybe I'm being lied to on a daily basis. I'm getting tired of doubling down on FAZ. I know what you said about leverage...but hey, it was a gamble. FAZ may not work out for me, but it's not because I didn't do my homework. The articles below are a couple examples...

http://www.bloomberg.com/apps/news?pid=20601039&sid=a04oVutXQybk

http://www.bloomberg.com/apps/news?pid=20601206&sid=aq5oRHngaU_Q

Genius

Anonymous said...

Or maybe Elizabeth Warren is full of it too...

http://www.zerohedge.com/article/elizabeth-warren-we-have-real-problem-coming#comment-34694

Gerard said...

Elizabeth Warren is definitely not full of it. It's just that the market can stay irrational longer than you can remain solvent.

Anonymous said...

I don't doubt it. We'll see though, I've been hanging in there with periodic irrational moves myself.

Anonymous said...

Voltron,

I'm trying to validate a claim from another blog. The poster claims:

"I’m a Real Estate Broker in So. Cal and there is a massive cover up going on. All the banks are not foreclosing on the un paid mortgages. Everyone I talk to that hasn’t paid their mortgage for 6 months to 2 years are living there for free and haven’t been foreclosed on yet. Commercial Real Estate is vacant everywhere. I’m not sure how long tell people figure this out but it’s VERY bad. My best friend has a 1.3 mortgage and hasn’t paid a dime in 2 years. I’ve never seen anything like this. Its complete BS."

Have you heard anything like this and if so, do you know where I can find a reference for it?

Rich

Gerard said...

Rich,

Figure it's going to take about three months before the bank even starts the process. After that it depends on the state. Remember California had a moratorium on foreclosures. Also, foreclosure is one thing, eviction is another so that may take a few more months. I'd say 6-8 months is probably typical. Check out thehousingbubbleblog.com I used to read it a lot. It's mostly links to local news stories. It's anecdotal but it definitely gives you the zeitgeist.

http://thehousingbubbleblog.com/?p=5549

Anonymous said...

Some weird stuff going on today...lot's of shorting, but market is up. It's like a battle royale of the bulls and bears.

limeypieface said...

Gerard,

You may have answered this somewhere along the line, but what is your alternative to SRS? Obviously a few of us got smashed by it, but I'm still certain that the bottom is about to fall out the commercial real estate market. Put options on IYR perhaps?

Cheers,

The Limey

Anonymous said...

How much lower can natural gas go? Inventories are high, demand is low and supposedly the supply side can be readily increased when the price increases. All bad indicators of a price increase but the current historical lows are encouraging me to buy. Prices do seem to be fairly cyclical and there should be a steady rise in prices throughout the winter months.

Any thoughts?

Daniel

Gerard said...

With put options, you need to be right on the direction AND the timing. Some say Commercial Real Estate defaults may not peak until 2014!

Gerard said...

I have no idea about Natural Gas, sorry.

ToddH said...

Voltron,

A lot of places are saying that destruction of hte dollar's value is bullish for stock. THey have been moving inversely for quite some time.

Can you elaborate on this idea? I am struggling with the logic. I see why the value of a hard resource (like gold/oil) which is priced in dollars will increase, as the relative value of a dollar falls.

But I never thought of the SPY as a hard resource.

Any insights?

Thanks a ton.

ToddH

Gerard said...

SPY is part hard assets, part income stream. When inflation hits, nominal stock prices may rise, but will not keep up with inflation. I'm still calling for the DOW/Gold ratio to fall to 2.

Anonymous said...

Tron... dude you weren't kidding about the long delay for getting gold and silver. It was easy going through Kitco though.

Genius

Anonymous said...

Been following ETFC for a couple of years now. Accumulated a lot of shares over that time, curious if you've looked at this company? Recent news is fairly positive, but I'll be under water until it reaches ~$3.50. Don't know how I got under so deep on this one, just kept following it down.

Daniel

Gerard said...

ETFC (E*Trade) got into subprime lending and other shady things.

http://ml-implode.com/imploded/lender_E*TradeWholesaleLending_2008-04-22.html

Anonymous said...

http://www.proshares-lawsuit.com/

SRS and other proshares holders start class action lawsuit.

comments?

jeep

Gerard said...

I don't think they are going to win.

Anonymous said...

Voltron-

What is your read on going long on oil right now? I was looking at some of the ETFs---here is a site I looked at as a novice for some ideas of buying oil. With what is going on in Iran?? Of course, that has to be tempered with the continued economic slowdown driving down demand.

Anyway...

http://www.dailywealth.com/archive/2006/may/how-to-invest-in-oil-and-gas.asp

Thanks, man-

Chris Brewster

Gerard said...

might as well get oil and other commodities ETFs while you can. The government is starting to crack down on "hoarding", "market cornering" and any other way to hedge yourself and protect your purchasing power.

break, break jeep: Same goes for proshares a hedge

Anonymous said...

Tron,

Now that the Vix is relatively low ~28 and TLT is back up to 99, which month do you see as the having the best value in regards to buying puts to get short TLT? The Leaps or Mar 10s? Any other good ways to get short US Treasuries?

Thanks

Gerard said...

There isn't really another way for a non-institutional investor to short treasuries. I've been making money on my short TLT and losing on the puts due to the drop in the VIX. The longer dated options will gain more from a rise in the VIX.

David said...

Tron, buddy of mine here at the Kennedy School used to work for the World Bank. Says all the sentiment there is for replacing the dollar as the worlds reserve currency. Just last week the Pres of the World Bank ---
"The United States must brace itself for the dollar to be usurped as the world's reserve currency as American dominance wanes in the wake of the financial crisis, the World Bank president, Robert Zoellick, warned yesterday."

here's the link
http://www.guardian.co.uk/business/2009/sep/28/us-dollar-usurped-china-euro-world-bank

Come visit anytime here in Boston.
Dix

Gerard said...

David, What does your friend say about the World Bank running out of money? http://www.telegraph.co.uk/finance/financetopics/financialcrisis/6255816/World-Bank-could-run-out-of-money-within-12-months.html

The US will find it much more difficult to finance it's debt if the dollar loses it's reserve status. If the US is ever forced to issue non-dollar denominated debt, that's going to be the death spiral.

Anonymous said...

Tron,

Does the following statement from a Bloomberg News articles sound plausible to you? If not, why?

No Inflation

There is no inflation in the U.S. that would deter foreign investors from Treasuries. Consumer prices fell 1.5 percent in August from a year earlier, and have dropped for six straight months, the Labor Department in Washington said Aug. 16.

“Inflation is still declining in the U.S., so it’s wrong to say that the dollar is losing its purchasing power,” Redeker said. “The U.S. is a domestically driven economy. It has huge output gaps, and these are going to keep inflation subdued for at least two years.”

Genius

Anonymous said...

Great.. now Glenn Beck has taken up the the 'demise of the dollar battle cry'

http://www.foxnews.com/video2/video08.html?maven_referralObject=10489573&sRevUrl=http://www.foxnews.com/opinion/index.html

Gerard said...

Genius,

seen gasoline prices lately? gold? The official inflation numbers are bullshit, but the economists believe it.

Trust your own eyes

Gerard said...

Glen Beck is way over the top. I don't like him, but he does have "austrian school" economists on the show.

Anonymous said...

Tron,

Gas prices seem to have stabilized with oil around $70 a barrel. I don't think it will last. I'm happy (I guess) with gold prices since I've been buying gold and silver from Kitco over the past few months. It would appear that I'm "making" money, especially with the recent uptick in spot prices. Based on what I've seen...I agree that commodities may be the wave of the future. I'm quickly becoming a Jim Rogers fan.

Genius

Anonymous said...

Dollar to Hit 50 Yen, Cease as Reserve, Sumitomo Says (Update1)

http://www.bloomberg.com/apps/news?pid=20601087&sid=a_A5nqmw9Dq8

Ouch!

Jeep

Anonymous said...

Tron,

I'm not connecting the dots or see the significance of the last article you posted. Is Russia's plan significant? Can you elaborate?

Rich

Gerard said...

Usually banana republics are unable to raise money in their home currency and are "forced" to denominate their bonds in other currencies such as the US dollar. In this case it would seem that Russia is issuing debt in dollars not because they have to, but because they can . . . they will benefit from low interest rates and any crash in the dollar. Which would give them every reason to engineer a crash of the dollar. Imagine if China did this!

Anonymous said...

http://www.bloomberg.com/apps/news?pid=20601087&sid=abGqTvvT4URo

Oct. 26 (Bloomberg) -- Treasury Secretary Timothy Geithner’s plans to lock in near record-low borrowing costs in 2010 may mean a second year of losses on longer-term bonds.

After selling $1.9 trillion of short-term securities to finance President Barack Obama’s efforts to end the worst recession since the 1930s, the Treasury plans to lengthen the average due date of its outstanding debt to 72 months from a 26- year low of 49 months. That may mean boosting sales of 10- and 30-year bonds by 40 percent over the next year to $600 billion, according to FTN Financial in Memphis, Tennessee, driving down prices of longer-term securities.

Jeep

Anonymous said...

http://www.bloomberg.com/apps/news?pid=20601087&sid=alns58.8rItw

Oct. 26 (Bloomberg) -- The dollar fell as Asian stocks gained amid signs the global economy is recovering, reducing demand for the greenback as a refuge.

The dollar weakened against 11 of its 16 major counterparts amid speculation reports this week will show confidence among U.S. and French consumers improved. The pound fell on bets a Bank of England policy maker will signal an extension of the central bank’s asset-purchase program. The yen and euro strengthened after an official Chinese paper said the country should increase reserves in the currencies.

Jen and Brian said...

I know for a while now the rumor mill's been churning with hints of GLD not being able to back up its paper gold with the real metal (per your latest post). Are you still long GLD, or is it time to jump ship?
Spears

Gerard said...

I still have GLD. Maybe it is time to jump ship . . . my plan has been to roll the GLD into Perth Mint certificates from europac.net. As the situation deteriorates you can pay to have the mint fabricate gold bars for storage and ultimately take delivery of them. If you want to diversify a bit you can buy SGOL, which is a swiss gold physical gold etf. IAU also holds physical gold. DGL and UBG owns gold futures contracts and they can demand delivery. You can also buy shares in mining companies. I don't own mining stocks because I figure if the situation gets worse, people will want gold in hand not in the ground, so to speak.

Anonymous said...

http://townhall.com/columnists/WalterEWilliams/2009/11/04/economic_myths_and_irrelevancy

Anonymous said...

I've been trying to figure out if we're facing inflation or deflation. Through the course of my searching, I've found some interesting things about the "Carry Trade".
All of it is beginning to sound a lot like what Japan did in the 90s

http://www.ft.com/cms/s/0/f3aec6c2-b99e-11de-a747-00144feab49a.html

http://www.youtube.com/watch?v=VF0_OD4SO38

Genius

Anonymous said...

Tron,

Would you sell some of your gold now if you owned any? I'm thinking Merideth Whitney has a few good points and she's a pretty smart lady. If the market corrects, I would expect gold to correct with it.

Genius

Gerard said...

I'm not selling any gold, but I am in the process of converting paper gold (GLD) into real gold. I agree with Peter Schiff's view that if the market corrects, this time gold will decouple. The fact that gold can be now used as collateral, means that this time it won't have to be sold to meet margin calls.

Anonymous said...

Tron,

Wow dude, I thought you would post CNBCs article today concerning gold. I find it interesting when the talking heads start to babble.

http://www.cnbc.com/id/34038650

Genius

Anonymous said...

BTW,

I'm losing my mind! This guy, Jim Rickards, is basically saying the exact same thing that Peter Schiff was saying on his CNBC interview, except that this particular interview panel LISTENED to what Jim had to say and didn't laugh at him through the entire interview. Weird. I haven't read Crash Proof 2.0, but this guy made sense.

http://www.cnbc.com/id/34038650

Genius

Anonymous said...

Voltron,

What do you think about the rapid unwinding of the dollar carry trade? Could have a big impact on dollar value, hence gold.

Gerard said...

The dollar carry trade is just getting warmed up. It's basically free money (the carry) with potential for windfall profits if the dollar collapses. The more you leverage, the more money you make . . . but here's the catch . . . in order to prevent the carry trade from getting out of hand and causing a disorderly decline in the dollar, the Fed and Treasury will intervene in the FX market and try to trigger stop losses, unwinding the carry trade, of people that leveraged too much. Just don't use too much leverage and you'll be fine.

Anonymous said...

Tron,

WTF on WFC? So they are going to repay TARP funds by selling $10.65 billion at $25 a share. Who is buying $10.65 billion worth of Wells Fargo?

Ken Lee said...

Voltron,

What are your thoughts on the new gold ETF being launched by Sprott Physical Gold Trust (PHYS), which according to the linked article, "unlike GLD or the iShares COMEX Gold Trust (NYSE: IAU), investors in the Sprott fund will have the option to easily redeem holdings for physical bullion on a monthly basis."

Or do you think it is time to reject all gold ETFs and go exclusively with holdings in the Perth Mint?

http://www.fool.com/investing/general/2009/12/16/not-everyone-is-running-away-from-gold.aspx

Thanks,

Ballson

Gerard said...

it'll be interesting too see how converting phys shares works, mechanically. The Perth mint had some delivery issues in the past as did the comex futures contracts and the royal Canadian mint had several thousand ounces found missing after an audit, so they are not taking new customers. Bottom line is you need to diversify, including owning some coins at home.

SGOL is another ETF that stores gold in Switzerland

http://seekingalpha.com/article/160800-gold-etfs-face-new-competition-etfs-physical-swiss-gold-shares

Gerard said...

I don't know who is buying wfc. Citi put pressure on wfc to repay but their repayment fizzled. Wfc is small enough to be collateral damage should citi fail or anything else go wrong. It's shares are "priced for perfection"

Anonymous said...

Curious wether you've seen the "Fall of the Republic" video as advertised on the Fox News Sirius channel (131). It's seems like a two hour story of a diabolical corporate takeover of the world. Any thoughts?

http://www.youtube.com/watch?v=VebOTc-7shU

Gerard said...

re: "Fall of the Republic"

I don't think "they" are that smart. Because of perverse incentives, morons fail upwards. We live in an idiocracy.

Watch the PBS Frontline on how Geithner, Bernanke and Summers took down Brooksley Born

http://www.pbs.org/wgbh/pages/frontline/warning/view/

Anonymous said...

The California train wreck continues...

http://www.miamiherald.com/news/politics/AP/story/1416032.html

Here's an interesting website that tracks daily job loss news.

http://www.dailyjobcuts.com/

Genius

Anonymous said...

2010 might suck...

http://www.thefirstpost.co.uk/58066,business,catch-22-for-eu-member-states-facing-deficits

Anonymous said...

Tron,

Question..why do I hear in various news reports that our debt to GDP ratio is only 50-60%. Post WWII numbers are often referenced when our debt was apparently some 110% of GDP. But I thought our GDP was around $14T and I see the debt around $12.3T. That looks to be approaching post WWII levels. I don't understand, what am I missing? What's the real GDP number?

Genius

Gerard said...

GDP is 14.2T but the GDP is 70% consumption, so it's really a bullshit number. The 13.3T in debt does not include unfunded liabilities like Social Security, Medicare and Medicaid, so that's a bullshit number too. We are way worse off than after WWII when your industrial production and exports were strong, we were still on the gold standard, and enjoyed the growth and prosperity of the 1950s.

Anonymous said...

Voltron,

Thought this was interesting:

http://cohort11.americanobserver.net/latoyaegwuekwe/multimediafinal.html

Anonymous said...

Forbes Magazine (Liz Moyer) talks about WFC taking a hit, a very big one, in mid 2010. Highlights: 1.8T off balance assets, and new accounting rules making them need to raise 4-8B in 2010... all while their non-performing assets rose 29% in 3Q (article mentions not paying back TARP but I think WFC did that finally).... interesting though...

http://www.forbes.com/forbes/2009/1228/investing-wells-fargo-rf-micro-devices-makers-breakers.html

Jeep

Anonymous said...

Tron,

Above Forbes article ends thus: "Short the stock".

What's your recommended short technique (if you continue to agree with the WFC Short)....

At the money puts?

puts spread across decreasing strikes?

pure short sales?

Jeep

Gerard said...

I have shorts and Jan 2011 at the money puts, although 2012s are available now.

Triple D said...

Tron,

Do you have an opinion on the cost of the at the money puts? Do you think they are expensive at this point?

Thanks for the blog!
Dirty

Gerard said...

The VIX is relatively low, so options are pretty cheap right now

Anonymous said...

Tron,

On the article "...Mathematically Impossible To Pay Off The U.S. National Debt ", assuming the US gave up on Medicare/ Social Security and any other unfunded liabilities, wouldn't you agree that we could pay it off. Much like someone who has a mortgage on a house? Say in...30 years or so?

Rich

Gerard said...

No, because even without Medicare and Social Security, the debt is larger than the money supply. Regardless, if everyone repaid their debt there would be no money. That is the nature of a debt based monetary system. Money is created through fractional reserve lending as the principal of a loan, but the interest to service that debt does not yet exist. Watch the "Money as Debt" video.

Anonymous said...

Tron, If the US dollar will tank, should we buy foreign currency and if so which ones?

Gerard said...

Oy! It's a tough call because America, Europe, China and Japan are in a race to see which one collapses first. There are no commodity based currencies. There are no non-debt based currencies. The best you can do is invest in currencies of countries that are net exporters like Australia and Canada.

Anonymous said...

I would prefer Australia over Canada...ie which one is least scoialist.

Jason said...

So, the strategy that seems to be shaping up here in the last month - Get out of the US market, buy gold and Aussie cash, short Wells treasuries and the US Market specifically, but Europe, Japan and China too. Get back into SDS and SRS? Still a good time to BUY gold?

Any other details that may help me decide where to put that tax refund???

Navy Mutual Aid is still paying 7.5% dividend on their whole life plans...

Jason

Anonymous said...

Tron,

I gotta ask...any opinions on sirius (SIRI)? PIDROE got me into this thing way back in Iraq, 08 when we were also buying SRS. SRS paid off...SIRI didn't. I've held onto thousands of shitty shares ever since. Do you think recent news looks good for SIRI? Maybe double down on this thing?

Rich

Gerard said...

People who have it Sirius in their cars love it. I get it. But they have crushing debt and ultimately they are doomed by 3G wireless.

Triple D said...

Tron, any thoughts on whether the gov'ment will extend the practice of buying MBSs beyond March and how this may or may not affect banks such as WFC?

Gerard said...

I expect the Fed to extend the MBS purchases and that will allow WFC to "pretend" a bit longer

Anonymous said...

I just thought this was funny...in a sick sort of way.

See if you can find the United States on this list.

Here's a clue...Zimbabwe is ranked #112.

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2187rank.html

Genius

Anonymous said...

Tron... what do you think of TMV? I know what you said about 'abusing leverage' and ETFs like SRS that decay over time in a volatile market, but 30 year Treasuries???

Rich

Gerard said...

Tmv is too leveraged. Too much volatility drag. 30 year treasuries may not seem sexy, but they are leveraged by time and compounding. A little whiff of inflation would cause a huge move.

Richard said...

I know Tron has advocated walking away from your mortgage if you are under water. He is right, however if you have PCSed and own a home that's rent doesn't provide positive cash flow military service members are eligible for the HAP program. You can walk away, and get 90% of the original value back with no credit hit. http://hap.usace.army.mil/
Truly a life saver.

Anonymous said...

HAP Question...Anyone have legal expertise wrt the HAP? I want to sell my house to a relative while I qualify so I can collect HAP money. I will turn around and rent the house for short term to keep my family in it, then buy back the house later. Thoughts? Illegal?

Scotty said...
This comment has been removed by the author.
Anonymous said...

Tron,

Not sure if you've seen it, but here's the link to the 60 Minutes episode on Michael Lewis's new book, "The Big Short" (I'm still reading it).

Interesting to see the mention of Michael Burry.

http://seekingalpha.com/article/193958-michael-lewis-on-wall-street-s-delusion?source=hp_wc

Rich

Anonymous said...

Tron,

This article seems to support your assessment. Bonds are good too apparently. Wonder where all the support comes from, especially with the low volume we see in today's market.
I'm curious to see how long it will last.

http://finance.yahoo.com/news/Frustrating-Quarter-Again-For-cnbc-4062764650.html?x=0&sec=topStories&pos=4&asset=&ccode=

(And I'm still shorten the crap out of 30 Yr Tresuries via TMV because I'm not a believer)

Rich

Anonymous said...

Tron,

Any real significance to this bill?

http://www.zerohedge.com/article/its-official-america-now-enforces-capital-controls

I see a lot of chatter about it, but it seems to me that it's just trying to control offshore tax shelters.

Rich

Gerard said...

Capital controls are necessary to prevent ordinary folks from avoiding inflation, currency devaluation, taxes, tariffs and other confiscation and so it is a likely precursor to those. It is one of the main predictions of Peter Schiff in crash proof. The key is to get your money out now that way you'll be grandfathered in. The government is less likely to recall assets from abroad as that cause our foreign creditors to retaliate by withdrawing capital.

Stephen_H said...

Tron-

Ck this out when screening for the "health" of a company.

http://www.auditintegrity.com

One of the very few shops who actually put out "sell" recs.

Hint: type in WFC.

Cheers-
Dollar$

Anonymous said...

Tron,
Will the Fed auctioning WFC warrants over the next six weeks have an impact on the stock price.

Gerard said...

Given that the auction announcement is not a huge surprise, it's effect should have been priced in already with a slight adjustment when it was actually announced.

Anonymous said...

Curious.

Not sure if you've ever read this guy's blog.

http://market-ticker.denninger.net/

What's the sentiment out there?

Gerard said...

I do read Karl Denninger and listen to his podcast. He's a bit too political (and shrill). He spends a lot of time on proposing solutions or opposing government policy. That doesn't necessarily help me make money on trading, which is the focus of this blog. He focuses more than I do on technical analysis (charting specific price levels) I think that is a waste of time. He was also solidly in the "deflation" camp, which would have lost you a lot of money over the last 12 months. He is prolific and often makes good points and I listen to his analysis looking for signals of a deflation phase, which I now think is coming soon. I've linked to his blog several times in the past, but he doesn't quite make the cut to be on my "smartypants" list.

http://cfcsux.blogspot.com/2010/03/wells-fargo-makes-stupid-loans.html

http://cfcsux.blogspot.com/2009/04/market-recap.html

http://market-ticker.denninger.net/archives/703-Uh-Oh.....-Monetary-Flat-Spin.html

http://market-ticker.denninger.net/archives/587-The-Mother-Of-All-Frauds.html

Anonymous said...

Tron,
What is your outlook for the dollar and inflation/deflation, and their relationships with TLT? Specifically for those of us who may be holding Jan 11 puts. Thanks! for the rest of the year?

Gerard said...

I still own my 2011 TLT puts. I think there will be a another crisis this summer as the first wave of option arms reset.

Anonymous said...

Tron, I'm looking to buy a house this spring/early summer. I have some long positions from buying last spring which have made some money. Based on your prediction of another crash, would it be wise to sell and put towards a hefty down payment on quality socal real estate?
BURL

Gerard said...

http://www.nytimes.com/2010/04/21/business/economy/21leonhardt.html?hp

you won't make money on the house ... You'll make money on the mortgage, so I wouldn't make a big down payment. I'd get a va loan, sell my stocks and buy gold.

Jake said...

Is Cramer just supporting WFC to keep the turd shining? His argument for owning is a bit optimistic.

http://www.thestreet.com/story/10561419/1/wells-fargo-is-the-top-turnaround-play.html

Bullet

Gerard said...

It's an old article Aug 8 2009. Since then, the DJIA is up 20% and WFC is up 25%. His point was IF you believe in a turnaround THEN invest in WFC . . . fair enough.

Anonymous said...

Tron,

What's your opinion on Jan 2011 call options with a strike price of 7.50 for Citi? Jan 2012 options?

There's some hype out there, but considering your prediction of the coming crash...

Perhaps there's time left like when Cramer said to buy WFC?

Rich

Gerard said...

I avoid trading stocks that are below $8-$12 because they are too volatile. Like penny stocks, the slightest rumor can make it double or half. Citi fell so hard and fast that I missed it.

Chemo said...

http://mercatus.org/publication/gambling-other-peoples-money

Joining this discussion with a (relatively lengthy) paper written by a George Mason Economics professor entitled "Gambling With Other People's Money". I thought it was a pretty good read. It's most likely a review for most people reading Voltron's blog, but it brings up salient points to review (and possible support for the double-dip).

-Chemo

Anonymous said...

Wow! Voltron going back to ProShares! Sounds like we could be on the brink of another deflationary breakdown over the next few months (a la 2008). Could this be the end of WFC?

Anonymous said...

Latest article on zerohedge.com

"Gold Commercial Short Positions Hit All Time High, As Gold Spike Protection Team (LBMA)Keeps Very Busy"

Rich

Gerard said...

LBMA is highly leveraged short. If they can't control the rally, they will go bust

Anonymous said...

Here's some support for the DOW making a turn towards 5000.

http://www.cnbc.com/id/37126552

Tron, any downside to getting into the Jan 11 WFC Puts vice Jan 12. I own the some Jan 12 right now, but the Jan 11 are showing much more gains of late.

Bullet

Gerard said...

Jan 11 just seems awful close to me.

Triple D said...

Tron, A family member has been looking into palladium as a long term play and an option to holding strictly gold and silver. Seems the prevailing opinion is that it's becoming more popular in industrial use and it's something the government won't confiscate. Any opinions?

Gerard said...

I haven't the faintest clue about palladium ... Interesting point about confiscation risk being lower.

Anonymous said...

Never heard of this guy. But it looks like someone is gonna go ahead and sound the alarm.

Richard Russell says sell everything.

http://www.businessinsider.com/dow-theorist-richard-russell-sell-everything-liquid-you-wont-recognize-america-by-the-end-of-the-year-2010-5

Anonymous said...

Tron,

Referring to your chart of resetting mortgage loans that shows the impending double dip- Do you think the banks and anyone with exposure to these loans will be caught like they were in 2007? It seems that back then, no one had any idea how toxic the subprime bonds were so now it shouldn't be a surprise when things start to reset. Is there a way for the big banks to hedge against these bad loans or to protect themselves now that they probably have an idea of what's going to happen?

Gerard said...

The banks knew it was coming the first time around too. Who can they hedge with? Who is going to take the other side of 1.9 trillion in mortgages for Wells Fargo alone at 100 cents on the dollar? Well, the Federal Reserve has purchased 1.2 trillion in mortgage backed securities but they stopped in March. http://www.newyorkfed.org/markets/mbs_FAQ.HTML

Stephen_H said...

Tron-

What strike for WFC 2012 LEAP Puts do you recommend?

Dollar$

Anonymous said...

Tron,

I'm currently short WFC (2012 puts) and long SDS (Sep 35 calls) and long gold (bullion/coins). In what form are you long/short the market? I'm not all in, but since I've liquidated most of my equity positions and sitting on a pile of cash, I'm considering a much larger short position. I'm not asking you for advice on what I should do, but am curious as to what percentage of your assets you've committed to the next leg down.

Thank$

Gerard said...

I've pretty much sold all my stocks, so I'm "all in". short Wells Fargo, S&P 500 and Treasuries and long gold

Gerard said...

If you get at the money puts, you can make more money if the VIX goes up

Anonymous said...

The Vix is at a 1 year high- do you think options are expensive now or is there more upside potential in the longer term than the short term? i.e. are leaps cheaper than shorter term options from a volatility perspective?

Gerard said...

You pay more for longer dated options. The VIX is pretty high, but it's been higher.

Anonymous said...

Tron,
Do you still recommend Austrian bullion or are you shifting based on the Euro's performance?

Thanks,
Beef

BURL said...

Tron,
Is there any risk in getting my mortgage through Wells Fargo? I'm pretty sure if those clowns tank, the mortgage just gets sold to someone else, but I just want to be sure as they're offering a pretty sweet deal to me now...BURL

Gerard said...

BURL,

you're right no worries getting a loan from WFC.

BURL said...

Tron,
Does this blog go away with your new employment come September?

BURL

Gerard said...

yup

BURL said...

Tear

Anonymous said...

I'm getting the notion that there is some serious market manipulation going on. Is there any reason for the amature investor to still trade stocks these days?

Gerard said...

It is manipulated, and that's not cool. But you have to put your money somewhere and the system is rigged so that investors get screwed and speculators win.

http://cfcsux.blogspot.com/2010/06/bernanke-says-fed-does-not-engage-in.html

Anonymous said...

Tron,
My folks just move various investment accounts to Wells. 401k, etc. After hearing about your assesment of the bank's future they were curious if any of these accounts would be at risk. I'm pretty sure I know the answer but I told them I would ask.
Thanks,
Dirty

Gerard said...

Wells should have Finra insurance for their 401k

Anonymous said...

Tron...how much "stock" do you put into the ECRI indicators? Quote form UK Telegraph:

The ECRI leading indicator published by the Economic Cycle Research Institute has collapsed to a 45-week low of -5.7 in the most precipitous slide for half a century. Such a reading typically portends contraction within three months or so.

Full article: http://www.telegraph.co.uk/finance/economics/7852945/Ben-Bernanke-needs-fresh-monetary-blitz-as-US-recovery-falters.html

Rich

Gerard said...

I don't track the ECRI, but with respect to the inflation/deflation debate, I think the Fed will print enough money to stabilize house prices to keep the banks solvent. This is technically inflation in the money supply sense, but it will not mean price increases in all asset classes. House prices will be stable, but paper assets will go down in price and hard assets will go up in price.

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Anonymous said...

Thoughts on this???

Vino

China won't dump U.S. Treasuries or pile into gold
http://news.yahoo.com/s/nm/20100707/bs_nm/us_china_economy_reserves_1

PMac said...

Tron, Given current treasury prices, I am thinking about using TBT leverage. Any thoughts?

Anonymous said...

Tron,

Any thoughts on the Financial Overhaul Bill that Pres Obama is about to sign?

Good, bad, neither?

http://news.yahoo.com/s/ap/20100716/ap_on_bi_ge/us_financial_overhaul

Rich

Anonymous said...

Tron,

Would you say it's a good idea to refi your mortgage at a cost of $6,600 in order to get the 30 year fixed interest rate from 4.875% down to 4.5%?

Seems like a smart thing to do, especially if you have renters, yes?
Rich

Gerard said...

Don't refi! then you're loan becomes fully recourse.

Anonymous said...

http://www.infowars.com/the-ecstasy-of-empire/

Voltron, check out this article...makes sense to me...

Chris Brewster

Anonymous said...

Nooooooooooooooooooooooooooooo! Don't leave us Voltron!
Buss

Anonymous said...

I am currently a 0302, former hedge fund guy (mostly ops and execution trading) lined up for a deployment or two, but starting to plot my return to the business. I had “Genius” as an instructor at the TACP course and he showed me this blog. My email is c_malkus@hotmail.com if you have a moment I would appreciate the chance to speak with you in regards to your experiences on the street.

Stephen_H said...

We're well beyond the Rubicon now fellas. Bennie and the Inkjets going full-retard and the Return of Voltron just a few days apart....coincidence?...I think not.

Welcome Back, Sir....your chariot awaits.

Aaron Haines said...

Tron,

Do you have any advice on investing in the TSP (strategy). I currently invest in the C, S, & I funds 60%, 20%, 20%. I max out my Roth IRA and invest in some stocks as well.

G/R

Bear

Gerard said...

Conventional wisdom would be to invest in the Lifecycle funds. The Lifecycle funds are a mix of the other funds that is automatically adjusted over time based on your age. It assumes that the funds will perform as they have historically, which is dubious. Given that there is no commodities fund, or inflation linked funds, I would recommend rolling it into an IRA when you are discharged, so you have more options.