How to Speculate your Way to Success
Everybody Forced to Speculate?
According to an interview with Doug Casey, “Everybody is going to be almost forced to be a speculator to try to stay in the same place. Speculating means capitalizing on politically caused distortions in the marketplace.” ~editorHow to Speculate your Way to Success
Source: JT Long of The Gold Report (4/20/12)
So far, 2012 has been a banner year for the stock market, which recently closed the books on its best first quarter in 14 years. But Casey Research Chairman Doug Casey insists that time is running out on the ticking time bombs. Next week when Casey Research’s spring summit gets underway, Casey will open the first general session addressing the question of whether the inevitable is now imminent. In another exclusive interview with The Gold Report, Casey tells us that he foresees extreme volatility “as the titanic forces of inflation and deflation fight with each other” and a forced shift to speculation to either protect or build wealth.
The Gold Report: You told us about two ticking time bombs last September, Doug—the trillions of dollars owned outside the U.S. that could be dumped if the holders lose confidence, and the trillions of dollars in the U.S. created to paper over the 2008 liquidity crisis. It’s been six months since then. Have we averted the disaster or are we closer than ever? Continue reading
What All Major Depressions Have in Common
Signs of deflation are visible but the public will be fooled
Deflation requires a precondition: a major societal buildup in the extension of credit (and its flip side, the assumption of debt).
– Conquer the Crash, 2nd edition (p. 88)
Has the United States met that precondition?
Well, consider that total credit market debt as a percent of U.S. gross domestic product was
- 280 percent in 1929 at the start of the Great Depression
- 380 percent in 2008
The current build-up of credit goes far beyond major — it’s unprecedented.
It’s been rising steadily for 60 years. The slope literally looks like the side of a steep mountain.
Bank credit and Elliott wave expert Hamilton Bolton studied every major depression in the U.S. In 1957, he made this observation: Continue reading
America’s First Deflationary Depression: Is a Bigger One Ahead?
Social psychology precipitates economic depressions
Don’t blame Martin Van Buren for America’s first deflationary depression. Social mood rode higher in the saddle than did our 8th President, who only stood 5′ 6″.
Elected in 1836, by the time Van Buren assumed office in March 1837 a speculative bubble had burst and a banking crisis was at hand (sound familiar?) — the national mood had turned south and the “Panic of 1837″ followed. Van Buren was known as “The Little Magician,” but he could not pull an economic recovery out of the hat. He met defeat seeking a second term.
America’s first deflationary depression lasted until 1842. Van Buren blamed over-zealous business practices and a credit bubble (sound familiar 2x?). The panic precipitated bank failures; many speculators who bought land to capitalize on railroad expansion lost everything. The depression worsened as Van Buren continued Andrew Jackson’s economic policies. Businesses failed and unemployment was widespread. There were even “food riots” in several cities. Continue reading
Markets Fear Deflation
The best way to know the future is to survey millions of people and analyze their responses. That is exactly what the market does every day. And even better Mr. Market knows not only what people say they believe but where they are putting their money as well. In the following article Chris Ciovacco, the Chief Investment Officer for Ciovacco Capital Management shows us how the markets view the current possibility of deflation. Chris has an amazingly simple chart that shows us exactly what the market is thinking right now. That chart is the ratio of Treasuries to Treasury Inflation-Protected Securities (TIPS). Currently the ratio is indicating a deflationary bias in the market. When you think about it, if people fear inflation they will pay a premium for Inflation protection but as the fear of inflation decreases the premium decreases as well. Interestingly, deflation is bearish for the stock market. As Robert Prechter has been telling us for a while the only thing valuable in a true deflation is cash. Everything else decreases in value as we saw in 2008. ~Tim McMahon, editor
As we noted on November 1, a rally back toward 1,250 is well within bear market bounds. How we rally (volume, conviction, etc.) will tell us quite a bit about the odds of a more lasting upside move in stocks. We also outlined in a recent video reasons why the improvement in market breadth does not necessarily lean toward bullish outcomes. We are open to higher highs in stocks and the onset of a new bull market, we just do not have the evidence in hand to support those outcomes at this time.
We reviewed leading ETFs from several angles last night, including volume. The interest in Treasuries (TLT) and TIPS (TIP) was high in Tuesday’s session, with Treasuries getting a slight nod over TIPS. We will be watching the relative performance of TLT and TIP after today’s Fed announcement.
When the ratio of Treasuries to TIPS is rising it points to (a) little concern about inflation, and (b) increasing concerns about deflation. The chart below shows what the TLT:TIP ratio looks like during a bull market in deflation fears and a bear market in stocks.
In the following chart from November 21, 2008 we see an extreme example of rising deflationary expectations. When TLT:TIP is bullish, it tends to be bearish for stocks and inflation protection assets. The chart below shows what the ratio looked like during a bear market in stocks. The S&P 500 is shown under the bond ratio. Continue reading
It’s All the Same Market in a Deflationary Environment
On September 22, the Dow and S&P opened down over 2.5%. Oil was down, copper was down, and even GOLD was down sharply. Watch this video excerpt from Robert Prechter’s special video issue of the August Elliott Wave Theorist where he explains what is causing diverse markets such as these to move together in today’s environment.
 Free Report: Stocks — Buying Opportunity or Another “Free Fall” Ahead?Find out what these market moves mean to your investments with current analysis from Elliott Wave International. Bob Prechter has just released a FREE report — with urgent analysis from his August and September 2011 Elliott Wave Theorist market letters, including another video excerpt from the special video issue of the August Theorist. Stocks — Buying Opportunity or Another “Free Fall” Ahead? will help you put these uncertain markets into perspective so that you’ll be better positioned to both protect your investments when needed and prosper when opportunities arise. |
This article was syndicated by Elliott Wave International and was originally published under the headline It’s All the Same Market in a Deflationary Environment. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
Is a Stock Market Crash Inflationary or Deflationary?
Recently a subscriber asked me the question above, he gave quite correct arguments about how the stock market is “a zero sum game” in other words for every buyer there is a seller, so overall everything should stay in balance.
But as I’m sure you know there are at least 3 ways to measure money supply M1, M2 and M3. Each one includes increasingly broad definitions. From just cash equivalents up to including all sorts of time deposits and Government debts. But what they don’t include is stock valuations, however if the price of your stocks increases you feel richer and are more likely to spend money from your other accounts because you know if you need the money you can always sell your stocks.
So if you buy a stock at $10 and it goes to $20 you feel twice as rich. Has anyone bought that stock from you at $20? No! but it shows up on the credit side of your balance sheet nonetheless. So your net worth went from $10 to $20. and if you multiply that by the billions of shares floating around you have Billions of dollars created out of thin air! Continue reading
How Wealth Can Simply Evaporate
Evaporation of Wealth on a Vast Scale
How $1-million can disappear
By Bob Stokes
The bursting of the “debt bubble” which started in 2008 is far from over. It’s the financial story of our age and it’s happening before our eyes. The full scope is hard to keep up with because it’s unfolding at various levels.
The top level is the sovereign debt crisis:
National governments: Several in Europe and even the U.S.
State and local governments: services slashed; vendors waiting to get paid.
Corporations: financial institutions at home and abroad remain in questionable health. PIMCO Chief tells Bloomberg (9/13) “We’re getting close to a full-blown banking crisis in Europe.” And CNBC reports (9/14) “Moody’s Investors Service said…it downgraded the credit ratings of Societe Generale and Credit Agricole.”
Individual Households: “under-water” mortgages; “new conservatism” toward spending.
As the credit bubble continues to deflate, the evaporation of vast wealth may follow on a historic scale.
Does Deflation Remain a Threat?
From physics we learn that every action has an equal and opposite reaction. From nature we see the pendulum swing to its farthest extreme and then return an equal distance in the opposite direction. Even children know the saying , “what goes up, must come down”. But those laws of nature don’t apply to debt and credit inflation do they? Can debt creation can go on forever? In this article the editors of Elliottwave International look at the largest credit inflation in history and where it is going now. Will it eventually result in a massive deflation? ~ Tim McMahon, editor
A 90-Page “Deflation Survival Guide” Gives the Answer
April 19, 2011
By Elliott Wave International
“Every excess causes a defect; every defect an excess. Every sweet hath its sour…The waves of the sea do not more speedily seek a level from their loftiest tossing, than the varieties of condition tend to equalize themselves.”
This quote comes from Ralph Waldo Emerson’s essay, “Compensation.” He opens the essay with a poem which includes these two lines:
“Mountain tall and ocean deep
Trembling balance duly keep.”
Do Emerson’s prose and poetry actually speak to the subject of deflation? Indeed they do.
Recent decades have seen the biggest credit inflation the world has ever known. So the question is: What will “duly keep” the “balance” of so great an “excess”? Well, … Continue reading
Escaping the Great Depression – and Extending the Greater Depression
By Doug Casey, The Casey Report
Here at Casey Research, our view of the Great Depression of the 1930s is a little different from that of most people. In our eyes, Franklin Roosevelt wasn’t a hero, he was a villain. Nearly everything he did served to extend and deepen the economic downturn.
With the exception of supporting the 21st Amendment for the repeal of Prohibition, Roosevelt’s involvement in the economy was an unmitigated disaster. But in popular memory, that failure is obscured by U.S. success in WW2, over which Roosevelt presided.
Today, unfortunately, Obama and his minions are taking Roosevelt as a model and are straining to repeat his mistakes. Because the distortions in today’s economy are far greater than those in the 1920s and 1930s, and since the public now relies upon government far more than it did in those days, I don’t see any way around a more serious depression – the Greater Depression. It’s been going on since 2008, will get much worse, and has years left to run.
The Case For Hyper-Deflation
In all of history, there has never been an episode of hyperinflation that involved a currency that exists primarily as digits stored electronically in accounting programs.
Money is defined and decreed by government as being Federal Reserve Notes and Coins issued by the U.S. Mint, backed by the full faith and credit of the United States. The issue of what constitutes money within the United States is established by law and a matter of publicly accessible record and held as common knowledge.
Credit is defined as the provision of resources (such as granting a loan) by one party to another party where that second party does not reimburse the first party immediately, thereby generating a debt, and instead arranges either to repay or return those resources (or material(s) of equal value plus interest) at a later date. It is any form of deferred payment. The first party is called a creditor, also known as a lender, while the second party is called a debtor, also known as a borrower. Continue reading
