Economic Wake Up Call

[HauteHippie]

If we began to educate US citizens that the Federal Reserve system in our country is similar to the US Dollar equivalent to OPEC and crude oil, maybe some people would begin to realize the severe consequences of the system we decided to implement in 1913. Put simply, each regional Fed bank is like a member of OPEC with Bernanke and the FOMC being the 'Saudi Arabia' of the group. I ask any voter in our country...is this how you want YOUR money supply managed (manipulated)?

We sit in front of televisions like crack addicts awaiting Fed interest rate decisions. And when the Inspector General is asked about inquiries into their decision making process all we get is "We do not have the authority to conduct audits on Federal Reserve banks"

There is a bill in congress gaining a lot of steam, as people are becoming fed up (pun intended). I strongly urge you to read up on H.R. 1207 - The Federal Reserve Transparency Act of 2009 - and contact your congresspeople to support if you agree.

HR 1207 is, last I heard, gaining bi-partisan support and rapidly so. I even heard Ron Paul sounding surprised by its momentum in a recent clip from one of the financial news channels. Fingers crossed!

[HauteHippie]

alan grayson: where is the money?

general inspector: we didnt look at that specific area

lolololololol

Inspector General: We do not have jurisdiction to go out and directly audit reserve bank activity.

Alan Grayson: Well, I have a copy of the Inspector General Act right here, and it says among other things your responsibility is to conduct audits and investigations relating to the programs and operations of your agency. So I'm asking you ... if you're not responsible for investigating (the Fed's) $9T off balance sheet transactions, who is?

Inspector General: We have responsibility ... to conduct audits and investigations in that area. Ummm. In terms of who's responsible for investigating ... umm, would you mind repeating the question one more time??

[fat.tail.event]

As a portfolio manager/trader this truly is the one issue that keeps me up at night, or I catch my mind drifting and drilling down deeper into the problem. More and more the Fed is becoming this country's off balance sheet vehicle because of its sheer size, and thus financial power, coupled with the fact that there is minimal oversight of its activities. At the end of the day, the Fed is becoming the last mechanism we have as a country to compensate for our massive trade imbalances which have spun out of control. I realize we have spent many an hour posting on this board on the imminent collapse of the dollar due to these circumstances. Bear in mind imminent could be 2010, or 2020 if you are looking at it in the relation of long-term history.

Trading, investing and, unfortunately living, through this decline/collapse is going to be the largest single economic event of the 21st century. Large fortunes will be made and lost surrounding this event. If it happens rapidly and you are on the wrong side of the trade, it will be quite painful. There is also a suckers element to watch out for here. I would strongly advise to resist reorienting a portfolio or trade to compensate for long term deflation, even if it persists for 1-3 yrs or so. Many strategists will disagree with me at this point, but I think any deflation will be short lived, or even an indicator of coming hyperinflation. The next couple decades will be about managing your funds in the context of inflation...period. Bear in mind that the reported statistics on inflation, GDP, employment etc. have been and will be continued to be manipulated for political use. Pre Clinton govt calculations for the Consumer Price Index right now would read about +2%, whereas the govt is reporting it at -0.5%.

Many people are going to feel 'boxed in' as prices rise, the dollar declines, investment returns revert to means, taxes go up, leverage goes down. At the same time, more and more responsiblity is being shifted to individuals, families to manage around these headwinds (a big reason why I think big government will become so popular....no one wants or has time for such 'inconveniences' these days) A pretty painful confluence of economic events on the horizon...wouldnt you say?

[Demsey]

All this is my one gripe against the current administration's party.

It's certainly not their platform agenda and 'humanitarian' diatribe. That's all soft fluffy cotton candy and vanilla ice cream. Who doesn't like soft fluffy cotton candy and vanilla ice cream? Except none of that is EVER delivered because the vehicle is too big, sloppy, ignorant and inefficient due to the characterization of 'rule by committee' and 'spend and grow'. Everyone will get a piece merely because they are 'American'. PHOOEY!

It's like how 'MC Hammer' went down. He was a good man too. And a talented man too. And a father too. And a spiritual man too. And a Naval veteran too. His entourage was full of blood sucking morons and sycophants whom he thought wanted to pull it all together as a team but ended up dragging him down to the bottom of his money pool. A pool he thought had no bottom.

Stanley is OK now with Stanley. But man, he had to learn the hard way kicking the flotsam and jetsom to the curb and trimming all the fat away. That's what the US has to do.Too.

Fascism is such a [censored]. Put lipstick on that pig.

[docdoc]

Very interesting

[fat.tail.event]

Interesting you bring up Fascism.

I have wrestled with this simplistic view of 'socialism' constantly being thrown about these days.

The Obama central planning organization is acting in a very fascist manner, according to what I was taught in school. They are looking at corporate America, businesses, sectors, etc. and doing everything they can to get all of the oars rowing at the same time, rhythm in order to repair industries and restore growth. That my friends is corporatism and it is a main tenet of fascism. Whether or not we drop the corporatist stance and migrate to more socialistic tenedencies remains to be seen. But the only actionable stuff I see right now is corporatism, the rest has been rhetoric.

Another note...Moody's chopped Japan's rating to Aa2 the other day and the yen got punched in the neck repeatedly all day. Many say we are headed down the same road as Japan (lost decade)...but keep one thing in mind, Japan was running SURPLUSES, not defecits. So if that argument holds water (I am not sure yet), we start our decline in a bad position. I really feel Moodys is posturing and setting an administrative precedent about what's to come with the US. A US debt/currency downgrade will be one of the things to set this process in motion.

[GHBG35]

And we still have the prospect of record inflation to look fwd to...Interesting times.

After Katrina I have stood on the side of leave Federal Government out of everything.

[Demsey]

leave Federal Government out of everything.

That's what Benjamin Franklin was talking about, that's what Thomas Jefferson was talking about, that's what George Carlin was talking about, that's what Ronald Reagan was talking about, that's what you are talking about. That's what I'm talkin' 'bout.

The current administration thinks all the above ^^^^^^ are full of bull sh*t. Apparently. Whatever.

The Constitution was drafted so government has no real leverage against the will of the people. It may appear that has been lost, but it really hasn't. They know 'we the people' are armed. With more than what the Second Amendment allows. We have the voice of the replica watch forum. And some other liberties. Like votes. I pity the fools in '10. 'Cap and Trade' ? As if. Nice try. So it goes.

[fakemaster]

Muahahaha.

[HauteHippie]

Another note...Moody's chopped Japan's rating to Aa2 the other day and the yen got punched in the neck repeatedly all day. Many say we are headed down the same road as Japan (lost decade)...but keep one thing in mind, Japan was running SURPLUSES, not defecits. So if that argument holds water (I am not sure yet), we start our decline in a bad position. I really feel Moodys is posturing and setting an administrative precedent about what's to come with the US. A US debt/currency downgrade will be one of the things to set this process in motion.

This is right... Japan lost a decade despite an underlying sound economy. Their public works stimulus programs were self-funded.... Our situation is much different, and in reality, much worse.

So, just curious fat.tail, as a portfolio manager who is bearish on the dollar what are your general strategies beyond gold, MERKX (or equiv), and commodities?

[fat.tail.event]

This is right... Japan lost a decade despite an underlying sound economy. Their public works stimulus programs were self-funded.... Our situation is much different, and in reality, much worse.

So, just curious fat.tail, as a portfolio manager who is bearish on the dollar what are your general strategies beyond gold, MERKX (or equiv), and commodities?

An extremely live debate this question is...ultimately, how do you 'express' the trade. Expressing trades always has a multitude of answers and many can be right at the same time, some just more right...Right? And to boot, it will also come down to your views on timing. As I mentioned in a previous post above, the dollar is probably not going to outright collapse like a lot of the doomsayers lead us to believe. Personally, I feel this collapse will be slow motion, almost the same as a high inflation rate would bleed you for 3-5% per year. Take a look at USD charts over the past year or two and our argument here falls apart. Take a look at USD charts vs. 'the competition' currencies over this past decade and it all starts to make sense. What I am saying is that there is no magic bullet or quick buck trade for something that is so thematic in nature.

So no more framing, disclaimers etc...quick answers to start your brainstorming...how about?...

foreign bonds from commodity producing nations that run current account surpluses (obviously dont hedge your currency exposure)

long term foreign currency options...buy some cheap out of the money and pick up new contracts as they come available...throw some pennies at it for dollars in a couple years.

buy land...could be domestic, maybe some foreign...I would love a Brazilian agricultural land fund, for example

one portofolio manager by us keeps harping on the jewels, rare stones....maybe a good alternative to gold/silver

I think you hit the general strategies well Chief...The one thing most investors in 401k land probably dont realize, or dont do, is having large percentage of holdings in foreign equities in general...probably need 50% or so.