SOS 9 out of 10

9 out of 10 says

1. recession is over


2. gold price will achieve new high


3. US dollar will continue to collapse


4. bullish on US share market


5. crude oil will go further up


6. commodities will continue to improve


7. residential properties stablised


8. hyperinflation will be the near term threats

Lets us put on the thinking caps and use our common sense to answer the following questions

1. If the recession is over, why would unemployment is inching higher every month


2. If we accept the myth that gold price will fly during hyperinflation, you may be in for a suprise (it has been proven that there is not much correlation).


3. Remember Sept 2008, a sudden deleveraging has pushes the dollar up, don't you think it will happen again? Can we savely assumed deleveraging is over?


4. Is US market overvalued, it doesn't matter in a highly liquid environment, but...., what happen the sleeping giant (deleveraging) is coming for round two? Can we be sure all the toxic assets problems are resolved?


5. Do we thin crude oil, precious metal or agriculture will improve when the world largest consumption (USA) shrink? Or if they found new large crude oil in Russia (bigger than the entire middle east)? Have we ever thought for a while there is a major different between physical commodities and financial assets in commodities demand & supply, one is guide by real supply and demand, the other is guided by social mood. Do you know, an ordinary citizen can sell tonnes of crude oil at a fixed price at a new future without having to deliver when the contract expire? Don't we think this is different from the real demand for crude oil used by manufacturing plant, transportation etc. Look at shippings (uses lots of crude oil to run, what position are there in)?


6. Has the derivatives market of USD600 trillion problems resolved? If it is, what were the solutions? Anyone seen those actions taken? Any new regulations to control such practices? Have we forgotten AIG was brought down by "derivatives" or excessive risk taking in "derivatives"? Hey, why no one talks about derivatives, which is the elephant in the room!

MyView

Using the simplest common sense that we have, just imagine, USA consist of ONE government, ONE private sector, ONE printing machine, ONE financial institution, ONE citizen

So there are 5 souls in USA, once upon a time. ONE citizen has been borrowing up to USD45 trillion or gearing of more than 3 times to grow and consume, with a GDP of only USD14 trillion.

1. can the said consumption sustainable (which is driven by debt)? (btw, unemployment is about 9.7% and including part time, it is about 16%)


2. can the consumer and corporate continue to borrow with such high gearing? (btw, US citizen has recently went into saving mode)


3. more than a quarter of GDP is contributed by financial sector in US, do you think that contribution will be sustainable over the next few years? (btw, 98 banks had filed for Chapter 11)


4. btw, is the world USD600 trillion derivatives resolved? What happens to all CDOs, CLOs, CDS, MBS etc? Can anyone quantify? If not how can we said it is solved?

Of course, most times, the share market defy logic or common sense, this is because most people assume earnings drives the share market, which also has been proven wrong by Robert Prechter, although he did not says earnings is not important.

The verdict is, you may lie to somepeople some time, but you cannot lie to everyone all the time. That is besides the point anyway, the point is, if you do not solve the structural issues, it will come back to haunt you. Ever heard of the Tsunami, the second wave is the killer wave.

Will the same 9 out of 10 smart fellas who got it all wrong in 2008, got it right this time round? What additional indicators or tools they used differently to deduce at such predictions? Well, as far as common sense can tell us, the 9 out of 10 never get rich eventually.

Let us remind ourselves in Oct 6, 2008 see the chart above and also March 9, 2009.