SOS Road to Recovery?

All assets class is up:

Crude oil
Gold
Shares
Commodities
Bonds

Because

US Dollar is down

When will US Dollar going up, when they win the pretiest among the ugly, i.e. Euro, Pound and Yen.

MyView

Currently most hard asset class enjoy the increases at the expense of the lower US dollars, that is a fact. The question is when will it turn? It will turn when the social mood change (which is currently in the process) when we see the berish on US dollar is close to 90%. Soon, the debt burden will implode, when it will surpasses the quantitive easing, which is merely printing of money, NOT improving of healthy credits that leads to sustainable increase in consumption.

Without the healthy sustainable improve in credits, printing of money will not help in long run, perhaps a short spark, that is what is happening to the current assets classes.

Red alert, run before the wave ends. Don't go for the last 5% with a higher risk return. Clear your position and wait for the fall before reentering.

SOS Portfolio update & Dubai Debt

Refer to blog in Oct 12, 2009, Inflationist vs Deflationist - titled Ready Set Go

As at 27 Nov 2009

Inflationist UP 2.9%

Deflationist DOWN 3.27%

Well, both portfolios is rather flat, not much changes.

One thing for sure, the KBW Financial Index is still about 60% down from its 2007 peak.
And on 25 November 2009, Dubai's debt burst, about USD80 billion. So is RBS in UK, and the German banks.

The build up of the negative social mood that cause Lehman Brothers to collapse, not Lehman Brothers that cause the crisis.

Similarly, the build up of the negative social mood that cause Dubai property to collapse, not Dubai property that cause the crisis

MyView

One think that is sure in US is more banks are going belly up each month. NPL is building up, some of them are postponed using "creative" accounting. Commercial property is crashing. Most loans given out in US or Europe are loan the is not "very productive", i.e. loans that has the ability to create new income to repay the loans and interests.

So these "toxic" loans is increasing as days goes by. Printing money will not help, because printing money is exclusive from giving credit. One may continue to print, providing credit requires the evalution of the credit worthiness of a business.

With the implosion of "toxic" debt, credit creation is collapsing as a result of the viable credit worthiness is hard to come by as a result of collapsing debt and consumption.

SOS Deflation Checklist

Can the implosion of debt outstrip the printing of money?
Or can the printing of money outstrip the implosion of debt?

Debt - implosion? How much? Total private debt of US is about USD40 trillion, say NPL of 5% = USD2 trillion.
Derivative debt? How much? USD60 trillion x 5% NPL = USD3 trillion
Total NPL = about USD5 trillion or 36% of GDP.

Printing of money say USD1.2 trillion. What will happen?

SOS

Visit www.falundafa.org to learn more.

SOS For record purposes

Nov 16 2009

Reported by Bloomberg for 3Q 2009

44% exceeded forecast

31% below forecast

25% within forecast

All markets went up across Asia, Europe and USA for about 2%

MyView

It is a myth that economic earnings leads the markets, actually it lags the market. Some of the fallacy assumptions most of the analysts predict is that the earnings will lead the share markets and it was proven wrong many times, as we compare quarterly results against the DJIA over the past 30 years. And it is also a fallacy that most economists or analysts tends to extrapolates a trend, which is also another myth.

SOS Biggest Market

1. Currency market - traded USD3.2 trillion per day or USD 835 trillion per annum
2. Derivatives - outstanding @ 2008 is about USD600 trillion
3. Bond market end of 2008 - USD67 trillion
   
4. Stock market end of 2008 - USD36 trillion (traded USD80 trillion p.a.)
   
5. Housing market of 2008 - USD xx trillion
6. Gold produced p.a. 50 million oz x USD1100= USD55 billion (gold on earth about USD11tril)
   
7. World debt market = USD120 trillion (2 times of GDP)
   
8. USD M1, M2 & M3 = USD1.6 tril, USD8.3 tril & USD10.3 tril
9. World crude oil production in 2008 = 73 million barrels per day x USD80 per barrel = US5.8 billion day x 365 days = USD2.1 trillion p.a.
   
10. World GDP 2008 = about USD60 trillion

SOS What Rounini Said?

By Roubini in Nov 2009

On Oil

Roubini says the "recovery justifies oil going from $30 to "maybe $50". Since oil is today at $80, the remaining $30 are speculation, and speculators and herding behavior.However, there is a Finnish proverb: "Sh*t must be good. Millions of flies can't be wrong" (not Roubini who said that) , so oil can still go higher.However, $145 oil killed the economy last year. He is worried that oil is going to go over $100 for reasons that have nothing to do with the fundamentals of supply and demand. Oil at $100 right now will have the same effects on the economy as $145 in 2008. No matter what GS says.

USD Carry Trade and Commodities Bubble

Roubini believes there a huge bubble fueled by zero interest rates in the U.S. and in other countries which are causing a huge carry trade. The dollars are invested in risky assets such as commodities, equities, and credit. An even bigger bubble than before is being created."It’s going to go crashing down, in an ugly way." "I don’t know when the correction is going to occur, it could be a while longer, but eventually it will be a pretty ugly correction, across many different asset classes."

On Gold:

He does not believe in gold. He says there are two reasons gold can go up:1. Inflation, not the case now as are are in deflation (capacity glut, weak demand, big unemployment).2. Armageddon, or another depression. He thinks this has been avoided will all the massive printing."So all the gold bugs who say gold is going to go to $1,500, $2,000, they’re just speaking nonsense. Without inflation, or without a depression, there’s nowhere for gold to go".

MyView

Roubini, Soros, Prechter and Rogers...Oh my! They are singing the same tune. The risk of 4 of the intelligent experts said of the economy is wrong at the same time is almost zero. How can two renowned academicians, and two renowned investors reading the same pattern of US Dollar (in the short and medium term) be wrong at the same time?

What the majority (more than 80%) main media and analysts said:

Market will go up

USD will continue to decline

Gold will reach all time high

Commodities will continue to go up

OK, I have never knew or heard that majority will make money in the long run, but the fact is proven that one percent of the population own ninety percent of the world's wealth.

Would you choose to listen to the 4 fellas or the 12,000 fellas out there. Well, the majority may be right for the time being, but the 4 fellas are correct in the long run and makes lots of money.