Time to Short

[Arklatex]

Don't know how wise I am, but I have purchased FAZ, DPK, ERY, and RYNVX these last two days.

My thoughts, I don't think WW3 will be allowed to happen. Oh they'll put on a show, use their connections in the media for drama of war games and I certainly know of war profiteering and their "false-flag" antics but my heart says it will not be allowed to happen this time - oh I know they are trying but I have a hunch it won't materialize. Oil would then drop and rightfully so. I think Financials are due for a dose of reality. I believe the pressure on the Fed not to monetize is tremendous thanks to the energies that we have helped bring about into the collective conscious. Congressman are less likely to support bailouts due to our political pressure. Hardly any congressman wants to say "I voted for the bailout" and debt ceiling increases.

I think the Federal Reserve banks and elite equity interest in the Fed are scared for survival. Their only weapon methinks is to allow for a stronger dollar to let the market fall to teach us nay-sayers(us Sound Money believers) a lesson to give the illusion that the Fed is vital.

My timing is certainly not going to be spot on, but i believe within these next few weeks we will see a stronger dollar and market drop.

In the long term, one way or another granted their is not debt liquidation(forgiveness) the US Govt must use inflated currency to pay the interest on our debt. Therefore certainly my largest holding is the shiny yellow.

Any thoughts? How crazy am I? Where is gonegolfin?

Cheers and Blesses!

[The Gold Standard]

The only way to accomplish that is to raise interest rates which would immediately bankrupt the federal government. Are they willing to do that? I doubt it, but I could be wrong.

[Brian4Liberty]

Any thoughts? How crazy am I?

http://www.ronpaulforums.com/showthr...ike-2008-again

[Arklatex]

Are they willing to do that?

Is who willing to do that?

Factions exist within factions

[Brian4Liberty]

My stock broker actually said that jumping out of the market right now is a good idea. Not that I have ever taken any advise from him.

[The Gold Standard]

Is who willing to do that?

Factions exist within factions

The Fed. You said the Fed is going to strengthen the dollar. That means they stop printing money to hold down interest rates, and if they go up to 12% or so then that means the federal government defaults on it's debt because the cost of rolling over the debt will be more than federal revenues. Is the Fed willing to bankrupt the U.S. government to strengthen the dollar?

[Liberty74]

The Fed. You said the Fed is going to strengthen the dollar. That means they stop printing money to hold down interest rates, and if they go up to 12% or so then that means the federal government defaults on it's debt because the cost of rolling over the debt will be more than federal revenues. Is the Fed willing to bankrupt the U.S. government to strengthen the dollar?

Our government is already bankrupt from my opinion. It just a matter of when and how it will fall...kinda of like what is going on in Greece and the rest of the European countries who have worse mass debt loads than we do.

Something has to give and go. The dollar or the government? Maybe both???

[Arklatex]

Is the Fed willing to bankrupt the U.S. government to strengthen the dollar?

What if certain interests (who have pull within the banking cartel) stood to gain from a bankrupt U.S. Government. Just campfire talk.

[youngbuck]

What if certain interests (who have pull within the banking cartel) stood to gain from a bankrupt U.S. Government. Just campfire talk.

That could happen, and then we could end up back at a gold standard, or at least a non-fiat currency.

[DRHChi]

I don't think there is much the Fed can do at this point, the money is already created and in the hands of the banks. They are solvent and inflation is setting in. Banks may have trouble making a lot of money in a high inflation environment but they are still trading well below book value. As long as they stay solvent, and they will, the stock prices are going to head a lot higher. Especially Citi and Bank of America.

The Fed has a few tools to reduce the money supply but they probably won't realistically be able to use them.

I'm not saying we're not going to have a short term technical pullback, although I'm not necessarily expecting one. But all signs are pointing to much higher stock prices over the medium to long term, especially for the banks.

[Domalais]

I don't think there is much the Fed can do at this point, the money is already created and in the hands of the banks.

The Fed removes money from circulation by selling Treasury bonds.

[The Gold Standard]

The Fed removes money from circulation by selling Treasury bonds for as much or more than they paid for them.

Fixed that for you. Of course if interest rates rise then they will take a bath on the treasuries they try to sell, so they won't be able to pull much of that money out.

[Arklatex]

but they are still trading well below book value.

How much was Lehman worth compared to it's "Book Value" Book value as determined by who - which angels?

[RonPaulGetsIt]

I agree the time is ripe for another "deflation scare" to get people interested in buying bonds again.

More here: http://www.freemarketfan.com/2012/03...t-to-hide.html

[DRHChi]

How much was Lehman worth compared to it's "Book Value" Book value as determined by who - which angels?

It's not 2008/2009 anymore. The money supply has gotten a lot bigger and all of the big banks other than Lehman benefited. On top of that, the whole point is inflation will drive up the value of bank assets and actually make their "Book Value" stronger and stronger and less tenuous. If you want to bet against a bank by believing its book value is overstated in a stiff inflationary environment then good luck, but it doesn't make any sense to me.

[Bern]

The Fed removes money from circulation by selling Treasury bonds.

Yeah but, who's buying them?

[Domalais]

Yeah but, who's buying them?

Banks. They have the excess funds sitting as unprofitable excess reserves, after all.

[Domalais]

Fixed that for you. Of course if interest rates rise then they will take a bath on the treasuries they try to sell, so they won't be able to pull much of that money out.

Doesn't matter if they take a bath or not, since they give all their profits to the Treasury anyway.

[Jandrsn21]

I don't see another 2008 style collapse.

[The Gold Standard]

Doesn't matter if they take a bath or not, since they give all their profits to the Treasury anyway.

The way they remove money from the money supply is to sell the assets from their balance sheet. If they only get half as much for them as they paid, then they still have half of the money on their balance sheet and in the banking system. They can not pull out all of the money they pumped in. Your brilliant exit strategy is a failure.

[Domalais]

The way they remove money from the money supply is to sell the assets from their balance sheet. If they only get half as much for them as they paid, then they still have half of the money on their balance sheet and in the banking system. They can not pull out all of the money they pumped in. Your brilliant exit strategy is a failure.

Then they sell twice as many bonds.

The 'issue' you are bringing up is only a problem if the Fed intends to remove ALL the money from the money supply, and run out of assets to do so. Something tells me that abolishing the Federal Reserve Note is not on Bernanke's to-do list.

[Domalais]

I thought I should bring some actual numbers into the equation. The Fed holds $1,659,768,XXX,XXX in Treasury bonds as of 15 March.

The last available measure of M3 was in 2006. Then, it was ~$10 trillion, which was double the M2 at the time. If the current M3 is also double M2, that puts M3 at about $20 trillion. With the current monetary base at ~$2.7 trillion, quick-and-dirty money multipler math gives you ~7.4. That means that for each dollar of monetary base, monetary expansion due to fractional reserve banking yields a total of $7.4. That's lower than the money multiplier you would estimate from the required reserve ratio, but that difference can be explained by the $1.6 trillion of excess bank reserves that are not in circulation.

Using 7.4 as the multiplier, that means that the Fed could remove about $12 trillion from the money supply if they sold all their bonds at current value. If we use your pessimistic situation and assume that they sell for only half of their value, $6 trillion, that is still enough to remove 60% of the M2 money supply from circulation. More than enough to cause an instant global economic catastro$#@!.

[archangel689]

Don't know how wise I am, but I have purchased FAZ, DPK, ERY, and RYNVX these last two days.

Too Early. This is an election year, they're going to inflate the $#@! out of the currency to buy votes, etc.... wait until after the election is over...

[DRHChi]

I thought I should bring some actual numbers into the equation. The Fed holds $1,659,768,XXX,XXX in Treasury bonds as of 15 March.

The last available measure of M3 was in 2006. Then, it was ~$10 trillion, which was double the M2 at the time. If the current M3 is also double M2, that puts M3 at about $20 trillion. With the current monetary base at ~$2.7 trillion, quick-and-dirty money multipler math gives you ~7.4. That means that for each dollar of monetary base, monetary expansion due to fractional reserve banking yields a total of $7.4. That's lower than the money multiplier you would estimate from the required reserve ratio, but that difference can be explained by the $1.6 trillion of excess bank reserves that are not in circulation.

Using 7.4 as the multiplier, that means that the Fed could remove about $12 trillion from the money supply if they sold all their bonds at current value. If we use your pessimistic situation and assume that they sell for only half of their value, $6 trillion, that is still enough to remove 60% of the M2 money supply from circulation. More than enough to cause an instant global economic catastro$#@!.

Thanks for that, Domalais. But I think you would agree that the above situations you describe are incredibly unlikely. I personally think it is unlikely that we'll see any tightening whatsoever through 2012, and only a small chance we'll see some toward the end of 2013.

[Seraphim]

Short side trading the stock market is UBER dangerous - not because it's hard to time (it is, but...) because the markets are rigged and the big banks/FED will simply keep pumping and pumping and pumping with more phunny munny.

For us small time retail investors, you are MUCH better off buying the dips than shorting.

The goal is the debasement of the USD. In real terms the DOW/NYSE will continue to decrease - in nomimal terms I doubt it's going to drop much, and calling the precise moments in which it will is very, very difficult.

I wouldn't ever recommend shorting this market to anyone.

If you do short though, I hope you make an absolute killing.

[Bern]

Re: Time to short

(linked from the Yahoo! front page yesterday):

Goldman Sachs: Best Time in a Generation to Buy Stocks, Sell Bonds

http://finance.yahoo.com/blogs/break...154722104.html

Caveat emptor (expect stocks to take a bath)!

[airborne373]

Don't know how wise I am, but I have purchased FAZ, DPK, ERY, and RYNVX these last two days.

My thoughts, I don't think WW3 will be allowed to happen. Oh they'll put on a show, use their connections in the media for drama of war games and I certainly know of war profiteering and their "false-flag" antics but my heart says it will not be allowed to happen this time - oh I know they are trying but I have a hunch it won't materialize. Oil would then drop and rightfully so. I think Financials are due for a dose of reality. I believe the pressure on the Fed not to monetize is tremendous thanks to the energies that we have helped bring about into the collective conscious. Congressman are less likely to support bailouts due to our political pressure. Hardly any congressman wants to say "I voted for the bailout" and debt ceiling increases.

I think the Federal Reserve banks and elite equity interest in the Fed are scared for survival. Their only weapon methinks is to allow for a stronger dollar to let the market fall to teach us nay-sayers(us Sound Money believers) a lesson to give the illusion that the Fed is vital.

My timing is certainly not going to be spot on, but i believe within these next few weeks we will see a stronger dollar and market drop.

In the long term, one way or another granted their is not debt liquidation(forgiveness) the US Govt must use inflated currency to pay the interest on our debt. Therefore certainly my largest holding is the shiny yellow.

Any thoughts? How crazy am I? Where is gonegolfin?

Cheers and Blesses!

Interesting read. This hypothesis is basically what I am working on for the time being. Since I am new to trading (mostly commodities for now) I am no expert and will not offer any advice. But instead thank those who are sharing their thoughts.

Thank you.

[Brian4Liberty]

Who made money shorting?

[ILUVRP]

overall the mkt will trade on 2 things , fear or greed , anything else is just the market making noise.l

with the fed giving the banks money for free , you have greed.

with isreal wanting to take out iran ( with our help ) , you have fear.

w/o 401k's pumping the market every week and the banks getting all the free money they want i would be very leary about shorting this mkt .

buy puts and limit your losses.