The Year In Review, and a Look Ahead to 2008 [Ticker]

Detailed market commentary at The Market Ticker and Ticker Classics (The Year 2008 In Review)
Seeing huge swings in your account value? On margin? Read my "Come to Jesus" Ticker? If not, please do. Click here.
Donations are accepted; we offer GOLD ACCESS for enhanced privileges. T-Shirts, caps and coffee mugs? Click here.
BlogTalkRadio - Mondays at 3:30 Central - Yes, TickerGuy has a radio show (kinda)
See The Federationists on their new web site and forum.

RSS available
Forum is on DONOR ONLY today due to OpEx. See the FAQ if you need a gold star!

MarketTicker Forums Read Message in Ticker

User: Not logged on

Showing Page 1 of 7

First

Last

User Info

The Year In Review, and a Look Ahead to 2008 in forum [Ticker]

Genesis
Posts: 66462
Incept: 2007-06-26

Royal Flush!

http://market-ticker.denninger.net/archi....

----------
I used to play flute; I wonder if I can play a fife?
I incite prosecutors to create "Bubba Sausage Parking Lot" projects
Darrell Issa has a middle finger and knows how to use it - Me

Last modified: 2009-01-28 10:14:57 by genesis

2007-12-29 14:48:12

Etz3l
Posts: 8658
Incept: 2007-06-26

Quote:

. To inject “cash” they temporarily take in various debt securities (Treasuries and others) from banks, and issue them cash... and when they expire, you are required to give The Fed back the cash, with, of course, interest

They inject cash but end-up removing the amount of interest from the system.

I'm confused.

----------
I could slit my wrists and people would cheer - L. Blankfein.

http://www.youtube.com/watch?v=p8jm61vk2....

2007-12-29 15:06:46

Genesis
Posts: 66462
Incept: 2007-06-26

Royal Flush!

Why are you confused?

"Liquidity" is not inflationary.

What's inflationary is expanding the monetary base at a rate which exceeds the rate of productive increase.

Liquidity is a short-term loan; it therefore cannot be inflationary and in fact has the opposite tendency as it has to be paid back with interest.

The inflationary problem came from unwarranted expansion of credit - that is, intentional mispricing of risk.

The deflationary destruction will come from the repricing of that risk to reality, which will suck the "excess" out of the system - plus the interest that cannot be paid.

Thus, the deflationary downstroke will be worse than the inflationary upstroke was, because interest insures that it must be.

----------
I used to play flute; I wonder if I can play a fife?
I incite prosecutors to create "Bubba Sausage Parking Lot" projects
Darrell Issa has a middle finger and knows how to use it - Me

2007-12-29 15:09:44

Etz3l
Posts: 8658
Incept: 2007-06-26

So the more injections the Fed does (through TOMO's), the more cash (interest) they remove from the system. Hence the deflationary tendency.

Got it. BTW, excellent piece Karl.

Thanks.

----------
I could slit my wrists and people would cheer - L. Blankfein.

http://www.youtube.com/watch?v=p8jm61vk2....

Last modified: 2007-12-29 15:55:15 by etz3l

2007-12-29 15:17:51

Guydaley
Posts: 10361
Incept: 2007-07-10

Missouri & Wyoming
Online

I NEVER fail to read a ticker and pass them along a lot of times.

I don't need to wish you a Happy New Year. If I'm floating on a cloud from success, your probably cloud like in nature, maybe cumulous, some happy looking cloud in any case.

I don't think that even grizzled veterans like yourself get tired of making easy money and you can still get a thrill from it.

2008, Year of the Bear, cheers KD!

----------
2/17/09 = Hogzilla bill was signed = THE POINT OF NO RETURN = Cheers to the Reset, LONG LIVE THE UNDERGROUND ECONOMY! STARVE the BEAST! Adopt a J6P.

2007-12-29 15:52:42

Etz3l
Posts: 8658
Incept: 2007-06-26

Check this out, hehe

Quote:

The US will be the first country to suffer, with GDP growth tipped to turn negative from the second or third quarter of 2008.

But despite some dire warnings for the US outlook, Saxo Bank, known as an online FX trading bank, predicts the troubled US Dollar will stage a comeback against an "overvalued" Euro in 2008.

The China bubble that has been the big story since the late 90's will finally and significantly burst in 2008, with the Shanghai Composite index plummeting a colossal 40pc to target 2900 by the year's end.

http://www.telegraph.co.uk/money/main.jh....

----------
I could slit my wrists and people would cheer - L. Blankfein.

http://www.youtube.com/watch?v=p8jm61vk2....

2007-12-29 16:48:04

Krzelune
Posts: 1855
Incept: 2007-10-08

That was easy to understand. I emailed the link to friends and family and felt confident they will actually read it and learn, especially since there wasn't a single "ass****"; which is where they would normally stop reading.

Thanks Karl

2007-12-29 18:14:52

Architect
Posts: 769
Incept: 2007-07-11

london UK

Great stuff, KD . I still don't get the opening argument. It strikes me that someone must have constructed the trillions of dollars (and pounds) that now sit in the CBs in Asia. The local destruction of asset value in the US will not obliterate the dollars that are out of the country

2007-12-29 18:36:37

Gmak
Posts: 10176
Incept: 2007-07-27

Re-inventing the future at the speed of time.

This is definitely one to put in the links sections, and to simply refer to all newcomer discussions on deflation / inflation etc. Just like friends or family who have been through the same discussions and jokes so many times, one of them can say "Number 15", and everyone laughs - so to can we say "Link 15" to every ad nauseum query related to the subject matter, and it would be the de facto response - and a referral.

Great synthesis, Karl, in non-APL english.

Errata:

In the hair stylist paragraph,

Quote:

cannot possibly afford a $500,000 hour

, I believe that the word "hour" should be "house".

In the paragraph relating to 0% credit card balance transfers,

Quote:

your payment goes first your “0% transfer”,

needs the word "against" after "first".

2007-12-29 18:38:57

Knob
Posts: 262
Incept: 2007-07-24
Banned

First response to Your Ticker, KD. Great Year-In-Review. THANK YOU.

"A Man's Home Is His Castle"

This is arguably the worst financial scandal of all time. It has reached into (((the American Household))) in ways that no scandal has before it.
This time it is far worse because these debt instruments were sold almost literally to ever corner of the market. The underlying “assets” are (((American homes))) which have been inflated to twice their “true value”.

At least in the Tech Wreck they weren't ****IN WITH hard assets. As WE KNOW...
it's MORE than sub-prime.

----------
Rip off all the warning labels & let natural selection take its course.

2007-12-29 18:55:16

Raster
Posts: 1884
Incept: 2007-08-16

Rar!
Online

KD - An excellent article. Truly one of your best and very much appreciated. While an "ass****" or "cranial fornication" would have been nice for the sake of nostalgia, your restraint was admirable. :)

----------
ǝɹǝɥ ǝuo ןɐɯɹou ʎןuo ǝɥʇ ɯ,ı˙˙˙dn pǝʞɔnɟ ןןɐ ǝɹɐ sʎnƃ noʎ

2007-12-29 19:25:17

Pika-steph
Posts: 37237
Incept: 2007-09-11

^Why I keep^ fighting; so he is not fighting for nothing.
Online

Quote:

Denmark Bank predicts Ron Paul presidency, U.S. depression

Marty Eels
Published 12/26/2007 - 5:02 p.m. EST

Denmark based Saxo Bank predicts Ron Paul presidency in 2008. According to Pravda.Ru, the bank predicts Paul will be the next president and that the U.S. economy will plunge into a depression prior to the election.

Saxo Bank says the U.S. economy will shrink by 25% and the Chinese economy will decrease by 40%. The economic downturn will come about as a result of the housing crash.

Ron Paul has been critical of the Federal Reserve and has blamed the Federal Reserve for causing the real estate bubble and crash. Paul has said that the loose monetary policy of the Fed had artificially inflated real estate prices which lead to the collapse.

Paul supports ‘Sound Money’ and opposes the Federal Reserve’s ‘Inflation Tax’ and says that he wants to prevent a dollar collapse. On December 16th grass roots activists organized an online protest of the ‘Inflation Tax’ and donated a record 6 million dollars to Paul’s campaign in one day.

Paul now leads all Republicans in fundraising and is best positioned to win the GOP nomination. His campaign is already financed through Feb 5th when 22 states hold primaries.

Paul also advocates the elimination of federal income taxes and a non interventionist foreign policy and is an advocate of protecting the Bill of Rights and the U.S. Constitution. Paul has maintained that U.S. foreign policy was bankrupting the country.

Saxo Bank also predicts $175 a barrel for oil and the price of grain will double. Some have predicted that oil will climb to $250 a barrel if the U.S. attacks Iran. The bank also predicts that 30% of large building companies will go bankrupt

http://www.usadaily.com/article.cfm?arti....

Apparently, one bank agrees with KD. (Well, not the RP part, the severe deflation part and the part about everyone else gets it worse than we do.)

Yeah, jeez, no 'occular penetration'? What gives?

Seriously - thank you Karl. That was tremendous. I always think you can't outdo yourself...and then you go and do it.

This one is perfect for passing on. I mean, if they don't get it after THAT, then you can clearly hang-up your hat without guilt.

----------
Stop the Looting; Start Prosecuting - http://www.FedUpUSA.org

"America is at that awkward stage. It's too late to work within the system, but too early to shoot the bastards."

Last modified: 2007-12-29 20:14:33 by pika-steph

2007-12-29 20:12:34

Lukehappy
Posts: 940
Incept: 2007-06-26

Santa Fe, NM
Online

KD,

Thank you, thank you, thank you for all you do for us!!

Happy Holidays to you and your daughter.

Pete

2007-12-29 20:30:52

Theone
Posts: 6865
Incept: 2007-08-07
They crucified the only PERFECT one
Banned

Karl,

Very NICE... thanks for all you do..

----------
Let me know when the DENIAL of who runs everything is over. Until then enjoy the circle jerk. I'm going fishing.

State of the Union --->
http://www.mindspring.com/~lcruiser/Stat....

2007-12-29 20:39:19

Risingcream
Posts: 2224
Incept: 2007-09-07

Genesis,
If this all pans out in 2008, you will have created your little army of millionaires. Great ticker and thanks for the education.

----------
Civilization...ancient and wicked. --Subotai

The trees in Siberia are miles apart, that is why the dogs are so fast. -- Bob Hope

2007-12-29 21:06:33

Georgejw
Posts: 32
Incept: 2007-08-23

Alexandria VA

Thanks for best overall ticker of the year...forwarded to my kids, sisters etc...(Mom even got this one with no "ass****s"...thanks).

BTW, my wife, who is "financially agnostic", loves your technicals and will stop her work to hear them!

I appreciate your hard work and dedication to educating the folks who are willing to listen AND THINK.

2007-12-29 21:07:31

Wontbackdown
Posts: 2076
Incept: 2007-09-20

Big Irish Boo Yeah to you Gen...(BTW I hate Cramer)
Great Ticker, never miss them, eventhough I work from 06-18.

Can we put a Post together in General with the best Tickers from 07, so we can download the best technicals..
Gen any suggestions or favourites, again really appreciate it.

2007-12-29 21:49:23

Wontbackdown
Posts: 2076
Incept: 2007-09-20

By the way, the Avatar is off Nick Leeson for those of you who want to know..
He is after taking over the running of the Local Soccer Team...

2007-12-29 21:52:36

Donja
Posts: 119
Incept: 2007-08-10

KD,

Excellent Ticker!!

You say:

"The Fed has been de-leveraging its own balance sheet . . ."

First background, then a question:

As I understand it, the Fed is limited in aggressively reducing interest rates and expanding monetary base because reserves would pile up in banking system (banks hoarding cash) causing Fed fund rate to dive. With low demand for credit, the FFR drops below target. To raise target, the Fed would have to drain liquidity.

With this in mind, then, my question: how has the Fed been de-leveraging, and related to this, why has the Fed been de-leveraging (beyond the anticipation of deflation)?

2007-12-29 21:53:37

Ailujailuj
Posts: 9088
Incept: 2007-08-22

NYC --->LA

G
That is the best piece of writing to date.

Thank you.

----------
"Political correctness is a doctrine, fostered by a delusional, illogical minority, and rabidly promoted by an unscrupulous mainstream media, which holds forth the proposition that it is entirely possible to pick up a turd by the clean end." ...courtesy of vegasgirl

2007-12-29 22:37:10

Snooze
Posts: 1560
Incept: 2007-07-09

florida

Very well written. Thanks for all the effort.

The corn illustration is right on the money and warms the heart of an old farmer like me. You even used Parity to illustrate the correct pricing of the additional corn production. A fundamental concept lost on most "economists" these days.

Happy New Year.

----------
The past is the prologue of the future. BOHICA

2007-12-29 22:55:15

Financeguy
Posts: 4719
Incept: 2007-08-10

Charlotte

KD

What can I say? This is the best ever- simple to understand, right on content and even with language that can be forwarded to family and friends! Thanks for all that you do for the forum crowd and others with this public service. Those of us that have participated on the forum and have followed your insight will be well prepared for the next few years.

Many of us have also done our best to try and prepare others for the coming storm in the financial markets and you should be very proud of what you have accomplished. Hopefully our great country will emerge from this even stronger and with a renewed confidence that one person (or a small group of folks) working together can change things for the better.

Happy New Year my friend and to all of my new friends on the forum....

----------
"Granted, if you are not into Barbara Streisand and creme brulee, South Beach could be a tad lonely." Eleua

2007-12-29 22:56:15

Aimdog
Posts: 7
Incept: 2007-09-18

san diego

Great Ticker...you defenitly have a gift of explaining the truth to people who have no idea or just choose to ignore whats really happening.

Last modified: 2007-12-29 23:07:42 by aimdog

2007-12-29 23:05:53

Cameljoe
Posts: 804
Incept: 2007-08-21

Just pickin' stocks.
Online

Great ticker, thanks as usual KD.

----------
I SEE DEBT PEOPLE.
The best answer to your problems?
= Personal responsibility.

2007-12-29 23:31:08

Peace
Posts: 688
Incept: 2007-07-09

San Diego

Karl, thank you for the time you spent in this Ticker. I know how time consuming it is to write a good article, and this one is much appreciated.

A couple comments:
* retail numbers are even worse when you consider that the number of stores increased by 5% (David Horowitz)
* subprime and lending deflation is even worse when you include the leverage used
* I'm not sure that gold is destroyed in deflation. Gold, according to Mish, prospers in both deflation and inflation. It might be interesting for you to debate him on this. In any case, physical assets should be part of one's portfolio...I feel too scared having only paper assets.
* You recommend buying calls, but what happens if the counterparty goes bust? Can Citigroup (or other option maker) pay on the options when they go bust?

2007-12-29 23:50:10

Showing Page 1 of 7

First

Last