[Lemmo]

(06-07-2012 01:23 AM)chinogringo Wrote:  

I've been playing the leveraged ETFs both ways - FAS and FAZ. I also like SPXU.

I've been doing the same but playing with that much leverage is a dangerous game.

[nash23]

Yes, the euro govt debt crisis is looking more and more like how the next global financial crisis and subsequent economic depression is going to go down.

this in conjunction with the derivatives market where huge bets are made by banks that pretty much go unchecked and unregulated - the size of the market is apparently about 10 times the size of the global stock and bond markets. banks' lack of transparency on what derivatives they hold are also a huge issue right now

This is the series of events as i see it - Euro govt debt default and derivatives payoff gets triggered, banks default
because of euro govt debt and derivatives payoff exposure,
govt/taxpayers bail banks out, banks' funding cost goes thru the roof,
banks stop lending to businesses, businesses fail as a result, people
lose their jobs and unemployment goes above 20%.

Central banks cant do much as interest rates already currently near 0%, inflation may also flare up because so much money has been printed over the last few years. that would be worst scenario - depression with hyperinflation.

the question is when this pans out, what assets should people hold to protect or even build their wealth?? i guess exposure to defensive blue chips paying high dividends and with low leverage is part of the answer. be interested in hearing thoughts on this

[kosko]

Yes indeed estimates of the Shadow Dirvitves market is pegged at 1.5 Quadrillion. To put that intp perpesctive the whole economic output of Earth is only 50 Trillion. So Wall Street and the rest of the markets have gambled so much debt that it supersedes all the tangible wealth on earth. This is why you see what is going on right now The banks are looting Governments world wide trying to shore up their losses. Govt since they are corrupt are agreeing to chase this black hole by making us the people pay.

I say deflation is more of an issue. Eventually they will run out of money to throw at these debts. There is not enough money on earth to fill the whole. My guess is that globally you will get a number at ... surprise..surprise 50 trillion in which Govt would of printed up that amount and thrown at the banks. After this there will be deflation and most asset prices will plummet while debts will become impossible to pay back. Govt are praying for inflation as it will be a cop out for them and they can simply blow the bubble to shave off the debts but you see that America and the EU have thrown probably close to 15-20 Trillion since 2008 and we are still in negative or meager growth.

As far as assets go. The greatest asset known to mankind that supersedes gold which is a artificial hedge is... Land. No other asset has its value guaranteed or protected like land. This is what mega-rich invest in - aside from them hoarding gold they also horde land. Blue chips will give you secure gains, Gold will hold your wealth but the asset has no legitimate value and is heavily manipulated. Land long-term will out preform as it always has for hundreds of years.

War, the single greatest expenditure a country can make aside from nationalist or cultural disputes IMO it is purely based on the struggle of land. The majority of conflicts start over land disputes or hostile take overs. Europe was in continual war for almost 1000 years to settle disputes over the land their ethnicities resided on.

Coping a tract of farmland in South America will do more for your pocket then a play in 3M or TD Bank ever would.

[chinogringo]

Do you think the central banks will sit on the sideline and let this deflationary spiral take place? Will they let countries and banks fail?

I think not. The FED and ECB are all out of bullets. All they can do is print money and bailout entities. They have no other option. They will not let the system fail, no way.

Sure, precious metals may pullback. However, we will be seeing a lot more "QEs" and in the long run, gold will be the safe haven when inflation kicks in.

The US dollar and Treasuries are seen as safe havens. However, the US is in worse shape. After Europe blows up, the focus will be on the US, and then.. well who knows, but you can bet gold will be trading a lot higher.

Get ready to put that printing press on overdrive BEN!! QE3 here we come!!!!

(06-08-2012 12:30 AM)T and A Man Wrote:  

Gold/Precious metals, historically is not a good holding in a deflationary environment. That's not sound advice at all. if you foresee a european blow up thattakes down asset prices. You would not be wise holding gold at all, you would expect gold to track prices downwards.

It has historically been a store of value when recovery from a crisis is fueled by a massive injection in the monetary supply. This has happened with QE (x2), but we have yet to see inflation.

A Euro blow up will most likely see further deflation in the short term.

However, in ANY deflationary environment, you want to eliminate debt.