US Credit Bubble?

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DOW THEORY LETTER - RICHARD RUSSELL

"January 7, 2013 -- "You may delay, but time will not." Ben Franklin
.................................................

You and I are witnessing perhaps the greatest bubble in world financial history. And yes, it's the amazing American credit bubble. Honestly, no one knows exactly how large this credit bubble is. We have already run up a national debt of roughly $16.432 trillion. Further, we have unfunded future liabilities of anywhere from $50 trillion to $100 trillion (I have seen estimates of both figures -- Niall Ferguson claims our unfunded liabilities are $238 trillion). I'm afraid the gigantic credit bubble is doomed to topple over and splatter. It will burst when the credit of the United States is no longer accepted by our creditors.

The US will never default on its debts. That would be an unthinkable admission of sovereign bankruptcy. No, the US will, and is, following a different and time-tested method. The US will devalue the dollar, and thus attempt to pay off its debts with billions of devalued "mini-dollars." Of course, this is a form of subtle, legal robbery.

Suppose you just borrowed a thousand dollars from a friend to be paid off in the year 2030. In 2030 you pay off your debt in devalued "mini-dollars." Your friend screams, "This is thievery -- what the hell are you giving me? I can't use this junk!" You smile and say, "C'mon, I borrowed a thousand dollars from you, and I'm paying off my debt with a thousand newly-minted dollars, just as I promised you. I paid you off, so what are you squawking about?" Thus ends our friendship.

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Rewdog (Jan. 09, 2013 @ 9:22a) |

Well, you can place the Hugh Hendry bets. Short Japanese corporate bonds to try to bet against the yuan peg to the US d... (more)

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R.Russell's (in OP) predicts inflation flare-up. My opinion (unless someone knows better) is that he's profited more fro... (more)

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And your opinion on this subject is???? or did you just want cut and paste us an article that belongs on your blog and not FWF?


What is this sorcery
Disclaimer
Inflation!?

I'm sure there will be plenty of opinions

SinglePapa said:   I'm sure there will be plenty of opinions

My opinion is that you should have one, or not post a new thread.

Maybe every finance forum needs a little corner where the fringe can have a little doom porn orgy.

hey, there are people who successfully sell their opinion:
http://www.ireallytrade.com/2013forecastreport

and then there people who listen, make own conclusions and trade

Yes. The US credit card will run out. But it's going to be a long time until their is equivalent debt issuance as safe as US Treasury securities.

Look at the Pentagon like a very good repo service and then ask what other country has an equivalent.

GS chimes in:

The debt limit was formally reached last week, and we expect the Treasury's ability to borrow to be exhausted by around March 1 (if not before) and while CDS are not flashing red, USA is at near 3-month wides. Like the previous debt limit debate in the summer of 2011, the debate seems likely to be messy, with resolution right around the deadline. That said, like the last debate we would expect the Treasury to prioritize payments if necessary, and Goldman does not believe holders of Treasury securities are at risk of missing interest or principal payments. The debt limit is only one of three upcoming fiscal issues, albeit the most important one. Congress also must address the spending cuts under sequestration, scheduled to take place March 1, and the expiration of temporary spending authority on March 27. While these are technically separate issues, it seems likely that they will be combined, perhaps into one package. This remains a 'very' recurring issue, given our government's spending habits and insistence on its solvency, as we laid out almost two years ago in great detail.

Via Goldman Sachs: Q&A On The Debt Limit (Alec Phillips)

Q: What is the debt limit?

A: It is a legal limit on Treasury's borrowing imposed by Congress. Under the constitution, Congress, not the Treasury, has authority to borrow. Congress delegates this authority to the Treasury. Instead of approving each single debt issuance (as was done many years ago) it imposes an overall limit on debt that may be issued, leaving the Treasury to work out the details. The limit is currently $16.394 trillion.

Q: What is covered under the debt limit?

A: Marketable and nonmarketable debt held by the public, the Fed, and in government accounts. Debt held by the public ($11.6 trillion) consists of marketable securities held by domestic and foreign investors ($9.9 trillion) and marketable securities held by the Federal Reserve ($1.7 trillion). Intragovernmental debt ($4.9 trillion) consists almost entirely of nonmarketable debt held by government trust funds. Most of these trust funds finance specific programs, like Social Security.

Q: When will it be reached?

A: The formal limit has already been reached but the Treasury probably has enough headroom to last until March 1. The Treasury reached the statutory limit on debt on December 31. Since then, public debt outstanding has been held at $25mn under the limit. Even though the Treasury has reached the limit, it can continue to borrow through use of "extraordinary measures."

The Treasury has instructed Congress that it expects to have about $200 billion in "extraordinary measures" at its disposal, which will allow it to continue to borrow under the debt limit. January tends to be a low-deficit month and will probably produce a monthly deficit of $20bn to $30bn. February is a heavy deficit month, and in the last three years has produced a deficit of $220bn to $230bn. This year's February deficit is likely to be smaller than those years, as is the fiscal year deficit as a whole, but it still looks likely to be at least $200bn.

On December 28, the last business day before the debt limit was reached, the Treasury's cash balance stood at $59bn. Along with the "extraordinary measures," this should allow the Treasury to continue to pay its obligations without an increase in the debt limit until at least sometime in the second half of February, even if the budget deficit is at the high end of the range of the last few years. If the deficit over the next two months is slightly lower than the last few years, as we expect, the Treasury seems likely to get to March 1 before it exhausts its funds. Likewise, if the Treasury is able to increase the amount of headroom created by its "extraordinary measures" beyond the $200bn it has estimated, it might also extend the date it would exhaust its borrowing capacity.

Q: What are the "extraordinary measures" the Treasury can use to extend the deadline for raising the debt limit?

A: The primary strategies involve disinvesting government trust funds of Treasury securities. These have been ahead of several previous debt limit increases and have come to be known as "extraordinary measures." There are three primary strategies the Treasury can use to create additional headroom to borrow under the limit:

•Partial disinvestment of the federal employee defined benefit pension fund (creating $33bn to $93bn in headroom). The Civil Service Retirement and Disability Fund (CSRDF) receives contributions for current employees of $2bn per month and pays out $6bn per month to former employees. Once the debt limit has been reached, the Treasury may redeem securities equal to expected payments and may suspend new investments. The amount of the redemptions depends on the Treasury's declaration of a "debt issuance suspension period" (DISP). For each month it is expected to last, the Treasury can redeem one month's expected payments. In prior debt limit impasses, DISPs have been declared to last as short as two months to as long as 12 months, creating headroom of between $12bn and $72bn, along with a few billion more from non-investment of new inflows. A similar provision related to postal retirement creates $17bn more in flexibility. The upshot is a minimum of about $33bn in headroom and an upper bound of $93bn (in the case of a 12-month DISP), though the law is vague so it is at least possible that an even longer DISP could be declared if necessary.
•Disinvesting the "G Fund" ($156bn in headroom). The "Thrift Savings Plan" is a defined contribution system for federal employees, which provides several investment options including the G Fund that invests only in government securities. Federal employees and retirees currently have $156bn invested in the G Fund, and the Treasury can temporarily replace some or all of those Treasuries that count toward the debt limit with an IOU that does not.
•Disinvesting the Treasury's Exchange Stabilization Fund ($23bn in headroom). This fund can be used by the Treasury in a number of ways, with little oversight by Congress. The $23bn portion of the fund invested in dollars is in non-marketable Treasuries, which could be disinvested immediately if necessary.
Q: What happens if Congress does not raise the limit by the deadline?

A: The Treasury would need to immediately reduce outlays to equal income. Without an increase in the limit, the Treasury would not have cash on hand to pay obligations as they come due. Over the next three months, the Treasury is likely to spend roughly 40% more than it takes in, and without a debt limit hike it would need to immediately eliminate this deficit. While the Treasury would probably be able to prioritize spending, it isn't clear what the priorities are, and regardless of which priorities were chosen, the overall reduction in federal spending could result in a sharp downturn in near-term economic activity if it persisted for more than a very short period.

Ahead of the 1985 debt limit increase, the General Accounting Office (GAO, now known as the Government Accountability Office) advised the Senate Finance Committee that the Treasury had the authority to choose the order in which to pay obligations. Whether this opinion still holds today in light of legislation enacted since then is unclear. Prioritization did occur previously, following expiration of a temporary increase in the debt limit on July 1, 1957. As the federal government began to run a budget deficit, the Treasury was forced to delay payments to federal contractors in order to avoid breaching the limit (see for example Treasury Sec. Douglas Dillon's account of the events in "Key Areas in Current Economic Policy", Federal Reserve Bank of New York Monthly Review, June 1963). More recently, as the debt limit approached in early 1996, the Treasury indicated that failure to raise the debt limit would result in failure to make Social Security payments, though Congress provided relief before any delay occurred (see "Debt Ceiling: Analysis of Actions Taken During the 1995-1996 Crisis," GAO, 1996.)

Q: What about Treasury-related payments?

A: A failure to pay interest or principal is unlikely, as it was in the last debt limit debate. The Treasury has around $35bn in semi-annual coupon interest to pay on February 15. There is a good chance that the Treasury's "extraordinary measures" will last longer than this. However, smaller payments of around $6bn and $1bn are scheduled on February 28 and March 15, around the time the Treasury will exhaust its borrowing ability. If Congress has not increased the debt limit by that point, the Treasury seems likely to prioritize spending to make sure these payments are made or to extend its "extraordinary measures" so that it can borrow the amounts to make the payments. The Treasury's ability to roll over existing debt is even less likely to be affected, since replacing maturing debt with new issues should not add to stock of Treasury securities outstanding. Nevertheless, significant volatility could occur around Treasury auctions should Congress fail to raise the debt limit in a timely manner.

Q: If other non-interest payments are missed, would that constitute a default?

A: Not from the rating agency perspective. While some of the public commentary has referred to a failure to make scheduled payments on other obligations as a "technical default," the rating agencies are not required to respond in any particular way to a failure to make other payments. Ratings assigned by the three major rating agencies relate to the government as an issuer of securities and the payment of interest and principal on those securities. That said, a failure to make a scheduled payment could still be seen as a sign of increased risk, so it could still have ratings implications. For example, Fitch Ratings has said it might downgrade the US rating by one notch if the debt limit is not raised in a timely manner; it seems likely that an inability to make scheduled payments would trigger the type of downgrade Fitch has described.

Q: How long might the debt limit increase last?

A: It could last as long as two years or as short as a few months. President Obama has made clear he does not want to return to periodic debates on the debt limit and he is likely to push for at least a two-year extension, which would probably require an increase of around $2 trillion. House Speaker Boehner insists that any debt limit increase should be matched with spending cuts of an equal amount (when measured over ten years). If lawmakers were able to agree on a "grand bargain" involving significant entitlement cuts as well as new revenues, this could allow for enough budgetary savings (if not spending cuts) to allow a debt limit increase lasting two years or so.

However, another increase in tax revenue beyond the one enacted last week seems off the table for now, and there is little left to cut from the "discretionary" segment of the budget that was already cut significantly in 2011. The only major area of the budget left to cut is "mandatory" spending--mainly entitlement programs--but neither party has proposed more than several hundred billion dollars in specific, politically achievable cuts in this area.

If Congress can't agree on cuts to match a substantial increase in the debt limit, lawmakers have a few other options. Congressional Republicans could shift their goal to enacting a few key changes to entitlement programs, rather than hitting a particular dollar target. To make a smaller budget deal look larger, lawmakers might also consider a cap on overseas war spending, which could produce several hundred billion dollars in savings compared with official projections, even though most realistic budget projections (including our own) already assume this spending will decline. Either strategy could allow the debt limit to be increased by at least $1 trillion, good for about a year.

If neither of those strategies work out, the fallback plan would simply be a smaller increase in the debt limit. While larger increases in the debt limit that last 1-2 years have become the norm over the last decade, this was not always the case. In prior periods it was not uncommon to see increases that lasted only a few months, or in some cases just a few days. So while we assume that Congress will enact a longer-lasting increase in the debt limit this year, it would not be unheard of for one or more short-term extensions to come before the longer-lasting increase.

Q: How does the debt limit relate to other upcoming fiscal debates?

A: The debt limit is the most important of three separate fiscal issues Congress must address in Q1. Beyond the debt limit, congressional leaders and the President must work out two other issues: further delay in spending cuts under "sequestration" and an extension of government spending authority. While these are separate issues, it is clearly possible that all three could be wrapped up into one agreement.

Spending cuts under sequestration are scheduled to take effect from March 1, 2013. Those cuts had been scheduled to take effect January 1, but were delayed two months as part of the fiscal compromise reached last week. In the upcoming debate lawmakers will aim to delay those cuts once again, offsetting the increased spending that would result with savings (spread over ten years) from other areas of the budget.

A month later, on March 27, the temporary extension of spending authority (known as a "continuing resolution") that Congress enacted last year expires. Congress is likely to extend spending authority to September 30, the end of the current fiscal year, but lawmakers must first agree on a spending level. If no agreement is reached by March 27, all non-essential government operations funded by congressional appropriations would cease. However, while this sounds severe, it is far less of a risk to the economy or the market than a failure to raise the debt limit, since the lapse would be temporary and the payments that would cease are clearly categorized, would have no effect on Treasury financing nor on most payments to individuals, and are of a smaller overall size.

wanted my opinion? I'll put Fiscal Cliff put in a much easier to comprehend perspective.

Lesson # 1:

* U.S. Tax revenue: $2,170,000,000,000
* Fed budget: $3,820,000,000,000
* New debt: $ 1,650,000,000,000
* National debt: $14,271,000,000,000
* Recent budget cuts: $ 38,500,000,000

Let's now remove 8 zeros and pretend it's a household budget:

* Annual family income: $21,700
* Money the family spent: $38,200
* New debt on the credit card: $16,500
* Outstanding balance on the credit card: $142,710
* Total budget cuts so far: $38.50

Lesson # 2:

Here's another way to look at the Debt Ceiling:

Let's say, you come home from work and find there has been a sewer backup in your neighborhood....
and your home has sewage all the way up to your ceilings.

What do you think you should do ......

Raise the ceilings, or remove the sxxx?

Let's now remove 8 zeros and pretend it's a household budgetI stopped reading there.

meaning what: over-simplified?
ZenNUTS said:   Let's now remove 8 zeros and pretend it's a household budgetI stopped reading there.

SinglePapa said:   wanted my opinion? I'll put Fiscal Cliff put in a much easier to comprehend perspective.So that's *your* opinion? Then are you:

This person?
This person?
This person?
This person?
This person?

etc., etc., etc.

BTW, you didn't copy/paste the mathematically correct one, the "Total budget cuts so far:" should be $385, not $38.50

SinglePapa said:   

Let's now remove 8 zeros and pretend it's a household budget:
False comparison. Fiat money does not work that way

Its the difference between macroeconomics and micro

interesting. so what do u anticipate, ellory?

SinglePapa said:   interesting. so what do u anticipate, ellory?I can't predict what dysfunctional politicians will do

Personally I am hoping for the $1 Trillion coin so they can go work the real issues

also interesting how everyone just clicks red and no one in fact says what resolution they see for this market situation

SinglePapa said:   wanted my opinion? I'll put Fiscal Cliff put in a much easier to comprehend perspective.

Lesson # 1:

* U.S. Tax revenue: $2,170,000,000,000
* Fed budget: $3,820,000,000,000
* New debt: $ 1,650,000,000,000
* National debt: $14,271,000,000,000
* Recent budget cuts: $ 38,500,000,000

Let's now remove 8 zeros and pretend it's a household budget:

* Annual family income: $21,700
* Money the family spent: $38,200
* New debt on the credit card: $16,500
* Outstanding balance on the credit card: $142,710
* Total budget cuts so far: $38.50

Lesson # 2:

Here's another way to look at the Debt Ceiling:

Let's say, you come home from work and find there has been a sewer backup in your neighborhood....
and your home has sewage all the way up to your ceilings.

What do you think you should do ......

Raise the ceilings, or remove the sxxx?


You copy/pasted both of those, too.

now since everyone had a chance to contribute on subject of copy/pasting, maybe at least one person will contribute on subject of this market situation...

Everyone just watches bubbles and later complains after the fact (of their bursting). Another tendency is to look at everything is strictly political or social matter. OP is about a financial market of opportunity. A good trader can make lifetime's earnings with a timely entry in this market

Obviously, wealthy individuals with internationally distributed assets would be less affected by the collapse of any one fiat currency. As a point of historical interest, farmers who can maintain the ability to grow crops have fared better than those outside of agriculture. Sorry, I can't offer any trading tips. You might try "Money" magazine or "Mad Money" if that's what you were going for.

ellory said:   SinglePapa said:   interesting. so what do u anticipate, ellory?I can't predict what dysfunctional politicians will do

Personally I am hoping for the $1 Trillion coin so they can go work the real issues


A $1 Trillion coin would be an additional $1 Trillion obligation of the US Government. It might be seen as a ready willingness of the US to devalue it's currency, thereby reducing the "full faith AND CREDIT" of the US Government. The "real issues" might then grow to include international charges of currency manipulation, trade crises, and financial instability. The administration would likely argue that our currency is still being controlled by Congressional authorizations, yet the world financial markets could ask, "so how is Congress controlling it's authorizations? Be careful what you hope for.

SinglePapa said:   also interesting how everyone just clicks red and no one in fact says what resolution they see for this market situation

Apparently you don't understand what the voting means. Red means your post is stupid. It does not obligate a rebuttal.

SinglePapa said:   now since everyone had a chance to contribute on subject of copy/pasting, maybe at least one person will contribute on subject of this market situation...

Everyone just watches bubbles and later complains after the fact (of their bursting). Another tendency is to look at everything is strictly political or social matter. OP is about a financial market of opportunity. A good trader can make lifetime's earnings with a timely entry in this market

I could have made a lifetime earnings holding all the DTG and PCLN stock I bought in 2009
Till today

Doesn't take a good trader , I'm sure not one

SinglePapa said:   wanted my opinion? I'll put Fiscal Cliff put in a much easier to comprehend perspective.

Lesson # 1:

* U.S. Tax revenue: $2,170,000,000,000
* Fed budget: $3,820,000,000,000
* New debt: $ 1,650,000,000,000
* National debt: $14,271,000,000,000
* Recent budget cuts: $ 38,500,000,000

Let's now remove 8 zeros and pretend it's a household budget:

* Annual family income: $21,700
* Money the family spent: $38,200
* New debt on the credit card: $16,500
* Outstanding balance on the credit card: $142,710
* Total budget cuts so far: $38.50

Lesson # 2:

Here's another way to look at the Debt Ceiling:

Let's say, you come home from work and find there has been a sewer backup in your neighborhood....
and your home has sewage all the way up to your ceilings.

What do you think you should do ......

Raise the ceilings, or remove the sxxx?


Why does it have to be credit card debt? Why can't be a mortgage or a car loan? The reason I ask is because it makes a big difference. Debt in and of itself is not bad, it depends on what one does with the debt. If a family takes out low interest loan to buy a house so they reduce their long term housing cost, or a car so they can travel to a new job that will earn more money, that's not a bad thing. The same is true for the government, if they are borrowing to build roads and infrastructure and such that will improve the economy and thus grow the tax base its good thing.

You're argument is overly simplistic, and as others have pointed out, just copied and pasted from other sources. Thus all the red.

EndlessKnight said:   
Why does it have to be credit card debt? Why can't be a mortgage or a car loan? The reason I ask is because it makes a big difference. Debt in and of itself is not bad, it depends on what one does with the debt. If a family takes out low interest loan to buy a house so they reduce their long term housing cost, or a car so they can travel to a new job that will earn more money, that's not a bad thing. The same is true for the government, if they are borrowing to build roads and infrastructure and such that will improve the economy and thus grow the tax base its good thing.

You're argument is overly simplistic, and as others have pointed out, just copied and pasted from other sources. Thus all the red.

While correct in it's premise, your counter argument is also flawed. My greatest hero, Gregory Skovoroda (eighteenth-century philosopher, no-relation) is quoted in the preface to the Journal of the Royal Academy of Science (1970 I think), "We must be greatfull to God that He created the world in such a way that that which is simple is true and that which is not simple is not true". Families (or Governments) can borrow to create jobs or improve future opportunities. But when the debt reaches the point where it can never be paid back, then the family estate (infrastructure) or the incomes of future generations become adversly affected by interest payments (taxes). Alternatively, creditors, willing to accept pennies on the dollar, may step in and force bankruptcy (currency collapse).

SIS, you cite one hindsight example of buy-and-hold. As an argument that it's not important to figure out good market entry?

To all others who click red, which "doesn't necessiate" rebuttal - it's not about the red or about rebuttal. The question is simple: is there a trade associated with a potential (not hindsight, you geniuses) hugest bubble in history of the mankind

SUCKISSTAPLES said:   SinglePapa said:   now since everyone had a chance to contribute on subject of copy/pasting, maybe at least one person will contribute on subject of this market situation...

Everyone just watches bubbles and later complains after the fact (of their bursting). Another tendency is to look at everything is strictly political or social matter. OP is about a financial market of opportunity. A good trader can make lifetime's earnings with a timely entry in this market

I could have made a lifetime earnings holding all the DTG and PCLN stock I bought in 2009
Till today

Doesn't take a good trader , I'm sure not one

If there is, why would anyone tell you ?
Especially with your attitude

SinglePapa: This forum is really a series of methods to maximize returns in the midst of devaluing currency. It's a hedge. It's nearly impossible to compete against against a central bank that devalues the national currency to stabilize the economy. A less risky bet is to simply take positions where you can ride the wave of inflation.

The market is fully aware of this situation. The ramifications are unclear. So you diversify assets.

It is hard to identify a trade because you need to know when it is going to blow up.

OP, you should probably read Bill Gross's monthly report at the Pimco site.

You go to the stock market volatility thread and find the link and continue this discussion there.

thanx for mention of Gross's. That's been around for a while. What is NOT in the wide domain is the current market valuation of junk: the highest valuation in recent history!!!! (that is the lowest premium currently demanded by the market for junk). I anticipate opportunity, just like Paulson sniffed out opportunity in 2007

SIS, you're a legend and you're always appreciated
SUCKISSTAPLES said:   If there is, why would anyone tell you ?
Especially with your attitude

SinglePapa said:   thanx for mention of Gross's. That's been around for a while. What is NOT in the wide domain is the current market valuation of junk: the highest valuation in recent history!!!! (that is the lowest premium currently demanded by the market for junk). I anticipate opportunity, just like Paulson sniffed out opportunity in 2007


Over-leveraged companies are constantly being sought out for shorting --- but 2012 turned out not to be the year of the implosion

The market bottomed in 2008 when the fear was the greatest that those living on borrowed money would go bankrupt and economy would be in the death spiral

Fed doubled-down, tripled-down, and went all in to infinity

that's correct synopsis of 2012; but no such thing as infinity - thus opportunity looming?

ellory said:   SinglePapa said:   

Let's now remove 8 zeros and pretend it's a household budget:
False comparison. Fiat money does not work that way

Its the difference between macroeconomics and micro


I know comparing the national debt to household debt by simply subtracting some zeros is simplifying the matter greatly. However I believe it serves a very real purpose of making the national debt issue relate-able to the average person. If an over-simplification such as this gets the point across to the masses so that they understand some tough choices are in order, then I am all for it. I do not believe it is healthy for the nation for a large segment of the population to be so insulated in both real and mental terms from the existing impacts of tax increases; so dependent on existing spending; and so ignorant of future dangers of the current path. It is key to educate as much of the voting public as possible so that they can make somewhat-rational decisions while being somewhat-informed.

With regards to fiat-money, I propose that there are some valid similarities between the national debt and personal debt. What have we observed with personal debt in the past few years: they are backed only by the full faith and credit of the person issuing the debt. Even when debt is secured by real property, fluctuations in the real property can essentially render a significant portion of the mortgage debt unsecured. Forcing banks to write-down mortgage debt through legislation, and negotiating for settling unsecured debt for a fraction of the balance, have the same end result effect as paying off national debt through inflation: the debtee gets less than what he originally bargained for and is less willing to lend in the future, or will at least demand a higher interest.

this is correct on public awareness of the fact. But what about market opportunity? No one heard of Paulson pre-2008, the year he earned the most of any investor in history. Currently-developing bubble is even greater than the one he caught

I think its great, wwhenever there is turmoil, either up or down, the rich get richer.

I am he.

SinglePapa said:   that's correct synopsis of 2012; but no such thing as infinity - thus opportunity looming?

Maybe Delzy's strategy was executed too early?

SinglePapa said:   this is correct on public awareness of the fact. But what about market opportunity? No one heard of Paulson pre-2008, the year he earned the most of any investor in history. Currently-developing bubble is even greater than the one he caughtWell, you can place the Hugh Hendry bets. Short Japanese corporate bonds to try to bet against the yuan peg to the US dollar.

R.Russell's (in OP) predicts inflation flare-up. My opinion (unless someone knows better) is that he's profited more from selling newsletter than from his trades. My next opinion is that more likely than inflation flare-up is deflationary threat, as election prop is over and belt-tightening is inevitable. So dear AXIOM, I'm not necessarily seeking to invest in inflation hedge. On the other hand, market has currently priced in continued bail-outs and easings - and I think that bonds of all kinds should be played against. Especially junk
axiom said:   SinglePapa: This forum is really a series of methods to maximize returns in the midst of devaluing currency. It's a hedge. It's nearly impossible to compete against against a central bank that devalues the national currency to stabilize the economy. A less risky bet is to simply take positions where you can ride the wave of inflation.



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