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The Recession With the Diamond Shortage

madhedgefundtrader's picture




 

If we are now in recession, this is the most bizarre one in history. It is a recession where the first thing people do is rush out and buy a new car. That is what the sales figures for General Motors showed this morning, up an impressive 19.8% in September. The results were even better for Volkswagen (+36%) and Chrysler (+27%).

The data suggest that corporate managers start loading up on new inventories in this recession. That is what the Institute of Supply Management (ISM) suggests, with their index up from 50.6 to 51.5 last month. Managers also hire new people in this Frankenstein of a recession. Adding up the nonfarm payrolls for the past three months, there is a substantial gain in the newly hired by the private sector. This was further confirmed by the weekly jobless figures, which delivered a blockbuster decline of 37,000 to 391,000 in their latest report, a multi month low. Only the government is still taking the ax to employment, both at the federal and the local level.

Want to know what else our new recessionary consumers do? They buy diamonds. I was doing some early Christmas shopping at Tiffany’s (TIF) over the weekend, and the sales person told me that they were running out of diamonds, especially the high end kind over two carats especially favored by the wealthy. Also, when I flew into the Netjets Center in San Francisco on the way back from Las Vegas, I had never seen it so crowded. I’m talking packed with Gulfstream V’s, not Cessna 152’s. Not only are the rich getting richer, they are doing so at an accelerating rate.

Could it be that the recession exists only in the stock market and other investable assets? If there is, so be it. That is the world in which I inhabit, and right now it is screaming not only recession, but Great Depression. Price is truth, and my world, price action trumps fundamentals every day of the week, as my recent performance has so copiously demonstrated.

Let me give you an alternative explanation here. A modest 2% GDP growth rate is forcing a permanent downshifting of price earnings multiples from its historic 10-22 range to a more subdued 8-16 range. Investors are happy to pay premiums for an outsized future, not the more subdued and austere one we are now facing.

That means we could see more downside before the bloodletting is over. If your assumption is that the S&P 500 delivers $100 a share in earnings in 2011, then an eight multiple takes us as low as 800 in the index on a spike down. Granted, this is an extreme view, but given the recent dismal price action, one that cannot be dismissed.  Until then, I’ll be shopping for more diamonds.

For those who wish to participate in Macro Millionaire, my highly innovative and successful trade mentoring program, please email John Thomas directly at madhedgefundtrader@yahoo.com . Please put “Macro Millionaire” in the subject line, as we are getting buried in emails. Hurry up, because our software limits the number of subscribers, and we are running out of places.

To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.

 

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Mon, 10/10/2011 - 09:44 | 1757168 BorisSDT
BorisSDT's picture

Is this a paid advertisement?  Why do they let this clown contribute.

Mon, 10/10/2011 - 09:12 | 1757056 PulauHantu29
PulauHantu29's picture

NINJA car loans.....It's VooDoo. What do you expect when the taxpayer funded GM gives away cars zero down no payments for years.....it's the NINJA car loans.

Mon, 10/10/2011 - 08:34 | 1756946 PPagan
PPagan's picture

What a bizarre post!

"Could it be that the recession exists only in the stock market and other investable assets? If there is, so be it. That is the world in which I inhabit...."

Apart from the careless grammar, compares with Marie Antoinette's dietary advice.

I had actually contemplated looking into his Macro-Millionaire deal; this biases me against the idea,

Mon, 10/10/2011 - 08:24 | 1756923 Cui Bono
Cui Bono's picture

Thanks Tyler, Now my short term memory is stuffed with douche.....CB

Mon, 10/10/2011 - 08:18 | 1756908 israhole
israhole's picture

The diamond market has no true price discovery, and thus are likely the biggest scam of all time after the Fed.

But at least the madhedegefund gets to bragg about blowing cash again.

Mon, 10/10/2011 - 10:59 | 1757475 oddjob
oddjob's picture

He blows more cock than cash.

Mon, 10/10/2011 - 08:16 | 1756903 dumpster
dumpster's picture

software limits number of subscribers lol

ten thousand the max  so hurry.. 

Mon, 10/10/2011 - 08:12 | 1756896 disabledvet
disabledvet's picture

Best way to "move money": diamonds. Light and pricey like the women who wear them. Irrational to see the price soar even though there are billions of them?

Mon, 10/10/2011 - 07:58 | 1756870 squexx
squexx's picture

48% of American households are on some form of government handout. That sounds like a DEPRESSION to me!

Mon, 10/10/2011 - 09:24 | 1757096 Gohn Galt
Gohn Galt's picture

Oh yes and just like the last depression cartels control pricing and supply.  With the airlines and car rentals, same thing, they knew what was around the corner and have pulled back on inventory and schedules.  With a few exceptions such as Denver, unofficial US Capital, multimillion dollar subsidies pay to keep plane seats open and plenty of rentals.

Back to diamonds, I wonder how long they can keep up the cartel.  Diamonds are not as rare as one thinks and you can make industrial diamonds out of almost any carbon source.  I saw an industrial diamond drill bit made out a jar a peanut butter and it held up pretty good.  The high end manufactured diamonds are getting harder to spot.

Mon, 10/10/2011 - 07:38 | 1756835 Schmuck Raker
Schmuck Raker's picture

IMO it's time for some consolidation in the "contributor" space, Tyler.

May I suggest: MadhedgeSovereignfundTraderman

Mon, 10/10/2011 - 07:26 | 1756821 imaginalis
imaginalis's picture

"Diamond Shortage"

"there is a limit to the number of subscribers"

Mon, 10/10/2011 - 10:49 | 1757436 oddjob
oddjob's picture

Those premium subcribers got the sweet AMR trade...a 75% loss over 6 months...cant not beat that.

Mon, 10/10/2011 - 07:18 | 1756810 Eugend66
Eugend66's picture

Piglets facing diamonds this time, not pearls ... . Sad !

Mon, 10/10/2011 - 07:14 | 1756800 nickt1y
nickt1y's picture

Off with his head!

Mon, 10/10/2011 - 07:03 | 1756784 Reptil
Reptil's picture

It's not so much this guy. It's the top 1% (in wealth, and income) being in a self imposed information bubble: They're actually thinking they can do without a consumer economy. Which is wrong: top dogs need a pack too. Artificial reality is not a safety net.

http://www.reuters.com/article/2011/09/15/us-italy-luxury-idUSTRE78E4H92...

Mon, 10/10/2011 - 07:50 | 1756856 Ruffcut
Ruffcut's picture

Debeers controls the supply of diamonds and are creating their own shortage. They are still talking trading vehicle for trading diamonds with jp and goldsuck.

Getting the heartbeat of the market from tiffenys?

I don't see new gm shit here in motown. channel stuffing. Most new vehicles are ford trucks and lincolns. THe peeps are pissed at gov motors.

Mon, 10/10/2011 - 07:14 | 1756801 FEDbuster
FEDbuster's picture

The master trying to say everything is alright on the plantation without the slaves based on the government crop support check.  What a douche.  The collapse will be epic.

Mon, 10/10/2011 - 06:55 | 1756772 DogSlime
DogSlime's picture

Want to know what else our new recessionary consumers do? They buy diamonds.

 

That's right MHFT, there's no recession really.

How do you look yourself in the mirror?  You make me fucking sick, you deluded shill.

Mon, 10/10/2011 - 06:41 | 1756763 Capt Tripps
Capt Tripps's picture

Is there any point to this beyond sharing your diamond shopping adventures and pimping your own blog?

Mon, 10/10/2011 - 08:29 | 1756931 FunkyMonkeyBoy
FunkyMonkeyBoy's picture

He can afford diamonds, but can only afford a @yahoo.com email addrress even though he has a domain name. Go figure. Probably just wealthy and thick (like most of wall st filth).

Mon, 10/10/2011 - 10:09 | 1757264 LowProfile
LowProfile's picture

Regular readers of ZH can skip this (they know diamonds are a shitty store of value, except perhaps certain 'named' diamonds).

Looks to me like there's a fire sale on 'em now http://kliguy38depression2news.blogspot.com/2011/03/diamonds-are-girls-b... (He's a ZH reader)

Found him via this interesting Google search http://www.google.com/search?q=diamonds+as+a+store+of+value+depression

 

Mon, 10/10/2011 - 09:49 | 1757190 BorisSDT
BorisSDT's picture

Agreed, what a dumbass.

Do NOT follow this link or you will be banned from the site!