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Five Lessons About The Economy And The Markets From David Rosenberg
Five simple lessons from one of the original skeptics.
- The problem of excessive debt globally was never expunged in the last recession, just as the inflation imbalance was not resolved in the 1980 recession. Hence the need for the 1982 downturn. Ditto for 2012.
- It's not ALL about Europe. Remember the S&P 500 peaked this year within 24 hours of that poor U.S. first-quarter GDP report (and downward revisions) was released in late April. The economy was already stagnant heading into the financial spasm, which has been equivalent to four Fed rate hikes. The lags between the financial economy and the real economy are generally four-to-six months so expect to see the not-so-nice stuff hit the GDP fan by November. No bear market ever bottomed ahead of the recession — usually around 30% of the down-move occurs by the time the contraction has arrived. Trade from the short side.
- Dividend yields are little better than 2%. The 10-year U.S. Treasury note yield is below 2% and the 5-year south of 1%. In other words, relatively secure yield is scarce. That in turn means that investors should be focussing on income as a critical part of their expected returns.
- The equity market will be susceptible to downward EPS revisions in coming months (upside revisions have collapsed in the past two months). But the corporate bond market is already behaving as though the default rate will head above 7% (from just over 2% now). In other words, credit has gone much farther than equities in pricing in a recession. And since the key is to be paid to take on the incremental risk as opposed to paying to take on the risk, bonds are an attractive part of the capital structure right now.
- Despite its blemishes (inflation, property bubble), China is not going away and its influence on commodity markets will remain very constructive, notwithstanding the ebbs and flows of the business cycle.
Source: David Rosenberg, Gluskin Sheff
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Tired of no change? Buy your change damit!
100$ per per person... empties all pennies, nickels, dimes, and quarters in the country!
http://en.wikipedia.org/wiki/United_States_Mint_coin_production
-100$ brick of nickels.... 97$!~
-100$ brick of pennies... 50$! (thats for the zinc ones, 200$ for copper!)
http://www.coinflation.com/coins/basemetal_coin_calculator.html
Want real change? Buy some fucking change then and spread the word.
Why? I have a few hundred worth of nickels at home but so what... What the heck does anybody have to gain by doing this and why are you posting it as post #1 it in response to this article???
Because its a mark of hyperinflation. When a quarter is worth more then a quarter...
Its a check and balances on the fiat paper.
When everyone has 100$, and they all demand it in change, and the banks don't have it.... WTF happens?
I'm just curious, thats all.
you enjoy your nickels and pennies, i will enjoy my gold and silver bullion coins.
Rofl, you say that like I have no gold or silver coins... ROFL!111
-This is Copper coinage.
Dime 0.0046 pounds of copper
Nickel 0.0083 pounds of copper
Quarter 0.0115 pounds of copper
Nickels are the cheepest copper around! (along with nickel)
And a nickel-copper alloy is monel, which is resistant to salt-water... perfect for lures =)
And zinc-copper alloy is good stuff as well..
and nickel-copper-zinc alloy is used in the engines, condensers, and water pumps for sea water
Dime rolls are handy when stored in 12 gauge shells
Nickels sure as hell don't hold up at the beach or in wet saline soil to well... Second only to zinc pennies from my experience (and zincs practically dissolve in park soil). If it's all Cu, or bronze though, they do pretty well especially if they don't get a repeated wet/dry cycle.
Note what the silver looks like after 50 plus years in the ground though...
http://home.earthlink.net/~axenolith/2-14-09b.jpg
Or a 100...
http://home.earthlink.net/~axenolith/DecBarbera.jpg
Interesting pics thanks.
Of course, this is all theory because it won't happen any time soon but what would probably happen is the bank will politely tell you they don't have any change, sorry. They don't keep a lot on hand and I have cleaned out my local branch a couple of times. I placed a special order for nickels which worked out well. But anyway, I doubt it's going to change anything about the ponzi/fiat paper game, unless perhaps it leads to a hastening of additional debasing of our coins (nickels) into cheaper metals.
Now if the US Mint decides to bebase the alloy in the current cupronickel to something cheaper like zinc, then I would argue it would be wise to grab every nickel you can because there will be a secondary market in which they will trade close to melt value someday, (much like pre-65 junk silver today).
I'd say you're/we're better off putting most of your money into silver or gold. But, if you want to hold cash at home, a few hundred dollars worth of nickels is a good way to go. Zero risk to the downside (vs. paper FRNs), other than having to explain why you need all those nickels.
I can't remember who did it, but some millionaire has a million dollars worth of nickels squirreled away - the Treasury confronted him about it and he answered "I just like nickels." I agree with the idea that if you're going to "buy" something, buy silver and gold, but I would encourage divisibility (fractional gold pieces, silver bullion, pre-1965, and copper pennies/nickels). Cover all your bases so when it's time to use your stash, you're not trying to buy groceries with a 1 oz. gold coin or a 100 oz. silver bar.
Kyle Bass in Texas.
A current (2009) penny waighs exactly .5 grams less than a 1982 penny, and is also noticeably thinner.
My wife and I were looking at this the other day. Both of us, 10 out of 10 times, were able to distinguish the two (one in each hand) with our eyes closed.
For some reason I found that surprising, but really it isn't.
another, perhaps more reliable way to distinguish copper from non-copper pennies is to flip them in the air. copper rings out, non-copper does not. this is helpful especially in determining which 1982 pennies are mostly copper (most of them) since, unlike the removal of silver from the coinage in 1965, the reduction in copper content occured in late 1982, not at the end of the year, so both kinds were minted that year.
I do this with silver and gold coins as well. That "ring" of a true coin on the table is distinctive. Coin dealer taught me that a long time ago.
It's true. The copper pennies make a ringing sound when dropped on a hard wood surface, while the zinc pennies make a clacking sound.
I remember distinctly the moment I learned that pennies were no longer made of copper. It was in July 1982 while working at a summer job. A coworker, while welding, blew a fuse (one of the few actual fuses left in the fuse box). I replaced the fuse with a shiny new penny. The welder only worked for a few seconds before stopping again. Upon inspection of the penny, I saw scorch marks at the points of electrical contact and zinc where the copper had burned away. Substitution with an older penny restored full functionality to the welder.
Sounds like just another way of making a run on the banks. I would agree it would be a better way of making a run on the banks, because at least change would retain some if not all of its value, and it's harder for the government to create coins to meet demand rather than paper. And banks, once they ran out of coins, would just offer cash instead - so it wouldn't really do anything. Interesting idea, but not really related to the article.
Change you can believe in.
This is a cool idea! A vulnerability to be exploited! Imagine the damage to vending companied if there were a shortage of coins....
No.3 "That in turn means that investors should be focussing on income as a critical part of their expected returns. "
Does that mean if the investor has a paying job, that he should focus on that income????
Oh, that 2% is so juicy. Woo the fucking whoo. Gotta go long on that shit, before its too late.
It will take 3 weeks to get 100$ of pennies delivered.
100$ emptied my local branch of Nickels.
How long till all the change is gone?
100$ in change, says within 100 days, you can't change 100$ into change in a bank!
Agreed. If you're going to hold currently circulated "cash," the only way to go right now is coins and not paper bills - at least they have some metal that will retain some amount of value. I personally separate out the nickels and pre-1982 pennies from the rest, then post-1982 pennies. But I keep all my change, and never trade it in for paper.
I was saving nickels, until I found out that a 24 oz glass jar of nickels weighs a lot and is only worth about $40. Not really worth it, so I took it down to the local CoinStar and cashed them in. The same jar of quarters is about $200, which is worth saving for a rainy day.
You let Coinstar take 8-12% [depending on your location] instead of rolling up a small jar worth and stopping by the bank? A fool and his money is soon parted indeed...
finally, someone mainstream telling the truth about China and commods.
Too much debt, too many regulations, etc., etc. We ARE Greece (or at least France/Germany/Japan) and no one admits it.
http://confoundedinterest.wordpress.com
#6 - Don't get high on your own supply.
regarding #5 ... I think Rosenberg is biased in commodity outlook due to him being in Canada.
It may be Canada but it may also be that he's defending his commodity call when commodities appear to be no safer than equities given recent market treatment. Plus negative roll yield on futures is the "anti-income", contrasts heavily with his yield theme, and I don't believe I have ever seen him differentiate from physical to futures exposure.
That said, notice his out about the business cycle - you push a recession and potential global slow down (not unlikely at this juncture), you will see commodities sell off as demand goes down and China won't need to produce as much. I also think given all the attention to the Chinese resource misallocation that was their stimulus (investing in empty over capacity to keep people at work), commodities were long due for an epic trouncing. People were extrapolating that to infinity and assuming away all kinds of risks for deflation. Futures markets, flows, and leverage make them especially suseptible to big moves up/down a la 2008.
For what it's worth I am a Rosenberg fan and think very highly of him and his work. Honestly, finding a market strategist that is willing to stick to his guns and doesn't try to repaint what he's said in the past to match current market conditions (i.e. playing I'm always right) is hard enough to find. Get one of those who's an independent thinker and genuinely smart, that's something to be proud of.
"Remember the S&P 500 peaked this year within 24 hours of that poor U.S"
Who said it peaked, Bob? Are you GOD or something?
We still have few month to play.
"#6 - Don't get high on your own supply."
ZH been high of Al Jazeera supply, so it's OK, I guess.
But Bobbo does have a gift for stating the obvious, sometimes?
This is a cool idea! A vulnerability to be exploited! Imagine the damage to vending companied if there were a shortage of coins....
Lessons 2 and 4, if proven correct, will be Rosie's Oracular triumph.
Afternoon flush in the works???? Intraday charts rolling over me thinks...
Don't we have QE3 already? ZIRP + TWIST = QE3 because TWIST is selling short to buy long and ZIRP is 0% short, so the FED must also be buying short, right?
I would argue we have perpetual QE with ZIRP, because the banksters borrow from the FED at 0% and buy government debt or whatever the hell else they buy or sell short or naked short with their free money and make money on margin. This is how Treasuries are still so low from a yield perspective - endless demand for basically risk-free profits by borrowing from the FED and then investing in Treasuries and making that 1-2% risk-free, with the rest of the demand taken up by the FED direct t-bill purchases. It's a coordinted effort the keep this thing going as long as they can.
Is it really QE, though? It's not expanding the base money supply, so I would argue no.
The FED is adding to base supply though. They are selling short and buying long with the TWIST, but at the same time the short can't rise because of ZIRP, so they must also be buying short.
".. China is not going away .."
You think?????
I mean, since they -- the global banking cartel -- have offshored America's production assets and capital assets to China primarily, and they finance dams in China through their World Bank, while China gets around human rights and environmental concerns by building dams in Myanmar, Africa and Brazil, etc., I would pretty much agree with the blog poster for stating the obvious.
The brutally obvious.....
S&P to 400? .....heading fast in that direction with present leadership indecision.
For #3
How do you focus on yield when interest rates are so low? This is a huge problem for retirees that require income. For example my dad has plenty of gold but absolutely must have income, so he's in a few of those energy MLP's that yield a lot and some preferred shares with decent dividends, knowing full well that the share prices could tank. What other options are there? It's so fucked up that there is nowhere for seniors to put their money and get a decent yield without risking too much principal.
He still doesn't get it.
Oil has been over $100 / barrel more or less all year long. ALL YEAR LONG. Civilization can't function on that.
Most likely only by the end of October DJIA will be stable under 10000. It is not a collapse that is happening today, just the unwinding of effects of QE2. Predictable since beginning of QE2:
http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&start=0#p30485
The mistake in this February 6th chart today is 0%. Its spot on within the thicknes of the line I used to draw it.
However, long term picture with deflationary recession in the USA does not look good for DJIA stocks nor recession:
http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&st=0&sk=t&sd=a&sta...
So its deflationary recession till end of 2014 ( I have longer term predictions, just finetuning them, up to 2015).
After that , in 2015 the USA default on debt, and inflation. That might help to go out of recession, might cause ( even before the default) some wars.
The interesting thing now for me is to predict how much and when vs, what currencies USD will appreciate, meaning that those currencies will buy less and less oil. Will they tolerate it or try to increase the values of their currencies somehow (e.g. China moving to silver standard?)
More on currency rate forecats later. Clearly , USD will appreciate almost against every currency in 2012-2014, being a reserve currency and mother of the USA debt that pays for everything. It has already started.
most debt in the world is dollar denominated but that does not mean dollar will be strong :)
The reason is very few debts will actually be repaid and most of the debts will have to be written off
and people who have no debts but have savings will not buy dollars but will buy gold instead
Notice how there is no longer any talk of a flat tax. Heaven forbid everybody (and we mean everybody) would pay one rate. But then again, how many thousands of bureaucrats would lose their jobs at the IRS with such a simple tax rate?
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