Value destruction..?

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Value destruction..?

Post  Kleerance on Tue Aug 04, 2009 11:05 pm

I've been thinking.... (gee)..
I'm 99% sure of that US Dollar must collapse. I may be wrong, but that's my belief. Because of the US debt and the many corporate mistakes done over the years. Both from the powerful macro guys and the the greedy corporate owners. You can't print more dollars and think you can get away it in an easy way. Well not if gravity still exist. If it was that simple world would be an easy place to live in. . However....
I live in Norway where things still are overpriced IMO. Houses, wages, cars everything. The thing is..... If (when) the US dollar is taking the real dive, there is a lot of wealthy Europeans ready to buy american assets. I have listened to comparisons about domestic summer houses in Norway vs. nice houses in Key West, and believe me there are some buyers ready here... Now what will happen to the stock market with a falling Dollar. Is it really gonna fall that much? I mean in real value - yes, but in US Dollar terms? Unless the entire currency system collapse, there will be some heavy buyers out there of american assets. And that may in fact boost the stock exchange. (Because Wall Street is priced in US dollars). Is it then possible that both the Dollar and the stock exchange will collapse at the same time? I mean american property is still worth something. And if the US dollar is collapsing then the prices have to soar in domestic currency (Not only gold). You know several companies in Europe are listed in US. And theses companies still have the same pricing in Euro. And with a falling dollar these companies will soar to heaven in US dollars, just to make an even price with Euro listings.
I'm not sure myself about this actually, just wondering if there are any other views to this. It sound odd, a Wall Street rally as a proof of terrible times?
Think about being short the stock market in such situation.... That must be value destruction.

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Re: Value destruction..?

Post  Shelby on Wed Aug 05, 2009 12:28 am

You didn't think the bankers were going to let you escape their noose did you?

Kleerance wrote:I've been thinking.... (gee)..
I'm 99% sure of that US Dollar must collapse. I may be wrong, but that's my belief. Because of the US debt and the many corporate mistakes done over the years. Both from the powerful macro guys and the the greedy corporate owners. You can't print more dollars and think you can get away it in an easy way. Well not if gravity still exist. If it was that simple world would be an easy place to live in...

Well it is not quite that simple. Nobody is printing dollars, they are create ledger entries, and you have to look at who is getting the treasuries as collateral. The dollars are mainly ending up back in the Tbond market, which means the money is back at the banks again!! The govt never touches the money, it is just some fancy paperwork to give banks more and more money, which they can pay out to the insiders in off balance sheet transactions. The govt borrows to give the banks money, then the banks are speculating with it, by creating money out of thin air from their TARP reserves sitting at the Fed, then buy the long Tbonds at higher rates. The govt borrows to give banks money, then borrow the same money back from them! It is just a circular way to transfer the net worth of USA to bankers. When the suckers from the coming crash of the stock market, rush back into Tbonds, then the banks will make another killing on their recent long bonds at 4%.

This has caused the marginal utility of debt to go negative, which means deflation-- private sector is contracting while the govt sector grows like a cancer. So dollar can actually get stronger!

Kleerance wrote:...However....
I live in Norway where things still are overpriced IMO. Houses, wages, cars everything. The thing is..... If (when) the US dollar is taking the real dive, there is a lot of wealthy Europeans ready to buy american assets. I have listened to comparisons about domestic summer houses in Norway vs. nice houses in Key West, and believe me there are some buyers ready here... Now what will happen to the stock market with a falling Dollar. Is it really gonna fall that much? I mean in real value - yes, but in US Dollar terms? Unless the entire currency system collapse, there will be some heavy buyers out there of american assets. And that may in fact boost the stock exchange. (Because Wall Street is priced in US dollars)...

I expect all the fiats will competitively devalue. I don't think you will see that arbitrage, except maybe for brief periods and that real estate in USA will fall, so the foreigners might be incentivized to come in and buy if their local economy is strong. But I don't think many country will escape this deflation (maybe India will), and I don't think USA real estate will bottom for a long time.

Kleerance wrote:...Is it then possible that both the Dollar and the stock exchange will collapse at the same time?...

This can only happen when the world's debt is no longer priced in dollars. No hope of that happening until the world is exhausted of stimulus and bailouts. That is why I don't expect the dollar to die any time soon.

Kleerance wrote:...I mean american property is still worth something. And if the US dollar is collapsing then the prices have to soar in domestic currency (Not only gold)...

Yes I am predicting that to happen at the bitter end (maybe 2012 or 2014?):

http://goldwetrust.up-with.com/economics-f4/inflation-or-deflation-t9-195.htm#1706

The catalyst will be that the Hyper-deflation has peaked and people just can't take it any more.


Kleerance wrote:...You know several companies in Europe are listed in US. And theses companies still have the same pricing in Euro. And with a falling dollar these companies will soar to heaven in US dollars, just to make an even price with Euro listings.
I'm not sure myself about this actually, just wondering if there are any other views to this. It sound odd, a Wall Street rally as a proof of terrible times?
Think about being short the stock market in such situation.... That must be value destruction.

Agreed it is very dangerous to make bets on markets that are derivative effects from the main dollar and US stock markets, because these can whipsaw in unanticipated/myraid scenarios.

I am reasonably confident in shorting the US stock market directly, but the timing is the key hurdle.

Hope my reply was helpful. I encourage dissenting opinions or further questions/comments. I want to learn from others and to see what other people are thinking.

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Bankers Watch as Sweden Goes Negative

Post  Guest on Sat Aug 29, 2009 2:29 am

And they sneer at gold for not paying interest!

"Henrik Mitelman, chief fixed-income strategist at SEB, the Swedish bank, said that the negative deposit rate, combined with a cut in the repo rate to an historic low of 0.25 per cent, sent a powerful signal to the market that the Riksbank intended to keep rates close to zero until economic recovery was well under way. "What the Riksbank did was very brave. They decided to see if markets could cope with it and the markets have."

http://gata.org/node/7730

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