Kunstler's Easthampton Burning? Lessons from Argentina's economic collapse
I added some groupies, so for a quick background:
aresfinancial is a points chaser. Points are hard to obtain in CAPS. A stock that falls 30% may not yeild any points, unless the market falls 40%. I WAS #1 in points with 10962. That might change today.
abitarePERFECT - is a clean Bear. He does the accuracy thing, that Fools go crazy for. He was created to compete with bridgeboy0, who could never catch Ares. abitarePERFECT was ranked #6. bridgeboy0 is -5000 points.
I also have an account on updown.com under abitarecatania was up 160% YTD. Not all "Allstars" are created equal. I would guess many Allstars with Green thumbs must be broke. Since I have been playing CAPS the Bric Story, Commodity Bubble, Oil Bubble, Housing Bubble, have imploded and many a past Allstar have imploded with these "stories".
I can see a rally where many of the new "uber bears" may get taken to the wood shed too. If you look at my points chart you can see at 10k Ares might be a little over done in the near term.
The market has sold off far further then I would have guessed and has caused a panic and multiple hedge fund implosions. I could see a rally back to 10k, but my guess is we are heading lower. I expect deflation and DOW 5-7k are not out of the question. King Henry changed the rules of the game from tyranny comes flight and panic seaking safety.
We now set on a fence of inflation, hyperinflation, stagflation or deflation. Higher unemployment is coming the main thing Americans should be concerned about is their job. Do what you have to do to stay employed and save money. The slow down hitting America could last decades.
The speed and size of the unwind has been amazing. You can look at my previous post to glance at the world markets sell off. My guess in Dec 07 was 25% drop S&P500 and a 40% drop in China.
We have blown thru that. Fools jumping on my Bandwagon now may have missed the move that moved me to Top of Fooldom.
We are in Black Swan territory now. I see multiple Black Swans circling. Fools, who used to mock my bearish write ups, have lately gone quiet. But, you can write your own narative from here. Deflationary depression or Argentine Collapse or it just all becomes normal and the games continue. The Argentine collapse is extremely interesting, because the corrupt, politically correct, ineptitude appointment of VP Eva Peron is strikingly similar to VP choice Palin.
To help you with your narrative I have found:
East Hampton Burning
by James Kunstler
In the typhoon of commentary that's blown around the world a step behind the financial tsunami that's wrecking everything, two little words have been curiously absent: "fraud" and "swindle." But aren't they really at the core of what has happened? Wall Street took the whole world "for a ride" and now a handful of Wall Street's erstwhile princelings have shifted ceremoniously into US Government service to "fix" the problem with a "toolbox" containing a notional two trillion dollars. This strange exercise in financial kabuki theater will shut down sometime between the election and inauguration day, when the inaugurate finds himself president of the Economic Smoking Wreckage of the United States. What will happen?
I have thought for some time that things could get dangerously out of hand in America, despite our exceptionalist notion that we are immune to the common plot-lines of history. For starters, inauguration night will seem more like Halloween, as those two little words fly in to haunt the new president. So, a large and looming question is: who will be appointed the next attorney general of the US (to replace the human sash-weight currently occupying the office), and how soon will the federal marshals be scouring the wainscoted hallways of Goldman Sachs, JP Morgan Chase, not to mention a thousand Greenwich, Connecticut, hedge fund boiler rooms, with man-sized nets?
A story-line is already emerging to the effect that these birds really didn't quite know what they were doing in grinding out that multi-trillion dollar basket of alphabet securities sausage (a theme on Sunday's "60-Minutes" broadcast). Nobody will buy that line of bullsh t, though -- and certainly not in the courtroom where, for instance, Mr. Hank Paulson will have to answer why his own firm of Goldman Sachs set up a special unit to short its own issues. It will be edifying to see how they answer.
In the meantime, however, millions of Joe-the-Plumber types will have gotten their pink slips, slipped helplessly into foreclosure, watched the repo men hot-wire their Ford pickups, and eaten down the kitchen cupboard to a single box of Kellogg's All-Bran (which had been sitting there for eleven years infested with weevils). They will be watching the official proceedings in the federal courtrooms with jaundiced eyes as they hunch in their tent cities, in the rain, sipping amateur-brand raisin wine bartered for a few snared rock doves. How long before the hardier ones among them venture out to Easthampton with long knives and matches?
It will bring little satisfaction though, and the disappointment could lead to a more inchoate outbreak of civil disorder that would be more like a free-for-all of vengeance and grievance. There will be a great outcry for the new government to "do something!" Perhaps that will finally bring the troops home from Iraq -- only for them to find that the Homeland has become Iraq....
If the financial system completes its self-destruction -- and that's looking more and more like a real possibility -- there will be several pretty awful consequences. One is that the United States will be forced to declare bankruptcy by repudiating its own debt. All those who took refuge in US Treasury bonds and bills will be like folks who sought shelter from a tornado in their out-house. That would go hand-in-hand with a massive currency inflation that is likely to follow the current phase of compressive liquidating deflation -- in which every possible asset is being sold off for less than its face value. That process is self-limiting due to the finite supply of real salable assets. The trillions of dollars injected into system while this is happening must eventually snap-back as people shed the last fungible article and compete for necessary commodities like food and fuel with dollars that are suddenly plentiful but worthless. At some point, the government may have to summon up a new currency. I don't think it will be anything like the "Amero" which the paranoid fringe incessantly mutters about as part of their fantasy in which the US, Mexico, and Canada all join up to become one country. But any "new dollar" would probably have to be backed by gold.
As we discover ourselves to be a much poorer nation, one of my correspondents put it: "the bogus risk-swapping economy must be replaced by a net value-added economy." That means actually making things, growing things, and rebuilding things, and that can only begin to happen if we do not stupidly sucker ourselves into a war with other nations who are liable to be extremely ticked off at us for destroying the global economy, but also competing with us for a dwindling supply of resources that are not equitably distributed around the world.
This means especially oil. I hope you're enjoying the temporarily cheap prices at the gas pumps, because this is purely a function of the compressive deleveraging that is going on right now, as contracts and positions held in energy markets are being dumped by everybody and his uncle to raise cash to meet margin calls. My guess is that oil and its byproducts will become much more difficult to get in the months ahead -- not just more expensive, but literally not available. The current falling price of oil has little to do with the real supply and demand fundamentals. It's simply a function of the markets being in near-total disarray. We're running on current inventory, and running it down. In the background, all kinds of peculiar and terrible things are happening. The entire apparatus of allocation and distribution is being thrown out of whack. The smaller tanker operations are going bankrupt. The "less-developed" nations are heading back to the 17th-century level of daily life without electricity. The oil exploration and development projects that were planned for hard-to-get oil netting $100-a-barrel minimum -- in places like the deepwater Gulf of Mexico, Siberia, and Central Asia -- are being shelved, which means the world has less of a chance to offset coming depletions in old fields.
The bottom line of all this is that we in the US could find ourselves in a situation of shortages, hoarding, and rationing. This would pretty much kill off whatever remains of the previous shuck-and-jive economy -- hamburger sales, theme park visits, Nascar weekends -- while it makes obvious the failures of our suburban living arrangements (and drives the value of housing there closer to zero).
The new president will have to be Franklin Roosevelt on steroids, with some Mahatma Gandhi and Florence Nightingale thrown in. My pet project of restoring the American passenger railroad system might seem pretty minor in the face of all this, but it's at least a place to start that will accomplish several things: allow people and things to get places without cars and trucks; put many thousands of people to work at many levels doing something of direct, practical value; and be a small step in rebuilding confidence that we are a society capable of accomplishing something.
An outstanding read here, whether you think the world is going to end or not the lessons here are outstanding. You should have them in your memory regardless of your guestimation of the future.
Lessons from Argentina's economic collapse
Many very valuable lessons here:
URBAN OR COUNTRY?
Someone once asked me how did those that live in the country fare. If they were better off than city dwellers.
1) Those that want to harm you/steal from you don't come with a pirate flag waving over their heads.
2) Neither do they start shooting at you 200 yards away.
3) They wont come riding loud bikes or dressed with their orange, convict just escaped from prison jump suits, so that you can identify them the better. Nor do they all wear chains around their necks and leather jackets. If I had a dollar for each time a person that got robbed told me, "They looked like NORMAL people, dressed better than we are", honestly, I would have enough money for a nice gun. There are exceptions, but don't expect them to dress like in the movies.
4) A man with a wife and two or three kids can't set up a watch. I don't care if you are SEAL, SWAT or John Freaking Rambo, no 6th sense is going to tell you that there is a guy pointing a gun at your back when you are trying to fix the water pump that just broke, or carrying a big heavy bag of dried beans you bought that morning.
Someone hit me in the head please because I messed up about the gold issue.
Everyone wants to buy gold! "I buy gold. Pay cash" signs are everywhere, even on TV! I can't believe I'm that silly!
I just didn't relate it to what I read here because they deal with junk gold, like jewelry, either stolen or sold because they needed the money, not the gold coins that you guys talk about. No one pays for the true value of the stuff, so big WARNING! Sign on people that are buying gold coins.
Since it is impossible to determine the true mineral percentage of gold, small shops and dealers will pay for it as regular jewelry gold.
What I would do if I were you: Besides gold coins, buy a lot of small gold rings and other jewelry. They should be less expensive than gold coins, and if the SHTF bad, you'll not be losing money, selling premium quality gold coins for the price of junk gold. If I could travel back in time, I'd buy a small bag worth of gold rings.
Small time thieves will snatch gold chains right out of your neck and sell them at these small dealers found everywhere. This is VERY common at train stations, subways and other crowded areas.
So, my advice, if you are preparing for a small economical crisis, gold coins make sense. You will keep the value of the stuff and be able to sell it for its actual cost to gold dealers or maybe other survivalists that know the true value of the item.
In my case, gold coins would have been an excellent investment, saving me from loosing money when the local economy crashed. Even though things are bad, I can go to a bank down town and get paid for what a gold coin is truly worth, same goes for pure silver. But where I live, in my local are small time dealers will only pay you the value of junk gold, no matter what kind of gold you have. So, I'd have to say that if TSHTF bad, gold jewelry is a better trade item than gold coins.