All Forum Posts by: Jack Ryan

Rich - good point, it is much more advantageous if the debt was used to purchase real assets then say a bottle of Louis XIII at the night club. :) Of course all dollar denominated debt would still be less relative to your earning power.

I think you guys are misunderstanding the FED funds / discount rate. That is only the rate at which banks borrow. IF banks are lending that rate + risk premium is what you are borrowing at. Right now risk premium is super high.

For example with Sallie Mae, JCF on the rocks, student loans are yielding very high rates if you can get one at all.

As for banks paying us, troubled "banks" such as GMAC are offering 4.5-5% CDs. Considering this is FDIC backed you are essentially buying 6 / 12 month US treasuries at 350bps+ over current yields - a great investment.

If the US can maintain dollar hegemony we will continue to be in the best position in this global collapse. However there are indications many of the G20 don't want to play anymore.... DOW is only 30 stocks. I am thinking S&P 500 -> 400 by late next year. This is after 75% of the homebuilders and half the commercial reits collapse...

What unemployment benefits is free money! I always try to qualify for it (after I eliminated my own position last time hahaha)

Actually studies show unemployment benefits have a fairly large GDP multiplier as opposed to tax stimulus...

Originally posted by Rich Weese:

couple responses to thread.
Platinum is not a tradeable commodity, like junk silver or small gold coins.
Debt is horrible at worst, palatable at best. Depends on what kind; installment, consumer, or investment debt-makes a dif imo.

You guys are correct, but the problem is it just depends.

1. Right now platinum / gold coins are difficult to trade because they are hard to move and floating will over $100 over spot. However there is some speculation that the paper gold markets may dislocate due to the lack of underlying physical supporting these markets. India has already went through this scenario.

2. Deflation - Yup, we are going through a huge deflationary crunch right now. Having debt in deflation is bad. However Bernanke has repeatedly said he will do whatever it takes to fight deflation. >IF< this includes currency debasement (which he stated is an option), this can cause hyper-inflation. In a hyper-inflationary environment you would want to leverage up to your eyeballs in debt.

:wink:

Originally posted by Taz:

Interestingly, the credit market has not seized up. It has tightened and it needed to do it.

Sorry what part of a 200bps+ TED spread means the credit markets have not seized up? Yes it's down from 400bps, but there is VERY little lending going on. The only lending going on is from the GSE's, but that is only because they are mandated to shovel all the crap loans on their books, until at some point they either get bailed out with more tax money or default...

CNN money is usually a few weeks behind the financial headlines. However, any competent investor can add a few facts together:

1. Lending will likely remain tight (banks insolvent)
2. Massive job losses are starting (economic recession)
3. 50-100% housing appreciation in some areas since 2000
4. Boomers starting to retire in 2011

Just like the Nikkei for the last 15 years - HOUSING MAY NOT RECOVER FOR DECADES.

Buy and hold strategy has failed, we are on the backside of an asset bubble... Sell while you can, and buy low if we enter hyper-inflation...

Debt is not a bad thing if we enter into a hyper inflationary environment. The question is:

1. How bad is deflation
2. What is the FED gonna do about it?
3. Will the FED's actions trigger hyper-inflation

It's a very difficult subject to predict.

I have 5500rds of ammunition, a decent amount of platinum, but I will not get into gold until sub $600/oz, and especially not with a $100 over spot price for eagles...

That's not entirely accurate, mortgage rates are based on a wide basket of investment options which does include the 10yr, but also a number of other components (such as LIBOR and GSE debt). Mortgage rates are not moving down despite the FED approaching ZIRP because of the risk premium assigned to holding asset backed paper.

Basically the FED has lost control of the massively deflationary situation - and we may very well see interest rates shoot to the moon if the US treasury market dislocates.

That said, if we do make it through this crisis unscathed, deflation succesfully abates and institutions resume lending then we may see very low interest rates.

It's a coin toss these days just like any other financial decision...

I think it's too early for gold, we're still in the deflationary process of this nightmare. Platinum might be more reasonable play as I think it's a bit oversold, although with auto-demand dropping demand for platinum will continue to decline. Whether or not the USD will debase faster than platinum decline remains to be seen....