Hi ------,


Forced Selling of physical possessions

A lot of six figure professionals have lost their jobs or are about to lose their jobs. A large number of these professionals are not going to find work. When they run out of cash, they are going to have to start selling physical assets: homes, amplifier collections, motor boats, etc...

Forced selling has already started and it is going to get worse

The rise in homes for sale is an example of this forced selling. The unemployed are running out of savings and are being forced to sell. Another example is the former mortgage broker who is selling his amplifier collection on eBay:

Ron: Well, once everything was gone as far as paper money like stocks, bonds, IRAs, now I'm having to resort to my physical collateral, which is my possessions really.
http://consumerist.com/5009728/fromer-mortgage...


Luxury goods/homes going to take a hit

Up until now, luxury goods and homes have escaped the worst of the credit crisis. However, I expect a flood of second hand luxury goods/homes to come onto the market as jobs are lost and wealth is destroyed (stocks falling, etc...). For example, the housing market for the superrich is going to start falling rapidly (ei: New York apartments). Bankers who have lost their jobs and can't find new ones are going to sell their motor boats. Etc... If the stock market crashes 50% to 75% later this year, the sale of luxury goods is going to accelerate, and prices will drop fast.

Coming Luxury good fire-sale

Wait six months to a year and you will be able to pick up any and all types of luxury goods for a fraction of what they are worth today. Deflation and depression are unavoidable at this point.

Oil going under $50

When banks start seriously cutting on credit card loans, consumer spending is going to tank, and China's economy is going to collapse. During the last great depression, factory shut down and layed off large number of workers due to lack of demand. This will happen again, except this time America's industry has been outsourced to China. So although I expect a great depression, the worst of the unemployment will be in China/India.

Anyway, when China/India collapse together with the American consumer, demand for oil is going to drop like a rock. The collapse in the demand for oil together with the large amount of speculation in oil market right now means that oil is heading under $50 within 6-9 months.


Love,


Eric



Bought but can't hold
Commentary: Put your house on the market now? Are you nuts?

Sent: Thu 5/29/2008 12:31 AM
Subject: *****Index Speculators*****

Hi ------,


This is a great article on how Index Speculators are driving up commodity prices. Index Speculators "allocate a portion of their portfolios to 'investments' in the commodities futures market, and behave very differently from the traditional speculators that have always existed in this marketplace."

Key passage from article:

We may be getting ready to stage a very interesting economic experiment. Is Masters right that prices are driven by speculation, or is it supply and demand? Follow me on this one. I'm not saying that this will happen, but it's an interesting scenario.

Many developing countries subsidize the price of oil to their citizens, so they don't feel the pain of higher oil prices. But a headline in last week's Financial Times is that Asia is finally getting ready to cut their subsidies as oil rises to $135. The awareness that they need to allow market conditions to prevail is finally being acknowledged, as they cannot afford the subsidies. This is going to help drive down demand for oil over time.

As demand starts to fall, let's remember that the storage facilities for oil waiting to be refined are a finite item. If all those tankers end up needing to find a home at the same time, even as demand for oil is going down, you could see the price of oil go down rather quickly in the short term.

Love,


Eric

What's With the Price of Oil? - Minyanville

Sent: Thu 6/26/2008 1:29 AM
Subject: ***********************FUTURE PLANS: Shorting energy stocks***********************

Hi ------,


I don't know if you remember, but earlier this year I predicted there would be inflation 3-6 months then deflation. Well, I think we are getting close to the end of inflation, with oil having one more move up to go.

The reason I predicted inflation earlier this year was that I believed the money coming out of the credit and equity markets would create a bubble in commodities. This has happened. I also predicted that, after the decline of the stock market slowed, the commodity bubble would burst and there would be deflation. This should happen by the end of the summer.

Like the Royal Bank of Scotland, I believe there is going to be a big decline in stocks over summer. I also believe that oil will initially bounce higher in reaction to the crashing stocks. Once the market has fallen over 20%, the flow of money into oil will slow, and the reality of excess supply and falling demand will hit oil and other commodities like a ton of bricks. This will be a good time to be short energy stocks.


To summarize, after the next decline in financial stocks, when Citibank gets into $10-15 dollar range, I am going to start looking for a good point to cover my short position in C and short energy stocks instead.


Love,

Eric

Sent: Fri 6/27/2008 1:29 AM
Subject: **************Fund Brings Commodity Bets to Masses**************

Hi ------,


Oil is such a bubble right now! This article shows exactly what I expected: with the real estate, equity, and credit markets being unattractive, money is flowing into commodities.

The article also shows how index investors are driving up commodity prices.


Shorting energy stocks:

When oil hits $150 it will be time to look for a good opportunity to short energy stocks. (I am hoping oil hits $150 at about the same time as citi drops under $15)

---------------------------------------------------

Key quote:

"It's been on a pretty long bull run, so there's always a chance for a correction," said portfolio manager Paul Brigandi. "However, investors are increasingly becoming aware that commodities are becoming part of an overall diversified portfolio. They have a very low correlation with other asset classes. A lot of people use [commodities] as a hedge against inflation."

What a quote!

"commodities are becoming part of an overall diversified portfolio"? WTF. Apparently it is becoming fashionable to add commodities to your porfolio (forget research and stuff like that). With this, It should be completely obvious why commodities are skyrocketing and will continue to skyrocket. An increasing number of investors are putting money . Commodity prices now have nothing to do with reality, but are controlled completely by the enormous flow of money of portfolio investors (not speculartors). This completely idiotic, thoughtless strategy is going to cost these portfolio investors billions.

"They have a very low correlation with other asset classes"? Wrong! They have a direct correlation with equities/credit markets. Money is fleeing from equities/credit markets to commodities as portfolios get reallocated. When this flow of money slows down, commodities will crash.

"A lot of people use [commodities] as a hedge against inflation"? More like the money flowing into commodities is causing inflation. When the money stops flowing, inflation will disappear, which will cause investors to sell commodities in panic. The deflationary forces of debt destruction and economic slow down, long held in check, will run free. The fed rate will drop to 1% or lower.

WHEN THE COMMODITY BUBBLE BURSTS, A DEFLATIONARY HURRICANE/TSUNAMI WILL HIT THE PRICES OF EVERYTHING.


Love,

Eric

Fund Brings Commodity Bets to Masses

Sent: Mon 6/30/2008 12:12 AM
Subject: ***Crude Oil Unsustainable Advance and Stock Market Double Non-Confirmation***

Hi ------,


Look at this graph of Crude Oil over the last ten years and tell me you don't see a bubble:




The Hess Corporation (HES) is one of the energy stock I intend to short. Here is a graph of the Hess Corporation over the last ten years:




Key quote from Article below:

I have included a chart of crude oil going back to late 1994 below. I think that one would be hard pressed to say that this advance has not gone parabolic or vertical. Any parabolic advance is simply a result of irrational behavior that is driven by a high degree of market participants speculating in that market. This is the stage of the game where speculation runs wild. Everyone has bought into the belief that everything has now changed, that higher prices will prevail until the end of time, that this time is definitely different and that they must get on board in order to stake their claim. This is what I term the "all in phase."

When I say "all in" what I mean is that price will continue its parabolic advance until the allure of speculative profits have pulled the masses in. Then, once the mass inflow of speculation begins to fade, the momentum of the move begins to fade as well. It is at that point that the emotionally driven speculative parabolic advance peaks. Then, without the massive inflow of new buyers all of a sudden that price level can no longer be supported. It is then at this point that prices collapse.

Again, I intend to go short Citigroup if I see a good opportunity to do so (like C rallying to $18 Monday). When C drops under $15, I will start looking for signs of a bottom. As soon as I see selling slowing, I will cover C and short HES.

OIL WILL CRASH WITHIN TWO MONTHS

Demand has been dropping and oil supplies have been rising, The world simply can't sustain oil prices at $150+, no matter how much speculative money pours in. As the stock market crashes in the next two weeks, oil (and other commodities) will be pushed up to one final high, but, after that, oil prices will collapse.

***Too good an opportunity to pass up***

I don't know if you shorted financials or not, but you absolutely can't miss on shorting energy stocks. Once the stock market crashes %20 more (pushing oil to new highs), THERE WILL BE ABSOLUTELY NO FORCE ON EARTH CAPABLE OF MOVING OIL PRICES HIGHER. Like shorting Citigroup two months ago, shorting energy stocks will be an immensely profitable, low-risk trade.

Risk/Reward

At $150+ oil, the risks/rewards are:

*** RISKS: energy stocks manage to climb, at most, another 10% before crashing
*** REWARDS: energy stocks crash more than 50% in less than two months.

(after equities market crashes another 20%) I recommend going at least 20% short energy stocks to protect against declines in the rest of your portfolio.


Last key passage from article below:

At this stage of the game, I still cannot yet say that the advance in oil is over. For that I have to watch my indicators as well as for specific cyclical developments and structural breakdowns that have not yet occurred. But, I can without a doubt tell you that we are in a parabolic spike, that we should be nearing the "all in phase" and that a collapse in oil prices will follow. In the meantime, the key for me in identifying this top is to watch my ever so important Cycle Turn Indicator. Once this occurs along with the first sign o f a cyclical top I would not want any part of the long side on oil. In fact, once I see the right setup develop oil might just be the best short sell since the Nasdaq decline between 2000 and into 2002.




Love,

Eric

Crude Oil Unsustainable Advance and Stock Market Double Non-Confirmation

Sent: Mon 6/30/2008 11:59 PM
Subject: ***************************China's economy is being decimated***************************

Hi ------,



China's economy is being decimated by two forces:

INFLATION:
*** The falling dollar: The worsening economic outlook for the US is causing investors to put their money in Euros and commodities. The falling dollar is eroding the profits of Chinese companies which are paid in declining dollars. (Warning the US dollar is oversold. When the world realize that economies around the world (ie: China) are doing as badly or worse than the US, the dollar will rally)
*** The commodity bubble: To hedge against inflation and the falling dollar, investors pouring money into commodities. Soaring commodity prices are driving up costs for business in China.

DEFLATION:
*** Shrinking money supply: Around the world, financial institutions are cutting back the amount they lend to consumers and businesses. This means the amount of money/credit available for purchasing goods is shrinking, and this puts downward pressure on prices.
*** Economic weakness: Job losses, falling housing prices, etc. put downward pressure on prices because consumers/businesses have less to spend.


SUMMARY: While Chinese companies are facing rising costs and are being paid in weakening currencies, they can't raise prices because of the deflationary pressure in their export markets. These rising costs and declining revenue are forcing thousands of factories to close.


---------------------------------------------------

Key Quotes from article below showing evidence of China's problems:

The transformation is most apparent in the boomtowns that tied their fortunes to making one product cheaply, from Guangdong province in the south to Honghe's environs in the Yangtze River Delta. Many of these manufacturing centers have seen hundreds if not thousands of factories and workshops close in recent months, industry executives say. In Shengzhou, a city near Shanghai that claims to make one-third of the world's neckties, manufacturers are trying to hold a united front to boost prices. Dongguan, in Guangdong, is seeing makers of toys, shoes and brushes close shop.

"Many of these manufacturing centers have seen hundreds if not thousands of factories and workshops close in recent months" = falling demand for oil and commodities. (Commodity prices ARE creating demand destruction in China)

Like many exporters world-wide, those in Honghe executed their contracts in dollars. As the U.S. currency has fallen, exporters here say they no longer know how much they might earn -- or lose -- when it comes time to deliver sweaters three or four months after they ink a contract. "We want to be very careful with U.S. dollar orders," Mr. Yao says.

"As the U.S. currency has fallen, exporters here say they no longer know how much they might earn -- or lose"

Manufacturers say their profits have dwindled as they pay out more for raw materials and energy. China's strengthening currency has made Honghe's products more expensive for important markets such as the U.S., where the price of Chinese goods surged a record 4.6% in May from the previous year, according to the U.S. Commerce Department. Foreign buyers, used to inexpensive Chinese products and nervous about economic weakness at home, are often refusing to pay more.

"[Foreign buyers,] nervous about economic weakness at home, are often refusing to pay more" shows the deflationary pressure which exists on consumer prices.


---------------------------------------------------

Conclusion:

The reason we have had rising commodity prices despite powerful deflationary pressure on consumer prices is because China and other exporting nations are absorbing the pain. However, there is a limit to the ability of factories in export nations to absorb ever increasing commodity prices. Already thousands of factories have been forced to close. If oil spikes up to above $150, the majority of industrial production in exporting nations will shut down. When this happens, the dollar will rally in faced of unexpected economic weakness in developing nations, and demand for commodities will collapse. The rallying dollar and collapsing demand will burst the commodities bubble, and oil prices will crash as investors panic.

So if oil starts trading above $150, it will be time to consider shorting energy stocks, because thousands of exporting companies in China and around the world will be going out of business.

(Despite what idiot financial commentators say, demand is NOT holding up in developing countries like China)



Love,

Eric

China's Export Machine Threatened by Rising Costs

Sent: Wed 7/16/2008 1:39 AM
Subject: ************************************GoldMoney************************************

Hi ------,


Gold and precious metals are now the market's safe haven. During latest round of market panic, precious metals were where investors flocked to and not US treasuries. This is because there is fear that the bailouts of Freddie and Fannie will jeopardize the credit worthiness of US treasuries. Considering this new role as the market's safe haven, it is worth looking at gold as an investment

Since we are at the tail end of a commodity bubble and deflationary forces are taking hold of the US economy, the majority of commodities are headed for a steep price correction. However, gold may be the exception to this trend. Although gold prices will head lower in the immediate future dragged down by other crashing commodity markets and d ecreasing fears (stocks will probably rally if oil prices fall), they probably won't fall as far and will reverse sharply higher when the market resumes its downtrend. The reasons for this come from gold's unique role as the currency of last resort.

Although it is often treated like any other commodity, there are key differences between gold and other commodities:

*** Gold is not renewable—Nearly all commodities are renewable and have an essentially endless supply. Even oil (ethanol) and diamonds can be artificially manufactured. On the other hand, the world's supply of gold is finite ,and gold cannot be produced by artificial means.
*** Gold is not consumed—A significant proportion of the total quantity of gold ever mined is currently held by central banks and international organizations. A commodity that isn't consumed isn't a commodity.
*** Gold has intrinsic value—gold is one of the few investments that is not simultaneously an asset and someone else's liability, which makes it a good hedge against unforeseen disasters in times of uncertainty.


Where does gold fit in to our current economic circumstances? Well, we are headed towards a multiyear financial crisis, and Gold is an excellent crisis hedge. There is a good chance that, as fears about financial institutions and government debt grow, gold could hit $2,000. Unlike oil, forecasting high gold prices makes sense given its current role as the safe haven investment.

GoldMoney

GoldMoney seems like one of the easiest and safest ways to invest in gold. I included the Wikipedia entry on GoldMoney at the end of this email. It might be a good idea to look into GoldMoney and possibly open an account with them so, if the right opportunity presents itself, you can easily transfer money into gold.

http://www.goldmoney.com/

After the oil/commodity bubble has burst and gold prices have come down, there will be a good opportunity to put money into gold rather than holding cash. An investment in gold is likely to be safer and more profitable than holding US treasuries or parking cash in money markets.


Love,

Eric