tag:blogger.com,1999:blog-502356674750161309.post2256355749403972723..comments2009-06-14T22:26:49.989-07:00Eric deCarbonnelhttp://www.blogger.com/profile/08023745289801416061noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-502356674750161309.post-34113887435926047782009-06-14T22:26:49.989-07:002009-06-14T22:26:49.989-07:00Eric, I did some thinking but not enough research about Zimbabwe&#39;s share prices rising and the question I have is:<br /><br />Did those share prices rise before or after all those new larger denominated bills were created?<br /><br />From reading the article, it seems like it happened after those billion dollar bills were created. And i can understand why stocks would rise after those bills were created but not before. It&#39;s the same issue with bond rates. The govt. is trying to keep bond rates down by printing more Fed Notes and throwing it in the bond market to stop defaults(which is the reason for the rates climbing).<br /><br />I think it will be a waste of time to invest in the stock market even if there will be a future rally because in order for us to have this rally zimbabwe size bills will have to be created, by that time inflation will be way high. More people will be well in to focusing on buying physical things than investing in the stock market which&#39;s seemingly high return will be nothing compared to the rise in prices. So i wouldn&#39;t fear shorting the stock market BUT i wouldn&#39;t short it for the same reason. I wouldn&#39;t short it because the return you win from the bet will be wiped out by the high rise in prices of other things(which will come in the short term).<br /><br />I also wouldn&#39;t be in the commodities futures/paper market because the higher the price rises the more risky and illiquid the stock/bond becomes. The price is the risk premium, the higher the price rises the more risky it is, meaning the greater the chance of you getting stiffed on delivery and settlement.<br /><br />So in the short to medium term commodities will rise but their paper promises will be illiquid. So don&#39;t put money in to them(the paper commodities that is).<br />In the short to medium term stocks will fall so don&#39;t go long.<br />In the short to medium term prices on things will rise, so don&#39;t short stocks as the return will be wiped out by rising prices on other things(instead buy and hold physical gold/silver)<br /><br />And in the long term stocks will rise but the price of things will be much higher by this time so don&#39;t put money in stocks waiting for this rally. I mean first of all, this rally will happen well in to the hyperinflation period, so for you to be able to even have the money to participate in this rally, you&#39;d have to have something that would maintain it&#39;s value against the rising prices. Most people won&#39;t. This future rally in stocks, like today&#39;s will be mostly govt. influenced(govt. pumping money directly in to stocks). In fact I&#39;m willing to bet that 100% of the Zimbabwe stock market rally was govt. influenced. Can you imagine some guy in Zimbabwe talking about investing in stocks? That&#39;s the same as loaning money. The people aren&#39;t doing that during hyperinflation, the govt. is.<br /><br />Anyway you&#39;re only chance at survival is hoarding physical gold/silver in your own personal private protected keeping. That&#39;s all you should be doing right now. Forget about trying to make that extra buck or 2 and get some physical gold and silver before it&#39;s too late. It&#39;s better for you to secure the physical gold/silver now than later. Then when you feel you have enough physical gold and silver, if there is still time you can try to make some extra cash through some arbitrage or stock short or whatever but priority should be survival gear, and survival gear is physical gold/silver.Numonicnoreply@blogger.comtag:blogger.com,1999:blog-502356674750161309.post-46927580341524533212009-06-10T23:07:53.409-07:002009-06-10T23:07:53.409-07:00Anonymous said... <br /><i>I am confused here, Do you me all shorting or selective shorting. I figured to go long commodities and short the Dow. Is my stategy way off?<br /><br /></i>If you are long commodities, you should be ok.<br /><br />I still believe stocks are going up in dollar terms (so it is dangerous to short them). There may be an inial drop as investors panic out of service sector stocks (market could possibly even drop back below 5000), but ultimately the DOW is headed 20,000 and beyond (driven up mostly by commodity stocks). It is what happened in Zimbabwe.<br /><br /><i>Zimbabwe is buckling under economic meltdown, characterised by world&#39;s highest inflation last officially put in July at 231 million percent.<br /><br /><b>Share prices went up 3,500 percent last year due to hyperinflation</b>.<br /></i><a href="http://www.marketskeptics.com/2009/02/zimbabwe-stock-exchange-resumes-trading.html" rel="nofollow">Zimbabwe stock exchange resumes trading, in US dollars</a>Eric deCarbonnelhttp://www.blogger.com/profile/08023745289801416061noreply@blogger.comtag:blogger.com,1999:blog-502356674750161309.post-53006849259131813692009-06-10T21:28:52.430-07:002009-06-10T21:28:52.430-07:00Actually the PER for S&amp;P 500 right now is around 120x.<br /><br />I will bet that stock should going down from here, no matter how high inflation is.<br /><br />Even few hundreds percent of inflation is not enough to push stock significantly higher, only Zimbabwe style inflation can do that.<br /><br />From my country experience (Indonesia), during very high inflation on 1998 asian crisis: <br />USD - Rupiah rate jump from 2000:1 to 9000:1, groceries prices go up a lot (4 - 5 time higher), but stock market was going nowhere... Stock market didn&#39;t catch up until few years after the crisis is over, after 2002.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-502356674750161309.post-75504048982782226742009-06-10T20:05:51.044-07:002009-06-10T20:05:51.044-07:00I think actually there&#39;s nothing wrong with government printing money. Just make sure that money goes directly to real works, like building / repairing infrastructure.<br /><br />QE is a disaster because that money goes to help bankers improving their balance sheet instead of going to real works!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-502356674750161309.post-16796662181848526732009-06-10T19:21:41.351-07:002009-06-10T19:21:41.351-07:00Eric or anybody,<br /><br />&quot;Where we appear to be headed is for a test of the Dow lows [not sure I believe this]. You had better pray those lows hold [Shorting stocks is betting against inflation, don’t do it].&quot;<br /><br />I am confused here, Do you me all shorting or selective shorting. I figured to go long commodities and short the Dow. Is my stategy way off?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-502356674750161309.post-78353013983480258552009-06-10T19:06:56.241-07:002009-06-10T19:06:56.241-07:00Ha, so true, fed wont raise rates before 2010Bowtiehttp://www.blogger.com/profile/04667846768771658607noreply@blogger.comtag:blogger.com,1999:blog-502356674750161309.post-83655194052149149102009-06-10T18:42:32.101-07:002009-06-10T18:42:32.101-07:00The idea of FED raising rates. Hahahahahaha! Not a snowcones chance in hell.Numonicnoreply@blogger.comtag:blogger.com,1999:blog-502356674750161309.post-9173641873870342192009-06-10T17:05:53.325-07:002009-06-10T17:05:53.325-07:00Is that possible that the FED will tighten its monetary policy at a certain point in the near future, as some say? A kind of U-turn like that, would it not be even more catastrophic? Thanks.Robertnoreply@blogger.com