The False Recovery Buys Us Time

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Morpheus's picture
Morpheus
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The False Recovery Buys Us Time

I was talking with my finacee the other day aboutt this false recovery, where economic news that is "less bad" now seems to be the new "good news".

It doesn't add up. How on God's green Earth can the S&P climb ~50% on: a.) poor earnings, b.) increasing unemployment, c.) worsening trade imbalances, d.) deeper deficits, and e) an unfolding commercial ARM bomb?

Well, the answer lies within the spin meisters and the wise words of a book that I highly recommend: Fear, Greed, and Panic, The Psychology of the Stock Market. by David Cohen, Psy.D.

The stock market, in my opinion, is our new bubble. Everyone's feelin' good again, just like the housing bubble cured all of our ails after dot.bomb.

In short, I don't think it'll last but also, I have no idea when the house of cards come crashing down. But I see no underlying fundementals indicating that it should last. In face, I see the contrary. I see "the higher the climb, the more violent the fall".

That said, let's be grateful that this is happening. It gives us more time to adequately prepare for the inevitable. I'm hoping for another 6-8 months, a year would be great.

As the market rallies, PM prices stay within reason. There is no "money on the sidelines". Capital must flow somewhere, and in this case it's pouring into an overvalued stock market. Which buys us an opportunity to grab commodities such as PM's and other future essentials at a relative bargain.

So, let's talk about this. How long do you think this financial Indian summer will last and what do you plan on doing in the meanwhile now that you're given more time to prepare? 

What do you think are the triggers for the inevitable market meltdown? I think that when this market crashes again, it'll be deeper and more devasting than 2008. 

Remember, in times of great economic upheaval, true wealth is never destroyed. It is merely transferred. So how are you going to have that transferred towards you instead of away from you? 

Me? Gold and silver.

gyrogearloose's picture
gyrogearloose
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Re: The False Recovery Buys Us Time
Morpheus wrote:

 

That said, let's be grateful that this is happening. It gives us more time to adequately prepare for the inevitable. I'm hoping for another 6-8 months, a year would be great.

 

So, let's talk about this. How long do you think this financial Indian summer will last and what do you plan on doing in the meanwhile now that you're given more time to prepare? 

 

I am constantly amazed that it has lasted this long.

Chris mentioned somewhere that he and Becky have been surprised at the systems resilience.

I think so much of the inertia comes from the vast bulk of people not wanting to see or believe that the future will be anything other than a continuation of the recent past, burning reserves to hold on till the recovery hits....

Some family has banned me from talking "doom and gloom", and are carrying on as if I had said nothing, even now that the first wave has hit. Others came around as a result of the first wave. Being able to say "I told you so" is only effective on some people.......

So absent of any particular data either way, discussions in January on some site around fall in the US being a likely time for the next wave to hit, based on Obama's honeymoon period being over, cold and no money for heating for many,  large numbers of peoples unemployment insurance running out, it could be that October adds to its collection of very bad days for the sharemarket.

In preparation planning, the longer the better on the personal front, as we are living as if it has already hit, building reserves.

Bank account always empty...... ;-)  but we are running out of storage space ! Cupboards overflowing with second hand clothes brought very cheap, etc.

 

Cheers Hamish

 

 

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Ken C
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Re: The False Recovery Buys Us Time

The tipping point trigger could be any of the dozens of bad things that several people on this site have listed. This could happen at any time but like you I think we have a while longer. I suspect however that the trigger will be some surprise that no one has considered. The result will be the same nevertheless.

On another note, I am certain that after the collapse there will be multitudes of people flinging accuastions and recriminations about "why didn't you tell us that it was so bad"  The only way to get their attention would be to pre-empt Dancing With the Stars on the boob tube or put a note in every cheese burger and pizza. The MSM is not going to put out the message.

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rocketgirl1
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Re: The False Recovery Buys Us Time

I'm not talking to family and friends about what I know anymore.  They're not listening anyways.  We're moving so soon most of our friends will be far away and family will be closer (900 mls. away instead of 2000 mls.) but still far enough that if they want tangible help they'll have to come to me and I'll be more then happy to share everything I have.  In the new place I intend to blend in but again, not talk about what I know because by then It's going to be too late for tangible action to avoid the underlying problems.  By then any meaningful actions will be responses to what is taking place rather then pre planning.  The only real reason to talk with people is to help them pre-plan but I think the time is soon coming when it'll be too late.  My concern is that the people in my area that I've been trying to get through to will suddenly realize I was right and they should have listened and now they know I must have prepped (I don't talk about what I've done just that there will be problems that should be prepared for) .  I've been thinking about helping neighbors but will they turn on us?  I guess it all depends.

One of my biggest reasons to prep is so that I don't end up in line.  I see the lines on tv and I really want to be that person thats handing out the food and not in line receiving the food.  I want to plan enough to be of help if I can.  If I am in line I want it to be just to blend in so I look the same as everyone else.  I read something a while back that talked about blending in with everything, lights out at night, hang clothes to dry, etc.  Share your tools.

 

Just some thoughts.

switters's picture
switters
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Re: The False Recovery Buys Us Time

My sense is that we'll have another down-wave sometime around October when the spin meisters, to use your term, can no longer hide just how bad things really are.  At this point I think we're in for a further deflationary spiral for another couple of years, and that inflation won't really kick in until after that.  Along those lines, I think the price of PMs - especially silver - may fall during that period.  Gold will probably rebound sooner, as it has historically performed well during deflation.  I also think silver will eventually rebound and eclipse gold, but my sense is that will take a couple of years at least.

Of course I could be absolutely wrong.  The more I study this, the less certain I am about making any predictions at all.  There are just too many wildcards and unpredictable variables.

I will say this: the system is probably more resilient than most of us imagine.  People have been predicting its demise since the 1970s (and long before that, actually) and it's still limping along.  Our system personified is like a drug addict.  Addicts can be amazingly resourceful in finding their next fix and simply surviving.  My cousin is an addict, in fact, and he has defied all of our predictions about how long he would last before he crashed and burned.  But at some point, inevitably, it all catches up and it won't be pretty.

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beez123
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Re: The False Recovery Buys Us Time

To expand on some things Switters has touched upon, I think the "system" is like Keith Richards. By all accounts this man should have died in the 70's sometime, but he still keeps on ticking, and rocking, to the amazement of everyone. I don't think you can ever count the system out. It might have much more steam in it than anyone realizes.

My thinking has been pushed and pulled in so many directions the past year on issues like inflation vs. deflation that I don't know what is going to happen. I have listened to so many people, much smarter than I am, disagree with each other and give very valid sounding and rational arguments in favor of one position or the other, one economic school of thought vs. the other, etc. that I don't know what to think anymore. I mean, these people are much smarter and more knowledgeable than I am, so if they are confused, or get things wrong, or disagree with each other... wow, how am I supposed to know what's coming?

Just get prepared. What I do is try to provide a bit of insurance for myself in several different areas. Hedging bets, I guess some would say. That's the only thing I know to do at this point. Play it safe and put some money down on all outcomes. Invest here, buy some of that, learn how to do this, keep reserves of this, stockpile that, sell extras of this, etc. 

And then, get back to life. Keep an eye on the economy and politics, producing income, but also remember to enjoy myself, and try to tune out the noise.

Good luck to everyone in their preparations for... whatever (and whenever).

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Cloudfire
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Re: The False Recovery Buys Us Time
rocketgirl1 wrote:

 I read something a while back that talked about blending in with everything, lights out at night, hang clothes to dry, etc.  Share your tools.

One of my strategies, since I have a large number of unprepared, less-than-ethical neighbors, is to befriend some of the nearby, young, fit, male would-be pilferers, on the notion that, if they know they can get food and other assistance from me without a fight, they may actually be useful in protecting what I've got.  Sometimes, it pays to have friends in low places . . . not too low . . . not the sort that will turn on you out of sheer greed . . . . but the sort that knows how one hand washes the other . . . .  I'm not divulging much, at this point . . . but I've already enlisted their help in watching my garden, and deterring their pilfering friends from tiptoeing through my okra . . . . in exchange for some veggies and herbal/alternative healthcare, and a blind eye to some of their nefarious business transactions.  The trick is to find ones who are basically decent folks, but who know, from the School of Hard Knocks, that making a living and defending one's turf is sometimes better handled, shall we say, informally.

 

SagerXX's picture
SagerXX
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Re: The False Recovery Buys Us Time
rocketgirl1 wrote:

I'm not talking to family and friends about what I know anymore.  They're not listening anyways.  

Amen, sister.  My wife just yesterday called for a time out on any further discussion of SHTF and/or prep.  Fortunately, having done a bunch of "entry-level" prep, the next big issue IMO is selling our house -- downsizing both literally and in terms of our expenses -- and she has agreed she wouldn't mind.  Of  course, Spring is traditionally when you put a house on the market, and depending on the kabillion variables out there the next big downleg could happen tomorrow, or 2 years from now.  Too many of the people more knowledgeable than I say they figure it hits sometime between 2-9 months, meaning putting our house on the market next April will likely be too late.  My wife is having lunch w/our realtor as I type this.  I'm interested to see if we get what I would consider "straight talk" advice from her or something more "green shooty"...

Selling the house, apart from less labor/upkeep and lower expenses (we could live in a rental that'd cost us about 1/2 what our mortgage costs), would -- assuming we could get our (smallish amount of) equity out, would also provide us w/some funds that could go towards muchly-needed further prep.  My wife and I have a system whereby our disposable income (and we define that as what's left over after meals out, entertainment expenses, etc.) gets divided into 1/2 and we each spend our portion the way we like.  She generally goes in for making the home more homey.  In the last 5-7 months I've been spending mine on PMs, storable food, my first firearm (& ammo of course) etc.  

Any equity we'd get outta the house I'd put in PMs (silver methinks) as a hedge against collapse & a long-term investment.  I'd go buy a sustainable homestead tomorrow if I could (and if my wife was ready).  But we're not there as a partnership yet.  

Bottom line is I'm glad for the alleged recovery and am busy doing all I can (as listed above) -- and working myself hard to build connections & a community (which IMO is the most difficult *and* time-consuming task of all) of like-minded, hard-working and courageous folks.

Great thread, Morpheus.  Thanks for gettin' it rolling!

Viva -- Sager

 

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putaforkinUS
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Re: The False Recovery Buys Us Time

 I was just thinking of starting a thread about this very topic!

I am a small business owner and am apparently one of very few in my circle of influence that takes the position that we, as a country, are truly in bad shape.  When I say bad shape, I'm speaking specifically about the economy.

I broke off from a fairly large company in July "08 to start my own consulting firm.  The timing couldn't have been worse.  We have survived the first year of business in probably the worst financial mess since the Great Depression.  Our business has survived only because our clients believe the garbage coming from the media about recovery.

In the fall last year, many people around me thought that things would get much worse and that we could be headed for financial catastrophe.  I still believe that.  While there is no doubt that certain fundamentals of the economy have improved since March, many others have not.  And I'm not so sure that the fundamentals that have improved aren't improving just because of people buying into the "green shoots" hype.

Tax receipts off double digits from last year show that business and people aren't making as much money.  Unemployment numbers show that that's not going to change in the near future, other than businesses potentially running a little more profitably short term due to cuts in overhead.

If people aren't making as much, and are saving instead of spending, where will the recovery come from in our consumer based economy?  We don't have the magic home equity ATM on the sides of our houses anymore either.

Having said all of that, the markets keep rising and our clients keep spending.  My personal strategy is to protect my household situation like many of you are, but to wait until the end of September or October of this year and then change how I view the economy from the perspective of a business owner.  I guess what I'm saying is, if the economy doesn't tank again this fall like it did last fall, I can't afford to sit on the sidelines with my business with extremely conservative moves at every turn.  I need to take advantage of the fact that an apparent majority of people out there think everything is going to be OK and grow my business aggressively.

Some input from you on the previous paragraph would be great.

As far as the thread subject, I'm fully expecting a crash again by this fall.  If it doesn't happen, then I have no idea when it will.  Nothing in this current financial paradigm can be sustained and I'm amazed daily that it's still going.

 

dan

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SteveS
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Re: The False Recovery Buys Us Time
rocketgirl1 wrote:

I'm not talking to family and friends about what I know anymore.  They're not listening anyways.

I'm feeling the same way, but one can make subtle statements. My wife and I were mulling over what to give our 6 year old grand-neice for her birthday - she has everything she could want and I refuse to buy Hanna- whatever knick knacks. I sent her two silver 1oz rounds with a note that these are silver and to keep them safe. I plan on doing that for other occasions too. Hopefully it will get the parenst thinking, but if it makes me 'that weird Uncle Steve' I'm ok with that too....

 

 

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strabes
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Re: The False Recovery Buys Us Time

The only reason the market is up is because markets move up and down.  Don't waste time looking for fundamental reasons.  Much like an airline pilot overshoots center and keeps adjusting back, the market overshoots the center bear market trend by shooting down and up in this overall collapse, just like it did in the depression.  I posted a chart a while back with the up and down waves of the depression.  So far things are looking quite similar.  

So regardless of how loud Cramer and CNBC yell, ignore everything they say.

It seems to me Elliott Wave is the best analyst of these up and down waves.  They have now recommended exiting all long positions and starting to build shorts, but only with gambling money since many shorts will not be paid in this next collapse.  The crash might not come for a few months, but there's not much more upside left so there's no reason to keep your long positions (as I've said before, unless you're a trader with a solid system that's capable of playing smaller waves)...most upside came in the early phase of the corrective wave that started March 9. Sentiment indicates uber-bullish ratings now which means there's not much more upside potential and the ratings match the ultra high points that indicate institutional money is getting ready to pull the rug out from under the little people.  

In terms of preparing, I decided NOT to move back close to family where I'd have lots of space, storage, gardening, etc. For now I'm staying in Seattle in a dense house that doesn't have room for much stored food and the like.  Might be a mistake but I have deeper reasons to stay right now.  

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britinbe
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Re: The False Recovery Buys Us Time
SteveS wrote:
rocketgirl1 wrote:

I'm not talking to family and friends about what I know anymore.  They're not listening anyways.

I'm feeling the same way, but one can make subtle statements. My wife and I were mulling over what to give our 6 year old grand-neice for her birthday - she has everything she could want and I refuse to buy Hanna- whatever knick knacks. I sent her two silver 1oz rounds with a note that these are silver and to keep them safe. I plan on doing that for other occasions too. Hopefully it will get the parenst thinking, but if it makes me 'that weird Uncle Steve' I'm ok with that too....

 

 

Its the same here.  At least my wife listens and supports me now she can see things for herself, but as for the rest of the family and freinds....when they think I'm a sandwich short of a picnic.  In a similar approach to you with your grand-neice, we bought a silver bar to give as a wedding present.  In the UK silver as a wedding present is regrded as good luck (well, in some parts of the country).......... but yes, I expect some funny looks

 

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