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Posted: 6/8/2009 1:24:17 PM EST
[Last Edit: 6/8/2009 1:27:25 PM EST by Templar223]
Link back to original document, with pretty formatting.

ETA: I cleaned it up a little.


Ten Things You Must Do

by Karl Denninger
Market Ticker Forum

As I have often said, "I don't do specific investment advice."

There are several reasons for this, among them being:

1. I'm not a registered investment advisor. That is, it is actually illegal for me to run someone else's money (other than as a trustee, such as for my daughter.)
2. It is flatly impossible for me to calibrate someone's risk appetite and capacity, both physical and mental, to absorb possible loss, over The Internet or, for that matter, without an extensive inventory of someone's income, assets and liabilities. (By the way, most so-called "financial planners" don't do nearly enough in this regard to FULLY understand their clients.)

But at turning points in the market - such as prior to 2008 - it was easy to see what was coming - even if timing was somewhat uncertain.

This is one of those times, and it compels me to publish a list of "10 things you must do now" - that is, if you have your eye on the ball.

The last week's wild gyrations in the bond market have made clear that Bernanke and his "pals" are quickly losing control of the bond curve. Friday's selloff in 2s was particularly ominous as that money did not go into equities or precious metals - it simply "went". The 2year is commonly thought of as the "demarcation line" between the short and long end, so when I saw 2s get sold down the antenna went up in a major way.

It is one thing for people to flee the long end of the bond curve; that's bad. Its another for people to flee Treasury bonds in general - that's an unmitigated disaster. The auctions last week showed that there is an incredible appetite from foreigners for very short term government debt - 4 week to 52 week bills - where the indirect bidder activity was at or close to double historical norms. This, in the face of the incredible amount of issuance that is occurring, tells me that they're selling something to replace it with these short-term instruments. Friday told us what the "something" was.

Folks, we have taken the wrong road. At the fork in mid 2007 and indeed into 2008 when the fork was still accessible I wrote extensively on the path we had to take if we wanted to avoid at best a Japan-style flatline of the economy for years, and at worst something beyond the 1930s in terms of awful.

We have done nothing to rid ourselves of toxic debt. The implosion of the PPIP, the latest incantation of the "Super-SIV" (remember that?) makes clear: government will not force recognition of losses and thus the clearing of the market, as doing so would destroy too many who have bribed, er, made "campaign contributions", to the political sphere.

Worse, government not only took on these debts themselves (via The Fed and Treasury with their "support" programs) but continues to issue more and more debt to fund what is a categorically-insane federal budget - one that is, this fiscal year, going to run a deficit of some forty percent. To put this in perspective when George W. Bush was President many (myself included) were screaming about 10% fiscal deficits. Barack Obama proposes to run a deficit four times greater in percentage terms. Where are all the media and other pundits who were yelling about Bush's "deficits for war"? Silent, that's where, because this time the person doing it is a Democrat.

But math doesn't care about politics. Math IS.

As a consequence we will instead face the music that this debt overhang will impose on us, whether we like it or not. We have now transferred some $12 trillion in either liabilities or "promises" to The Federal Government, representing a tripling of the "public float" of outstanding debt and a doubling of the nominal amount.

This approaches the GDP of the nation in "additions" and exceeds it in total - a demonstrably unsound liability and at or beyond the "warning levels" that Moody's, S&P and Fitch have said would trigger possible "AAA" downgrades. That is coming, whether it happens now or later.

The demographics also cannot be argued with. The boomers have had their retirement decimated. Even with the market levitating at a P/E (on GAAP earnings) of some 120 times (!), they've still lost more than 30%. Computing P/Es on "operating earnings" is a sham and a fraud, declaring that investment and credit losses don't really matter, yet if you go over to the WSJ "data page" or Yahoo's, that's what you'll find. (Why do they do this? That's easy - if you saw a P/E of 120, what would you do as an investor?)

As the boomers are forced to pull their retirement funds they will come out of stocks and ultimately yank the underpinning out from under all asset classes. It is inevitable.

You have undoubtably seen the "quotes" up above on the banner of this page. Those are not abstract musings. They are mathematical computations of where the indices and those names should be trading without the excess liquidity provided by pulled-forward debt demand. Will the indices and names get there? Probably not, because not all debt-driven demand will disappear. But it is a sobering reminder, in your and my (along with everyone else's) face of exactly how much fraud we have countenanced in our financial system.

Pulled-forward demand cannot be pulled forward a second time. You can keep layering it up but each layer leaves behind interest expense and a principal overhang, both of which must ultimately be either paid off or defaulted.

Now add to this the foolish (arguably insane) pandering to the UAW in favor of bondholders with both Chrysler and GM. The government (wisely?) decided to make "secured" bondholders in GM whole - something they didn't do with Chrysler. Who were they? Largely the very same banks who got TARP payments. Gee, what a surprise. The "ordinary bondholder" - that is, the retiree or parent trying to finance their kid's college education got hosed, while the UAW, who was also unsecured, got more than twice the recovery they should have. Worse, none of their "legacy costs" - pensions, medical and hourly pay - were brought in line with competitors. GM and Chrysler will go bankrupt again, this time after draining more than $50 billion out of the Treasury!

Honda and Toyota executives have to be chuckling at the stupidity of our government, and salivating at the opportunity to take GM and Chrysler apart - for a second time.

The risk of a "sudden stop" event where the bond market tells the government to "piss off" has never been higher. A ratcheting up of the yield curve, when the average maturation of government debt is now just under 4 years, could easily double interest expense in the budget. This would put the government in a nasty box: either curtail spending by twice that much (that is, roughly $800 billion) immediately or the addition to the deficit could force another ratchet higher in yield. This is a "death spiral" that can happen with amazing speed. If it does, everything you think the government should provide will disappear and asset prices - all of them - will collapse along with the economy.

How likely is this outcome? About 60%. Not certain - yet - but too high. A couple of years ago I would have pegged this sort of nightmare scenario in the 20% range. Back in September and October, 30-40%. In March, 50%, but driven by pension fund explosions in the large-cap space. Now that seems to be temporarily off the table due to the rally in the stock market (gee, think Bernanke saw that risk too?) but the problem wasn't resolved - they just shifted the risk once more, this time to the Treasury curve. If the government is once again forced to pull liquidity to defend the Treasury complex (and I believe they will) we will ratchet the risk higher, as the stock market will again decline precipitously but we will have cleared nothing, leaving the risks as cumulative.

How many times can we "kick the can"? An infinite number of times? Absolutely not. Each kick fills the can with more and more sand, until you stub your toe.

Do you want to be investing in stocks right now? Why? On the back of a 40% rally? If you missed it, you did. What are the odds of another 40% increase? Back to 2007 highs? With unemployment knocking on 10%? - the "more severe" stress test scenario - and almost certain to not stop there?

Now consider the risk of a 40% decline - that is, back to the March lows or worse. Unthinkable? Think again; it happened before, didn't it? Care to bet against the macro economic environment?

Don't say you weren't warned.

So without further adieu, here's my list of 10 things you need to be doing now:

Stop listening to those who claim that "The Market is telling you the recession is ending/over." Baloney. What was the market telling you in October of 2007 when the SPX hit 1576? That everything was great and "subprime was contained", right? Any more questions on that piece of nonsense?

Get out of debt - NOW.
Revolving debt in particular is murderous. If your credit line hasn't been cut back or your interest rate jacked, you're one of the few. It will happen. Going bankrupt due to increasing debt service requirements (with or without job loss) sucks.

Stop spending more than you make - in fact, do the opposite - start saving. NOW. You need to be saving 10% of your gross income. Not net or "excess" - gross. These funds serve two purposes: an emergency fund (which you're likely to need) and if you have one already it will also serve as a fund to buy up assets that will be puked up when things get really bad. You don't get wealthy by selling to some other sucker - you get wealthy by buying when nobody has any money to buy - that is, by driving the hardest bargain you can imagine!

I've said it before but it bears repeating: have the ability to make it even if you lose your job. Most people say three months of reserves are necessary. I've said six months to two years, and I'll reiterate it. And reserves means cash, not credit. Parked in a credit union is ok - but be prepared to make that actual cash in a big honking hurry if you need to. How do you know if you need to? If and when the first Treasury auction fails, the market crashes below the 666 March low and/or a big bank fails, you need to.

Pull ALL of your business from ANY bank that has received federal assistance. The community banks and credit unions have been screwed by the crony government interests in two ways - first, by regulators allowing bankrupt banks to pay overly-large CD rates when they're insolvent (that's fraud on its face) and second by proposing to tax them through FDIC assessments to pay for the sins of the imprudent. Withdraw your consent and assistance - move your funds to a credit union or local community bank, but before doing so ask to see their financials and look specifically for over-leverage in commercial real estate and other development "assets". HIT THE BAD GUYS IN THE WALLET - THE ONLY PLACE THEY UNDERSTAND!

If you have assets in the stock market, and have thus enjoyed the rally off SPX 666, either sell or hedge that exposure RIGHT NOW. The upside risk is what - 10%? What's the downside risk? 50% or more. You can hedge effectively with PUTs which have gotten much cheaper as the VIX has fallen, or simply sell out and go to cash. In my opinion you're insane to play for another 10% gain when you may suffer a 50% loss, but that's my view. Just don't say you weren't warned if you do nothing and the collapse occurs!

Figure out what you're going to do if we suffer a "sudden stop" and be prepared to execute that plan. Consider what a collapse in trucking, for example, does to the food supply into major cities. This is a low-probability risk right now (perhaps 10-20%) but if it happens major cities will become free-fire zones within hours. A gun won't do you a damn bit of good when there's a potential rifle barrel sticking out of every window and the person behind it is interested in the bag of groceries you're carrying. You are not Rambo (and by the way, have you noticed that Rambo always goes after bad guys in some small, flat hellhole? Ever wonder why? With a sniper rifle poking out of every second window even John Rambo doesn't stand a chance.) Those who live on the coasts have hurricane plans. Everyone needs a "sudden stop" plan, and it must not rely on access to credit of any sort, because if "it" happens that access will disappear instantly. For people in rural America, this might not be that big of a deal. For those who live in big cities it is - and its something you probably haven't thought through to the degree you need to.

Don't count on metals. I know, I know, we're going to hyperinflate and gold is going to the moon. I have one question: Can you eat it, drink it, run your car on it, sleep under it, or screw it? No? That's a problem. A "sudden stop" is not a hyperinflationary event - it has good odds of being quite the opposite. God help you if you put your eggs in that basket and are wrong.

Acquire lawful means of self-defense. Your odds of being victimized are roughly 1 in 100 annually under normal conditions. What happens when its 1 in 5? Think it won't be? Ok, if doesn't really get bad then you spent money on something you don't need, but you still have it and can sell it (even if you take somewhat of a loss.) If you wait, and then decide you need it, what are the odds of being able to find a firearm? And by the way, weapons you don't know how to use in a competent and cool fashion if you need to are worthless or worse. This means range time and/or professional instruction, and both take time, effort and money. Again, this is called "hedging" - your life and property, this time (instead of your investment portfolio)

Figure out who your friends are - and aren't. This isn't about who you like. Its about who you can trust with your back - no questions asked. If things get bad the second-to-the-last thing you want to be is alone - right before being around anyone who is less than 100% trustworthy. Think about this point long and hard - this doesn't mean dumping acquaintences now, but it does mean knowing who you group with if you need to - and who you avoid.
Link Posted: 6/8/2009 2:12:39 PM EST
Always unnerving, because it is all so plausible. Maybe our economy is way too resilient to collapse. Maybe it isn't. It's not as if these economic statistics and ratios come and go every decade so that we can accurately predict the outcomes.
Link Posted: 6/8/2009 2:13:08 PM EST
Well I copied and pasted and forwarded on to a few people. I think its what alot of us have been saying for the last year. Im almost there.
Link Posted: 6/8/2009 2:15:32 PM EST
[Last Edit: 6/8/2009 2:16:10 PM EST by JBlitzen]
What he says about gold is exactly what I've said for months. Not saying you can't make money off it, just that it isn't the end all be all of value that it's thought to be.

Karl's kinda freaking out.

Looking at the market activity today, I kind of am, too. All this supposedly good news and the DJIA dives in the first hour, rises for no apparent reason, then drops and ends up 1 point.

I don't get it. I don't like markets I don't get.

Karl hasn't posted something that bad in months, but he's ramped up lately. I hope he's wrong.
Link Posted: 6/8/2009 2:25:24 PM EST
TEOTWAWKI!!!!!!!!!!!!!!111111111111111!!!!!!!­!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Link Posted: 6/8/2009 3:32:25 PM EST
Scary times.
Link Posted: 6/8/2009 3:48:47 PM EST
Originally Posted By Citabria7GCBC:
TEOTWAWKI!!!!!!!!!!!!!!111111111111111!!!!!!­!!!!!!!!!!!!!!!!!!!!!!!!!!!!!



technically, it is, based on the fact that the so called experts have never seen this before.
Link Posted: 6/8/2009 3:59:10 PM EST
Originally Posted By JBlitzen:
What he says about gold is exactly what I've said for months. Not saying you can't make money off it, just that it isn't the end all be all of value that it's thought to be.

Karl's kinda freaking out.

Looking at the market activity today, I kind of am, too. All this supposedly good news and the DJIA dives in the first hour, rises for no apparent reason, then drops and ends up 1 point.

I don't get it. I don't like markets I don't get.

Karl hasn't posted something that bad in months, but he's ramped up lately. I hope he's wrong.


What's his reputation overall in the Investment community? Is he a chicken little type?
Link Posted: 6/8/2009 4:23:40 PM EST
Well, I dont know who he is but I agree with his 10 steps.

if you dont owe anybody, have a big wad of cash and lots of food and things you need to survive youre better off than 95 % of people in good times........in bad youre a genius. I am gonna leave the 401K where its at tho.....but no other stocks or for that matter bonds......gonna go with cash, preps, and probably some metals.
Link Posted: 6/8/2009 4:43:03 PM EST
"The US Congress has abdicated its role as a governing body."

I stole that quote because it's so true...
Link Posted: 6/8/2009 4:51:03 PM EST
Originally Posted By fruitjacket:
What's his reputation overall in the Investment community? Is he a chicken little type?

Absolutely, but he's also gotten an unusual number of things right.

In fact, if you pick a random month archive on his blog, check out the articles, then check out news stories and charts from subsequent months, you can verify that.

On the other hand, it's always easy for a permabear to look good during a bear market, just as it's pretty easy for a bull to look good in a bull market.

On the other other hand, I'm aware of that and still consider Denninger worth reading.

Link Posted: 6/8/2009 4:53:16 PM EST
Originally Posted By uncool:
Well, I dont know who he is but I agree with his 10 steps.

if you dont owe anybody, have a big wad of cash and lots of food and things you need to survive youre better off than 95 % of people in good times........in bad youre a genius. I am gonna leave the 401K where its at tho.....but no other stocks or for that matter bonds......gonna go with cash, preps, and probably some metals

His suggestion seems to be to move your 401k out of whatever fund it's in and put it in cash. I'm sure he means still in the 401k, so that you aren't taking a tax hit.

It's not bad advice, I've been considering moving my IRA money out of an S&P index and into something much more conservative. It'll still be in the IRA, just at significantly less risk from a move down in equities.
Link Posted: 6/8/2009 5:19:43 PM EST
Don't underestimate the power of the printing press. The Gov't won't default on its obligations; it will honor them in grossly devalued dollars (and blame it all on Bush, the Republicans, the Chinese, etc. etc.). Expect crushing new taxes and cuts in gov't benefits. This thing will probably play out like Argentina or Japan. I don't see Mad Max or Fallout 3 at all. There might be a blip or two, but I don't see a sustained collapse as long as the Gov't can print.

The meltdown scenario is extremely unlikely; as a history buff I really can't find any situations where there was a complete and sustained collapse of a large economy due to a financial/economic crash. The Great Depression is the closest thing, but even then 75% of people were still working, albeit at reduced salaries (40% cuts on average). It really sucked to be part of those 25%, but I don't think anyone starved to death.

Even during the devastation of war economies proved very resilient and picked themselves up. Germany and Japan were bombed into the stone age and emerged as the dominant players in industrial production within years. Given the dislocations of their infrastructure, economies, and political institutions all utterly destroyed, they still made it. People are resilent; they adapt and move on.

I think we are in for a long, miserable period of stagflation as the prices for some things like houses and cars collapse, but the prices for commodities and utilities like food, electric, and gas skyrocket. I think the America we've grown accustomed to for the past 20 years is gone for good, maybe that's a good thing.

Karl's points are well taken, but I don't think you'll need those guns.
Link Posted: 6/8/2009 5:39:18 PM EST
Get out of debt - NOW. Revolving debt in particular is murderous. If your credit line hasn't been cut back or your interest rate jacked, you're one of the few. It will happen. Going bankrupt due to increasing debt service requirements (with or without job loss) sucks.


I have noticed this response on several forums and I am not sure I completely agree with this statement or fully understand the implications. If the economy fails, why worry about bills you may have? Conserving cash and building supplies would be the utmost consideration. Please explain why paying off debt will help, not sure I agree.
Link Posted: 6/8/2009 5:57:07 PM EST
Unlike the 1930's EVERYONE, public and private is up to their ears in debt. People didn't have funky mortgages, CAR mortgages, credit card debt, and half a dozen insurance policies to pay each month to worry about back in the 1930s.

People also lived closer to home, neighbors took care of one another, and the local, county, and state budgets weren't in free fall due to outlandish outlays to prisons, schools, and a bloated bureaucracy. So the state COULD spend money on welfare.

Thirdly, the USA was a major industrial power just flexing our muscles.... we were a major EXPORTER to the world and the world of the 1930s invested in us as the safest of bets.

Today, we're all underwater, the local, city, state and fed governments are all in debt and their liabilities are crushing. The massive welfare state is crushing tax payers, and there's not enough people with liquidity to keep the whole shee-bang rolling...except maybe China and the oil producers but they're getting spooked about buying more debt.

So if the world stops buying our debt, the federal government will have to cut its expenses for the first time evah. Guess who gets cut first? DOD. Everyone else fights tooth and nail but prisons and education will go too. States won't be able to pick up the slack and the dominoes start to fall.

Also, Germany and Japan rebounded from ww2 thanks to the USA providing them a largely free pass from needing to worry about defense spending....so they could focus on rebuilding their economies. They also had us providing them with the basics to enable them to maintain law and order....again a huge bonus we're NOT going to have from anyone else in the world, even China isn't big enough (yet) to play the victorious America.

If we tank, there aint' anyone out there who will come to our rescue folks. The buck stops here.
Link Posted: 6/8/2009 5:59:25 PM EST
Originally Posted By Tomato_Thrower:
Don't underestimate the power of the printing press. The Gov't won't default on its obligations; it will honor them in grossly devalued dollars (and blame it all on Bush, the Republicans, the Chinese, etc. etc.). Expect crushing new taxes and cuts in gov't benefits. This thing will probably play out like Argentina or Japan. I don't see Mad Max or Fallout 3 at all. There might be a blip or two, but I don't see a sustained collapse as long as the Gov't can print.

The meltdown scenario is extremely unlikely; as a history buff I really can't find any situations where there was a complete and sustained collapse of a large economy due to a financial/economic crash. The Great Depression is the closest thing, but even then 75% of people were still working, albeit at reduced salaries (40% cuts on average). It really sucked to be part of those 25%, but I don't think anyone starved to death.

Even during the devastation of war economies proved very resilient and picked themselves up. Germany and Japan were bombed into the stone age and emerged as the dominant players in industrial production within years. Given the dislocations of their infrastructure, economies, and political institutions all utterly destroyed, they still made it. People are resilent; they adapt and move on.

I think we are in for a long, miserable period of stagflation as the prices for some things like houses and cars collapse, but the prices for commodities and utilities like food, electric, and gas skyrocket. I think the America we've grown accustomed to for the past 20 years is gone for good, maybe that's a good thing.

Karl's points are well taken, but I don't think you'll need those guns.

i don't think the melt down would occur b/c of the financial/economic crisis, but moreso b/c of the effects of the crisis and the vast difference btwn America now and during the depression. take, for example, karl's example of a trucking stoppage. during the depression, many people had the ability to produce their own food. today, not so much, especially factoring in the vast number of people now suckling the .gov's teat.
Link Posted: 6/8/2009 6:19:21 PM EST
Originally Posted By JohnnyP:
Get out of debt - NOW. Revolving debt in particular is murderous. If your credit line hasn't been cut back or your interest rate jacked, you're one of the few. It will happen. Going bankrupt due to increasing debt service requirements (with or without job loss) sucks.

I have noticed this response on several forums and I am not sure I completely agree with this statement or fully understand the implications. If the economy fails, why worry about bills you may have? Conserving cash and building supplies would be the utmost consideration. Please explain why paying off debt will help, not sure I agree.

Mathematically, you're correct. If you were in Zimbabwe five years ago, you'd want to finance all sorts of shit on ten year loans. You could pay them off now with six minute's income.

In practice, you're wrong. That math only works out if you correctly time the market, which nobody ever, ever does. Ever. Given that you'd get it wrong, then the advantages of carrying the debt are minimal. The disadvantages are obvious.

If hyperinflation does hit, you can always put cash into tangibles.

If deflation hits, you can't just pay off loans.

And if everything goes pretty normal, then you still can't pay off loans.

So, focus on paying off the loans, and just keep a nose in the air for serious inflation.
Link Posted: 6/8/2009 6:21:16 PM EST
Originally Posted By JusAdBellum:
Unlike the 1930's EVERYONE, public and private is up to their ears in debt. People didn't have funky mortgages, CAR mortgages, credit card debt, and half a dozen insurance policies to pay each month to worry about back in the 1930s.

People also lived closer to home, neighbors took care of one another, and the local, county, and state budgets weren't in free fall due to outlandish outlays to prisons, schools, and a bloated bureaucracy. So the state COULD spend money on welfare.

Thirdly, the USA was a major industrial power just flexing our muscles.... we were a major EXPORTER to the world and the world of the 1930s invested in us as the safest of bets.

Today, we're all underwater, the local, city, state and fed governments are all in debt and their liabilities are crushing. The massive welfare state is crushing tax payers, and there's not enough people with liquidity to keep the whole shee-bang rolling...except maybe China and the oil producers but they're getting spooked about buying more debt.

So if the world stops buying our debt, the federal government will have to cut its expenses for the first time evah. Guess who gets cut first? DOD. Everyone else fights tooth and nail but prisons and education will go too. States won't be able to pick up the slack and the dominoes start to fall.

Also, Germany and Japan rebounded from ww2 thanks to the USA providing them a largely free pass from needing to worry about defense spending....so they could focus on rebuilding their economies. They also had us providing them with the basics to enable them to maintain law and order....again a huge bonus we're NOT going to have from anyone else in the world, even China isn't big enough (yet) to play the victorious America.

If we tank, there aint' anyone out there who will come to our rescue folks. The buck stops here.


agree with you except this, two weeks and im free ! its gonna be an interesting ride tho
Link Posted: 6/8/2009 6:34:01 PM EST
[Last Edit: 6/8/2009 6:40:27 PM EST by uncool]
Originally Posted By JohnnyP:
Get out of debt - NOW. Revolving debt in particular is murderous. If your credit line hasn't been cut back or your interest rate jacked, you're one of the few. It will happen. Going bankrupt due to increasing debt service requirements (with or without job loss) sucks.


I have noticed this response on several forums and I am not sure I completely agree with this statement or fully understand the implications. If the economy fails, why worry about bills you may have? Conserving cash and building supplies would be the utmost consideration. Please explain why paying off debt will help, not sure I agree.


In two weeks I will be debt free........Ill pay off my house and owe nothing to anyone. Ill be free to pay cash for what supplies I want and put away what cash I want and only have to worry about paying the 500.00 dollar property tax bill once a year......Think about that for a minute. Thats why you payy off your debt and stay out of debt. I hope I dont have to but I can live on 600.00 a month and not have to worry about bill collectors. I have a years worth of expenses in the bank and plan on doubleing that at a minimum. Ill be sitting in my paid for home watching the entertainment while the repo folks are taking the home of the folks across the street and behind me. Any questions ?
Link Posted: 6/8/2009 7:05:21 PM EST
My brokers began cautioning of a bond meltdown about a month ago. They said "3 to 6 months".

China cautioned Obama about rampant printing about two weeks ago. They have cards to play, cards which will hurt, if Obama ignores them.

The debt WILL be addressed. One way or another.

Until it is, I might dabble with up to 25% of my assets, looking for smaller, short term gains, but the bulk of my assets stay in cash and in puts, or the ETF variant of same. I made about $20k in emerging markets between the March bottom, and when I dumped at 8500 two weeks ago. If I lose there, odds are I won't lose all of it, and I can afford it if I do. Until the major factors dragging down our economy, debt, housing prices, commercial real estate, wages and unemployment, all show signs of a real fix, I am running my assets as if from a bunker under seige.

Most assets protected in cash, small amounts in play on volatility hopes.

I think Denninger gets two things wrong, well one wrong and he misses one completely.

Metals are never edible, he's correct about that. But lets say that you are, like me, waiting to pull the trigger on some big ticket items, things you don't need if the S doesn't hit the fan, but things that will be critical if S does HTF. I could use a larger tractor for cutting the grass. I epxpect to spend around $10k for it, when and if I ever buy it. At that price, I can get a good basic farm tractor in decent shape, with a small frontloader and a six foot mowing deck. If it looked like the S really was HTF, spending another $1000 to $1500 for a tiller or plow would be a minimal expense for a maximal gain.

But buying a 40 horse tractor is just a little over the top to cut two acres of grass once a week. I could do a LOT better with a very nice, new ZTR or standard mower set up JUST to cut grass, $5-8000 for the absolute top of the line.

If I wait too long, and a meltdown is in full swing, I may not be able to get cash out of the bank to buy a real tractor that will cut grass and plow a few acres for a large home garden. The cash my be so diluted by Obama's printing that nobody wants it. Cash may be unwanted since "you can't eat it". At that point, a nice pile of shiny gold might just buy me a tractor, where any other assets will not.

If I have gold only, I could easily be fucked. If i hold cash only, I could easily be fucked. Holding BOTH gives me a beter chance to put the final polish on my preps especially for big ticket items I might not buy if the S never HTF.

The point Denninger misses completely...check your FDIC limits.

Cashing in can EASILY put one account over the $250k limit and if there is a bond meltdown, well, banks hold a lot of bonds, so the risk of bank closings is not past us yet. Be sure you understand how your investment accounts handle cash sweeps, where the cash goes, and when it happens, daily, weekly, monthly, etc.

Further, unless Congress does soemthing new, FDIC limits will revert to $100K per account at midnight on December 31, 2009. Waiting till the last minute to re-distribute cash is NOT the best way to get good interest rates on accounts or CDs. A LOT of people will be trying to do that, don't be one of them. Take your time and get your accounts dispersed over the next few weeks, don't wait till the last second, or until a bond market collapse catches you short.

Link Posted: 6/8/2009 7:52:30 PM EST
FDIC is for rare problems. It cannot possibly replace lost cash from an industry wide collapse.

You're right about being careful, just take it one step further and don't trust FDIC in this sort of situation.

But, hopefully, this is all chicken little stuff and we'll be focusing on OJ Simpson again in a few months.
Link Posted: 6/8/2009 8:01:59 PM EST
Originally Posted By JusAdBellum:
Unlike the 1930's EVERYONE, public and private is up to their ears in debt. People didn't have funky mortgages, CAR mortgages, credit card debt, and half a dozen insurance policies to pay each month to worry about back in the 1930s.

People also lived closer to home, neighbors took care of one another, and the local, county, and state budgets weren't in free fall due to outlandish outlays to prisons, schools, and a bloated bureaucracy. So the state COULD spend money on welfare.

Thirdly, the USA was a major industrial power just flexing our muscles.... we were a major EXPORTER to the world and the world of the 1930s invested in us as the safest of bets.

Today, we're all underwater, the local, city, state and fed governments are all in debt and their liabilities are crushing. The massive welfare state is crushing tax payers, and there's not enough people with liquidity to keep the whole shee-bang rolling...except maybe China and the oil producers but they're getting spooked about buying more debt.

So if the world stops buying our debt, the federal government will have to cut its expenses for the first time evah. Guess who gets cut first? DOD. Everyone else fights tooth and nail but prisons and education will go too. States won't be able to pick up the slack and the dominoes start to fall.

Also, Germany and Japan rebounded from ww2 thanks to the USA providing them a largely free pass from needing to worry about defense spending....so they could focus on rebuilding their economies. They also had us providing them with the basics to enable them to maintain law and order....again a huge bonus we're NOT going to have from anyone else in the world, even China isn't big enough (yet) to play the victorious America.

If we tank, there aint' anyone out there who will come to our rescue folks. The buck stops here.


Your post is correct, but you left the the tremendous amount of gold Japan had taken from their occupied territories. Amongst the academic types it is un-PC to even discuss it.
Germany also looted like Huns (lol) but used most of it to purchase war material from 'neutral' countries.
Link Posted: 6/8/2009 8:52:16 PM EST

Originally Posted By uncool:
Originally Posted By JohnnyP:
Get out of debt - NOW. Revolving debt in particular is murderous. If your credit line hasn't been cut back or your interest rate jacked, you're one of the few. It will happen. Going bankrupt due to increasing debt service requirements (with or without job loss) sucks.


I have noticed this response on several forums and I am not sure I completely agree with this statement or fully understand the implications. If the economy fails, why worry about bills you may have? Conserving cash and building supplies would be the utmost consideration. Please explain why paying off debt will help, not sure I agree.


In two weeks I will be debt free........Ill pay off my house and owe nothing to anyone. Ill be free to pay cash for what supplies I want and put away what cash I want and only have to worry about paying the 500.00 dollar property tax bill once a year......Think about that for a minute. Thats why you payy off your debt and stay out of debt. I hope I dont have to but I can live on 600.00 a month and not have to worry about bill collectors. I have a years worth of expenses in the bank and plan on doubleing that at a minimum. Ill be sitting in my paid for home watching the entertainment while the repo folks are taking the home of the folks across the street and behind me. Any questions ?

Absolutely. The debt free person is in a MUCH better position to ride out economic turmoil.
Link Posted: 6/9/2009 1:57:41 AM EST
It's important to think through what we want.... Germany and Japan post-ww2 had their territorial integrity assured by the world's super power, law and order established, and had their economies rebuilt by the creation of liberty of movement, commerce, and foreign capital investments. Not needing to spend on defense was a HUGE bonus.

Image what debt we'd all have been able to pay down the past 5 years if every firearm related expense went to the debt payments!

Now consider what a SHTF situation would be like if you lived on an island or military base such that your security situation was assured....you could focus all your energy and attention on shelter, food, tools, rebuilding or changing careers rather than on pulling boring guard duty or wasting energy watching your six.

This is why BTW, fleeing into the absolute boonies makes alot more sense than hunkering in a suburban home-turned-into-a-bunker. In a complete meltdown of civilization, the chief threat will be OTHER people who are desperate, irrational, and coming to seize whatever they can to survive (which isn't that irrational).... in the absolute boonies, anyone out there already has what they need to survive.... or at least don't panics when the snow covers the pass...

So bugging OUT makes sense to the degree you are prepared. Distance provides defense.
Link Posted: 6/9/2009 2:38:57 AM EST
This is the point at which I either swear off of KD for good....or hail him as a prophet. At this point, I'm not sure.

Question - for Frozenny or other market heads, When is the next treasury auction and how can we track it's success or failure? How often are treasury auctions?
Link Posted: 6/9/2009 2:41:51 AM EST
Templar223, not that I'm stalking you but I've been following your posts, and up to now you seemed to scoff at some of this stuff. When I can, read your posts in other forums also. (obviously to try and learn something from you) Do I read into this that you are not buying it 100%?
Link Posted: 6/9/2009 2:47:06 AM EST
Originally Posted By Tomato_Thrower:
Don't underestimate the power of the printing press. The Gov't won't default on its obligations; it will honor them in grossly devalued dollars (and blame it all on Bush, the Republicans, the Chinese, etc. etc.). Expect crushing new taxes and cuts in gov't benefits. This thing will probably play out like Argentina or Japan. I don't see Mad Max or Fallout 3 at all. There might be a blip or two, but I don't see a sustained collapse as long as the Gov't can print.

The meltdown scenario is extremely unlikely; as a history buff I really can't find any situations where there was a complete and sustained collapse of a large economy due to a financial/economic crash. The Great Depression is the closest thing, but even then 75% of people were still working, albeit at reduced salaries (40% cuts on average). It really sucked to be part of those 25%, but I don't think anyone starved to death.

Even during the devastation of war economies proved very resilient and picked themselves up. Germany and Japan were bombed into the stone age and emerged as the dominant players in industrial production within years. Given the dislocations of their infrastructure, economies, and political institutions all utterly destroyed, they still made it. People are resilent; they adapt and move on.

I think we are in for a long, miserable period of stagflation as the prices for some things like houses and cars collapse, but the prices for commodities and utilities like food, electric, and gas skyrocket. I think the America we've grown accustomed to for the past 20 years is gone for good, maybe that's a good thing.

Karl's points are well taken, but I don't think you'll need those guns.


OK, but aside from that, how did you like the play Mrs. Lincoln?

75% at reduced salaries - sounds peachy!!! Good effin luck with that.
Link Posted: 6/9/2009 2:50:39 AM EST
[Last Edit: 6/9/2009 2:53:28 AM EST by FordGuy]
Originally Posted By jeffers_mz:
My brokers began cautioning of a bond meltdown about a month ago. They said "3 to 6 months".

China cautioned Obama about rampant printing about two weeks ago. They have cards to play, cards which will hurt, if Obama ignores them.

The debt WILL be addressed. One way or another.

Until it is, I might dabble with up to 25% of my assets, looking for smaller, short term gains, but the bulk of my assets stay in cash and in puts, or the ETF variant of same. I made about $20k in emerging markets between the March bottom, and when I dumped at 8500 two weeks ago. If I lose there, odds are I won't lose all of it, and I can afford it if I do. Until the major factors dragging down our economy, debt, housing prices, commercial real estate, wages and unemployment, all show signs of a real fix, I am running my assets as if from a bunker under seige.

Most assets protected in cash, small amounts in play on volatility hopes.

I think Denninger gets two things wrong, well one wrong and he misses one completely.

Metals are never edible, he's correct about that. But lets say that you are, like me, waiting to pull the trigger on some big ticket items, things you don't need if the S doesn't hit the fan, but things that will be critical if S does HTF. I could use a larger tractor for cutting the grass. I epxpect to spend around $10k for it, when and if I ever buy it. At that price, I can get a good basic farm tractor in decent shape, with a small frontloader and a six foot mowing deck. If it looked like the S really was HTF, spending another $1000 to $1500 for a tiller or plow would be a minimal expense for a maximal gain.

But buying a 40 horse tractor is just a little over the top to cut two acres of grass once a week. I could do a LOT better with a very nice, new ZTR or standard mower set up JUST to cut grass, $5-8000 for the absolute top of the line.

If I wait too long, and a meltdown is in full swing, I may not be able to get cash out of the bank to buy a real tractor that will cut grass and plow a few acres for a large home garden. The cash my be so diluted by Obama's printing that nobody wants it. Cash may be unwanted since "you can't eat it". At that point, a nice pile of shiny gold might just buy me a tractor, where any other assets will not.

If I have gold only, I could easily be fucked. If i hold cash only, I could easily be fucked. Holding BOTH gives me a beter chance to put the final polish on my preps especially for big ticket items I might not buy if the S never HTF.

The point Denninger misses completely...check your FDIC limits.

Cashing in can EASILY put one account over the $250k limit and if there is a bond meltdown, well, banks hold a lot of bonds, so the risk of bank closings is not past us yet. Be sure you understand how your investment accounts handle cash sweeps, where the cash goes, and when it happens, daily, weekly, monthly, etc.

Further, unless Congress does soemthing new, FDIC limits will revert to $100K per account at midnight on December 31, 2009. Waiting till the last minute to re-distribute cash is NOT the best way to get good interest rates on accounts or CDs. A LOT of people will be trying to do that, don't be one of them. Take your time and get your accounts dispersed over the next few weeks, don't wait till the last second, or until a bond market collapse catches you short.



I read your post and think, "WTF." tiller or plow? this tells me you have no clue. cutting the grass? you'd be eating the grass. "shit hits the fan, man I'm getting the Zero Turn MOwer!!!" Awesome. two acres is enough to feed plenty, but if you wait until you need it, you'll go hungry. growing stuff is like college....takes years and some people still come out stupid afterward.
Link Posted: 6/9/2009 3:31:30 AM EST
Originally Posted By JohnnyP:
Get out of debt - NOW. Revolving debt in particular is murderous. If your credit line hasn't been cut back or your interest rate jacked, you're one of the few. It will happen. Going bankrupt due to increasing debt service requirements (with or without job loss) sucks.


I have noticed this response on several forums and I am not sure I completely agree with this statement or fully understand the implications. If the economy fails, why worry about bills you may have? Conserving cash and building supplies would be the utmost consideration. Please explain why paying off debt will help, not sure I agree.


He's talking about revolving debt like credit card debt, where the card issuers are jacking people's interest rates up to 25-30% on a whim. Low-interest fixed rate loans, like on a mortgage, aren't necessarily the problem.
Link Posted: 6/9/2009 3:52:47 AM EST
Originally Posted By Bubbles:
Originally Posted By JohnnyP:
Get out of debt - NOW. Revolving debt in particular is murderous. If your credit line hasn't been cut back or your interest rate jacked, you're one of the few. It will happen. Going bankrupt due to increasing debt service requirements (with or without job loss) sucks.


I have noticed this response on several forums and I am not sure I completely agree with this statement or fully understand the implications. If the economy fails, why worry about bills you may have? Conserving cash and building supplies would be the utmost consideration. Please explain why paying off debt will help, not sure I agree.


He's talking about revolving debt like credit card debt, where the card issuers are jacking people's interest rates up to 25-30% on a whim. Low-interest .


if you loose your job and dont have the money to pay them they are a huge problem. Granted, if all you owe is a resonable mortgage then you are in better shape than most
Link Posted: 6/9/2009 4:38:03 AM EST
Originally Posted By uncool:
Originally Posted By JohnnyP:
Get out of debt - NOW. Revolving debt in particular is murderous. If your credit line hasn't been cut back or your interest rate jacked, you're one of the few. It will happen. Going bankrupt due to increasing debt service requirements (with or without job loss) sucks.


I have noticed this response on several forums and I am not sure I completely agree with this statement or fully understand the implications. If the economy fails, why worry about bills you may have? Conserving cash and building supplies would be the utmost consideration. Please explain why paying off debt will help, not sure I agree.


In two weeks I will be debt free........Ill pay off my house and owe nothing to anyone. Ill be free to pay cash for what supplies I want and put away what cash I want and only have to worry about paying the 500.00 dollar property tax bill once a year......Think about that for a minute. Thats why you payy off your debt and stay out of debt. I hope I dont have to but I can live on 600.00 a month and not have to worry about bill collectors. I have a years worth of expenses in the bank and plan on doubleing that at a minimum. Ill be sitting in my paid for home watching the entertainment while the repo folks are taking the home of the folks across the street and behind me. Any questions ?


Yeah what happens when all the houses around you have been repo'd and the junkies move in?
Link Posted: 6/9/2009 4:51:08 AM EST
Originally Posted By Darkninja:
Originally Posted By uncool:
Originally Posted By JohnnyP:
Get out of debt - NOW. Revolving debt in particular is murderous. If your credit line hasn't been cut back or your interest rate jacked, you're one of the few. It will happen. Going bankrupt due to increasing debt service requirements (with or without job loss) sucks.


I have noticed this response on several forums and I am not sure I completely agree with this statement or fully understand the implications. If the economy fails, why worry about bills you may have? Conserving cash and building supplies would be the utmost consideration. Please explain why paying off debt will help, not sure I agree.


In two weeks I will be debt free........Ill pay off my house and owe nothing to anyone. Ill be free to pay cash for what supplies I want and put away what cash I want and only have to worry about paying the 500.00 dollar property tax bill once a year......Think about that for a minute. Thats why you payy off your debt and stay out of debt. I hope I dont have to but I can live on 600.00 a month and not have to worry about bill collectors. I have a years worth of expenses in the bank and plan on doubleing that at a minimum. Ill be sitting in my paid for home watching the entertainment while the repo folks are taking the home of the folks across the street and behind me. Any questions ?


Yeah what happens when all the houses around you have been repo'd and the junkies move in?



Ill buy them for pennies on the dollar with the cash ive saved and rent them out to hot single moms for sex
Link Posted: 6/9/2009 4:58:01 AM EST
[Last Edit: 6/9/2009 4:59:27 AM EST by Tomato_Thrower]

Originally Posted By FordGuy:
Originally Posted By Tomato_Thrower:
Don't underestimate the power of the printing press. The Gov't won't default on its obligations; it will honor them in grossly devalued dollars (and blame it all on Bush, the Republicans, the Chinese, etc. etc.). Expect crushing new taxes and cuts in gov't benefits. This thing will probably play out like Argentina or Japan. I don't see Mad Max or Fallout 3 at all. There might be a blip or two, but I don't see a sustained collapse as long as the Gov't can print.

The meltdown scenario is extremely unlikely; as a history buff I really can't find any situations where there was a complete and sustained collapse of a large economy due to a financial/economic crash. The Great Depression is the closest thing, but even then 75% of people were still working, albeit at reduced salaries (40% cuts on average). It really sucked to be part of those 25%, but I don't think anyone starved to death.

Even during the devastation of war economies proved very resilient and picked themselves up. Germany and Japan were bombed into the stone age and emerged as the dominant players in industrial production within years. Given the dislocations of their infrastructure, economies, and political institutions all utterly destroyed, they still made it. People are resilent; they adapt and move on.

I think we are in for a long, miserable period of stagflation as the prices for some things like houses and cars collapse, but the prices for commodities and utilities like food, electric, and gas skyrocket. I think the America we've grown accustomed to for the past 20 years is gone for good, maybe that's a good thing.

Karl's points are well taken, but I don't think you'll need those guns.


OK, but aside from that, how did you like the play Mrs. Lincoln?

75% at reduced salaries - sounds peachy!!! Good effin luck with that.

Skip the sarcasm, you're older, and smarter, than that. While people were working at reduced salaries, remember, there was deflation as well, so prices were cheaper. I suspect the purchasing power of these workers was still largely intact.

The points we need to remember are that even with massive dislocations caused by economic collapse and war, 1. Things did not go feral; 2. People did not starve; and 3. Life went on. It really sucked for a lot of folks for a long time. It will be bad...greatly increased crime and disruptions in services.

FerFals posts re the Argentinian collapse, must reading for all, are (hopefully) a worst case scenario for us; the Japan lost decade is a more likely outcome. Even the partisan, Democratic flag waiving economists like Krugman concede that when we recover it will be a "jobless" recovery.

Denninger, who I follow, supports his doom scenario on a failed treasury auction(s). I think there will be a failed auction, but does this spell doom? I don't know. When this happens, the Gov't will take some drastic steps, including massive new tax hikes and suspension of some services. I think the Gov't will attempt to restore confidence in the debt market. Without question, a failed auction will cause long term interest rates to soar, crippling a recovery. Those without debt and who have cash will score.

The key question, then, is what are the macro-economic implications of high long term rates? The Gov'ts ability to monetize debt will get logirithmically more expensive. All debt that floats will become crushing. Assets tied to debt, like real estate, will crash. The ability to finance new capital expenditures will become steep. This is without doubt a downward spiral...not sure how it ends.
Link Posted: 6/9/2009 5:24:57 AM EST

Originally Posted By Bubbles:
Originally Posted By JohnnyP:
Get out of debt - NOW. Revolving debt in particular is murderous. If your credit line hasn't been cut back or your interest rate jacked, you're one of the few. It will happen. Going bankrupt due to increasing debt service requirements (with or without job loss) sucks.


I have noticed this response on several forums and I am not sure I completely agree with this statement or fully understand the implications. If the economy fails, why worry about bills you may have? Conserving cash and building supplies would be the utmost consideration. Please explain why paying off debt will help, not sure I agree.


He's talking about revolving debt like credit card debt, where the card issuers are jacking people's interest rates up to 25-30% on a whim. Low-interest fixed rate loans, like on a mortgage, aren't necessarily the problem.

I think the economic situation in this country will continue to slide mainly due to the rising unemployment rates and the crushing debt this country is building. So again, I will simplify my question; should I worry about my credit rating (unsecured type loans such as credit cards)or stocking cash and assets to make it through the probable depression that is looming?
Link Posted: 6/9/2009 5:35:43 AM EST
Stock cash, cosumables, whatever you need and forget about your personal credit rating. Credit scores are for chumps....especially when our own county is printing money out of thin air. When it all comes down...and it will, the ant who could care less about his credit rating will be sitting better than the grasshopper who was soooo concerned over his.
Link Posted: 6/9/2009 5:42:44 AM EST
Amidst all the economic debate "will it fail or won't it" and the history lessons of the Depression or WW II think about the one variable that decides the outcome, the people. Ask yourself the question, "Are we a more or less civilized society today than we were in the 30s or 40s"? or, "Do the majority of the people possess the means and ability to fend for themselves in a civilized manner as did the generation of the 30s and 40s"?

If everything "appears" to go to hell in a handbasket will the population maintain their self-control and civility? I can only hope so, but the NYC blackout and hurricane Katrina lead me think otherwise. As long as the politicians and pundits can maintain a semblance of control and influence then we have a chance.
Link Posted: 6/9/2009 5:48:34 AM EST
Originally Posted By garrotter:
Stock cash, cosumables, whatever you need and forget about your personal credit rating. Credit scores are for chumps....especially when our own county is printing money out of thin air. When it all comes down...and it will, the ant who could care less about his credit rating will be sitting better than the grasshopper who was soooo concerned over his.

I completely disagree.

If you're going to gamble your life on a depression, you might as well move out of the US as well.
Link Posted: 6/9/2009 5:53:19 AM EST
[Last Edit: 6/9/2009 5:54:05 AM EST by FordGuy]
Originally Posted By Tomato_Thrower:

Originally Posted By FordGuy:
Originally Posted By Tomato_Thrower:
Don't underestimate the power of the printing press. The Gov't won't default on its obligations; it will honor them in grossly devalued dollars (and blame it all on Bush, the Republicans, the Chinese, etc. etc.). Expect crushing new taxes and cuts in gov't benefits. This thing will probably play out like Argentina or Japan. I don't see Mad Max or Fallout 3 at all. There might be a blip or two, but I don't see a sustained collapse as long as the Gov't can print.

The meltdown scenario is extremely unlikely; as a history buff I really can't find any situations where there was a complete and sustained collapse of a large economy due to a financial/economic crash. The Great Depression is the closest thing, but even then 75% of people were still working, albeit at reduced salaries (40% cuts on average). It really sucked to be part of those 25%, but I don't think anyone starved to death.

Even during the devastation of war economies proved very resilient and picked themselves up. Germany and Japan were bombed into the stone age and emerged as the dominant players in industrial production within years. Given the dislocations of their infrastructure, economies, and political institutions all utterly destroyed, they still made it. People are resilent; they adapt and move on.

I think we are in for a long, miserable period of stagflation as the prices for some things like houses and cars collapse, but the prices for commodities and utilities like food, electric, and gas skyrocket. I think the America we've grown accustomed to for the past 20 years is gone for good, maybe that's a good thing.

Karl's points are well taken, but I don't think you'll need those guns.


OK, but aside from that, how did you like the play Mrs. Lincoln?

75% at reduced salaries - sounds peachy!!! Good effin luck with that.

Skip the sarcasm, you're older, and smarter, than that. While people were working at reduced salaries, remember, there was deflation as well, so prices were cheaper. I suspect the purchasing power of these workers was still largely intact.

The points we need to remember are that even with massive dislocations caused by economic collapse and war, 1. Things did not go feral; 2. People did not starve; and 3. Life went on. It really sucked for a lot of folks for a long time. It will be bad...greatly increased crime and disruptions in services.

FerFals posts re the Argentinian collapse, must reading for all, are (hopefully) a worst case scenario for us; the Japan lost decade is a more likely outcome. Even the partisan, Democratic flag waiving economists like Krugman concede that when we recover it will be a "jobless" recovery.

Denninger, who I follow, supports his doom scenario on a failed treasury auction(s). I think there will be a failed auction, but does this spell doom? I don't know. When this happens, the Gov't will take some drastic steps, including massive new tax hikes and suspension of some services. I think the Gov't will attempt to restore confidence in the debt market. Without question, a failed auction will cause long term interest rates to soar, crippling a recovery. Those without debt and who have cash will score.

The key question, then, is what are the macro-economic implications of high long term rates? The Gov'ts ability to monetize debt will get logirithmically more expensive. All debt that floats will become crushing. Assets tied to debt, like real estate, will crash. The ability to finance new capital expenditures will become steep. This is without doubt a downward spiral...not sure how it ends.


You ever type the first thing that pops in your head? haha, well that's what I did...so please excuse my sarcasm in the other post. I guess my point was that what you described as not all that bad - would be all that bad. A horrible scenario for most, especially those 25% who can't feed their babies. And maybe I read into what you weresaying that you were dismissive about the whole scenario, which may not be the case.
Link Posted: 6/9/2009 5:57:12 AM EST
Originally Posted By FordGuy:
This is the point at which I either swear off of KD for good....or hail him as a prophet. At this point, I'm not sure.

Question - for Frozenny or other market heads, When is the next treasury auction and how can we track it's success or failure? How often are treasury auctions?


i'm not a "market head", but my google fu is most excellent.

3 year notes today
10 year notes tomorrow
30 year bond thursday

http://www.treasurydirect.gov/RI/OFAnnce

the 10 and the 30 will be pretty damn telling as to whether other countries have confidence in the US.
Link Posted: 6/9/2009 5:58:36 AM EST
Originally Posted By JohnnyP:

Originally Posted By Bubbles:
Originally Posted By JohnnyP:
Get out of debt - NOW. Revolving debt in particular is murderous. If your credit line hasn't been cut back or your interest rate jacked, you're one of the few. It will happen. Going bankrupt due to increasing debt service requirements (with or without job loss) sucks.


I have noticed this response on several forums and I am not sure I completely agree with this statement or fully understand the implications. If the economy fails, why worry about bills you may have? Conserving cash and building supplies would be the utmost consideration. Please explain why paying off debt will help, not sure I agree.


He's talking about revolving debt like credit card debt, where the card issuers are jacking people's interest rates up to 25-30% on a whim. Low-interest fixed rate loans, like on a mortgage, aren't necessarily the problem.

I think the economic situation in this country will continue to slide mainly due to the rising unemployment rates and the crushing debt this country is building. So again, I will simplify my question; should I worry about my credit rating (unsecured type loans such as credit cards)or stocking cash and assets to make it through the probable depression that is looming?


Well first if you choose to not pay what you rightfully owe and you have the means to pay it, you are a dirt bag , not a survivalist. (nothing personal, if you make the choice to go that route thats what you choose to be) I chose to get out of debt before I went nuts on preping.....worked for me quite well. I dont have to look over my shoulder for someone trying to serve me a summons or my phone ringing off the hook with bill collectore haunting me. Its a nice way to live. I followed dave ramsays plan and highly recomend it.

Only you can decide this question. I was raised you pay your bills and if you dont it says alot about your character. My dad had a stroke when I was a kid. He was out of work for like 6 months. Mom paid the bills and kept us fed but it wasnt easy. Do what you will but for me what youre talking about isnt an option.
Link Posted: 6/9/2009 6:18:12 AM EST

Originally Posted By XSabers:
Amidst all the economic debate "will it fail or won't it" and the history lessons of the Depression or WW II think about the one variable that decides the outcome, the people. Ask yourself the question, "Are we a more or less civilized society today than we were in the 30s or 40s"? or, "Do the majority of the people possess the means and ability to fend for themselves in a civilized manner as did the generation of the 30s and 40s"?

If everything "appears" to go to hell in a handbasket will the population maintain their self-control and civility? I can only hope so, but the NYC blackout and hurricane Katrina lead me think otherwise. As long as the politicians and pundits can maintain a semblance of control and influence then we have a chance.

The average person today is completely unable to provide for themselves unless they pick up what they need at Walmart.

If things get really bad we will have a legion of hungry, ignorant, Jerry Springer fans roaming about trying to score free shit.


I'm on high ground and I enough ammo to make it for a while.
Link Posted: 6/9/2009 6:23:33 AM EST
[Last Edit: 6/9/2009 6:32:14 AM EST by EXPY37]
Things likely won't collapse because of a failed T auction, things will collapse because of lack of incomes for the Sheeple because of a structural failure to produce meaningful 'things' of value. [Like we used to but taught the rest of the world to produce to compete with us at lower cost -often with better quality]

I don't know how many times I've suggested this point but many folks keep looking at the financial markets instead of looking at the big picture.

These folks are so focused on financials they miss the forest for the trees.

The wealth of a nation is a large part what it produces.

We have fallen behind in 'production' and we no longer produce enough and sell enough to the rest of the world to support ourselves re what we import -which is A LOT.

To compensate, the .gov and we the Sheeple, have run up enormous debt internally and abroad.

Now we have run out of much of the ability to further increase that debt and we have mostly ignored the REQUIREMENT that we begin producing more things of value for ourselves and more importantly to sell abroad to reduce and offset that debt.

It is doubtful if production can possibility be ramped up in time to even begin to offset our debt load. We aren't even thinking about it.

Instead we think about if the next T auction is successful so we can feed our debt habit.

Combine that with an administration that seems to WANT and PUSHES the country to failure to achive its goal of socializing everything and stealing the country from us, it isn't hard to see how we are completely unable to reverse the internal economic trend.

THIS TIME is unlike the 1929 period in nearly every respect. We were like a coiled spring of potential productivity then, now we are a wimpering overweight debtor who isn't willing to do what is necessary to pay for his consumption.

FEED ME –– FEED ME, is our new motto.

And while we are wimpering wanting more $$$ so we can spend it, our enemies internally and externally are slicing us to ribbons and we haven't even come to realize it -yet.

Because we are so bloated with political correctness, self absorbtion, corruption, a .gov that no longer governs with the country's interest at heart, instead is completely focused on staying in power for themselves, and probably more than 50% of the population are entitled and couldn't do a days work if they had to.

And they now pretty much control the political landscape with their majority vote.

We don't want to see the real problems at hand.
Link Posted: 6/9/2009 6:48:42 AM EST
Originally Posted By EXPY37:
Things likely won't collapse because of a failed T auction, things will collapse because of lack of incomes for the Sheeple because of a structural failure to produce meaningful 'things' of value. [Like we used to but taught the rest of the world to produce to compete with us at lower cost -often with better quality]

I don't know how many times I've suggested this point but many folks keep looking at the financial markets instead of looking at the big picture.

These folks are so focused on financials they miss the forest for the trees.

The wealth of a nation is a large part what it produces.

We have fallen behind in 'production' and we no longer produce enough and sell enough to the rest of the world to support ourselves re what we import -which is A LOT.

To compensate, the .gov and we the Sheeple, have run up enormous debt internally and abroad.

Now we have run out of much of the ability to further increase that debt and we have mostly ignored the REQUIREMENT that we begin producing more things of value for ourselves and more importantly to sell abroad to reduce and offset that debt.

It is doubtful if production can possibility be ramped up in time to even begin to offset our debt load. We aren't even thinking about it.

Instead we think about if the next T auction is successful so we can feed our debt habit.

Combine that with an administration that seems to WANT and PUSHES the country to failure to achive its goal of socializing everything and stealing the country from us, it isn't hard to see how we are completely unable to reverse the internal economic trend.

THIS TIME is unlike the 1929 period in nearly every respect. We were like a coiled spring of potential productivity then, now we are a wimpering overweight debtor who isn't willing to do what is necessary to pay for his consumption.

FEED ME –– FEED ME, is our new motto.

And while we are wimpering wanting more $$$ so we can spend it, our enemies internally and externally are slicing us to ribbons and we haven't even come to realize it -yet.

Because we are so bloated with political correctness, self absorbtion, corruption, a .gov that no longer governs with the country's interest at heart, instead is completely focused on staying in power for themselves, and probably more than 50% of the population are entitled and couldn't do a days work if they had to.

And they now pretty much control the political landscape with their majority vote.

We don't want to see the real problems at hand.


Schiff couldn't have said it any better.
Link Posted: 6/9/2009 6:51:57 AM EST
Because we are so bloated with political correctness, self absorbtion, corruption, a .gov that no longer governs with the country's interest at heart, instead is completely focused on staying in power for themselves, and probably more than 50% of the population are entitled and couldn't do a days work if they had to.


You forgot welfare leaches who don't know how to earn a living...
Link Posted: 6/9/2009 7:05:51 AM EST

Originally Posted By uncool:
Originally Posted By JohnnyP:

Originally Posted By Bubbles:
Originally Posted By JohnnyP:
Get out of debt - NOW. Revolving debt in particular is murderous. If your credit line hasn't been cut back or your interest rate jacked, you're one of the few. It will happen. Going bankrupt due to increasing debt service requirements (with or without job loss) sucks.


I have noticed this response on several forums and I am not sure I completely agree with this statement or fully understand the implications. If the economy fails, why worry about bills you may have? Conserving cash and building supplies would be the utmost consideration. Please explain why paying off debt will help, not sure I agree.


He's talking about revolving debt like credit card debt, where the card issuers are jacking people's interest rates up to 25-30% on a whim. Low-interest fixed rate loans, like on a mortgage, aren't necessarily the problem.

I think the economic situation in this country will continue to slide mainly due to the rising unemployment rates and the crushing debt this country is building. So again, I will simplify my question; should I worry about my credit rating (unsecured type loans such as credit cards)or stocking cash and assets to make it through the probable depression that is looming?


Well first if you choose to not pay what you rightfully owe and you have the means to pay it, you are a dirt bag , not a survivalist. (nothing personal, if you make the choice to go that route thats what you choose to be) I chose to get out of debt before I went nuts on preping.....worked for me quite well. I dont have to look over my shoulder for someone trying to serve me a summons or my phone ringing off the hook with bill collectore haunting me. Its a nice way to live. I followed dave ramsays plan and highly recomend it.

Only you can decide this question. I was raised you pay your bills and if you dont it says alot about your character. My dad had a stroke when I was a kid. He was out of work for like 6 months. Mom paid the bills and kept us fed but it wasnt easy. Do what you will but for me what youre talking about isnt an option.
Just to shed some light, this does not apply to me personally. I am financially set. I do not want bigger government nor higher taxes. I keep hearing people, professional and working types who feel they will defalt on all their loans if the economy craters. I personally feel it will get much worse in the next year or so and will have serious ramaficaitons for decades. I was brought up like most, pay your way and save some on the side. I guess I cannot rationalize their way thinking other than a handout or a free ride from big brother is on the way. This type of thinking has me seriously worried. i don't consider myself a survivalist either, just trying to position myself for the future. Whatever it may bring.
Link Posted: 6/9/2009 7:14:55 AM EST
Originally Posted By uncool:
Originally Posted By Bubbles:
Originally Posted By JohnnyP:
Get out of debt - NOW. Revolving debt in particular is murderous. If your credit line hasn't been cut back or your interest rate jacked, you're one of the few. It will happen. Going bankrupt due to increasing debt service requirements (with or without job loss) sucks.


I have noticed this response on several forums and I am not sure I completely agree with this statement or fully understand the implications. If the economy fails, why worry about bills you may have? Conserving cash and building supplies would be the utmost consideration. Please explain why paying off debt will help, not sure I agree.


He's talking about revolving debt like credit card debt, where the card issuers are jacking people's interest rates up to 25-30% on a whim. Low-interest .


if you loose your job and dont have the money to pay them they are a huge problem. Granted, if all you owe is a resonable mortgage then you are in better shape than most


Note I said a fixed rate low-interest mortgage isn't necessarily a problem. If you bought a huge house and you need two incomes to make that mortgage payment, then yes, that's a problem. If you bought a house and can support your family on one income then you'll be ok.
Link Posted: 6/9/2009 7:19:08 AM EST
[Last Edit: 6/9/2009 8:05:03 AM EST by jeffers_mz]
Originally Posted By FordGuy:
Originally Posted By jeffers_mz:
My brokers began cautioning of a bond meltdown about a month ago. They said "3 to 6 months".

China cautioned Obama about rampant printing about two weeks ago. They have cards to play, cards which will hurt, if Obama ignores them.

The debt WILL be addressed. One way or another.

Until it is, I might dabble with up to 25% of my assets, looking for smaller, short term gains, but the bulk of my assets stay in cash and in puts, or the ETF variant of same. I made about $20k in emerging markets between the March bottom, and when I dumped at 8500 two weeks ago. If I lose there, odds are I won't lose all of it, and I can afford it if I do. Until the major factors dragging down our economy, debt, housing prices, commercial real estate, wages and unemployment, all show signs of a real fix, I am running my assets as if from a bunker under seige.

Most assets protected in cash, small amounts in play on volatility hopes.

I think Denninger gets two things wrong, well one wrong and he misses one completely.

Metals are never edible, he's correct about that. But lets say that you are, like me, waiting to pull the trigger on some big ticket items, things you don't need if the S doesn't hit the fan, but things that will be critical if S does HTF. I could use a larger tractor for cutting the grass. I epxpect to spend around $10k for it, when and if I ever buy it. At that price, I can get a good basic farm tractor in decent shape, with a small frontloader and a six foot mowing deck. If it looked like the S really was HTF, spending another $1000 to $1500 for a tiller or plow would be a minimal expense for a maximal gain.

But buying a 40 horse tractor is just a little over the top to cut two acres of grass once a week. I could do a LOT better with a very nice, new ZTR or standard mower set up JUST to cut grass, $5-8000 for the absolute top of the line.

If I wait too long, and a meltdown is in full swing, I may not be able to get cash out of the bank to buy a real tractor that will cut grass and plow a few acres for a large home garden. The cash my be so diluted by Obama's printing that nobody wants it. Cash may be unwanted since "you can't eat it". At that point, a nice pile of shiny gold might just buy me a tractor, where any other assets will not.

If I have gold only, I could easily be fucked. If i hold cash only, I could easily be fucked. Holding BOTH gives me a beter chance to put the final polish on my preps especially for big ticket items I might not buy if the S never HTF.

The point Denninger misses completely...check your FDIC limits.

Cashing in can EASILY put one account over the $250k limit and if there is a bond meltdown, well, banks hold a lot of bonds, so the risk of bank closings is not past us yet. Be sure you understand how your investment accounts handle cash sweeps, where the cash goes, and when it happens, daily, weekly, monthly, etc.

Further, unless Congress does soemthing new, FDIC limits will revert to $100K per account at midnight on December 31, 2009. Waiting till the last minute to re-distribute cash is NOT the best way to get good interest rates on accounts or CDs. A LOT of people will be trying to do that, don't be one of them. Take your time and get your accounts dispersed over the next few weeks, don't wait till the last second, or until a bond market collapse catches you short.



I read your post and think, "WTF." tiller or plow? this tells me you have no clue. cutting the grass? you'd be eating the grass. "shit hits the fan, man I'm getting the Zero Turn MOwer!!!" Awesome. two acres is enough to feed plenty, but if you wait until you need it, you'll go hungry. growing stuff is like college....takes years and some people still come out stupid afterward.


Either you misunderstood what I said, or else I said it wrong. A big ZTR is what I'd get if we pass through this meltdown withOUT the SHTF. In the current world, a tractor is more than I need, in terms of breakdown frequency, in terms of a structure to house and protect it, in terms of fuel usage, and in terms of how much grass i have to cut right now. I have 5 acres. About 3.5 are leased to a big time farmer. I have to cut between 1.5 and 2 acres now and it has killed my Deere STX-38. But as time goes by, I develop more and more of my acreage, and I'm trying to expand my land holdings as well. So I could definitely justify a tractor in the future, but right now, only if the S really is HTF.

I have a garden. You're right about my tractor knowlege. But I understand machines and all I need is something to break ground. A pitchfork serves my needs adequately now, but I am getting older and a pitchfork will not grow most or all my own food. If I see a machine suitable for breaking the ground I'd need broken under major food production conditions, I'll know if it will do what I want or not. If I call the tool the wrong name, and somebody laughs, well fuck them, tractors aren't exactly hard to come by around here if you have the cash, or the gold, or the bullets to trade for it, and I do. I could return the laughter at rural rubes who never even heard of an intermediate vector boson, but that'd be a waste of time. They are happy with their lives, I'm happy with mine, no need to salve wounded egos, or wound them further, we both have better things to do, capisce?

This land has been farmed for about 150 years. It is maintained by aerial surveillance, and cheamical/nutriant application computer controlled on a variety of big Deere equipment. It yields as high as about any other land you can point to. The dark black topsoil is 28 inches deep, everywhere I dig. My garden and techniques produce a huge over-abundance of produce. I can as much of my produce as I can, I give much away, I eat and freeze the rest and this is as big a garden as I can handle right now, without giving up the rest of what I am. If running this garden does not prepare me for running a larger garden across 3 to 5 acres, so be it. I have more important things to do right now than farm land for food I cannot eat and cannot take care of without making sacrifices in other areas which are more important to me.

I am as close to being ready to expand my "farm" as I choose to be, under the economic conditions I see right now, today.

I am doing my research on tractors, in case I have to get one quick, the cash is in place for a quick sale, and I am completely surrounded, on all sides by farmers who do not have time to post online, they are out in the fields as I type this, and they have proven very willing to answer any questions I have come up with. I can WALK to the co-op from here, and be back within an hour.

If you make your living as a farmer, and are happy doing it, my hat is off to you. My skills lie in other directions, namely, defining a problem, assembling a collection of facts and observations, assessing where the informational gaps lie, filling those gaps, constructing theories to meld the data into hard formulae that improve the quality of life for mankind, testing those formulae, and implementing real solutions to huge problems.

Rather than spending today raising a ridiculously large garden, most of which would rot on the vine because I don't have time, or pressing need to pick it, I will be getting the grass cut so I can lay the driveway to the proposed 30x65 outbuilding that will house, among other things, my physics lab, macjhine shop, and prototype production facility. A shed roof, built on one side will house my landscaping and growing equipment for now, and will also rapidly be available to shelter limited personal livestock should the situation requiring that ever occur.

As quickly as you see a need for significant personal food production, I see a need for sustainable energy production. If the SHTF, I will probably be able to switch over to food production that will satisfy my needs. There will be a learning curve. If the curve is short enough, I may survive, and will maintain a more modest experimentation and pre=production capablity.

If I run out of food and do not survive, you will be free to farm for generations to come, but you will do it in the dark, under animal and human power, without cheap fuel, without fertilizer, without plastics and polymers, and without cheap efficient fertilizers, all of which now come from the fossil fuels we are blythly burning for the privilege of polluting our air and water, all to keep running our iPods and Blackberries. You will farm in the dark, and you will be torn from farming by all the people who cannot or will not live peacefully in the dark.

If SHTF, and if I do manage to grow enough to keep me fed, you will have all the energy you ever dreamt of, without any pollution, paying zero fuel costs, only paying plant costs for increased energy production.

That's the tradeoff I have studied on and off for almost 30 years now, and the decision to take a chance that I can switch to producing more food should the need arise is one I am comfortable with, come what may.

If you want to be part of the problem, continue to make fun of my farming ignorance. If you want to be part of a solution, tell me the name of a tractor pulled machine that can bust up 2 to 5 acres, and let's move on.

Link Posted: 6/9/2009 7:20:02 AM EST
Originally Posted By EXPY37:
Things likely won't collapse because of a failed T auction, things will collapse because of lack of incomes for the Sheeple because of a structural failure to produce meaningful 'things' of value. [Like we used to but taught the rest of the world to produce to compete with us at lower cost -often with better quality]



When the T auctions fail, and things DON"T come to a "sudden stop" then KD will lose a lot of credibility; many will assume things are fine for a little longer....this will result in a harder crash than it had to be since folks just refuse to see the storm before rain hits their nose.
Link Posted: 6/9/2009 7:29:49 AM EST
Originally Posted By uncool:
In two weeks I will be debt free........Ill pay off my house and owe nothing to anyone.


Most mortgage companies require home insurance on the TOTAL value of your home. When you are debt free, you can lower your insurance to only your house. The land, pasture fence, well, etc. will not burn down!

You can negotiate a policy that only covers the replacement cost of home based on your house's square footage.

Why insure dirt?
Link Posted: 6/9/2009 7:44:04 AM EST
Originally Posted By FordGuy:
Originally Posted By EXPY37:
Things likely won't collapse because of a failed T auction, things will collapse because of lack of incomes for the Sheeple because of a structural failure to produce meaningful 'things' of value. [Like we used to but taught the rest of the world to produce to compete with us at lower cost -often with better quality]



When the T auctions fail, and things DON"T come to a "sudden stop" then KD will lose a lot of credibility; many will assume things are fine for a little longer....this will result in a harder crash than it had to be since folks just refuse to see the storm before rain hits their nose.


No way things will come to a sudden stop. We just need to reeducate KD.

The poster earlier who said he's "financially set" or something like that will have a real surprise when the .gov takes his financially set cash -for the good of all the Leeches who are crying FEED ME and who all vote for the .gov that is going to take his $$$...

Count on it.



Link Posted: 6/9/2009 8:19:34 AM EST
Originally Posted By EXPY37:
Things likely won't collapse because of a failed T auction, things will collapse because of lack of incomes for the Sheeple because of a structural failure to produce meaningful 'things' of value. [Like we used to but taught the rest of the world to produce to compete with us at lower cost -often with better quality]

I don't know how many times I've suggested this point but many folks keep looking at the financial markets instead of looking at the big picture.

These folks are so focused on financials they miss the forest for the trees.

The wealth of a nation is a large part what it produces.

We have fallen behind in 'production' and we no longer produce enough and sell enough to the rest of the world to support ourselves re what we import -which is A LOT.

To compensate, the .gov and we the Sheeple, have run up enormous debt internally and abroad.

Now we have run out of much of the ability to further increase that debt and we have mostly ignored the REQUIREMENT that we begin producing more things of value for ourselves and more importantly to sell abroad to reduce and offset that debt.

It is doubtful if production can possibility be ramped up in time to even begin to offset our debt load. We aren't even thinking about it.

Instead we think about if the next T auction is successful so we can feed our debt habit.

Combine that with an administration that seems to WANT and PUSHES the country to failure to achive its goal of socializing everything and stealing the country from us, it isn't hard to see how we are completely unable to reverse the internal economic trend.

THIS TIME is unlike the 1929 period in nearly every respect. We were like a coiled spring of potential productivity then, now we are a wimpering overweight debtor who isn't willing to do what is necessary to pay for his consumption.

FEED ME –– FEED ME, is our new motto.

And while we are wimpering wanting more $$$ so we can spend it, our enemies internally and externally are slicing us to ribbons and we haven't even come to realize it -yet.

Because we are so bloated with political correctness, self absorbtion, corruption, a .gov that no longer governs with the country's interest at heart, instead is completely focused on staying in power for themselves, and probably more than 50% of the population are entitled and couldn't do a days work if they had to.

And they now pretty much control the political landscape with their majority vote.

We don't want to see the real problems at hand.


Well said!

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