Economy FAQ - Research and Due Diligence Repository - Updates Ongoing

[jds6958]

Table of Contents

Work in Progress


Table of Contents - Post # 1
Introduction - Post # 2
Purpose of Thread - Post # 3
Best Case Scenario - Post # 4
Contrarian Economist- Post # 5
Depression - Post # 6
Economists - Post # 7
End Times and the Economy - Post # 8
Equity Markets - Post # 9
Executive Branch - Post # 10
Federal Reserve - Post #11
Financial Entities - Post #12
Foreign Markets - Post # 13
General - Post # 14
Global Food Stocks - Post # 15
Gold/Silver/Other Precious Metals (PM's) - Post # 16
Government Budget - Post # 17
Government Statistics - Post # 18
Historical Economic Downturns - Post # 19
Housing Market - Post # 20
Hyperinflation - Post # 21
Inflation/Deflation Debate - Post # 22,23
Jobs - Post # 24
Media - Post # 25
Oil/Gas/Energy - Post # 26
Preparedness - Post # 27
Plunge Protection Team (PPT) - Post # 28
Recession - Post # 29
Resources - Unchanging Online Resources - Post 30
Resources - Updated Daily Online Resources - Post 31
Resources - Updated Occasionally Online Resources - Post 32
Retirement - Post 33
Solutions - Post 34
Subprime/Mortgage Crisis - Post 35
U.S. Dollar and Other Currencies - Post 36
Worst Case Scenario - Post 37
Misc. - Post 38

[jds6958]

Introduction

In an attempt to set the climate of this thread I would like to offer some of my educational economic background and some history that ignited my interest in global macroeconomics. I have no economic degree. I am in the process of obtaining my MBA and as result, I have had some exposure to textbook economics, which for all practical purposes I've learned, are just a penny short of worthless. I am employed full time in the healthcare sector at one of the largest and one of the most respected hospital systems in the U.S. and world. I function as a management engineer trained as a black belt (http://www.isixsigma.com/ca/mbb_bb/)in six sigma (http://en.wikipedia.org/wiki/Six_Sigma)and lean (http://www.lean.org/WhatsLean/).

All of that being said, it is apparent am no economic expert by any stretch of professional standards. Anything that I know or believe I know stems from my own independent study. I am still learning and my understanding continues to evolve.

I am an avid stock trader on the U.S. equity markets. On and off, I have traded for years. The simplicity and success of my trading surprises most. I average about 200 trades a month, 75% of trades are based on pure mathematical formulas and statistical models that average 125% - 245% profit per year (over 5 years so far) as capital gains, and the remaining 25% of trades focus on DD and research that averages 80% annual capital gains. I focus on buying stocks that meet certain criteria and then exiting the position the very next day for an average small (sometimes large) profit with a 85-91% success rate using a discount online broker. The quick turnaround and method allows compounding gains (http://www.investopedia.com/terms/c/compounding.asp), little risk, high predictability, little time, little attention or brains. It has suited me well.

In August, I began to notice abnormal volatility in the markets, mostly stemming from the financial and housing sector. I assumed that this was fallout from the "subprime" crisis that had been making headlines. Once October arrived I began to notice economic events were beginning to impact my numbers to a slight extent, I had do begin to do research and DD to see how I would need to adjust.

I continued trading until 10/31. My research and study suggested that at a minimum the US was going to experience a slight to moderate recession. I discontinued trading and held cash into my accounts. I then proceeded to continue with my research and DD.

It was brought to my attention that many of these investment and mortgage brokers and banks have exposure to Structured Investment Vehicles (http://www.investopedia.com/terms/s/structured-investment-vehicle.asp) (SIVs), Collateralized Debt Obligations (http://en.wikipedia.org/wiki/Collateralized_debt_obligation) (CDOs), Credit Default Swaps (http://en.wikipedia.org/wiki/Credit_default_swap)(CDSs) and the mostly unregulated Over the Counter Derivatives (http://en.wikipedia.org/wiki/Derivative_(finance)) (OTC). This appeared complex, and in reality it was beyond complex. (http://www.fasb.org/derivatives/issuea16.shtml) The scope of the issue was sprinkled through out the whole foundation of the global economy. Derivatives have been labled financial weapons of mass destruction (http://www.marketwatch.com/news/story/derivatives-new-ticking-time-bomb/story.aspx?guid={B9E54A5D-4796-4D0D-AC9E-D9124B59D436}&dist=TNMostRead) by some. Realizing that, I considered the possibility that the housing crisis was not going to just correct with little repercussions in other economic sectors. I realized that these highly leveraged complex financial instruments could begin to default and unwind at the slightest downtrend thereby any ownership of these instruments could create insolvency (http://en.wikipedia.org/wiki/Insolvency)overnight in any financial entity if they were marked to true value. Wanting to begin trading again I wondered that if I just avoided the housing and financial structure, then I may be able to mitigate the effects in my strategy. I began to examine this further.

So, I learned that the US banking system is generally leveraged 12 to 1 and investment firms are generally leveraged 32 to 1. Some entities were leveraged 78 to one. Yes, 78 to 1! I realized that these entities could not even absorb a markdown of 1-2 percent with out threatening a contagious systematic implosion. At this point I had shifted my mentality. I immediately adopted a capital preservation strategy instead of a capital accumulation strategy. I had to throw out all of the old rules and assumptions and learn more.

To financially protect myself appropriately I had to search for the safest place to position my assets. I noticed that the Fed had been addressing this issue using inflationary USD destroying policies and solutions. The USD did not appear to be a safe position. I examined other currencies, I discovered that the scope of the issue is global in scale. I could not predict how every foreign central bank (http://en.wikipedia.org/wiki/Central_bank)would react, but currency debasement was likely. Foreign currency notes did not appear to be an option. The swiss (http://en.wikipedia.org/wiki/Franc_(Swiss_currency))and cando (http://en.wikipedia.org/wiki/Canadian_dollar) appeared stable, but for how long? Because all financial entities are suspect at this point, and could be ticking time bombs, I moved my liquid assets into physical gold/silver and took delivery.

I began to theorize that the FED would attack this problem with every tool that they had and would maybe even create new tools. This would all be inflationary and destructive to the USD, which was already in a fragile downtrend. (http://www.thelion.com/bin/forum.cgi?msg=79&tf=us_and_global_economy&cmd=read) My handle is "General" at the lion.com.

Knowing the size of the potential collapse I began to realize that we were either going to experience extreme deflation (http://en.wikipedia.org/wiki/deflation) or extreme inflation (http://en.wikipedia.org/wiki/Inflation). The FED appears to want inflation and the have the tools to accomplish inflation as a solution. However, when speaking of extremes in either direction there will be pushback. They will try to manage the crisis at a manageable speed and make every attempt to not alarm the public. Public panic would be the final nail in the coffin for these overleveraged (http://dealbook.blogs.nytimes.com/2008/04/02/the-leveraged-planet/) entities, the stock markets would plummet, which is one of the last remaining pillars holding up the 514 trillion dollars of global derivatives. A derivative collapse can not be permitted (http://www.marketoracle.co.uk/Article4037.html). The FED will have to stay on top of this and take quick immediate and unprecedented action to artificially support the markets (http://www.marketoracle.co.uk/Article1771.html)through inflationary pressure.

In realizing that inflation was a very likely outcome I felt comfortable with my PM position. All debt that I have is at a fixed rate which is a positive situation in a high inflationary environment. I realized that I may lose my job as well as countless others. I stocked up on storage food (http://www.waltonfeed.com/) and supplies (http://beprepared.com) for family and extended family. I realized that the social structure and collective psychology of the US may not fair well during and economic collapse (http://en.wikipedia.org/wiki/December_2001_riots_(Argentina)). I decided to take advantage of the families log home in a farming community as a possible safe haven and storage ground.

I began to marvel how this could all be a large piece of economic end times events. I expanded my research. I learned volumes spanning back decades on our economic foundation and how it has evolved into what it is today.

If you have every seen the movie "The Matrix" I felt as though I was unplugged from the Matrix.

The purpose of the introduction is to inform you that I do not consider myself an expert. Any information found in this thread is either other expert's research, my own opinion, or someone else's opinion adopted as my own. This is more or less a launching pad to help you in your research.

[jds6958]

Purpose of This Thread

The purpose of this thread is 3 fold.


To support the ongoing DD thread (http://www.rr-bb.com/showthread.php?t=23115)as a resource as things progress.

To provide a centralized repository of economic material that is easy to access and understand.

To help me organize and collect my thoughts and solicit feedback for areas in which I may have wrong information or faulty logic.



The format of this thread is segregated by categories with common Q&A supporting each category.

Please note:

Some statements will be of my own opinion, and some will be of an expert's opinion, I will make every attempt to distinguish between the two. I do not consider my opinion all that valuable, but as an aid to ongoing discussion.

My opinion when it happens may be completely off base with reality, I offer it as a springboard to prompt additional thought and feedback only. I am open to editing certain posts based on new information or conversation as this thread progresses.

I expect to only post articles, DD, and research that either support an argument (data or news article) or map out a systematic, data driven, thought process that leads to a logical conclusion (analyst article). I will make every attempt to not post bad data (which is common in economics) or analyst or economist opinions that are supported by nothing or bad data (which is also common).

I prefer to offer DD, research, and true data to assist readers to come to their own conclusion and less of my own speculation and bias, when I do, I will make every attempt to back it up. If I post a statement that does not appear correct or if contrary/alternate but possibly valid argument exists, please feel free to present it.

[jds6958]

Pending

[jds6958]

Pending

[jds6958]

Pending

[jds6958]

Pending

[jds6958]

Pending

[jds6958]

Pending

[jds6958]

Pending