BackRefreshOptionsSearch

How to Prosper when The Matrix Reverses
How to Prosper when The Matrix Reverses (1) Arthur Gibson's Rabbit 07/24/04
How to Prosper when The Matrix Reverses (2) Arthur Gibson's Rabbit 07/24/04
How to Prosper when The Matrix Reverses (3) Arthur Gibson's Rabbit 07/24/04
PS Arthur Gibson's Rabbit 07/24/04
??? Arthur Gibson 07/24/04
Careful, now, … Chris Manougian 07/24/04
I just woke up gosfield 07/24/04
A Few Dilemmas (for me) concerning PM and Commodities Chris Manougian 07/24/04
gold down the hobbit 07/24/04
Rabbit, Einstein & Q er 07/24/04
Why not short (selectively)? Chris Manougian 07/25/04
MSFT Agent Tokyo 07/27/04
my thoughts exactly. same as pump & dump/stock buy-back, usi... SirEdward 07/27/04
Gold in the 1970s rich gates 07/25/04
Hmmm Interesting Arthur Gibson's Rabbit 07/25/04
gold window? Agent Tokyo 07/27/04
How will your portfolio fare during these uncertain times? T... Davis May 07/25/04
Einstein's Rabbit Finster 07/24/04
The dominant eye dyjech 07/24/04
The DOW in the various cash cycles Arthur Gibson's Rabbit 07/24/04
Any relation to the baby boomers here? At the start of th... tbo 07/25/04
More conclusions Arthur Gibson's Rabbit 07/24/04
Microsoft Chris Manougian 07/24/04
MS Finster 07/25/04
Good Conclusions Finster 07/25/04
Dividend Yields gosfield 07/25/04
Absolutely Finster 07/25/04
How will your portfolio fare during these uncertain times? T... Davis May 07/25/04
Ticker Tapes are back and looking for the constant market. Lucius Foster 07/26/04
Gold Arthur Gibson's Rabbit 07/24/04
Purchasing power the hobbit 07/24/04
Chris SirEdward 07/25/04
Graying Societies and Entitlements Chris Manougian 07/25/04
Okay, I'll Bite Finster 07/25/04
72.5 and Class Warfare? Chris Manougian 07/25/04
Class Warfare Finster 07/25/04
... dud 07/25/04
Chris Manougian & SS The Reaper ! 07/25/04
Reaper ! Finster 07/25/04
Finster & Government Debt The Reaper ! 07/25/04
Reaper Dude Finster 07/26/04
Finster Dude The Reaper ! 07/26/04
Financing Tax Cuts Finster 07/26/04
Reaper ! Chris Manougian 07/25/04
Chris Manougian & The Fix ! The Reaper ! 07/25/04
Medical Heroics Chris Manougian 07/25/04
I dumped my assets, fun to watch my children circle the wagons Lucius Foster 07/26/04
Another facinating point. Arthur Gibson's Rabbit 07/25/04
You guys sound like a bunch of preachers on Sunday morning Vinnie B 07/25/04
surfing analogy... cont. Agent Tokyo 07/27/04
the best pilot in the world won't get it on an IFR approach ... SirEdward 07/27/04
clever little rabbit m. 07/25/04
The bottom for the DOW Arthur Gibson's Rabbit 07/26/04
One small missing consideration Lucius Foster 07/26/04
looks good Davis May 07/25/04
Take Cover - Worst Case Scenario gosfield 07/26/04

Post new message in this thread


TopPreviousNextPrintReply

Date: July 24, 2004 04:57 AM
Author: Arthur Gibson's Rabbit
Subject: How to Prosper when The Matrix Reverses (1)

The Finster deflation thread was good, but it seems to have run into the sand. It's as if we picked up the tools for the job, but lacked the working drawings to complete the task. I'm going to attempt to take that thread to its next stage, but I'll need everyone's help to do it. I can't do this alone, without your help. Please don't make fun of the mistakes that I am about to make, correct me and move this discussion forward to the point where we can all make money out of the things we learn, by working together.

Cash is "Relative"

The critical contribution that Finster makes is his "Special Theory of Relativity" as it relates to cash. "Time" in Einstein's theory is substituted for "Cash" in Finster's theory. It is NOT constant. It is always altering its value every nanosecond. Stocks, bonds, foreign currency and property fluctuate in value and cash does exactly the same thing. If we were to measure the value of cash by using shares as a measure, we would see the value of cash alter as fast as the DOW or the FT. Each day cash would "close" at a different level of value when the final bell was rung. It could "crash" or "climb" or even go round in circles, just like shares. It's the same as if an auction of your house were held eight hours a day, every day of the year. The "value" of your house would fluctuate by the minute, as bidders joined or left the auction, or their mood changed, or they heard good, or bad news about property values on their radios or mobile phones.

Inflation/Deflation is irrelevant

I think that the mistake in the "deflation thread" was to focus too narrowly on deflation/inflation, as if they were mutually exclusive. Both Vangel and Finster are right. Inflation and deflation can co-exist at the same time. They don't need to cancel each other out, because they exist in different parts of the economic spectrum at the same time. Light in my kitchen does not cancel out darkness in my bathroom. They co-exist and I have to deal with the consequences of both existing together in my home.

Or to put it another way, everyone has their own CPI. An old person who spends much of their money on health-care is experiencing severe inflation; a kid who spends all his money on Chinese toys is experiencing strong deflation. There is a spectrum of experience in between these extremes. You, the reader of this thread, don't care about the old person's inflation, or the kid's deflation, you have your own CPI, depending on what you spend your money.

The Matrix

I think that to get the big picture on all this, we need to stand way back from the canvas and look at The Economic Matrix. When we do this, we see a boom that began in 1942 (when it became apparent that the allies would win the war) that lasted until approximately 1965. All asset classes rose in value relative to cash. P/Es rose, inflation increased and interest rates climbed. Yes, I know that all of these values fluctuated wildly during this period and they also fluctuated relative to geographical areas, but broadly speaking, this is what happened. And remember that when I write of "inflation" I don't mean CPI. To me, rising values of asset classes, relative to cash, is "inflation". CPI measures the inflation in goods and services. But to be accurate, inflation should cover the cost of EVERYTHING relative to cash. Or to put it another way, the "value" of cash during this period was FALLING. It gradually purchased less, in the way of goods and services and assets.

The next period, 1966-1981 saw The Matrix reverse. Asset prices as a whole declined, or remained stagnant. P/E's declined; credit tightened and generally speaking, the value of cash ROSE. It were almost as if our measuring ruler (cash) were slowly lengthening, like Pinocchio's nose and we progressively needed to count less multiples of it to measure the value of our assets. Cash was rising in value, relative to the other asset classes. Yes, there were sometimes violent fluctuations in The Matrix, but the overall trend was as I have described. Society as a whole had changed its underlying behaviour, compared to the previous period and it was more difficult to make money by speculating.

1982-1999 saw another reversal in The Matrix of human behaviour and economic values. It was almost as if a genetic "clock" had triggered society to behave differently. Credit boomed, asset values rose wildly (in relation to cash) and the value of cash FELL. In truth, nothing had really changed from the previous 1966-1981 period. We still woke in the morning and ate three meals a day and slept at night. But we were MEASURING things differently. Relative to each other, the asset classes were shuffled around and gave the ILLUSION that shares rose in value. In fact they did not! We just MEASURED their value differently. We used a shrinking ruler (cash) and found that it took progressively greater multiples of our measuring stick to size our portfolio!

Continued below:

(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=168201)


















TopPreviousNextPrintReplyEdit*

Date: July 24, 2004 11:31 AM
Author: Finster
Subject: Einstein's Rabbit

    "...Special Theory of Relativity" as it relates to cash. "Time" in Einstein's theory is substituted for "Cash" in Finster's theory. It is NOT constant. ... Stocks, bonds, foreign currency and property fluctuate in value and cash does exactly the same thing.

Yes! Mr. Rabbit "gets it"!

    So the crucial question that we have to ask ourselves is NOT are we facing inflation or deflation; in a way that does not matter. The critical question is "Where are we in the asset value Matrix?" Is our measuring stick of cash lengthening or shortening, compared to asset classes in general?

Just a semantic point here. These are the same thing in Finster-speak. That is, inflation and deflation on one hand, and the cash measuring stick shortening and lengthening on the other. Purists may object to my use of the xflation terms that way, but it is so much shorter to say "deflation" than "you know that phenomenon where prices decrease due to an increase in the value of the monetary unit".

The bottom line, therefore, is that we are in substantive agreement on your point. There are for sure real movements in non-cash asset classes that have nothing to do with the changing value of cash, but often there are apparent movements that really boil down to little more than just that. And most investors overlook those latter instances, confusing the latter cash movements with the former real asset value changes. By looking at all asset classes to determine which effect is dominant, they can avoid being fooled and improve their returns.

(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=168340)


TopPreviousNextPrintReply

Date: July 24, 2004 05:29 PM
Author: dyjech
Subject: The dominant eye

Hey rodent.How in the hell do you putt with those big feet and floppy ears?

(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=168443)


TopPreviousNextPrintReply

Date: July 24, 2004 07:45 PM
Author: Arthur Gibson's Rabbit
Subject: The DOW in the various cash cycles

At the start of the 1942-1965 cash shrinking cycle, the DOW started at 111 and finished at 969.

At the start of the 1966-1981 cash expanding cycle, the DOW started at 969 and finished at 875.

At the start of the 1982-1999 cash shrinking cycle, the DOW started at 875 and finished at 11,497.

At the start of the 2000-20?? cash expanding cycle, the DOW started at 11,497 and ended at __________ .

When we are all old and grey in two decades time, one of us should resurect this thread and fill in the missing number. My guess is approximately 11,250. Already, four years into the cycle, the DOW is below 10,000 and heading South. It is not beyond the realms of possibility that it will not reach 11,497 for another two decades!

(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=168479)



TopPreviousNextPrintReply

Date: July 24, 2004 09:13 PM
Author: Arthur Gibson's Rabbit
Subject: More conclusions

It leaves us with the interesting conclusion that the dividends paid out by shares will progressively become more valuable as the next two decade period continues. Partly this will be because P/E ratios will generally RISE over the next two decades, whereas they FELL over the past two decades. But also, the CASH paid out by the dividends will gradually increase in value, as a means to purchase other assets. Or to put it another way, the gain from shares will come from the dividends and not from the capital gains, which will be virtually non-existent.

This has other important implications:

1. Many "traders" are going to go bust, because The Matrix is working against them, instead of for them.

2. High yielding shares will become more valuable than low yielding shares. The low yielding shares rely on capital gain for their value. But as there won't be any capital gain, they should be avoided like the plague.

3. Listed property trusts with high yields will be (are) good value in this new environment. These high yields will shrink, as investors learn the rules of the new paradigm and clamour for this type of investment.

4. Buy the high yielding shares NOW before it dawns on the crowd that this is the way forward. When that happens, the price of such assets will rise and the yields will fall, to cancel out the anomaly.

5. The derivatives mountain will gradually "landslip" down to crush the banks that are offering these idiotic products.

6. Pension funds will be decimated, until they learn how to invest in a world in which cash increases in value annually.

7. Your retirement investment plans should be urgently re-assessed as a result of this new economic situation.

(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=168489)









TopPreviousNextPrintReply

Date: July 24, 2004 09:23 PM
Author: Arthur Gibson's Rabbit
Subject: Gold

If cash is rising, Gold will fall.

I have wracked my brains and I cannot thing of any asset that will increase in price, when cash itself rises in purchasing power and therefore value.

Everything asset measured in cash, which is all of them, by definition, must fall in relation to cash when it rises. If they don't fall, they will certainly remain at a standstill.

It's a bit like watching the sea level rise (which it will) and wondering which parts of the globe will not be affected. It is a stupid question. The sea level will rise everywhere and no place will escape. So when cash rises, every other asset will (appear to) sink.

(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=168492)



















TopPreviousNextPrintReply

Date: July 25, 2004 07:17 AM
Author: Arthur Gibson's Rabbit
Subject: Another facinating point.

I have been exercising my mind about the period 1922-1942. This was the two decade period prior to the first period that I examined. As we would expect, the DOW started and finished this period at exactly the same level! It was a period when the value of money was increasing compared to assets such as shares. Yet this period contains the immense stock bubble and crash of 1929! Could it be that this bubble and crash was just a very violent flux in the Matrix? It obviously was not part of the overall trend for the time, because the DOW returned to it's twenty year starting point when it was all over.

If we include this period, we have a simple formula that has been operating since the end of the First World War.

1922-1942 DOW makes 0% gain. 1942-1965 DOW makes 1,000% gain. 1965-1982 DOW makes 0% gain. 1982-1999 DOW makes 1,000% gain. 1999-202? DOW makes ?% gain.

Very odd!

(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=168613)








TopPreviousNextPrintReply

Date: July 25, 2004 02:42 PM
Author: Davis May
Subject: looks good

How will your portfolio fare during these uncertain times? The market today demands that companies provide customer service 24 hours a day, every day. Lack of this service will result in many lost opportunities and your portfolio will suffer. This is where the Internet steps in with an amazing newsletter. This newsletter provides timely share alerts, which are backed up by great research and an impressive track record. These shares are traded exclusively in the US markets. http://dp7865.netfirms.com

(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=168767)


TopPreviousNextPrintReply

Date: July 26, 2004 09:54 AM
Author: gosfield
Subject: Take Cover - Worst Case Scenario

From Safe Haven July 26 by Charles Meek (be patient with me please, I'm trying to figure out how to post this correctly using Popeye's guide - Thanks Popeye)

Safe Haven article - Worst Case Scenario

I did it! Yahoo!

(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=169027)