Planning for euro breakup / hyper inflation

shangri la

All the talk up to this point has been how to protect wealth if Ireland reverts to the punt nua / hyperinflation occurs, ect.

One of the best hedges, if not the best, is gold and some view it as the only true currency. At the moment it is trading at close to historically high levels and there is speculation that gold ETFs are actually backed by as little as 1% physical gold.

The second hedge/opportunity is real estate. As it is generally accepted that the Irish market has at least another 20% drop due at a conseriative guess due to a myriad of factors it would be better to look abroad if real estate is your thing. Where are the opportunites to be had?

Basically, where are the speculators looking to if they were to take a position today?

shangri la

Any advice on this?

From a bit of reading I have been doing it seems at present that speculators are waiting for gold to start to fall so as to short it heavily due to the demographic of people who have already purchased gold or deposited savings into accounts in countries seen as safe that there is not much more upside to be had in gold so its time to play the other side of the fence.

yesman2000

Was thinking about this too. Wouldn't be too sure about gold, what would people's opinions be on commodities e.g. corn, oil, live cattle etc. Would make sense if the 'experts' are predicting hyperinflation. Any thoughts?

Gold is down 10% since November

Adrock-aka

Buy dollar!

betonit

Adrock-aka wrote: »

Buy dollar!

buy euro!

stackerman

Adrock-aka wrote: »

Buy dollar!

Good luck with that

OfflerCrocGod

keving wrote: »

Good luck with that

They aren't in a recession.

Soulja boy

OfflerCrocGod wrote: »

They aren't in a recession.

Despite them pointing the finger at europe they aren't any more stable either.

OfflerCrocGod

Soulja boy wrote: »

Despite them pointing the finger at europe they aren't any more stable either.

Comparing the last year it would seem to me that the US is far more stable. It's the eurozone crisis that is doing real damage to the world economy not the silliness over the debt ceiling. If Ireland suffers less then the rest of the eurozone in the next year it will down to our closer links to the US.

yesman2000

Were there not suggestions that the Fed were printing Dollars not too long ago? Not exactly something you'd want to put money into, especially with hyperinflation already being touted.

OfflerCrocGod

yesman2000 wrote: »

Were there not suggestions that the Fed were printing Dollars not too long ago? Not exactly something you'd want to put money into, especially with hyperinflation already being touted.

You must understand how inflation works before you react to what the central bank does. That was the mistake commodity speculators made - simply printing money doesn't create inflation of it's own accord, plenty of people long on oil have been burned this year due to that.

Only the silly Austrian's believe such simplistic notions.

yesman2000

OfflerCrocGod wrote: »

That was the mistake commodity speculators made - simply printing money doesn't create inflation of it's own accord, plenty of people long on oil have been burned this year due to that.

I made my second statement in relation to US Dollars only, nothing to do with commodities, surely if you hold a currency and a government started printing more of it that can't work in your favor. Just working off a basic supply and demand model here.

OfflerCrocGod

yesman2000 wrote: »

I made my second statement in relation to US Dollars only, nothing to do with commodities, surely if you hold a currency and a government started printing more of it that can't work in your favor. Just working off a basic supply and demand model here.

Supply and demand is what causes inflation, if the spending of the government and private sector is greater than the productive capacity of the economy you will get inflation as they are bidding up scarce resources. If the central bank buys assets from banks and the banks sit on the liquidity (keep them as excess reserves) there won't be inflation as there is no bidding for productive capacity.

It's immaterial how large the monetary base becomes if the private sector is retrenching and reducing spending. They actively don't want the credit - they don't want the new money! The Fed was just trying to prevent deflation which they did but hyperinflation is not on the horizon as there is a large amount of slack in the economy, this is even larger in the eurozone. Unless you think the labor market in Ireland, Spain, Portugal is tight?

stackerman

OfflerCrocGod wrote: »

Supply and demand is what causes inflation, if the spending of the government and private sector is greater than the productive capacity of the economy you will get inflation as they are bidding up scarce resources. If the central bank buys assets from banks and the banks sit on the liquidity (keep them as excess reserves) there won't be inflation as there is no bidding for productive capacity.
t?

Yes indeed

BUT . . .
The $ is strengthening because people are afraid of the Euro and others, but they do not seem to see the REAL danger in the $. When they do they will dump the $ and move (you can prob guess where I think to ), just as China has been doing.
People will get burnt by the dollar, if they get the timing wrong, just as some did by the franc (all be it for a diff reason) The truth is that all printing is simply, to use a now common term, kicking the can down the road.

OfflerCrocGod

China is trying to prop up the Yuan so it's having to sell off some dollar assets to sell dollars. There is no danger in the dollar, far less then in any other currency that's for sure. Currencies strengthen and weaken - in normal circumstances - due to the strength of a countries economy. The US is just looking better then the rest that's all. If there is any real panic or crisis the $ will just strengthen and everything else will take a dive. All leverage will need to closed down and it is used in all commodity markets so they would go down.

If I need to cover margin calls I need $'s not gold. Gold would be liquidated just as quick as oil or stocks, liquidity is what matters and $/UST is king there.

yesman2000

Why is liquidity so important when there is so much uncertainty around at the moment. I know it comes down to personal preference but i'd prefer (some degree at least) certainty over liquidity any day?

OfflerCrocGod

yesman2000 wrote: »

Why is liquidity so important when there is so much uncertainty around at the moment. I know it comes down to personal preference but i'd prefer (some degree at least) certainty over liquidity any day?

If you are running 14 positions and the average leverage is 9 to 1 and one of your positions declines 7-8% you may need to cover a margin call on that position, you can only cover it with adequate collateral or cash - cash being preferred as it is not subject to haircuts. Therefore you either close one of your other positions or shrink it down.

In the market there is a general sense of unease so there isn't a strong offer (buyers) out there so your operations depress the market even more, pushing others into the same position you are in. These people then start closing other positions in other investments and they effect your other positions, so you get margin calls in those positions...

When people panic they tend to panic in mass, and to spruce up returns there is a lot of leverage used by very, very large players. When clients come knocking you can't have them redeem by paying them back in oil barrels, gold or copper. They want $s. Brokers want $s to fill the margin calls. When things are bad you don't want a balance sheet full of speculative investments you want one full of $s.

You can try and swim against it if you want, but it's an ocean and it wants to go one way and it will sweep you away as you clutch your Monetary Base graphs and scream "Hyperinflation!!".

Inflation happens if everyone is buying, not if everyone is panic selling. The technical term in that case would be Deflation.

In a true panic asset prices go down as cash is king, the ultimate in insurance.