Gyroscopic Investing

Talk about parroting! So no one here is parroting Cullen Roche? They guy who doesn't grasp the difference between cash and debt !

Mdraf wrote: Talk about parroting! So no one here is parroting Cullen Roche? They guy who doesn't grasp the difference between cash and debt !

At least I'm up front about where I get my Macro from.

Money is debt — except coins (which are debt free). It's debt-based money. Money has been debt for thousands of years. If you think he doesn't get it, you've still never explained why.

See also: Debt: The First 5,000 Years

Libertarian666 wrote:It is very impolite to make assumptions as to the source of my analysis. I am not parroting anyone.

Please. Everything you say about the dollar is exactly the same thing he says. There is no difference as far as I can tell. If I'm wrong, can you at least explain the difference between your opinion and Peter Schiff's?

Gumby wrote:

Mdraf wrote: Talk about parroting! So no one here is parroting Cullen Roche? They guy who doesn't grasp the difference between cash and debt !

At least I'm up front about where I get my Macro from. And, yes, all cash is debt — except coins (which are debt free). If you think he doesn't get it, you've still never explained why.

Because while all cash is debt not all debt is cash. That is enough to make them different. Cash is preferable and hence more valuable than debt. That's why debt pays interest and cash doesn't. 

Mdraf wrote:

Gumby wrote:

Mdraf wrote: Talk about parroting! So no one here is parroting Cullen Roche? They guy who doesn't grasp the difference between cash and debt !

At least I'm up front about where I get my Macro from. And, yes, all cash is debt — except coins (which are debt free). If you think he doesn't get it, you've still never explained why.

Because while all cash is debt not all debt is cash. That is enough to make them different. Cash is preferable and hence more valuable than debt. That's why debt pays interest and cash doesn't.

Wonderful. So, by that logic, when debt pays 0% interest, it is no different from cash.

(And I'm pretty sure the coupon payment is what makes up any difference in perceived value).

Mdraf wrote: Because while all cash is debt not all debt is cash. That is enough to make them different. Cash is preferable and hence more valuable than debt. That's why debt pays interest and cash doesn't.

It's just an accounting identity. One person's cash is another debt. Obviously from any individual's perspective, it's preferable to have cash in the bank rather than having an equivalent amount of debt. But from a macro perspective, everyone's cash collectively represents debt held by others.

Gumby wrote:

Mdraf wrote:

Gumby wrote: At least I'm up front about where I get my Macro from. And, yes, all cash is debt — except coins (which are debt free). If you think he doesn't get it, you've still never explained why.

Because while all cash is debt not all debt is cash. That is enough to make them different. Cash is preferable and hence more valuable than debt. That's why debt pays interest and cash doesn't.

Wonderful. So, by that logic, when debt pays 0% interest, it is no different from cash.

Not at all. It's simply debt that pays 0% interest.  Ask any business if their Accounts Receivable -even from a 100% reliable source - is the same as cash. ! Both are shown as assets on the balance sheet. Which one would you rather have?

Pointedstick wrote:

Mdraf wrote: Because while all cash is debt not all debt is cash. That is enough to make them different. Cash is preferable and hence more valuable than debt. That's why debt pays interest and cash doesn't.

It's just an accounting identity. One person's cash is another debt. Obviously from any individual's perspective, it's preferable to have cash in the bank rather than having an equivalent amount of debt. But from a macro perspective, everyone's cash collectively represents debt held by others.

Wrong.  And that's what you Cullenites don't grasp.

Mdraf wrote:Which one would you rather have?

Btw, I would rather own US Debt than Cash in a bank. And if you don't know why, then you should read more Harry Browne.

Mdraf wrote:

Pointedstick wrote:

Mdraf wrote: Because while all cash is debt not all debt is cash. That is enough to make them different. Cash is preferable and hence more valuable than debt. That's why debt pays interest and cash doesn't.

It's just an accounting identity. One person's cash is another debt. Obviously from any individual's perspective, it's preferable to have cash in the bank rather than having an equivalent amount of debt. But from a macro perspective, everyone's cash collectively represents debt held by others.

Wrong.  And that's what you Cullenites don't grasp.

Wait, you don't believe that one person's cash is another debt? Do you not know where our non-coin money supply comes from??

Do you not realize that the non-coin money in your pocket and your savings account came from either the government, a business, or your neighbor going into debt?

Mdraf wrote: Wrong.  And that's what you Cullenites don't grasp.

Why is it wrong? And are you saying I have an incorrect view of how things actually are for Americans in the USA right now, or how things could be in another set of circumstances?

The odd thing, Mdraf, is that you criticize us and Cullen, but you seem to have no explanation whatsoever for where money comes from. Except for coins, all money comes from debt (most of it is from private sector debt/credit)! If you can prove otherwise, please let us know!

Pointedstick wrote:

Mdraf wrote: Wrong.  And that's what you Cullenites don't grasp.

Why is it wrong? And are you saying I have an incorrect view of how things actually are for Americans in the USA right now, or how things could be in another set of circumstances?

You are wrong in buying into Roche's explanations. That's all.  All his technical explanation is built upon a faulty assumption. You are mesmerized by the technicalities and fail to grasp the essence.

Look at the Fed's balance sheet right now.  Bernanke does not value its massive bond portfolio on a mark-to-market basis. But the surge in interest rates has already erased almost $200 billion in the Federal Reserve's capital.

If interest rates continue to head higher, the value of the Fed's liquid assets that it could sell would decline and further undermine its capital cushion. And if the velocity of rate increases intensifies, the Fed, with only $62 billion in capital, could see its entire capital base completely wiped out.  It could paralyze the Fed's ability to defend the dollar's purchasing power, causing Treasury prices (TLT) to fall further and thereby push interest rates even higher.  Roche says this doesn't matter !!

Tick tock, Mdraf.

It's been a few weeks now and you are still unable to answer the question of where all non-coin money comes from. (Hint: It all comes from a debt).

Mdraf wrote:

Pointedstick wrote:

Mdraf wrote: Wrong.  And that's what you Cullenites don't grasp.

Why is it wrong? And are you saying I have an incorrect view of how things actually are for Americans in the USA right now, or how things could be in another set of circumstances?

You are wrong in buying into Roche's explanations. That's all.  All his technical explanation is built upon a faulty assumption. You are mesmerized by the technicalities and fail to grasp the essence.

No offense, but surely you can see how unsatisfying of a response that is, right? I mean, I'm wrong because my information comes from someone who you know is wrong but whose arguments you have declined to refute or offer an alternative explanation to?

Yer gunna have to do better than that!

Mdraf wrote: Look at the Fed's balance sheet right now.  Bernanke does not value its massive bond portfolio on a mark-to-market basis. But the surge in interest rates has already erased almost $200 billion in the Federal Reserve's capital.

If interest rates continue to head higher, the value of the Fed's liquid assets that it could sell would decline and further undermine its capital cushion. And if the velocity of rate increases intensifies, the Fed, with only $62 billion in capital, could see its entire capital base completely wiped out.  It could paralyze the Fed's ability to defend the dollar's purchasing power, causing Treasury prices (TLT) to fall further and thereby push interest rates even higher.  Roche says this doesn't matter !!

All of that may be true (even though I don't think it is), but I don't see how it'e relevant to the purely mechanical discussion of how cash is created in a debt-based monetary system. That's all we're discussing right now.

Mdraf wrote:If interest rates continue to head higher, the value of the Fed's liquid assets that it could sell would decline and further undermine its capital cushion. And if the velocity of rate increases intensifies, the Fed, with only $62 billion in capital, could see its entire capital base completely wiped out.  It could paralyze the Fed's ability to defend the dollar's purchasing power, causing Treasury prices (TLT) to fall further and thereby push interest rates even higher.  Roche says this doesn't matter !!

Capital cushion? Does Giant Stadium worry about running out of points to award when the score gets too high?

Pointedstick wrote:I don't see how it'e relevant to the purely mechanical discussion of how cash is created in a debt-based monetary system. That's all we're discussing right now.

Exactly. Where does money come from, Mdraf? Tick tock.

Cash is money now.
Debt is a promise to give cash later.
That's your explanation. Is it that hard to understand ?

Fast paced discussion we have going here.

Mdraf wrote: Cash is money now.
Debt is a promise to give cash later.
That's your explanation. Is it that hard to understand ?

And yet, all cash — except coins — comes from debt.

What you fail to realize, Mdraf, is that when you get rich, you become rich by others going into debt.

Note that you still did not answer the question of where money comes from. All you did was define what cash and debt is in overly-simplistic terms. What a shame that you won't take the time to understand where all money comes from.

kka wrote:

MediumTex wrote: I took a look at the S&P chart from a the last couple of years and it is a beautiful upward trend.

Right now, we appear to be in a trough that is still consistent with the multi-year trend.

In the next three months we should either rocket higher or the whole trend will start to break down, which will chase a lot of momentum money out of the market. 

It should be a lot of fun to watch the markets between now and the end of the year.

I predict that by December 31 the stock market will be lower and gold and LT treasuries will be higher.  JMHO, of course.

How much lower/higher?  If you're going to make a prediction, put some numbers on it.

Okay.

On December 31, I predict:

SPY - 141
GLD - 147
TLT - 116

MediumTex wrote: I took a look at the S&P chart from a the last couple of years and it is a beautiful upward trend.

Right now, we appear to be in a trough that is still consistent with the multi-year trend.

In the next three months we should either rocket higher or the whole trend will start to break down, which will chase a lot of momentum money out of the market. 

It should be a lot of fun to watch the markets between now and the end of the year.

I predict that by December 31 the stock market will be lower and gold and LT treasuries will be higher.  JMHO, of course.

Well, it looks like I was insufficiently optimistic about the stock market and I was simply wrong about gold and bonds.

The stock market had more gas in the tank than I thought it did.

MediumTex wrote:

MediumTex wrote: I took a look at the S&P chart from a the last couple of years and it is a beautiful upward trend.

Right now, we appear to be in a trough that is still consistent with the multi-year trend.

In the next three months we should either rocket higher or the whole trend will start to break down, which will chase a lot of momentum money out of the market. 

It should be a lot of fun to watch the markets between now and the end of the year.

I predict that by December 31 the stock market will be lower and gold and LT treasuries will be higher.  JMHO, of course.

Well, it looks like I was insufficiently optimistic about the stock market and I was simply wrong about gold and bonds.

The stock market had more gas in the tank than I thought it did.

or maybe just a bit early?

The future is unpredictable. That said, of those years when Wall Street saw significant declines in January, about 70% of the time the market ended the year lower.

Ad Orientem wrote: The future is unpredictable. That said, of those years when Wall Street saw significant declines in January, about 70% of the time the market ended the year lower.

I guess we need to add to that other 30% then. A reversion to the mean. 

murphy_p_t wrote:

MediumTex wrote:

MediumTex wrote: I took a look at the S&P chart from a the last couple of years and it is a beautiful upward trend.

Right now, we appear to be in a trough that is still consistent with the multi-year trend.

In the next three months we should either rocket higher or the whole trend will start to break down, which will chase a lot of momentum money out of the market. 

It should be a lot of fun to watch the markets between now and the end of the year.

I predict that by December 31 the stock market will be lower and gold and LT treasuries will be higher.  JMHO, of course.

Well, it looks like I was insufficiently optimistic about the stock market and I was simply wrong about gold and bonds.

The stock market had more gas in the tank than I thought it did.

or maybe just a bit early?

I'm not convinced that we are in the early stages of a new secular bull market like 1982-2000, and thus I would assume that the 100%+ return that the stock market has provided since 2009 will be interrupted by reality at some point.

I just don't know when that will be.

MediumTex wrote: I'm not convinced that we are in the early stages of a new secular bull market like 1982-2000, and thus I would assume that the 100%+ return that the stock market has provided since 2009 will be interrupted by reality at some point.

I just don't know when that will be.

I am pretty sure that we are at the end of the bull market when you think that we are in a secular bull market. 
And when you set the starting point for your measuring at 2003, 2004 or 2005 you will see that the market returned around 9-11% with dividends. That is pretty much the long term average, so we are not out of the norm, the last years were only a mean reversion from the recession years.