The Yellow Brick Road

Something about Dollar

Andy Bebut — Sun, 17 Aug 2008 12:19:17 +0000

The principle of relativity, from Newtonian mechanics to Einstein/Lorentz/Poincaré theory of special relativity, has its roots in the basic principle that physical laws should be the same in all inertial reference frames. In other words, there is no such thing as an absolute motion.

Here I want to apply this simple principle of the absence of the absolute motion to the dollar.

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Credit Crunch is still ahead

Andy Bebut — Fri, 15 Aug 2008 03:29:32 +0000

The latest podcast with David Goldman is, as usual, pretty grim. He has very casual, calm style of talking, thanks to the host, Tom Keen, who is always extremely friendly and careful with anyone, from the most insane optimist saying that the economy is about to accelerate big time to the economists that are practically predicting the depression, without saying the “D” word. Goldman is one of those.

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The top is near

Andy Bebut — Tue, 12 Aug 2008 02:22:53 +0000

Here I’m trying to make several observations that hint the medium-term stock market distribution had started, when smart money are selling stocks to Cramer minions.

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Oh, Maggie, what have you done?

Andy Bebut — Sun, 10 Aug 2008 04:12:41 +0000

Do you have a feeling that something big is happening? I do.

The last year was amazing. Today is exactly a year since the biggest financial crisis in 25 years had started, and we are still posting the GDP growth and there is no recession, at least on TV. The big hairy hand from abroad is handing us a wallet every time we need to borrow some more to make another bailout or tax cut. Will it ever end?

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K-wave: transition to Autumn

Andy Bebut — Thu, 31 Jul 2008 03:47:17 +0000

The next installment of Kondratyev wave (table of content is here) is about Paul Volcker and the transition from Summer to Autumn.

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Crash or not Crash?

Andy Bebut — Tue, 29 Jul 2008 03:03:08 +0000

Today I was asked to quantify my ambiguous statements that you can kiss the stockmarket goodbye but at the same time we avoided the off-the-cliff crash, thanks to Bernanke efforts. So I’ve decided to put a chart under this.

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K-wave: Summer and the Lemming theory

Andy Bebut — Sun, 27 Jul 2008 04:28:27 +0000

The next article from the Kondratyev wave cycle (table of contents) is about Summer, the season when the unwelcome inflation develops and the stock market is in a bearish trend.

As the primary Guinea Pig for examining the K-wave is theUnited States I will avoid using the term hyperinflation, as back in 1970s US economy did not slide into real hyperinflation. According to this Wikipedia article, the minimal threshold for hyperinflation is about 30% per year, and it never was that bad in US, in the whole history of the country. Moreover, the real hyperinflation is always end-of-game, i.e. it must end with government default and replacement of the currency with a new one. I’m not aware of any exception, so by that definition the 10-15% inflation in United States during the 1970s was not a hyperinflation.

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Commodity bubble may burst very soon

Andy Bebut — Fri, 25 Jul 2008 03:05:38 +0000

Martin Pring just published a very nice report on commodities, with tons of good charts and also a lot of fundamentals. What I like in his approach (and what I’m usually trying to do myself) is that he is usually finding the way to chart the fundamentals as well. For example, the rate of change in unemployment benefits - is that a technical analysis or fundamentals?

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China may dump its US Treasury holdings

Andy Bebut — Thu, 24 Jul 2008 02:04:19 +0000

The spectacular growth of Chinese economy in recent years (well above 10% of Y/Y GDP increase) is making the analysts to be very shy with any predictions that are not 100% rosy. Some famous hedge fund managers are making their kids to learn Chinese, others are competing with predictions when China will surpass US as a world biggest economy.

I think it can be attributed to well-known human brain feature to extend any trend ad infinitum, so to some extend I can say that possible trend reversal here is not only an economic event, but also a medical diagnosis for the forecasting community. Back in the 80s they used to predict that Japan will become the World biggest economy within few years. The clock is still ticking.

My task here is much simpler. I’m not here to demise a Great Chinese Empire but merely to make the case that foreign assets held by China are in great danger.

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Who will bite this bullet?

Andy Bebut — Mon, 21 Jul 2008 15:44:33 +0000

In this podcast Nariman Behravesh, chief economist at Global Insight Inc. is throwing out some surprising research. The most interesting bullet points are:

Q2′08 GDP in US is +2.5% (who would imagine!)
Q4′08 is negative
Q2′08 GDP in Eurozone is already going negative, by their estimates (wow!)
US headline inflation will reach +6.5% sometimes during this year
US headline inflation will be as low as below 1% sometimes in 2009
Next major bank collapse will bring interest rates to 1.5%

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