Jason Moran
Thursday, October 23, 2008
  Market Predictions From Grandpa

Grandpa Bouchard stopped in town yesterday seemingly to rave about the stock market, cycles, charts, patterns, and the idiots of the world. Grandpa is retired now, but he has been a broker among a myriad of other things. He has spent 10-16 hours per day for 60 years researching the market - and he has some pretty strong opinions.

He said just about everything fits into one of 16 (or so) patterns and it is so easy to predict what will happen next if you identify the right pattern.

One of them is a depressionary cycle that was supposed to hit a year ago. He told us to get our money out of the market and even to get it out of banks. He was a year off, but it was a 240 year cycle leading into a depression that he identified quite a while ago and it is hard to get down to exact dates when the cycles are that big. Of course it is cool that his predictions are starting down the path that he felt they would, but if he continues to be correct then things will get far more scary than they are now.

Grandpa told me (with crazy eyes) WAIT FOR GOLD TO HIT $650. As in, he's positive gold will continue to drop in price at least to $650 per ounce. Once it does then I should buy up gobs and gobs of it because it will go through the roof for years and years.

So, why are precious metals dropping in price even though demand is through the roof? Have my lessons in economics been a complete waste? He says this: Hedge funds and the other very large owners of gold and silver have to sell now because they need cash to stop the bleeding - that is helping to drive the price down over demand because they are bigger players. They should be all sold out soon which is when those with demand (regular people) will start getting their hands on it...and when prices will skyrocket.

Overall Grandpa B is worried about having almost anything sitting in the stock market as a whole. He is actually serious when he says this will be a Great Depression unlike the 1929-1932 time period. He thinks nearly every financial institution will collapse and he has asked my cop dad which gun he should purchase to protect his home from the crazies in the coming years.

"A depression is when money goes back to it's rightful owner". - Grandpa Bouchard

Unfortunately my grandpa thinks things will get far more difficult than I can imagine (with me being 28 years old and never having lived through difficult times during my lifetime). However, he believes the U.S. will fair better than most of the rest of the world. Sure, there was a housing bubble in the U.S. with home prices going up an average of four times their value over some number of years I can't remember. However, over that same period England's home prices went up 12 times, Ireland 20+ times! Most countries went up a similar amount. So, if a $100,000 house in the U.S. drops down to it's real value at $25,000 that's pretty tough to deal with. However, in Ireland that $100,000 would drop down to about $4,000! My head would asplode.

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Friday, October 03, 2008
  Deleveraging, Depressions, and Bailouts Oh My!
I hate those greedy, evil and selfish banks as much as you do. This predicament is a terrible spot to be in. However, do you want to have another depression? The depression was the result of a "do nothing" policy. The government never stepped in and things were pretty bad for a while. They would have been worse if a world war didn't start up after a few years.

Anyway, $700b bailouts suck, too. I've been paying my mortgage and other debts, so why should I take on more to cover the sorry louts that can't pay up (and to cover the banks sorry behinds for ever approving them in the first place!).

However, have you ever heard of The Paradox of Deleveraging? The same principal carries in the opposite direction. If *I* am thrifty then *I* save money. However, problems happen when *everybody* does the same thing. If *everybody* suddenly becomes thrifty then they do not save money! By spending money I am providing somebody else's paycheck. If everybody stops buying things then *I* do not have a paycheck because of how everything interacts. The paradox of deleveraging is similar because it isn't one or two banks failing - it is all of them!

The third option that isn't being talked about is nationalization a la Sweden a few years back. Not everybody is a fan of it, though. Fannie Mae and Freddie Mac are already pretty much nationalized...so why not some more financial institutions? I haven't come to a conclusion on this one yet.


I did want to say that the powers that be are finally checking into the silver market. It seems that when demand is through the roof, supply is pretty much gone, yet prices go down it raises some eyebrows.

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