Japan Is Not A Good Example Of How Deflation Typically Plays Out

 

Home Forums The Automatic Earth Forum Japan Is Not A Good Example Of How Deflation Typically Plays Out

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  • #6157

    p01
    Participant

    Vic financial group collapses owing $660m

    Nervous investors, including farmers and workers in regional Victoria, will have to wait to find out what will happen to the hundreds of millions of dollars that are tied up in the company’s collapse.

    This is what TAE was talking about, but on a really large scale.

    #6159

    Professorlocknload
    Participant

    p01,

    Ever wonder what the reaction if those headlines should ever read “All Mutual Funds Halt Redemptions Until Further Notice,” meaning until all insiders have cleared their holdings? Or, “Money Market Mutual Funds Break the Buck. Redeemed at 50 cents on the Dollar.” Many don’t know how close to breaking of the buck we were in 09.

    Not to scare the horses here, but, the more I research this stuff, well,
    putting new line on the reels and sharpening the hooks! Might have to do a Sweeny Todd and open a barber shop, to keep the wife in pie material 😉

    #6160

    davefairtex
    Participant

    professor –

    Not to scare the horses indeed.

    If things go really badly south (meaning, if major institutions whose short-term repo instruments fill the money market funds go BK the way Lehman did) the fifty cents on the buck event could happen.

    The funds are a bit smarter this time around – they’ve dropped euro banks from their dance cards, which I think will address the first wave of issues. But if I see tensions rising severely, you can bet my digital cash will run and hide in a short term treasury. Treasury Direct. Fewest middle men involved, and hopefully the last thing to get thrown under the bus. Its that or a demand deposit account.

    Note that buying a short term treasury and stuffing it in your brokerage account will avoid losses from your money market fund breaking the buck, but it will NOT address the problem of the broker going under. Case: MF Global bankruptcy, where MFG customers who had physical gold bars (paying storage fees, no less!) became general creditors in the bankruptcy losing the same 20-something percent off their account balances as everyone else. Best to have a sturdy broker who doesn’t play funny games with hypothecating customer assets.

    Note also the Treasury Direct purchase should probably occur a number of days prior to the emergency, or else the ACH transaction from your bank might not go through – or it might get reversed, etc. And some auctions only happen weekly, so…probably best not to cut things too fine.

    Probably best to have a plan in place, with all the abilities to transfer assets tested ahead of time, understanding the delays involved.

    Rules of Trading:
    Rule #1: don’t panic!
    Rule #2: when a panic is going to happen, make sure you panic first.

    #6161

    davefairtex
    Participant

    Random chart I’m working on:

    This is a chart of finance-related headlines since late 2006, aggregated by nation, counted on a monthly basis. Its a pretty simple concept, but I think it is interesting to see how the newsflow moves from nation to nation. Is the rough number of finance-related headlines indicative of the level of crisis in the nation? Or just the amount of breathlessness the press brings to bear upon the issue?

    I don’t know. Its just data I collected. Submitted for…your enjoyment.

    Attached files

    #6162

    Professorlocknload
    Participant

    Got it there, Dave.

    I’ve, sometime back, connected Mutual Fund accounts with FDIC bank accounts, and set up self directed IRA’s in SIPC brokerage accounts for misc. paper solids. The GNMA’s and TIP’s have been good these last few years, both .gov backed, but the sweet is about gone there. I mean, where to from zero? Damn, might as well stick it in the Bank of Atlas/Mason at these rates, yes? Especially considering what the “C” in the above “Insurance” institutions stands for!

    Pretty much collected everything forward I’m gonna need here these next few 5 or 6 years, so I’ll weather it. Been through worse.

    #6197
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