Three Asset Classes that Can Actually Outpace Coming Inflationary Price Increases 80 comments
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“Excess capacity is temporarily suppressing global prices. But I see inflation as the greater future challenge."
- Alan Greenspan, June 25, 2009
"The US economy may witness double-digit inflation in a few years unless the central bank tightens up its monetary policy… Unless we roll in this whole degree of expansion, we will be in trouble… I am not talking 3-5 per cent inflation, I am talking double-digit inflation in the US.”
- Alan Greenspan, September 9, 2009
--
Man, the Dow hit 10,000! Happy days are here again! Right?
Wrong.
Do you know what I loathe about the word "recovery?" It can mean whatever you want it to. It's sort of like using the word love. You might say you love sushi, or you love beef jerky, or you love Michael Jackson. Or whatever. But that's a whole lot different, for instance, than saying you love your child. We can agree on that, right? Children are way more important than beef jerky. And Michael Jackson.
I can't say I'm Alan Greenspan's biggest fan anymore. He did, after all, betray his roots not so many months ago, when he essentially proclaimed free markets to be flawed. Those of us who have studied his career -- and especially its beginnings -- know better, of course; poor old Alan was just reacting to a political environment that needed someone to whom it could point its ugly, bureaucratic finger. Who better than Alan? Somebody had to take the blame, right? You can't just have a financial meltdown without getting mad at somebody. My only beef with the poor man is that he actually agreed to do it.
But then again, Alan Greenspan has been swimming in the Washington political sea for a very long time, so we really shouldn't be all that surprised, should we? And, after all, he did play the let's-create-the-illusion-of-wealth-by-making-money-cheap game. No, he took the appointments, scratched his ticket, and came up a loser. Unfortunately, he took the entire U.S. housing market -- and subsequently the global economy -- down in the process. Thanks Alan.
No matter where you stand on the Greenspan issue, you still have to respect the man; he was, for better or for worse (I say worse), the architect of the longest protracted bull market of the 20th century -- and beyond. So when I read the quotes above, I can't merely dismiss them just because I think Alan is a sell-out, a turncoat, and a political lackey. And, of course -- as most of you know -- I happen to agree with Alan Greenspan on the particular point of coming inflation. Well, sort of. I actually think inflation is going to be a lot worse than "double-digit." Here's my favorite part of his observation:
"...unless the central bank tightens up its monetary policy... Unless we roll in this whole degree of expansion, we will be in trouble..."
To me, that says it all. There are literally trillions of components to the U.S. economy. How in the hell is the Fed going to know the precise moment it needs to reverse policy? I mean, who's going to argue against the fact that the success of its predictive power has been -- at its very best -- questionable. If Bernanke and his pride of dullards don't call this one right, we are all screwed. And in my mind, that means only one thing.
We are all screwed.
Dollars, Equities, Housing and All the Rest of It
A lot of people sit in front of televisions all day, staring at Erin Burnett and Maria Bartiromo (and the people they talk to), believing that, because the stock market is moving up so rapidly, we are in the middle of an economic recovery. And that's just silly. One might argue we are in the middle of a stock market recovery -- and based on simple, raw percentages, that position might carry some weight. But then you think about the the first time the Dow hit 10,000 -- about a decade ago -- and you look at the relative prices of gold (about $250 per ounce in 1999, as opposed to almost $1100 an ounce today) and something starts to become clear: this so-called "stock market recovery" may not be all that recuperative after all. I mean, gold is the ultimate and most efficient harbinger of inflation -- is it not? And what is gold telling us -- in a loud, clear voice?
And what about oil? Since its recent bottom eight months ago, it has more than doubled in price. I've been trying to tell you that oil, gold, and agriculture are going to be the biggest winners when the dollar starts its slide. Did you listen? Well... some of you did. But, my goodness, there were certainly a lot of people telling me I was a fool, an idiot, and a traitor. I'm sure they're all still out there, as eager as ever to show me the errors of my ways. Unfortunately most of my dissenters and critics believe there are only three phases to this economic fiasco, and they wrongly believe we've completed both -- that the recession is over. But that's just more nonsense. Here's what the common wisdom is saying:
PHASE TWO: Global quantitative easing -- meaning unprecedented rate-cuts, coupled with unprecedented currency-printing, borrowing, and spending.
PHASE THREE: Stock market recovery.
And suddenly everything is fine, right?
No! Everything is not fine. A quick look at the prices of oil, gold, and agriculture tell a much different story -- they have been rising significantly. And perhaps the most powerful signal of all is the increase in long-term Treasury yields over the last nine months -- despite the Fed's repeated announcements that it intends to keep rates low by buying the long end of the yield curve! The evidence continues to mount -- we're not anywhere near the end of the pain. No, there is a fourth phase to this economic storm: foreign creditors begin to abandon U.S. Treasuries, driving yields higher. Unprecedented printing causes massive inflationary pressure, driving the prices of all asset-classes higher, as major world currencies fail. Most people become euphoric, proclaiming an "economic recovery." Others buy gold, oil, and agriculture and hunker down for the worst.
The most interesting part of all this to me is watching the business news channels, who focus 90% of their energy on equities. I know it's natural; audiences comprehend a share of Google (GOOG) a whole lot better than they do a barrel of oil. But the stock market is in trouble -- even as it continues to rise. And that seems to be the most difficult concept for anyone to grasp! Mark my words: in real terms, equities are going to underperform gold, oil, and agriculture for a long time, and this necessarily means stocks will underperform inflationary price increases. It's just math.
Don't get me wrong; I love Google and a dozen or so other companies just as much as the next guy. At my core, I'm a value investor. I just don't happen to think there is any value to be found in this economy. The American consumer -- who drove the vast majority of the economy up until two years ago -- is dead. How are companies going to make money? Sure, stock prices will fly higher as the dollar falls, but what does that mean? Just because the dollar is failing does not mean American corporations are necessarily becoming more productive. Can net income outpace inflationary dollar-destruction? The answer is, of course, no.
Let's return to Google. I think the company is going to be around for a long time, and I believe it's a great business model with a lot of room for growth. And when Google beats its numbers and the CEO says he's excited about the future, well I get just as warm inside as the next guy. For about twenty seconds.
Just because stocks are moving up -- and even reporting some good numbers -- does not mean this is an economic recovery. And don't forget that, for the last year or so, I've been predicting not only a rise in the stock market, but a meteoric rise. I think the Dow is going to 20,000 and beyond, and I think it's going to happen a lot sooner than anyone believes. I also have no doubt it will blow through that mark with all the euphoric and histrionic drama of every other media-driven bull market explosion in the last thirty years. Of course the stock market is going to go higher -- in dollar terms -- because the dollar is falling apart! Housing is going to do the same thing: if the government keeps rates artificially low and offers tantalizing tax-incentives for investing in real estate, of course prices will go higher! Why wouldn't they? And thus the next (bigger) bubble begins.
In fact all asset classes are going to go higher as the dollar disintegrates! That's the way inflationary pressure works! But again: just because asset-classes are moving inversely to the phony currency in which they are denominated (by definition) does not mean we are in the middle of an economic recovery! According to BusinessDictionary.com an economic recovery is the "...phase in an economic cycle where employment and output begin to rise to their normal levels after a recession or slump." Yes, I know. Economists everywhere are saying the recession is over. Yes, CEOs everywhere are starting to become optimistic. But isn't this the same gaggle of pundits, academics, experts, and general know-it-alls that were prepared to deliver us the so-called "Goldilocks Soft Landing" three years ago? Yes. Smart group of folks, that.
On October 2, 2009, The United States Bureau of Labor Labor Statistics gave us the happy news: U.S. unemployment now sits at 9.8%. More specifically, it said this:
"Since the start of the recession in December 2007, the number of unemployed persons has increased by 7.6 million to 15.1 million, and the unemployment rate has doubled to 9.8 percent."
Does that sound like an economic recovery to you?
Our foreign creditors -- like Japan, China, and Saudi Arabia -- are now talking about ditching the U.S. dollar in favor of another reserve currency. Do you really believe they're going to continue to lend to the United States at absurdly low rates, in perpetuity? Our government has committed itself to spending $13 trillion dollars on this economy. Where is that money going to come from? You can read any number of my articles over the last year to get the answer to that question. But I assure you, printing dollars in current quantities is the death knell of our beloved currency. And I equally assure you our creditors are neither naive nor stupid, and they are not going to simply keep dumping money into a debtor economy whose currency is in jeopardy, whose savings rate is almost zero, and whose consumer has run out of leverage. Why do you think the Chinese -- for instance -- have bought U.S. Treasuries for so long? Because they knew the American consumer would return the capital to the Chinese economy many times over! But the American consumer is out of fuel. So what now...?
I've been talking for months about the $13 trillion mistake, as well as its historical implications. The evidence only continues to mount: on Friday, October 16, The U.S. reported that the federal deficit just hit an all time high of $1.42 trillion. My favorite part is the annual percentage increase in government spending, up 18.2% -- the biggest jump since 1975.
So here's the deal. Just as every asset-class in the universe collapsed starting in 2007, the massive implementation of quantitative easing that ensued is going to ensure equally massive inflationary pressure on most -- if not all -- of the world's currencies. So your job, as an investor, is not to try to figure out which asset-classes are going to increase in value, because they all are -- relative to the currencies in which they are denominated.
No, your job is to figure out which assets are going to outpace inflationary price increases. I've already given you one clue: this stock market surge you're seeing? It's an illusion. While equity prices will undoubtedly go higher, productivity and earnings are not going to outpace inflationary price increases -- simply because consumers are not going to have the power to fuel corporate profits as they once did. Sure, you'll get a good return from the stock market -- in nominal terms -- in coming years. And maybe that's enough to get you excited. I watch CNBC enough to know that there are a lot of people who believe this rally is authentic. But in real terms, it's unsustainable and unrealistic, because the dollar is falling, and its decline is accelerating. It won't be long before the smartest investors recognize stocks are not going to outpace inflationary price increases. And thus begins Phase Four.
So what asset-classes will outpace inflation? Do I have to say it again? Precious metals, energy, and agriculture. These assets are no longer mere hedges against inflation. Not only will they continue to elicit demand from investors seeking return, but many of them have industrial value, as well -- increasing the likelihood of increased demand and superior returns. And there's one more thing I have to add, which is probably going to cause me all sorts of grief from my more conservative readers, but I'm going to say it anyway: I'm not a huge fan of leverage -- for obvious reasons, considering the mess we're in. Nonetheless, if you can get into any superior-performing assets using leverage at a low fixed-rate of interest, you're rate of return is going to be exponentially higher.
Phase Four. The train is starting to pick up speed. If you weren't listening to me over the last ten months, I hope you will now...
Disclosures: Paco is long TBT and Gold. He also holds U.S. dollars by necessity, pending the advent of private gold-backed currencies.
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This article has 80 comments:
Would you add to your list of acceptable investments equities or debt in jurisdictions that manage their currencies rationally, e.g. Canada, Australia?
Bull!! We owe the longest protracted bull market to the advent of the personal computer and follow-on innovations and efficiencies. We owe much more to guys like Gordon Moore and Bob Noyce than to Alan Greenspan! Big Al was just another "Chief Thief" at the Fed -- the organization that colludes to benefit large domestic and international banking elites, at the expense of the average worker, by fluctuating rates and currencies to the benefit of bankers rather than those living on fixed incomes and/or hoping for a fair return on savings.
Congratulations to Canada, Australia, and New Zealand. So far they are looking pretty good. And by "pretty good" I mean "sane".
The Fiat Dollar is now the symbol of our national disgrace. As the dollar atrophies so, it makes visible to all who care to see (The majority of Americans apparently look but do not see), the degeneration of America's capacity to create true wealth. Without this capacity, honest jobs and sustainable income cannot be generated.
2. As the world marks down Regime that currently controls, corrupts and corrodes the US and seeks to spread its slow acting venom throughout the world (via the Fiat Dollar , criminal misallocation of resources and cascading deceits) so it marks down America's ability to remain an economic and geo-strategic hyperpower. This markdown is manifest in the gradual but inexorable decaying of the exchange rate of the once honest( now fraudulent) dollar against real assets.
The world's need for things from the earth(energy, minerals, aquifer water)
and things on the earth(agricultural,dairy and animal products; fibers; timber; residential, commercial, industrial, industrial, recreational and untamed land and water)
as well as transforming technologies, bandwidth, true talent and actionable knowledge, continues and will continue to increase, especially in the Global South.
In dollar terms, not only will the real assets of and on the earth go up in price in but so will useful information, knowledge and engineered technologies and true, globally demanded and globally deployable talent(including entrepreneurial and inspirational talent). Finally,in my view, the dollar price of globally appealing corporate brands with demonstrated and enduring brand equity will also rise.
Give a 18 year old a credit card with a $50k limit. He/She will live in unprecedented 'prosperity'. New car, new computer, new flatscreen TV, new clothes, eating out, etc. etc. etc. until the bill comes due. Now Uncle Ben gives him another card with another $50k, pay the monthly minimum with the old one, party on with the new.
Add up total consumer and government debt over the past 20 years. There's your 'Bull' market. Add-on the 13 T newly-committed, add the untold T's (10? 50?) in entitlement programs, and explain it to me like I'm a 6 year old who is going to pay those bills?
On Oct 19 02:55 PM Socialism cannot compete! wrote:
> "No matter where you stand on the Greenspan issue, you still have
> to respect the man; he was, for better or for worse (I say worse),
> the architect of the longest protracted bull market of the 20th century
> -- and beyond."
>
> Bull!! We owe the longest protracted bull market to the advent of
> the personal computer and follow-on innovations and efficiencies.
> We owe much more to guys like Gordon Moore and Bob Noyce than to
> Alan Greenspan! Big Al was just another "Chief Thief" at the Fed
> -- the organization that colludes to benefit large domestic and international
> banking elites, at the expense of the average worker, by fluctuating
> rates and currencies to the benefit of bankers rather than those
> living on fixed incomes and/or hoping for a fair return on savings.
In my opinion, even with high unemployment and problems with leveraged loans and CRE, Bernanke and co. will have to start defending the dollar, or else your base case unfortunately will come absolutely true.
Just throwing out the devils advocate position. (Either way its not a good situation at all. People are in for more suspense to say the least).
Regarding what he just said. He is thoroughly correct now that he's out of power. It's nice to know he knows something about fiscal prudence. But sorry, it's a bit too late and now he is just a mealy mouthed voice in a tornado of opinions. It serves him right.
The reason why no opne is complaining that oil is $80 bucks a barrel and your fuel prices are rising is because everyone knows this is a Federal Reserved induced dollar devaluation. It has nothing to do with anyone else. No oil production curtailment, no gold shortage, no undersupply, or too much demand. Just too many dollars.
When people say that it's our budget deficit they have it only 1/4 right or 3/4 wrong. In fact, the dollar's devaluation is mostly Federal Reserve QE related and artificialy stimulated liquidity driven by the prolonged abnormally low rates set by the Federal Reserve. In fact the Fed has poured more liquidity into the market than any elected official and spending program in 2008 and 2009. The deficit pales in comparison to the backstops and money the Fed balance sheet expansion has losed upon the world. Everyone knows it.
So when Bernake goes on his next speaking tour, he should be chastizing himself not others for their lack of fiscal competence. The Federal Reserve is the biggest cause for low savings rates in the US, Trade imbalances, and dollar devaluation. They always have been and they always will be for as long as they are around. They are the printing press and big spenders. Even more so than our elected officials. It's just that they are allowed to hide their nefarious actions because they claim immunity from audits and from accountability because they are a "private company".
I wonder, as a private company who made more per employee in 2009, GS or the Federal Reserve? And which bank is the biggest systemic risk? To have the Fed manage systemic risk is like asking AIG to manage the insurance industry.
So don't be so down on yourself for electing Bush Jr. or Obama. Whoever you elect means so very little compared to who sits in the throne of the Federal Reserve. If anyone's going to ruin your life it will be them and they figure that there is almost no chance you can or will do anything about it.
In the mid 90's, the Wall Street Journal ran an editorial with the headline "Bankrupt Canada?" It stated "Turn around and check out Canada, which has now become an honorary member of the Third World." It referred to the Canadian dollar as the Loonie Peso or something like that.
Back then, Canada had the second highest ratio of debt of any industrialized economy. Today, Canada's net debt-to-GDP ratio is the lowest in the G-7 economies.
Like I said 10 - 15 years in a long time. These things go in cycles.
On Oct 19 02:54 PM Steve in Greensboro wrote:
> Thanks, Mr. Ahlgren, for your thoughts.
> Would you add to your list of acceptable investments equities or
> debt in jurisdictions that manage their currencies rationally, e.g.
> Canada, Australia?
Canada's debt at the time was 68.4 per cent of its gross domestic product. Thirty-five per cent of federal revenues were drained by interest payments on the debt. Its debt is now less than 30 per cent of GDP - the lowest in the G7 and it has handled the great recession quite gracefully. Like diet and exercise to lose weight, spending cuts and higher taxes are the only cure for fiscal obesity.
On Oct 19 02:54 PM Steve in Greensboro wrote:
> Thanks, Mr. Ahlgren, for your thoughts.
>
> Would you add to your list of acceptable investments equities or
> debt in jurisdictions that manage their currencies rationally, e.g.
> Canada, Australia?
Good point about turning around a "hopeless" fiscal situation.
In 1995 Finance Minister Paul Martin balanced Canada's federal budget by cutting the federal health and social transfer to the Provinces by $11B. Scaled up 10X to the US economy that would equal a $110B reduction in annual transfers from Washington to the states. Canada's provinces use the health and social transfer mainly to fund health care and education, which are provincial responsibilities under Canada's constitution. The provinces all squealed but responded by rebalancing their own budgets and cutting whatever they could from the 2 big ticket provincial budget items, health and education. So if there was 'pain' it was dispersed as widely as possible by Martin's budget balancing move. And now Canada leads the OECD in fiscal (and banking) health.
In 1993 Alberta Premier Ralph Klein and Treasurer Jim Dinning attacked Alberta's deficit spending, that began with the oil collapse and depression (in Alberta) of 1982. They required ALL gov't departments to find 5% cuts, which actually happened. Alberta had a 25 year plan to pay off its net debt, but after oil began rising in 1998 and natural gas took off the debt was paid out in full 10 years early. Alberta now has no net debt (some debts are longer term and can't actually be paid out until they come due, but Alberta has set money aside to pay these). This year due to the collapse in natural gas, Alberta's major royalty cash cow, Alberta is running an $8B deficit. But over the past few fat years the province has saved $17B in a sustainability fund, so no new borrowing will be required to fund the deficit. Gas royalties are still low but tarsands construction is starting up again so Alberta should endure the present recession quite well.
Most other Cdn provinces have been behaving as fiscally responsibly as Alberta (and some are doing even better which is why political change is in the Alberta air), with the exception of Canada's biggest province--Ontario. Ontario's socialist premier is determined to 'go green'. Admittedly, Ontario has suffered fully 1/2 of all Cdn manufacturing job losses as steel and autos are way down, but if you want to see what Obama's greenonomics might do to America just have a look at Ontario.
Agriculture....check
Chemicals.....check
Industrial minerals....check
Gold....a very poor inflation-adjusted history
idiots & traitors of the world (me included) know
inverse repo time is coming and RMB/USD is (ands will be)
the global hedge ancor now.
Too much emphasis is focused on the 10% unemployment and not enough on the 90% with jobs, who, apparently, are still getting raises, as hard as that may be to accept by some. It's their behavior that will control the economy, not the jobless.
We've already been through the meat-and-potatoes portion of this recession, and we haven't had any deflation, except as measured by the leaving out food and energy from the stats, and even that has prices basically flat. Now, things are improving, and the government's printed trillions haven't even hit the street yet.
As long as people use year-over-year measures that use as the denominator a period before the economic collapse, wrong conclusions will be drawn about the direction of the economy. Soon, the denominator of that equation will be lower than all the numerators, and all the measures will indicate improvement, not worsening.
Inflation is no longer labor driven. It's driven by the fact that worldwide demand for basic resources --energy, food, minerals-- is outstripping the production rate, and many of these cannot be ramped up, like manufactured goods, simply by adding labor, which, yes, is readily abundant. This trend has been and continues to be aided and abetted by near-suicidal "environmental" policies that pretend that if we don't invest in these areas, the demand will just somehow go away or be met by windmills ( a perfect Quixotic fantasy).
Finally, there's never been a period of sustained worldwide deflation in modern recorded history, save for a brief period in the '30's, when the money supply was in a disastrous cyclical contraction from 1929-1935. Now, with world governments having printed unprecedented amounts of currency, the usual laws of supply and demand will take over unless they make a heroic effort to withdraw that largesse, which politician's are always loathe to do, no matter what they may say.
Yes, you are correct: somebody's going to get financially crushed, and it's going to be anybody in "safe," fixed-rate investments at historic low yields. The longer the term of those investments, the worse the crushing will be.
On Oct 19 10:58 PM sethmcs wrote:
> Somebody is definitely wrong and is going to get financially crushed.
> The 10 year bond yields 3.395%. Oil is at $79.75 a barrel and gold
> is at 1,065.50 an oz. No COLA adjustments for the next two years.
> 10% of the labor force on unemployment perhaps another 6% on underemployment.
> Industrial production at maybe 60% capacity. Not a picture of inflation
> to me at least not now. Weak dollar? Will inflate earnings of US
> multinationals through currency translation and will improve competitiveness
> of exports. Will discourage imports. I think I read that US oil imports
> actually fell. Cargo containers of foreign goods are falling, rail
> and truck shipments are down. Personal income is falling. AND you
> guys think gold and oil are great investments? Do you realize that
> deflation will wipe you out? I recall stagflation of the seventies
> but that was labor driven. Can't demand higher wages when there are
> six applicants for each job. Sorry but I see what the fed sees. A
> real threat of deflation. A second oil shock can definitely cause
> a double dip recession and will if it goes unchecked. There was some
> noise a while back about curbing the speculative investments in oil
> futures but nothing has come of it yet. Maybe another spike and the
> rules will change. Maybe. As was stated in the other comments that
> things goes in cycles. In the 80s Japan economy was the envy of the
> world. In the 90s Japan could not do anything right and is still
> struggling even today. Now the middle kingdom China is the envy.
> In ten years in the future we may have to bail China out to avoid
> unrest. Stranger things have happened. To have inflation you need
> too many dollars chasing too few goods. That seems to be the case
> with gold and oil. Recently I seemed to read that there are 600 million
> barrels of oil under contract in the next three months. My only question
> is where are they going to put it?
The first sentence is true, and a very important point. I am afraid that everyone isn't aware of this fact. The MSM rarely gripes about the Fed's bloated balance sheet.
Example: When the first 700B stimulus came out, the MSM attention was focused on this extravagant government spending. Meanwhile, the Fed had expanded its balance sheet by 2000B or more at the time.
On Oct 19 07:29 PM Moon Kil Woong wrote:
> First, Greenspan's comments just shows he was fully cognizant that
> his policies, much the same as Bernake's, is bad for America and
> leads to dollar devaluation and asset bubbles. Which shows he just
> wanted to be superman on his watch regardless of the fact he was
> doing so by setting an economic timebomb. I still have no respect
> for the man.
>
> Regarding what he just said. He is thoroughly correct now that he's
> out of power. It's nice to know he knows something about fiscal prudence.
> But sorry, it's a bit too late and now he is just a mealy mouthed
> voice in a tornado of opinions. It serves him right.
>
> The reason why no opne is complaining that oil is $80 bucks a barrel
> and your fuel prices are rising is because everyone knows this is
> a Federal Reserved induced dollar devaluation. It has nothing to
> do with anyone else. No oil production curtailment, no gold shortage,
> no undersupply, or too much demand. Just too many dollars.
>
> When people say that it's our budget deficit they have it only 1/4
> right or 3/4 wrong. In fact, the dollar's devaluation is mostly Federal
> Reserve QE related and artificialy stimulated liquidity driven by
> the prolonged abnormally low rates set by the Federal Reserve. In
> fact the Fed has poured more liquidity into the market than any elected
> official and spending program in 2008 and 2009. The deficit pales
> in comparison to the backstops and money the Fed balance sheet expansion
> has losed upon the world. Everyone knows it.
>
> So when Bernake goes on his next speaking tour, he should be chastizing
> himself not others for their lack of fiscal competence. The Federal
> Reserve is the biggest cause for low savings rates in the US, Trade
> imbalances, and dollar devaluation. They always have been and they
> always will be for as long as they are around. They are the printing
> press and big spenders. Even more so than our elected officials.
> It's just that they are allowed to hide their nefarious actions because
> they claim immunity from audits and from accountability because they
> are a "private company".
>
> I wonder, as a private company who made more per employee in 2009,
> GS or the Federal Reserve? And which bank is the biggest systemic
> risk? To have the Fed manage systemic risk is like asking AIG to
> manage the insurance industry.
>
> So don't be so down on yourself for electing Bush Jr. or Obama. Whoever
> you elect means so very little compared to who sits in the throne
> of the Federal Reserve. If anyone's going to ruin your life it will
> be them and they figure that there is almost no chance you can or
> will do anything about it.
Just curious, where did you you get your data that shows assets classes correlation with inflation ? Because I am interested in seeing how other asset classes respond to inflation, can you please post the website that has this data? Thanks
On Oct 19 09:39 PM Tack wrote:
> Energy....check
> Agriculture....check
> Chemicals.....check
> Industrial minerals....check
> Gold....a very poor inflation-adjusted history
The USA went off the Gold standard in 33 and it took some time for that to reflect in increased money supply and inflation. Since 35, there has been only one deflation (early 50's) but that was mild (appx 4%).
On Oct 20 05:07 AM Tack wrote:
> Finally, there's never been a period of sustained worldwide deflation
> in modern recorded history, save for a brief period in the '30's,
> when the money supply was in a disastrous cyclical contraction from
> 1929-1935.
nice rally
not sure why you say lt rates have been rising for 9 mths
so your arguments are wrong
stay informed
sethmcs.. good post on the arguments for deflation, and I agree wholeheartedly that is the threat. As to the oil, either JPM or the other morgan (MS) - always forget which - were supposedly stockpiling cheap oil on VLCC carriers offshore earlier this year - if true, this is a nice way to artificially take supply off the market. Now, I'm sure GS and a few other reputable Wall Street paragons of virtue would NEVER think of doing something like that...
I'm just going to toss out some random stuff here:
1) Indeed returns on gold do not seem to be well correlated with inflation but perhaps more correlated to periods of "unrest". So even without inflation on the horizon gold is not a bad place to park some cash?
2) Inflation vs. Deflation ... can't we have BOTH?
It seems to me it's not as simple as one or the other...
Certainly some assets/classes will be suffering "deflation" for years to come ... residential and commercial RE seem to have large inventories to work off for example. On the other hand it seems we could be in for shortages of ag. commodities, energy, and other "hard" assets. The stuff that the BRIC needs to build out their countries?
3) oil being held off the market - well I guess that could be the case, but a VLCC holds about 2M bbls, and with worldwide consumption at 80M+ bbls/day could there BE enough tankers willing to sit at anchor to really make a big difference???
PPI down sharply.
Sorry - we have deflation.
The place to be is equities and hi-yield bonds. Watch their values continue to climb.
Keep saying the sky is falling - I am buying and fully invested.
On Oct 20 08:57 AM MexCom wrote:
> Inflation? Where is the inflation?
> PPI down sharply.
> Sorry - we have deflation.
> The place to be is equities and hi-yield bonds. Watch their values
> continue to climb.
>
> Keep saying the sky is falling - I am buying and fully invested.
On Oct 19 03:45 PM Swashbuckler wrote:
> "No, there is a fourth phase to this economic storm: foreign creditors
> begin to abandon U.S. Treasuries,....". About a year ago I figured
> that China would be committing economic suicide by not buying our
> debt. I have since revised my thinking with a few minor modifications,
> aggregating approximately 180 degrees. I believe now that there is
> NO WAY THEY WON'T pull the plug. IMO, all that remains is for them
> to fine tune their strategy. When they bail, we will be in a world
> of sh#t and they know it. And when we collapse economically, we collapse
> socially. I'm talking government exchange controls, seizure of personal
> property(gold), the works. Our economic demise is in the Chinese
> long term interest of being the world's soul superpower. They will
> sacrifice some short term comfort to reach this long term goal. IMO.
Both are correct for different time periods.
After all, the market will go up and down.
There is so much either/or thinking in these posts. For instance, both the poster and commentator made statements that were either/or and then based what to do next on that specious idea.
Either/ or thinking is cognitively primitive and doomed to fail 50% of the time, given enough time. Ask a pre-eight year old child to predict and you will get an either/or scenario.
From a cognitive stand point, and youshould consider that because you tend to act as you plan in financial matters, to make money in the market, learn to think integratively. The future is based on a set of conditional probabilities, not an either/or sequence.
I apologize to those I offend. I'm only trying to help.
G
On Oct 20 08:57 AM MexCom wrote:
> Inflation? Where is the inflation?
> PPI down sharply.
> Sorry - we have deflation.
> The place to be is equities and hi-yield bonds. Watch their values
> continue to climb.
>
> Keep saying the sky is falling - I am buying and fully invested.
www.bloomberg.com/apps...
One of the reasons, intuitively at least, that I like all the other classes is that many societies --Western ones, at least-- are erecting constant impediments to expanded, or even continued, production, all in the worship of the false environmental god. Huge Asian-continent societies, unburdened by such niceties, are growing in their demands at a voracious rate, and, so, the pressure on prices for true needs, like fuel, food, and raw materials will only accelerate, even without considering other customary inflationary pressures.
Gold, on the other hand, is in ample supply for any true industrial needs, so the price only responds to fear, not necessity, which, as history has shown, is a poor bet.
On Oct 20 06:28 AM Living4Dividends wrote:
> High Tack, I am a follower of yours, because you tell it like it
> is. I agree that Gold has a poor inflation-adjusted history (seems
> counterintuitive - but there it is).
>
> Just curious, where did you you get your data that shows assets classes
> correlation with inflation ? Because I am interested in seeing how
> other asset classes respond to inflation, can you please post the
> website that has this data? Thanks
>
> On Oct 19 09:39 PM Tack wrote:
I don't know if America is sitting on that kind of jackpot.
On Oct 19 08:41 PM E Nuff Sed wrote:
> People sometime forget these things run in cycles. In 1995, the Wall
> Street Journal insulted Canadians by declaring their country an honorary
> member of the Third World. "Bankrupt Canada?" was the headline on
> the editorial. They called the Cdn dollar the northern peso.
>
> Canada's debt at the time was 68.4 per cent of its gross domestic
> product. Thirty-five per cent of federal revenues were drained by
> interest payments on the debt. Its debt is now less than 30 per cent
> of GDP - the lowest in the G7 and it has handled the great recession
> quite gracefully. Like diet and exercise to lose weight, spending
> cuts and higher taxes are the only cure for fiscal obesity.
>
> On Oct 19 02:54 PM Steve in Greensboro wrote:
asset deflation
price deflation
this happened in Japan during the 90's
On Oct 20 08:45 AM fatpitch2 wrote:
> Nice article, thanks.
>
> I'm just going to toss out some random stuff here:
>
> 1) Indeed returns on gold do not seem to be well correlated with
> inflation but perhaps more correlated to periods of "unrest". So
> even without inflation on the horizon gold is not a bad place to
> park some cash?
>
> 2) Inflation vs. Deflation ... can't we have BOTH?
> It seems to me it's not as simple as one or the other...
> Certainly some assets/classes will be suffering "deflation" for years
> to come ... residential and commercial RE seem to have large inventories
> to work off for example. On the other hand it seems we could be in
> for shortages of ag. commodities, energy, and other "hard" assets.
> The stuff that the BRIC needs to build out their countries?
>
> 3) oil being held off the market - well I guess that could be the
> case, but a VLCC holds about 2M bbls, and with worldwide consumption
> at 80M+ bbls/day could there BE enough tankers willing to sit at
> anchor to really make a big difference???
The U.S. oil reserves are greater than Canada; the gas reserves are four times as large; and, by the way, the U.S. has the world's largest reserves of coal.
We just have idiot politicans.
On Oct 20 10:54 AM Shaftsinker wrote:
> Canada also happens to have the world's second largest oil reserves
> and virtually endless metal, gas, and precious metal resources. Not
> to mention it also leads the world in potash and uranium production.
> Our unemployment is already decreasing.
>
> I don't know if America is sitting on that kind of jackpot.
>
> On Oct 19 08:41 PM E Nuff Sed wrote:
On Oct 19 09:34 PM derryl wrote:
> E Nuff Said:
> Good point about turning around a "hopeless" fiscal situation. <br/>
>
> In 1995 Finance Minister Paul Martin balanced Canada's federal budget
> by cutting the federal health and social transfer to the Provinces
> by $11B. Scaled up 10X to the US economy that would equal a $110B
> reduction in annual transfers from Washington to the states. Canada's
> provinces use the health and social transfer mainly to fund health
> care and education, which are provincial responsibilities under Canada's
> constitution. The provinces all squealed but responded by rebalancing
> their own budgets and cutting whatever they could from the 2 big
> ticket provincial budget items, health and education. So if there
> was 'pain' it was dispersed as widely as possible by Martin's budget
> balancing move. And now Canada leads the OECD in fiscal (and banking)
> health.
>
> In 1993 Alberta Premier Ralph Klein and Treasurer Jim Dinning attacked
> Alberta's deficit spending, that began with the oil collapse and
> depression (in Alberta) of 1982. They required ALL gov't departments
> to find 5% cuts, which actually happened. Alberta had a 25 year plan
> to pay off its net debt, but after oil began rising in 1998 and natural
> gas took off the debt was paid out in full 10 years early. Alberta
> now has no net debt (some debts are longer term and can't actually
> be paid out until they come due, but Alberta has set money aside
> to pay these). This year due to the collapse in natural gas, Alberta's
> major royalty cash cow, Alberta is running an $8B deficit. But over
> the past few fat years the province has saved $17B in a sustainability
> fund, so no new borrowing will be required to fund the deficit. Gas
> royalties are still low but tarsands construction is starting up
> again so Alberta should endure the present recession quite well.
>
>
> Most other Cdn provinces have been behaving as fiscally responsibly
> as Alberta (and some are doing even better which is why political
> change is in the Alberta air), with the exception of Canada's biggest
> province--Ontario. Ontario's socialist premier is determined to 'go
> green'. Admittedly, Ontario has suffered fully 1/2 of all Cdn manufacturing
> job losses as steel and autos are way down, but if you want to see
> what Obama's greenonomics might do to America just have a look at
> Ontario.
Pick the right periods and you can make some pretty misleading points. What about gold hitting $800 about 3 decades ago?
I can see good arguments for oil and agriculture but gold confounds me.
My point is there is absolutely no way the USA can ride natural resources to prosperity the way Canada has.
On Oct 20 11:32 AM Tack wrote:
> Take a look: www.eia.doe.gov/emeu/i...
>
>
> The U.S. oil reserves are greater than Canada; the gas reserves are
> four times as large; and, by the way, the U.S. has the world's largest
> reserves of coal.
>
> We just have idiot politicans.
With a 10% unemployment rate, what that statistic implies is that all of the gainfully employed got a 10% pay raise. Now, if you want to include all of the government handouts, then I can partially understand the statistic, but not to the extent that personal incoming being up.
Don't believe everything the government tells (or doesn't) tell you.
Your basic investment scene of a collapsing dollar and raising commodity price is the correct one.
But you happen to pick the WORST three in the commodity asset classes. Actually they are the bottom ones: Oil, Gold, Food. Let me explain why these three are bottom performers in commodities, not top performers. Because even Jim Rogers did not get it right, as he pitched agriculture as his top favorite.
For example, rhodium price went from $300 to $10000 in a few short years, on a mere 4% global shortage. How many people even know what rhodium is. Can you imagine any food item could see price going up 30 fold due to a mere 4% shortage? Like say milk goes from $4 a gallon to $120 a gallon, because there was a 4% shortage in the supply? No way! Read the story:
seekingalpha.com/artic...
From philosophical point of view, the best investment must NOT be the one recognized by almost every one. The best investment is always recognized by only a very few. My favorite commodity hoard is tellurium. Bought at roughly $50 per pound. I could easily see it goes up to $2000 per ounce, or a 600 fold gain. I bet not many people on this planet know what is tellurium.
Now let's look at your three choices: Gold. Gold is a constant, in terms of purchase power. The world has a massive stockpile of gold, that's why its valuation is very stable in terms of purchase power. You hedged inflation OK, but you have nothing to gain in gold. The world is in no way short of gold.
Oil. Modern society can not operate without oil. Oil is energy source. A raising oil price increases cost of almost everything proportionally. So as oil price goes up, everything goes up as well. Oil provides very good inflation hedge. But as oil price raises so is the cost of everything. So you have little to gain. More over people will attempt to switch to cheaper energy source, like coal.
Food. Every one knows food. Every one buys food. So it is ridiculous to claim that hoarding food is the best investment. Hoarding food to ensure the security of supply to your family is a good idea. But making a profit out of it? Forget about it.
The problem with food is every one consumes it, but not every one can afford it. The poorest people are already spend 90% of their income on food. Do you expect them to be able to pay 900% of their income for food? No they will simply stop eating, reducing the demand. So there is a very low price cap on common food as demand destruction happen at a very low level.
The best commodity class to invest in are those that most people do not know, and are so critical that they are demanded at any high price level, and their supplu is so price inelastic that higher price would not be able to stimulate more production. Ideally this should be something easy to store and preserve.
One thing that fits the character is PGM metals (platinum group metals), platinum and palladium. If oil supply becomes a problem, you need conversion from one fuel to another, and that requires PGM metals. If fuel cell is widely used to improve energy efficiency, you need PGM.
The best PGM metal I like is palladium. If cold fusion becomes a commercial reality, which is our only hope of overcoming Peak Oil, then palladium price will reach such a high level that I can not even predict where it will be.
seekingalpha.com/autho...
So stick with some one others don't know. Stick with something not every one buys, stick with something that is a by-product. Those are the best commodity hoards.
A thoughtful and reasoned article which I believe has great insight. There, is another Phase that few are aware of, or understand. When the reality of Peak Affordable Oil coupled with Peak Potable Water slams against a world of increasing demand due to population growth there will be massive financial disruptions here and abroad. Everyone knows, but seldom pauses to reflect on the fact that we consume in the neighborhood of twenty percent of the daily world oil production for our drop in the bucket population of 300 million. Those who deny that the peak has arrived do so because were they to admit the truth and begin to discuss what to do there would be terrible political repercussions. So lets just speculate that oil supply dwindles at the same time China calls in it's markers with our treasury bonds, imagine how awful that would be. Humanity deals better with possible near term threats, than those further out there even when the threat could result in an economic and social calamity of massive magnitude.
You state Tellurium will be your best investment. Are you advocating purchasing it and storing it yourself? To whom would you sell it? I understand that it is highly toxic, and to avoid the powder. Could you please provide more information on this?
Other than purchasing rare earth minerals companies such as those Jack Lifton writes about, and perhaps SWC for the platinum group, what suggestions do you have?
Thank you. You picked up another follower!
OyGee
To MexCom - you have been drinking too much Kool-Aid from Washington and Wall Street - deflation is merely a fairy tale - a good story to get 'suckers' to buy Treasuries at near zero per cent. There has NEVER been a fiat currency which has increased in value - i.e. deflation - and there never will be.
> My point is there is absolutely no way the USA can ride natural resources
> to prosperity the way Canada has.<
Shaft, what in heck is the point of thumbing your nose at American citizens who are already hurtin' beyond words? What's your point? Man, when you're neighbor's too sick to cut his own lawn, you'd cut it for him, wouldn't you. You wouldn't give him hell for gettin' sick because you're a better guy than that. Cut it out already.
The fact is that (as Tack says), the USA probably has a whole hell of a lot of untapped resources remaining but politicians are shootin' down project left, right and center for some insane reason.
I am so extremely bullish on tellurium that this is one investment that I entered without an exit strategy yet. Yes I do hoard physical tellurium ingot. Bought it from ASARCO and stored it some where in my backyard. Even a burglar would NOT steal it because they have no idea what this toxic material is, and how to sell it for cash.
Why tellurium? Do a web search on "Phase Change Memory". This electronic revolution will replace all of our computer memory chips. All of our hard disks, Blu-Ray DVDs and all that, and more. The demand will be so high, the supply so narrow that it will drive price up to crazy levels. Companies like Intel would not blink their eyes if this material is sold at twice the gold price.
I am a big fan of Jack Lifton, BTW. I do have disagreement with him many times. He is a good researcher. But he just do not know everything.
On Oct 20 03:10 PM optionsgirl wrote:
> Dear Marc Anthony:
> You state Tellurium will be your best investment. Are you advocating
> purchasing it and storing it yourself? To whom would you sell it?
> I understand that it is highly toxic, and to avoid the powder. Could
> you please provide more information on this?
> Other than purchasing rare earth minerals companies such as those
> Jack Lifton writes about, and perhaps SWC for the platinum group,
> what suggestions do you have?
> Thank you. You picked up another follower!
> OyGee
" For the first time, a major global exchange will accept gold as collateral. The CME Group, the world’s largest derivitives exchange operator, will take physical gold for things like margin requirements -- an industry first."
99% of people do not like Thomas Malthus. 99% of people do not like Charles Darwin. But these two guys speak the absolute truth. Peak Oil is merely part of the Malthus view of the world. Human race has always been confined by the limited available and accessible resources on earth. That is a fact for millions of years.
On Oct 20 02:47 PM The Dark Years wrote:
> Mr. Ahlgren:
>
> A thoughtful and reasoned article which I believe has great insight.
> There, is another Phase that few are aware of, or understand. When
> the reality of Peak Affordable Oil coupled with Peak Potable Water
> slams against a world of increasing demand due to population growth
> there will be massive financial disruptions here and abroad. Everyone
> knows, but seldom pauses to reflect on the fact that we consume in
> the neighborhood of twenty percent of the daily world oil production
> for our drop in the bucket population of 300 million. Those who deny
> that the peak has arrived do so because were they to admit the truth
> and begin to discuss what to do there would be terrible political
> repercussions. So lets just speculate that oil supply dwindles at
> the same time China calls in it's markers with our treasury bonds,
> imagine how awful that would be. Humanity deals better with possible
> near term threats, than those further out there even when the threat
> could result in an economic and social calamity of massive magnitude.
> Marc Anthony: Thanks for your response. For everyone who thinks that
> Gold is not a good investment, I give you this, from Agora's 5 Min
> Forecast today:
>
> " For the first time, a major global exchange will accept gold as
> collateral. The CME Group, the world’s largest derivitives exchange
> operator, will take physical gold for things like margin requirements
> -- an industry first."<
Good eye OptionsGirl!
BNN in Canada reported that this morning... that the CBOT will be accepting gold as collateral for purchases of anything including "gold". How fabulous is that? They used to only accept "real stuff" like treasuries. If this isn't the most incredible endorsement for the stellar future gold has before it, I don't know what is. The message in this shouldn't be overlooked... this is monumental. No, "monumental" isn't a strong enough word.
Until policy drastically changes and calls a bankrupt duck "fupped duck," increasing segments of physical production will cease to exist because finance to support physical economic processes will not be forthcoming in those measures needed to sustain present capacity. We already see this effect in so many places you would have to be practically blind, deaf and dumb not to acknowledge what, really, is going on.
Thus, given our present direction, it is by scarcity that hyperinflation will be felt by most.
As the second person to ever invest in tellurium, I'm looking forward to your next update.
Just go to news.yahoo.com and search for "phase change memory". You see a lot of recent activities. The tellurium based chalcogenite material has this unique properly of easily change phase. If you think about it, the application potential is unlimited. The physics curiousity of discovering something whose conductivity changes easily leads to the whole semiconductor based electronics revolution. Under the new Obamaism, anything that changes is good :-) Change is not easy, researchers have worked on the phase change material for over 4 decades, now we finally see commercial products. The rest will be history soon.
Have you noticed that in recent earnings conferences, FSLR absolutely would NOT talk about tellurium at all?
On Oct 20 03:55 PM optionsgirl wrote:
> Marc Anthony: Thanks for your response. For everyone who thinks that
> Gold is not a good investment, I give you this, from Agora's 5 Min
> Forecast today:
>
> " For the first time, a major global exchange will accept gold as
> collateral. The CME Group, the world’s largest derivitives exchange
> operator, will take physical gold for things like margin requirements
> -- an industry first."
Peter Bernholz did some research of hyperinflations during the 20th century...apparently the US will be at the tipping point sometime soon:
www.planbeconomics.com.../
Anything else? food? electricity? electronics? automobile? People talk about Fed's huge money supply but it does not seem to have any effect on inflation. So, where is this hyper-duper?
> The obvious problem of this "inflation" talk is that there is scant
> evidence of such an inflation. <
No... the problem is that you wouldn't recognize the evidence of inflation if it slapped you upside the head. The U.S dollar has lost 96% of its value since the inception of the FED. At the end of the second world war, one US dollar bought 400 Japanese yen. Today it buys only 90 yen. That gasoline that you buy for something like $3 a gallon, I used to buy for 28 cents.
You see scant evidence? Maybe you're just too young to realize that the chocolate bars you gobble up at $1.00 a copy used to cost a nickle. I think you need a slap upside the head just on general principles.
The last time I checked: Acura TL costs me 55,000 while in December 2008 it would cost me 57,000. So, the Japanese are willing to accept less USD for their products. That is what you call the "worthless" currency?
On Oct 21 03:58 AM Albertarocks wrote:
> On Oct 20 08:59 PM Andrew D wrote:
Laissez faire economics, the gold standard and the lack of a central bank were tried in the US already - go read up on 19th century history. They worked like crap, which is why today we have an interventionist government, a paper dollar and the Fed.
On Oct 20 01:48 AM phdinsuntanning wrote:
> Ostiaz Paco, hedge yourself. Most of the fools,
> idiots & traitors of the world (me included) know
> inverse repo time is coming and RMB/USD is (ands will be)
> the global hedge ancor now.
You say to avoid stocks as if "stocks" were a homogeneous asset class where one-size-fits-all; but advise holding precious metals, energy and agriculture, How do we do this? Fill our garage with copper bars? Put a 300 barrel tank for crude in our basements? Load up on gold ingots which the gov't will confiscate? (More on this later). And no matter how you do it, storage costs, sales charges, transportation, etc. will eat most of the profits. So what's a guy to do?
I have an aversion to mutual funds, ETFs, etc. where my assets are controlled by Madoff-type middle men. Isn't the only practical way to control energy, agriculture, etc. by owning equities in the companies that base their business on them? In other words: buy their "stocks"?
I said I'd return to the gold matter. I'm ninety years old, and grew up during the great depression. My father was a WWI vet and was opposed to both political parties (as am I). So during the twenties he chose to forego the enormous profits in stocks, and put all our savings in gold for just the same reasons that people are recommending it today. I even put all of my newspaper selling profits in gold coins. Come 1933, that great Democratic demagogue, Franklin Roosevelt, chose to force us to sell all our gold to the government at $20.16 per oz. Of course, we were still better off than having invested all our savings in Insull Utilities or some other widely touted stock, but with most of his retirement funds gone, my father had to work until he died. What makes anybody thing that that great Democratic demagogue, Obama, will do anything different?
AS inflation progresses, at some point the payment of interest on our ever increasing debt will become insurmountable. Since only housing speculators completely repudiate their debt, it is likely that the US will organize a series of financial forums to consider revising trade payments, mutual banking regulation or some other red herring, but from which will emerge instantaneously and without warning the "New Dollar" which will be worth one thousandth of the "Old Dollar" (that's what you and I are stuck with). But after just having been royally fleeced, why would anyone even consider holding debt denominated in "New Dollars" regardless of the interest rate? Because the "New Dollar" would be partially backed by gold. And guess where all that gold would come from!!
I
Gee, I guess we could blame Brooksley Born, but that would sort of be a slap in the face to the facts. It was, after all, Brooksley who in the 1990's as head of CTFC after a long legal career in derivatives and futures markets tried to get congress to pass laws regulating derivatives trading and it was Mr. Greenspan who led the charge against Ms. Born. Greenspan won and we all know how that turned out.
Derivatives markets -- and especially futures markets -- create liquidity and price efficiency. The last thing in the world we want to do is impose more regulation on derivatives.
On Oct 19 03:45 PM Swashbuckler wrote:
> "No, there is a fourth phase to this economic storm: foreign creditors
> begin to abandon U.S. Treasuries,....". About a year ago I figured
> that China would be committing economic suicide by not buying our
> debt. I have since revised my thinking with a few minor modifications,
> aggregating approximately 180 degrees. I believe now that there is
> NO WAY THEY WON'T pull the plug. IMO, all that remains is for them
> to fine tune their strategy. When they bail, we will be in a world
> of sh#t and they know it. And when we collapse economically, we collapse
> socially. I'm talking government exchange controls, seizure of personal
> property(gold), the works. Our economic demise is in the Chinese
> long term interest of being the world's soul superpower. They will
> sacrifice some short term comfort to reach this long term goal. IMO.
> You can pick and choose whatever currency you want. GBP/USD conversion rate haven't changed for ONE CENTURY: It is still in the 1.3 - 2.0 history range and it stands at 1.6. Talking about Japan, JPY has deflationary pressure after the Japanese asset bubble, which I expect the same as here.<
Sorry, wrong again!
1940 - 1 British Pound = $4.25 USD
Protecting from inflation by looking in the rear-view mirror (i.e. CPI, PPI) does not work. Do you buy life insurance after you die? No. The smart people buy life insurance when they're young and the prospect of dying is remote.
On Oct 20 08:59 PM Andrew D wrote:
> The obvious problem of this "inflation" talk is that there is scant
> evidence of such an inflation. Talking about gold's upswing is laughable
> because it gets little relevance to the consumer price basket. Even
> oil is not quite irrelevant in this case since the only evidence
> of its impact is gas price went up 25% - 30% from March low.
>
> Anything else? food? electricity? electronics? automobile? People
> talk about Fed's huge money supply but it does not seem to have any
> effect on inflation. So, where is this hyper-duper?
On Oct 21 07:11 AM Andrew D wrote:
> You can pick and choose whatever currency you want. GBP/USD conversion
> rate haven't changed for ONE CENTURY: It is still in the 1.3 - 2.0
> history range and it stands at 1.6. Talking about Japan, JPY has
> deflationary pressure after the Japanese asset bubble, which I expect
> the same as here.
On Oct 21 10:42 AM Paco Ahlgren wrote:
> I hope you're not blaming derivatives for our current economic crisis.
> Respectfully, that's a pretty banal argument -- and one that Warren
> Buffett has championed over the years...
>
> Derivatives markets -- and especially futures markets -- create liquidity
> and price efficiency. The last thing in the world we want to do is
> impose more regulation on derivatives.
You're central theme that equitie prices won't benefit from rising inflation are ridiculous - what do you think those companies get paid with? As their dolalr incomes rise significantly through inflation, so will their share prices, its a moot point as to whether that represents an increase in value or not, the increase in dollars will be there all the same.
What some of you call a great Bull Market....was a market of BULL...T
The wasted billions that could have updated infrastructure, improved airport radar, provided solar roofing for the southwest USA, built nuclear power stations and rapid trains and new gas turbine hybrid cars are lost.
A lost decade has occurred already. Now we even give Wallstreet bail out money and bonuses for the mess. The is no management in Washington or New York....just groups sucking in money....
Buy natural resources CNX,TCK,OXY, CNX , integrated oils Chevron , XOM, and if Congress authorizes money for real employment projects BUY CAT, NUE, wood producers , GMOand
DBA and silver for protection.
Which should tell us everything we need to know about our political (and financial) landscape.
The banks own the government - both parties.
Keeping us divided over BS leads to our not noticing that it doesn't truly matter which side is in office.
It is not Red vs. Blue vs. The Fed.
It is all of them vs. us, the shrinking middle class.
On Oct 19 07:29 PM Moon Kil Woong wrote:
> First, Greenspan's comments just shows he was fully cognizant that
> his policies, much the same as Bernake's, is bad for America and
> leads to dollar devaluation and asset bubbles. Which shows he just
> wanted to be superman on his watch regardless of the fact he was
> doing so by setting an economic timebomb. I still have no respect
> for the man.
>
> Regarding what he just said. He is thoroughly correct now that he's
> out of power. It's nice to know he knows something about fiscal prudence.
> But sorry, it's a bit too late and now he is just a mealy mouthed
> voice in a tornado of opinions. It serves him right.
>
> The reason why no opne is complaining that oil is $80 bucks a barrel
> and your fuel prices are rising is because everyone knows this is
> a Federal Reserved induced dollar devaluation. It has nothing to
> do with anyone else. No oil production curtailment, no gold shortage,
> no undersupply, or too much demand. Just too many dollars.
>
> When people say that it's our budget deficit they have it only 1/4
> right or 3/4 wrong. In fact, the dollar's devaluation is mostly Federal
> Reserve QE related and artificialy stimulated liquidity driven by
> the prolonged abnormally low rates set by the Federal Reserve. In
> fact the Fed has poured more liquidity into the market than any elected
> official and spending program in 2008 and 2009. The deficit pales
> in comparison to the backstops and money the Fed balance sheet expansion
> has losed upon the world. Everyone knows it.
>
> So when Bernake goes on his next speaking tour, he should be chastizing
> himself not others for their lack of fiscal competence. The Federal
> Reserve is the biggest cause for low savings rates in the US, Trade
> imbalances, and dollar devaluation. They always have been and they
> always will be for as long as they are around. They are the printing
> press and big spenders. Even more so than our elected officials.
> It's just that they are allowed to hide their nefarious actions because
> they claim immunity from audits and from accountability because they
> are a "private company".
>
> I wonder, as a private company who made more per employee in 2009,
> GS or the Federal Reserve? And which bank is the biggest systemic
> risk? To have the Fed manage systemic risk is like asking AIG to
> manage the insurance industry.
>
> So don't be so down on yourself for electing Bush Jr. or Obama. Whoever
> you elect means so very little compared to who sits in the throne
> of the Federal Reserve. If anyone's going to ruin your life it will
> be them and they figure that there is almost no chance you can or
> will do anything about it.
I hate regulations as much as the next guy, but some regulations are required to prevent certain people and institutions from pulling the wool over people's eyes.
Of course, with our government, the danger is always that they'll create exactly the wrong solution and make the problem worse.
On Oct 21 10:42 AM Paco Ahlgren wrote:
> I hope you're not blaming derivatives for our current economic crisis.
> Respectfully, that's a pretty banal argument -- and one that Warren
> Buffett has championed over the years...
>
> Derivatives markets -- and especially futures markets -- create liquidity
> and price efficiency. The last thing in the world we want to do is
> impose more regulation on derivatives.