TarCottage

Why High Inflation Will Not Take Hold

Comments I have read so far are quite interesting.

I agree we are in a secular bear market for stocks and a secular bull market for commodities that started in 2000.

Regarding the statement that from 2000 on, growth in real corporate earnings has been low, is probably correct if you factor in the large devaluation of the U.S. dollar during this period.

However I disagree with the author that since 2000 inflation has not been a concern. I estimate, based upon the increase in the price of gold expressed in U.S. dollars, that real inflation has been near double digits since 2000.

The real problem we all face in trying to figure out the true rate of inflation in a fiat money world is that, except for maybe gold, we have no reliable fixed horizon on which to benchmark inflation against.

The annolgy I use is this. Imagine Uncle Sam, Mr. Yen, Mr. Euro, Mr, Pound, Mr. Ruble, etc. all falling in space. Without a fixed horizon to reference to, if Uncle Sam is falling faster than Mr. Yen and company, then at least two observations could be made. One, Uncle Sam is falling faster than Mr. Yen and company. Or two, if uncle Sam isn't falling, then Mr. Yen and comapany must be going up. Your answer probably has a lot to do with how you preceive things.

My view is that all the currencies are constantly being inflated, some faster than others. I use gold as my fixed horizon.

Best Regards to All

Is the Bear Market Almost Over for the S&P and Silver?

Hi Roland:

I enjoy your Elliott Wave comments and always read them with great interest because few are brave enough to publish their Elloitt Wave counts for all to see. Not being at all an expert, it is my understanding that generally the very long Elliott Wave usually consists of about five waves (3 up and 2 down + more shorter waves inside of these waves, which is where I get lost!).

However, have you ever considered that maybe the time periods you have assigned for your 1-2-3-4-5 Elliott Wave positions are off? Below is the reason why I think you might want to reconsider the timing for your Elloitt Wave counts.

To my way of thinking the 5th Elliott Wave of the long term bull ended about 2000 and with that a new long term bear market then started. I am using 2000 as the end of the secular bull because (my) Elloitt Wave (count), Knodratieff Wave, and Ian Notley all seem to generally concur on this date.

I believe most people don't understand that we are already in a bear market and have been for 8 years now. In a bear market, buying the dips and holding (as you do in a bull market), provides little upside (reward) but plenty (mostly) of downside (risk). All risk and no reward, hardly a winning stradegy.

In a bear market, to make money investors (not traders) need to avoid investing in those sectors of the market that are in secular (long term) bears and only invest in those areas that are in secular bulls. Starting about 2000, maybe earlier, energy and gold began their secular bulls after having been in secular bears since 1980. Starting in 2000 just about anything based upon paper (i.e. financials, banks) entered their secular bear.

What seems to have confused most people is the so called bull market that started about 2002 ending mid-2007. I believe this actually was a bull rally in a secular bear market. Many will say but this rally reached the same high as the dot.com rally in 2000. Yes, nominally it reached the same number, but when adjusted for the "real" rate of inflation, at best it retraced about 1/2 of it's 2000 high.

So if investors make the mistake of continuing to invest as if they are still in a bull market, then they are going to experience continuing losses. This is because in a secular bear, each succeeding bull rally makes lower highs and each bear portion lower lows. It is like going down rapids. If you buy and hold like you did in a secular bull, you are going to go lower and lower. That is like trying to make money by buying high and selling low.

It is for the above reason that I am questioning the timing of your Elloit Wave counts. I think if you adjust your Elloit Wave count with the 5th wave of the secular bull ending in 2000, you will find many of the little things that haven't made sense will start making more sense and agree better with current market conditions.

Best regards.