OstrichHater

The Flat Line Market: Lessons from Japan

That top chart should be in real terms and not in nominal terms, which would give a different picture, because the Fed/Treasury is currently just inflating our way out of the mess we are in.

For the next 8 years (the remainder of that chart) the housing market is likely to stay flat, but not in real terms.

Also the stock market is likely to rise, but in real terms probably not by more than a few % annually.

ISM Index: Another Sign of a V-Shaped Recovery

Who cares? You should. Aren't you an investor/trader? You should realize that you can profit from this information.


On Dec 01 01:07 PM bigbear4511 wrote:

> Who cares. This V shaped recovery only benefits wall street, not
> main street. It is completely artificial pumped by stimulus and a
> dropping dollar. If it was a real v shaped recovery jobs would have
> increased some 500,000. Wait till the birth/death ratio hits in February.
> Unemployment will hit 11.5%.

The Twenty Year Stock Bubble Is Still Inflated

This is a very interesting analysis, but the author's calculations seem to miss the impact of inflation on nominal GDP growth. I believe the authors forecasts are likely for real GDP growth, which isnt the whole picture.

With the massive amount of money printing that the Fed has done and will likely continue to do, we are more than likely going to get inflation for the next 5-6 years. I suspect that inflation will ramp up to 4% over the next couple of years, possibly even higher. That combined with GDP rebounding immediately in late 2009 and early 2010 (~5%), and then tapering off to a 2-3% range, its not unlikely that we will have nominal GDP growth of greater than 6%, even while real GDP growth lags historical trend rates.

This could bring the relationship back much faster (5-6 years) with no or very limited stock market appreciation.

Will There Be New Lows in 2010?

Edwards is a very bright man, but I do think that he is missing an important dynamic when he talks about "unwinding of the 'grotesque debt excesses' of the last decade."

Specifically, one must remember that the majority of debt that is held by corporations (think bonds and pensions) and households (think mortgages) is generally at a fixed rate. However, inflation is not fixed. If the fed can artificially create inflation (remember helecopter Ben is chair of the FOMC), then asset values will be artificially raised and the deleveraging problem slowly fades away over time. This dynamic becomes even more effective if the government stated CPI is lower than the actual inflation rate, as we have seen in the last decade. This makes the private and government pensions which are tied to the CPI essentially get smaller and smaller with time.

I am certain that this is what the Fed intends to accomplish-- i.e. inflate our way out of the de-leveraging process. The only question is how sucessful will they be in their efforts.

Does Bernanke Blow Bubbles Too?

bubbles are grea.... you've just gotta get out before they burst! ;-)