mrbill

Why the U.S. Recovery Will Lag

"One of the many reasons is that banks and their willingness to lend will remain under pressure for quite a while."

Never mind the unwillingness to lend, how about the unwillingness to borrow?

China Is Now in Firm Control of U.S. Debt Markets

Yet another deflation = armageddon post.

"My folks bought a color TV in 1965 for 600 dollars ,that same size color tv can be bought at wal mart for 199"

That's not deflation, that's a technological improvement. Nevertheless, that $600 TV will have lasted 30 years, whereas the $199 wally special will last about five.

"My first baseball glove was 29 dollars and my daughter got hers 38 years later for 9 dollars"

And that $9 baseball glove will have to be replaced sooner than the $29 glove. Cheaper products do not necessarily equal a greater value.

If we used honest money, things would get cheaper over time thanks to technology. Over the last few centuries we have been able to produce a lot more for a lot less work, and what do governments do? Print the difference and then some.


On May 28 02:19 PM dividendmachine wrote:

> Thios is hardly news but the author did a great job
>
> However my "theory" is the following. We both agree that the "golden
> rule" is he who has the gold makes the rules"
>
> Invariably China is concerned about the "socialist" government that
> Obama is proposing. It is in everyones best interest worldwide that
> the US has a strong economy and perhaps they sent Obama a message
> by pulling out of treasuries
>
> The only way that can happen is with lower interest rates and a healthy
> stock market
>
> Consumer confidence jumped from March to April
>
> and that is in spite of the unemployment rate rising.
>
> FACT is more than half this country and those who control over 90%
> of the assets own stocks.
>
> In January and February Obama "needed" to sell doom and gloom to
> get through his stimulus
>
> The fact is China DECIDES America's fate now. Bernanke and Obama
> and Geintner are merely figureheads with little control
>
> China needs America not only as the only people on Earth stupid enough
> to buy all the useless shit produced but there is another reason
> as well
>
> America is a conveinent "bogeyman" for teh rest of the world. In
> fact China would have that role if the US was to collapse
>
> Those in power in China have "no choice" but to keep financing their
> debt.Where else can you put a trillion dollars?
>
> Truth is that America has had inflation for 60+ years since WW2 ,and
> gradual inflation is a LOT better than deflation
>
> Each industry has been effected differently
>
> What we are not taking into consideration is how much the price of
> many goods we buy has gone down in price
>
> My folks bought a color TV in 1965 for 600 dollars ,that same size
> color tv can be bought at wal mart for 199
>
> My first baseball glove was 29 dollars and my daughter got hers 38
> years later for 9 dollars
>
> 28 years ago a quarter pounder with cheese was 1.15 and now its about
> double
>
> Gas when i was a senior in hi scholl was 2.09 30 years later its
> now 2.35 .when you add the large increase in fed and state tax the
> oil company is getting Less money for the barrell of oil
>
> Levis now cost less than they did 30 years ago
>
> Now somethings like concert tickets have ballooned
>
> 28 years ago i saw the rolling stones for 15$ ,23 years later the
> same ticket was 225 dollars
>
> Cadillac because of the UAW and managements greed has increased in
> the past 30 years by more than 400%
>
> 2 large pizzas are almost the same as they were 30 years ago
>
> In my hometown a house that sold for 52 ,000 dollars 27 years ago
> just sold for 68,000 but 3 years ago the same house was 120,000<br/>
>
> My point is despite the inflation that has happened in the past 30
> years,Each industry has varied in how it has changed

China Is Now in Firm Control of U.S. Debt Markets

I should have mentioned, the oversupply is due to new capacity. Not so much lower demand.

China Is Now in Firm Control of U.S. Debt Markets

"I also find it quite funny to see everybody calling to buy gold. Look, there is no inflation right now. There is just speculation about the eventual weakness in the USD. This is driving gold and oil higher because they are paper and speculative markets."

Gas prices have been going up. Is that deflation?

"To verify my theory just check out the price of Nat Gas, which in my view is a much better indication of commodity inflation. It keeps on deflating."

Your theory stinks. The reason natural gas is down is because of a massive oversupply. But thanks to quantitative easing, it's now forming a bottom. See UNG.

On May 26 07:05 AM jeandit75 wrote:

> China being the largest creditor of the U.S. Government, they can't
> afford to have a collaps in the USD cause it would wipe out their
> investment. The other reason why China must keep a strong dollar
> currency is the Yuan's undervaluation is working as a natural subsidiary
> to their exports, a natural competitive advantage they surely want
> to keep. I therefore can't see why China would shoot themselves in
> the foot in having a dollar collaps. That's that simple.
>
> I also find it quite funny to see everybody calling to buy gold.
> Look, there is no inflation right now. There is just speculation
> about the eventual weakness in the USD. This is driving gold and
> oil higher because they are paper and speculative markets.
>
> To verify my theory just check out the price of Nat Gas, which in
> my view is a much better indication of commodity inflation. It keeps
> on deflating. It is impacting the Utilities' profitability and is
> a proof that this current recession is driven by delevraging and
> deflation.

Obama (Should Say) to California: Drop Dead

Here's part of the problem:

www.youtube.com/watch?...

On May 30 02:49 PM Market Sniper wrote:

> Spot on! I have lived in California since 1957 and watched as this
> state has, with increasing speed, swirled around the toilet bowl.
> For a long time now, basically a one party state (if that really
> makes much difference!) that is the TOTAL control of government worker's
> unions of various stripes. From teachers, state employeed janitors
> to state employeed scientists. They ALL have unions. Bloated salaries,
> phenomenal benefit packages and unbelievable retirement benefits
> have been just part of the problem. The state will have to go bankrupt
> to clear out the dead wood as well as break these union's backs.
> Basic question: since when do government workers, whose ENTIRE paychecks
> come from the taxpayers, have the right to even unionize or collectively
> bargin? This has been taken to the most bizarre level in the Netherlands
> where the Dutch Army is unionized! Peter, again you point out the
> abysmal absurdity of the situation.

Obama (Should Say) to California: Drop Dead

"Federal backing of California bonds would effectively turn them into Treasury bonds, with the added appeal of being exempt from California state income tax. Therefore, the Treasury will be at a competitive disadvantage when it looks to issue its own debt to Californians. If it then has to guarantee the bonds of all the other 50 states, why would any Americans buy Treasuries when they can get identical credit quality on better terms from the states? The only real buyers left would be foreigners, who are already queasy about the Treasuries they own."

Great point. Which is why I've been saying, look out for a new muni bond tax. This will be the perfect reason to do it.

Fears of Inflation Seem Overblown

"inflation is hard to come by when wages and demand fall - money printing cannot offset loss of income and confidence. If you believe in inflation you have to believe jobs will grow, and wages will rise. Does anyone believe that?"

What a terrible observation. Have you considered that other countries will pickup where we leave off? If you think money printing won't make prices rise, why stop at a few trillion, how about 10 or 20 trillion in freshly printed dollars backed by nothing?

I am not one to suggest the collapse of the dollar, and I've made that point here before. But that we will have inflation thanks to the Fed's monetary policy, if something doesn't change soon, you can count on it.

On May 29 06:21 PM Fighting Yoda wrote:

> Despite all the money printing deflation is taking root - CPI data
> clearly show that. CPI as usual under reports - it under reported
> inflation now under reports deflation. For inflation hawks - inflation
> is hard to come by when wages and demand fall - money printing cannot
> offset loss of income and confidence. If you believe in inflation
> you have to believe jobs will grow, and wages will rise. Does anyone
> believe that?
>
> There is too much surplus capacity globally – look at China – do
> you think US is going to import all the junk that we imported from
> them. In US itself do we have shortage of auto or home capacity.
> Despite huge production cuts the capacity is still surplus. Nat gas
> is another very good barometer – rig count keeps going down but the
> inventories keep rising, and of course prices keep falling.
>
> Green shoots are simply smoke and mirror tactics of Wall Street,
> meanwhile the Govt. is simply watering these weeds.
>
> Velocity of money is dwindling as credit crunch continues, just because
> there is thaw in the credit markets (as measured by TED spreads)
> does not mean credit has increased. Credit is decreasing – both availability
> and demand. Money is money + credit – money may increase but if credit
> decreases more – net money has actually decreased.
>
> SFP Fed had recently published a nice paper on the subject: U.S.
> Household Deleveraging and Future Consumption Growth
> www.frbsf.org/publicat...

Fears of Inflation Seem Overblown

Of course we had inflation in '08. Did you not see the cost of food rising over 10% as a study found in late '08? We also had food inflation in '07.

On May 29 03:34 PM redbaron wrote:

> And Real Estate has not yet bottomed, Right? And what about commercial
> real estate, which is the other shoe to fall. Oil is less than half
> of what it was last summer, and we didn't have inflation then, so
> why is the increase in oil now inflationary? Inflation eventually,
> but not yet, IMHO.

So How Good Was Housing Data in March?

"FHA is reporting rising defaults."

"Conclusion: Neutral"

"The Office of the Comptroller of the Currency of the U.S. last week detailed rising mortgage delinquencies throughout 2008."

"Conclusion: Neutral"

Talk about spin.

"Case-Shiller data demonstrated another month of breathtaking declines in home prices."

"Conclusion: Negative."

Why is this bad? Do you have kids, do you want them to be priced out of the market thanks to artificially low interest rates and other government subsidies such as tax credits? And what effect will low interest rates have on the cost of living for everyone including home buyers in two to five years? Is it better to pay $1 million for a $500K home if you get an interest rate of zero? Artificially low interest rates and subsidies are great, you save a couple of hundred on your monthly mortgage, but end up paying several hundred more on higher property taxes, food, energy, and fuel.

Are Stocks Actually Cheap Now?

It's a traders market.

The Financial Crisis Is Escalating Out of Control

“so many people who formally owned their own homes are forced to rent and those who can afford to own rental properties grow their wealth dramatically”

Don't count on it. As home values plummet, so do rents, and more foreclosures on the part of landlords. Lot's of flippers and investors were buying all through 2008. They are in deep s#%t right now.

We need another 20% drop to be inline with inflation. In a depression the value of homes could fall 50% from where they are today. At least, that's what happened in the great depression.

It is very tempting to rush out and buy investment properties. But I can assure you, it's much too early for that:

www.newfinancialwisdom...

And if inflation kicks in and interest rates rise, that will put even more downward pressure on home prices. For many years to come prices will stay down. I'd say a decade at least.

Death of Equities: Part of a Never Ending Series

For the lowest possible risk be highly diversified: stocks (US and abroad), bonds of all types, soft and hard commodities, cash and foreign currencies, even real estate, etc. You probably won't lose any money, but you won't make a killing either. Maybe we need a Total Market (r) ETF?

S&P 500 P/E Ratio at Troughs: A Detailed Analysis of the Past 80 Years

“Deflation is even worse because once consumers become convinced that prices will be lower next month, they naturally and logically stop buying”

Utter nonsense. Computer and electronics prices fall every year, but that doesn't stop people from buying. And no one is going to starve for a month waiting for food prices to fall. Just like no one will wait two weeks for gas prices to drop so they can't go to work. Effectively what you're saying is, people don't want cheap products. This is the typical investor mind set: buy when things are going up, sell when they're going down. IT DOESN'T APPLY TO THE REAL WORLD.

And the reason people, err, speculators, have stopped buying houses is because they are no longer going up (for all the obvious reasons). Gone are the days where you could flip a home and profit tens of thousands in just six months. Like Peter Schiff said back in 2006, paraphrasing “before, people used to buy homes because they could afford them, now they buy because they need the money. And if you need more money, you buy a vacation home.”

A bubble bursting is not “deflation”, it is a correction.

“The collapse in demand forces prices further downward which results in an economic death spiral “

Likewise, massive inflation also creates an economic death spiral because the cost of living rises. Do you really believe corporations and small business will increase salaries to compensate? Perhaps if they are run by unions, otherwise, it's not going to happen.

Stocks on the Verge of... Something

"Wasn’t it the CEO of Bank of America (BAC) who said they had plenty of capital, but took billions in TARP — who then said the dividend was safe, but then cut it in half — who subsequently said the dividend is now safe, but cut it again to one penny?"

Good point. Sadly most people, especially in the US have short term memories. In the US, not only can you fool us once, but several more times, and then some.

The Search for a Bottom

This is one of the most sensible articles I've read in a long time. Congrats.