Jasper M

The Good and Bad of Wal-Mart

I am no great fan of WalMart, but just to play devil's advocate, lower wages are Not a negative if you are the one paying them, whether directly, as an employer, or indirectly, as a customer.

WalMart is an engine of deflation, and if did not exist, someone else would have come up with a similar business model, and reaped the rewards. Whether that is a bad thing depends (like all deflationary engines) on whether you are leveraged or not.

Don't Believe Long-Term Oil Forecasts

On Nov 09 03:58 PM Tony Daltorio wrote:

> Much of the emerging world has not and is not going through the financial suicide the US is with credit.

Rriight . . . there has been next to no credit inflation in Europe, or China . . . wait, no . . .

> And that is where most of the future demand for oil will come from.

I would love to know where one supposes this demand will come from, with marginal demand for their exports vanishing, likely for decades to come.

Britain Ramps Up on Nuclear

"Scotland . . . placed a ban on future nuclear . . . the ban exists to help get the local wind and wave industries off the ground, Jim Mather, Scotland's energy minister, told us."

And there's 'green energy', in a nutshell - has to use government force to BAN competition, before it can get off the ground.

Does Disaster Loom from Dollar Funded Carry Trades?

"If indeed the dollar is still 'overvauled' and going to 40 . . . "

Yeah, it's so not, Karl, not anytime soon. Bearishness is always greatest at a bottom, and the current slew of predictions re the 'death' of the dollar are a product of its turn, and thus do Not reflect actual trend.
Here, at the end of the credit deflation, we can reasonably expect to see the price of almost everything drop vs. the dollar.

Don't Believe Long-Term Oil Forecasts

"No reasonable person expects the world to return to those prices any time soon."

The oldest rhetoric trick in the book - call those who disagree with you unreasonable, without any substantial argument to support it.

Credit inflations tend to reverse Very quickly, which destroys money supply, faster than central banks can replace it. That drives down prices - FAST - as there is simply less purchasing power around.
And we have been through the grandest credit inflation in very nearly 300 years. Maybe ever.

Options Trader Wrong-Way Weekly Wrap-Up: Party Like It's 1999

Author would appear to refute some of his own predictions, as he is describing the stage for a massive deflation that will erase much of the changes in cost structure he laments.

Positioning for a Bond Rally

I used to be expecting that, as well, on flight to quality when the rally ends. But the technical indicators look sketchy, and with the fundamental picture looking SO bad, I can't help but expect that the quality flown to will end up being something besides T-bonds. Or even the longer T-notes.

In my minds eye, I see a picture of Obama, Bernanke, and Geithner, over the caption "Would you buy a used bond from these men?"

Is the Hated U.S. Dollar About to Rally?

It is the nature of the ends of movements that "virtually no one noticed".

Mr. Big, I think you over-rate the Feds capacity to control interest rates.

Underperforming Banks: A Bad Sign for the Markets?

A "mean reversion-ist" might argue that, since finance was so over-emphasized prior to 2007, this is just an internal correction.

However, I think the author is on to something. The graphs bear out reality - saturation: Debt mongers have no more prudent places to lend.

Why the IMF's Indian Gold Sale Matters

For Jeff:
"I'd be interested in looking at a paper or chapter to a relevant article if you have one. "
1) von Mises is a pretty thick read. Hayeck is easier, but not so rigorous. If you are going for pure ease of digestion, I would recommend absolutely anything Robert Prechter has written on the subject in the last ten years.
OR . . . when it comes to money supply, you can pretty much do your own research, using things like M2. Yes, they don't publish official numbers anymore, buy, like the CRB, others have stepped in to fill that gap.
M2 is mostly bank accounts, which, in law and in fact, are just an IOU from the bank (with an ever shakier guarantee). Compare them to the only truly durable parts of the Money supply, cash, and gold, and you have a treMENdous credit overhang.

2) ". . . it doesn't seem as if the Fed would allow hundreds of billions of credit dollars to vanish in smoke over the course of a lazy afternoon even though that is, of course, theoretically possible. It would just be too devastating for the economy for them to allow it."
The Fed has no capacity to price these debts, precisely because there are so many preexisting ones already out there - much like printing currency (albeit fast), if they attempt to artificially boost the price, they inescapably undermine the value of all those preexisting debts (by reducing value of dollars to be paid), lowering their aggregate value by at Least as much as they inflated, + some additional penalty based on fear of more of the same.
The result is net credit destruction, which means net money supply destruction, beCause of, and at least as fast as, their attempts to halt it.
But never mind the theory: You'll note the 30 year bond is beLow were they announced QE. It's already started.

3) Bernanke is a self deluded sophist, trying to jawbone his way to victory. The fact is, most of their money supply creation techniques depend on a well functioning economy to work. Money velocity. Once a deflation really gets going, they do Nothing.
That just leaves the physical printing presses, which would take DECADES to fill the hole in money supply.

4) China is Trying to move away from export dependence the way most smokers try to move away from their habit. Too slowly; the crisis is right around the corner.
And diversity of trading partners will not save them here, as depressions are world-wide phenomena.

5) I trust the public proclamations of the heirs of Mao exactly so far as I might toss them. They will sell their gold for the things they cannot produce on their own, and which a dearth of trade will leave them no currency to buy with.

6) My foreceast for severity is independent of debt load (most will be defaulted on both in the US and in China), but on dependence on trade, which Always suffers in depressions. They THINK (pronouncement) they need 8% growth to stem unrest. They WILL not get it.
What do you suppose the response will be, on the part of a Communist state, when the model they have committed to so severely completely falls apart? While I don't relish dwelling on the details, suffice it to say I am confident the results will NOT be good for business.

Meanwhile, the explosion of the $US, vs., well, Everything will give the US Treasury a leg to stand on, as what little tax receipts it gets will be in more valuable currency.

This is all off the top of my head (or through my hat, according to some). For a better constructed (or just more slowly written) read, I have several posts on my Instablog re Deflation and China.

What if World Governments Had Washed Their Hands of the Financial Crisis?

Author seems to be among the many, Many who feel the bullet has been dodged, successfully, and there is no more peril of depression. That reamins to be seen, and my bets are on far worse to come.

And I second Mr. Wrixon. above, on all points.

Why the IMF's Indian Gold Sale Matters

On Nov 04 01:27 PM Screwloose wrote:

> "The IMF had to sell?" This is an organisation with an unlimited
> power to print money -

Exactly - MONEY, Not value.
It is this very ease of creation of fiat currencies that will drive their addicts to sell their real assets, to try to defend the value of their fake product.

Have We Reached the End of the Private Sector Economy?

I think all concerned may find that the "public sector" can come to its own end, pretty darned fast. Its growth has been ssutaiend by complacency, and that's pretty much done, now, don't you think?

Why the IMF's Indian Gold Sale Matters

JeffDB:
I grant that Indja is not the weakest hand. But they, too will do some selling before this is over.

As to the dollar supply, that is almost all credit at this point, and can vanish in the course of a lazy afternoon. And probably will: See von Mises for the inevitable fate of credit inflations.

I would argue that, in a deflation, China will fare far worse than the US, as (ONLY, we are now assure) 20% of its economy is export. When that Goes Away, they will Never hit the growth targets they think They need to prevent unrest (8%, last time I checked), and it'll be back to the 'good old days' for China.
Put another way - when we have a depression, we get Roosevelt. When China has a depression, they get Mao.
Different this time? I SURE hope so. But hope is not a strategy.

Why the IMF's Indian Gold Sale Matters

". . . this gold never hit that open market, AND NEVER WILL."
(emphasis added)
OH, WHat an assumption!

The IMF sold because it Had to. But the author seems to assume that 'everything is alright now' in IMF land, that the bailouts that drained its coffers are over.
Nothing could be further from the truth.

This sale IS a big deal, because it is The Wave of the Future: gold in weak hands, being sold to raise cash.
1) The IMF's 'heavy lifting' to shore up failing national finances is Just Getting Started,
2) Russia has fiscal (and possibly military) ambitions based on an Oil price it will never see again,
3) and China, well, China is making every mistake they can, as fast as they can. When they lose the export chunk of their economy (ONLY 20%, we are now assured), all those piles of commodities they have acquired will be of little use.

All these payers have terrible track records for smart moves, and they will be selling big chunks of their hoarded yellow within a few years, just for operating capital.

And don't suppose those hedge funds and ETFs known to be stockpiling will help stabilize the situation. The hedge funds are leveraged, and so any that are already loaded up must necessarily dump for margin calls. And the ETFs must sell on the whims of their share holders.