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wmateri

wmateri
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  • Consumer Confidence Implodes In Japan [View article]
    Inflation is good for paying off government debt. Debt is the only way we current have to produce new money. Governments can only pay their debts by taxes and they can only raise taxes in an economy where the money supply is growing. Otherwise, they remove money from the economy, i.e. they destroy money when they pay their debts. This, throws economies into recession (or so goes the fear at the Fed). So, in order to pay (at least some of) their debts, governments pay them back with money of lesser value than they originally borrowed. The value of the money they use to repay their debts is reduced by inflation. So our economies need inflation when governments borrow (and boy, have they been borrowing) so that they have any hope of appearing to even try to pay their debts. Otherwise, they can only pay by monetizing the debt (printing money) and that leads to hyperinflation.
    Apr 17 08:50 PM | 3 Likes Like |Link to Comment
  • Consumer Confidence Implodes In Japan [View article]
    Okay, now I'm confused. Central banks the world over (okay, maybe only in Europe, the USA, Canada and Japan) are all doing there best to get some actual price inflation going. Now the Japanese Consumer Confidence indicator shows that the Japanese people believe that the JCB is going to get what it wants, i.e. prices going up. And this is a bad thing?!! QE everywhere is all about inflation; it's about to start working in Japan. And, guess what? That means prices going up! Yay! At least one Central Bank will be able to accomplish its goals.

    We used to say deflation is bad because consumers won't buy now if they think they can get a better price later. Now we're saying inflation is bad because consumers won't have enough money left over to buy things. Maybe having an economy that relies on ever-increasing consumerism is the actual bad thing.
    Apr 17 10:01 AM | 4 Likes Like |Link to Comment
  • Germany Says Nein And Ya [View article]
    Great analysis Marc. Do you think today's actions in the Ukraine increase the risk that Russia will cut gas supplies to that country? Do you think exports to Europe would also be affected? What impact would any of that have on Germany's economic outlook? Is this one way that Europe could get its desired inflation? And would that be a good or bad thiing for them? Thanks.
    Apr 15 01:43 PM | Likes Like |Link to Comment
  • Belgium Can't Get Enough Treasuries [View article]
    ECB buying Treasuries and selling Euros? Prop up dollar and weaken Euro?
    Apr 15 10:26 AM | 3 Likes Like |Link to Comment
  • Momentum stocks collapse as Nasdaq posts worst loss since 2011 [View news story]
    Maybe letting a bit of air out of stocks is the only way to get someone besides the Fed to buy Treasuries?
    Apr 10 04:54 PM | 4 Likes Like |Link to Comment
  • Fed's Evans: Where's the inflation? [View news story]
    Inflation as calculated by the same formula used in the 80s (http://bit.ly/nyzRiF) is near the same levels that then Fed Chair Paul Volker used to justify huge increases in the Fed rate. These days we call much of that inflation "wealth", e.g. increased housing prices. It's there for the Fed to see, but the question is, why are they ignoring it?
    Apr 9 04:16 PM | Likes Like |Link to Comment
  • The Fed Is Backed Into A Corner With No Way Out [View article]
    77777 - Yellen has said all along that taper decisions would be made over time and be data dependent. Nevertheless, in my opinion, it is important that the Fed sow a little confusion so that it is no longer quite so easy to front run its decisions. Unlike the past few years where Fed decisions had little economic effect but substantial effect on asset prices, decisions over the next few years have the potential to do both real economic and market damage. So the Fed needs to be careful about what it says and the mixed message is, no doubt, part of their strategy.
    Mar 31 06:32 PM | Likes Like |Link to Comment
  • Seeking Alpha Crowd Wisdom Predicts Future Stock Returns [View article]
    I would expect that the authors of the study created an analysis program for sifting through the SA comments, looking for sentiment indicators, reads to end, etc. I would encourage SA to contact the authors to see if their software can be incorporated into the SA website so that all may enjoy this type of analysis. Looking forward to the first time someone accuses an author of stacking the comment section with positive or negative words.
    Mar 20 11:46 AM | 3 Likes Like |Link to Comment
  • The Nuclear Option: Russia's Threat To Dump Treasuries [View article]
    It's possible to view this entire "crisis" as a bunch of "jawboning" (sorry, I meant "forward guidance"). Central bankers have demonstrated over the past few years that simply talking can move markets (both bond and equity) significantly. Witness Mr. Draghi's pledge to do "whatever it takes" and how it rescued bond yields in the EU. Though no follow-up action was ever approved nor taken, the pledge was sufficient to rescue Europe (so far). Similarly, for military action the Ukraine crisis has seen remarkable little shooting, only exercises, incursions, threats and counter-threats. Yet, these are certainly having a deleterious effect on US and European markets. How far these can be pushed without significant escalation (either military or financial) remains to be seen.
    Mar 16 12:27 AM | Likes Like |Link to Comment
  • The Nuclear Option: Russia's Threat To Dump Treasuries [View article]
    So the main questions I like to ask are "Given what I know about the way the world works today, what would have to change to make me alter my investment predictions? What might cause those changes? Are any of those factors operating today?" Asking questions like this may have saved investors in Japan some heartache in the early 90s and investors in US stocks grief in 2000 and 2008.

    I think you have supported your thesis quite well and have enjoyed both supporting and contradicting comments. But I worry that the USA and Eurozone have mis-handled their finances, financial systems and, now, are mishandling geopolitics on a global scale. I also doubt either China or Russia are about to drop the T-bomb but, at the same time I suspect their long game is to alter the current power-status (including their reserve currency weights). Part of this includes putting pressure on western financial markets and, perhaps, their currencies. However, I would have to think their game is a long one as they have little or no desire to hurt themselves (as least not too much).

    Given that, there are a number of actions either Russia or China could take to cause unilateral (mostly) problems in the west. They could accumulate large amounts of gold while raising rumors about the gold stocks of the west. They could weaken petrodollar and other dollar-based trade by creating seperate reserve currency exchange agreements. They could weaken the value of the petrodollar to Saudi Arabia by encouraging "energy independence" in the USA, thus reducing the global requirement for dollars.

    What does China and Russia (eventually) have to gain from this? Well, we all know that these countries will eventually have to move towards a more consumer-oriented economy and that a stronger local currency would help that. (Whether US manufacturing exports would automatically gain by a weaker USD is not obvious in the global context as it has a long way to go before becoming the lowest price supplier.)

    So the question would become "Given the direction in which Russia and China might wish to move their economies and power bases, and given ongoing east-west political differences, how might you expect them to apply pressure to western financial systems in the face of ongoing western reluctance to cede power, financial strength, and wealth?"

    Thanks for taking the time to address these issues. Clearly the responses to your article(s) keep you very busy and I realize I have raised points beyond your fairly direct thesis in this article.
    Mar 16 12:11 AM | Likes Like |Link to Comment
  • The Nuclear Option: Russia's Threat To Dump Treasuries [View article]
    James - I liked your Apple analogy but, without any context, its conclusions may have been incorrect. If, before selling it's shares, Apple already had, say, poor sales of a recently-released product, a few security problems, and weaker margins than expected, such a sell-off could definitely cause a longer term drop in Apple shares. You only have to look at Blackberry of the past four years to see the effect of such concerted actions. I think this kind of sophisticated, multi-point attack is more what Russia has in mind at the moment, so I would be wary of focussing on any one play too much.
    Mar 15 04:58 PM | 2 Likes Like |Link to Comment
  • The Nuclear Option: Russia's Threat To Dump Treasuries [View article]
    James - I'm not sure that your assertion that "No nation is forced to use USD as a reserve currency" is completely correct, though it depends on what exactly you mean by "forced" and within what time context. I was under the understanding that the petrodollar agreement between the USA and Suadi Arabia whereby all petro-purchases would only be made in USD pretty much "forced" most of the rest of the world to use USD (as they were all buying oil from the Saudis). Maybe you prefer to call that a "market choice" but when the choice is between freezing or not, I don't think that is much of a choice.

    In the same vein, the US and Europe has a "choice" now to ignore the actions of Russia in the Crimea but I don't think many in the west think there is much of a "choice" at all, only right and wrong. Similarly, the US, Europe, Canada etc. have a choice to make in whether to apply sanctions or not against Russia and to bear the (perhaps inevitable) backlash from Russia, which might include leaving Europe dark and immobile. Will Russia have a choice to impose its own sanctions in reaction to the west or will it be an inevitable (and predictable) cultural and historical outcome. I guess we can all point to freewill and choice but, from an investing perspective, being able to predict based on context might be a bit more valuable.
    Mar 15 04:46 PM | Likes Like |Link to Comment
  • The Fed's Reverse Repo Actions In 2014 Means QE Effectively Ended In December But They Forgot To Tell Us [View article]
    Joseph - You do some of the best in-depth macro analysis I know of. Thanks.
    Mar 14 03:32 PM | 3 Likes Like |Link to Comment
  • The Nuclear Option: Russia's Threat To Dump Treasuries [View article]
    Pony01 - I agree that the actual threat of physical war is as significant as going to war. For this reason, I believe Putin will walk a fine line in maintaining threats and pressure (along with some small actions) but without provoking anything more that sanctions and threats from the west. Europe and the US have teetered in such a weak economic state for such a long time that the right kind of economic pressure, coupled with western indecision and internal dissent, might make it difficult for western countries to focus on healing their economies. This just makes our western economies one small black swan away from another financial drop. I don't believe that Russia or China are interested in destroying the USA and Europe but I do think they would like to weaken them a bit, in general.
    Mar 14 08:57 AM | 2 Likes Like |Link to Comment
  • The Nuclear Option: Russia's Threat To Dump Treasuries [View article]
    James - Thanks for this article; it presents the opposing argument clearly and succinctly. One question: You note that US Treasuries are sold for US dollars and that the Treasuries market is so huge that both Russia's and China's holdings only amount to about 1%. But, if both Russia and China dumped about $1T worth of Treasuries into the market over a very short time, where would the $1T of USD come from to buy them?
    Mar 14 08:41 AM | Likes Like |Link to Comment
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