It's tough to invest or protect your wealth when we go 100% one way and then days later 100% another way.
The most chaotic and unstable market maybe in the history of the world.
I walked by a retailer's promo sign today advertising their "Inflation-Buster SALE!". And I laughed. By the time the ink dried on that sign, deflation had set in.
Thank you Ben Bernanke (in charge of price stability). Nice work.
Consumer prices drop by largest amount in past 61 years as energy prices see record plunge
WASHINGTON (AP) -- Consumer prices plunged by the largest amount in the past 61 years in October as gasoline pump prices dropped by a record amount.
The Labor Department said Wednesday that consumer prices fell by 1 percent last month, the biggest one-month decline on records that go back to February 1947. The drop was twice as large as the 0.5 percent decline analysts expected.
The big drop reflected not only a huge fall in gasoline and other energy costs, but widespread declines in other areas. Core consumer prices, which exclude food and energy, fell by 0.1 percent last month, the first drop in core prices in more than a quarter-century.
The big retreat in consumer prices reflects a remarkable turnaround from just a few months ago when a relentless surge in energy prices raised concerns that inflation could get out of control.
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38 comments:
I dunno - a couple of trillion dollars dumped into the world financial system? Eventually that's gotta have upward pressure.
Its not always the storm that's painful, its the dangers lying in wait after the storm has passed and the long arduous cleanup.
When gas prices were shooting up, the Fed refused to raise rates because core inflation wasn't high. Now gas is down and they're running and screaming about deflation and needing to drop money from helicopters, even though core inflation is barely negative.
I am so fucking confused right now.
http://seekingalpha.com/article/106776-7-key-points-about-deflation
Here's what I think we'll see happen in the period ahead, timing uncertain:
More asset-deflation
A period of lower inflation (disinflation) and perhaps CPI-deflation
CPI-inflation that goes no higher than 10 or 15 percent
I do not foresee a Zimbabwe-style "hyper-inflation" on the order of 100, 1,000, or 10,000 percent. The talk of "hyper-inflation" also detracts from the quality of the overall discussion on this topic as, more often than not, there seem to be only the two extremes from which to choose - either 1930s-style deflation or Weimar Germany hyper-inflation. In my view, we are much more likely to first see 1990s Japan-style deflation and then 1970s U.S.-style inflation (absent the wage pressures) which will surely be enough to send the price of gold soaring once again as it did in the late-1970s.
Happy Daze are here again...
1-20-09 The End of an Error.
Let the trials begin:
Dick Cheney indicted for organized crime by Texas grand jury
By John Amato Wednesday Nov 19, 2008 5:30am
Cheney is accused of investing some $85 million in the Vanguard Group that houses federal inmates. The grand jury accuses Cheney and Alberto Gonzalez of engaging in organized criminal activity.
Too bad he didn't have to do a perp walk for us.
Prison for Cheneyburton. Priceless.
>I walked by a retailer's promo sign today advertising their "Inflation-Buster SALE!". And I laughed.
Should have gone wild instead. Ripping kicking and biting the sign, screaming incohearantly. Now that would have made an awesome youtube video.
Homes vs Stocks
Nov 11th 2008 3:57PM
"The fact that you may be underwater in your mortgage is of no relevance if you can make the payments."
If you can make the payments on your mortgage, it shouldnt matter if your house is worth 10pct of your mortgage. If you can make the payments, make them
"My last house, I remember being freaked out watching as my rate on my Adjustable Rate Mortgage went up and up as I watched the value of my house go down. For 2 years my rate went up, my house value went down. Fortunately, I liked living there. I wasnt building any equity, in fact, I was negative, but I was going to have to pay to live somewhere. On top of everything, my credit was bad enough, I didn’t want to make it any worse. In fact, I knew that if I didn’t make the payments on my house, my chances of ever owning a house again were none and none. So I kept paying the note every month. In spite of the financial pain.
Then a funny thing happened. Interest rates started to go down. I didnt even know it until I got my annual notice saying that my mortgage payment would go down. The value of my house wasnt going up, but for the next several years, my payments went down. It took years, but I actually built equity in the house.
Which is exactly the point. Buy and hold works when it comes to the HOME you LIVE IN. Turning in the keys because you have negative equity is a fool’s game. If you do, YOU WILL NEVER OWN A HOUSE.You will be a renter FOREVER.
Your home has far more value than its mark to market price because you can live in it . Do whatever you can to stick it out. It will pay off for you in the long run"
--Cuban
http://blogmaverick.com/
What do you guys think of this investment stategy:
Buy $10k of Freddie or Fannie shares around $0.35 per share.
Hold for 5-10+ years.
Sell at $15.00+ per share = $418,571.00 PROFIT!!!
Are these companies going to be kept alive by the govt.? If so couldn't their share price return to $15+ per share in 5-10+ years? Major opportunity?
Ben is done in two years, if not sooner. Keith, why is Paul Volcker on Obama's team; I think it speaks volumes on interest rates for the future.
Talk about not seeing the forest for the trees! The Fed and Treasury have just pumped the monetary equivalent of 1/3 of US GDP into the financial system and you dare talk about deflation? - LOL. Bernanke and Obama have pledged to do whatever it takes to revive the economy, "whatever it takes", and yet you want to claim deflation?
The recent plunge in commodity prices and the lack of lending by frightened banks are indeed deflationary. But these are short term reactions that belie the long-term, fundamental trend of increasing money supplies world wide.
Keith likes to talk about the wisdom of Warren Buffett. Buffett is buying equities and dumping bonds - a move that makes no sense at all in a deflationary environment. So spare us the drama Keith, you're behaving like a tiny pennant flag next to a big highway - every truck that goes by flips you around.
The governments of the world can do only what they know to do - they will print money in a vain attempt to "solve" the crisis. There will be inflation.
Cheney is accused of investing some $85 million in the Vanguard Group that houses federal inmates. The grand jury accuses Cheney and Alberto Gonzalez of engaging in organized criminal activity.
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It is just so "Cheney" that he would invest in prisons. I wonder if he used to tour them and dream at night about his torture investment.
A positive solution to the foreclosure crisis.
http://tinyurl.com/66zq3g
Keep it Simple: Stop the Foreclosure Crisis with the Right to Rent
By Dean Baker, TruthOut.org. Posted November 19, 2008.
For those not offended by simplicity, there is an easy solution. Congress can temporarily modify the rules on foreclosure to give families facing foreclosure the right to rent their homes at the market rate for a substantial period of time. Rep. Raul Grijalva proposed such a change in the Saving Family Homes Act, which would allow homeowners the option to remain as renters for up to 20 years following a foreclosure.
This bill would immediately give families security in their home, so that if they like the home, the neighborhood, the school for their kids, they would have the option to stay in the house for a substantial period of time. This also has the great benefit for the neighborhood that homes will remain occupied.
Perhaps more importantly, this change in foreclosure rules will give banks a real incentive to negotiate conditions under which homeowners can stay in their homes as owners. Banks do not want to become landlords. The bank will own the house after a foreclosure, but a house with a renter is worth much less to them than a house over which it has complete control.
Simple, positive solution.
But Tonto... that $400,000 is only going to buy you a cup of joe in 15 years according to Schiff...
And hello Cuban... good luck in days ahead.
I think Windfarmer paints the most plausible sounding picture above.
Jim: I'm confused too!
Thimblelina
Buy $10k of Freddie or Fannie shares around $0.35 per share.
How about buying $10k of Ford at $1.40? Analysts are predicting over 20% growth rate in 2009 combined with pricing power on small vehicles. If they avoid bankruptcy the stock could go up over 1000% in a couple years.
Back in housingpanic.com, I'd stated that Warren Buffett was overrated and that his big hits were Coca-Cola, AMEX, BNSF Railway, and GEICO during secular bull markets, during major pullbacks... BFD! If I had (both cash at the time and) access to the minutes of the board meetings for those firms, I would have bought 'em as well back then.
I repeat... a buy 'n hold investor is a goose waiting to get slaughtered in a true bear market. That's where the Livermores and the Soros have proven their merit as traders, trading up, down, and in sideway channels.
Now, Buffet's *bailout* investment in Goldman Sachs has lost billions and at best, will break even with the treasuries for the so-called long haul (ala 5-7 years). And the stock market is still in the start of the secular bear market, sideways but sloping downward for some time. I say, if you want a piece of IB for your portfolio, buy GS when investors start to dump the tobacco/booze/util stocks. That's a reversal sign for a bear market. I suspect that's the buying opportunity window for volatile financials because either GS will be in the toilet or it'll be a nice fodder for all kinds of M&As. For now, protect yourself and your money and seek out shorting opportunities if you're an active trader.
steely - next time read my post before you comment
inflation - had it
deflation - now underway
inflation - to come
get it?
Keith,
Please state your case for Inflation after deflation? What makes you think Inflation will come if the economy goes into a Great Depression. Everyone will want to sell everything on the cheap, I don't understand the case for Inflation.
By the classic definition inflation meant increase in money supply. Now it is a general term for price increases.
By this definition, price increases did not mean the same thing as inflation. Inflation is a cause of price increases. This may sound like semantics, but I think knowing the difference is important, just like knowing a homeowner is not a homedebtor, or a professional is not a realtwhore.
Mish was right, then.
Keith,
The post-deflationary inflation will be interesting because most currency pairs are not PM denominated.
So in effect, the USD, Yen, GB Pound, Euro, and Swiss are more or less the sum total (> 80%) of the global volume, traded on the Forex. Now, will competitive volumetric pairs like the Yuan be floated on the Forex like the others, in the next decade or so? Because if not, this inflation will be multi-currency in nature and there'll be a huge worldwide PM and commodities spike in all currency pairs. Can that occur given the state of politics? Realize, the collapse of the Argentinian Peso could easily occur since the buyers simply dropped out of the already tiny pool, leaving the holders with a collapsing currency. Or will this be a type of Intl black market for real valued-added goods with cash equivalents being shunned out?
My God, I can't believe this investment environment. This just like previous economic downturns will confuse the hell out of experts and arm chair experts like us! You just watch. God only know what will happen, perhaps "stag-def-inflation", "stagdeflation", "deflation" or a "depression"?????
Would appear off topic at first glance; but look deeper and it is exactly what TPTB have wrought upon us because of our financial weakness which the world will exploit.
FMW
Russia to build nuclear reactor for Chávez
Russian president Dmitry Medvedev expected to sign a nuclear agreement next
Snip: More importantly for Moscow and Caracas, a nuclear deal will showcase a partnership which advocates creating new "poles" of power to check American hegemony.
Nick Day, a Latin American specialist, said the nuclear deal was deliberately timed to pile pressure on the US administration during a moment of transition and weakness.
"Russia is manoeuvring hard in the time between Obama's election and his inauguration. What the Russians are trying to do is to set up a chessboard that gives them greater mobility in negotiations when he [Obama] comes to power," Day said.
http://tinyurl.com/6qlynu
"This just like previous economic downturns will confuse the hell out of experts and arm chair experts like us"
As in "it's not like your great grandparents' depression"...
I think we are at the tip of "competitive devaluation". I predict those holding out for high prices will soon price to market and exhaust any sideline cash in waiting. The Gov. sees that its time to prop up the real problem on the horizon, employment. I cant wait to see the new trasury dream team, I hear Paul Volker was mentioned.
Everyone will want to sell everything on the cheap, I don't understand the case for Inflation.
---------------------------------
Inflation is an increase in money supply.
what you are talking about is price inflation, which can be caused by an increase in money supply but it can also be caused by a decrease in supply of a widget when demand is level.
Helicopter Ben will eventually kick the printing presses into high gear and start flying the money copters. that WILL lead to price inflation.
RUH ROO!!!
http://www.reuters.com/article/newsOne/idUSTRE4AI11B20081119
Texas grand jury indicts Cheney, Gonzales of crime
HOUSTON (Reuters) - A grand jury in South Texas indicted U.S. Vice President Dick Cheney and former attorney General Alberto Gonzales on Tuesday for "organized criminal activity" related to alleged abuse of inmates in private prisons.
The indictment has not been seen by a judge, who could dismiss it.
This is a great time to get into the market. We wont have any more pain. It's all inflation from here. Go out and buy some stock and property. Coast clear....
Your Friend in DC,
Satan
Everyone will want to sell everything on the cheap, I don't understand the case for Inflation.
---------------------------------
Inflation is an increase in money supply.
what you are talking about is price inflation, which can be caused by an increase in money supply but it can also be caused by a decrease in supply of a widget when demand is level.
Helicopter Ben will eventually kick the printing presses into high gear and start flying the money copters. that WILL lead to price inflation.
-----------
It still doesn't prove that inflation will take over. Look at all the trillions upon trillions we have printed and we got the opposite effect, deflation.
Again, if there is no demand for products, deflation will take hold which is currently the situation. How can we be certain that inflation will take hold when demand is going down and Bernanke has already proven that you can pour trillions upon trillions without affecting Inflation in the short term, will this hold long term? Again, where is the proof that Inflation will come?
LMAO @ Satan..
"Look at all the trillions upon trillions we have printed"
Here's the problem... it's the term 'printing'. In effect, it's really free lending. Because it's easy to give out money, from a counterfeiting outfit, which would induce inflation w/o a hitch. See "The Counterfeiters" on that topic.
On the matter of lending, however, it's the whole pushing on the string. There's a lot of credit but no one's willing to lend because there's no income generating business besides investing in Repo men type of operations.
One of the reasons the bailout hasn't already created inflation (increase in the money supply) is because it was used to pay off bad derivative debts by the Central Banks. The bad debt is "theoretically" not part of the money supply. Paying it off just makes the pain go away - ostensibly. The trouble is, it wasn't even close to enough money. They will want three more bail out bills just like it before too long. Look at the fight over the Automakers. If Deflation were here to stay and the dollar was immovable as the world's reserve currency, raining money from the sky would actually help to save the economy. But this isn't spiraling deflation ala 1930, it's disinflation. That is because true inflation numbers have been well suppressed until now. Some things will stay deflated, but inflation is coming. Peter Schiff was right. Bonds will be yet another bubble that pops.
Just bought Bank of America at $13.16 per share.
Citi is trading at $6.50 (but still will not touch this dog).
TOOLS,
CORRECT COMMODITY PRICES ARE COMING DOWN. HOWEVER, WE AS CONSUMERS HAVE ALREADY ACCEPTED THE HIGHER PRICES OF GOODS CAUSED BY THE PAST INCREASES OF COMMODITITES. IN OTHER WORDS, GAS WILL COME DOWN BUT YOUR CORN FLAKES WILL NOT!!!!
TOOLS!!!!
DOPES!!!!
"Just bought Bank of America at $13.16 per share."
Hope you plan on cost averaging into BAC. With The S&P close today, this sucker could drop another 20% before it catches any support. BAC is too big to fail but nobody's gonna shed a tear if it trades at $8.
Bullshit, Keith.
Food prices are rising EACH WEEK.
Nah, we don't need something like food entering into the equation.
They pick the info they need to try to justify what they want.
Why even bother? They do what they want anyway.
It still doesn't prove that inflation will take over. Look at all the trillions upon trillions we have printed and we got the opposite effect, deflation.
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that is because there has been even more credit destroyed. money supply is actual money + credit. the credit destruction is going to stop but the printing won't.
The printing will stop at some point. The Fed is a partially private entity. They want to look out for their own interests, too.
In my lowly opinion, price inflation has nothing to do with increased money supply or any fundemental reason at all. It is all about the story that can be sold at the moment. People, investment firms, and hedge funds are so used to 35%-50% gains a year that they can't fathom a realistic 4%-8% per year at all. Therefore storys must be dramatic, convincing, forceful and believable. Over the last 15 years we were told many stories that have amounted to nothing more than fairy tales.
We were told that tech stocks were the "wave of the future" when their technology was nothing new, only newly packaged. This story didn't hold when people lost interest in it as well as not buying computers or cell phones on monthly basis like the story said they would.
Next came real estate. No more land, housing in super short supply, people are going to get priced out, blah, blah, blah. But in the end P/E won out and the whole story collapsed.
Then like magic, peak oil and the death of the dollar appeared in Sep or Oct of 2007 which had people running for commodities. Rogers, Boone, and Schiff had people buying that shit like no tomorrow. Prices doubled, the dollar died and I couldn't drive to Reno NV without planning in advance how much cash it would cost me and allocating for it in my budget.
The dollar died already. Price Inflation raged out of control for almost a year and it broke the back of the American economy as well as the world. I think that price inflation will happen again because another story will be told and everyone will buy it until prices climb to a rate that no one can afford and they will fall even harder.
I don't believe fundementals mean shit anymore. It is all about the story and nothing more.
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