37 replies to this topic

[rkd80]

I tend to agree with IT here. We have sectors of the economy in an obvious deflationary spiral and Nav's assertion regarding the bond market is probably true. However at the same time we are seeing a continued effort from our government in debasing our currency thus providing fuel for a commodity rally. Combine the two and the picture is stagflation.

[jjc]

Hard to believe that with all this money being thrown at the economy that deflation is the result. Anything is possible, but I don't give that much of a chance. In fact, if there's even a further hint of it, I expect to see more pumping, more printing.

IT

I'm with you IT. Inflation is the story. (Freudian edit).

Edited by jjc, 30 June 2009 - 01:42 PM.

[Rogerdodger]

Inflation is the herd's consensus. That's scary...

Looks like we're still deflating for now:

Home prices post 18.1 percent annual drop in April

"Consumer prices fall in Europe for the first time since 1996. U.K. reports poor economic news, but is optimistic."

Gene Inger:
"The other night we again highlighted parallels between the Great Depression of the 1930s and this current Great Recession+. Others compared the fall in US Industrial Production from its mid-1929 and late-2007 peaks, showing that it has been milder this time. They thus conclude that things are resolving. Well, absolutely the shock or systemic aspect is behind; but if you look at some other historical patterns, or the real important story given scant coverage this week (Japan sinking into near-Deflation of an historical proportion), you might arrive at a conclusion other than the more typical 'severe recession', or 'great recession', and something closer to our term 'Controlled Depression', which is how we've described the evolution of our work, which believes that while we will get out of this mess in-time; much current optimism is misleading.

One economist refers to the current situation, with characteristic black humor, as only "half a Great Depression." Recently we showed the well-circulated 'Four Bad Bears' graph comparing the Dow in 1929-30 and S&P 500 in 2008-9. It shows the US stock market since late 2007 falling just about as fast as in 1929-30; with the last rebound a bit more extensive (which we thought it might be particularly in financials and oils too; because some things are different this time; as some other things are possibly worse, like the insanity of trying to spend our way out of deficits by magnifying those deficits)
Aside growing Deflation in Japan or parts of Europe; the big story that nobody seems to extrapolate on a National basis, is California.
Consumers are wounded; commercial property issues are barely surfaced; we are resetting to the 'new paradigm' which everyone calls the 'new normal', and that has a multiple valuation quotient to it as well. For that reason we cannot remove risk from the plate at this time, and believe actually that irrespective of the next couple weeks, it remains an issue."

[TMN]

Hard to believe that with all this money being thrown at the economy that deflation is the result. Anything is possible, but I don't give that much of a chance. In fact, if there's even a further hint of it, I expect to see more pumping, more printing.

IT

We are already in a deflation. The entire planet is deflating. India's deflation was spectacular - inflation dropped from 14.5% to -0.5% in about a year, despite record pumping, printing, interest rate cuts et al. Now it's just a question of whether it will be a depression or not.

I assumed we were talking about the future. Over the course of the next few years you will see inflation. If anything, it will be a repeat of the 70s...stagflation. I also assumed from your post that when you recommend buy US T bonds, you're talking about the US economy. In any event, that's what I'm referring to, not India.

IT

Yes i was talking about the U.S T-Bonds and i was referring to the future trends in deflation which should gather steam in the coming months. India was just an example of how dramatic things turned out there.

very interesting u say that abt india. tks. reg bond mkt i am thinking at the moment, at least for the 30y, we have seen the top in cash terms..
below 112 is very bearish. i favour a bond rally over the intermediate term from here.

[zoropb]

I am with Nav to a certain degree and with others after the deflation ends. Deflation is a general drop in prices. We have been deflating in homes for 3 years we have deflated in stocks by 40% here from top. We have deflated commodities by 60% from 2007 and after this dead cat bounce we have one more drop into new lows and we will end the deflation probably along with commodities, real estate, and stocks. So it is deflation we are in until it ends and reverses... unless you think think we are done going down in all 3 of these assets. Z

[securelstmile]

I am with Nav to a certain degree and with others after the deflation ends.
Deflation is a general drop in prices. We have been deflating in homes for 3 years we have deflated in stocks by 40% here from top. We have deflated commodities by 60% from 2007 and after this dead cat bounce we have one more drop into new lows and we will end the deflation probably along with commodities, real estate, and stocks. So it is deflation we are in until it ends and reverses... unless you think think we are done going down in all 3 of these assets.

Z

I agree deflation until it ends and then like all pendulums pushed to strongly to one extreme it will eventually snap back hard ie inflation.

[TheArchitect]

unless you think think we are done going down in all 3 of these assets.

Z

Z... i don't think it's out of the realm of possibility here to see a move out of paper and into hard commodities...

the 30 year and the upcoming Commodities rally

[zoropb]

unless you think think we are done going down in all 3 of these assets.

Z

Z... i don't think it's out of the realm of possibility here to see a move out of paper and into hard commodities...

the 30 year and the upcoming Commodities rally

I agree it is going to come TA but the need for cash is still really great and folks will re sell everything again to get it next drop. Then the Govs will likely go really wild printing to stop the drop and then put your seat belts on because that will launch the bull market in the coms. I also wrote here in 2003 or 02 that there is going to be a food problem in the next decade and we are there next year. Man how time flew! I think grains will go insane after the next big drop. I remember joking with Larry K, IYB, and others here back then that we may need to brush up on farming skills.

Z

[milbank]

The Trophy Wife and I are ready...

[ed rader]

Hard to believe that with all this money being thrown at the economy that deflation is the result. Anything is possible, but I don't give that much of a chance. In fact, if there's even a further hint of it, I expect to see more pumping, more printing.

IT

We are already in a deflation. The entire planet is deflating. India's deflation was spectacular - inflation dropped from 14.5% to -0.5% in about a year, despite record pumping, printing, interest rate cuts et al. Now it's just a question of whether it will be a depression or not.

What's your time frame....12 months? I can look back over just about every time frame that starts before mid 2007 and show inflation of varying degrees. We are standing in front of a deflationary tree in an inflationary forest.

Agree that deflation is possible but unlkely.

Like i said, we are already in a deflation, which is getting ready to intensify over the coming months. The bear market rally in bond yields is over IMHO.

FWIW i agree with you about deflation. i know many others won't but most did not not see the housing market bubble for what it was either ... and i know you did .

ed rader