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Reflation. When and How?


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#1 Alton

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Posted 13 October 2013 - 09:56 PM

Consuelo Mack's "Wealthtrack" (October 11, 2013) begins by mentioning the backdrop of the 30-year Anti-Inflationary stance of the Federal Reserve. David Rosenburg affirms his belief that this secular trend is ending, and the Fed has shifted to a Pro-Reflationary Monetary Policy, with "Price Stability" taking a diminished role. This is likely old news to many here, but exactly how will it occur? The meat of this interview comes later.

As an appetizer Rosenburg puts the Fed's December, 2012, statement of a willingness to tolerate inflation expectations up to 2.5%, in perspective. He points out we've recently had a period of notable fiscal restraint with a tax hike and sequestration which have limited GDP growth. Usually this would result in recession, but instead we've had mild growth.

The disconnect presents a puzzle which Rosenburg characterizes as both fascinating and disturbing. Normally real GDP growth of only 1.6 percent (as we've had in the past year) results in an increase in unemployment. Instead, we have had a decrease from 8.1 percent to just over 7 percent. The trend stays intact, even when you factor in labor force dropouts.

So we have only 1.6 percent growth, but it has drawn more resources from the labor market than expected. Why? Solving the puzzle is the main course, and Rosenburg offers a collection of thoughts which suggest how the situation might evolve. He also includes some general thoughts on how to position a portfolio during various stages if his scenario unfolds as expected.

Wealthtrack Episode 1016 (10-11-2013)

I've resisted including details of how Rosenburg "connects the dots." The interview is worth the view (audio track is also available). I'm aware Rosie has his critics, and some of them reside here. My sense of the man is he knows his calls are not all perfect, but he presents some compelling associations here. And he compares the derision he gets when he presents these possibilities, to the derision he experienced when talking about excesses in the housing market in 2006.

-- Alton

#2 Dex

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Posted 14 October 2013 - 08:51 AM

Thanks for posting that.
"The secret of life is honesty and fair dealing. If you can fake that, you've got it made. "
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#3 Alton

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Posted 14 October 2013 - 09:21 PM

"I don't care what you say about me ... as long as you spell my name right." The quotation is attributed to several people, but the consensus seems to be George M. Cohan as the originator. When I wrote the post on the "Rosenburg" interview I think my brain switched off. It would be arrogant to think that David Rosenberg would read the summary, but I offer an apology for misspelling his name anyway. The apology extends to anyone who read my comments and may have been off-put by the error. Don't let it diminish your opinion about the interview. Tried to write this as a funny addendum but couldn't, so I'll just include the emoticon :-} for an embarrassed smile, and pay more attention when the site spellchecker gives me one of those squiggly red lines under a name.

#4 Not Too Swift

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Posted 02 March 2014 - 08:34 PM

Thank you for the link. However, that interview is from Oct 2013, when T bond yields were rising. They rose until nearly touching 4% (at the 30 year trend line) at end of year, and then started back down. TLT is now above the 200 day SMA. I will think in terms of inflation when long rates break the 30 year trend line.
I let the market tell me what to do. The trouble is she mumbles a lot, and I'm hard of hearing.

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#5 Not Too Swift

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Posted 02 March 2014 - 08:43 PM

My bad. The post was last October too. Sorry.
I let the market tell me what to do. The trouble is she mumbles a lot, and I'm hard of hearing.

1576 ONO. Upside down, reverse, inside out, snort...

#6 Alton

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Posted 09 March 2014 - 01:35 PM

Thank you for the link.

[The] interview is from Oct 2013, when T bond yields were rising. They rose until nearly touching 4% (at the 30 year trend line) at end of year, and then started back down. TLT is now above the 200 day SMA.

I will think in terms of inflation when long rates break the 30 year trend line.

I posted this on the Long Term (lower turnover) board knowing it would probably take a long time to play out, if at all.

Part of Rosenberg's thesis is that even modest growth could drain resources out of the labor market more quickly than expected, and could lead to inflation based on increased labor costs. I will be looking to see if inflation evolves the way he suggests -- with moderate GDP growth leading to a tighter labor market -- but imagine the powers-that-be are now sensitive to the possibility and might be more vigilant in responding.

I am wondering also how an increase in the U.S. minimum wage might feed demand for basic goods & services while simultaneously dampening job growth numbers. That would complement Rosie's outcome, but shift the source of inflation somewhat. The labor market would not be as tight, but money would flow more into CPI items (bad inflation) and less into financial markets (good inflation).

Even so, all those numbers are stretchy and squishy, so we shall see what happens. -- AGL

Edited by Alton, 09 March 2014 - 01:38 PM.


#7 PorkLoin

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Posted 19 March 2014 - 07:36 PM

the backdrop of the 30-year Anti-Inflationary stance of the Federal Reserve. David Rosenburg affirms his belief that this secular trend is ending, and the Fed has shifted to a Pro-Reflationary Monetary Policy, with "Price Stability" taking a diminished role.


Man, I just don't know..... The Fed has seemed pretty "easy-money" to me ever since the inflation-fighting days of Paul Volcker. Federal Funds rate of 20% in mid-1981...yeah, Baby.

I do think the government, and by extention, the Fed, is not willing to accept deflation. No matter what, they'll be "pro-reflationary" or whatever you want to call it, no matter inflation, price increases, fast currency devaluation.

#8 Alton

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Posted 23 October 2014 - 02:31 PM

Well it's October, and a year gone by from the start of this thread -- time, I think to put it to rest. Rosenberg shared his belief the Federal Reserve has modified its Anti-Inflation stance of the prior 30+ years to a Pro-Reflation stance, a keen insight. But his thoughts on the economic progression simply haven't unfolded along the lines he was thinking, at least in the 12 months following. The primary expectation as I recall was that inflation would pick up specifically because of tightness in the labor market in a moderately growing economy. Of course the scenario might still be in the process of unfolding, but a forecast with an indefinite time period doesn't serve. Undoubtedly Rosenberg has modified his opinions since the 2013 Wealthtrack program, but I haven't kept up with changes. Being an economic prognosticator must be difficult, especially with the other side of "the trade" being taken by folks who know of your opinion and can act with a lot of clout to counter it. -- Alton

Edited by Alton, 23 October 2014 - 02:32 PM.


#9 AChartist

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Posted 24 October 2014 - 06:25 PM

I didnt listen as it was 1 year old and you said it didnt play out. I have these macro ideas. The stock market is the major component of gdp, the only part that goes up to cover up all the losses. That is what it will be all about keeping stock market rising to cover up gdp bleed. I think gdp losses are 7% a year. There is no easy money, cars loans are mostly subprime higher interest, mort rates might be lower but there is low new mortgage origination's which means no new easy money coming in, consumer credit rates are many multiples higher than ever. I think two part time low pay jobs no benefits with obamacare subsidy is not a growth or gdp. I think real gdp is 5-6 T if double counting and reselling of foreign goods can be accounted. I think debt went up almost 1T this year because of taxation killing capital spending and productive investment, and because the money spent pumping markets is charged to the public balance sheet. Everything they do is a scam and there is no meaning to any of their numbers so it is something else and quite dasdardly. Manufacturing jobs is below 1950 level. Documenting he illegal immigrants is probably an attempt to collect SS taxes as they will not be paying much or any income taxes. I am surprised they are even considering the mere survival of the system long enough to be concerned with that. Their drain by obamacare subsidy with squash any other benefits of collecting revenue from illegals. They like these illegals because they have no expectation of education or learning english with no aspiration for better jobs, fit right in. It looks like its all designed to implode by design and my next idea on that is not yet, not until debt is equal to all private assets to be confiscated in the name of the public balance sheet, maybe 40T debt. So the stock market still goes up to cover it up.

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#10 AChartist

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Posted 24 October 2014 - 10:25 PM

Median Income. It was over $36,000 not so long ago. Down 23% in just one year, thats why I work the financial markets, all the terror goes into one end of NYSE and comes out the other in stock prices. Noticing McDonalds, Walmart sales collapsing? When walmart sales drop, each day is reordering less, they can only order on the days receipts, empty shelves? two part time obamacare jobs might have done that, if they liked their insurance? taxing marginal employers into welfare might have done that, all time low small business existing puts more of them into excess labor market driving up labor competition. how 'bout min wage to shut down more marginal operations and put more in the streets, that'll work. this is from SS admin which may be clean data. the orwellians lately started to falsify median income stats by allocating certain government spending to household income statistics. Hedonics is what the inflation counters do. why wouldnt they just divide all gov spending to each household and raise median statistic to 250,000 just like that, make them all even to beltway salaries. this pig is not just over soon the occult bought the farm funny how the luciferians hate math, they do opinions from ZH today: 50% Of American Workers Make Less Than $28,031 A Year Submitted by Tyler Durden on 10/24/2014 - 20:35 The Social Security Administration has just released wage statistics for 2013, and the numbers are startling. Last year, 50 percent of all American workers made less than $28,031, and 39 percent of all American workers made less than $20,000. We are witnessing the slow-motion destruction of the middle class, and very few of our leaders seem to care.

"marxism-lennonism-communism always fails and never worked, because I know

some of them, and they don't work"  M.Jordan