Inflation or Deflation?

[Coaster]

Stocks going up, but the stimulus has a lot to do with it.
Jobless high, but usually the last to move up after a reccession.

Huge increase in money supply thus USD going down.
I am thinking massive inflation soon but what of the short term?

Should have done Ec102+ intead of leaving college

 

[tiznow]

both

just look at what happened in the 70s/80s

although i don't think inflation will be that strong with CPI going that nuts...deflation will have more up the upper hand so to speak

basically i think this secular bear (which started in 2000) is kinda in between the deflationary 30s depression...and the massive inflation (while markets go sideways for a decade) 70s......

it woulda been as deflating as the 30s if not even more bubble bigger than in back than...but the fed really threw down the gauntlet with all the quantitative easing after they got to 0%....

in real terms (factoring in the inflation factor over those years) expect the dow to be 90% lower than it was in 2000.....when we hit rock bottom

 

[tiznow]

long term picture i see things basically in 2000 we entered a secular bear

and it shouldn't have been all that bad just kinda a normal cycle of things....but where things go real bad was in 2002 with mr. magoo fighting deflation...and the lenders went and started lending cheap money to anybody with a pulse type shite....which turned a bad situation into a depressionary type situation....

From a historical perspective since 1900 there have been 3 Secular Bull Markets and 3 Secular Bear Markets as shown by the tables below of the Dow and S&P 500. As you can see during a Secular Bull Market the Average Annual Return (highlighted in red) is considerably higher than during a Secular Bear Market (highlighted in blue). Thus the long term Buy and Hold strategy that worked well in the 1980's and 1990's for investors may have not worked very well during the Secular Bear Markets of 1906-1921, 1929-1949 and 1966-1982.

Secular Bear Markets vs Secular Bull Markets and Dow Performance
Secular Bear Duration Avg Yearly Ret Secular Bull Duration Avg Yearly Ret
Markets (Years) (Dow) Markets (Years) (Dow)
1906-1921 16 1.58% 1922-1928 7 17.20%
1929-1949 21 1.69% 1950-1965 16 10.60%
1966-1982 17 1.59% 1983-1999 17 15.30%
2000-?

anyway its late and i'm rambling away from the topic

but from where we stand now i think deflation has the upper hand (looking at the next 12-18 months) at the current price point we are at now with a huge rally since march....

 

[Coaster]

Great stuff tiz

That was what I was looking for.
Your crystal ball has about 12-18 months before the inflation starts cookin'
Up in the Great White North we just had our CPI figures come out today.
About 0.5 to 1.0% negative. across the land.
Canada is doing very well with the recession and yet shows a drop.
We are such a tiny piece of the puzzle though.

Gonna start slowly inflation hedging next year about spring.

Thanxs

 

[tiznow]

Second half next year when I think the deflation hits in a big way

Next 6 to 8 months we transition from inflationary worries back to deflationary worries like we did in late 2007 to mid 2008

Looks like oil may be ready to do a what the fuck rally like it did late 2007 through mid 2008

As it ramps while the growing worry is debt implosion on the horizon

It will ebb and flow between inflation and deflationary worries for a while going forward

Based on history we got till 2015-2020 before we can think about an end to the secular bear

 

[tiznow]

Great stuff tiz

That was what I was looking for.
Your crystal ball has about 12-18 months before the inflation starts cookin'
Up in the Great White North we just had our CPI figures come out today.
About 0.5 to 1.0% negative. across the land.
Canada is doing very well with the recession and yet shows a drop.
We are such a tiny piece of the puzzle though.

Gonna start slowly inflation hedging next year about spring.

Thanxs

Yeah Canada austrailia guys like that will weather the storm better than most since their economies are commodity based

We in a long term commodity bull and long term economic bear at the same time

The thing to worry about on the non gold commodities though is china

They are so overextended in terms of infrastructure spending and all the consumption of commodities related to that

It'll be a choppy ride but if you look back to 2000

Gold oil copper all up around 300 per while equity markets in the us are down

This will be the continued trend for another 5 to 10 years IMO

 

[Coaster]

Canadian Fed presents interest rate review Tuesday.
Will stay the same.

US defecit at 1.8 Trillion has me wondering about the inflationary cycle earlier.
Devalued dollar will help trade but inflated money supply could kick in inflation.
In your opinion what effect would that have on interest rates?
Can the US unilaterally keep them down if other economies recover.
Australia, sellers to China have already increased the prime.
Once again they are a piss pot sized country like Canada and have little effect on the World scene.
If rates rise the US debt will kill the economics we have presently. New monteray unit?

Interesting times.

 

[erwinmark]

I think we have a real chance of a deflationary cycle, similar to Japan. The talking heads at the FED., stated when they were putting together the TARP program, we want to get the toxic assets off the balance sheets of the banks, to prevent a Japan type deflationary cycle. To date all the banks still have all that toxic shit on their balance sheets, so we could be in for a long slow recovery.

 

[Coaster]

Nice parallel to Japan.
Their recession was precipitated by falling house prices AND easy credit. Failing banks. Akin to USA
Then deflation.
At the time they were the 2nd largest economy in the world.
Interest rates were at zero for about 10yrs.

 

[tiznow]

except this time its much worse as far as the overall global economy is concerned cause its not just japan

its the US...japan who is still stuck in deflation...and the euro zone in deep shit too (expect to see more iceland events before this is all over)....

 

[Coaster]

The Japan example may be profetic.
They also tried the the stimulus package and feared inflation by over doing it.
Just ended up with higher taxes.
Bailing out companies for jobs....IMHO.... creates more unemployment in the long run.

As people invest, I think the main topic is the one we are discussing now.

 

[Coaster]

I fear as the US tries to inflate the money supply to pay it's obligations, the interest rates will rise, creating a reverse effect.
With massive debt payments it will be the fall of America as we know it.

 

[tiznow]

The Japan example may be profetic.
They also tried the the stimulus package and feared inflation by over doing it.
Just ended up with higher taxes.
Bailing out companies for jobs....IMHO.... creates more unemployment in the long run.

As people invest, I think the main topic is the one we are discussing now.

yeah if they wanted to truly stimulate they would invest in companies with a future...

all they are doing is throwing money at shitty businesses that will continue to lose money (deflation)

most of the money thrown around to date...has been thrown in deflationary black holes (japan did the same thing)...and isn't stimulating a damn thing....its just slowing the deflationary pace....

sorry can't help myself whenever this discussion comes up i always have to toss this in

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[Coaster]

Not a bad tune, thanxs for that.

We are on similar planes.
A bit depressing.