Thu, Jan 29, 2015, 8:33 PM EST - U.S. Markets closed

Recent

% | $
Quotes you view appear here for quick access.

Petróleo Brasileiro S.A. - Petrobra Message Board

  • docjoe999 docjoe999 Mar 12, 2010 12:07 PM Flag

    Great inflation versus deflation

    debate here, a must watch.

    http://finance.yahoo.com/tech-ticker/the-great-%22inflation-or-deflation%22-debate-mish-vs.-dr.-doom-441196.html?tickers=^DJI,TIP,TLT,TBT,XLF,UUP,GLD&sec=topStories&pos=8&asset=&ccode=

    These are two of my all time favorite market gurus, Marc Faber and Mish Shedlock.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • Interesting stuff doc.

      The bigger threat no doubt is deflation, so that is why it won't happen, the government won't let it happen. So, look for mild inflation... that is what the government prefers to keep to pay previous debts... which it has a ton !!!

      The weak euro dollar will keep a tailwind at the US dollar and keep it from falling. While low interest rates and a weak economy will keep the dollar from inflation. Don't expect much deflation to happen, in spite of the fact that RE prices will come down, a strong dollar will keep commodity pricing up.

      In the long term, I think the US dollar and the US are in bad shape. I don't know what happens with Europe, but in the end, the Asians kick our butts... economic speaking.

      Sorry, that's my take.

      • 4 Replies to rgneckow
      • I find it funny that I mention where inflation is, commodity based items, and everyone lectures me on inflation and commodity based items. Yes, I know food and energy are up, but that's not a huge part of the average American's budget.

        Housing is usually the big ticket item, and that is WAY down. A buddy of mine just bought a 5 bed room, 3500 sq foot house in a Dallas suburb for $210,000.

        As for RG's comment, "The bigger threat no doubt is deflation, so that is why it won't happen, the government won't let it happen."

        Deflation's cause is always decreased consumption, so how is the government going to get consumers to continue consuming? The truth is that it's not the government but the federal reserve who has the power, and they have done their part.

        But so did the Japanese central bank, and Japan still had deflation. The prescription is the same, flooding the system with capital and cutting interest rates to 0%. So the real question is why do you all think that a solution that didn't work in Japan, will work here?

        Washington and the Fed. thinks that they have "solved" the problem. All they did IMO was kick the can down the road.

        The point of all this maneuvering is to devalue the dollar. By giving 0.1% interest, there is incentive to move out of cash and into stocks, commodities, and bonds.

        But the read of the day was from Barry Riholtz.

        A 2000 page bankruptcy report on Lehman's showed what I have known and been saying all the time: the cops are on the take. The SEC, accounting firms, rating agencies, and media analysts are totally incompetent in valuing businesses. Only the short sellers, the most hated of the bunch, have a modicum of common sense.

        The average Joe stock picker looks at Lehman's and thinks "What a mess", but I am here telling you that it's not just Lehman's. The entire banking system is built on the same sand Lehman's is, and the correct value of the banking system is at least 90% less than it currently is.

        GE, with a market cap of $181 billion, is every bit as technically broke as GM was two years ago. If not for low interest loans backed by the U.S. government, GE would have declared bankruptcy.

        There is only so long this balance sheet con can go on. People need to ask themselves why the stock that they have invested in is any different than Lehman's and at the end of the day, most won't. They just hope that they same sorry case of losers who missed Lehman's will work for their protection. It's not going to happen.

        And what will happen when the con falls apart? People will move from stocks back into dollars, and the increased demand for the dollar will make it stronger. And a stronger dollar will mean lower commodity prices.

        Oil is the great example in the commodity market. The price today is the same as it was in 2006 when we had one million bpd spare capacity. Now we have five million bpd spare capacity. The reason oil has gone up then has nothing to do with supply and demand, and it has everything to do with people moving from dollars to commodities like oil for safety's sake. That trend can easily be reversed.

        Despite this surplus capacity being on both the EIA and IEA websites, some knuckleheads here choose not to believe the numbers. This is the investor equivalent of covering one's ears and screaming "la, la, la, la".

        So the real question in the inflation-deflation debate is not about food and energy prices today but about asset prices. Is corporate America lying about asset valuations as badly as Lehman's did? If you think they aren't, then feel free to not worry about deflation.

      • I find it funny that I mention where inflation is, commodity based items, and everyone lectures me on inflation and commodity based items. Yes, I know food and energy are up, but that's not a huge part of the average American's budget.

        Housing is usually the big ticket item, and that is WAY down. A buddy of mine just bought a 5 bed room, 3500 sq foot house in a Dallas suburb for $210,000.

        As for RG's comment, "The bigger threat no doubt is deflation, so that is why it won't happen, the government won't let it happen."

        Deflation's cause is always decreased consumption, so how is the government going to get consumers to continue consuming? The truth is that it's not the government but the federal reserve who has the power, and they have done their part.

        But so did the Japanese central bank, and Japan still had deflation. The prescription is the same, flooding the system with capital and cutting interest rates to 0%. So the real question is why do you all think that a solution that didn't work in Japan, will work here?

        Washington and the Fed. thinks that they have "solved" the problem. All they did IMO was kick the can down the road.

        The point of all this maneuvering is to devalue the dollar. By giving 0.1% interest, there is incentive to move out of cash and into stocks, commodities, and bonds.

        But the read of the day was from Barry Riholtz. See the link: http://www.ritholtz.com/blog/2010/03/accounting-fraud-short-sellers-the-sec/

        A 2000 page bankruptcy report on Lehman's showed what I have known and been saying all the time: the cops are on the take. The SEC, accounting firms, rating agencies, and media analysts are totally incompetent in valuing businesses. Only the short sellers, the most hated of the bunch, have a modicum of common sense.

        The average Joe stock picker looks at Lehman's and thinks "What a mess", but I am here telling you that it's not just Lehman's. The entire banking system is built on the same sand Lehman's is, and the correct value of the banking system is at least 90% less than it currently is.

        GE, with a market cap of $181 billion, is every bit as technically broke as GM was two years ago. If not for low interest loans backed by the U.S. government, GE would have declared bankruptcy.

        There is only so long this balance sheet con can go on. People need to ask themselves why the stock that they have invested in is any different than Lehman's and at the end of the day, most won't. They just hope that they same sorry case of losers who missed Lehman's will work for their protection. It's not going to happen.

        And what will happen when the con falls apart? People will move from stocks back into dollars, and the increased demand for the dollar will make it stronger. And a stronger dollar will mean lower commodity prices.

        Oil is the great example in the commodity market. The price today is the same as it was in 2006 when we had one million bpd spare capacity. Now we have five million bpd spare capacity. The reason oil has gone up then has nothing to do with supply and demand, and it has everything to do with people moving from dollars to commodities like oil for safety's sake. That trend can easily be reversed.

        Despite this surplus capacity being on both the EIA and IEA websites, some knuckleheads here choose not to believe the numbers. This is the investor equivalent of covering one's ears and screaming "la, la, la, la".

        So the real question in the inflation-deflation debate is not about food and energy prices today but about asset prices. Is corporate America lying about asset valuations as badly as Lehman's did? If you think they aren't, then feel free to not worry about deflation.

      • That is why I think Canandian $ and Australian $ is pretty good hedge tool.

    • Doc, whether or not inflation or deflation in the type of things I'm looking at, one cause of it has little to do with events in the US ...atleast from a demand POV.

      But keep in mind, inflation can be for two reasons and we might see both having an effect in the US.

      As we've seen in the last few years, physical energy, metals/minerals, and gold demand are not nearly so effected by goings on in the US anymore.

      Unless you can make the case that the US and OECD is going to fall off the edge if the earth in terms of the economy and reduce oil demand by something more than 5 million b/d within the next 2 or 3 yrs, the EM's are there to more than make up for it. And OECD demand is even less important for most other resources.

      And I would note my recent posts WRT met Coal and Iron ore prices along with todays news RE potash prices that Musk posted.



      So I have no doubt that the US RE market might be weak and CRE will weaken further along with pricing for certain consumer goods like LCD TV's, clothing, and Barbie dolls but when it comes to things like food, and other commodities, you have to look to the rest of the world to see what might be going on.

      IOW, US inflation rates might have very little to do with what happens economically within the US.


      Hmmm, I might even have to reconsider on the price of Barbies should they be popular in LA.

      But that's just run of the mill garden variety inflation that's based on supply demand fundamentals for raw materials and energy.

      The real inflation kicker comes a little later and that has to do with Faber's concerns WRT deficits and the Fed's increased need to print because their simply won't be the demand for the amount of bonds necessary to finance the shortfall in fiscal revenues for the years to come.

      Only question is if the markets might start to discount this secondary driver of inflation that is purely monetary ahead of time.

      So keep an eye on what China and India are willing to pay in USD's for it's raw materials ....as well as the quantities they are buying.

      One more thing....gasoline prices might well be going up now because of industry shutting down of domestic refinery capacity so fuel prices could be going up for both int'l and domestic reasons.

      Isn't it strange to see a potential for inflation in fuel prices (as a result of domestic factors) in one of the weakest markets for fuel?

      as bearish as I am for prospects in US and the OECD, I would hate to even ponder how much more bearish I would have to be in order for me to think overall global price deflation was in the cards... but who knows, maybe there's hope for you.

      Wins

      • 1 Reply to winsabokk
      • Man, Winny, you just don't get it. When I ran an office, sure there was costs for energy and real estate, but they were minimal.

        MY BIGGEST COST BY FAR WAS LABOR.

        Energy cost me around 1% of revenue, and rent was 5% at most. OTOH, labor was close to 50%, and I am sure my situation was hardly unique.

        Clearly with unemployment higher, the pressure to pay higher wages is less.

        I just talked to a restaurant owner who says that his business does best when real estate blows up. He said that the real estate folks are great waiters because they know how to handle difficult customers and put on a happy face.

        And how much of your monthly budget is devoted to commodities that you currently need? For the most part, that is limited to food and energy, and I would be shocked if that made up more than 25% of your monthly expenses.

        What I would ask Faber is if gold is so damned great because of its limited supply, why isn't land better?

        <but when it comes to things like food, and other commodities, you have to look to the rest of the world to see what might be going on.>

        That is ridiculous, Winny. You think U.S. labor costs have nothing to do with food prices? I guess those blueberries pick themselves.

        Midwestern U.S. floods had a lot more to do with corn prices than Indian demand.

        <The real inflation kicker comes a little later and that has to do with Faber's concerns WRT deficits and the Fed's increased need to print because their simply won't be the demand for the amount of bonds necessary to finance the shortfall in fiscal revenues for the years to come.>

        You guys don't even get the deflationist argument. To us, Faber's scenario would be orgasmic in comparison to the one we see.

        The reason that there is going to be continued demand for U.S. T bills and bonds is because bonds are the only asset class that have the chance to give you a positive return. With deflation, all other asset classes give you a negative return. A 1% return looks pretty good when all other classes are giving you -10%.

    • If you discuss with Deflation with consumer who buys grocery in the household, she/he will think you are crazy! -:)

      According to my wife, here are two items for illustration I regularly buys from warehouse club

      (1)One jar of honey, price in 2006 $6.50, now $10.50
      (2)One bag of 10 LB Onion, price in 2006 $4.00, now $6.50

      No need to give you more example such as GAS! -:)

      Deflation MY #$%$

    • *...government hastened the instabilities by decreasing regulation (CFMA etc.) when they should have been maintaining or increasing it.*

      Agree with your point, Fred. But I ask you: the ideology behind decreasing regulation to the point where the parties that dominate markets get to enjoy the benefits of *self-regulation* belongs to which political ideology/party:

      A. Democratic
      B. Republican
      C. Socialist
      D. Communist

    • E. The connected few.

    • The advocates and opponents of this legislative nightmare were not differentiable by party affiliation.

      http://www.huffingtonpost.com/2009/05/11/glass-steagall-act-the-se_n_201557.html

    • Thanks for your notes, RG:

      *...since when has our government done much that has been intelligent ? If we had intelligent lawmakers I would not be so opposed to government intervention...* WE ELECT OUR REPRESENTATIVES. ULTIMATELY THE BLAME LIES WITH US. STUPID PEOPLE ELECT STUPID POLITICIANS WHO ENACT STUPID POLICIES.

      *...with all the money they have spent, and programs they've instituted, they have not even been all that successful. For the amount they have put our future generations in debt, they could have at leas got a better return on our money...* I THINK THE BAILOUT HAS BEEN ENORMOUSLY SUCCESSFUL. THE FINANCIAL SYSTEM HAS BEEN STABILIZED, THERE IS EVIDENCE OF GROWTH AND JOB CREATION IN SOME SECTORS. THE PATIENT MAY HAVE AN IV DRIP, BUT HE IS WALKING AROUND THE ER. FROM AN INVESTMENT POV, THE STOCK MARKET IS UP 70% FROM LOWS. I PERSONALLLY RECOUPED IN ONE YEAR, 2 YEARS WORTH OF LOSSES. I HAVE A HARD TIME IMAGINING A BETTER RETURN.

      I believe the inevitable can only be delayed so long, and then the eventual will be played out. AGREE... TIME IT RIGHT, GO SHORT, GET RICH.

      *THE INSTITUTIONS THAT FAILED should have suffered the consequences... not us. Why do the American people need to suffer for risky and bad management of corporations ? Why is it our financial duty to see that they were bailed out ? * CONSIDER THE ALTERNATIVES IN THE CONTEXT OF SYSTEMIC BREAK-DOWN... I THOUGHT YOU DID NOT ADVOCATE DOING NOTHING...

      Banks were never supposed to be allowed to become to "big to fail". What happened with the regulations against interstate banking ? 8 YEARS OF REPUBLICAN *LEADERSHIP* ALLOWED THE PHILOSOPHY OF *SELF-REGULATION* TO TRIUMPH. BYE-BYE GLASS-STEAGALL, BYE-BYE SEC, HELLO $100 MILLION PAYDAYS FOR INVESTORS IN UNREGULATED MARKETS, HELLO SYSTEMIC RISK-TAKING BY AIG, HELLO ACCOUNTING FRAUD AT LEHMAN, HELLO MADOFF...

    • Well, if you want to evaluate success as the stock market recouping losses as a net gain, the perhaps YOU had some success with the bailouts. Kicking the problem down the road a couple of years is not my idea of success.

      The stock market lost more than 50% of it's value, and regained about 60% of its value, the is a net loss. If you loose 50% of your capital, you need a 100% gain to break even. So, Wall St. is not putting much value in this recovery ... yet.

      BTW- don't try to make it a Rep/Dem issue, 90% of our lawmakers are idiots. We elect stupid politicians because we have poor choices. Look, if my choice for president was Obama or McCain, therein lies the problem.... garbage in garbage out.

    • musk, you going short ? If so, what vehicle are you going to ride ?

      I'm still long, this market has no reason to go higher... but I think it does, save a negative story from Greece or the Fed.

      irrational exuberance

    • Agree. I dont know what is going on today except a bounce off overhead resistance... I am long except that I bot the short China etf FXP.

      My coal mining stocks are getting hammered hard today... may have to step out... but coal has been a consistent winner for a year and the fundamentals are pretty good -- undecided at this time.

      GLTY

    • View More Messages
 
PBR
6.40-0.160(-2.44%)Jan 29 4:08 PMEST

Trending Tickers

i
Trending Tickers features significant U.S. stocks showing the most dramatic increase in user interest in Yahoo Finance in the previous hour over historic norms. The list is limited to those equities which trade at least 100,000 shares on an average day and have a market cap of more than $300 million.
Amazon.com Inc.
NASDAQThu, Jan 29, 2015 4:00 PM EST
Core Laboratories NV
NYSEThu, Jan 29, 2015 4:00 PM EST