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Baloney - We've Been Warning About Stagflation For Two Years!


Parsad
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I take offense!  ;D  According to this article at CNBC, only Mohammed El-Erian and Richard Cochincos have been warning about stagflation.  Rubbish!  If you read our quarterly letters for the last two years, we warned about a short-term deflationary period and then a likely stagflationary environment.  Cheers!

 

http://www.cnbc.com/id/41740766

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I'm not a macroeconomical predictions guy. But if the only task in live I could do would be to predict macroeconomical things, I would put my tocken on stagflation too. That being said, I would be worried about my prediction. Things are always clearer in the rear view mirror than the windshield.

 

 

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I take offense!  ;D  According to this article at CNBC, only Mohammed El-Erian and Richard Cochincos have been warning about stagflation.  Rubbish!  If you read our quarterly letters for the last two years, we warned about a short-term deflationary period and then a likely stagflationary environment.  Cheers!

 

http://www.cnbc.com/id/41740766

 

I cant quite resist, this.  What is with all the macro-economic stuff on this board again.  ;)

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Salami,

Ive been in the deflation/stagflation camp for some years now - hence why im usually top heavy in cash  :P

 

Cash is okay during deflation, but hard assets are better during inflation are they not? And just for arguments sake (in a friendly kind of way) isn't Ben's goal in life to print enough cash to cause hyper-inflation...er inflation?

 

cheers

Zorro

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I cant quite resist, this.  What is with all the macro-economic stuff on this board again.

 

You're so right Al!  Just last week I made fun of some board members and all of the macro-talk.  You set us straight!

 

Now what's the over/under on Fairfax's market price at December 31, 2011?  ;D  Cheers!

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Salami,

Ive been in the deflation/stagflation camp for some years now - hence why im usually top heavy in cash  :P

 

Cash is okay during deflation, but hard assets are better during inflation are they not? And just for arguments sake (in a friendly kind of way) isn't Ben's goal in life to print enough cash to cause hyper-inflation...er inflation?

 

cheers

Zorro

yes, but when they have to try sooooooooo hard to create a synthetic inflationary situation, Im not to eager to be in the vortex.

I pick my spots very very carefully now.

I know the old 'dont fight the fed' mantra but im just not comfortable being in bed with them right now. IMO, all the printing of $ in the world wont do a hell of alot -  except short term inflation with prolonged deflation/stagflation -just robbing Peter to give to Paul. Look at japan and their perpetual low interest rates.  Different methods but somewhat similar objectives.

 

Edit: I forgot to mention its CAD$  ;) So, theres a bit of a hedge there too.

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Guest ValueCarl

Let's look at the deflation argument which still seems plausible. Maybe the Bond Pimp at PIMCO selling his exposure is reminiscent of Bill Miller's recent sale of LVLT at under one pps.  imo

 

What is fascinating is to see what the bond market is telling us. Yields continue to fall and are now down around 20 basis points for the long Treasury from the nearby high even in the face of mountains of supply ($29 billion of seven-year notes today) and the news of how Bill Gross at PIMCO radically cut his exposure recently. The bond market is telling you something very important here that rather than being a permanent source of inflation, what we are witnessing is a global exogenous deflationary shock (the impact on discretionary spending in America will be considerable — consumers use 140 million gallons of gasoline annually and prices are already up 30 cents so far this year and the run-up is far from over). The price of copper is telling you the exact same thing as it rolls over to a four-week low, though security of supply and hoarding of raw materials in general should help establish a firm floor for all non-oil commodities. The surge in wheat, corn, and soybean prices is also being unwound.

 

Read more: http://www.businessinsider.com/david-rosenberg-february-24-2011-2?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+clusterstock+%28ClusterStock%29&utm_content=Google+Reader#ixzz1Euc6HlbV

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Guest ValueCarl

It's just a discussion board with opposing views from time to time, so I don't find it to be picking at all. As a matter of fact, I'm just a messenger pondering Rosenberg's comments and observations which were being quoted, as the respected economist he is. As for the S&P 500, it seems to have told us thus far that, lost top line growth(revenues/sales) was managed by controlling operating expenses, most importantly, human resource expenses(labor) which has salvaged bottom lines(net incomes) for the time being while corporate savings have been bolstered in the form of cash by many large, global corporations.

 

When do they begin hiring in mass remains the largest, most perplexing question being confronted by market participants looking for an expanding economy placing idle people back into productivity today. I anticipate that global pressures-uncertainty-will continue to take its toll keeping those corporations cautious at best.      

 

 

In totality, I have no idea how all of this global turbulence is going to finish being played out, but I do know that global unrest will take its toll on all economies and peoples seeking goods and services excluding WW3, of course. Sadly, goods and services are not free; therefore, massive global unemployment doesn't bode well for the forward "cash balances" of global companies selling discretionary or non-discretionary items to starving people. You can couple that with the recent "dear tax" in the form of higher prices for food and gas to the working people in the US, for example, many of whom are one pay check away from bankruptcy as it is.

 

When you add all of that up, you can get to Rosenberg's more doom and gloom, deflationary scenario-assuming you don't have cash, or jobs-as a result of too many OVERPRICED GOODS chasing too many "STARVING, UNEMPLOYED" desperate people with NO MEANS to pay their FREIGHT.  

 

Anecdotal story: Local Best Buy store doing relatively slow sales recently with a lot of college grads working there because there is nowhere else to go, and a smaller paycheck while they live at home is better than no paycheck at all.  I am hearing the same stories well beyond Best Buy locally as well. Finance majors working at the local YMCA lifeguarding, as another example. :'(    

 

 

 

   

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Even the best of us turns to the "dark arts" of macro predictions every now and then.

 

Increases in commodities prices and high unemployment certainly feel like precursors to stagflation to me -- but then again, I wasn't alive in the 1970s, so maybe someone who was around could give us their perspective.

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Guest broxburnboy

It's just a discussion board with opposing views from time to time, so I don't find it to be picking at all. As a matter of fact, I'm just a messenger pondering Rosenberg's comments and observations which were being quoted, as the respected economist he is. As for the S&P 500, it seems to have told us thus far that, lost top line growth(revenues/sales) was managed by controlling operating expenses, most importantly, human resource expenses(labor) which has salvaged bottom lines(net incomes) for the time being while corporate savings have been bolstered in the form of cash by many large, global corporations.

 

When do they begin hiring in mass remains the largest, most perplexing question being confronted by market participants looking for an expanding economy placing idle people back into productivity today. I anticipate that global pressures-uncertainty-will continue to take its toll keeping those corporations cautious at best.      

 

 

In totality, I have no idea how all of this global turbulence is going to finish being played out, but I do know that global unrest will take its toll on all economies and peoples seeking goods and services excluding WW3, of course. Sadly, goods and services are not free; therefore, massive global unemployment doesn't bode well for the forward "cash balances" of global companies selling discretionary or non-discretionary items to starving people. You can couple that with the recent "dear tax" in the form of higher prices for food and gas to the working people in the US, for example, many of whom are one pay check away from bankruptcy as it is.

 

When you add all of that up, you can get to Rosenberg's more doom and gloom, deflationary scenario-assuming you don't have cash, or jobs-as a result of too many OVERPRICED GOODS chasing too many "STARVING, UNEMPLOYED" desperate people with NO MEANS to pay their FREIGHT.  

 

Anecdotal story: Local Best Buy store doing relatively slow sales recently with a lot of college grads working there because there is nowhere else to go, and a smaller paycheck while they live at home is better than no paycheck at all.  I am hearing the same stories well beyond Best Buy locally as well. Finance majors working at the local YMCA lifeguarding, as another example. :'(    

 

 

According to Milton Freidman, the father of supply side economics, inflation is everywhere a monetary phenomenon.. and at this time and place every central bank in the world is supplying more money to counter a global delevering impulse brought on by poor risk management all the way down the food chain. This condition produces price inflation as too much money chases the same number of goods.

Without ongoing further QE there will be a continuance of the 2008 delevering event, with some economies doing better than others.

If you recall, deflationists 2 years ago claimed that growing economies could not decouple from the US economy. That observation has proven false as indeed there are clear winners, economies that have rebounded and others in worse trouble than before.

The current media barrage stoking deflation fears is just manufacturing consent for another round of QE, after all, asset price deflation as a result of another delevering event will wipe out the US banks which the Fed was created to save.

Job one is more QE, more inflation denial and an attempt to keep bond yields low. If the Fed has anything to do with it, interest rates will remain low, the economy, particularly the housing/mortgage/MBS security market couldn't withstand higher rates.

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I cant quite resist, this.  What is with all the macro-economic stuff on this board again.

 

You're so right Al!  Just last week I made fun of some board members and all of the macro-talk.  You set us straight!

 

Please burn and bury this thread Prasad. Now we have to endure misspellings of famous economists last names, false paternities of voodoo economics, and misuses of insights on monetary phenomenon. This is too much for me an MIT graduate and I am on the edge of start firing sarcasms a la Rudy Dornbusch.

 

Guys, I have not tried to enlighten you, please do not try to endarken me. Let's leave macro discussions for people that we really hate.

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Guest ValueCarl

I wouldn't argue with Milton Friedman, or maybe I would since economic cycles merely rhyme rather than repeating themselves always exposed to unintended consequences along the way. :-\

 

I guess what I am envisioning is too few able bodied citizens-working class-chasing a large volume of goods and services as a result of too many QE's-including a non working class who will remain hard pressed to get back to work-that had artificially stoked prices, like in the commodities markets especially food and energy which comes back as a tax on the after tax "disposable incomes" of the same working class tiring by the hour and day. 

 

I don't have goggles across the globe, but it appears that central bank everywhere have acted like birds of a feather including The Peoples Bank of China throughout long time periods tied to fiat currencies. China may be an exception in sustaining itself, and not the tail of the US dog any longer, but I somehow doubt that principle having a certain sense to the nature which resides in that hyper growth oriented beast, one who has succeeded mostly serendipity up until now.

 

Maybe it has become factual that the world's population has grown beyond its current capacity to provide necessary resources, and this is why central banking planners create wars, but I'm just thinking out loud, and not looking to offend anyone who believes the kind of excessive printing that has been done ends well for some new sheriff(s) in the equation excluding all out war.

 

Sorry PlanMaestro, I just couldn't resist one last MACRO SWAG!  ;D   

 

http://blacklistednews.com/6-Charts-Which-Prove-That-Central-Banks-All-Over-The-Globe-Are-Recklessly-Printing-Money-/12762/0/13/13/Y/M.html     

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It's just a discussion board with opposing views from time to time, so I don't find it to be picking at all. As a matter of fact, I'm just a messenger pondering Rosenberg's comments and observations which were being quoted, as the respected economist he is.

 

Got it, you were quoting Rosenberg.  I guess I don't understand why he brings up the prices of bonds, asking what it tells us.  One might have said in 2006 that the price of bonds told us that collapse in demand was not coming, and then one could say today that the price of bonds suggests no coming growth in demand.  Why would we bolster an argument today using bond prices after learning how poorly the current predicament was forecast by bond prices before the collapse happened?  If bond prices are set by the crowd, then why is the respected economist asking the crowd what to think?  The crowd is probably also following what Rosenberg is saying, given that he is one of the thought leaders.  So it's sort of a circular reference in a way between Rosenberg and the crowd.  I just don't get it -- it sort of completely ignores the pithy wisdom about how the market is there to serve, not to instruct.

 

You are correct in how you described what the earnings of the S&P500 are telling us.  However when I asked the question I meant to refer to the PRICE, but I wasn't explicit.  The price of course is a factor of future expectations, not just current.  It was brought up to state that one can either say the crowd expects continued relative fair weather (S&P500), or one can say the crowd expects more misery (the bond market) -- I think he was cherry picking the bond market to bolster his views... I doubt it was an accident that he neglected to mention the S&P500.

 

 

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This is not so much an opinion but an honest question:

Does anyone else notice/get the feeling that things which are happening currently both economic and geopolitical would almost always (in the past) have a huge impact on the equity/bond markets yet currently they are not?

 

As I said, this is just a question, i guess of perception - but its what I feel right now.

 

Anyone else?

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This is not so much an opinion but an honest question:

Does anyone else notice/get the feeling that things which are happening currently both economic and geopolitical would almost always (in the past) have a huge impact on the equity/bond markets yet currently they are not?

 

As I said, this is just a question, i guess of perception - but its what I feel right now.

 

Anyone else?

 

Do you mean, for example, the unrest in the Middle east/North Africa, and gold doing little and the S & P rises when in the past gold would be way up and the markets way down? Nope, didn't notice that at all..... :D

 

 

cheers

 

Zorro

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This is not so much an opinion but an honest question:

Does anyone else notice/get the feeling that things which are happening currently both economic and geopolitical would almost always (in the past) have a huge impact on the equity/bond markets yet currently they are not?

 

As I said, this is just a question, i guess of perception - but its what I feel right now.

 

Anyone else?

 

Do you mean, for example, the unrest in the Middle east/North Africa, and gold doing little and the S & P rises when in the past gold would be way up and the markets way down? Nope, didn't notice that at all..... :D

 

 

cheers

 

Zorro

Makes you really wonder who is behind the curtain pulling the strings.

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Makes you really wonder who is behind the curtain pulling the strings.

 

I have stopped wondering because I think I know some of the culprits and there is nothing I can do about it!  :'(

I can find really undervalued propositions but I have lots of cash on hand because at some point they will get it wrong!  8)

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