Deflation Watch

Historically equities have been a good hedge against inflation because companies can increase their prices and therefore maintain their profit margins. If inflation gets too high the only relief is gold. But a moderate degree of inflation is good for stocks.
 
Birch,

That is one reason why I am starting to get out of the 'F Fund'.

I just wish we could invest in REITs and commodities.

Do equities behave well in inflation?
 
When the bond vigilanties start to roll the bond market over - that will be the first sign of inflation worry. Enjoy the merits of deflation while you can - there are benefits, especially if you have steady income. Keep the folks tied up in bonds out of stocks for as long as possible - their time will come to move back to stocks once the Dow has gained its previous highs at 14,154 - then the rush to invest (get me in at any price) will propel the market to even higher highs.
 
Howdy folks,

I have found a great inflation/deflation site. It is InflationData.com.

The numbers in the chart are YOY inflation rates by month of year.

The interesting factoid is that YTOD (Jan - Jul) we have had only 0.75% inflation.

The rate from Aug 2008 to Aug 2010 is -0.4%

That, folks, is very close to deflation.

And, we are decelerating.


Note: The chart pointed to is YOY for the month. The far right column is tha annual inflation rate (note that last year we faced deflation). Poke around. Kinda a neat site.
 
Alevin,

This chart (HT: DoctorHousingBubble) shows the trend line for inflation - and hence, deflation...

consumer-price-index.png


It ain't lookin' good. We should be experiencing 70's era inflation right about now. The Fed should be ratcheting up interest rates. Democrats should be whining about the Fed affecting the election. In actuality, not so much.


This chart (linked to CalculatedRisk) scares me more than anything else I have seen. It demonstrates that we are in very rare territory when it comes to job recovery after a 'recession'.

alevin said:
these are the charts in the back of my head all the time any more....

http://dshort.com/charts/mega-bear-comparisons.html?mega-bear-quartet-real-extended

http://dshort.com/charts/mega-bear-2000-comparisons.html?mega-bear-2000-extended

and here's what people are doing quietly, while there is still time. (not guns and ammo, but realistic steps just the same, and ones that can make sense even if the worst doesn't happen).

http://www.financialsense.com/contr...t-should-i-do-the-basics-of-resilience-part-1
Click to expand...
 
these are the charts in the back of my head all the time any more....

http://dshort.com/charts/mega-bear-comparisons.html?mega-bear-quartet-real-extended

http://dshort.com/charts/mega-bear-2000-comparisons.html?mega-bear-2000-extended

and here's what people are doing quietly, while there is still time. (not guns and ammo, but realistic steps just the same, and ones that can make sense even if the worst doesn't happen).

http://www.financialsense.com/contr...t-should-i-do-the-basics-of-resilience-part-1
 
WarrenLM,

In Kalefornea they furloughed State employees last year. I think it was two days a month. This year there will be three days per month. It actaully happened - not just a threat. It is real. It is a 10% pay cut.

You DO NOT get paid for the furlough days. You cannot take annual leave to get paid on furlough days (I can check on that, but I am 99% certain). There is NO payback to cover the salary when things get better.

Also, much of the part-time staff has been laid off in Kalefornea. My LibTard State of the Little People used part-time staff to avoid the huge benefit packages demanded by union contracts. Whoopie, no healthcare for lots of employees. So good for the Little People. So WallMart like.

Here it is in a nutshell...

There is NO money.

Even with the furloughs Kaleforea ran a large deficit. The game is over here on the left coast - but Illinois may beat my LibTard state down the crapper. Kindof a competition:p


As far as the Feds. We got back pay for the 1995 gubmint shutdown. Kinda dumb. However, things are very different now. All those folks in tri-pointed hats and 'Don't Tread on Me' signs want to slash government expenditures. If furloughed DO NOT count on getting back pay.

Warrenlm said:
Furloughs, the threatened kind, always make big headlines but I'm wondering how often they actually happen in the public sector, and then what the impact is. For instance, I wonder if employees actually furloughed can use annual leave, banked or advanced, to cover the lost days, or if subsequent actions pay them back, or any other maneuver that results in no real loss to most employees?

What happened to the pay of the federal employees that were furloughed not long ago from a few agencies? Did they all actually lose dollars?

I think private sector layoffs make much less news and actually impact real people but the news media can't focus.
Click to expand...
 
Bullitt said:
This is deflationary and may soon come to a town near you.

http://articles.latimes.com/2010/jul/29/local/la-me-furloughs-20100729
Click to expand...

Furloughs, the threatened kind, always make big headlines but I'm wondering how often they actually happen in the public sector, and then what the impact is. For instance, I wonder if employees actually furloughed can use annual leave, banked or advanced, to cover the lost days, or if subsequent actions pay them back, or any other maneuver that results in no real loss to most employees?

What happened to the pay of the federal employees that were furloughed not long ago from a few agencies? Did they all actually lose dollars?

I think private sector layoffs make much less news and actually impact real people but the news media can't focus.
 
James48843 said:
Deflation?

Or hyper-inflation ($5 gas and grub will be pricey).

Which is it?
Click to expand...


James,

We are in deflation. Increased prices in fuel and food will be made up by laying off more people and automating more tasks. Or, by simply not hiring more folks. You can easily have most of the economy deflating while having a subset inflating.

And $5 gas is not hyper-inflation...

But, a home losing 50%+ of its value is deflationary...

And, there is always the option of stagflation:)
 
Boghie said:
Deflation is here!!!
Excepting fuel and food!!!

What a joy. Folks will be outa work, there will be $5 gas, and grub will be pricey.

How about that Hope and Change:p
Click to expand...

Deflation?

Or hyper-inflation ($5 gas and grub will be pricey).

Which is it?
 
"After a period when much of the focus had been on price promotions and major sales events, it appears, as evidenced by Wal-Mart Stores Inc.'s (WMT) recent performance, that increasingly price may no longer be enough to influence customer purchases," said Michael Exstein, retail analyst at Credit Suisse.

Wal-Mart, despite being a low-price leader, has been seeing its U.S. same-store sales fall since last year. The retailer is trying to counter the situation by reducing prices even further.

http://online.wsj.com/article/BT-CO-20100621-710189.html?mod=WSJ_latestheadlines
 
dang!
my ninja loan lender is oob

Hey- ps.
My experimentation with quadruple witching week netted me + 1.972%. That's with 20% F & 80% S.
Monday & Tuesday were up, W,T,F shrunk slightly each day.
I'll take it.
 
crws said:
does that mean there will be more beach frontage?
Click to expand...

Why, yes, it shore does...

But, realize that gubmint employees will get hurt hard too :)

All those Tea Party Patriots will push the gubmint to shrink. And, there are vast numbers of folks who don't dress in funny clothes and carry odd signs that will go the same way. They will simply refuse to fund the beast.

So, were you planning on a big Alt-A mortgage for a nice bungalow in San Diego? :p
 
Deflation is here!!!
Excepting fuel and food!!!

What a joy. Folks will be outa work, there will be $5 gas, and grub will be pricey.

How about that Hope and Change:p
 
Deflation—Not Inflation—May Be Bigger Threat to Economy

Economists and policymakers generally don't take the D-word lightly, but when enough economic indicators show falling prices, it's time to ask if deflation, not inflation, is the more immediate threat to the US economy.

By one measure or another, reports on producer prices, consumer prices and import-export prices in the past week all showed declines—meaning falling prices—and they're hardly the first negative readings this year.

"There's clearly deflationary pressure," says Dean Baker, co-director of the Center for Economic and Policy Research, who worris that the "economy is just drifting along."

"We haven't seen an economy like this in 70 years," adds David Resler, chief economist for Nomura Securities.

http://www.cnbc.com/id/37750600
 
Boghie and I were talking the other day about 4th Turning, aka Winter. He thinks this 20-year portion of the 80-year Kondratieff Cycle started back in 2000. I'm inclined to agree. There's a checklist for Winter. I didn't know that til tonight. The full list is included in the article referenced, Here is part of the list....with commentary from Tim Wood (my inserts in blue).

I have said for years that the deflationary forces of K-wave winter is a global phenomenon. With the credit issues now surfacing overseas, this is proving correct. ...when the Phase II decline gets into gear, it is going to be far worse than Phase I (March 09 low) and farther reaching as well. Also, the credit crisis that continues to materialize will deepen and is a direct result of the forces of the deflationary K-wave winter that I believe lies ahead (Wood refers to 06 as early Winter, so he apparently agrees Winter started sometime around then or earlier-he doesn't actually say in the article)..

the checklist associated with K-wave winter. from David Knox Barker’s book The K- Wave.

“Global Stock Markets Enter Extended Bear Markets”
I have said since 2007 that this is where we are, and ever since the 2009 low I have explained that we have been in a bear market rally. The Phase II decline is out there and it will be global in nature.

“Trends During Winter: Stocks Down, Bonds Up, Commodities Down”
I believe that the bust in commodities in 2008 was associated with this trend change and that since the 2009 lows, commodities have also been in bear market rallies.

“Interest Rates Spike In Early Winter Then Decline Throughout”
In June 2004 the Discount rate was at 2.00%. By June 2006 it was at 6.25%, and in August 2007 the Fed once again began to cut the Discount rate. This too fits.

“Economic Growth Slow or Negative During Much of Winter”
I doubt that many will argue this point at this time.

“Commercial and Residential Real Estate Prices Fall”
This obviously began back in 2006 and is still ongoing.

“Bankruptcies Accelerate and High Debt Eliminated by Bankruptcy”
This has obviously begun and was no doubt been related to the housing and credit bubbles. But I suspect it will worsen as the Phase II decline and the deflationary forces take hold once again.

“Social Upheaval and Society Becomes Negative”
Just wait!

“Banking System Shaken and New One Introduced”
The banking system was shaken in 2008, but there should still be more to come.

“Free Market System Blamed and Socialist Solutions Offered”
Just wait, we have only seen the beginning!
....
“Debt Level Very Low After Defaults and Bankruptcy”
This has not happened..

“Trade Conflict Worsen”
It’s coming.

“View of the Future at a Low Ebb”
When the cheerleading on CNBS stops, we will be there.

.....
“Real Estate Prices Find Bottom”
This has not happened.

“There is a Clean Economic Slate to Build On”
Not happened yet.

“Investors are Very Conservative and Risk Averse”
Again, this has absolutely not occurred.

“Interest Rates and Prices Bottom”
Not happened.

“A New Economy Begins to Emerge”
Has not happened

“Stock Markets Reach Bottom and Begin New Bull Markets (end of Winter?)”
Again, we aren’t there yet. ( Birchie disagrees, of course ;). )
Click to expand...

http://www.financialsense.com/Market/daily/friday.htm
 
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