This picture is worth at least a thousand words.
The current interest rate on the three month treasury bill in the secondary market is 1.42%. If the annual inflation rate is above 1.42% the hoarding of hard goods will continue and/or accelerate one would think.
Petrol rationed to stop hoarding as supplies dwindle on the forecourts
Ministers and petrol suppliers insisted it was "business as usual", with no danger of shortages as long as nobody panicked.
Sounds like a bank robbery. I don't know about you, but I'm most likely to panic when I'm told not to panic. Further, as long as nobody panics? What a horrible disclaimer that is. Somebody, somewhere is bound to panic. I guess that means there is a danger of shortages.
The Secretary of State for Business, John Hutton, said: "The advice that I have received is that there is plenty of fuel in Scotland for a significant period."
Whose advice? Significant to whom? Yeah, well, last night I was told that the sky would turn green and would stay that way for a significant period. I'm not at liberty to name my sources.
Despite these reassurances, several garages reported that they had already sold out of fuel or were running low on supplies.
Perhaps the reassurances aren't adequate. The assumption seems to be that people are hoarding fuel because they think it will run out. I'm hoarding toilet paper. It isn't because I think we'll run out. I'm confident toilet paper will always be available. Call me an optimist. I just tend to think it won't be getting any cheaper.
I go round and round on the inflation vs. deflation debate. I can say that had I embraced deflation wholeheartedly in 2004 when I first turned bearish I'd have lost a lot of money by now. Embracing inflation on the other hand has been rather kind to me.
Source Data:
FRB: Selected Interest Rates
St. Louis Fed: CPI
As Mish says, if you're going to panic, panic first.
ReplyDeleteAllanF,
ReplyDeleteLook what I found trying to come up with a suitable reply. It was realeased in 1999.
Panic Rules!
http://www.southendpress.org/2004/items/Panic
Rule #1: Don't panic. Rule #2: Panic first.
But wait, there's more!
In accessible, conversational style, Hahnel takes on the finance managers at their own game and reveals the empty illusions that prop up the bubble of prosperity—until it must burst, with dire consequences worldwide.
Now that's just plain spooky.
Hi Mark,
ReplyDeleteYour graph is considerably off. The commodity boom was 1970-1974. The GSCI had negative returns in 1975 and 1976.
Regards
Stag,
ReplyDeleteEmbracing inflation on the other hand has been rather kind to me.
Nothing like betting with the house. In the long run, the odds are heavily in your favor.
Anonymous,
ReplyDeleteThanks for your comments but I stand by my chart. You are missing half of the 1970s commodity boom.
Please note the chart of the CRB index in the following article.
http://seekingalpha.com/article/51945-david-fry-s-market-outlook-for-tuesday-fed-watch
Yes, there was a softening in commodities during the 1974-1976 recession, but commodities soared immediately afterwards. People were in serious hoarding mode. The Hunts brothers even tried to corner the silver market.
Further, look at the price data oil, platinum, gold, silver, and copper in the following table.
Oil vs. Metals (Part 1)
http://illusionofprosperity.blogspot.com/2007/09/oil-vs-metals-part-1.html
That's a commodity boom.
MAB,
ReplyDeleteNothing like betting with the house. In the long run, the odds are heavily in your favor.
Nothing like betting with the overpriced depreciating/deflating asset on top of a chunk of inflating land, that's heavily taxed, heavily insured, and requires heavy maintenance?
I probably wasn't supposed to take your comment literally, was I? ;)
Stag,
ReplyDeleteTres bien, double sens (aka double entendre).
Just in case you forgot: Sell in May and go away. That one doesn't get a lot of play on bubble vision.
One more thing. I believe that the commodity boom is well into the speculation phase. No way this is all demand based. There are just way too many ETFs, ETNs, mutual funds, hedge funds, etc. chasing the same number of futures contracts. Big leverage too. It looks like money chasing rising prices to me. The fed & the negative real interest rates are just adding fuel to the speculative fire. Timing these things is impossible, but my best guess is the easy maoney has been made and the risk/reward profile of commodity investing now is better suited for gamblers.
MAB,
ReplyDeleteJust in case you forgot: Sell in May and go away.
That's so old school. Now it is just go away.
Carrefour cancels May Day sales, ads following China protests
http://news.xinhuanet.com/english/2008-04/25/content_8050941.htm
BEIJING, April 25 (Xinhua) -- French supermarket chain Carrefour has canceled its three-day sale planned for the May Day holiday on the Chinese mainland, which will cut 20 percent off itssales volume on this market during that period, said a media manager of Carrefour.
Carrefour
http://en.wikipedia.org/wiki/Carrefour
Stag,
ReplyDeleteThat's so old school. Now it is just go away.
Indeed. That's so old it's olde.
It's comforting to hear the fed say inflation "should moderate." I'm trying to weigh that against the fact that speculators SHOULDN'T be bailed out. I suppose everything balances as long as you use a sliding scale.
I'm trying to weigh that against the fact that speculators SHOULDN'T be bailed out.
ReplyDeleteIt is tough when they are sitting in the boat with you.
I must be an optimist. I see the boat as half full and I've always loved the water.