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My short-term inflation mood recently popped up to positive and I'm now resetting it back to inflation/deflation neutral (as seen in the upper left hand corner of my blog).
I gave oil a chance to create some inflation. It appears to be a false alarm.
Oil looks toppy. Copper looks toppy. Gold looks toppy. Wages look toppy. Debt looks toppy. Stocks look toppy. China looks toppy.
About the only thing I see these days that doesn't look toppy is the dollar. There may very well be too many dollar bears right now.
A Lonely Dollar Bull in 2009
Right now, everyone is dollar bearish. And I mean everyone. Conversely, the number of bets on gold and a declining dollar are at their highest levels since before July 2008 when global markets collapsed. When everyone is on the same side of the fence, you know the trend won’t last.
That's what my gut is telling me.
Real Estate Newsletter Articles this Week: Existing-Home Sales Increased to
4.15 million SAAR in November
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At the Calculated Risk Real Estate Newsletter this week:
[image: Existing Home Sales]*Click on graph for larger image.*
• NAR: Existing-Home Sales Increase...
11 hours ago
10 comments:
One more thought. The author of the link I supplied also wrote the following.
http://rosemanblog.sovereignsociety.com/2009/09/gold-bull-market-not-inflation-driven-in-late-2000s.html
"If gold prices are tied to inflation then why has spot gold risen a cumulative 300% this decade compared to just 25% for U.S. CPI? Something doesn’t give. True, gold should exceed inflation but that rate of excess performance belies a different story behind this rally."
Gold was in a massive bubble in 1980. Why can't more people see that?
Once again, gold's price was fixed for roughly 40 years. It could NOT rise in price due to the government's manipulation of its price. Then, one day, the government released it. 40 years of pent up price appreciation hit it like a coiled spring. Gold's price was launched and it overshot its target. For the next 20 years the gold bubble had to deflate. It deflated TOO much. That 20 year trend became self-reinforcing. At some point along the way, gold became a very good bargain again apparently.
Is it a relative bargain now though? I don't think so. It was relaunched into the stratosphere. It is well above its long-term inflation adjusted average price.
That's my theory and I'm sticking to it. I could be wrong, but it certainly explains something that others find unexplainable.
Further, if house prices are tied to inflation then why have house prices doubled this decade compared to just 25% for U.S. CPI? Something doesn't give there either. Oh yeah. I remember now. Housing prices were in a bubble!
See how that rising prices logic doesn't quite work for me?
Stag,
I wholeheartedly agree with you on the price of gold. Further, I think commodity prices in general are stupid high. I foresee a lot of natural gas type cliff diving for many commodities.
Oil looks toppy>
http://tonto.eia.doe.gov/dnav/pet/hist/wrpupus24.htm
Yeah, unfortunately for oil speculators, demand has rolled over and is getting weaker. Color me a skeptic, but how are higher oil prices going to increase demand?
http://tonto.eia.doe.gov/dnav/pet/hist/wrpupus24.htm
I don't accept the notion that inflation is too much money chasing too few goods. It's more like too much credit chasing too few goods. Going forward, I just don't see a problem with too much credit. Too little seems more likely.
Aggregate demand is sick and will not recover any time soon imo. I can't speak for anyone else, but I'm spending less than ever and have no plans to increase my buying activity. In the last year I drastically reduced my discretionary spending - fewer dinners out, hardly any clothing purchases, Blockbuster instead of the movie theater, no profession sporting events. And it has little to do with prices. Quite frankly, I realized I enjoy a de-complicating lifestyle. "Free" time, it doesn't get cheaper than that.
I am CNBC. NOT! I am the face of deflation.
mab,
I believe that copper has doubled in price on the theory that things will go back the way they were before the crisis.
On the other hand, if they don't or China is merely stockpiling copper for the future, then copper investors will soon be sorely disappointed (again).
"I am CNBC. NOT! I am the face of deflation."
I am CNBC. I am the face of silly. I am using a Costco coupon to buy more aluminum foil even though I know aluminum makes up 8% of the earth's crust.
I just can't help myself though. I hope I'm actually paying too much for aluminum foil right now. It will mean that we don't hyperinflate in my lifetime.
One thing is certain though. I'll need FAR less aluminum foil in the future. That should help in some small way to keep the prices down for everyone else.
"Quite frankly, I realized I enjoy a de-complicating lifestyle. "Free" time, it doesn't get cheaper than that."
Indeed! Welcome to the club!
My latest post includes a video of an amazingly happy bird. You will note that the bird does not require a huge mansion. The bird does not require a luxury car. The bird does not require diamond jewelry or a Rolex. We could learn a lot from birds.
Mark,
we should all hope wages are not toppy, as they are lower now in real terms than 10 years ago! I need a raise!
GYSC,
I hear you. I'll put it at the top of my list of things to hope for then.
1. Rising Inflation Adjusted American Median Wages
2. World Peace
3. Sound Financial Policies
4. Sustainable Long-Term Growth
5. Mr. Fusion
GYSC,
we should all hope wages are not toppy, as they are lower now in real terms than 10 years ago!
Yeah but at least debt is way up!Besides, we can forget worrying about real terms now. Per the BEA, aggregate private wages and salaries are down ~ 5% in NOMINAL terms over the past 2 years.
I need a raise!
So do 3 billion Asians.
mab & GYSC,
"So do 3 billion Asians."
And so did 1,700 teachers in Kent, Washington. What they got was "up to" 2.75% the first year, and 1.6% the second year, depending on a teacher's level of experience and education. That may or may not keep up with inflation. Time will tell.
Kent strike ends: Teachers overwhelmingly accept deal
http://seattletimes.nwsource.com/html/localnews/2009863923_webkentstrike15m.html
What prompted them to overwhelmingly accept the deal you might ask? My theory is...
"Darvas said teachers would be fined $200 a day, retroactive to Sept. 8, if they did not report to work that day. The union also faced fines of $1,500 a day."
Just a hunch. Money isn't all that easy to come by these days (deflation).
Gold can't be printed up.
Dollars can (and are).
Sorry, not everything is relative and merely a matter of flow this way for away, then flow that way.
Go ahead, hold you savings is USD.
As I see things, any abrupt change in the near term is likely to be a crisis of confidence that causes both a bank and dollar run.
Actually I prefer Gold not to be the recipient of speculators attention because that tends to destroy. Nice and steady is better.
Any chances for a Gold run? About none. Sure it might pump up and down, but it's future is bright
and Gold surpasses equities,bonds and real estate in safety by leaps and bounds (physical gold that is, not paper GLD)
One can't realistically say that about the USD. In fact some real nasty surprises could very be in store for holders of USD.
Go ahead, speculate.
I am not a speculator, I'm a saver.
Anonymous,
Gold may not be printed, but it is mined. Silver cannot be printed either, yet we know what has happened to inflation adjusted silver prices in the last 600 years. The price has fallen immensely. The vast size of modern mining equipment has helped to do that.
I honestly believe that you are not a speculator based on what you have written and I hope it works out well for you. I would point out that 1/3rd of my nest egg was in physical gold and silver from 2004 to 2006 and it treated me VERY well. I am very sympathetic to your arguments.
However, that is not true of many gold investors. The price will be set by how they act.
"Speculators take large risks, especially with respect to anticipating future price movements, or gambling, in the hopes of making quick, large gains."
My mindset is surely not that of a speculator. I most certainly do not anticipate making large inflation adjusted gains by holding treasury inflation protected securities (TIPS). History may show that I was foolish, but it won't show I was speculating.
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