1979 Style Hoarding

June 18, 1979
Behavior: Hoarding Days

One key ingredient in all hoarding, explains U.C.L.A. Sociologist Ralph Turner, is public distrust. Says he: "The ordinary human being knows that Government authorities and business leaders give a lot higher priority to keeping the populace calm than to telling the truth."

Factors other than a loss of faith in government may also be at work: a competitive culture, high anxiety about the economy and conflicting reports on which shortages are long-term or temporary. Says Sociologist Jackie Boles of Georgia State University: "At times like this we need strong leadership to jolt people out of this competitive behavior. Unfortunately, our leadership has said, 'Yes, we have an energy shortage,' and 'No, we don't have an energy shortage.' People are operating in a vacuum of leadership." Adds Brenner: "The public will try to get the facts themselves, and when no reliable facts are available, they will create their own drama."

And they say history never repeats? The drama is mighty intense these days.

February 24, 2011
David Rosenberg: Forget Oil And Inflation, The Real Story Is In The Bond Market

In his daily note, David Rosenberg expands on a point we just made, that if you dig beneath the oil spike and its knock-on effect on inflation, the real story right now is deflation:

For what it is worth, prices don't generally crash without rising first. Commodity prices certainly have risen. I continue to lean deflationary and have been doing so since November 9, 2009. I said the following then and I still believe it.

That doesn't mean that I think oil can't make it to $100. Who knows? I don't think it will stay there if it does though, any more than it could stay at $140 the last time.

We're now in theory-being-tested mode.

Nearly my entire nest egg sits in inflation protected treasuries and I-Bonds. I'm simply trying to maintain my purchasing power. That's all. Inflation will not help my purchasing power though. The more inflation there is the worse I will be doing (as I pay tax on the inflationary gains). Although I have inflation protection as a saver, I can therefore still root for deflation and/or the lack of inflation.

The same cannot be said of those who are exposed directly to highly leveraged "sure thing" commodities. There's potential for a great loss in purchasing power. The easy gains on the way up can become hard losses on the way down. Just something to think about.