Tuesday, November 29, 2011

The Path of Least Political Resistance (Musical Tribute)


Click to enlarge.



Source Data:
St. Louis Fed: Custom Chart

9 comments:

tj and the bear said...

In other words, I do not think that any asset is good at any price (dotcom stocks, real estate, gold, silver).

So, real, tangible goods pale in comparison to the paper promises of an irresponsible and outrageously over-indebted government? Some of those assets -- land & PMs -- have value that transcends governments, borders, races, religions and time itself. Paper... not so much.

For a very sharp guy you've got one helluva disconnect going.

[I don't want to wear out my welcome to your fine blog, so I'll STFU on this.]

Stagflationary Mark said...

tj and the bear,

For a very sharp guy you've got one helluva disconnect going.

That's true if we hyperinflate or default. I have said repeatedly that it is a risk to me and that it is not a trivial one.

However, that is clearly not what I believe will happen (at least in my lifetime).

I do think we could slide into higher inflation though, hence why I want inflation protection on my bonds.

Stagflationary Mark said...

I would also point out that many people felt that gold was the perfect investment in 1980. In hindsight, it was one of the biggest bubbles of the last century.

Investors who bought at the peak and held for 20 years were slaughtered as gold's price fell dramatically in nominal terms and inflation (in things like toilet paper) continued higher. The net result was an 85% loss in real purchasing power over the period.

Even buried cash in one's backyard did much, much better than gold over those 20 years. That's how overpriced gold was. Do you really think it could not happen again?

Further, those who bought real estate as a tangible anti-dollar play in 2007 were sadly disappointed. Over and over they were told that real estate would never get cheaper though. Cash was trash.

Our country's been debasing its currency for a century. I expect it to continue. That's not news to me.

Just opinions of course.

Stagflationary Mark said...

I would also point out that I have a very large hoard of cheap tangible goods (toilet paper, canned goods, spare clothing, and so on).

There will never come a time when I would trade all of it for 5 one-ounce gold coins.

AllanF said...

This will sound arrogant, but I don't mean it to be.

The comment thread reminds me, it's been a while since I pointed out Mark is a _saver_, not an _investor_. I don't know why he doesn't make this point more clear, more often; though he does in his own imitable way, so maybe to his mind he does make it overwhelmingly obvious. :-)

To clarify, an investor is looking for the best return on capital, usually against some arbitrary benchmark of his own choosing, which is not unusually some stranger he met on some internet message board. Many investors are suckers that would willingly paying taxes exceeding capital on inflationary gains in their TIP portfolio if it allows them to gloat over the poor suckers in non-inflation adjusted treasuries.

In contrast, a saver doesn't care about what the guys in treasuries or TIPS are doing. A saver is only interested in maintaining a standard of living into the indefinite future. The saver has willingly foregone goods and services now or in the past (lowered his standard of living) in hopes of calling upon them at some future time (raise his future standard).

Mark used to be an investor. He did quite well at it. He wisely decided one only need get rich once, stopped investing, and started to concentrate on saving instead. That meant cashing in "paper" for consumer goods. Glad bags and Tasty Bites make for lousy investments, but as savings go, they are tough to beat.

Stagflationary Mark said...

AllanF,

Thanks for pointing out that I am a saver. You have nailed saving vs. investing as a philosophy and how it relates to me.

Many investors are suckers that would willingly paying taxes exceeding capital on inflationary gains in their TIP portfolio if it allows them to gloat over the poor suckers in non-inflation adjusted treasuries.

I follow the TIP message board. Here's anecdotal evidence to support your claim.

21-Nov-11
TIPS COULD THEORETICALLY PAY 500% APR

If inflation is 500%. That would put milk around $17 a gallon.

I do believe that Mr. Uppercase would gloat even as the taxation on those gains would give him much pain (and no "real" benefit).

Joya said...
This comment has been removed by a blog administrator.
Fritz_O said...

A 400 point move in the first few minutes of trading!!

Where were the "circuit breakers"?!

Shouldn't the market have halted and paused to give traders time to reconsider their transactions??

Wouldn't that have been the right thing to do when the panic buying set in?

So many questions, so little time to make the next high-frequency-trade!

Stagflationary Mark said...

Fritz_O,

Wouldn't that have been the right thing to do when the panic buying set in?

It was like a doorbuster sale and everyone rushed to the $2 waffle irons.

At the very least, you'd think there would be some pepper spray available to control the crowds. ;)