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Click to enlarge.
Any questions?
Source Data:
Yahoo: S&P 500
Yahoo: Nikkei 225
St. Louis Fed: CPI
Official Statistics of Japan: CPI
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...
10 hours ago
8 comments:
Awesome chart. No questions.
Did you already do Japan interest rates to US interest rates?
After Japan blows up from their monstrous debt, there will be armies of economists lining up to say it can't happen here, led by Bernanke.
Geithner: "The US will never lose it's AAA rating."
Mr Slippery,
Did you already do Japan interest rates to US interest rates?
I wouldn't want to abuse the readers with the Obvious Bat™. It stings! It stings! ;)
After Japan blows up from their monstrous debt, there will be armies of economists lining up to say it can't happen here, led by Bernanke.
In theory (but perhaps only in theory), one can amass infinite debt at 0% interest rates if only interest payments and mild deflation are considered. You go Japan! ;)
"After Japan blows up from their monstrous debt"
This is a fundamental misunderstanding about debt.
For someone to owe money someone else has to lend it.
When the population of borrowers and lenders is in the same country, there is no "blow up" possible.
Essentially, Japan has no debt, just a deferred settling of unpayable debts among each other. They can do this forever probably.
Our problem is much different than Japan's, in that we are so reliant on them (and others) to buy our debt.
But they are equally reliant on buying our debt to keep their currencies from appreciating on them.
One big circle jerk. The thing I'm afraid most of is the loss of our ability to actually pay our way in the world. Maybe that's already long gone for us, but Japan doesn't have that problem.
Troy,
In any event, I think we both see this playing out over an extremely long period of time. Heck, I've been a bear 7 years so far.
Circle jerking (irrational) can continue longer than I can stay alive (solvent).
I should probably be thankful for that, not that future generations should.
With Japan's aging population their ability to self-fund deficits is quickly diminishing. I need to try searching if anyone's put a date on it. Kind of like SSA going into a deficit right about now (call it Peak FICA).
I've been mulling over in my head, and actually mentioned it to a friend this week, so am now taking it up a notch and sharing it here (fwiw :-)) the hypothesis that given all bubbles are ultimately financing phenomena, therefore the tell on the bubble popping is when the weakest credits lose their financing.
With the tech stock bubble it was when vendor financing started drying up.
I used that hindsight to immense profit to recognize that when the sub-prime lenders lost their warehouse lines of credit, the Alt-A's would soon follow. (I under-estimated the severity of it to run up to the prime banks, or else I'd be sippin' margaritas in Tahiti right about now.)
I intend to use it what I expect will be the final bubble with the sovereign debts. The PIIGS are clearly the sub-primes. I think UK, France, and China are the Alt-A's. US, Germany, and Japan are the primes.
When I shared it with my friend he said, OK how do you invest on that? It is not as easy as an stock bubble like tech co's or homebuilders and lenders, but I think it means you don't have to worry about the proverbial fire insurance of guns, gold, and shorting treasuries until you see interest rates tick up. But once they do tick up, you have to move fast because these positive feedback loop of rising interest rates making the debt harder to service which leads to rising interest rates is enormous when the numerator is in the trillions.
While I'm sharing hypothesis. I expect Paul to win the nomination, but loose the general election. He will be remembered as the Goldwater of his time. The election of 2024 will be the watershed.
Apologies for the rambling.
AllanF,
I've been mulling over in my head, and actually mentioned it to a friend this week, so am now taking it up a notch and sharing it here (fwiw :-)) the hypothesis that given all bubbles are ultimately financing phenomena, therefore the tell on the bubble popping is when the weakest credits lose their financing.
I think that's a reasonable hypothesis. Further, the "sure thing" acts as an investment magnet. If you can make 1x by investing in it then you can make 2x (or more) by borrowing to invest in it.
Here's something that would alter my view of inflation protected treasuries.
In theory, I could get a 4% home mortgage on my paid off house. I could use that money to buy 0.73% 30-year TIPS. If inflation hits 10% like it did in the 1970s then it would be a fantastic investment. The key word is "if".
This is how it relates to what you wrote. If I thought many investors were borrowing money to buy TIPS (either using the mechanism I just pointed out or by using other forms of borrowing) then it would make me very nervous.
We know there is some borrowing to buy inflation hedges (into gold and silver for example). Is some even finding its way into TIPS? Probably. It is human nature to leverage up sure things. The key is how much and how could we possibly know? In theory, I could use a credit card to buy gold and silver if I thought my dollars would soon turn worthless. I would bet all I own that someone out there has. That was not a great plan for gamblers who did it last week.
This is a ramble protected zone. Ramblers such as myself are free to roam. ;)
"With Japan's aging population their ability to self-fund deficits is quickly diminishing."
But they're losing population at the lower ages, so they can shift what was investment in kids to whatever old people need.
Plus old people don't really require much from society.
They have all the stuff they're going to need, all they need on a daily basis is basic food, a roof, and a TV.
As for Ron Paul, libertarianism is for adolescents. Libertarianism, like conservatism in general, does not have answers, it simply avoids addressing societal problems at all.
I do agree that 2024 will be the pushover point in the US though. We've made a lot of promises to the middle class boomers, and they will hit full retirement just around then, being aged 63-78.
Troy,
They have all the stuff they're going to need, all they need on a daily basis is basic food, a roof, and a TV.
I'd fit right in. I wouldn't even require my TV hooked up to cable if push comes to shove. Heck, I'm still playing a lot of Dai Senryaku on my PS2 (even though I own a PS3). I don't think that game will ever get old.
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