The one question I seem to get more than any is on (Hyper) Inflation versus Deflation. As previously noted, we clearly are in a Deflationary party of the cycle now.

While inflation may occur ion the future, and the possibility exists for Hyper-Inflation, these are merely potential issues down the road.

As  these two charts show, we now have Deflation, are likely to see it continue for some time into the future:

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Near Record Deflation Rates At All Levels

click for larger charts
cpi-ppi

>

US capacity utilization leads core inflation by about a year

cap-util-leads-core-inf
Chart source: Albert Edwards, Society General

Category: Inflation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

195 Responses to “Deflation or Inflation?”

  1. Mannwich says:

    But no deflation in commodity markets. I wonder where all the gov’t-injected liquidity is going? Gee…I wonder…..

  2. cvienne says:

    Job losses = demand destruction
    credit contraction = demand destruction

    …fill in the blanks

  3. Mannwich says:

    But yet, oil still at ~$70 a barrel is totally justified. Insane.

  4. Cohen says:

    I wouldn’t be surprised to see some sort of correction in commodities, perhaps sooner than later. Jeff Saut posted this chart on Monday and it seems the Shanghai index is leading the SP5 by a couple of weeks. If that relationship holds, we could see a larger decline in US markets, bringing commodities along with it.

    http://image.minyanville.com/assets/FCK_May2009/Image/LisaCatch/BLOOMBERG1.jpg

  5. mcHAPPY says:

    The people who jumped on the inflation bandwagon will prove to be correct – they will just be off on the timing by a few years. Unfortunately most people are not patient and cannot see past the next trading day or week. Once the realization of deflation occurs (i.e. mainstream media are reporting the obvious) they will get out of their inflationary positions and jump on the deflationary bandwagon. This will cause the commodity markets to crash. At this point deflation will be hyped and talked about until it is too late and inflation will become a beeeotch cira early ’80′s. This has been my position for months and while the markets and commodities have taken off I have yet to see a piece of evidence to sway me from this belief. The fact no one I have spoken to has taken my belief seriously and/or dismiss immediately only gives me comfort.

  6. Mannwich says:

    ……And the markets reverse/rally today. What a farce.

  7. JohnnyVee says:

    Deflation wins hands down…those talking inflation or at worst hyper inflation are lost.
    IMO, commodity prices are rising because, like China purchase of iron, copper, etc. investors want something physical that has value even if they are expensive. Other reason, what else is one going to speculate in?

  8. mcHAPPY says:

    @JohnnyVee

    I think China is seeing the big picture down the road. They are storing huge amounts of commodities expecting inflation – however many years away. I believe they will continue to do this on any significant dip – which is to be expected sooner or later.

  9. km4 says:

    Deflation for awhile with a whipsaw to inflation ( and possibility Hyper-Inflation )

  10. DL says:

    It’s worth drawing a distinction between CPI and commodity prices.

  11. leftback says:

    LB came around to this as well some time ago, after noting that Mish and Gary Shilling just kept on being correct.
    Peter Schiff may be entertaining and intelligent but has been dead wrong on a number of issues.

    Commodity specs will get burned by another dollar rally when we play the Fall Classic: Deleveraging, Part Deux™.
    Although you can be sure that oil traders will try to game the hurricane season as they did a few years ago….

  12. Marcus Aurelius says:

    We have deflation now, but if we are ever to regain growth, it will only be via inflation (if for no other reason than that’s all fiat monetary systems and fractional banking can do). There is not enough cash to offset the world’s debt, no matter how fast that cash cycles (and right now the deflation we’re seeing is due to the fact that the cash isn’t cycling). If there’s a deflationary scenario that will ever balance debt and growth (other than universal default or debt forgiveness) , I’d like to hear it.

  13. BearishNews says:

    Barry, did you see Eric Janzen’s Argentina 2001 comparison? He acknowledges that the dollar is unique, but makes some thought-provoking points. Like the fact that Argentina had deflation just months before they had 120% annualized inflation. And that the scale of our problem is much larger by many measures.

    http://www.itulip.com/forums/showthread.php?p=106493

  14. mcHAPPY says:

    @Marcus and BearishNews

    Exactly – timing is going to be the issue in the switch from deflation to inflation/hyper-inflation.

    With declining revenues does anyone care to predict what the outcome of $70-plus will be on large businesses/corporations? What about small businesses and consumers barely hanging on?

  15. mcHAPPY says:

    * “….. outcome of $70-plus (oil that is)…”

  16. Thor says:

    I think there needs to be a clear distinction between 70′s style high inflation and zimbabwe style hyper inflation. I see that word “hyper inflation” thrown around like candy – does anyone really expect us to have 1000% inflation a month?

  17. wally says:

    This is the big question. The surprise for the Fed so far is that pushing dollars out the door has only created small bubbles (the stock market aneurism) because the dollars have not been redistributed. No liquidity whatsoever has one to the general public – excepting a few construction workers and some clunker traders. It is not enough for the Fed to print money, apparently. Their pals were the big banks, and now they live or die with them.

    There appears to be absolutely nothing on the horizon that would give pricing power to individual wage earners. Nothing. There may be price increases, but it is hard to make those stick when the buyers have no money.

    I won’t say we will never have inflation, but without a lot more dollars in general circulation – or a lot more credit on the books (which also is not in the cards for anybody but government), it will not happen now.

  18. manhattanguy says:

    Shiller expects another Housing bubble in the next five years. Most homeowners are still living in their surreal world. I see inflation as a huge problem in a year or two.

    Buffet said we are going to crush under mountain of debt. Eventually China and others will stop buying our debt.

    http://finance.yahoo.com/tech-ticker/article/306287/Buffett-We%27re-Going-to-Be-Crushed-Under-Mountain-of-Debt?tickers=tbt,tlt,udn,uup,brk-a,brk-b,spy

    BTW, we don’t have any job producing economy in the near horizon.

  19. The Curmudgeon says:

    LB is to trademarks what cvienne is to all caps.

    The PPI and CPI are mostly meaningless for teasing out inflation. Too much monkeying with the data. Measured against a metric that doesn’t change or is subject to government manipulations, we have inflation right now, or as Mannwich pointed out, please explain $70/barrel oil and oil supply increasing while demand decreases worldwide. Or copper, or any of the other basket of commodities that have recently made a run. Across-the-board increases in commodities prices with a very few exceptions for market-specific dislocations, is the essence of inflation.

  20. wally says:

    Other blogs draw comparisons to past events; I’ve seen the claim that the Great Depression is the only modern example of true deflation.

    Almost all the inflation examples of modern times are for a single country, and the currency goes haywire relative to standards that remain stable elsewhere. This recession is worldwide and lots of countries are trying to inflate at once. The unknown is: is it inflation if everybody has it? Or is the Great Depression the better yardstick after all?

  21. jr says:

    Inflation and hyperinflation are two entirely different things that are frequently confused; while hyperinflation is sometimes thought of as “high inflation”, its not.

    Hyperinflation is what happens when you have a currency crisis. What causes currency crises? Sovereign defaults. Janzen’s itulip piece posted above is thought provoking in this regard.

    Persistent deflation means business and consumer defaults = decrease in business activity with subsequent loss of tax revenues, accompanied by increasing demands for safety net services. I think FY2009 tax receipts are running behind the combined costs of just mandatory federal expenditures, DOD, and interest costs. http://www.zerohedge.com/sites/default/files/images/Deficit.PNG

    Persistent deflation springs the debt trap. I don’t expect it imminently, but a hyper will come. The FED is in checkmate :

    Sovereign default = hyperinflation.

    Printing our way out = hyperinflation.

    ===============
    ===============

    Some unconventional thoughts based on Martin Armstrong’s ideas – the Waterfall Effect

    http://fofoa.blogspot.com/2009/08/waterfall-effect.html

    “The deflation that Prechter sees (as well as Mish, Denninger, Ackerman, Weiss and many others) is very real. It is the collapsing economy and paper financial structure. It is real deflation in real terms. But unfortunately for them, the dollar is not the true base of the pyramid, and it will only benefit temporarily as a “pass through level”. (See “All Paper is STILL a short position on gold”).

    Hyperinflation (a currency event as Jim Sinclair so eloquently tells us) is always concurrent with deflation (economic malaise) when measured in real terms (gold). The dollar is only paper, and it is being printed like crazy. So to measure things in dollars becomes very confusing when looking to the future. The above-mentioned deflationists cannot imagine the hyperinflation event that I describe because they are stuck on their cycles and technical analysis that has always been measured in dollars. But in this crisis, the currency itself is the key. All else is noise.”

  22. ellidc says:

    It should be of interest to some that Warren Buffet declared in the NYT today against the greenback tidal wave. No political ability to fix the problem means market will discipline excess dollar creation. I think also this will be a different kind of inflation, not likely to follow the historical correlations with capacity utilization. It will be more the international dollar overhang coming home to roost in the form of dollar denominated asset price inflation.

  23. wally says:

    Oil and some other commodities are not a good stable measure because pricing systems have evolved that are not true market systems; they are quasi-monopolies or monopolies of agreement and consent.

    Prices may collapse if these cartel systems fall apart, but until then they can maintain per-unit profits at low production levels… which is fine for them, short-term.

  24. mcHAPPY says:

    @The Curmudgeon

    If looking at m/o/m, yes inflation. If looking at y/o/y, then deflation. We’ve come a long ways down since this time last year.

  25. constantnormal says:

    @Marcus Aurelius 12:08 pm

    “If there’s a deflationary scenario that will ever balance debt and growth (other than universal default or debt forgiveness) , I’d like to hear it.”

    How about if we had erased the banksters, applied a similar amount of money/credit/debt to managing the collateral damage instead of trying to keep the banksters alive, and buried the banksters’ toxic debt hoard in the same grave as the banksters and their egregious compensation and risk-taking?

    Then the newly-minted debt would be in the support of viable businesses whose goals were not opposed to the well-being of the rest of the nation/planet, and we would have an excellent moral hazard lesson to reinforce proper behavior? Might even be able to apply some dearly-needed reforms to the system, without so many pesky lobbyists being funded by out own bailout money.

    Oh wait — I see — you said “other than universal default or debt forgiveness”. I guess this sorta fits into those general shoes, in that it wipes away a ton of debt instead of adding debt to the debt we already have (which is all that our bailouts are doing).

    Never mind. :-)

  26. Bruce N Tennessee says:

    Markets reverse this morning on the oil news…ok…but which side of schizophrenia should we listen too?

    http://finance.yahoo.com/

    “Stocks turned positive on Wednesday as energy shares gained after a government oil inventory report showed a huge drop in crude supplies last week.’…..

    or

    http://www.nasdaq.com/asp/EconodayFrame.asp

    Highlights

    “Supplies are a little less bloated in the Aug. 14 week. Stocks of crude fell 8.4 million barrels to 343.6 million with stocks of gasoline down 2.1 million and distillates down 0.7 million. Oil prices shot nearly $1 higher in instant reaction to the results. Nevertheless, stocks are still swollen and demand is still surprisingly weak.”

    ….evalutation of spins is harder than figuring out why the twins didn’t come back from the Mother Country when Lefty returned….

  27. Marcus Aurelius says:

    wally:

    So, in your analysis, what’s the end game? General default?

    Financially, the result of no velocity in the supply of money will kill everyone involved. Our economy is a pyramid scheme — no money from the bottom means no money to the top.

    Before the Central Bank/Pseudo-government lets the system die on the vine, they’ll apply fertilizer to the roots. Why wouldn’t they? It costs them nothing and if they’re devious enough about doing it, they can stay on top forever.

    We’ll inflate, or we’ll perish (not saying that’s what we have now, but that it’s the only tool in the box).

  28. leftback says:

    Japan is probably a better comparison than the Great Depression, because Japan was the Poster Child for QE, Zombie Banks and other Central Bank Interventions of the kind with which we are now all too familiar. The Japanese asset deflation was accompanied by substantial waves in the equity market before the N225 hit bottom.

    Crude making a third approach to $72. Anyone who believes there isn’t a glut of oil and all of its products is clearly hallucinating, or more likely, is long crude for the day. This is quite obviously a leveraged carry trade, sell $ and buy all the commodity futures. When it suits GS and other trading desks to turn around and sell it, you name it, oil/copper/gasoline/gold will retreat sharply, like last year.

    mcHAPPY is right. y/o/y we are now seeing the deflationary effects of last fall’s oil price crash. That will stay in the y/o/y PPI numbers for a while.

  29. Marcus Aurelius says:

    jr Says:

    Persistent deflation springs the debt trap. I don’t expect it imminently, but a hyper will come. The FED is in checkmate :
    ________

    Yes, indeed.

  30. hopeImwrong says:

    First, to me, inflation is a rise in the “cost of living.” Which is also, a devaluation of the currency in “local” terms (as opposed to international terms). If you had a dollar you saved from last year, it will buy less value when spent on your living expenses. That’s what I’m calling inflation.

    I am seeing important basic business and household items rising in price. These are not discretionary items. I’m seeing this increasingly common in my daily routine. Others I ask see it also. Something is going on here. My dollar is buying less of the everyday discretionary items for home and business. Sometimes I can get a much lower quality item for the same price as a higher quality item was available before, but I’m still getting less value for my dollar when the quality is lower and the price is the same.

    Then, there are opposing forces, housing has been going down, wages are going down. But, I don’t see this as the determining factor of the value I can get for my dollar.

    The price increases I’m seeing in stores and suppliers are so reminiscent of the 70s, that I have only recently decided the erosion of buying power is starting, and it will accelerate.

    Inflation vs deflation? I don’t care what statistics you use. The reality is, I’m seeing less and less value for my dollar over time.

  31. mcHAPPY says:

    Looking at how the day has unfolded I am convinced this is orchestrated to get average people back in the stocks and commodity rally so GS/JPM/etc. can unwind their positions. I really agree with Robert Prechter at this moment – the markets are poised for a mother of a crash but don’t be surprised to see S&P at 1100 before it happens. If you leave a few tankers out to sea for a week longer there is your shortage of 8.4 million barrels.

  32. torrie-amos says:

    The india breakout imho kept us afloat for may june and july, fwiw, india is about to close a huge gap in a major index, imho, the dollar, copper and the velocity of this down move in india should tell a tale of what is in store………………

  33. wally says:

    Marcus Aurelius,
    I don’t suppose there is ever truly an end game, but it is very hard for me to see a world where an elite chugs along making money off each other (can’t do that in a zero-sum system). Your suggestion that they will fertilize the roots may be the only option. When they did that last time, I think they called it WWII. So much fertilizer has already been shipped off to people who hoard it or play speculative stock investing with it, that making new fertilizer to give to the masses would certainly blow everything to to the moon. I think, though, that we have to go through a lot of suffering before the political will is there to bestow largesse anybody but the elite. Take health insurance, for example…

    I’ll bet the French Revolution was an utterly impossible idea to the minds of Louis and Marie.

  34. hopeImwrong says:

    Correction to above – my doillar is buying less of the everyday NON-discretionary items…

  35. leftback says:

    The Euro put in a lower high and backed off. Hope it sticks.

    The FED is indeed trapped. They cannot use QE if they want to keep interest rates low. We would be infinitely better off allowing asset prices to fall than adding to an already enormous national debt. Given the fact that the FED, like the FDIC is approaching insolvency, one suspects that a new wave of the credit crisis may lie ahead of us.

  36. Thor says:

    @Hope “The price increases I’m seeing in stores and suppliers are so reminiscent of the 70s”

    I’m not seeing any price increases here in LA at all. My grocery bill has gone down, eating out has as well. Clothing is cheaper now than it was a year ago, I’ve also seen prices at both Home Depot and Lowes in my area decline. What price increases are you seeing and where?

  37. The Curmudgeon says:

    @mcHappy (cool handle)…

    agreed…inflation just started rearing its head along about the time the stock markets turned around. The crash in commodities prices reflected two things: demand destruction and credit/money destruction. Their resurgence for the most part does not reflect demand increases. China’s vast purchases of copper and other commodities of late appear to be an inflation hedge. China got burned in the commodities boom, and looked silly for having outsourced their monetary policy to the fed.

  38. manhattanguy says:

    Here in NY eating out is as expensive as it was 2 years ago. In fact most places have raised prices on food and drinks within the past year.

    But I agree grocery bill has been pretty stable for me as well. I use milk and eggs prices as an indicator of food price inflation. Both seem to be same or slightly less than a year ago.

  39. Thor says:

    How much more copper and such is China buying this year compared to last year and how long, in an inflationary environment, would those extra purchases be affective as a hedge?

  40. Marcus Aurelius says:

    There are solid signs of deflation. Potato chip makers recently increased the weight of their product, but not the prices ( just Google ‘Bigger bags of chips’). Fast food joints are advertising their $99 menus. The price of milk is down:

    http://www.forbes.com/feeds/ap/2009/08/17/ap6785646.html

    Housing prices are still declining, wages are declining.

    That said, there’s only one way to pull us out of this (and it’s not to make dollars more scarce).

  41. hopeImwrong says:

    @Thor

    I’m in Rochester NY.

    I’m seeing food prices rise. Not the mass produced stuff from off-shore, but the local produce in the groceries and at farm stands.

    Also, have a big garden. Basically a year around activity. Supplies I bought in the spring are generally higher in price right now (unless they are on clearance). Energy (admittedly volatile) is up.

    Driveway sealing supplies are higher (if you are in that business).

    Also, like I said, I factor in quality. If I could get jeans for $20 last year that would last for 1 year, and this year the “same” jeans are $17, but they last 6 months, I’m paying more (getting less value).

    This is new. It may not be widespread enough yet to show up. Prices were not rising like this previously. They were rising slower, almost imperceptibly.

  42. cvienne says:

    @lefty

    This move back from from 978 (towards 1,018) is starting to have the “look & feel” of the move back in June…

    Where the market did a retrace from 889 to 956 and stopped EXACTLY at 61.8% (or, 931)…

    If that’s the case, there’s room to 1,003…

    Interestingly…261.8% of 1018-978 = 914…

    Wherein lies a GAP DOWN & GAP UP to fill from back in June…(and would incidentally be within a few points of the WEEKLY close of the first week on ’09)

    Just saying…

  43. Marcus Aurelius says:

    Oops: $.99 menus. Mortons has the $99 menu.

  44. cvienne says:

    Re: Commodity Price Inflation

    I’ve said this a million times…

    If China, indeed, wants to diversify its holdings out of dollars, and into commodities like copper, oil, & iron ore… What good does it do them to BID AGAINST THEMSELVES as the marginal accumulators of these raw goods? (Unless someone sees REAL demand that I don’t see)…

    You’d think it would be wiser to do it in waves… Keep the dollar from collapsing for awhile & tank commodities price speculators, then reverse the trade…

  45. manhattanguy says:

    I also want to add that my maintenance and energy cost have gone up a lot since last year. I heard MTA is planning another price hike (currently at $2). Not complaining so much as I rarely take subway in the city. And what about education cost? Has anyone checked how much Business schools are asking these days?

  46. leftback says:

    It’s possible vendors in some areas where there is less competition (and less of a depression) may actually try to increase margins to prop up the business. In general, wherever there is saturation of the market (NYC/LA) there seem to be signs of price stability or even decreases. There is a lot of store brand and other forms of trading down.
    Strongly suspect that another downdraft in energy prices will cement the deflationary trend this winter.

  47. leftback says:

    manhattan: LB can tell you that MTA is already $2.25 and talking about another hike. The rats are healthy though.

  48. wally says:

    “I also want to add that my maintenance and energy cost have gone up a lot since last year.”

    Natural gas is the cheapest in 7 years; I expect a cheap winter here in Minnesota. The huge disconnect between oil prices and natural gas illustrates my point about cartel control of oil. It is not a market price; it is a managed price.

  49. Thor says:

    Cvienne – Thank you for making the point I was trying to get across .

  50. hopeImwrong says:

    Re: Milk and egg prices.

    Some farmers are losing money, many are switching to garbage feed for animals. Mass produced eggs are cheap, but not very good.

    Big operations have huge fixed costs, and must sell at a loss for a while to stay in business (hoping for higher future prices, or lower costs). What I think is coming, is a wave a farm bankruptcies (or closings). This has happened before.

  51. mcHAPPY says:

    Of course Manhattan is seeing prices rise. Where do you think most of the bonuses are being spent?

  52. call me ahab says:

    “BTW, we don’t have any job producing economy in the near horizon.”

    that’s the gist of it

    this commodity play is such a scam- gas prices over $4 a year ago based on specualtion alone- what is wrong with that picture?

    if it defaltion- and we are looking at decreased world production- than why the increase in commodities? It would seem there would be less demand- thus lower prices- economics 101-

    unless the bet is that the $ will crash- a true currency crisis- and everyone running to get their hands on real assets-

    lb makes a good point re Mish and Shilling- but Schiff may be right in the end-

    and maybe Jim Rogers is ulimately correct- isn’t he the one who said invest in farmland

  53. Battleaxe says:

    Is there really deflation yet? See this chart from John William’s Shadow Government Statistics site: http://www.shadowstats.com/imgs/sgs_cpi_home.gif?m=Nov2008. Real CPI is +1%, but the government adjusts it down to -2% (to keep social security payments down).

    I haven’t seen prices go down, except for home prices oand going out of business sales.

  54. hopeImwrong says:

    I was in the deflation camp, I’m not so sure anymore. Inflation may be a year or two out, but I think it will be serious when it gets here, and it will possibly be masked initially by asset and commodity deflation.

    I reserve the right to re-evaluate this position at any time.

  55. davossherman@gmail.com says:

    Collapse in any and everything nonessential.

    Until the dollar dies.

    China, is I believe, buying hard assets and likely laundering their worthless Bennie Boy IOUs.

    United States of Zimbabwe with Mugobama.

  56. teraflop says:

    Difference between asset classes that can or would be financed versus the rest.

    Consumption continues to consume commodities which are paid typically on terms akin to “2/10 Net 30″ whereas anything financed (RE) or has expected cash flows (businesses) is heavily discounted.

    I don’t make a call on commodities, just the velocity of money is different between consumables versus investments.

  57. cvienne says:

    @ahab

    “we are looking at decreased world production- than why the increase in commodities?”

    Why?

    So the “geniuses” at the City, JPM, GS, & Morgan Stanley trading desks can get their fat b0nuses!

  58. ben22 says:

    @Manny,

    I do not believe oil at $70 can be called confirmation of no deflation in commodities. Oil dropped faster last year when deflation took hold than it ever had before, roughly 80% over just several months. The action now is very speculative, not demand driven, and that can help be fueled here in the short term by all the optimism out there.

    Maybe someone can help me clear up to the two but I think there is confusion about the money supply and then that vs the fact that the total stock market value that is held in cash right now is still very high, so that money is in fact finding a home, not the “new printed money” Faber had a chart of this in his last letter. Can someone poke holes in that idea for me?

    As for the govt injecting liquidity, it’s been a complete failure from my view and is not anywhere near enough to cause inflation. Money is $52T in credit and only roughly $2T in actual cash/banknotes as I’m to understand it. The Fed’s growth in the Fed’s balance sheet from $900 billion to $2t nothing more than a rounding error when this is considered. They are expanding the balance sheet by buying up crap from the banks and what seems to still be going on is the collateral that underlies this debt is still losing value. As a result the reduction in the aggregate value of dollar-denominated debt is deflation, which is now occurring.

    What can cause the market to completely crash as well as all this credit is delevers so fast that the Fed will not even have the time to try to stop it, they can’t print fast enough.

    In any event, even if that never plays out, for me it seems that we’ve got a long long way to go with the credit deflation, it has hardly started.

    Thanks for the post BR, was really curious where you were at with this right now.

    Also, since there is so little actual cash vs. credit, if it continues it should be good for the dollar.

  59. manhattanguy says:

    @ahab
    Yes..Jim Rogers mentioned that Fund managers and Investment bankers should go into Farming because there is a shortage of farmers. He is referring to the fact there are too many I-bankers these days.

    My take on it is that at least Farmers are producing something. What are I-bankers doing anyways?

  60. mcHAPPY says:

    @hopeI’mwrong

    “I was in the deflation camp, I’m not so sure anymore. Inflation may be a year or two out, but I think it will be serious when it gets here, and it will possibly be masked initially by asset and commodity deflation.”

    Exactly! Too many people have aligned themselves with inflation. Very few win in the markets as everyone can’t be a winner (ie. for every buyer, there is a seller). Inflation has been talked about endlessly for months and months. Deflation is the short term issue, inflation is the long term issue. How many people look long term and HAVE THE GUTS TO STICK IT OUT? How many people change strategy mid-course? How many people jump in to the stock market AFTER a 50% gain? How many people do trading institutions screw based on behaviours, emotions (greed and fear), and good ol’ volatility? Each jump higher in the markets and commodities loses a few more short to long until soon the longs lose – again.

  61. Onlooker from Troy says:

    ““same” jeans are $17, but they last 6 months”

    Wow, hope, you must be pretty tough on jeans. I haven’t gone through clothes like that since I was 10. :)

  62. ben22 says:

    this has been said before but like the 90% of economists that say now that the recession is over, the VAST MAJORITY are betting on inflation and if for no other reason this will most likely not happen the way people think as a result.

    When my joe retail clients come and tell me they are concerned about all the inflation we are going to get something is up.

  63. hopeImwrong says:

    @onlooker – Try gardening. Wear and wash each day.

  64. [...] And why focus on deflation? Ritholtz looked at the same report from Rosenberg and posted this on his blog: [...]

  65. cvienne says:

    @manhattanguy

    “My take on it is that at least Farmers are producing something. What are I-bankers doing anyways?”

    I’ll tackle that…

    The I-bankers are at lunch scraping the 3 little corn niblets that came as a garnish to their $75 appetizer off their plate…

    The niblets were left over from the acres & acres of the rest of the crop that mostly went to ethanol production… Next year, there won’t be any ethanol, OR niblets because the the I-bankers dusted them off by bidding up fertilizer prices too high.

    So they’ll have to call I-Man to see if his edamame is fruiting yet…

  66. cvienne says:

    @OT

    onlooker was referring from the “belt size” going from 34-36-38-40…

    jk-onlooker ;-)

  67. I-Man says:

    LOL…

    This debate is so old hat. See? Not even karen got involved in this one today…

  68. cvienne says:

    I meant “hope”

  69. call me ahab says:

    “What are I-bankers doing anyways?’

    grabbing the last last pieces of wealth and hitting the life rafts before the ship goes down?

    but really- i don’t think those guys are even that smart- they will pobably be still be rolling aound in the their chest of money when the water blows through the hatchway to their stateroom

  70. cvienne says:

    @I-Man

    I know…I’m just trying to stay on topic while this thing does it’s FIBO back to 1003…

    Edamame anyone?

  71. cvienne says:

    @ahab

    I doubt any of then will get high schools named after them…

  72. leftback says:

    Today’s rally comes to you courtesy of PUMPCO, as Bill Gross decided to talk down the dollar this morning. The resulting rally in the Euro, sell-off in Treasuries and interesting interpretation of the oil inventory reports were all inevitable consequences of that initial event – a butterfly flapping its wings in Newport Beach. Nonsense rally.

  73. I-Man says:

    Speaking of inflation vs deflation…

    Feeling the cold steel old chap?

    This week of USO is starting to look like the SPX during the week of 7/17… all over again.

  74. 1001 says:

    = = = Leftback = = = =

    you are an idiot

  75. HCF says:

    @ahab:
    > i don’t think those guys are even that smart

    Agreed completely… Like with every profession, there are very few truly exceptional financial professionals. Perhaps John Paulson deserves every penny he’s earned. But for the run of the mill bankster in a bailed out company, imho, they pretty much “deserve” to be paid nothing more than an average accountant. And if more than that, certainly not several million dollars a year more…

    HCF

  76. Bruce N Tennessee says:

    http://finance.yahoo.com/tech-ticker/article/306287/Buffett-We're-Going-to-Be-Crushed-Under-Mountain-of-Debt?tickers=tbt,tlt,udn,uup,brk-a,brk-b,spy&sec=topStories&pos=9&asset=&ccode=

    Buffett: We’re Going to Be Crushed Under Mountain of Debt

    …The longer he keeps at the investing game, the less I understand him. We are basically a year since the treasury started the bailout game, and what, 6 months or so since we knew Bernanke was going to really start QE…so why state this now? This late?

    ….Reminds me of how he missed making money in the tech bubble…because he said he didn’t understand how to value tech stocks…(Yeah, I know….)…

    but it does seem a tad odd, that he would mention this now….

  77. HCF says:

    To add onto my comment about bankers above:

    Bankers, lawyers, accountants, etc. to me are considered “friction” to me. In the physical world, friction is necessary or nothing at all would hold together. However, as we’ve all seen, friction can make everything grind to a halt when there is too much.

    In other words, it would be chaos to have no bankers, lawyers, accountants, etc., but we could probably do better with maybe 1/10 of what we have. Society as a whole would do better with an excess of scientist, engineers, craftsmen, carpenters, farmers, and the such.

    HCF

  78. I-Man says:

    Left,

    You have more haters than Mike Vick bro- so you must be doing something right! :)

  79. call me ahab says:

    lb-

    making friends again?

  80. hopeImwrong says:

    @cvienne – Belt size inflation is a bear. The answer is the same: try gardening.

  81. Onlooker from Troy says:

    I think that even most (clearly not all though) of the inflationistas acknowledge that we’re liable to see some more deflation in the short run, maybe even a severe bout. So the question is timing, as usual. It will be a bitch to be holding commodities and such through that, even if the end result is severe inflation. Kind of like last year. I suppose it argues for a modest insurance allocation of gold maybe, then wait to see how things shape up; again.

    hope

    Oh I do plenty of gardening and such. But I’m strictly a shorts guy for the most part. Still, I’ve never gone through clothes like that. You wearing the same ones every day? That would do it, I suppose.

    cvienne

    “@OT

    onlooker was referring from the “belt size” going from 34-36-38-40…

    jk-onlooker ;-) ”

    Huh? You lost me there.

  82. call me ahab says:

    please excuse my egregious spelling and basic sentence structure errors- its really my typing skills that suck in conjunction w/ no spell check here at the office- but maybe- just maybe- I am not very bright

  83. ben22 says:

    Bruce says:

    so why state this now? This late?

    Bruce, he’s saying it now for the same reasons he’s been chriping about a second stimulus plans. When you own that many banks, well….. I wonder if some day, WB will be the one exposed when the tide (of debt) goes out.

  84. cvienne says:

    @Bruce in TN

    Re: Warren B

    Perhaps some “weather balloons” being launched here (as WB & Bill Gross came out in harmony this morning on that topic)…

    The dollar is lower today, but overall, it seems to be taking it in stride…

    Maybe WB actually wants to buy a few dollars or T-Bills here…

  85. ben22 says:

    Left,

    You have more haters than Mike Vick bro- so you must be doing something right!

    Yeah, what was that all about?

  86. leftback says:

    @1001: Eloquent. Are you a gold bug, a China bull or some other variety – just a random hater?
    Look, there are so many dollar bears it is an incredibly crowded trade, and the EUR is massively overbought.
    There are quite a few fellow “idiots” like Dave Rosenberg who think that the $ and the Treasury market is not dead.

    Here is the PIMCO dollar story. Over the long term they may be right, but not necessarily in the short term:
    http://www.bloomberg.com/apps/news?pid=20601170&sid=aLW8jvysIe5k

  87. hopeImwrong says:

    I’m really thinking I should short here. I expect a bear trap 1000-1008 on the S&P, 1600-1612 on the NDX. Or maybe we don’t break 1000 nor 1600.

  88. cvienne says:

    @hopeImwrong

    1003 would be a 61.8 FIBO retrace back to 1,018…

    Right now it’s NEON BOGEY as 998 (where we are right now) is a 50% FIBO…

    Then, you have a trendline that catches 1008 just about the point where the current wave would intersect…

    It’s ripe for a ramp to 1003 into the close (make the shorts sit on that overnight)…Scare ‘em up to covering into 1008 tomorrow morning, then gettin the hell out of Dodge…

    I’m just a spectator…

  89. Onlooker from Troy says:

    Bruce

    Indeed it is rather head scratching to try to follow old Warren these days. But the most transparent reason for this recent stance is that he got his bail out so now it’s time to tighten things up. But that doesn’t square with his other call for more stimulus. I don’t know what to think, but one thing I’m clear on is that he’s got his own interests in mind. He demonstrated that already. It surely has to be some kind of short term tactic (maybe to help assuage the bond market), because if the market takes another dive, his stock will take another big hit, as it’s a leveraged play on the market, with all that insurance biz.

    And this saintly good guy image is being eroded quickly; although not amongst the hard core cult. I’m sure they’ve got plenty of rationalizations in mind, as long as their stock pulls out of the doldrums.

  90. Mannwich says:

    1001 is really just Dennis Kneale.

  91. call me ahab says:

    my take is 1001 is short the $ or maybe long foreign currencies/gold-

    Schiff disciple possibly

  92. Daffyorbugs says:

    @cvienne

    If things are that fixed why hasn’t some disgruntled employee blown the whistle< or written a book?
    Zero Hedge is the only one who comes to mind.

  93. I-Man says:

    My take is 1001 is just some douche bag who’s feeling a little extra insecure today…

    But anyways…

    Must say I’m a bit impressed by the power of the clowns in USO today, I wouldnt have thought they could push it up past 38.44…

    I feel bad for anyone who got short AHEAD of inventory numbers this morning… I’m feeling pretty rotten about shorting it afterwards. I forgot the feeling of cold steel on I and I balls. Might have to dump half of my SCO depending on the close. Already getting uncomfortable.

  94. danm says:

    The people who jumped on the inflation bandwagon will prove to be correct – they will just be off on the timing by a few years.
    ————-
    I always seem to see the change 2-3 years in advance. So in my book inflation in 1-2 years.

  95. hopeImwrong says:

    I-man – I used out of the money SCO puts to limit my risk.

  96. hopeImwrong says:

    Just added to my index shorts

  97. leftback says:

    This short squeeze action today reminds me a lot of the later stages of last summer’s crude oil bubble. Lots of abusive oil bulls showed up on TBP and then disappeared overnight when the bubble popped. These specs will run for the hills as soon as the $ bears dump all their leveraged commodity trades. Then Cold Steel™ will be reversed.

  98. danm says:

    I see that word “hyper inflation” thrown around like candy – does anyone really expect us to have 1000% inflation a month?
    —–
    Well if you consider that the fed has taken maybe 1 trillion in bad loans off the banks books and exchanged them for freshly “printed” cash and that this could be leveraged 10X…

    And that it will probably do some more when CRE hits the fan.

    Anything is possible.

  99. hopeImwrong says:

    Came within one point of my stop on srs today. That doesn’t happen too often.

  100. hopeImwrong says:

    Anyone who says they are selling rips, should have sold some this afternoon.