| | | On 17 Jul 2019, at 3:02 PM, H wrote:
If consumer price inflation starts rising, stocks will collapse, just as they did in 1973-1974. When price inflation rises from a very low level, P/E multiples become compressed, and the higher P/E ratio are when it happens, the bigger the effect of the compression on prices. Last time the trailing SPX P/E ratio fell to less than 6. If that were to happen today, the index would decline by more than 80%.
High inflation is NOT "hyperinflation". In hyperinflation scenarios nominal stock prices will rise, at a pace that still ensures major losses in real terms. Anyway, we are light years away from a hyperinflation scenario and unless central bank legislation is completely upended, it is not going to happen. But double-digit inflation might - and that is extremely bearish for stocks.
On Wed, Jul 17, 2019 at 8:46 PM G wrote:
We can all agree the world operates on pure smoke and some mirrors, and the truth will come back, some day.
But what do we want? deflation of all these pumped up fake assets? or inflation including more up rising markets?
I'm not quite sure I know at the moment TBH
On Wednesday, July 17, 2019, 1:16:46 PM CDT, H wrote:
According to a recent Merrill Lynch survey, 99% of fund managers expect inflation to decline (vs. 80% who expected it to accelerate a year ago). A few months ago there was a Business Week Cover asking "Is Inflation Dead?". The rule of thumb is that headlines that end in a question mark are usually best answered with "no". When it's on the cover of Business Week, it becomes an apodeictic certainty. :)
Note: there are many reasons that expect consumer price inflation will remain subdued - but close to turning points, it always looks as if the prevailing trend was unstoppable. In late 1979/ early 1980 when gold and crude oil made their blow-off peaks, almost no-one expected inflation rates to come down, never mind trend down for the next 30 years and be replaced by concerns about deflation. And yet, here we are...
What could lead to a return of "price inflation"? A brief overview:
Business Cycles and Inflation, Part 1
Business Cycles and Inflation, Part 2
On Wed, Jul 17, 2019 at 6:07 PM H wrote:
Despite Argentina's relatively high yields, foreign holders of its bonds have lost a ton of money - USD-ARS rate attached.
On Wed, Jul 17, 2019 at 5:15 PM G wrote:
Your country has been selling 100 year bonds that are prob returning negative rates at this point. At least argentina century bonds are yielding 7.9%! But they'll never be paid back, so they really have a zero plus negative yield :)
pretty interesting 100 year old apples right there.
On Wednesday, July 17, 2019, 10:02:38 AM CDT, H wrote:
This is beyond insane. The important thing about interest rates being manipulated into negative territory: it is an apodictic certainty that this results in capital consumption.
The reason is that positive time premiums - this is to say, positive time preferences - are an inviolable category of purposeful human action/ behavior. Time preferences cannot possibly turn negative, as long as time is actually passing and there is a sooner and a later. Future goods will always trade at a discount to present goods, it cannot be otherwise, since we would simply stop consuming if they had no discount - all activity would become future-oriented and we would all starve to death.
This means that the natural, or originary interest rate cannot be negative. If market interest rates turn negative, they are therefore definitely below the natural rate - and this ensures capital malinvestment on a grand scale.
Mises on zero or negative rates:
If there were no originary interest, capital goods would not be devoted to immediate consumption and capital would not be consumed. On the contrary, under such an unthinkable and unimaginable state of affairs there would be no consumption at all, but only saving, accumulation of capital, and investment. Not the impossible disappearance of originary interest, but the abolition of payment of interest to the owners of capital, would result in capital consumption.
The capitalists would consume their capital goods and their capital precisely because there is originary interest and present want-satisfaction is preferred to later satisfaction. Therefore there cannot be any question of abolishing interest by any institutions, laws, and devices of bank manipulation. He who wants to "abolish" interest will have to induce people to value an apple available in a hundred years no less than a present apple.
What can be abolished by laws and decrees is merely the right of the capitalists to receive interest. But such laws would bring about capital consumption and would very soon throw mankind back into the original state of natural poverty.
On Wed, Jul 17, 2019 at 1:33 PM G wrote:
Insanity: Now Even Junk Bonds Have Negative Yields
| | Insanity: Now Even Junk Bonds Have Negative Yields
"This is one of those sentiment shifts that financial historians will single out for special attention when sift...
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On Wednesday, July 17, 2019, 5:58:18 AM CDT, J wrote:
H, the sausage-making process seems to say we are nearing end of sausage/making, and when so, ugly.
On 16 Jul 2019, at 7:33 PM, H wrote:
Something that to my surprise has elicited very little comment, but this is very important imo. There are now glaring divergences between the big cap indexes and the broader market and small caps. The fact that these divergences have evolved over a period of 18 months makes them extra significant - 2019 is likey to become an "interesting" year in the markets. Note also the loss of momentum (higher price highs combined with lower RSI highs) in the big caps.
On Tue, Jul 16, 2019 at 11:57 PM J wrote:
Do not worry
Too much
We are engaged w/ a big experiment
We are the objects of experimentation
’They’ will tweak and tune, for our own good
Things may break, and should stuff break, they were broken already anyway
If now, sooner or later would have, so sooner the better
On 16 Jul 2019, at 4:02 PM, G wrote:
i feel like we're all floating on some kind of velvet cloud of some kind
some of us are going to fall a few miles to earth
and some of us
are going to maintain air buoyancy.
this is now after all this time the most surreal. thus far. however, i expect more of the same. death is around the door for all players.
who will cheat death? |
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