The conventional wisdom is that Germans are too afraid of cranking up printing presses, having been burnt by hyperinflation in the 1920s, so they want stable money supply, while the PIIGS can only pay their debt by printing or defaulting. But if you forget the myth about stable Germany and look at the actual debt-to-gdp ratio, all of a sudden German debt doesn't look sustainable either. If the bond market decides to demand a higher yield, Germany too will be bankrupt. So I think that what we are seeing now is just a short-term beggar-thy-colony policy where the imperial heartland is trying to win some advantages for itself at the expense of the periphery, but in the longer term, EU will be printing money as fast as America. [more]
A new trend is in place: emerging markets all suffer horribly from food inflation, while the rich West hardly notices it at all. What's the matter? [more]
Few leaders are eager to join the Eurozone nowdays, as the debt crisis casts doubt on survival of the currency union, but such candidates still exist. Today, the beleaguered Eurozone had to consider one particularly unlikely candidate: Putin. [more]
Interesting. So, during the whole last week, when Irish debt traded at 9% yield like a junk bond, the analysts from S&P believed that Irish debt deserved AA- rating. Then the news came that EU would bail out that bankrupt government. The financial geniuses from S&P thought about it and concluded that Irish bonds are now less safe than they were before the bailout announcement. I am wondering if anyone is still taking these clowns seriously. [more]
We are approaching the S&P 1170 price level which I identified earlier as the most likely bottom for this pullback. I don't have a high confidence for this call. It's a low-confidence call as compared with my prediction of a bottom in September, but I will make it anyway. I think we'll get more "positive" news in December (positive for stock speculators, that is), enough good news to manage a Christmas rally. I understand those who will prefer to wait for lower prices, but I would still take some long positions tomorrow. My reasons? Whatever pessimists may say, $600 Billion is a big chunk of liquidity, and barring unforeseen events, Bernanke should eventually succeed in adding a stock bubble to his list of bubbles, if in nothing else. And the price of 1180 is less expensive than 1230! [more]
When I first read his op-ed in the Times, I was surprised by the sycophantic tone of his comments. He certainly didn't sound like the same WEB we used to know. If you read any of his previous articles and compare it with this latest piece, you might think they were written by two different people. (As a side note, I wouldn't be surprised to learn that were in fact written by two different people. Why have secretaries if you can't let them do some piece of creative writing?) [more]
That was really stupid. To work 80 years for his stellar reputation - and to ruin it in one day with this article.
One day after the $4 Billion scam at Transneft is revealed, Putin publicly thanks Transneft management, presumably to give people a clearer idea about who is covering up this theft. This is a welcome step that will help make corruption in Russia more transparent. Until now, he would usually take his time to reward the thieves. [more]
And now China is considering price controls. That's an act of desperation when interest rake hikes don't help and doing nothing won't help either. As a palliative measure it might help, but the reason they had to go back to the practices of Chairman Mao is that they never created a viable domestic market that can ignore price swings of rice because it's a minor expense. The bottom line: all mercantilist economies run at full speed into a concrete wall sooner or a later. [more]
I've been predicting the crash of China for a while now, but the bubble has been refusing to burst. But fundamentals always win in the long run. Finally, this week, after a long period of irrationality, the first fishes floated belly up. [more]
On the gold standard (and its twin GEP, i.e. gold equivalence provision) proposal, I am agnostic. I don't think it would change much, and I don't think it would do any damage. Here is why. [more]
Just in case you thought of Putin as a pathetic bumbler, here is one area where he succeeded in making his country a world leader. Transparency International has just updated its Corruption Perception Index, and Russia moved closer than ever to the top spot. [more]
I am content to see this pullback, which proves that just as I said last week, there was no particular rush to buy stocks at 1230 just because of this QE2 monster. After all, Bernanke did not just give $600 Bln to companies as a free gift, so a money-losing bankruptcy candidate still remains a money-losing bankruptcy candidate...
In its current form, the budget proposal is not as horrible as one might expect, but it's still bad enough. [more]
Doesn't it feel like the good old times just before Lehman's collapse? Inflation panic, commodities going parabolic, triple-digit oil, stock market optimistic because of expectation of liquidity from the Fed but concerned about purchasing power of consumers being eroded by Peak Oil, a counterintuitive rise of bonds, crappy stocks outperforming good ones, emerging markets mania...Something very strange is going on. I'll be surprised if we don't see some dramatic trend change in the next few months. [more]
It's a great time to prepare for inflation. Or for deflation. Doesn't matter, really. Because the outcome is the same. You buy gold to prepare for inflation. What about deflation? That's too is OK, gold does well in deflationary times. Or so the goldbug's party line goes. [more]
Vice finance minister thinks the US has some "obligation" to keep its money supply stable just because China decided it wants to use the dollar as the reserve currency. (How about this: MSFT has an obligation to announce a generous buyback program because I decided its shares were worth $100?). The truth is that the US never signed any such obligations. Plain and simple, China just overpaid for junk paper issued by Bernanke & Co. It is Chinese vice finance ministry officials who have an obligations to China not to be idiots and to look carefully at the securities they are buying. [more]
The ex-mayor of Moscow (that's Moscow, Russia, of course, not Moscow, Idaho!) used to claim his wife would become richer still if she were not married to a mayor. Let's see how that turned out in practice:
Bernanke's op-ed in Washington post was usual boring stuff, but one part of it is very important. For the first time ever, the Printing Press chief mentioned inflating a stock bubble as an important goal. [more]
It can be heart-wrenching to own any dollar savings and hear every day from the media that you should be robbed through inflation to give house speculators the rate of return they were counting upon. But this justified emotional distress is only the half of the challenge. The other, and by far more difficult part, is to resit that little voice that's telling you: 'I must do something!" Sorry, but the time to do something was two years ago, and today too many traps have been set for the savers who came to the party late. The house speculators will only be happy to take their inflation gains and your savings to boot. Yes, it's too bad your savings will be cut in half by inflation, but trust me, it won't make you feel better if you lose the other half in stocks, gold, or commodities. [more]
How could I deny Krugman his Idiot of the Day award, which he so amply deserved with this complaint: [more]
Soros makes a $1M bet on the intelligence of the American voters and loses it. This is a bet nobody has won yet.
Humility has never been Krugman's main character flaw, to put it very mildly, but in his last few blogs he allowed his arrogance to go supernova. [more]
The people win today's Idiot award collectively by going to the polls to vote.
Here is my current take on the market in anticipation of QE2. [more]