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Deflation - From Stagflation/Inflation

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May 14, 2011 – Comments (12) | RELATED TICKERS: FXI , SPY , BOM

yep. i expect to see the us transition from stagflation to deflation... watch as the caps players who are oober bulls who put on positions in the bottom of 2008-2009 start falling off the leader boards :-)

 

china's inflation should start choking off their economy but you really can't tell because they are a command economy.. and in the past their leadership was a supporter of the concept that it was ok if half of china starved so that the other half could eat well.

 

lol.. real estate, heading lower, globally, usa/euro/china/dubai/portugal/greece/ireland

commodities? bubble... canada/australia/brazil

stocks? overvalued by at least 30%.. as they still forecast net growth.. and that's not realistic.

bonds? well.. the us treasury bonds probably are going to rally... as the above plays out.. but in the long run the debt burden is unsustainable.

 

well, as we see those who have locked in higher standards of living through the real estate boom of the last 20 years... deteriorate, and business decline, deflation style unless we get more stimulus to put up additional stagflation... be careful. bet the trend. right now, stocks aren't as cheap as they seem. 

12 Comments – Post Your Own

#1) On May 14, 2011 at 9:22 AM, buffalonate (48.20) wrote:

Our economy still has a lot of room to grow.  Unemployment is still at 9% so our recovery is just beginning.  Last time I checked corporate earnings were doing really well so why would stocks be overvalued by 30%?  I read on article on Seeking Alpha by some guy that thought the market was overvalued by 50% to 70%.  I laughed out loud because it was just ridiculous.  He, like you, didn't use any statistics to prove his opinion.  The catalyst for our future growth is people gaining employment.  In the last 7 months our economy has added 1.3 million jobs and that rate appears to be increasing.  The prices of commodities is coming down which will provide more catalyst for growth in discretionary spending.  There are a lot of tech stocks that are extremely overvalued and I wouldn't touch but I have been finding a lot of cheap stocks in other sectors.

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#2) On May 14, 2011 at 10:51 AM, MoneyWorksforMe (< 20) wrote:

Bernanke has you fooled, again....A deflationary scare is a precursor to more QE/stimulus...

We go into outright deflation right now, we're completely screwed... 

I agree equities are overpriced here; by how much I'm not really sure...I think we see another mild to moderate (5-10%) correction, followed by more QE, putting the inflation trade back on as equities and commodities/precious metals reach new highs...

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#3) On May 14, 2011 at 2:20 PM, 100ozRound (28.53) wrote:

MoneyWorksforMe

x2

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#4) On May 14, 2011 at 6:32 PM, leohaas (30.14) wrote:

Really?

You seem to suggest there is stagflation right now. That is not the case. Stagflation is high inflation (which we don't have right now; but feel free to create you own statistics to "prove" me wrong), combined with high wage increases (which we don't have right now; but feel free to point to any union that has enough clout anywhere is this great nation to demand a large wage increase).

 

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#5) On May 14, 2011 at 10:44 PM, FreeMarkets (41.81) wrote:

@ leohass:

We did have stagflation in the 1970's.  Here are the stats:

Average Unemployment rate: 6.21%
Average Inflation rate: 7.04%
SOURCE

The above was considered severe enought for Volcker to raise interest rates to over 16%.

Today the Unemployment rate is: 9.00%
Inflation rate (measued the SAME way as in the 1970's) is: >10.00%
SOURCE

Average unemployment rate: 6.21%
  Average inflation rate 7.04%Average unemployment rate: 6.21%

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#6) On May 15, 2011 at 12:41 AM, whereaminow (< 20) wrote:

leo,

where did you get the idea that staglation is defined by high wage increases?

i see it repeated her by keynesian chuckleheads a lot.

it's a myth.

requires high inflation and low growth.

period.

don't be another keynesian chucklehead. you're better than that.

David in Qatar

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#7) On May 18, 2011 at 1:35 PM, chk999 (99.96) wrote:

I just don't see how we get deflation with so much money being created.

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#8) On May 19, 2011 at 1:01 AM, bradford86 (99.79) wrote:

chk:

http://welling.weedenco.com/html/20110429_Welling_Lapolla_REPRINT.pdf 

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#9) On May 19, 2011 at 1:05 AM, bradford86 (99.79) wrote:

in terms of inflation/deflation/stagflation presently..

 i think that we've seen stagflation. consumer prices have increased, unemployment has increased. the only thing that hasn't increased is real estate prices.

i am saying that going forward, a lot of this is because there has been a lot of speculation in commodities to fuel the boom in china that is set to crash probably in the 2nd half of this year.

 get excited :-) short iron ore, aluminum, copper, zinc, caterpillar, deere, freeport mcmoran, etc. 

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#10) On May 19, 2011 at 7:05 PM, chk999 (99.96) wrote:

I lived through stagflation and WIN (Whip Inflation Now) back in the '70's. This is nothing like it so far.

I've never actually heard of a case of a fiat currency having large deflation. Can you provide such an example? 

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#11) On May 24, 2011 at 2:44 AM, bradford86 (99.79) wrote:

hmm...

wouldnt that be any market crash?

deflation is challenged head on by 0% interest rates.

 i'm just saying in the short term i am seeing price pullbacks on everything because the demand we've seen for building and commodities is unsustainable, a lot of it is central planning from china and a lot of speculation.

 i am curious... what are you thinking is happening? nothing? standard economics?

i think that there is a lot of systemic risk... china overbuilt, property bubbles everywhere, commodity bubble, zombie banks.. medicare/medicaid/ SSC/ euro crisis.

In the past, has there always been so much uncertainty? 

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#12) On June 04, 2011 at 1:29 AM, ETFsRule (< 20) wrote:

 FreeMarkets (99.29) wrote: 

"Inflation rate (measued the SAME way as in the 1970's) is: >10.00%"

Wrong. Show me your calculations & methodologies if you want to make this point. Posting a link to a quote of someone else being wrong, doesn't make something right.

John Williams at Shadowstats is a clown, his inflation figures are made-up and ridiculous, he has no accountability, and he doesn't show his methods for arriving at any of those numbers.

chk999 (100.00) wrote:

"I just don't see how we get deflation with so much money being created."

We get deflation because of slow economic growth, high unemployment, massive layoffs and budget cuts by the federal gov't, house prices plummetting, food prices increasing at a snail's pace, and the M2 money supply growing at a rate that is much slower than its historical average.

How would we NOT have deflation?

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