Transitory Inflation???

Well, I'm back again shortly. Just wondering if anyone is heeding my warning about inflationary pressures that I forecast two years ago? Looks like the dollar index is now around .73 and many market "experts" claim it is heading lower. Silver is at $48 from $18 in just 9 months time. Gasoline is over $4.40 a gallon where I live. There is talk about prices rising for most final products as commodity prices have risen and companies can no longer disregard their increase. PIMCO has dropped their bonds in anticipation of a bond market implosion. QE2 is ending in June. What effect will this have on the stock market? Interest rate are still near zero, even as inflationary pressures are expanding. Unemployment is still near 9%. Housing prices continue to fall. And we now hear that inflationary pressures are transitory? Just what the H*LL does that mean? Does anyone think prices will come back down anytime soon? Or is the rate of inflation "transitory." Meaning once the prices go up, the rate of inflation will drop lower and the higher prices are here to stay?

For one thing, people are too concentrated on the U.S. and it's fiscal policy. Does anyone think China or Brazil will be lowering their demand for oil and commodities any time soon?

http://finance.fortune.cnn.com/2011/04/28/the-coming-commodity-price-nightmare/

 

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I too expressed heavy concern for this a few months ago. My warning was all but luaghed at by most who now should open their ears and eyes a little more. Get ready for the loss of the dollar as the world reserve currency and super/hyperinflation. When we loose the reserve status, it will change the lives of millions of people overnight and if you do not have PM's as a hedge you will loose everything. JMO

 

Hyperinflation/birthchels

 

Whassat?

 

It should be considered that high rates of inflation are not possible unless nominal GDP is rising rapidly along with national incomes. When it isn't, every increase in the price of one item is being offset by a decrease in the price or quantity of another. Without a rising nominal GDP, the general rise in the price level that constitutes inflation is not possible, particularly in a service economy. Also, large drops in the bond, stock, and housing markets are more a symptom of delfation than inflation. And the end of QE2 will be deflationary by definition. So it may turn out that Bernanke will be proven correct over time. The forces of inflation and deflation are still in a tug of war, and it isn't clear yet which will win, or even if stability returns. For every symptom of inflation, such as rising commodity prices, there is an offsetting symptom of deflation, such as falling real estate prices. Now I'm certain that many folks will have a strong opinion one way or another, and if they are correct they will announce that they knew it all along, but all they are really doing is calling a coin flip correctly. Sorry, but that's just the way it is.

 

Is anybody going to explain what a "birthchel" is?

 

In my perspective (after previous discussion with knowledgeable folks here =) inflation is how much the monetary supply is expanded beyond the rate of expansion of goods and services. So inflationary pressures to me do not mean the inflation rate, but the impact on prices (commodities vs. USD). I also think the housing market will continue to remain deflationary, but I don't know that that's enough to combat the current uptrend in inflation. In a free market I would expect rising prices at some point to stifle demand and then come back down. I don't think we will see a drop in oil prices though, because they've been having record profits for a while now. IMO part of the reason the price is high is because people are still paying for it, but inflation plays a role too, and as long as energy is up everything else will be too. So, while I interpret their verbage as saying prices will come back down, I do not think that will be the case.

 

You see, this is the reason why I don't come here much anymore and post. I'm trying to have a serious conversation about a real problem we are all experiencing in the world, and you're only concerned with "what is a birthchel?".

 

who says it's his only concern? maybe he's waiting for an answer then to respond to it and the OP...

 

You have to look at the bright side. These people are your competition in the investing world.

But you are correct, there is less reason to post now than in the past. The PM circus has arrived.

 

No, I think our competition in the investing world is the folks who sling billions a day, based on deep and accurate up-to-the-millisecond market intelligence, wide and fast direct pipes into the exchange datasystems, state-of-the-art support algorithms, and the drive that comes only with the knowledge that your eight-figure salary depends on your performance.

But I'm sure some of us here have that special something that will let them outperform the sharks.

 

I'm sorry that my tongue-in-cheek question has entirely derailed your Serious Thread. If you're unhappy with the tone here, you might possibly be able to find one or two other threads full of serious (and interminable) discussion.

 

I used to work with some of the folks you mention and your fears are largely unfounded. Their knowledge is a mile wide but an inch deep, and career pressure negates a lot of their advantage. The Goldmans of the world will always have a trading edge because of the speed of their systems and lower costs, but beyond a holding period of a few weeks, the playing field is pretty level because of the internet. That's why they largely cannot outperform the market. They are the market.

 

I'd like to think you're right. In particular, "they are the market" rings true -- but I still can't see how any individual can hope to outperform them in the long haul. I see people talking about technical analysis, double tops, head-and-shoulder patterns, and it all seems like astrology -- infallible at predicting the past, but no better than chance at predicting the future.

 

Commodity prices can also go down, sometimes sharply, and did just a few years ago. Now, they are unlikely to do so during an upturn in the business cycle as a general rule, but bad harvests can turn around in a year. Fall 2008 to fall 2010, world wheat production was down more than 5% as demand went up.

 

You refer to the technique of technical analysis, which is only one approach to investing. And in a sense you are correct. Whenever you read a post here or elsewhere that talks about the chart indicating some particular future price level [up or down], you can be certain that the writer has no understanding of the subject. Charts will never tell you where the price will be in the future. All technical analysis is designed to do is tell you whether some action is warranted right now because the probability of gain looks hgher than the probability of loss. That is all it does. When people start believing the charts are talking to them about the future, they have moved into the realm of astrology. Please note that this isn't meant to disparage astrology in any way. There are a few investors around with excellent track records by applying astrology to the market. Go figure.

The only way to get comfortable with the market is to study and start investing, at least on a small scale. It's like driving a car. No matter how much you read, there is a limit to how good you will be without getting behind the wheel.

 

It seems like I'm completely missing your point. How is "determining the probability of gain vs. the probability of loss" not "predicting the future"?

I mean, I can look at the current price of a good that I possess, compare it to the price I paid, and determine with 100% reliability whether I'll realize a gain or a loss if I sell it right now. That's not technical analysis, that's simple subtraction.

But if I use some technique to determine the likelihood that I'll profit or lose by buying or selling something later, I'm predicting the future.

What am I missing?

 

There are a few chart patterns where history has shown that there is a greater than 50% chance of gain if you buy at a particular price without specifying what the likely future price will be. Many of the techniques are extremely complex when you read about them, but most boil down to the observation that if something has been going up in price for a reasonably long time, it is likely to keep going up -- at least for a little while longer.

More importantly, if this doesn't make sense to you, and technical analysis isn't highly respected because it doesn't make sense to a lot of people, then you should avoid it and ignore those who use it. So you aren't really missing anything. You perfectly understand the difficulty involved.

 

Okay, so that is predicting the future -- just not in terms of exact price points. Specifically, it's assuming that past performance is a predictor of future results -- which it probably is, except when it isn't. But, yeah, probably more than 50% of the time.

From "things that are rising will likely continue to rise", it's a small step to "things that spike suddenly will often fall back a little bit the next day (as people take profits)", and other higher-order patterns. Soon, you're up to your eyeballs in intimidating equations, which do a pretty good job of predicting what will happen next, except when they don't.

But it is still predicting the future.

 

If it was easy, everyone would be rich. When done well, investing is simple, but it is never easy.