Saturday, Feb 07, 2009
The deflation smokescreen.
Telegraph: Our economy is being held to ransom by deflation fear
Our currency has lost a third of its value in twelve months – pushing up import prices. But inflation isn't a problem. Inflation is yesterday's news.
Politicians and commentators, instead, warn of deflation around every corner. I don't deny deflation is bad. Falling prices warp incentives, increase real debts and – if expected to continue – hammer retail spending. Such problems plunged Japan into a decade-long recession in the 1990s.
But UK policymakers evoke the spectre of deflation not because it's an immediate danger; it's instead been conjured up as an excuse – so ministers can yank monetary policy back from the Bank and throw fiscal caution to the wind, using fear to trump objections based on common sense and economic lessons hard-won over many decades.
44 Comments
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1. quiet guy said...
An amazing and depressing post, techieman.
"UK policymakers evoke the spectre of deflation not because it's an immediate danger; it's instead been conjured up as an excuse – so ministers can yank monetary policy back from the Bank and throw fiscal caution to the wind,"
To me that's a conspiracy!
"The reality is that the price-dampening impact of the slowdown will soon be overwhelmed by huge inflationary pressures generated by the grotesque policy errors now being made in our name."
Vindication for the gold bugs?
It seems to me that I should stop worrying about house prices and concentrate on financial survival.
2. quiet guy said...
Oops. Sorry tyrell & techieman. I must be getting tired.
3. Flashman said...
The lead premise of this article is that Sterling has lost a third of it's value. Sterling has been vastly overvalued for several years. 1.5 Dollars to the pound used to be considered 'about right'. The overvaluation of the pound was significantly responsible for the imbalances in our economy. Our manufacturing industry didn't stand a chance while imports became artificially cheap. UK interest rates were consistently higher than those of our neighbours which encouraged huge inflows of capital. These huge inflows of capital directly led to spiralling house prices and consumer debt. The newly lowered interest rates will ultimately cut off supplies of excess capital and cause house prices to fall. Our newly devalued currency will cause a resurgence of manufacturing and curtail imports. Any period of economic adjustment will inevitably be painful but the alternative is a return to high streets dominated by estate agents and kitchen showrooms. The British obsession with property and shopping is a hard nut to crack. Reducing capital inflows is the only hammer hard enough to crack that nut. It is also bogus to claim that the deflation story is a lie. If interest rates were not at an all time low then there would already be a serious deflation problem (inflation is already close to zero in the Euro-zone because their interest rates are higher). The Japanese suffered badly from inflation but they did not have our debt problem. Imagine how bad we'd be hit with our enormous debts? Deflation of course also leads to an increase in 'real' interest rates which are far more important than nominal interest rates. This article is as full of hubris as the claptrap eminating from our politicians. We need more balanced articles from the 'expert' media.
4. flashman said...
The lead premise of this article is that Sterling has lost a third of it's value. Sterling has been vastly overvalued for several years. 1.5 Dollars to the pound used to be considered 'about right'. The overvaluation of the pound was significantly responsible for the imbalances in our economy. Our manufacturing industry didn't stand a chance while imports became artificially cheap. UK interest rates were consistently higher than those of our neighbours which encouraged huge inflows of capital. These huge inflows of capital directly led to spiralling house prices and consumer debt. The newly lowered interest rates will ultimately cut off supplies of excess capital and cause house prices to fall. Our newly devalued currency will cause a resurgence of manufacturing and curtail imports. Any period of economic adjustment will inevitably be painful but the alternative is a return to high streets dominated by estate agents and kitchen showrooms. The British obsession with property and shopping is a hard nut to crack. Reducing capital inflows is the only hammer hard enough to crack that nut. It is also bogus to claim that the deflation story is a lie. If interest rates were not at an all time low then there would already be a serious deflation problem (inflation is already close to zero in the Euro-zone because their interest rates are higher). The Japanese suffered badly from inflation but they did not have our debt problem. Imagine how bad we'd be hit with our enormous debts? Deflation of course also leads to an increase in 'real' interest rates which are far more important than nominal interest rates. This article is as full of hubris as the claptrap eminating from our politicians. We need more balanced articles from the 'expert' media.
5. paul said...
flashman, you have completely the wrong end of the stick.
Firstly, falling interest rates categorically do not lead to falling house prices. you seem to be utterly ignoring the MPC's voting record over the last five years which has been shown by a numerical analysis to be targeting high house prices. inflation, UK manufacturing, the price of imports, currency stability, economic sustainability, none of these things have mattered to the MPC. And this can be proven.
The article is right to say boo to the deflation ghost. There will not be deflation on the high street, because the MPC are using sterling's devaluation to propel inflation. Doemstic goods will almost certainly deflate - the housing market is in chronic deflation right now - and rightly so.
To give you an idea, what used to happen when we had a recession? Yep, interest rates used to go up to repair banks' balance sheets and encourage saving. But now we have the opposite. Why is that? Because the independence of the Bank of England's rate setting function has been compromised for some time! Why do you think that just about every cabinet member has - at some time - correctly 'predicted' the rate movement outcome of a forthcoming MPC meeting!
Why are they reducing interest rates instead of raising them? The short answer is to inflate away massive government debt. In other words, the government has chosen to use monetary policy to solve their own problems first while creating a massive problem for anyone foolish enough to be prudent.
So now you know why we have a debt problem, and why the government is using the mysterious spectre of deflation to excuse themselves unsustainably low interest rates with unacceptably high inflation.
6. cyril said...
I don't know if you would call it a conspiracy, but the art of politics is being able to present things as the opposite of what they are in reality - so you get the best of both worlds and twice as many votes.
The Bank of England MPC has never been independent. It is stuffed full of group-thinking cronies waiting for their knighthoods, with a couple of harmless mavericks to give it a bit of credibility. But it made our economic policy look more soundly-based because it appeared to be independent of governement. Now the experiment has so obviously failed, the MPC might as well be brought back in-house.
7. cyril said...
I don't know if you would call it a conspiracy, but the art of politics is being able to present things as the opposite of what they are in reality - so you get the best of both worlds and twice as many votes.
The Bank of England MPC has never been independent. It is stuffed full of group-thinking cronies waiting for their knighthoods, with a couple of harmless mavericks to give it a bit of credibility. But it made our economic policy look more soundly-based because it appeared to be independent of governement. Now the experiment has so obviously failed, the MPC might as well be brought back in-house.
8. cyril said...
I don't know if you would call it a conspiracy, but the art of politics is being able to present things as the opposite of what they are in reality - so you get the best of both worlds and twice as many votes.
The Bank of England MPC has never been independent. It is stuffed full of group-thinking cronies waiting for their knighthoods, with a couple of harmless mavericks to give it a bit of credibility. But it made our economic policy look more soundly-based because it appeared to be independent of governement. Now the experiment has so obviously failed, the MPC might as well be brought back in-house.
9. flashman said...
Paul, I said that reduced capital inflows will lead to falling house prices (lower interest rates inevitably lead to lower capital inflows which in turn reduces the supply of mortgage finance). This is what the carry trade was all about. There is no "numerical analysis" and no actual "proof" of the sort you are suggesting. I've been an economic analyst and currency trader for two decades and I've never come across any such analysis or proof (if I'm wrong show me a link to the numerical evidence and proof). Conspiracy theories and wishful thinking do not constitute proof. The government are bombarding us with self serving nonsense and the press are trying to sell newspapers. The rest of us should try to remain balanced and reasoned. Nothing is black and white. There is no single policy that is completely correct a nothing the government does will be fair to everyone. Surely this site would be more useful if its contributors didn't seethe when an opinion was offered that did not cheerlead for the standard dogma. I am of the opinion that house prices will fall a long way. I just don't agree that the government/BOE are trying to destroy us all to enrich a few insiders
10. flashman said...
Paul, One of my children (she's doing an economis GCSE) has just suggested that I point out to you that the BOE only has a mandate for controlling inflation. So of course you are correct when you complain that "UK manufacturing, the price of imports, currency stability, economic sustainability, none of these things have mattered to the MPC".
11. phdinbubbles said...
@flashman
The BoE has had a discretionary mandate to control house price inflation if they wished since 2003 - housing costs were removed from the inflation index they were supposed to be controlling but they also could set interest rates according to housing costs if they saw fit.
It's interesting to hear what you've got to say - I always thought house prices were going to crash because I considered a different point of view to what everyone kept saying around me (usually that they wouldn't crash because IRs are low) - it's good to hear someone with different views on this site. Where I tend to disagree with you is that I think house prices are going to continue to go down because of a lack of demand for mortgages rather than because of mortgage finance supply issues - a lack of demand because of 1. Unemployment increasing 2. FTBs priced out for years quite happy to sit and wait with falling prices. 3. The artificial demand created during the boom by a fear of having to pay more if you waited has now gone - the supertanker has been turned round now and I don't think it's that easy to stop even if ther banks are capable of lending more.
12. quiet guy said...
flashman,
Thanks for your contributions. I agree that we shouldn't take dogmatic positions. My reference to a "conspiracy" was supposed to be tongue-in-cheek - I have argued against conspiracy theories in the past on this blog.
You say that there is no single policy that is completely correct and nothing the government does will be fair to everyone. Personally speaking, I agree with Paul that the government will seek to inflate their way out of debt i.e. they are favouring the interests of debtors over savers due to the scale government liabilities and the political consequences of HPC. Of course, I am not a finance professional.
13. paul said...
There is no "numerical analysis" and no actual "proof" of the sort you are suggesting. I've been an economic analyst and currency trader for two decades and I've never come across any such analysis or proof (if I'm wrong show me a link to the numerical evidence and proof). Conspiracy theories and wishful thinking do not constitute proof.
flashman, many things can be proven with numerical analysis - it is surpricingly useful. For example, did you know that most doctors misdiagnose because of availability errors? Or that sumo wrestling matches can be shown to be rigged. All through statistical analysis - and I'm not talking about numerology - just mathematics.
Now have a look at the following link, and consider another career.
Bank of England Interest Rate Policy Targets UK House Price Inflation
14. paul said...
flashman, as my pet cat has just pointed out, your child needs to study harder.
The Bank sets interest rates to keep inflation low, issues banknotes and works to maintain a stable financial system.
Therefore my statement currency stability, economic sustainability is quite correct, and your child needs to crack on with some serious studying rather than listening to your wayward logic!
15. paul said...
And I don't think there is any conspiracy at all - I don't think there is any cabal of powerbrokers looking to take over the world through the Bank of England.
No, just good old-fashioned incompetence and misguided thinking within the government, treasury and Bank of England.
Have a look at the now infamous Mansion House speech from 2006 to see just how wide of the mark the great and good were.
Gordon Brown's Mansion House speech
Interestingly, (conspiracy theories aside), the speech has now been removed from the HM Treasury website. If you read the speech, you'll quickly see why.
16. paul said...
Sorry to have to go on, and flood this thread, but the following is a gem.
I believe that we were right not to go down that road which in the United States led to Sarbannes-Oxley, and we were right to build upon our light touch system through the leadership of Sir Callum McCarthy - fair, proportionate, predictable and increasingly risk based. I know Sir Callum is committed to reducing regulatory administrative burdens and the National Audit Office will now look at the efficiency and value for money of our system.
Gordon Brown, Mansion House Speech 2006, Wed 21 June 2006.
17. Adarmo said...
So what you're saying Paul is that anything can be proven with analysis? So you can prove yourself right or wrong? Also, deflation is a purely monetary phenomenon, and the BoE is right to be concerned about it. Do you think anybody wants to go back to the way things were in the '30s? Also, the Google search you pulled up isn't that impressive, the Bank of England does have a duty to maintain financial stability, but this is via monetary policy and it's repo system. I MHO the government is really screwing up. Capital, both human and financial, is leaving the country and the brain drain is highest for 50 years. These short term 'fixes' implemented by myopic government are causing long term damage, and once these people are gone I doubt they'll come back until they want the free health care we all so generously pay for. As for me, I'm taking my Economics degree, and my CFA (and my first class degree holding chartered accountant girlfriend) and going somewhere where land is cheap, the air clean, the people friendly and natural resources abundant. See you in British Columbia.
18. enuii said...
Having read all the above comments the blunt truth is that Britain is burn't out and it's subjects are tired and mentally exhausted. The young do not want to saddle themselves with ridiculous income multiples to purchase a house and anyone over 40 would be insane to take a large mortgage on with old age and impending retirement either forced or voluntary looming.
Many younger (<45) people relied on their chosen profession or trade providing a steadily increasing income as the years passed to absorb the effects of increased borrowings without realising that generally age brings an income plateau and forgot that this may well coincide with the financial burden of older children. If you left having kids to your 30's or 40's you will have a nasty surprise financial waiting around the corner.
How many people are currently kidding themselves about their retirement, can you afford to pay a mortgage from a money purchase pension scheme? An increasing number of people (of all intelligence levels) in this country are slowly realising that taking on ever increasing levels of debt is financial suicide especially if you are over 45.
On the brighter side youngsters will learn from their parents bitter experiences and may well end up more financially astute than their parents were in the nineties and noughties.
As for the UK reality will sink in as we economically end up like Ireland, a cold grey and grubby version of Italy, Spain, Greece but with too many people on too small an island to be economically viable.
If the UK were a business it would be in administration lets just hope New Labour don't push us into receivership.
19. p. doff said...
Flashman.
Respect!
20. Flashman said...
Paul, by way of proof you offer a complete banality, "did you know that most doctors misdiagnose because of availability errors? Or that sumo wrestling matches can be shown to be rigged". You then provided a link to a chart that completely disproves your earlier claims (the first half of your chart correlates the wrong way). I am sorry if my post (and possibly my profession) causes you emotional distress. I often read this site (gauging a diversity of opinion is very it is useful to me professionally) and I felt compelled to contribute rather than just absorb. I will not, however, post again.
PHD in bubbles, I understand your point but there in fact only a loose correlation between interest rates and house prices. There is however a near 100% correlation between availability of capital/credit and and bubbles of all types. All I was pointing out is that lower interest rates will have the (possibly inadvertent) effect of reducing capital inflows/credit availability. Low interest rates are indicative of our economy being buggered. House prices cannot rise in a buggered economy and they also cannot rise when there is a shortage of capital. I was attempting to assure you that house prices will not rise because interest rates are low. Only a booming economy and an abundance of capital/credit will do that. I'm off to the pub. Good luck to you all..and you Paul.
21. flashman said...
Paul, by way of proof you offer a complete banality, "did you know that most doctors misdiagnose because of availability errors? Or that sumo wrestling matches can be shown to be rigged". You then provided a link to a chart that completely disproves your earlier claims (the first half of your chart correlates the wrong way). I am sorry if my post (and possibly my profession) causes you emotional distress. I often read this site (gauging a diversity of opinion is very it is useful to me professionally) and I felt compelled to contribute rather than just absorb. I will not, however, post again.
PHD in bubbles, I understand your point but there in fact only a loose correlation between interest rates and house prices. There is however a near 100% correlation between availability of capital/credit and and bubbles of all types. All I was pointing out is that lower interest rates will have the (possibly inadvertent) effect of reducing capital inflows/credit availability. Low interest rates are indicative of our economy being buggered. House prices cannot rise in a buggered economy and they also cannot rise when there is a shortage of capital. I was attempting to assure you that house prices will not rise because interest rates are low. Only a booming economy and an abundance of capital/credit will do that. I'm off to the pub. Good luck to you all..and you Paul.
22. hpwatcher said...
All I was pointing out is that lower interest rates will have the (possibly inadvertent) effect of reducing capital inflows/credit availability. Low interest rates are indicative of our economy being buggered.
I agree with this, the real effect of low ir's are capital flight.
Moreover as Gordon Brown said, ''a weak currency is the sign of a weak government''.......
23. paul said...
flashman, you seem to have thrown your toys out as an emotional reaction to an application of simple mathematics.
You initially tried to counter my argument with an appeal to authority (" ... and I should know because I am an authority on the subject"). And then a beg the question argument ("You must be wrong because even my child knows you are wrong").
These kinds of false argument won't cut it here, and I'm sorry that you feel unwilling or unable to contribute something of more substance. Thanks for coming anyway though.
24. techieman said...
Paul you will often be wrong about alot of stuff - as are we all! I think your current classic is the that £ is going to fall through the floor (when its already plummeted as much as and as quickly as would be a classified as a sterling crisis in most other periods of our history - ask Flashman!).
I am sure i can find a post of you wittering on about that just as i said i didnt expect the pound to reach Euro parity and it to rise against the Euro right at the end of 08. The fact is that the pound has risen substantially against the Euro since then and noone on here (least of all you) seem to want to discuss it. By that i mean where they think it will go and why. As you know i am not "news fed". You can see an example of this in the markets Friday - the unemployment numbers in the US were poor and yet the S&Ps went higher. I could have told you before that the market looked like it wanted to go higher, and i actually contemplated posting (before the event) that on the basis of whatever the number the US markets would grind higher unless the Non farm was extraordinarily high.
I have no interest in someone telling me whats happening but i do have an interest in someone explaining to me what they think will happen and why. There is no point in analysing where we are (thats the job of reporters) its where we could and will go thats the issue.
I actually dont mind you telling me that the pound is going to collapse - thats your view and thats fine. What i do object to is anyone being so dogmatic so as to say i am right and you are wrong. Relative to that if i had sold the pound and was holding an aggressive Euros position i would be farquaharsened.
You remind me a little of the guy that Matt Damon "owns" in Good Will Hunting when he goes to the bar have a look - http://www.youtube.com/watch?v=nQezXbiroiE.
By the way Freakonomics is a good book but the views of it would be better raised in context.
As for you Flashman - yes its good to get diverse opinions as possible, whether right or wrong - if they are backed by co-hesive argument then fine. I am prepared to alter my position on lots of things - i have no pride of position personally. (something i have in common with George Soros - apparently; although thats about all i have in common .... sadly!)
Flashman do you think cable is approaching (at least an intermediary) low? By the way i've just come back from the pub.
25. Cymail said...
It pays not to get too emotionally attached to our ideas. It is impossible to have available all the inputs necessary to predict with certitude the future direction of a given market. At best our predictions are educated guesses. You can rail at the govt., the MPC, banks, individuals all you want but at the end of the day, none of these groups in isolation control all the inputs and thus the market.
And the best predictor of the direction of a given market? The market itself!
26. shining wit said...
Flashman........ "I felt compelled to contribute rather than just absorb. I will not, however, post again."
Wahtever the attitiude of a few regulars are, I for one want to hear much more from the 'front line' as it were. I've found your recent posts some of the most insightful and interesting views here, in the nearly 5 years I've been reading it.
27. paul said...
If I'm wonrg, let people come and tell me why! But patronizing with false arguments doesn't offer any value.
Yes, I do think the pound will collapse - when the BoE starts buying up assets in earnest. This after all is what they are preparing us for in their latest missive on the state of the economy - keep watching.
28. techieman said...
But paul that is the point isnt it - these things are already priced in! The bad bank is already the perceived wisdom, simple! Therefore the shock may be when the government refuses to support such a concept. Markets are (except for major shocks) lead indicators, emploment for example is a lagging indicator.
Ok so now you are qualifying your argument of a collapsing pound by stating that will happen when the BoE buys assets. But what happens if the bad bank is co-ordinated across all frontiers then what will the pound be being sold against? How will the ECB deal with a Eurozone wide scenario? Its the market re-action to the news thats the important thing.
Are you saying that the pound collapses against what the rouble? euro ? dollar? swissy? aussie? or is it against the price of precious metals or commodities? And when is that going to happen? Really i am interested to know when i need to aggresively sell the pound and against what?
By not refuting my analysis of your previous posts you seem to be confirming my perception of the content of them. As regards the article yes the deflation in my view is very real, in that way i concur with Flashman. But i suppose we have something in common - we both make our living pitting wits against the perceived wisdom of the masses and (mostly) are happy to take a contrary position.
I may be right and i may be wrong but so far the direction of and (dare i say it) size of my personal account indicates mostly the former.
You may do well to review such past posts and then you can attempt to say "patronizing with false arguments doesn't offer any value".(i am assuming that is aimed in my direction) I question whether your opinion is itself of any value except for an opposite indicator along with other divergence indicators.
When you put your neck on the line be prepared to have it chopped off. Dogma is the thing that will ultimately kill you "i know i am right when will this market listen" is the epitaph of many an unsuccessful market operator.
29. bellwether said...
Paul generally your views do not strike me as indepenant or even well thought out. TM is right theories need to be tested and what better way than putting your money into them. Reality soon proves you to be fallible and teaches you to always assume that.
Flashman I hope you are not serious about stopping posting , would seem a bit of an overreaction and selfishly have been finding your contributions useful.
30. techieman said...
bellwether ... The witness should be allowed to answer... :-).
Re Flashman - yes i second your point. I like diverse opinion even form house price market bulls!
31. flashman said...
It seems I was wrong. Most people on this site are more than reasonable. It is always an interesting read.
techieman, you are entirely correct in your perception of currency prediction. In response to your question re cable being at an intermediate low...I have no idea. No one does. As you intimated in your previous post, the current price of anything represents an immediate consensus of opinion. If there was a consensus that sterling was headed lower, then it would already be lower. Professional forex traders gauge the current atmosphere and react immediately. The current atmosphere is mercurial and never stops shifting (this is why I read this and many other sites) The only people who take long term views on a currency are hedging (IE retailers guarding against fluctuations that might ruin the profit margin/viability of an imported line). I would like to show you all how wise I am by predicting the future of movements of Sterling but sadly I am unable to do so. Beware of people making long term predictions. They are either charlatans or fools.
32. bellwether said...
Paul having said that I currently tend to your view that sterling as a store of value is going to prove to be terrible relative to just about everything. I think the the UK is uniquely badly placed and will emerge from this a far poorer and smaller country in world terms. I have posted pretty extensively why I think that is the case elsewhere.
That said I moved my most of my money back into sterling from yen at £1/123 ie this is a longer term view and not one I'd put the house on - if I owned one.
33. bellwether said...
Flashman suggesting most people on this site are reasonable is probably pushing it but good to see you are not seriously in the huff.
I think longer term views are the most interesting although as we seem to be saying they fall down as dogma when not constantly tested or altered in light of what is happening.
34. techieman said...
flashman - yes i agree that no one really knows and obviously your view and mine re this are in unison. However - obviously i believe in various typeso tech analysis to look for levels of potential trend continuation / reversal. My philsopy is looking for a reasonable risk reward at tech levels and arranging stops, targets accordingly.
My style is not one of continual positions - been there done that on LIFFE - in all or even a market but looking for sensible areas to initiate a position either with the trend anticipating its continuation or looking for a reversal. I look for what i consider high reward / low risk trades - and would typically look for big moves (10 cents for example at the moment).
It looks to me that you place little faith on the techs - i dont have an issue with that , whatever works for you works and whatever doesnt doesnt!
Anyway please do continue to contribute - its sometimes annoying on here and often fun. I have learnt alot and continued to be active -which has really surprised me i thought when i first came on i would be on here for a couple of weeks max. And of course it takes all sorts i think divergent views are fine but being rude to someone because theirs doesnt conform to your own is the politics of the playground. Thats my view everyone is entitled to the opposite! Everyone's opinion is equally valid whether we agree ort disagree.
Bellwhether and i have raised this question before and i was looking for other input just out of academic interest really, not as a trade confirmation!
35. flashman said...
LOL not in a huff...just thought I might be an unwelcome intruder. My inlaws are visiting so I'm more than happy to hide behind my laptop screen until I can escape to the commuter train tomorrow
36. bellwether said...
TM sure we can pick up on this again. There have been some interesting posts on this from stillthinking who seems to share some of my uber bearishness on the uk - I believe in some of the Schiff/Rogers school of thought on shift west to east but their take on the demise of US is overdone but it might turn out to apply to the UK, which seems to share all of the US problems (and more) and few of its advantages.
37. flashman said...
techieman, sadly I stare at charts all day so forgive me if I'm a bit jaundiced. Obviously like you I was schooled in technical analysis and indeed spent the first 15 years of my trading career being purely a technical analyst. Most of my colleagues still work that way and at least half of them do better than me. I decided to become a 'fundamental' analyst because I am bone idle. I read a bunch of articles and place my trades accordingly. My performance is 12% worse than when I was a technical analyst but now I only work 3 hours a day instead of 12.
38. techieman said...
Bellwhether in the words of peston "lets be clear" :-). I basically dont know about whether or not we see sterling lower but i do think we were due a turn against the Euro - which we have obviously had, and which imo since it broke 8800 seems to want to go lower in the shortish term. [ i mean the £ stronger ]. As i said i didnt think it would go through 8800 .... but it has...
As for cable i do think we are due (at least) an intermediate low and as for FTSE - well you know my position (in both senses of the word on that) am looking for not much more upside before a largish fall to new lows and then a major recovery before a more major collapse - but all of that is dynamic - at the moment not looking for much more than 4400 to liquidate a current position, and then be sidelined.
Yes still thinking is a very thoughtfull (as the names implies) poster. He often argues with himself to come up with a final version of what he thinks - you can see that in his posts!
Again as for yen as we discussed i dont follow it (suppose i should) but i hope it goes well for you.
39. techieman said...
flashman - interesting admission. Although basically my view on the fundamental / technical argument is that fundamentals suit some peoples personality and technicals other. Its funny i switched from the fundamentals to the techs because i couldnt understand the conflicting fundementals. So i take my hat off to you!
I try to keep things simple and dont use that many indicators, although i cant remember how many i have looked at.
40. techieman said...
Last thing before dinner flashman - my experience of what taught me most was being on the wrong side of short sterling when Lamont was raising rates to support the pound and then finally took us out of the snake. That taught me not to be so far up myself and realise i could always be wrong. In actually fact i made back more or less all of the money i lost by going long the FTSE, but the lesson remains.
Although it was expensive tuition (just under six figures) it was easily the best lesson i have learnt, i actually averaged the position until i couldnt afford it and bailed [just as well cause to hold it for the next few days would have been disastourous]. A few people i know got wiped out whereas a few made fortunes (one guy i knew was long 150 contracts of way out of the money calls - which went form 5 to 125 ticks).
I am sure you have seen and could tell similar tales!
41. bellwether said...
TM - Buffett's comments about working with TA for years before giving up have always interested me but then he was referring to company and there are better guides as to what is going to happen ie the accounts. I can see why TA would work well with currency.
I actually bought up a reasonably amount of Wells Fargo stock at $17 last week because a very brutal analysis of the company gave it a fair value of about $16 (at least it has an accouting value!) and I think US financials are due a recovery. In fact I agree (for now!) that the FT and other indices look as if they are going to rally and I think financials will lead that. I agree that this is part of a larger downtrend to levels that are difficult to predict at present.
My biggest story at present are commercial property stocks. Many of these companies are going to fail because they share a lot of common risk with banks (without tacit govt support) and they remain way above fair value as rental streams are going to dry up majorly in 2009.
Only reason for following yen and usd is that I think they will be the survivors out of the big 3. The Euro/Sterling going forward seems to be a story of relative weakness.
42. bellwether said...
TM - Buffett's comments about working with TA for years before giving up have always interested me but then he was referring to company and there are better guides as to what is going to happen ie the accounts. I can see why TA would work well with currency.
I actually bought up a reasonably amount of Wells Fargo stock at $17 last week because a very brutal analysis of the company gave it a fair value of about $16 (at least it has an accouting value!) and I think US financials are due a recovery. In fact I agree (for now!) that the FT and other indices look as if they are going to rally and I think financials will lead that. I agree that this is part of a larger downtrend to levels that are difficult to predict at present.
My biggest story at present are commercial property stocks. Many of these companies are going to fail because they share a lot of common risk with banks (without tacit govt support) and they remain way above fair value as rental streams are going to dry up majorly in 2009.
Only reason for following yen and usd is that I think they will be the survivors out of the big 3. The Euro/Sterling going forward seems to be a story of relative weakness.
43. paul said...
Okay, lets just leave the inital confrontation aside. Flashman, we've had a few trolls on this board of late, and some are even well known Economics commentators, posting under psuedonyms, irritated that they've been proven wrong over the years about the current credit situation. It seems you're not one of them so I apologize for being abrasive.
To the matter at hand now. Quantitative easing is a threat right now - its the Bank of England, reading the riot act to savers to get out and spend or Swervin Mervyn will debase the currency. The threat of deflation is the cue for this action that if lowering rates doesn't get savers spending, the threat of deflation will force his hand to start printing money like an African dictator.
If he carries through with it, and its picked up by the media, I expect the pound to plummet. This is the scenario that I think is not priced in yet.
44. titaniccaptain said...
@Flashman
I am pre placed in the conspiricy camp unfortunatly by being a christian lol.....I am waiting for the end of the world with a large G&T and a foot massage....
All you traders are arriving here en mass........ aswell as politicians and journos.....im chuffed
I feel timid to comment on inflation/deflation in such company so I will ask a question............how will money get into the hands of the man on the street to push (retail/food/materials etc.) prices up? how will it filter from the recapitalised banks to the public once they are fully recapitalised if the banks are not going to repeat the previouse mistakes? in other words how can inflation visibly manifest? I cant see how it can so it looks like cash is King at the moment....but as STR2007 said the other day..........it doesnt hurt to set up a bullion vault account incase they start throwing money from the rooftops......