Monday, Sep 06, 2010
A non existent deflationary scenario?
The Market Oracle: Inflation Mega-Trend Long-term Growth Spiral Continues to Drive Stock Market Trend
''The stock market closed up 298 points on the week at 10,448 (10,150). The bears that predominantly follow a non existent deflationary scenario, consistently and persistently fail to comprehend what drives the worlds economies and stock markets which is the inflation mega-trend.''
Posted by hpwatcher @ 08:38 AM (914 views) Add Comment
16 Comments
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2. uncle tom said...
I get so tired of this conspiratorial theorising that credits the world's governments with a collective brainpower, and ability to collude, that they simply don't have.
And what a load of tosh this article's title is - the financial equivalent of 'sex change vicar in wife swap mercy dash'
Any element of interest in this piece is buried under the garbage..
3. will said...
Uncle Tom,
I have always felt that Nadeem is trying to make a name for himself by being 'correct' in the face of overwhelming evidence to the contrary.
I have never read one of his articles which talks about share valuations (p/e, yield etc). He obviously feels that 'things are different this time'.
4. mark wadsworth said...
Are we talking "deflation" in terms of (a) [vaguely defined] money supply contracting; or (b) in terms of consumer prices; or (c) house prices?
(a) is contracting, (b) is up a bit in some things but not in others (partly down to sterling having weakened, although it's now bottomed out) - but it's impossible for every country to have imported inflation, isn't it? and (c) are clearly on a downward trend across the whole world (the UK government alone has succeeded in propping them up by throwing colossal amounts of money at it)
I'd call that a two-nil victory for deflation myself.
5. drewster said...
Mark W,
You could add wage deflation - that's definitely happening in the UK and many other countries.
6. tom101 said...
I see sterling is doing well today....
7. Crunchy said...
1. uncle tom
That's the problem it's not the governments.
You will get it one day. Maybe!
8. Crunchy said...
3. mark wadsworth
Are you saying that the cost of living has gone down? Food, bills, insurance, taxes and wages are not inflating.
Don't see it myself, I'm still waiting.
9. Goldbug9999 said...
a) go and read "fooled by randomness"
b) remember that "those that can, trade, those that cant, write psuedo news articles and pimp investment advice products"
10. Stevenl said...
Remember that high unemployment and wage deflation can help big corporates. I reckon there are some cheap stocks out there, as well as a lot of dogs.
They look even cheaper against low interest rates. Deflation = low interest rates for a long time, but even the mighty Tesco is yielding 7% on it's current P/E valuation.
11. bellwether said...
I think Nadeem has been pretty fairly served here. He has been writing the same incredibly narrow and one sided article every week, for a year and half now. But then why bother with anything approaching rigour when you can come up with puns like "blogosfear" instead.
12. mark wadsworth said...
Drewster, indeed, let's add wage deflation, that makes it three-nil to the deflationists
Crunchy: "Are you saying that the cost of living has gone down? Food, bills, insurance, taxes and wages are not inflating."
No I never said that as it's quite clearly not true - but look at the components...
You can exclude utilities (inflated by greenie subsidy nonsense) and taxes (entirely down to government action - and VAT hike to 20% is an EU "harmonisation" directive), and yes, food prices have gone up, but this is (bubbles apart) down to poor harvests/increased demand. It's not inflation as such. Ditto oil price bubble. A lot has to do with sterling having fallen twenty-odd per cent two years ago (which is still working its way through). Has insurance gone up? I dunno. I don't pay much insurance myself. And yes, wages are not inflating (see Drewster's comment).
13. Crunchy said...
12. mark wadsworth
You have explained why I have not bought into the deflation senario, even though it should make more sense.
I knew they would tinker. When it does come, finally, I have a hunch people will be no better for it, even worse off, unless they have
shielded their (ready for the dirty word).... savings.
14. easybetman said...
Hi MarkW,
1. Money supply growth is still positive in the UK and in any case, the aggregate amount of money created in the past 10 years probably exceed growth in real goods and services by 50% (Economy nominal growth 5% ish, money growth double digit, so say 10-5% x 10 years = 50%, very roughly). It just happened these additional money preferred to lock them-self in low velocity accounts (e.g. ISA etc) or go to bid for properties as opposed to bid for real goods and services. There are some sign that these money are now moving to bid up real things (while capacities are being destroyed and new capacities can't come online due to credit issues, overpriced properties & labour etc).
2. HP inflation - don't really care about that really other than on imputed rent basis, which I agree is generally deflating.
3. Consumer prices - even the hedonic and funnily adjusted CPI is positive. If you want to call a bigger living expenses bill 'deflation' then I will have nothing more to say....
15. easybetman said...
Hi MarkW,
Excluding indirect tax is a reasonable (and I agree). But excluding the rest are not. So, if there is a surplus harvest and prices are down, do you then count it and call that 'deflation' or you don't count that. Surplus/bad harvest are simply deflation/inflation cause by decrement/increment in productivity growth. Insurance premium are up by about 20% in generally - partly I suspect is dued to the miserably investment return (and oh... close to zero fixed income investment return) and they are trying to get the money off the customers.
Telecoms are up as well. Per minute charges up, less handset subdisy etc.
16. techieman said...
i think his chart here: http://www.marketoracle.co.uk/Article22397.html [last chart on the page] looks ok, and given the article posted the next comment sounds a bit odd to me
"Whilst the current corrective bounce looks set continue into the middle of 2010 (allowing for a potential one month blip as a consequence of the bad January weather), this rally is still seen as a correction within a housing bear market that is expected to remain in a depression for many years, before house prices succumb to the effect of the inflation mega-trend and start to rise." having your cake and eating it to me!