Optobear Posted March 17, 2008 Share Posted March 17, 2008 Following the seeming absence of a black monday, surely we're forced to conclude that the markets are fundamentally assuming major inflation? The basic principle being that there are only a finite number of BP shares, and if you want to own them under inflation you'll need to pay more in future, hence share prices survive the worst news in decades regarding international banking. Interesting for house prices, because it will mean that the right strategy was 1) Buy hugely expensive house. 2) Take out huge mortgage on 5 year fixed rate. 3) Wait around watching while prices fall a bit, but then rise further, while your salary increases eroding the debt. To which, and given that I was following the prices are mad, and I'm hoping for a proper fall strategy, I have to say... bugger! Optobear Quote Link to comment Share on other sites More sharing options...
South Lorne Posted March 17, 2008 Share Posted March 17, 2008 (edited) Following the seeming absence of a black monday, surely we're forced to conclude that the markets are fundamentally assuming major inflation? The basic principle being that there are only a finite number of BP shares, and if you want to own them under inflation you'll need to pay more in future, hence share prices survive the worst news in decades regarding international banking.Interesting for house prices, because it will mean that the right strategy was 1) Buy hugely expensive house. 2) Take out huge mortgage on 5 year fixed rate. 3) Wait around watching while prices fall a bit, but then rise further, while your salary increases eroding the debt. To which, and given that I was following the prices are mad, and I'm hoping for a proper fall strategy, I have to say... bugger! Optobear ...on the property side that was the case in the 70's...today and going forward there is little funding around for future mortgages ...and the UK sub prime has not hit yet.....IMHO there is a lot of 'down' for house prices to go..... Edited March 17, 2008 by South Lorne Quote Link to comment Share on other sites More sharing options...
InternationalRockSuperstar Posted March 17, 2008 Share Posted March 17, 2008 Following the seeming absence of a black monday, surely we're forced to conclude that the markets are fundamentally assuming major inflation? The basic principle being that there are only a finite number of BP shares, and if you want to own them under inflation you'll need to pay more in future, hence share prices survive the worst news in decades regarding international banking.Interesting for house prices, because it will mean that the right strategy was 1) Buy hugely expensive house. 2) Take out huge mortgage on 5 year fixed rate. 3) Wait around watching while prices fall a bit, but then rise further, while your salary increases eroding the debt. To which, and given that I was following the prices are mad, and I'm hoping for a proper fall strategy, I have to say... bugger! Optobear Back in July, I seem to remember that Nationwide was offering 125% mortgages at 5.02% fixed for 25 years. Sorted. Quote Link to comment Share on other sites More sharing options...
Confounded Posted March 17, 2008 Share Posted March 17, 2008 Following the seeming absence of a black monday, surely we're forced to conclude that the markets are fundamentally assuming major inflation? The basic principle being that there are only a finite number of BP shares, and if you want to own them under inflation you'll need to pay more in future, hence share prices survive the worst news in decades regarding international banking.Interesting for house prices, because it will mean that the right strategy was 1) Buy hugely expensive house. 2) Take out huge mortgage on 5 year fixed rate. 3) Wait around watching while prices fall a bit, but then rise further, while your salary increases eroding the debt. To which, and given that I was following the prices are mad, and I'm hoping for a proper fall strategy, I have to say... bugger! Optobear I not so sure, although I do have days like yours. The markets (US) are gagged atm, if they can continue to gag them then yes I think they aim to inflate out of this issue rather than end up in a 20-30 slump. However I do think the market will speak, as it does in all the regions outside of the media friendly equities. Quote Link to comment Share on other sites More sharing options...
Timm Posted March 17, 2008 Share Posted March 17, 2008 Following the seeming absence of a black monday, surely we're forced to conclude that the markets are fundamentally assuming major inflation? The basic principle being that there are only a finite number of BP shares, and if you want to own them under inflation you'll need to pay more in future, hence share prices survive the worst news in decades regarding international banking.Interesting for house prices, because it will mean that the right strategy was 1) Buy hugely expensive house. 2) Take out huge mortgage on 5 year fixed rate. 3) Wait around watching while prices fall a bit, but then rise further, while your salary increases eroding the debt. To which, and given that I was following the prices are mad, and I'm hoping for a proper fall strategy, I have to say... bugger! Optobear What do the markets know? Quote Link to comment Share on other sites More sharing options...
domo Posted March 17, 2008 Share Posted March 17, 2008 3 month treasuries hit the lowest since the 1950s today (well under 1%!). Nothing like the 70s. Quote Link to comment Share on other sites More sharing options...
AC2 Posted March 17, 2008 Share Posted March 17, 2008 Following the seeming absence of a black monday, surely we're forced to conclude that the markets are fundamentally assuming major inflation? The basic principle being that there are only a finite number of BP shares, and if you want to own them under inflation you'll need to pay more in future, hence share prices survive the worst news in decades regarding international banking.Interesting for house prices, because it will mean that the right strategy was 1) Buy hugely expensive house. 2) Take out huge mortgage on 5 year fixed rate. 3) Wait around watching while prices fall a bit, but then rise further, while your salary increases eroding the debt. To which, and given that I was following the prices are mad, and I'm hoping for a proper fall strategy, I have to say... bugger! Optobear FTSE down 3.86% in a day? That's quite black. As for the US, dollar devaluation may lead to price inflation in imported goods for a while, but wage inflation? That seems less likely unless the US wants to price itself out of every global market. Same for the UK. Price inflation through currency devaluation will not erode your debt. Quote Link to comment Share on other sites More sharing options...
barsark Posted March 17, 2008 Share Posted March 17, 2008 It was like HPC.co.uk on Bloomberg half an hour ago.......................... .....inflation, deflation then stagflation all in the space of a few minutes. No one knows yet. Quote Link to comment Share on other sites More sharing options...
Timm Posted March 17, 2008 Share Posted March 17, 2008 Price inflation through currency devaluation will not erode your debt. Neither will it erode the house-purchasing power of your STR fund, unless substantial amounts of foreign currency enters the market. This seems unlikely outside of prime central London, and increasingly unlikely to continue there too. Quote Link to comment Share on other sites More sharing options...
oracle Posted March 17, 2008 Share Posted March 17, 2008 (edited) HYPERSTAGFALATION IT IS!!! Massive depreciation in "assets"..ahem...like property. massive appreciation in basics like food. no wage bargaining power....immigration or not: immigrants stay and undercut the locals.......rivers of blood just like uncle enoch said immigrants go....property utterly collapses,consumer spending halts and blood on the streets..just like uncle enoch said. now lets be sensible about this boys and girls,we on here have been harping on about this for ages. For the last 18 years,the anglosaxon consumer kept the world economy going while japan and asia went tits up. now it's payback time,those who drank the most from the punchbowl will wake up with the biggest hangover. Edited March 17, 2008 by oracle Quote Link to comment Share on other sites More sharing options...
The Masked Tulip Posted March 17, 2008 Share Posted March 17, 2008 And bank savings IRs? Quote Link to comment Share on other sites More sharing options...
Fairies Wear Boots Posted March 17, 2008 Share Posted March 17, 2008 Don't people think we're going to have large nominal falls in house prices? As we're in a state of 'low interest rates and low inflation', even if you don't believe it, CPI = Chinese Products Index and all that, surely as the public sector aren't getting decent payrises and won't, inflation won't really go rampant? I'm no economist and maybe I have a rather rosy outlook, but I remember when I first came on here people were going 'inflation won't mask falls' this time around. I have this feeling that they'll try and keep wage inflation down, and general inflation down, and am hoping if the CPI starts billowing they'll raise rates to counter it. If they don't, and inflation rages out of control, we'll have crashing house prices AND rampant inflation. Quote Link to comment Share on other sites More sharing options...
Timm Posted March 17, 2008 Share Posted March 17, 2008 HYPERSTAGFALATION IT IS!!! Depflation. Quote Link to comment Share on other sites More sharing options...
Guest Shedfish Posted March 17, 2008 Share Posted March 17, 2008 the markets spoke to Mike Shedlock too - i think me and him heard the same thing, but he does explain it better than i ever could http://globaleconomicanalysis.blogspot.com...-deflation.html Quote Link to comment Share on other sites More sharing options...
Guest Skint Academic Posted March 17, 2008 Share Posted March 17, 2008 Depflation. They will understand after two to three years, they converted some mild stagflation into depflation – a new term in global economy when in one part of the world economies expand with severe inflation because of demographic reasons and in another part the economies collapse into a deflation driven depression due to lack of high overhead [sic] and lack of purchasing power. Makes me think of meteorology and a high pressure system next to a low pressure system. Eventually it evens out, but not before a big storm hits. Attaining equilibrium always requires a release of energy. Quote Link to comment Share on other sites More sharing options...
mew too Posted March 17, 2008 Share Posted March 17, 2008 someone else disagrees... http://globaleconomicanalysis.blogspot.com/ Now Presenting: Deflation! It's time to stop pretending. Deflation is here and it is now. Anyone who sees stagflation or inflation out of what's happening now missing the boat. Let's consider the evidence. Yield Curve As Of March 16, 2008 Are short term interest rates at 1.16% and falling indicative of stagflation? Certainly not. Remember: Inflation is a net expansion of money and credit while deflation is a next contraction of money and credit. See Inflation: What the heck is it? if you need a refresher course. The above chart shows bank credit to be expanding at 10% annually. Certainly that is not deflation if the chart is accurate. But is the chart accurate? What if bank credit was marked to market? What would that look like? For that we turn to Bear Stearns (BSC). Quote Link to comment Share on other sites More sharing options...
Optobear Posted March 18, 2008 Author Share Posted March 18, 2008 someone else disagrees...http://globaleconomicanalysis.blogspot.com/ Now Presenting: Deflation! It's time to stop pretending. Deflation is here and it is now. Anyone who sees stagflation or inflation out of what's happening now missing the boat. Let's consider the evidence. Yield Curve As Of March 16, 2008 Are short term interest rates at 1.16% and falling indicative of stagflation? Certainly not. Remember: Inflation is a net expansion of money and credit while deflation is a next contraction of money and credit. See Inflation: What the heck is it? if you need a refresher course. The above chart shows bank credit to be expanding at 10% annually. Certainly that is not deflation if the chart is accurate. But is the chart accurate? What if bank credit was marked to market? What would that look like? For that we turn to Bear Stearns (BSC). Mew Two, I wish you were right, but the markets seem to have spoken even more strongly today in favour of inflation. 3.5% up on FTSE, 3.1% on Dow. Fed rate dropping 0.75%, which is a 25% actual cut. In effect, we are just seeing the prop-wash from the helicopter drops at the moment causing turbulence in the markets. Optobear Quote Link to comment Share on other sites More sharing options...
bob monkhouse Posted March 18, 2008 Share Posted March 18, 2008 Mew Two, I wish you were right, but the markets seem to have spoken even more strongly today in favour of inflation. 3.5% up on FTSE, 3.1% on Dow. Fed rate dropping 0.75%, which is a 25% actual cut. In effect, we are just seeing the prop-wash from the helicopter drops at the moment causing turbulence in the markets. Optobear Will libor drop... Quote Link to comment Share on other sites More sharing options...
the_duke_of_hazzard Posted March 18, 2008 Share Posted March 18, 2008 ...but gold is down - the money going to the sm? Quote Link to comment Share on other sites More sharing options...
Moo Posted March 18, 2008 Share Posted March 18, 2008 Following the seeming absence of a black monday, surely we're forced to conclude that the markets are fundamentally assuming major inflation? The basic principle being that there are only a finite number of BP shares, and if you want to own them under inflation you'll need to pay more in future, hence share prices survive the worst news in decades regarding international banking.Interesting for house prices, because it will mean that the right strategy was 1) Buy hugely expensive house. 2) Take out huge mortgage on 5 year fixed rate. 3) Wait around watching while prices fall a bit, but then rise further, while your salary increases eroding the debt. To which, and given that I was following the prices are mad, and I'm hoping for a proper fall strategy, I have to say... bugger! Optobear Chin up Opto! Just remember, the bit in bold is the bit that matters when it comes to house prices. Oil, gold, shares, wheat, lobster thermidor aux crevettes with a Mornay sauce garnished with truffle paté, brandy and with a fried egg on top and spam, whatever, can go through the roof, but it's wages that matter. If we see them go through the roof, then it's time to wheel out the word "bugger". Chances of massive wage inflation here in the next few years? My genitals will sprout wings and fly to Devon before that happens... Quote Link to comment Share on other sites More sharing options...
scott666 Posted March 18, 2008 Share Posted March 18, 2008 If we get more price inflation (as I think we will) how do they eventually kill the inflation? Presumably at some point the CB's have to increase rates (ala Volker) because I can't see the supply of food/energy increasing enough in the next couple of years to cap prices. Quote Link to comment Share on other sites More sharing options...
Optobear Posted March 18, 2008 Author Share Posted March 18, 2008 Chin up Opto! Just remember, the bit in bold is the bit that matters when it comes to house prices. Oil, gold, shares, wheat, lobster thermidor aux crevettes with a Mornay sauce garnished with truffle paté, brandy and with a fried egg on top and spam, whatever, can go through the roof, but it's wages that matter. If we see them go through the roof, then it's time to wheel out the word "bugger". Chances of massive wage inflation here in the next few years? My genitals will sprout wings and fly to Devon before that happens... Watch out that doesn't happen on 11th August. You wouldn't want to see them fly to Devon on the glorious twelfth. I can imagine some shooting type bragging about bagging a brace! Quote Link to comment Share on other sites More sharing options...
winkie Posted March 18, 2008 Share Posted March 18, 2008 ...but gold is down - the money going to the sm? Houses are dead, gold is finished...long term the only way up is.......? Quote Link to comment Share on other sites More sharing options...
Methinkshe Posted March 18, 2008 Share Posted March 18, 2008 ALL markets are seriously out of kilter. The walls have been breached. Survival mode has taken over from pastoral mode. Imagine a hen run that has been invaded by a fox. There are chickens running this way and that. Occasionally the fox bites off a head and for a few hours the chickens get a respite. But the fox still lurks. The fox is still in the chicken run. It isn't time to relax just because a head or two have been bitten off. There's still a whole chicken run to intimidate and many more heads to be bitten off. Quote Link to comment Share on other sites More sharing options...
Errol Posted March 18, 2008 Share Posted March 18, 2008 If gold can correct to around $850 that would be excellent. I'm watching with interest. Quote Link to comment Share on other sites More sharing options...
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