Thursday, March 19, 2009

Did inflation ever really disapear?

Gold Jumps, Oil Tops $50 as Inflation Concern Spurs Commodities

March 19 (Bloomberg) -- Gold jumped the most since September and oil exceeded $50 a barrel for the first time in two months on speculation the Federal Reserve’s steps to spur growth will revive demand for commodities as a hedge against inflation.

Posted by flintster1994 @ 02:21 PM (2059 views)
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37 thoughts on “Did inflation ever really disapear?

  • Stagflation here we come.

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  • one swallow doesnt (neccesarily) make a summer

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  • Oil? lol.

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  • For goodness sake inflation never went away all that the elite morons did was sell the masses the lie about deflation in order to get away with printing vast sums of new money so that they could inflate their debts away and continue with the economic ponzi scheme that they can’t correct.

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  • Welcome to the next wave of destruction.

    Printing presses v inflation who will win the race. Errrrrrr!

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  • little professor says:

    With the US printing $1trillion, there was no way deflation was ever a realistic possibility.

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  • Can’t beleive anyone actually considered deflation might be a bad thing let alone a possibility.

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  • 5. little professor

    Yeah, and the rest.

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  • mountain goat says:

    Historically this part of the business cycle of boom and bust should have been deflationary. Credit bubble got out of hand and is now bursting which means that supply of debt money should deflate. GB, Bernanke and Co are trying to fool economic mother nature but I wouldn’t be so sure they are going to win this battle against deflation. Seems to me like a heroin junky trying stay high by increasing the dose. Will he survive without going cold turkey? Maybe big deflation is just being delayed? I don’t expect this answer to be clear for some years to come.

    GB, Bernanke and Co think that if they can just get us borrowing and spending again they can save the day. But I think the world economy has stepped on a landmine. If Central Banks don’t lift their foot off then it wont explode. But sooner or later the foot gets tired. How long can they print $1Trillion out of thin air and hope to solve a $100 Trillion global debt collapse?

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  • flintster1994 says:

    Great analogy mg!

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  • Good summary MG.

    Also in fairness golds advance is simply a function of dollar weakness because of the QE announcments stateside.

    Techieman I’ve taken a large short position on EUR/GDP and plan to sit it out until we get back down towards 90. Any thoughts on this?

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  • Who is going to bother paying back debt if these numpties just print it out of existence?
    I’d be worried if I were a creditor.

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  • Excellent post by mountain goat – I like this bit in particular “GB, Bernanke and Co are trying to fool economic mother nature” – as Thatch said long ago as PM you simply cant buck the market.

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  • mountain goat –
    Exactly. If they do succeed in their goal at avoiding the necessary deflation in nominal terms by pushing the effect onto the monetary value itself (i.e. printing money to stop assets falling in nominal terms) then the only rational outcome is for the dollar to loose it’s status as the reserve currency to be taken by the Euro (prob) or maybe Japanese Yen (or even both) as foreign exchange reserves are shifted and U.S. debt is shunned. Good luck is all I can say, maybe there has been a secret deal with China?

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  • BW – so you are long GBP v EURO? I told you a few days ago i was long just below 9000. I have got out of half @ 9360 ish. It goes one of two ways i think – a pullback and then a march on or just a march on (i got out of some based on money management). Near term support (which may be broken) at 9320 after that more major support at 9130. I have moved stops to break-even and that will either get hit or i will look for around par to get out. At that point i will look to see a good place (depending on market action then) to hedge a cash Euro position.

    Next area to look for if we march on before or after a pullback would be mid 9500s.

    I am confused i thought a few weeks ago you were discussing “par” with me?

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  • Sorry – to clarify i am long the Euro v GBP. But obviously i could be wrong! I would like to be able to say good luck but obviously cant.

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  • 666 its strange a while back on here everyone was saying that the Euro was doomed. Fundamentally though i agree with that but i just think the market tells me IF and WHEN that happens. The Euro / $ chart looks to have turned to the upside (Euro higher) at least for a while.

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  • mountain goat says:

    Glad I wrote something sensible for a change!

    51ck-6-51x switching from the dollar as reserve currency will be hard because USA still the biggest economy and exporter (most people don’t realise this). No where has the depth of money (for those needing to borrow) as Wall Street. At least that was before October 2008. Trouble is the repo market got out of hand, payment in dodgy derivatives was accepted practice. When the music stopped in October all of a sudden only Treasuries will do as hard cash. Those left holding toxic slime got wiped out, apart from banks who handed them over to the tax payer. Toxic derivative “assets” now reside on the Feds and BoE balance sheets. This is what I meant by the Central Bank foot on the land mine. But how much is really toxic? Can it be written off and a few $ Trillions printed to fill the gaps? Whoever knows probably won’t tell. But it can’t be a fun answer else why is the world economy on its knees? I really can’t see this story having a happy ending, and luckily I am not in charge.

    Time to show my ignorance now! Gold to go to $1250 (silver $25) with this spring 2008 stock market rally and dollar fall. Then next round of death defying falls (including gold) where you got to hold the sick bag close (when I plan to be short UK banks and Euro stoxx). I think Euro zone has still to face some of the harsh realities the USA and UK already have.

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  • mountain goat – I agree with the above (as much as I do not think gold should go up, it probably will due to the crisis hedge factor [not inflation hedge factor]). I think hard is an understatement, but once the ball starts rolling there will be little that can stop it.

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  • Techiman talk to me!!

    I’ve shorted the Euro v Sterling at 9420 I’m worried you seem to be suggesting the Euro is on a March to parity.

    My thinking was pretty basic the Euro has been on a serious (and more or less unjustified march upwards for nearly a month) and after a hyper move up last day or so looks to be stalling at Jan high. Buying of the Euro must have involved shutting out a lot of bad news about the EU and surely will eventually start to be heard. Also wondering if the market will start to punish rather than reward the EU region for not Q/E’ing.

    The trade is going well so far but I’m not too proud to bail.

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  • MG don’t know if you picked up on this which I posted a week or so back but worth a read

    http://online.barrons.com/article/SB123638344892658021.html?mod=googlenews_barrons

    The suggestion of a substantial rally for the next couple of months is starting to look good, especially if Banks can push on a bit from here. This will then lead to the next and biggest down leg where the market will be cut in half (from peak) probably for final time. I think that would take us to about 70% from peak which I read months and months ago and which I liked – same people were suggesting the dollar would strengthen in the crisis which has proved quite prescient – the tallest midget was how I recall they described the dollar which seems quite apt.

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  • japanese uncle says:

    Yesterday I was stunned to find most prices including coffee and honey have gone up by around 10% at a local Tesco. But I must also mention that the number of shoppers in the rather large premises (around 3000 sq meters ) was definitely less than a dozen at 10:20 pm. Last year, the number of shoppers in that hour were five times bigger, I recall. How long can they sustain with such inflated price and scanty customs, I wonder?

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  • BW to be absolutely blunt once you have made a decision you should go with it and not let anyone (me included) disuade you otherwise. ALL traders are wrong sometimes so i could just as easily be wrong as you – to be fair you could say my sale @ 9360 was wrong (actually itr was very wrong as i got a better fill in a fast market)- we had 9500 today and yes that looked overbought. So i sold on the way up and you sold (i assume) on the way back down .

    Will your trade work? Well i dont know. I cant advise you – all i can say is i bought the Euro a couple of times before and took a hit. I re-entered because i thought there would be a squeeze up – technically the market was bouncing along the bottom of an uptrend with a converging downtrend too. It (IMO) had to break and i bet on it breaking to the upside (for various technical reasons). What i am getting at is that i have been wrong on this. As ive always said its not being right or wrong its how much money you make and lose when you are.

    So on balance do i think it goes lower from 9420 – well quite possibly yes (but possibly no) but how much l dont know. Thats not how i trade.

    Your fundamental analysis could be right but where i your stop on the trade – yes we were clos tothe most recent proper high and we are near the apex of the triangle (but thats only generally important when you hit new highs – althoughb it was a consideration for me.

    Re FTSE i have been saying that 3950 is the area that needs to be breached and that would result in an upside overthrow of a trend channel – if thats right we would have had a downside break of a trend channel and an upside break in the next swing move. Unless ive got my channels wrong thats prety unusual which is why i have a FTSE short looking for new lows. I got in todayquite high up so ihave a low risk and if it goes through 3950 i will have to re-evaluate.

    After that (a new swing low) i would think thats it – for now. The thing that could blow this out of the water would be a persistent ramp on Wall street. (which is why i have a tight stop).

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  • Techieman first of all thanks for taking time to post – as always really helpful. Will post a bit more on this shortly.

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  • Techieman, I guess the system I have been trying to run is buy and sit on a position for as long as it takes so don’t generally have stops although rethinking that aspect after wiping out a good weeks trading gain on a couple of bad trades.

    The reason for the approach is that I find short terms movements difficult to read and just don’t have temprament for it.

    So say with the Euro I’m thinking either the ECB will move in the direction of other countries and take more aggresive currency steps and even if they won’t (or can’t) the crisis in the union will be pushed to the forefront again sooner than later – the stock of bad news is revolving. Also the currency looks hugely overvalued from a historic perspective. I don’t eg see the euro being able to sustain parity even assuming it can reach it and any snap back would surely be huge.

    I guess I’m thinking of trying to look at movements over maybe a month or two rather than a day or two. I don’t know much about trading techniques- are there people who you are aware of who look to trade on that basis? I guess I’m wondering if the stragtegy is fatally flawed in some way.

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  • bidin'matime says:

    BW – I’ve tried trading over a day or two and, while the market fluctuates within a tight range it can work – just double up when it moves against you and cash in when it moves back again – but as soon at the market starts to move seriously, it can wipe your profits out very quickly – I had to give up, as I couldnt take the stress! Maybe if you can be confident of the next big move, you ‘bet’ each time it goes the opposite way, then cash in when you have a modest profit and wait for it to move back again – but of course you then miss out on the big profit when it (finally) goes as expected.

    What I would be interested to know is whether Techieman actually makes a decent return from his trading, or is it all theory…?

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  • Someone told me that I should always use stops, saying you are right or wrong. A good nights sleep is what a sharp trader needs.

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  • BW we all trade differently. It literally has taken me years to find what workls for me. What does is to look for high reward and low risk trades that i hold for a while. I try to get my risk lower after a few days. I will give you an example i was long this Euro move and i had a 150 point stop (the reason for the stop to begin with is twofold – to put it at a place where your analysis is proved wrong and to control the risk.

    IG gives me a “guaranteed stop” for a couple of ticks / points (sorry i know its pips in Forex but i come from LIFFE). In any case once the trade moves in the right direction i then move the stop again somewhere i think is “sensible”. I will then in effect OCO the stop with a partial liquidation of the position – either a quarter or a half. If it moves more in my direction i either look for the next area where i want to get out of some or i try to judge where to reduce the stop to (this then becomes a technical issue).

    If the market goes to where i think it will as my best “guess” i will liquidate NEARLY all the rest (the example i can give there is liquidating some FTSE 3900 puts i liquidated some at lower prices, so i made +100points +200 points and +400 points. BUT i kept a small position (5%) just in case it goes in my direction more (even though i dont think it will). I then (footsie example) thought that the market would have a recovry but at the maximum to 3950. [the options expire tomorrow as triple or it might be quardruple witching]. So i suppose if i had really thought that with conviction then i would have bought the FTSE.

    I did say that the move back up would be IMO a place to re-short. Which is what i have done today. When i sold the market had been to 3915 and looked like it was rocketing up – but thats the point it always looks like that. So i sold quite high (just below 3900) with a stop @ 3960. I have now moved that stop to yesterdays high. Now that might get hit tomorrow – normally option expiry is volatile, and it could go through 3915 and not hit 3950 and then reverse. But if that happens i take a small loss and live to fight another day.

    In terms of size no one position should blow you out of the water.

    If i have not been trading a particular market for a while – for example now i am not in the DAX – when i see an opportunity coming up i will generally put very small trades down just to get in tune with the market. I will generally lose on those trades but i get usd to how the market is moving. I could paper trade but that just doesnt work – an account statement doesnt lie – paper trading does. I will respond to your question in a minute.

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  • Techieman said…..an account statement doesnt lie – paper trading does.

    Words of wisdom from a rare pro!

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  • bidin ma time – I have posted here a few times as to positions etc. Now i suppose you may think i am making it all up but its easy to check me out. I did a post on March 2nd i think about this move. I also said about Gold topping last March…. well anyway you can do a search if you like on my posts. I am obviously not gonna post my accounts on here or tell you who i am but really its up to you to believe or not. I think BW asks me stuff because i stick my neck out and give some real time responses to where i think the market goes before it does. I thbink the only time ive posted and got it wrong was a short term punt buying gold with a tight stop that got hiot pretty much straight away.

    Anyway the reason i do post this stuff is it makes it easier for me to maintain discipline, and if someone asks, i think its rude not to reply.

    As i said BW in response to yours :

    “don’t eg see the euro being able to sustain parity even assuming it can reach it and any snap back would surely be huge. ”

    Yes i agree but thats the fundementals – if we get to parity then its likely lots of people will panic and we could have a bit of a blow off (thats more normal in commodities). If we get there and the world is saying the £ is doomed etc it will probably be time to step aside or be a scale up seller (although thats risky).

    “I guess I’m thinking of trying to look at movements over maybe a month or two rather than a day or two. I don’t know much about trading techniques- are there people who you are aware of who look to trade on that basis? I guess I’m wondering if the stragtegy is fatally flawed in some way.”

    That depends purely on your attitude to risk. Personally i would be sick to the stomach with a large position thats going against me without me having any idea where my risk gets cut off, but if you are comfortable then i cant advise you differently.

    As Bidin ma time says – everything works until it doesnt.

    Have a plan implement that plan – thats really all i can say, it has to be your plan and you have to be comfortable with it. TO be honest if the £/Euro comes back to 9000 then i would have made some (unless i decide to compound) so it wouldnt be the end of the world – 360pips is pretty good – i am happy enough with that.

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  • Crunchy am never sure with you if you are being straight or extracting the urine! But if the former i apologise and thank you for your comment.

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  • Sorry to go on BW but this might help your methodology. If you believe the maket wil go in the opposite direction to a sharp trend against you, then you could just say (in this case) short a small amount, and if it goes higher short some more etc. I am not advocating doing that but I have sometime and guys on the floor used to average their positions in this way. You can then increase the size as it goes against you. For example 1 unit as your first entry then if it goes say – i dunno – 50 points above that sell 2 more units then another say 50 points 3units and then 50 points above that say another 4 units.

    A small retracement from the high will enable you to get a better positon. All in all i wouldnt recommend doing that on a one day basis because a real screamer can close on the highs or lows, but if you separated them out by a points value and a number of say up days that might work.

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  • techieman, Seriously I think it is great that a good trader is willing to impart there knowledge.

    It’s thanks to all on here that I have a better understanding of what it is that I always thought I understood.

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  • ok Crunchy – good luck with the crude!

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  • mountain goat says:

    BW thanks for the Barrons article. I like the idea this rally might go for a few months. Money is tired of being sidelined and has no where to go if dollar falls. Any shorts left are going to give up after a while as each unexpected leg up squeezes them.

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  • Techieman I genuinley appreciate the support and advice, I’m always going to learn by my mistakes but good advice probably means I don’t have to repeat the errors so many times.

    I’ll keep working on the strategy – if the position is small i don’t mind it turning against me for days at a time for as long as my theory as to where things move doesn’t change. Beyond a certain level however trading like this is impossible for me and I flail around usually making a bad position worse.

    Till later and best of luck meantime.

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  • Maybe the price of oil has been kept low so that when gold takes off oil will follow suit without the world grinding to a halt.

    crude analysis. lol

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