Down goes the Dow

I'm neither bearish nor cynical about "the economic system".

I am wary and skeptical about self-serving statements, as should be any rational person.

I have no confirmation bias, as evidenced by the fact that I have no opinion on the issue of whether the weather did or did not affect the aggregate economy, and if so, how.

Without more explanation, analysis, or proof, the statements are, as you put it, b.s.

The poster "stacked cards" has many things correct in my opinion...and note that he or she mentions rising inflation, which is more significant IMO than anybody yet realizes.

This is not bearish or cynical--I believe there is still real wealth to be created, and money to be made, in the current situation--I just do not look to the current markets as a reasonable vehicle to this end.

Maserati wrote:

I'm neither bearish nor cynical about "the economic system".

I am wary and skeptical about self-serving statements, as should be any rational person.

I have no confirmation bias, as evidenced by the fact that I have no opinion on the issue of whether the weather did or did not affect the aggregate economy, and if so, how.

Without more explanation, analysis, or proof, the statements are, as you put it, b.s.

The poster "stacked cards" has many things correct in my opinion...and note that he or she mentions rising inflation, which is more significant IMO than anybody yet realizes.

This is not bearish or cynical--I believe there is still real wealth to be created, and money to be made, in the current situation--I just do not look to the current markets as a reasonable vehicle to this end.

well maser - I respect you cause you have a coherent view and know quite a bit...but do you really want to say that you're not bearish? You think that there is a solid chance of societal breakdown, for pete's sake! You are one step from being a prepper! You seem to distrust vitually everything about the current econ system, from gov't data onwards.

In other words: know thyself, Maser. You are predisposed to bearishness. Do not foot yourself otherwise - could be very expensive to you.

er..do not FOOL yourself, I meant.

Cause footing yourself is not expensive - it is just nonsensical.

Maserati wrote:

The poster "stacked cards" has many things correct in my opinion...and note that he or she mentions rising inflation, which is more significant IMO than anybody yet realizes.

What are your concerns re: inflation? It is rising, but very slowly and is projected to stay well below 2% through 2015. Maybe your focus is beyond that?

Pay attention wrote:

Maserati wrote:

The poster "stacked cards" has many things correct in my opinion...and note that he or she mentions rising inflation, which is more significant IMO than anybody yet realizes.

What are your concerns re: inflation? It is rising, but very slowly and is projected to stay well below 2% through 2015. Maybe your focus is beyond that?

that's a rabbit hole - many people think the 'true' inflation rate is like 6% and the government lies about it. It's a boring argument and always results in the word 'sheeple.'

The world is a lot bigger than just the US.

There is substantial room for growth in emerging markets, and certain businesses are positioning themselves to take advantage.

The problem as far as the US is concerned, regarding these growth opportunities, is what to do with accounting and profits, and how a US person/investor can benefit.

So I'm not "bearish" overall--growth will happen. Regional energy is a concern, but much of the required development is such low-hanging fruit that even weak or disrupted energy supplies will not preclude growth.

The domestic situation in the US needs to be cleaned up. Things I am skeptical about are US consumer spending and disposable income, US public accounts, and escalating US taxation.

But I'm not generally "bearish". I even see the opportunities that abound as a result of crappy weather!

DJIA, S&P500, NASDAQ down on the day 0.2, 0.5, and 1.2% so far. More non-committal fiddle-faddle, still no particular reason to have entered the markets since the beginning of the year, unless some whopping dividends are declared.

agip wrote:

Pay attention wrote:

What are your concerns re: inflation? It is rising, but very slowly and is projected to stay well below 2% through 2015. Maybe your focus is beyond that?

that's a rabbit hole - many people think the 'true' inflation rate is like 6% and the government lies about it. It's a boring argument and always results in the word 'sheeple.'

I'm using IMF numbers.

Pay attention wrote:

agip wrote:

that's a rabbit hole - many people think the 'true' inflation rate is like 6% and the government lies about it. It's a boring argument and always results in the word 'sheeple.'

I'm using IMF numbers.

ok, in that case the convo will end in 'moutin-personnes'

:-)

agip wrote:

Pay attention wrote:

I'm using IMF numbers.

ok, in that case the convo will end in 'moutin-personnes'

Sometimes you crack me up.

OK, let's sidetrack into a mini discussion of inflation.

I admit from the outset that my understanding of the concepts I am about to bring up is not well developed...but I would like to bring them up for discussion anyway.

My primary concern is the domestic buying power of a US dollar, primarily for essentials, productive equipment, and real property.

Inflation = increase in the price of goods & services, or conversely, a decrease in the purchasing power of a dollar

When there are "too few dollars", they are scarce and the value of a dollar rises--that is, its purchasing power rises. This is deflationary. OK, if you have cash or its equivalent, and there are no other forces affecting the value of the dollar.

QE is in part designed to create money and thereby avoid deflation, is it not? We currently cruise along at a low rate of inflation as measured by the CPI--but it is relatively easy to show that the real rate of inflation is much higher than that. The government keeps the CPI number low because the lower the number, the less it costs them in terms of benefits indexed to the number.

Assuming this is true, and that inflation is higher than measured by the CPI, is not QE overkill? Because of it, the dollar tends to devalue in terms of domestic buying power--while it seems to remain strong internationally.

Thoughts? Should the real rate of inflation decrease as tapering increases? Has it, in response to the tapering already announced? What is the lag time, if any? Is the vast increase in social benefits (welfare, medicare, medicaid, SS and SS disability, etc) a way other than QE to increase the money supply and thereby avoid deflation?

Maserati wrote:

OK, let's sidetrack into a mini discussion of inflation.

...

My primary concern is the domestic buying power of a US dollar, primarily for essentials, productive equipment, and real property.

Inflation = increase in the price of goods & services, or conversely, a decrease in the purchasing power of a dollar

...

QE is in part designed to create money and thereby avoid deflation, is it not? We currently cruise along at a low rate of inflation as measured by the CPI--but it is relatively easy to show that the real rate of inflation is much higher than that.

The government keeps the CPI number low because the lower the number, the less it costs them in terms of benefits indexed to the number.

...

Ok, first we are going to have to define "real rate of inflation". Then we are going to have to use a verifiable, reproducible manner of calculating it and agree upon its value for some relevant period of time. Then we can begin this discussion without it being pure BS.

So, you're up - define it, show in detail how to calculate it, provide figures as well as the raw numbers behind those figures.

I'll be waiting.

I will not comment on your claim of endemic and systematic fraud by the BLS.

I will say that the argument for future higher inflation is this:

Lots of money has been created by QE2 and open market operations at the Fed. Where is that money? At the banks. What are the banks supposed to do with that money? Loan it to businesses. Are they? Well, yes, some, but at lower volume than usual. Why? because of low demand for loans and lingering caution at the banks, left over from the financial crisis.

So that QE2 money has not yet been inflationary. Money stuck in a bank and not buying anything is not inflationary.

however

If banks start loaning out more money and that money gets into the money supply...bam, that would be very inflationary.

So that's the game - will the banks loan the money out? When? How much? Can the fed take away money before inflation digs in? Is the fed kidding itself that it will be brave enough to raise rates and kill inflation in time?

My concern was that, although the QE money goes to banks, it does end up purchasing something...securities. Bonds, equities, futures, commodities, currencies. Even the money that has been lent out--we're talking about major lending here, not $10k to the mom-and-pop shop for a new sign--it can be argued has done nothing but put money into corporate accounts, if one considers that many are sitting on piles of cash.

What are they doing with the cash? 3 things: 1) keeping it, in which case it is in a bank, in which case the bank invests it in securities; 2) returning it to shareholders and/or officers, who tend to be well-heeled people who invest in the markets, or 3) buying back their own stock.

All 3 of these things amount to buying securities.

So whether the banks lend it or not, it ends up buying securities of some sort, resulting in inflated securities prices.

Which is where we are at now.

In part, this explains the desire of the powers-that-be to "put money into the hands of the poor", because they spend it--directly, on consumer goods, rather than indirectly, on securities or other investments. This is the shift that will prevent deflation, which deflation could conceivably continue even though securities prices continue to skyrocket.

Where will the money come from? Not QE, that is borrowed, and is even now tapering. It will come from the "investor class", and be given to the "consumer class" (for lack of better terminology). Deflation will result in securities, because there will be less money chasing them, as the consumer class to whom money is being transferred are not, and will not be, in any kind of a position to purchase investments.

Markets will be down structurally, and prices of consumer necessities will be inflated. The response will then be to raise interest rates.

Of course this could all be wrong if the banks just hold cash. But none do, as far as I am aware.

DJIA, S&P500, NASDAQ now down 1.6, 2.1, and 3.2%

Now that's slightly more significant, but we'll have to wait to see how it plays out. More fiddle-faddle. Still no reason to get back into the market.

So, pure BS is your style. As long as you can throw out ill-defined terms and make long-winded arguments around them you are in your comfort zone.

Got it.

No, I own what I write.

You know what? It's about time I put some rigor into that measurement. I might do it over the weekend and let you know. Unlike core CPI, I include volatiles because there are ways to systematize their fluctuations. PCEPI will give some clues.

I also include taxes.

Your criticism is noted and welcome, and your abrasive style is appreciated.

I think I understand your position, you're just expressing it very badly.

Go away, write it down, review it, edit it, and come back with a management summary by cob Monday.

You are quite likely correct about my expressing it poorly; that is no doubt the result of gaps in my knowledge, as well as a lack of writing rigor.

I try to stay away from projecting my individual situation onto the masses. Although it is my own situation with which I am most intimately familiar, it is often folly to try to predict the behavior of groups using data from a sample size of 1.

Like you, I'm still trying to make money in all this. Heck, the best way to do that might just be to go back to working a job for somebody else. The horror, although I do command a hefty salary.

No, I'm not a financial consultant(!), although I have done extremely well with financials. So unless I'm incredibly lucky (which is possible), I must be onto something.