Tuesday, March 6, 2018

The Beady Eye!

Don't neglect the BDI....


Dry bulk set to break the upside after a very long drought.

GNK
GOGL
DSX??
NMM

Add to positions on the way up.

gh

Friday, February 16, 2018

Of Course it is About Inflation!

Look! The market went down and then it went up!

So it can't be about "inflation"!, they say.

Yes, it IS about inflation. Let me explain.

Start with the famous quote by Milton Freidman, "inflation is always and everywhere a monetary phenomenon".

Now consider that for the last 40 yrs. the central banks of the world have been fighting deflation with monetary stimulus. The deflation from Asian imports was countered with free money. What else was there to do???
We put all of our manufacturers out of business and laid off the help. In a "normal" world the nation would experience a colossal depression and imports would be unaffordable. But instead of that terrible thing we printed money by making credit available to everyone. We created a "service" economy out of thin air. We spread the credit around and got into the business of serving each other. (For minimum wages, of course) So we had some money to buy those imports. The importers had huge margins, stocks went up, and we all got on the gravy train as we became a "service and financial" economy.
That deflationary wave lasted most of the last decades. Now, Asia is coming into their own so to speak. They want broad increases in standards of living. China is increasing wages by letting the yuan appreciate. They do that by NOT buying U.S. dollars. Same in the rest of the emerging world. They will start to consume what they produce. That means prices for us will go up as the standards of living in the whole world go up, production being equal.
For decades we only measured inflation as the price of commonly used goods. Those were in good supply. Food, energy, etc....We didn't measure financial asset prices as part of inflation, but they surely were inflated if you consider what they would have been without central bank credit.

So, yes, it was inflation that we caught a whiff of. Another "taper tantrum"....

They will think of excuses and other names for what is and will happen, but it will be the result of free market capitalism and easy credit for decades. Because capitalism works. Capitalists make money. The profitable enterprises survive and prosper. And they stash the money away or loan it to others. This is the function of sovereign wealth funds. They "save", to coin a word. And now, in order to raise the standards of living of themselves they will spend what they have saved. That means there will be more money coming into the markets to compete for the goods we take for granted. And they will be using our money. Well it was 'ours'....But they have most of it now...

Interest rates will rise for those with demand for money and no savings....That is us...

What will democratic societies do when faced with a lack of money. We are in the process of cutting our safety nets. Cutting social programs. And running up our national debts even as we speak.

Perhaps we will depend on the kindness of strangers? Or central banks!

Alas.

Monday, February 5, 2018

What? Me Worry?

Inflation worries?
Oh, puhleez!

Does anyone really think the central bankers of this world will actually act to stop inflation?

The world has been waiting for inflation for decades to bail us out of our debts.

As money flees bonds it is more likely to be invested in oil, or steel, or gold...

Assets, in other words.

The only troubling spot is if wages for the workers start to rise. But that will  be needed to offset a rise in the cost of consumer credit.

Methinks the stock averages protest too much.

They ain't making anymore world, you know.

Tuesday, January 9, 2018

Is This Time Different?

I remember quite well what happened when long bonds were set to go down in '07.....

Here is an interesting chart of the long bond "bubble".

How much of "growth" is dependent on consumer debt and lending?

If there was a movement from long bonds to other assets would that include "real" assets?

The chart.


 
 
Timing is everything.
 
gh