Are we headed for hyperinflation?

[Capt Caveman]

Tesla has already dropped 17% from its peak.

Yeah, and only up 460% over the last year. :biggrin: And after Q3 earnings released, we'll see another high.

Again, high school or college?

 

[LegendKiller]

So what will people like me (zero debt -no CC, no car or house note, and have some money in the banks with excellent credit score) to do?

Go out and buy a house (30 years mortgage) and a new car (with 5-6 years car note) because of low interest rate? What else is there to do to financially protect myself?

Invest in a basket of consumer non-discretionary goods manufacturers??

 

[Attic]

So, if I understand. You don't think QE will end? Ever? If it does not end will it grow in your opinion?

I have read on other sites that say it won't end and still others say it will be cut no later than 2nd quarter 2014.


.

Under the best of circumstances I don't think it ends for 2-3 years. We may get a small taper in early/mid 2014. Fed says its data dependent. Truth is they can't risk losing control of interest rates.

Problem is that the US will need to issue more debt going forward, this will put out more supply of treasuries. The fed remaining at 85billion (45b of treasury buys) if treasury supply goes up would put upward pressure on rates IMO. So they can't taper into increasing debt needs, keeping the same rate of treasury purchase would be relatively a taper if US issues more treasuries.

Beyond that we know what has occurred since QE1. It is difficult/impossible to get out of. The last hint of a taper a few months back sent rates surging.

 

[Attic]

So what will people like me (zero debt -no CC, no car or house note, and have some money in the banks with excellent credit score) to do?

Go out and buy a house (30 years mortgage) and a new car (with 5-6 years car note) because of low interest rate? What else is there to do to financially protect myself?

Clearly QE hurts the ultra conservative savers, it's destroyed the savings rate and has sucked out hundreds of billions from those accounts earnings. This has pushed a lot of that money into riskier investments, but those remaining in savings accounts have had their rate and earnings decimated.


Most important: If owning a house (though you don't) you refinance to lower 30yr rate if possible. Don't pay off early. Car, buy used fuel efficient cheap to maintain reliable one.

Invest in the market, index funds that spit out dividends you reinvest. Of course don't sell/touch the principle you build here. One of the surest inflated markets are the equity markets. That will continue with easy money policies. Keep ~20% cash to buy into equities if market tanks 20-30%.

Cut consumption of stupid BS goods. Spend on yourself and others in prudent manner.

 

[shady28]

Invest in a basket of consumer non-discretionary goods manufacturers??

The direction this thread is heading illustrates the problem with the economic 'winter'.

If you were in indexed stocks in 2000, you are up about 20% in 14 years. But, in terms of buying power, you lost. If you were in cash only, you lost even more. Commodities did very well, but per my previous post - commodities are the last domino to fall, and it appears to be falling now.

If that's correct and the last domino is falling, there will be no reliable place to make positive value return. People in the past tend to chase markets back and forth, losing all the way. The most you can hope for is to preserve value. The smart move is likely to be highly diversified in type of investment, ie stocks, bonds, cash, and hard assets like land.

In other words, it becomes a game of finding the asset that loses the least value.

 

[LegendKiller]

The direction this thread is heading illustrates the problem with the economic 'winter'.

If you were in indexed stocks in 2000, you are up about 20% in 14 years. But, in terms of buying power, you lost. If you were in cash only, you lost even more. Commodities did very well, but per my previous post - commodities are the last domino to fall, and it appears to be falling now.

If that's correct and the last domino is falling, there will be no reliable place to make positive value return. People in the past tend to chase markets back and forth, losing all the way. The most you can hope for is to preserve value. The smart move is likely to be highly diversified in type of investment, ie stocks, bonds, cash, and hard assets like land.

In other words, it becomes a game of finding the asset that loses the least value.

So take any other period. Taking X or Y date is silly and isn't a long enough time horizon.

Long-term stocks have more than kept up with inflation.

 

[Spungo]

So what will people like me (zero debt -no CC, no car or house note, and have some money in the banks with excellent credit score) to do?

Go out and buy a house (30 years mortgage) and a new car (with 5-6 years car note) because of low interest rate? What else is there to do to financially protect myself?

Bernanke Mode: You should get a HELOC and use that money to invest in the stock market. Now is the perfect time to buy because it's currently at an all time high. Have you considered buying stock in Tesla or GM? Alternative, you could use that borrowed money to buy products from China. Employing Chinese workers somehow helps America.

Yeah, and only up 460% over the last year. And after Q3 earnings released, we'll see another high.

And why would it go up? Forward PE ratio is 95, which is horrible. Price to sales is 14.7. To put that in context, Toyota's price to sales is 0.71, Ford's price to sales is 0.46. The stock is so incredibly overpriced that down is virtually the only direction it can go from here.

 

[LegendKiller]

Bernanke Mode: You should get a HELOC and use that money to invest in the stock market. Now is the perfect time to buy because it's currently at an all time high. Have you considered buying stock in Tesla or GM? Alternative, you could use that borrowed money to buy products from China. Employing Chinese workers somehow helps America.


And why would it go up? Forward PE ratio is 95, which is horrible. Price to sales is 14.7. To put that in context, Toyota's price to sales is 0.71, Ford's price to sales is 0.46. The stock is so incredibly overpriced that down is virtually the only direction it can go from here.

Analyzing stocks by looking at PE ratios is like comparing car engines and only relying on cylinder count.

LOL @ comparing a high-risk growth company to established manufacturers. That's about as silly as it gets.

 

[Anarchist420]

although no one now knows when hyperinflation will really come, it should be pointed out that legal tender and govt distort the natural order.

 

[fskimospy]

The direction this thread is heading illustrates the problem with the economic 'winter'.

If you were in indexed stocks in 2000, you are up about 20% in 14 years. But, in terms of buying power, you lost. If you were in cash only, you lost even more. Commodities did very well, but per my previous post - commodities are the last domino to fall, and it appears to be falling now.

If that's correct and the last domino is falling, there will be no reliable place to make positive value return. People in the past tend to chase markets back and forth, losing all the way. The most you can hope for is to preserve value. The smart move is likely to be highly diversified in type of investment, ie stocks, bonds, cash, and hard assets like land.

In other words, it becomes a game of finding the asset that loses the least value.

Your entire post relies on an arbitrary selection of dates. If you bought a couple years before 2000 or a couple years after that destroys your whole point.

 

[shady28]

Your entire post relies on an arbitrary selection of dates. If you bought a couple years before 2000 or a couple years after that destroys your whole point.[/QUOTE20%.]

Not really. Look at a similar block of time from the peak before the 1987 crash in stocks to 2000. You would have done much better than in the last 14 years since 2000. ie about 350% vs 20%

 

[fskimospy]

Not really. Look at a similar block of time from the peak before the 1987 crash in stocks to 2000. You would have done much better than in the last 14 years since 2000. ie about 350% vs 20%

So once again you're relying on arbitrary dates that include buying a the peak of a market run-up. As soon as you pick an example that doesn't involve buying at a peak, your point falls apart.

 

[shady28]

So once again you're relying on arbitrary dates that include buying a the peak of a market run-up. As soon as you pick an example that doesn't involve buying at a peak, your point falls apart.

Market cycles will generally start at a trough, run to a peak, then a new cycle starts at a peak and runs to a trough.

What you are talking about is trying to make money on short-term trades within one of those cycles. That isn't what happens to the majority though.

Look at this chart again. There are 15-20 year cycles where its good to buy stocks and easy to make money in stocks, and 15-20 year cycles where it isn't so good. 1949-1968 good. 1968-1982, not good. 1982 - 2000 good. 2000 - 201? not good.

Sure within those cycles, there are buying opportunities. But from a long term perspective, losing money on average for 15 years is something few people can afford.

The thing is, these cycles make up a larger cycle that represent spring, summer, autumn, and winter. The cycle we're in now, 2000-201x, is winter.

Everything we see that we think is some new economic problem has happened before. The market blowoff and bubble of 2000 was predicted and explained by someone who died 65 years before it happened.

The current winter should be debt repudiation, but that hasn't been allowed to happen. They've merely extended the winter cycle by preventing elimination of bad debt; that still has to happen.

We will see a new low on the markets in constant-value dollar terms before this is over.

 

[fskimospy]

Market cycles will generally start at a trough, run to a peak, then a new cycle starts at a peak and runs to a trough.

What you are talking about is trying to make money on short-term trades within one of those cycles. That isn't what happens to the majority though.

Look at this chart again. There are 15-20 year cycles where its good to buy stocks and easy to make money in stocks, and 15-20 year cycles where it isn't so good. 1949-1968 good. 1968-1982, not good. 1982 - 2000 good. 2000 - 201? not good.

Sure within those cycles, there are buying opportunities. But from a long term perspective, losing money on average for 15 years is something few people can afford.

The thing is, these cycles make up a larger cycle that represent spring, summer, autumn, and winter. The cycle we're in now, 2000-201x, is winter.

Everything we see that we think is some new economic problem has happened before. The market blowoff and bubble of 2000 was predicted and explained by someone who died 65 years before it happened.

The current winter should be debt repudiation, but that hasn't been allowed to happen. They've merely extended the winter cycle by preventing elimination of bad debt; that still has to happen.

We will see a new low on the markets in constant-value dollar terms before this is over.

No, I'm explicitly not talking about trying to make money on short term trades, if anything you are. I'm saying that stocks well out-perform inflation over time. Since most people are investing in stocks for retirement they should largely be investing in greater than 15 year time periods.

Every example you have given is an example where the stock market does not outperform inflation so long as you bought at a particularly disadvantageous time. As soon as you look at the average person, who may have bought before that peak, during the peak, or after the peak, you would see that for all but the least fortunate the stock market outperforms inflation, sometimes dramatically so. You're cherry picking.

You appear to be referring to the Austrian business cycle theory, which is contradicted by empirical evidence. (as is basically all of the rest of Austrian economics)

 

[Jhhnn]

The current winter should be debt repudiation, but that hasn't been allowed to happen. They've merely extended the winter cycle by preventing elimination of bad debt; that still has to happen.

Add deflation & expansion/ consolidation by holders of great wealth if you're referencing the classic scenario.

Bad debt is only bad when it can't be serviced, which is the basis of intervention by the FRB & Treasury, to promote service of that debt. It's an attempt to fundamentally alter the boom/bust aspects of the business cycle. There is no historical precedent. The world would be better served if that were controlled on the way up, but that horse is already out of the corral thanks to the Ownership Society.

 

[LegendKiller]

Market cycles will generally start at a trough, run to a peak, then a new cycle starts at a peak and runs to a trough.

What you are talking about is trying to make money on short-term trades within one of those cycles. That isn't what happens to the majority though.

Look at this chart again. There are 15-20 year cycles where its good to buy stocks and easy to make money in stocks, and 15-20 year cycles where it isn't so good. 1949-1968 good. 1968-1982, not good. 1982 - 2000 good. 2000 - 201? not good.

Sure within those cycles, there are buying opportunities. But from a long term perspective, losing money on average for 15 years is something few people can afford.

The thing is, these cycles make up a larger cycle that represent spring, summer, autumn, and winter. The cycle we're in now, 2000-201x, is winter.

Everything we see that we think is some new economic problem has happened before. The market blowoff and bubble of 2000 was predicted and explained by someone who died 65 years before it happened.

The current winter should be debt repudiation, but that hasn't been allowed to happen. They've merely extended the winter cycle by preventing elimination of bad debt; that still has to happen.

We will see a new low on the markets in constant-value dollar terms before this is over.

Few people can't afford a 15 year decline? I started putting money away at 24, I was 2 years later since I went to grad school right after undergrad. If I retire at 55 I can last 2 down cycles without a problem, then move into bonds.

Who cares if your stocks go up or down every 15 years as long as the 30+ year cycle is in your favor, and it is. Your picking arbitrary points every 15 years is silly. Pick a 30 year period and let me know how you do.

 

[Jhhnn]

Few people can't afford a 15 year decline? I started putting money away at 24, I was 2 years later since I went to grad school right after undergrad. If I retire at 55 I can last 2 down cycles without a problem, then move into bonds.

Who cares if your stocks go up or down every 15 years as long as the 30+ year cycle is in your favor, and it is. Your picking arbitrary points every 15 years is silly. Pick a 30 year period and let me know how you do.

Unfortunately, few people begin investing when young, for a variety of reasons. Today's situation is that all too many younger workers live hand to mouth between bouts of unemployment & low wages, regardless of education.

It's part & parcel of explosive inequality.

 

[Moonbeam]

Unfortunately, few people begin investing when young, for a variety of reasons. Today's situation is that all too many younger workers live hand to mouth between bouts of unemployment & low wages, regardless of education.

It's part & parcel of explosive inequality.

Interestingly, even the richer folk in democracies with more equalized income distribution than the US are happier than rich Americans.

 

[LegendKiller]

Unfortunately, few people begin investing when young, for a variety of reasons. Today's situation is that all too many younger workers live hand to mouth between bouts of unemployment & low wages, regardless of education.

It's part & parcel of explosive inequality.

Even if you don't get going until 35 you still have two super-cycles to invest through.

 

[Anarchist420]

Interestingly, even the richer folk in democracies with more equalized income distribution than the US are happier than rich Americans.

the people in europe reduce the income inequality on their own (rather than their govts), quite fucking contrary to popular belief. and taxes would have to get much, much more regressive here for full blown socialism to happen... the Neo-Republicans[1], [2] have already taxed the people enough, and quite regressively at that.

you want govt run health care? then you're going to have to start paying a VAT to the u.s. govt. then your payroll taxes will go up. then you'll have to pay more income tax. all for something that most people dont even know that they'll even use what they're forced to pay for. and then when there are drug shortages due to price fixing it will not be pretty. and then more inequality than ever before happens when the wealthy get better health care from the private sector while the poor people who lose 90% of their income to taxation will be waiting 6 months to get treatment that they have little to no say in.

[1]members of the Party of Lincoln, not the Jeffersonian Old Republican '98ers
[2]yes i know that neo does not mean new

 

[LegendKiller]

the people in europe reduce the income inequality on their own (rather than their govts), quite fucking contrary to popular belief. and taxes would have to get much, much more regressive here for full blown socialism to happen... the Neo-Republicans[1], [2] have already taxed the people enough, and quite regressively at that.

you want govt run health care? then you're going to have to start paying a VAT to the u.s. govt. then your payroll taxes will go up. then you'll have to pay more income tax. all for something that most people dont even know that they'll even use what they're forced to pay for. and then when there are drug shortages due to price fixing it will not be pretty. and then more inequality than ever before happens when the wealthy get better health care from the private sector while the poor people who lose 90% of their income to taxation will be waiting 6 months to get treatment that they have little to no say in.

[1]members of the Party of Lincoln, not the Jeffersonian Old Republican '98ers
[2]yes i know that neo does not mean new

You have no fucking clue what you are talking about. Europeans are taxed, massively, through many ways. Furthermore, their governments, such as Germany, promote the middle class in a variety of ways, including the Mittlestand, Landesbanken, and massive union presence. Furthermore, they take a very level headed approach to allocation of educational resources by testing their kids half way through, sending some to university and the rest to practical schools. This is a huge governmental bureaucracy.

As usual you have it all wrong.

 

[Anarchist420]

You have no fucking clue what you are talking about. Europeans are taxed, massively, through many ways. Furthermore, their governments, such as Germany, promote the middle class in a variety of ways, including the Mittlestand, Landesbanken, and massive union presence. Furthermore, they take a very level headed approach to allocation of educational resources by testing their kids half way through, sending some to university and the rest to practical schools. This is a huge governmental bureaucracy.

so everyone is taxed to pay for everyone's expenses.

i also knew that the employees have a huge share in the companies they work for by regulatory legislation, but the union is only as bright as the members that run it... if you know what i mean.

that said, regulating is inbetween redistributing and the market, so the latter two will always cancel the first one out.

anyway, attempting to destroy all individuality is a revolt against the laws of Nature and of Nature's God.

 

[shady28]

Few people can't afford a 15 year decline? I started putting money away at 24, I was 2 years later since I went to grad school right after undergrad. If I retire at 55 I can last 2 down cycles without a problem, then move into bonds.

Who cares if your stocks go up or down every 15 years as long as the 30+ year cycle is in your favor, and it is. Your picking arbitrary points every 15 years is silly. Pick a 30 year period and let me know how you do.

You go boy, keep loading up on those stocks.

By the way, for my 30 year period I pick 1927 to 1957 :

 

[Jhhnn]

anyway, attempting to destroy all individuality is a revolt against the laws of Nature and of Nature's God.

Which has nothing to do with reality. It probably feels that way if you're a Marine Corps recruit, however.

 

[Siddhartha]

I do not see any fundamentals that would lead to hyperinflation.
1. Currently US inflation is low.
2. In the US. the official unemployment rate is around 7.4 and the last numbers I have seen for the underempoyed and discouraged workers who have completely dropped out are higher.
3. The House Republicans, because their party does not control the executive branch, are hell bent on driving the economy back into recession or at least keep growth at slow rate.
4. The rest of the world's, for example the EU, Japan, and Russia, are looking at stalled or slow growing economies. China's economy is slowing.
5. Prices of commodities, for example oil, that are bellwethers for inflation are down because of demand. The price of oil is being kept unhinged from the reality of supply and demand because of speculation of control of supply exposure.