Alternative title to Fed - Deflation, Moron.
I’ve been reading the debates between the deflation camp and the inflation camp for several years now. They all have great arguments. I tend to ignore the arguments and look at the charts. While the charts can lie for a short period of time, the obvious deflationary pressures since the early 1980s are difficult to ignore.
People constantly complain about the methods the government uses to calculate inflation. They probably have a valid set of debate points. But no matter how some pencil neck with a pocket protector determines the raw value of inflation, the market has been saying for over 20 years that inflation is falling in the long term. Granted, that this chart begins at an abnormal level due to out of control inflation in the late 1970s. But nothing in the last 20 years tells me that price pressures are doing anything but going down long term.
As I discussed in my “inflation is relative” post, there are many points in the past 20 years that a case could be made for significant inflation - in the short term. But in every case, the actuals do not match the estimates. The world continues to see less and less long term inflationary pressures.
The short term chart since 2003 shows a big jump in inflation into 2007. Then the price of the 10 year bond began to increase (yield decreased). Many arguments can be made in the short term for “why” this has occurred. But these arguments are rendered a waste of time when viewing the long term chart above. The price of the bond is doing nothing more than continuing the long term trend up (with yields going down).
Yields at this point could could move back up to the 1×1 Gann angle at the 50% time cycle to a 4.19% return by next summer. But this value remains on a downward slope in the long term.
Tags: Bonds · Inflation-Deflation16 Comments
16 responses so far ↓
Are you saying not to buy bonds? Long term? I think its time to head to the Mountains! All of my puts where bought out early while I was sleeping…too bad for me…but now we broke my trend lines and fib retracements…. As most of you men say, “The World is your Urnal”, well, I think we found out today, Piss on it!. its going Down, Next stop on the Dow is 7500, what a difference a day makes. The S&P blew thru my 920-950, and thru the 78.6% fib retrace from bottom of 02, Now we are looking at the bottom of 02 and Gentlemen that is 768 or I think lower, are we going to bounce, I hate to say this but I don’t think so, she’s like the song, Free Falling, Free falling, Marie looks a little upset right now, and “Art Cashin” got his wish, now if you look at 1929 you will see that this is almost a mirror image of what happened and the charts are almost exactly the same, Deflation is on its way fast, I know its hard to imagine streets full of People homeless but this is what could happen, and don’t laugh, if we break 768, this will happen, there is no liquid cash, that is why a month or so ago, I said to get what little $ most of us have out of the banking system, gold now could be worth more than cash, but its hard to hand a clerk gold to buy a gallon of milk..:) if you know what I mean, Now I am speculating of course, but I think Andy and Kurt know that I am serious,and I have to cont, on next blog.
Libby - No, not at all. Bonds are not my area but buying and receiving the interest in a deflationary environment is a good thing. People who bought 30 year bonds in the 1980 are still doing very well. What I am saying is to not position a portfolio assuming massive inflation. I’ve been reading for years about people buying TIPS because of the great inflation wave about to hit. But as I have said before, inflation is relative to whatever timeframe one is looking at. Trading TIPS may work out great for those who know how to do that (not me).
I just keep remembering what “Art Cashin from UBS, trading floor said the other day,,,,we need a bad day, a very bad day down to have this thing capitulate. Well, maybe we did that today, but I don’t think it is over. I just wonder what Arthur is thinking right now. Is this a buying opportunity, or Not???? Hummm… I am not sure yet, but I think Andrew’s date is coming up soon, and I think we turn around that time,Markets are closed on Monday, Oct. options expire on Thurs.16th, another full moon, Ahhhhhohhhhhh, hummmmmmmmm….I have my ideas on that, but I need to do some more chartology as Dillion says many trend lines have been broken severly, amongst energy, look at one of Andy’s favorites Cheasapeake broken arrow but it maybe time to buy, she could go back to the 30 area, nice return for such a great Co. Utilities are next, but major oil stocks are broke. GE is another broken arrow, and the list goes on. The S&P and Dow have both broken my Grand Supercycle middle line trend line, that is not good, next stop for Dow, on my fib retrace is below 02’s low, could this happen tomorrow(weather channel),,,a little humor never hurt anyone…LOL! Yes! IT! COULD!… Will it, I think so. Dow 5000 is next according to the trend lines, Andy, could you Gann that for me? time wise, Dillion is looking serious, Karen shit her pants today so she couldn’t show up, and Mackie, he’s like a pit bull on steroids, sick at home , and Mr. Cool Tim Seymour, well, thats a guy who lost a coo;l amount in Russia…Dillion forgot that the goverment is broke, listen to Kramer.
Come on, Libby… don’t hold back…
Don’t you just love it, Dillion wants to Hang em, the other guy in Guy Adomi seat, is scared to death….is this great or what, Andy, they’ve lost their ass’s and they are pro’s. This is it, psychologicaly, we are there Andy, Tomorrow is buy Day, this thing will fall, a thousand points tomorrow….get ready! These guys are nervous and smell of B-O……
Yeah…everyone is freakin’ out… aren’t they? OTOH - Maria looks completely relaxed.. which is the only thing that worries me…
Then theirs God, Denise Gartman, Would I like to be his apprentice. Man, I wish I could afford his updates! but I’m not sure what classification of whale he is?
Libby, You say it looks like 1929 and you also said prepare to buy tomorrow? I am sort of confused. How do I know it is not a falling knife anymore? It could go down 1000 points tomorrow and have a follow on day Monday too right? So what do you look for. I am sure Andy’s date of 10/10 could be off a few days too right? Andy any comments. Many thanks.
P.S: Andy, I could post from my wife’s laptop. This submit button that I now see here does not show up on mine. Maybe something my employer did. Now I think I will crack it though since I have something to comapre to this weekend.
regards, Ray
Ray - My long term date of October 10th is a reference date. Any time between now and next Friday is good with me. My rule of thumb is the move can ignore the cycle for up to two weeks. But eventually, after about a week and a half, it will be clear if I was wrong.
Ray, I would never recommend that just anybody buy into this crazy game. I myself just buy a little at a time, like eating an apple. I am buying cheap Dec. Calls. This move is happening just a weee bit too fast for everyone, I think its a B Wave Andy, So, be prepared for a fast swing to the up side, remember that larger degree 2nd wave, that would be a great match move to this one at 50-61% retrace of B, then we fall in the beginning of 2009. If that happens Wow, we are burnt toast. OH Andy, what are you doing up so late?
Libby - Your wave “B” and down in 2009 makes sense to me. As long as we held above the 2005 high I was thinking different. But now I am with you. But that won’t be bad. We can just go to cash/bonds and buy putz. Just as easy to make money going down as going up - when you know what is happening. I don’t have time to do a lot of that because of my day job. Reason I was up so late is because I’m taking today off from work. Gotta take out the AC and winterize the house.
Libby - Did you mean Dennis Gartman (vs Denise)? Maybe his wife does all the thinking like Cramer’s wife did at his hedge fund… anyway, I posted the real name so people searching for Dennis Gartman will be sucked by Google into my vortex and read my stuff…
Hey that was a good idea Andy, we need you a good heard following, Your good at what your doing, and you enjoy it thats whats important. Oh and Yes it was Dennis Gartman, my typing was just off an “n” ohhhhhhh and I put an ” e ” on the end, slap that mans face didn’t I….LOL! Poor Dennis….well, lets see how long this rally lasts, I am hoping for a week or two, have a great weekend, I am off to Portsmouth, Ohio to Swap Days, to find treasures, watch people, and have a relaxing WkEd, its a great flea market if you want to leave PA. for great bargains, over 100,000 people, Thanks for everything. Happy Trading everyone!
There was someone here mentioning that a crash was coming, I am not sure if it was Libby or Mike….
well, hats off to you guy, now, do you care to share when you think we’ll bottom? LOL….
if you want to make money, next time I say buy sell!
Kurt, sorry forgot to tell you, this is nothing of a crash, were just in the beginning stages, we need to be prepared for the next rally, this is only my opinion, not Andy’s, OK, so I think we only have one last chance to get out of our $ 401K’s, and that rally will begin soon.
Libby - I agree with you. Even if you are wrong, we get out on the bounce and then back in on the successful test. Thanks for providing an alternative view and keeping us straight.
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Note: This is not advice. This is just what I plan to do.