Monday July 26, 2010
This article by Ambrose Evans-Pritchard sums up where we are now. We must see an end to deflation before inflation can start. The article details the horrors of the German money meltdown in the 1920s. And it mentions the Japanese attempts the last twenty years which failed to stop their bull market. Now that governments have literally thrown trillions of dollars at the problem the seeds of eventual inflation have been sown. But as we write, condos are still being auctioned, unemployment is still being extended, WMT is still marking down prices, commercial real estate vacancies are on the rise, and bond yields continue to fall.
Interestingly Bill Gross at PIMCO is now predicting the end of the bond rally. As it has been a thirty year rally, he could well be off by a year or two, it is certainly not the time to buy stocks now which is what he is apparently suggesting. He will eventually be right about bond prices dropping but not quite yet. Bond prices will need to make a parabolic peak as they did in the fall of 2008, stocks will need to fall, and more and more For Sale property becomes rental property. Look for the number of pages of Distinctive Properties in the Wall Street Journal to expand as they become Distinctive Auctions. Notice that car makers are again offering nothing down, 60-72 months to pay. lease this car for 200 bucks a month, etc, these are deflationary signs....
Finally notice that gold and silver are not rallying with stocks, a decided negative event.
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