Heng Seng and Nikkei markets looking a bit weak.
MGLICKER
Posts: 7,995 ✭✭✭
Not hovering near daily highs like the SP500 has for 18 months.
To early to hit panic, but with both down 12% or so from highs, a deeper slide may be in store. Both countries each hold $1T plus in US debt, and could dampen our party rather quickly.
To early to hit panic, but with both down 12% or so from highs, a deeper slide may be in store. Both countries each hold $1T plus in US debt, and could dampen our party rather quickly.
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Liberty: Parent of Science & Industry
2008 Redux. Bad at first, good recovery and then a possible run if the other markets turn sour for good.
I knew it would happen.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Why?
Knowledge is the enemy of fear
<< <i> Both countries each hold $1T plus in US debt, and could dampen our party rather quickly
Why? >>
dumping those holdings and not purchasing more of US debt?
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>
<< <i> Both countries each hold $1T plus in US debt, and could dampen our party rather quickly
Why? >>
dumping those holdings and not purchasing more of US debt? >>
Japan has a national debt load which on a per capita basis is over double the US. Only thing that is keeping them afloat is extremely low 10 year interest rates of sub 1%. Dumping a Trillion $ of US debt would certainly rattle the dollar but may not be a choice in for Japan going forward.
China is in a similar position, though their debt, while soaring is not nearly as high as Japans. Problem in China is they are paying 150 basis points more to borrow on the ten year, than they earn from the US counterpart that they hold.
This thought that the world is going to sell US debt has been bounced around for years, and it never happens. And it isnt going to happen. Most of the world is kind of forced to buy Treasuries due to trade imbalances, and as much as many of the folk on this board would like to disagree, US Treasuries are the safest investment on the planet.
Knowledge is the enemy of fear
<< <i> US Treasuries are the safest investment on the planet. >>
As far as being default free, as a paper asset, you are correct.
In regard to earning a real positive return, the chances are beneath slim. 2.75% does not cut it in a 6-7% inflationary market.
<< <i>
<< <i> US Treasuries are the safest investment on the planet. >>
As far as being default free, as a paper asset, you are correct.
In regard to earning a real positive return, the chances are beneath slim. 2.75% does not cut it in a 6-7% inflationary market. >>
Is that the inflation rate in Japan?
Knowledge is the enemy of fear
<< <i>
<< <i> US Treasuries are the safest investment on the planet. >>
As far as being default free, as a paper asset, you are correct.
In regard to earning a real positive return, the chances are beneath slim. 2.75% does not cut it in a 6-7% inflationary market. >>
Prices aren't inflating 6-7% for necessities, necessities oscillate depending on supply/demand, seasons, droughts, wars, etc.
prices for stuff people want to buy are inflating surely, some at 5%, some at 15%, some 50% annually, year after year.
Whatever the market for those premium and luxury items will bear
Liberty: Parent of Science & Industry
<< <i>
<< <i>
<< <i> US Treasuries are the safest investment on the planet. >>
As far as being default free, as a paper asset, you are correct.
In regard to earning a real positive return, the chances are beneath slim. 2.75% does not cut it in a 6-7% inflationary market. >>
Is that the inflation rate in Japan? >>
Value of the dollar is more important to the return on a US debt instrument than the Japan inflation rate. PM Abe is even more of a money printing fruitcake than even Obama or Bernanke, so in the last year, the 10 year treasuries would have been a decent bet, with the fall in price being eclipsed by the falling Yen.
Problem for Japan though is the unsustainable debt, It is about $14T in US Dollars or about $300,000 per working Japanese citizen. Aging population and extremely low birth rate will result in less than a happy ending.
<< <i>Prices aren't inflating 6-7% for necessities, necessities oscillate depending on supply/demand, seasons, droughts, wars, etc. >>
Where I live food is a necessity. When a packaged item like cereal or soup that contains about 20c of raw ingredients jumps from $4 to $5 as they are all over the place, drought and seasons and holes in the ozone layer are not the problem. It is the result of a quadrupling of the money supply in 5 years.
<< <i>
When a packaged item like cereal or soup that contains about 20c of raw ingredients jumps from $4 to $5 as they are all over the place... It is the result of a quadrupling of the money supply in 5 years. >>
No it isn't, in my opinion. In your example, it's the result of the cumulative effect of changes in transportation costs, changes in labor costs, changes in regulatory and insurance and other overhead costs, and also additional profit for the manufacturer, because he has pricing power because people still want the product because at either 4 or 5 dollars, it's still a lot better, easier, and cheaper than foraging it and manufacturing it themselves.
If it were just the money supply quadrupling, why haven't prices quadrupled?
Liberty: Parent of Science & Industry
<< <i>If it were just the money supply quadrupling, why haven't prices quadrupled? >>
Indeed they will. Takes a bit of time to circulate raw currency through the economy. Hitting the financial markets first and will trickle down to consumer goods in time. I see a quadrupling of real CPI by 2020. Of course the federal reserve will still be insisting that their target of 2% per annum has not yet been hit.
Though we seem to be protected from such high inflation simply because our flag is red white and blue, that is a fallacy.
Economic laws have no patriotism and will respond to our recklessness as hard as Iran and Venezuela, with 30%-50% annual inflation.
<< <i>
<< <i>If it were just the money supply quadrupling, why haven't prices quadrupled? >>
Indeed they will. Takes a bit of time to circulate raw currency through the economy. Hitting the financial markets first and will trickle down to consumer goods in time. I see a quadrupling of real CPI by 2020. Of course the federal reserve will still be insisting that their target of 2% per annum has not yet been hit.
Though we seem to be protected from such high inflation simply because our flag is red white and blue, that is a fallacy.
Economic laws have no patriotism and will respond to our recklessness as hard as Iran and Venezuela, with 30%-50% annual inflation. >>
Well, that's just great then! We can expect values of our houses, coins, cars, our salaries, and stock holdings ("hitting the financial markets first") to quadruple as well?
or, if they " quadruple the money supply" again, will we expect prices and values to go up just another 20%?
something in this argument doesn't add up.
Liberty: Parent of Science & Industry
<< <i>Well, that's just great then! We can expect values of our houses, coins, cars, our salaries, and stock holdings ("hitting the financial markets first") to quadruple as well? >>
In dollars terms, I would expect houses and cars to keep pace with the expected inflation rate. Salaries tend to lag a bit as folks are reluctant to demand a cost of living raise from the boss, but will be forced to, to sustain any kind of decent lifestyle.
Stock holding do not perform well in an inflationary cycle. When short term rates hit 15-20% (or higher), investors will demand at least a 10% stock dividend on the SP-500. Yield now is a bit under 2.00%.
As the high inflation continues, stocks should start climbing from what would then be dramatically lower levels, but in real terms, inflation adjusted, equities would probably not be a real good place to be. Debt instruments would fare even worse.
I know that imagining such a scenario stretches the brain a bit (it does mine), but so do repeated Trillion dollar deficits and $85,000,000,000 per month infusions of fresh cash.
<< <i>
<< <i>
<< <i>
<< <i> US Treasuries are the safest investment on the planet. >>
As far as being default free, as a paper asset, you are correct.
In regard to earning a real positive return, the chances are beneath slim. 2.75% does not cut it in a 6-7% inflationary market. >>
Is that the inflation rate in Japan? >>
Value of the dollar is more important to the return on a US debt instrument than the Japan inflation rate. PM Abe is even more of a money printing fruitcake than even Obama or Bernanke, so in the last year, the 10 year treasuries would have been a decent bet, with the fall in price being eclipsed by the falling Yen.
Problem for Japan though is the unsustainable debt, It is about $14T in US Dollars or about $300,000 per working Japanese citizen. Aging population and extremely low birth rate will result in less than a happy ending. >>
So it sounds like they better hold onto those US Treasuries.
Knowledge is the enemy of fear
What century will that be?
Remember, there are Govts all around the world "keeping" rates low. If rates in the USA are 15%, then they will be 16% in England and 25% in Brazil. All is relative and does not operate in a vacuum.
And remember, the higher the rates, the more demand for the US assets, which includes the dollar and Treasuries. How awesome was it in 1979 to buy 30yr Treasuries at 15%. That was one heck of a great investment. And if rates ever get that high again, guess what I will be buying.
Knowledge is the enemy of fear