Saturday, March 22, 2014

Recent Stagflationary Mark Posts

Funny comment about agriculture and almonds,

"[C]entral part of my diet is almonds. I eat one serving a day religiously. $4B+ in revenue for CA growers, that's 3M ounces of gold at current prices -- Canada's (#8 on the gold producer list) entire gold output. I love ag. So magical, having wealth just appear on plants every year. No game really captures this, I mean the strategic importance of the ag economy. There's Farmville of course, but how food is produced and distributed is fascinating. It's so important to our economy yet the Fed focuses on 'nonfarm' so much. When you take a fly-over of e.g. Germany, it's nothing but farms! Only 2M workers apparently in the US. (one serving a day is 22lbs a year, ~ten 38oz Costco containers (actually I buy my almonds from Trader Joes) and ~10X the current US per-capita consumption rate."
Banks don't believe rising interest rates.
"Based on the chart, banks sure aren't buying the rising interest rate story. Perhaps it might have something to do with the growing deposit glut. No matter how much lip service the rising interest rate story gets, banks still look at their deposits and no doubt wonder where the rising interest rates will ultimately come from. It's not like they are going to suddenly offer 5% CDs on a whim, now are they?"
Bond market versus stock market.
"Put another way, the bond market props up the stock market. The stock market does not prop up the bond market. As a long-term bond investor, rapidly falling stock prices are about as likely to hurt me as rapidly rising stock prices helped me. Not much. The same cannot be said of stock market investors in reverse. As a long-term bond investor, if I am financially ruined then I will be taking stock market investors with me. Of that, I have no doubt. Why can't more people see this?"


theyenguy said...

The bond market props up the stock market; this is seen in the chart of Stocks, VT, relative to Credit, VT:AGG. A see saw destruction of credit investments and stock investments commenced in March 2014, as the Interest Rate on the US 10 Year Note, rose to 2.75%. The 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, will continue steepening, seen in the Steepner ETF, STPP, steepening.

ZIRP be dead. Long term bond investors, will be taking taking stock investors down with them as on October 23, 2013,as is seen in Revelation 6:1-2, Jesus Christ opened the first seal of the Scroll of End Time Events, releasing the Rider on the White Horse, who has a bow without any arrows, that is the Bow of Economic Sovereignty, to effect global economic coup d’etat to transfer sovereignty from democratic nation state to sovereign regional leaders and sovereign regional bodies, such as the ECB, by enabling the bond vigilantes to start calling the Interest Rate on the US Ten Year Note, ^TNX, higher from 2.48%.

At the end of the week, on Friday March 21, 2013, Sectors Biotechnology, IBB, led by stocks BIIB, REGN, ILMN, GILD, CELG, and AMGN, Solar Energy, TAN, and Pharmaceuticals, PJP and Yield Bearing Sector Leveraged Buyouts, PSP, traded lower and Nations, Greece, GREK, and the National Bank of Greece, NBG, traded lower, commencing the Great Bear Market Selloff which has commenced Great Depression II on the exhaustion of the world central banks’ monetary authority.

Economic destructionism got fully underway in March 2014 as the world central bank’s monetary policies have crossed the rubicon of sound monetary policy and have made money good investments bad. Inflationism is no longer the prevailing economic dynamic.

As a result, the world has pivoted from the paradigm and age of liberalism, where the capstone of economic activity has been the investor, into that of authoritarianism, where the debt serf is centerpiece of economic activity.

The speculative leveraged investment community developed peak prosperity, that is peak real disposable income, and peak moral hazard in March 2014. The new normal is austerity and debt servitude.

Under liberalism the three dynamos of creditism, corporatism, and globalism, supported multiple economic systems, such as crony capitalism, European Socialism, Greek Socialism, and clientelism, But under authoritarianism, the singular dynamo of regionalism supports only regional economic fascism.

The day of the fixed income investor has peaked as is seen in the charts of Dividends Excluding Financials, DTN, and Short Term Bonds, FLOT, topping out in value.

Out of soon coming economic chaos stemming from derisking out of currency carry trade investments, such as the EUR/JPY, and the GBP/JPY, as well as out of deleveraging out of debt trades, short term interests rates will be rising, causing money market funds to break the buck, that is the traditional constant $1 Dollar Value, with the result that capital controls will be implemented and banks everywhere will be integrated into the Government, and be known as Government Banks, and in the US the bank’s Excess Reserves will be captured, so as to speak, by the US Fed.

With a trade lower in the price of Gold, $GOLD, from $1380, one should start to dollar cost average, an investment in the physical possession of Gold Bullion, as in the age of destructionism, diktat and gold will be the only two forms of sustainable resource and wealth.

Stagflationary Mark said...

ZIRP be dead. Long term bond investors, will be taking taking stock investors down with them...

It took World War 2 to kill ZIRP in the aftermath of the Great Depression (and even then it was well after the war ended). You may wish to rethink your timing.

Banks are sitting on massive deposits and can't find enough qualified borrowers. If you think banks will be raising interest rates on CDs any time soon, I believe that you are mistaken. And if CD tates aren't going to rise, then the very popular "rising interest rate" theory continually pumped on CNBC and the financial media is nothing but smoke and mirrors.

If/when people begin to realize that the economy is not as strong as advertised (as seen in falling retail sales growth rates over the past 2 years), then we'll see what happens to interest rates.

And lastly, I owned gold and silver from 2004 to 2006. I wouldn't buy either commodity at these prices though (for a similar reason that I wouldn't dream of shorting the 10-year treasury at this level). No asset is good at any price, especially in a world in which the Fed loves blowing bubbles (and misguided hyperinflation theories run rampant).

Just opinions (but supported by facts).

CP said...

I agree with Yen Guy about a lot of stuff, but I'm in the "fat chance" school of thought about rising interest rates.

Mark's example is great. Visualize yourself walking into a BoA branch where you have $100,000 in checking. You want to buy a 1 year CD. The clerk says the rate is 5%.

Then you wake up.

CP said...