Are we hitting a deflationary patch?

[blazespinnaker]

Obama surprised us with some sensible policies. If he keeps this up, things might get a bit deflationary for a little while..

http://www.bloomberg.com/apps/news?p...zT0fsoPI&pos=1

U.S. Stocks Fall Most Since October Amid Curbs on Banks, China
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By Elizabeth Stanton

Jan. 23 (Bloomberg) -- U.S. stocks declined for a second week, sending the Standard & Poor’s 500 Index to the biggest drop since October, as banks plunged on a White House proposal to limit financial risk and China moved to cool economic growth.

[MulaMan]

Re: Are we hitting a deflationary patch?

but according to Fox News Obama's reckless speach on financial reform took down the stop markets 200 points and will hurt American business, prolong the recession, bad for American's 401ks, ..

...then they jumped back on the 20 year old "de-regulation" spin in that financial regulation is reckless socialism and we need to keep government out of our lives ..

just like heatlh care and all other government regulation the hurts big business but helps Americans.

most amazing to me is how working class republicans are so retarded as to constatly vote against thier own family's well being. That has got to be the true definiion of being retarded.

[goadam1]

Re: Are we hitting a deflationary patch?

but according to Fox News Obama's reckless speach on financial reform took down the stop markets 200 points and will hurt American business, prolong the recession, bad for American's 401ks, ..

...then they jumped back on the 20 year old "de-regulation" spin in that financial regulation is reckless socialism and we need to keep government out of our lives ..

just like heatlh care and all other government regulation the hurts big business but helps Americans.

most amazing to me is how working class republicans are so retarded as to constatly vote against thier own family's well being. That has got to be the true definiion of being retarded.

Welcome to rule by mobocracy and faux-populism.

[Crazyfingers]

Re: Are we hitting a deflationary patch?

Its truely amazing. The bankers needed democrats to get the bailouts. Now they need the Republicans to keep their hard earned loot. Right wing media and Fox news is telling its audience not to be jealous of the bankers and that any regulation of them is an attack on capitalism.

Obama harsh words gives them perfect cover to bail on the stock market and secure all their loot from speculating with bailout money. And the media will provide the cover or misinformation whatever you wanna call it.

Its amazing all the right wing radio shows etc can keep their lies straight. For example how will they justify smashing Ron Paul's bill to Audit the Fed? They would have to agree with Dodd and the Democrats. I am sure they have it all figured it thou.

When the fake Republicans start praising Dodd, Franks, Bernanke, Geitner, and Wall Street will the Fox news crowd wake up? I doubt it.

[jk]

Re: Are we hitting a deflationary patch?

Obama surprised us with some sensible policies. If he keeps this up, things might get a bit deflationary for a little while..

http://www.bloomberg.com/apps/news?p...zT0fsoPI&pos=1

U.S. Stocks Fall Most Since October Amid Curbs on Banks, China
Share Business ExchangeTwitterFacebook| Email | Print | A A A
By Elizabeth Stanton

Jan. 23 (Bloomberg) -- U.S. stocks declined for a second week, sending the Standard & Poor’s 500 Index to the biggest drop since October, as banks plunged on a White House proposal to limit financial risk and China moved to cool economic growth.

don't forget the fed is supposed to end qe in march. i imagine they might actually stop buying mbs for a while. that will spike mortgage rates, coinciding with the huge increase in resets for alt-a, option-pay mortgages. we should start a pool on how long the fed stays out of the mbs market.

[pmmeaney]

Re: Are we hitting a deflationary patch?

I saw an interesting post by Carl Denninger (I know he is not well respected at iTulip), but he made an interesting point on his "weekend roundup - 1/23" that I was wondering if others could comment on:

"Since March of last year the banks and stock market generally have rallied hard. But.....
The economy has not in fact improved. There are millions more out of work today than there were in March of 2009. There is scant little improvement in freight traffic. Sales tax and income tax numbers are below where they were last year at this time. This, of course, makes perfect sense - the unemployed pay few taxes.


The plates have been kept in the air only due to two things: (1) People not paying their mortgages for literally a year or more (and thus spending that money generally) and (2) massive transfer payments amounts to $500 billion a year from the government to the people - money that they borrowed, not taxed and collected."


The fact that found intriguing was whether people not paying their mortgages were stimulating the economy by spending the money elsewhere. Could this amount to a significant amount of money? My thought is that a lot of these people are unemployed. So they wouldn't have any money anyway. If it is substantial, it also means that the banks' balances look far worse than people are letting on.

[Kadriana]

Re: Are we hitting a deflationary patch?

I saw an interesting post by Carl Denninger (I know he is not well respected at iTulip), but he made an interesting point on his "weekend roundup - 1/23" that I was wondering if others could comment on:

"Since March of last year the banks and stock market generally have rallied hard. But.....
The economy has not in fact improved. There are millions more out of work today than there were in March of 2009. There is scant little improvement in freight traffic. Sales tax and income tax numbers are below where they were last year at this time. This, of course, makes perfect sense - the unemployed pay few taxes.


The plates have been kept in the air only due to two things: (1) People not paying their mortgages for literally a year or more (and thus spending that money generally) and (2) massive transfer payments amounts to $500 billion a year from the government to the people - money that they borrowed, not taxed and collected."


The fact that found intriguing was whether people not paying their mortgages were stimulating the economy by spending the money elsewhere. Could this amount to a significant amount of money? My thought is that a lot of these people are unemployed. So they wouldn't have any money anyway. If it is substantial, it also means that the banks' balances look far worse than people are letting on.

It feels like people are starting to cut back now that Christmas is over. I am starting to notice a change around here. On Friday, I got a call from my dentist's office that I could show up an hour early because there were no other appointments. I couldn't go early because of my children. When I got there, there were no other patients and there are usually at least 1 or 2 people in the waiting room. When I left, there was no one there. I had my pick of appointments even though I go every 4 months instead of 6. Usually the hygienist has to look at several days before she can find me a time. People are cutting back on their dental care and if they're cutting back there, I wonder where else they're starting to cut back.

[GRG55]

Re: Are we hitting a deflationary patch?

Obama surprised us with some sensible policies. If he keeps this up, things might get a bit deflationary for a little while...

...U.S. Stocks Fall Most Since October Amid Curbs on Banks...

...Jan. 23 (Bloomberg) -- U.S. stocks declined for a second week, sending the Standard & Poor’s 500 Index to the biggest drop since October, as banks plunged on a White House proposal to limit financial risk and China moved to cool economic growth.

don't forget the fed is supposed to end qe in march. i imagine they might actually stop buying mbs for a while. that will spike mortgage rates, coinciding with the huge increase in resets for alt-a, option-pay mortgages. we should start a pool on how long the fed stays out of the mbs market.

Seems like this is just all part of the ebb and flow, like the tide.

The reflation efforts of Central Banks around the world have been wildly successful in places like China and India, and moderately successful boosting stock markets and bank earnings in numerous other jurisdictions including the USA.

The question now, I think, is do we actually see any real deflation or does the money just move to another part of the global economy to create another incipient mini-bubble? If so, where? And what's the logical pair trade to position for that?

As for the Fed buying MBS, that was primarily to create a market-of-last-resort for Fannie and Freddie to sell to [in the absence of private domestic, private foreign or official foreign buyers], so F&F could keep lending more and maintain liquidity in the US mortgage market. Now that F&F have the ability to run an unlimited balance sheet with explicit backing from the US government, why does the Fed need to keep [or re-start] buying MBS?

[jk]

Re: Are we hitting a deflationary patch?

Seems like this is just all part of the ebb and flow, like the tide.

The reflation efforts of Central Banks around the world have been wildly successful in places like China and India, and moderately successful boosting stock markets and bank earnings in numerous other jurisdictions including the USA.

The question now, I think, is do we actually see any real deflation or does the money just move to another part of the global economy to create another incipient mini-bubble? If so, where? And what's the logical pair trade to position for that?

As for the Fed buying MBS, that was primarily to create a market-of-last-resort for Fannie and Freddie to sell to [in the absence of private domestic, private foreign or official foreign buyers], so F&F could keep lending more and maintain liquidity in the US mortgage market. Now that F&F have the ability to run an unlimited balance sheet with explicit backing from the US government, why does the Fed need to keep [or re-start] buying MBS?

what is the pathway by which f&f will get the dollars to buy more mortgages?

[GRG55]

Re: Are we hitting a deflationary patch?

what is the pathway by which f&f will get the dollars to buy more mortgages?

The usual avenue...Barney Frank et al......supported by the always frightful [to politicians] threat that without more money the housing market goes into meltdown.

Seriously, I can imagine a scenario where, in the absence of consumer lending by the financial sector, this Administration, Congress and Senate use F&F as an important conduit to funnel stimulus money directly to "the people".

Just as they are going to abandon the unskilled, chronically unemployed, they'll abandon the hopelessly overindebted mortgage holder [that so far they have been trying to "save"] and leave the villains in the banking sector to deal with the foreclosure fallout. What F&F will concentrate on is lending to the still solvent and viable borrower to maintain some liquidity in the housing market so transactions don't seize up completely even as housing prices continue to decline.

[jk]

Re: Are we hitting a deflationary patch?

The usual avenue...Barney Frank et al......supported by the always frightful [to politicians] threat that without more money the housing market goes into meltdown.

Seriously, I can imagine a scenario where, in the absence of consumer lending by the financial sector, this Administration, Congress and Senate use F&F as an important conduit to funnel stimulus money directly to "the people".

Just as they are going to abandon the unskilled, chronically unemployed, they'll abandon the hopelessly overindebted mortgage holder [that so far they have been trying to "save"] and leave the villains in the banking sector to deal with the foreclosure fallout. What F&F will concentrate on is lending to the still solvent and viable borrower to maintain some liquidity in the housing market so transactions don't seize up completely even as housing prices continue to decline.

f&f will get its money from the treasury. the treasury will get its money by selling tbonds... to the fed.

[flintlock]

Re: Are we hitting a deflationary patch?

It feels like people are starting to cut back now that Christmas is over. I am starting to notice a change around here. On Friday, I got a call from my dentist's office that I could show up an hour early because there were no other appointments. I couldn't go early because of my children. When I got there, there were no other patients and there are usually at least 1 or 2 people in the waiting room. When I left, there was no one there. I had my pick of appointments even though I go every 4 months instead of 6. Usually the hygienist has to look at several days before she can find me a time. People are cutting back on their dental care and if they're cutting back there, I wonder where else they're starting to cut back.

I've seen the same situation when I go to the doctor. Empty waiting rooms, short waits, etc.:confused: I even get aggressive calls telling me I need to come back for a "follow up". Things you never used to see.

I've also seen auto repair places struggling. One place I go to is offering 10% off on Mondays and dropped their price when I balked at a repair cost.

[c1ue]

Re: Are we hitting a deflationary patch?

The fact that found intriguing was whether people not paying their mortgages were stimulating the economy by spending the money elsewhere. Could this amount to a significant amount of money? My thought is that a lot of these people are unemployed. So they wouldn't have any money anyway. If it is substantial, it also means that the banks' balances look far worse than people are letting on.

SeanO made this assertion some time ago.

Certainly I can see it happening, but the real question is how long can it happen and what happens to the banks in the meantime.

The failure to pay on mortgages coupled with a not rising housing market means that the outstanding debt due is increasing - not only from the missed payments but also all the penalties, etc.

While Mark to Fantasy allows these banks and MBS' holders (the Fed) to assume these loans are still good, they are not and likely will never be.

So if this phenomenon is truly widespread (1 in 7 mortgages foreclosed on or delinquent) - the question is how long this can last and what the overall impact will be.

[shiny!]

Re: Are we hitting a deflationary patch?

I saw an interesting post by Carl Denninger (I know he is not well respected at iTulip), but he made an interesting point on his "weekend roundup - 1/23" that I was wondering if others could comment on:

"Since March of last year the banks and stock market generally have rallied hard.

I question Denninger's assertion. The market has risen, but it's my understanding that it did so on very thin volume with a large percentage of trades coming from Goldman Sach's program trading and other large program traders. Individuals that used to participate heavily in the SM have largely stayed out of this rise. During this rise a lot of corporations have sold large amounts of their stock at what they perceive to be highs. What does that tell us about their optimism for the future?

OTOH, the recent selloff has been heavy volume; lots of individuals divesting.

But I don't know cr*p about the stock market. We dumped our Roth IRA's (American Funds) about 18 months ago, before the big drop. My part time employer/landlord is seeing boom times in the medium-priced mobile home park business. Our competitors, expensive five-star mobile home parks, are emptying out.

My personal business, an E-commerce store selling affordable luxury items (most priced from $5-$50), is down 30% in gross sales, but material costs and shipping have gone up so my profits are down even more.

I'm seeing what so many others have observed: large assets like houses and cars (what people have) going down in price; consumables like food, fuel, clothing (what people need) going up in price. But price does not equal inflation/deflation. Inflation and deflation are about money supply, and I don't know what the money supply is and will be with so much deleveraging and printing going on simultaneously.

I hope my auto repair shop stays in business. I finally found an a good, honest mechanic.

[bill]

Re: Are we hitting a deflationary patch?

The question now, I think, is do we actually see any real deflation or does the money just move to another part of the global economy to create another incipient mini-bubble? If so, where? And what's the logical pair trade to position for that?

Look where the fund shakers are going, Asia.
Take Asia savings and run it threw the financial processing plant.
Keep pumping it until it blows.

http://online.wsj.com/article/SB1000...TMoreInMarkets

JANUARY 13, 2010
The support of Beijing's government should ease Carlyle's fund-raising as it can provide capital from the city's investment arms and help attract money from companies and financial institutions part-owned or supervised by the city government. It could also give Carlyle advantages on deals involving assets the city sells or on investment opportunities in surrounding regions.
"In order to get good investments you have to be close the ground," said Daniel D'Aniello, a Carlyle founding partner. "First we opened offices in Shanghai and Hong Kong. This is the next step."
The Wall Street Journal reported in August that the new Carlyle fund was in advanced stages. Carlyle also operates another smaller yuan-denominated fund for its Asia growth capital fund. The new fund being formed in Beijing will be managed by its Carlyle Asia Partners team, which focuses on larger growth investments and buyout deals in the region. Carlyle hopes to find co-investment opportunities for the Asia-wide buyout fund and the local-currency China fund.
Foreign private-equity firms for years have raised capital to do China deals from overseas. Recently, China's government has begun allowing foreign firms—including major players such as Blackstone Group LP—to raise funds from domestic investors denominated in yuan. That move lets local investors share in the industry's potential gains.

http://www.bloomberg.com/apps/news?p...d=atsocHBN.pdw

Dec. 18 (Bloomberg) -- China’s currency regulator, which oversees the world’s largest foreign-exchange reserves, appointed Pacific Investment Management Co. hedge-fund manager Changhong Zhu as its chief investment officer.
specialist in derivatives, Zhu managed the Pimco Absolute Return hedge-fund strategies at Pimco.

http://www.theasset.com/article/17595.html

Brown Brothers Harriman relocates senior partner to Hong Kong

20 Jan 2010 by The Asset

Brown Brothers Harriman & Co (BBH) announced on January 19 the relocation of Andrew J F Tucker, one of its senior partners, to Hong Kong where he will assume responsibility for the Asia-Pacific. According to the announcement, BBH has undertaken this step in recognition of the growth of its Asian business and the region's importance to the firm's strategy.

Tucker will retain his existing responsibility for the firm’s markets business. As head of Asia-Pacific, Tucker will be in charge of developing and executing the firm’s regional strategy and synchronizing key investments with business opportunities for all of BBH’s businesses.

“It is a great time for BBH to increase our senior management presence in Asia as we capitalize on the reputation we have established over many years,” said Douglas A Donahue, managing partner of BBH. “With Andrew’s leadership experience in banking, trading, and investor services and markets on a global basis, and his 31 years with the firm, he is the perfect choice to lead our effort in this important region.”

The firm today employs over 100 individuals across its Tokyo, Hong Kong and Beijing locations and services more than USD410 billion in assets for its Asian clients. BBH serves leading institutions in Japan, China, Hong Kong, Singapore, Korea, Taiwan and Australia as an investment, wealth and private equity manager, as well as a provider of global custody, administration and related services. The opening of the firm’s Beijing representative office in 2009 marked an important milestone for BBH in terms of building a strong base in Asia.