PPI Whopper

[Finster]

Re: PPI Whopper

It also depends on one's time frame and investing approach or philosophy.

There is a time lag factor that applies to changes in money and credit supply until they affect inflation, so they can be used for prediction.

The problem here is in the nonspecific use of the term "inflation". If you're talking about consumer price inflation, you are spot on, but consumer prices are not on our investment menu. And if you define "inflation" in the classical sense, there is no time lag whatsoever, because an increase in money and credit is inflation.

[Finster]

Re: PPI Whopper

There we go!

Now. You just need to put in some of those little red dots on the far right in yonder bottom chart .... because we are in recession right NOW.

[bart]

Re: PPI Whopper

Given that we are still not on a gold standard, it seems like that this superbear (which by my reckoning we're about half way through), will continue to proceed more similar to the one of the 1970s than of the 1930s. That is, nominal stock prices are likely to continue in the broad trading range established from 2000 to present while nominal gold prices advance at least another three times.

Surprisingly enough, I just happen to have a chart that covers those points... :rolleyes:

[bart]

Re: PPI Whopper

funny about money supply...its effects are known to show 12 - 24 months afterwards.

The money supply was the most watched number in the Seventies, remember? (Or maybe you don't remember, but trust me on that...it was widely watched as the core rate is today, I would say.)

Now there is barely a peep about it in the press.

Yep, the area of monetary lags is almost literally Econ 101. I even have a small page on my site about them ( http://www.nowandfutures.com/money_and_lags.html )

I was indeed there in the '70s too (and also had my free sub to various weekly Fed publications so I could track M1, 2 & 3 etc. ;) ), but it wasn't until about 1977-8 that it really started to impinge on public consciousness as I recall.

[Finster]

Re: PPI Whopper

Surprisingly enough, I just happen to have a chart that covers those points... :rolleyes:

[Chart]

Who's surprised ... :eek:

I was indeed there in the '70s too ...

Me too ... I was just too busy learning to walk and talk to pay much mind to investments. BTW, I also have some nice Florida real estate you might be interested in ...

[bart]

Re: PPI Whopper

The problem here is in the nonspecific use of the term "inflation". If you're talking about consumer price inflation, you are spot on, but consumer prices are not on our investment menu. And if you define "inflation" in the classical sense, there is no time lag whatsoever, because an increase in money and credit is inflation.

UhOh... I can feel a *Fin* coming on, and directed at me too... :eek:

In general we agree - true full inflation would be better represented by something like the FDI or CPI+lies plus asset inflation and other items and adjustments.

We also don't disagree about inflation very generally being an increase in money and credit, but there still is a time lag between the money and credit creation and its actual impact on prices and people. Even the hot money represented by POMOs, TOMOs, TIOs, etc. shows lags varying from days to months... in my ever so humble opinion of course. ;)

[bart]

Re: PPI Whopper

There we go!

Now. You just need to put in some of those little red dots on the far right in yonder bottom chart .... because we are in recession right NOW.

I truly have been very tempted to add them in, starting somewhere between August 2006 and March 2007... but I already get more than a few flame type emails (and V is enough foaming at the mouth "input" for me ;) ).

[bart]

Re: PPI Whopper

Me too ... I was just too busy learning to walk and talk to pay much mind to investments. BTW, I also have some nice Florida real estate you might be interested in ...

:eek:
http://www.nowandfutures.com/grins/pain.wav




I think your ride is here... ;)

[Finster]

Re: PPI Whopper

UhOh... I can feel a *Fin* coming on, and directed at me too... :eek:

...

We also don't disagree about inflation very generally being an increase in money and credit, but there still is a time lag between the money and credit creation and its actual impact on prices and people... ;)

But remember our interlocutor was asking in the context of where to put his investment $$. If money supply were a reliable guide, we ought to be able to tell him whether he should buy stocks, bonds, gold, or keep his money in cash. I say it isn't and we can't.

Feel free to prove me wrong. I'd like to know, too ...

[Finster]

Re: PPI Whopper

I truly have been very tempted to add them in, starting somewhere between August 2006 and March 2007... but I already get more than a few flame type emails (and V is enough foaming at the mouth "input" for me ;) ).

Alll right. How about a flame post!!! Or you can just send that puppy over here and I'll put in some little red dots for ya ...

[Finster]

Re: PPI Whopper

:eek:
http://www.nowandfutures.com/grins/pain.wav




I think your ride is here... ;)

:p

[insert waving white flag gif]

.........

[bart]

Re: PPI Whopper

But remember our interlocutor was asking in the context of where to put his investment $$. If money supply were a reliable guide, we ought to be able to tell him whether he should buy stocks, bonds, gold, or keep his money in cash. I say it isn't and we can't.

Feel free to prove me wrong. I'd like to know, too ...

True... and that's also why I was talking about one's overall approach and philosophy. If it's longer term like EJ, then buy & hold works just fine when the broad trends of money & "inflation" change (within the framework of the soft vs. hard asset cycle).

On the very short term, watching things like POMOs, TOMOs, TIOs, lease rates, interest rates, etc. work fairly well for me... and on the intermediate term I frankly admit I have little clue, other than the obvious things like follow existing trends until they break.

EJ and others have pointed out what I think are good ideas in infrastructure, agricultural type stocks and commodities and of course precious metals, but I just don't have the attitude it takes to do well on intermediate term selections.

[bart]

Re: PPI Whopper

Alll right. How about a flame post!!! Or you can just send that puppy over here and I'll put in some little red dots for ya ...

Thanks, I needed that.



Where would you put the start date of the recession?

Do you have any feel for how deep and long it will be?

[FRED]

Re: PPI Whopper

But remember our interlocutor was asking in the context of where to put his investment $$. If money supply were a reliable guide, we ought to be able to tell him whether he should buy stocks, bonds, gold, or keep his money in cash. I say it isn't and we can't.

Feel free to prove me wrong. I'd like to know, too ...

Something's got to give:

Percent changes in import price index
November 2005-06 1.3%
November 2006-07 11.4%

The Six Questions are:

1. Who?

2. What?

3. Where?

4. How?

5. When?

6. With what impact on what asset classes?

[Finster]

Re: PPI Whopper

True... and that's also why I was talking about one's overall approach and philosophy. If it's longer term like EJ, then buy & hold works just fine when the broad trends of money & "inflation" change (within the framework of the soft vs. hard asset cycle).

On the very short term, watching things like POMOs, TOMOs, TIOs, lease rates, interest rates, etc. work fairly well for me... and on the intermediate term I frankly admit I have little clue, other than the obvious things like follow existing trends until they break.

EJ and others have pointed out what I think are good ideas in infrastructure, agricultural type stocks and commodities and of course precious metals, but I just don't have the attitude it takes to do well on intermediate term selections.

Buy and hold? You must have me confused with the old Finster ...;)

Meanwhile, especially in an environment like this, it makes sense to use whatever tools you have at your disposal. People can make rational arguments for stocks on valuation grounds. On the other hand, they can argue the opposite on valuation grounds! A Dow Theorist might say the a bear market is in progress, but it wouldn't be the first time they did only to see the market rise. An eVangelist might say anything having to do with the US is going down ...