will gold/housing/oil deflate as it inflated?

[blazespinnaker]

Ok, gold/oil prices are dropping and housing is certainly busting and price drops are likely.

They all seem to be going down much as they went up?

Is this asset deflation in action? Will this happen in concert in much the same way?

[jk]

Re: will gold/housing/oil deflate as it inflated?

Ok, gold/oil prices are dropping and housing is certainly busting and price drops are likely.

They all seem to be going down much as they went up?

Is this asset deflation in action? Will this happen in concert in much the same way?

from ecri:

The Weekly Leading Index (WLI) rose to 135.5 in the
week ending September 1 from 135.1 in the prior week,
while its smoothed growth rate edged up to -1.5% from
-1.7%.

With WLI growth staying in a cyclical downtrend, the
U.S. growth outlook remains glum

if the economy continues to slow as expected then we'll see more of everything going down- commodities including precious metals, equities, interest rates [not bond prices]. i expect a "ka-poom," which is to say that at some point the fed gets nervous about deflation and starts madly pumping liquidity.

i am watching to see if gold breaks 575 or so. the tactical question is whether to try to be cute, lightening gold here [around 600 or above] with the idea of buying it back at lower levels, or whether to just accept the roller coaster and hold on for dear life. for now i'm in hold-on-and-live-with-the-anxiety mode.

[Finster]

Re: will gold/housing/oil deflate as it inflated?

Ok, gold/oil prices are dropping and housing is certainly busting and price drops are likely.

They all seem to be going down much as they went up?

Is this asset deflation in action? Will this happen in concert in much the same way?

No, it's not the assets that are changing in value. It's the dollar rising. It's like when you are sitting in stopped traffic and it seems to start drifting backwards. The first thing to check is whether your car has started drifting forwards.

[blazespinnaker]

Re: will gold/housing/oil deflate as it inflated?

from ecri:

if the economy continues to slow as expected then we'll see more of everything going down- commodities including precious metals, equities, interest rates [not bond prices]. i expect a "ka-poom," which is to say that at some point the fed gets nervous about deflation and starts madly pumping liquidity.

i am watching to see if gold breaks 575 or so. the tactical question is whether to try to be cute, lightening gold here [around 600 or above] with the idea of buying it back at lower levels, or whether to just accept the roller coaster and hold on for dear life. for now i'm in hold-on-and-live-with-the-anxiety mode.

Interesting ... so are you short on housing but long on gold? how about oil? are you still long on oil?

there is an 80% correlation between oil and gold. I'm not bearish on oil, but I certainly am not bullish

[jk]

Re: will gold/housing/oil deflate as it inflated?

Interesting ... so are you short on housing but long on gold? how about oil? are you still long on oil?

there is an 80% correlation between oil and gold. I'm not bearish on oil, but I certainly am not bullish

check out the chart below, which i lifted from

http://stockcharts.com/def/servlet/F...71940&cmd=show[s81999203]&disp=O



in a stagflation oil might not rise as much as gold. in an inflationary recession oil might not rise but gold would. i'm long only a very small position in oil and gneral commodities - about 1.5% or so, versus about 23% in pm's.

[bart]

Re: will gold/housing/oil deflate as it inflated?

in a stagflation oil might not rise as much as gold. in an inflationary recession oil might not rise but gold would. i'm long only a very small position in oil and gneral commodities - about 1.5% or so, versus about 23% in pm's.

I do urge caution if you're only looking at recession/stagflation - the historical record of gold during official recessions is not all that good:

1. the '70-71 period where it went nowhere
2. the '73-74 period did quote well, almost doubling... and then dropping 50% soon after it ended
3. the '80 period where it dropped almost in half
4. the '82-84 stagflation period where it dropped slightly
6. the '90 recession period where it dropped more than slightly.
6. the '01 period where it only went up slightly

[Finster]

Re: will gold/housing/oil deflate as it inflated?

I do urge caution if you're only looking at recession/stagflation - the historical record of gold during official recessions is not all that good:

1. the '70-71 period where it went nowhere
2. the '73-74 period did quote well, almost doubling... and then dropping 50% soon after it ended
3. the '80 period where it dropped almost in half
4. the '82-84 stagflation period where it dropped slightly
6. the '90 recession period where it dropped more than slightly.
6. the '01 period where it only went up slightly

What is this "stagflation"??? You either have inflation or you don't. If you do, why not just call it inflation? The term "stagflation" connotes that somehow if you have inflation, the economy 'should' be strong. Now where does an idea like that come from? That's a chunk of Keynesian codswallop and Phillips curve propaganda big enough to choke a central banker.

It is normal for an economy to stagnate when it's suffering inflation! No need for a special word for it!

[bart]

Re: will gold/housing/oil deflate as it inflated?

What is this "stagflation"??? You either have inflation or you don't. If you do, why not just call it inflation? The term "stagflation" connotes that somehow if you have inflation, the economy 'should' be strong. Now where does an idea like that come from? That's a chunk of Keynesian codswallop and Phillips curve propaganda big enough to choke a central banker.

It is normal for an economy to stagnate when it's suffering inflation! No need for a special word for it!

Au contraire - the term was coined by Harry Schulz in the '70s if memory serves and I'd hardly call him a Keynes guy. Its a contraction of stagnation and inflation and does describe an actual condition where inflation is significant while real GDP is contracting.

The US hasn't had real stagflation since the '70s, the period of 2000-2003 only had level real GDP (after a Williams based adjustment).

I agree that it can and does take attention off the true facts of inflation and how its created though.

I really like that *codswallop* idea, can I get it super sized? ;)

[Finster]

Re: will gold/housing/oil deflate as it inflated?

Au contraire - the term was coined by Harry Schulz in the '70s if memory serves and I'd hardly call him a Keynes guy. Its a contraction of stagnation and inflation and does describe an actual condition where inflation is significant while real GDP is contracting.

A Keynesian by any other name would stink as much.

The US hasn't had real stagflation since the '70s, the period of 2000-2003 only had level real GDP (after a Williams based adjustment).

And that was the last time (before these days) the US had a widely recognized inflation problem, too. The time before that was 1933 - 1945. And both times the economy was stagnant to downright crummy.

So when did we have an inflation problem that was not also a period of real economic weakness? The point being that the term "stagflation" embeds the idea that the simultaneous occurence of an inflation problem and a growth problem is somehow an anomaly. That's very essence of the Keynesian-Phillips-Curve paradigm, which posits a trade-off between growth and inflation. You can have high growth, but only at the risk of higher inflation, or you can have lower inflation, but only at the risk of lower growth.

It's just not true. Since the notion that inflation and real growth are involved in some kind of positive correlation is the basis of Keynesian-Phillips-Curve mythology and the term "stagflation" is based on the same, the logical conclusion is inescapable: the term "stagflation" is a reflection and endorsement of a failed economic theory. The fact that this failed economic theory is the selfsame paradigm that underlies just about everything uttered by Wall Street economists, Washington economists, and central bankers should make any contrarian worth his tin foil hat loathe the term, not cuddle up with it!

Consider yourself Finned!!! :eek:

;)

[bart]

Re: will gold/housing/oil deflate as it inflated?

Consider yourself Finned!!! :eek:

;)

I abase myself, oh Manor maven... shall I call it the "S" word now? ;)

[Finster]

Re: will gold/housing/oil deflate as it inflated?

I abase myself, oh Manor maven... shall I call it the "S" word now? ;)

Oy ... don't forget your get-out-of-finned-free card ...

[bart]

Re: will gold/housing/oil deflate as it inflated?

Oy ... don't forget your get-out-of-finned-free card ...

I'm saving that for the inevitable time that I really do blow it and get thunder-and-lightning-finned... ;)

Mother Nature... ;)

[jk]

Re: will gold/housing/oil deflate as it inflated?

So when did we have an inflation problem that was not also a period of real economic weakness?

answer: every year you did not specify as a period of weakness. we've had inflation pretty much all the time, good economy and bad.

[Finster]

Re: will gold/housing/oil deflate as it inflated?

answer: every year you did not specify as a period of weakness. we've had inflation pretty much all the time, good economy and bad.

But that isn't what I asked; no one thinks we had "an inflation problem" in the 1990s. And don't forget the essential context: "And that was the last time (before these days) the US had a widely recognized inflation problem, too. The time before that was 1933 - 1945. And both times the economy was stagnant to downright crummy."

Remember, when we're talking about the meanings of words, convention, not truth, is what rules. Words mean what people think they mean. So whether we had an inflation problem during those other times takes a back seat to whether they were widely recognized as inflationary.

[Finster]

Re: will gold/housing/oil deflate as it inflated?

I'm saving that for the inevitable time that I really do blow it and get thunder-and-lightning-finned... ;)

Mother Nature... ;)

That's probably about as good as it gets ...

... ahhh woe is me ... I must be losing my touch ...