merril lynch BoA- inflation may prove the solution!

[jk]

where have i heard this before?



Don’t forget, inflation is our friend
Posted by Izabella Kaminska on Apr 02 17:35.

Moderate inflation is and always has been our friend (hence the reason why government targets are 2%etc).

Accordingly, and perhaps unsurprisingly given current deflation fears, a little bit of inflation would be welcomed by any Western economy.

Going further, however, Merrill Lynch Bank of America (MLBoA) explains to what degree high inflation could actually prove the solution to the current crisis.

High inflation, they say, is the easiest way to help consumers, banks and corporates in their de-leveraging process because in high enough inflation environment, nominal house prices will not need to decline at all and non-indexed loans will lose their value without having to be formally written down. As they put it:
Inflation is, in our view, a compelling solution to stop the vicious cycle and thus one that governments around the world are unlikely to ignore.

Of course, with quantitative easing efforts about the risk of inducing too much inflation is very genuine. As MLBoA state:
Looking past the short-term—where we do not see inflation as a problem for OECD economies—it may however prove difficult to engineer a U-turn on money supply growth once economic growth starts picking up again.

So how do you protect yourself from such a potential u-turn? MLBoA says via inflation hedging with commodities:
Commodities are a natural instrument for investors concerned about inflation risk, due to their role as the very basic raw materials used to produce the goods we consume in our everyday lives. Urban consumers spend a significant portion of their budget in food, fuel and electricity which are directly linked to energy and agriculture. Hence, we should expect a direct relationship between commodity prices and inflation.

More directly, they advise there are four basic building blocks to be used to gain protection against a rising inflation environment: commodity investments, real estate, equity sectors correlated to inflation and inflation-linked debt/inflation swaps. And building up a portfolio that features a little bit of all of the above may well be the best way to outperform inflation in the long-run. Of course, a larger weighting should be given towards assets with realised inflation returns. As MLoB explain:
While inflation-linked bonds offer fixed real returns, the price of the bond embeds the market’s expectation of future inflation rates. Thus, IL [index iinked] bond returns are more linked to unexpected inflation the market did not foresee. On the other hand, commodities and real estate are asset classes with returns closer to realized inflation and therefore more likely to protect an investor against expected inflation.

Using IL bonds, equities, property and commodities, we construct a portfolio that aims to have the same level of volatility as inflation-linked debt and to function as a better tracker to inflation or inflation-linked liabilities.

http://ftalphaville.ft.com/blog/2009...is-our-friend/

[The Outback Oracle]

Re: merril lynch BoA- inflation may prove the solution!

IDIOTS!! iDIOTS!!!

[GRG55]

Re: merril lynch BoA- inflation may prove the solution!

where have i heard this before?



Don’t forget, inflation is our friend
Posted by Izabella Kaminska on Apr 02 17:35.

Moderate inflation is and always has been our friend (hence the reason why government targets are 2%etc).

Accordingly, and perhaps unsurprisingly given current deflation fears, a little bit of inflation would be welcomed by any Western economy.

Going further, however, Merrill Lynch Bank of America (MLBoA) explains to what degree high inflation could actually prove the solution to the current crisis...

This little item from the Conference Board has all the bases covered...inflation, double dip recession, deflation threat, something for everyone

U.S. seen facing danger of 2nd recession next year

Wed Apr 1, 2009 6:49pm EDT

NEW YORK (Reuters) - Although the U.S. economy is expected return to growth later this year, there is a danger of a second recession if monetary easing and a weak dollar leads to increased inflation expectations, a report said on Wednesday.

Massive stimulus spending and moves by the Federal Reserve to fuel economic activity is expected to jump-start the anemic U.S. economy in the last quarter of this year after it contracted 6.3 percent in fourth quarter of 2008.

But the Fed's moves to boost the economy by slashing interest rates and buying up billions in government debt could have undesired consequences, The Conference Board, a private research group, said in the report.

"If the United States experiences a too-rapid recovery, there may be a risk of another recession in 2010," said Bart van Ark, vice president and chief economist of The Conference Board.

"It may fuel expectations for a return to inflation, adding to the uncertainty concerning the pattern and path of economic recovery," he said.

The U.S. economy has the potential for a "double-dip" recession, Van Ark noted, similar to 1980 and 1982, as commodity prices rise on the back of a falling dollar and monetary easing.

He added, however, that the likelihood of this scenario taking place is small as deflation risks are great, while government stimulus spending should stem further economic decline and ease the flow of job losses.

The U.S. economy could contract by 2.6 percent in 2009, the largest annual decline since 1946, the Conference Board said.

[jk]

Re: merril lynch BoA- inflation may prove the solution!

my interest in this article is 2fold.
1. the mainstream is picking up on ideas we've had here for a long time.
2. the mainstream is moving toward recommending pm's, joining the early adopters. we know that some avant garde hedge funds have bought pm's. merrill is now moving toward recommending pm's. this is the beginning of the 2nd leg of the pm bull market.

[chrisk]

Re: merril lynch BoA- inflation may prove the solution!

my interest in this article is 2fold.
1. the mainstream is picking up on ideas we've had here for a long time.
2. the mainstream is moving toward recommending pm's, joining the early adopters. we know that some avant garde hedge funds have bought pm's. merrill is now moving toward recommending pm's. this is the beginning of the 2nd leg of the pm bull market.

From your lips to Gold's ears!

[nero3]

Re: merril lynch BoA- inflation may prove the solution!

where have i heard this before?



Don’t forget, inflation is our friend
Posted by Izabella Kaminska on Apr 02 17:35.

Moderate inflation is and always has been our friend (hence the reason why government targets are 2%etc).

Accordingly, and perhaps unsurprisingly given current deflation fears, a little bit of inflation would be welcomed by any Western economy.

Going further, however, Merrill Lynch Bank of America (MLBoA) explains to what degree high inflation could actually prove the solution to the current crisis.

High inflation, they say, is the easiest way to help consumers, banks and corporates in their de-leveraging process because in high enough inflation environment, nominal house prices will not need to decline at all and non-indexed loans will lose their value without having to be formally written down. As they put it:
Inflation is, in our view, a compelling solution to stop the vicious cycle and thus one that governments around the world are unlikely to ignore.

Of course, with quantitative easing efforts about the risk of inducing too much inflation is very genuine. As MLBoA state:
Looking past the short-term—where we do not see inflation as a problem for OECD economies—it may however prove difficult to engineer a U-turn on money supply growth once economic growth starts picking up again.

So how do you protect yourself from such a potential u-turn? MLBoA says via inflation hedging with commodities:
Commodities are a natural instrument for investors concerned about inflation risk, due to their role as the very basic raw materials used to produce the goods we consume in our everyday lives. Urban consumers spend a significant portion of their budget in food, fuel and electricity which are directly linked to energy and agriculture. Hence, we should expect a direct relationship between commodity prices and inflation.

More directly, they advise there are four basic building blocks to be used to gain protection against a rising inflation environment: commodity investments, real estate, equity sectors correlated to inflation and inflation-linked debt/inflation swaps. And building up a portfolio that features a little bit of all of the above may well be the best way to outperform inflation in the long-run. Of course, a larger weighting should be given towards assets with realised inflation returns. As MLoB explain:
While inflation-linked bonds offer fixed real returns, the price of the bond embeds the market’s expectation of future inflation rates. Thus, IL [index iinked] bond returns are more linked to unexpected inflation the market did not foresee. On the other hand, commodities and real estate are asset classes with returns closer to realized inflation and therefore more likely to protect an investor against expected inflation.

Using IL bonds, equities, property and commodities, we construct a portfolio that aims to have the same level of volatility as inflation-linked debt and to function as a better tracker to inflation or inflation-linked liabilities.

http://ftalphaville.ft.com/blog/2009...is-our-friend/

This is what I have been writing. They are right. Completely right. You can't have it so that the ignorant "mass", is slaughtered by the bear with his mattress full of cash, even if that seems like justice to some.

[GRG55]

Re: merril lynch BoA- inflation may prove the solution!

my interest in this article is 2fold.
1. the mainstream is picking up on ideas we've had here for a long time.
2. the mainstream is moving toward recommending pm's, joining the early adopters. we know that some avant garde hedge funds have bought pm's. merrill is now moving toward recommending pm's. this is the beginning of the 2nd leg of the pm bull market.

The other, more cynical, point of view is that in the rigged game of Wall Street the broker/analysts again move the retail clients into inflation hedges, the prop desk goes short and the sheep get sheared again...

[jk]

Re: merril lynch BoA- inflation may prove the solution!

The other, more cynical, point of view is that in the rigged game of Wall Street the broker/analysts again move the retail clients into inflation hedges, the prop desk goes short and the sheep get sheared again...

i think that comes much later. it's too early.

[ThePythonicCow]

Re: merril lynch BoA- inflation may prove the solution!

... You can't have it so that the ignorant "mass", is slaughtered by the bear with his mattress full of cash, even if that seems like justice to some.

I am unable to make sense of that sentence. Could you restate?

To whom would it seem like justice to slaughter the masses holding cash? If you're agreeing with the article that inflation is good, then why are you saying you "can't have" such a slaughter? Is inflation that slaughter of the masses cash you can't have?

In other words, I'm confused .

[ThePythonicCow]

Re: merril lynch BoA- inflation may prove the solution!

i think that comes much later. it's too early.

Too early for us to move into inflation hedges, or too early for the Banksters to yank the props out from under these inflation hedges and shear us again?

[nero3]

Re: merril lynch BoA- inflation may prove the solution!

I am unable to make sense of that sentence. Could you restate?

To whom would it seem like justice to slaughter the masses holding cash? If you're agreeing with the article that inflation is good, then why are you saying you "can't have" such a slaughter? Is inflation that slaughter of the masses cash you can't have?

In other words, I'm confused .

What I am saying is that the ignorant mass, that took on debt, lived the happy days. They can't get slaughtered by the deflation fearing bear, with his matress full of cash. That's not how it's going to play out. The bear, the guy with the cash, it's he that's going to get screwed, as greedy pigs always are, while the happy mass will reduce their living standard, through inflation.

If the deflation story made any sense, why then, are not people all over the big SUV's anymore? It's because they don't believe in it, they know in their gut oil prices, gas will be expensive as before. You see, it won't happen, the deflation story, it's a hoax, oil prices won't stay low, there won't be deflation, and cash is trash.

[jk]

Re: merril lynch BoA- inflation may prove the solution!

Too early for us to move into inflation hedges, or too early for the Banksters to yank the props out from under these inflation hedges and shear us again?

the latter is what i had in mind.

[ThePythonicCow]

Re: merril lynch BoA- inflation may prove the solution!

What I am saying is that the ignorant mass, that took on debt, lived the happy days. They can't get slaughtered by the deflation fearing bear, with his matress full of cash. That's not how it's going to play out. The bear, the guy with the cash, it's he that's going to get screwed, as greedy pigs always are, while the happy mass will reduce their living standard, through inflation.

If the deflation story made any sense, why then, are not people all over the big SUV's anymore? It's because they don't believe in it, they know in their gut oil prices, gas will be expensive as before. You see, it won't happen, the deflation story, it's a hoax, oil prices won't stay low, there won't be deflation, and cash is trash.

That's clearer - thanks.

The ignorant indebted are already getting slaughtered. They were depending on an increasing cash flow to handle debt payments and to service all their goodies. They are now having to cut back. They are losing or in fear of losing their jobs, their cash flow and their goodies, and are having to make uncomfortable adjustments downward in their standards of living.

Those people aren't buying all those big new SUV's sitting on the lots because they can't get financing and are less confident of their job, not because they have confident predictions of a resumption of high oil prices.

The deflation story is not a hoax; some prices really are down dramatically at present. Cash is not trash right now (for the last year.) Yes, it will likely become trash, at some time in the future, but that time is not yet known.

It seems to me, nero3, that you're thinking too linearly. This crash has multiple phases. It's not that one of those phases (the next inflationary phase, in your description) is the "one true phase" and all the other phases don't exist or are a cruel hoax.

Like most demolitions of large, complex, robust structures, this crash will require multiple phases.

For example, oil spiked up a year ago, enriching some countries such as Russia, Venezuala and Saudi Arabia, while ripping a hole in the wallet of the SUV driver. Then oil prices collapsed, devastating the oil exporting economies. Meanwhile, the financial debt paper market crashed, coming off its biggest boom in human history, devastating the so called "advanced" economies, temporarilly making cash and US treasuries an excellent store of wealth.

It will shift again, likely more than once, but that will not make your claim that "cash is trash" right all along. It will just make that claim right for that period of time.

There are seasons to great collapses, just as there are seasons to growing crops. What might be called for the week after the first spring rains might be ill advised the week before the first autumn frost.

[ThePythonicCow]

Re: merril lynch BoA- inflation may prove the solution!

Quote:

Originally Posted by ThePythonicCow ... too early for the Banksters to yank the props out from under these inflation hedges and shear us again?

the latter is what i had in mind.

Agreed.

[nero3]

Re: merril lynch BoA- inflation may prove the solution!

That's clearer - thanks.

The ignorant indebted are already getting slaughtered. They were depending on an increasing cash flow to handle debt payments and to service all their goodies. They are now having to cut back. They are losing or in fear of losing their jobs, their cash flow and their goodies, and are having to make uncomfortable adjustments downward in their standards of living.

Those people aren't buying all those big new SUV's sitting on the lots because they can't get financing and are less confident of their job, not because they have confident predictions of a resumption of high oil prices.

The deflation story is not a hoax; some prices really are down dramatically at present. Cash is not trash right now (for the last year.) Yes, it will likely become trash, at some time in the future, but that time is not yet known.

It seems to me, nero3, that you're thinking too linearly. This crash has multiple phases. It's not that one of those phases (the next inflationary phase, in your description) is the "one true phase" and all the other phases don't exist or are a cruel hoax.

Like most demolitions of large, complex, robust structures, this crash will require multiple phases.

For example, oil spiked up a year ago, enriching some countries such as Russia, Venezuala and Saudi Arabia, while ripping a hole in the wallet of the SUV driver. Then oil prices collapsed, devastating the oil exporting economies. Meanwhile, the financial debt paper market crashed, coming off its biggest boom in human history, devastating the so called "advanced" economies, temporarilly making cash and US treasuries an excellent store of wealth.

It will shift again, likely more than once, but that will not make your claim that "cash is trash" right all along. It will just make that claim right for that period of time.
.

Cash have been loosing value for the last 4-5 months, as most of the good investments bottomed out already then, most good investments are up 30% or more from the lows in november.