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Getting on a tangent, I seperate market commentators into a few camps...
-The babbling incoherents/idiots. Cramer, etc.
-Academics/professors. The Jeremy Siegels.
-The maverick professors/academics. Roubini.
-Books guys, prognosticators. All the authors in the 80's and 90's who wrote..."the coming recession of 1994 and how to prosper". No one remembers who they are in 10 years.
They come up with a big theme, and they're generally right. Or what they say seems to make sense. But they stray into too much self agenda, too much of their own business at stake. Too much self promotion to look at objectively.
Or they venture off into esoteric stuff like Elliot Wave. Schiff is the 2000's version of these guys.
-The grizzled veteran. Like Barton Biggs, John Bogle. But too US centric and too vanilla. Buy low cost index funds....but what if your index fund goes down 40% and never comes back? I.e. Japan...
-More worldly, Rogers, Marc Faber, Soros. But still not above making mistakes and getting it right.
And plenty of other ones. But you have to take whatever makes sense and do your own research, reading and draw your own conclusions.
Interesting analysis, my only question is how can you not put Jim Rogers into the same category as Schiff and his ilk. Rogers has been predicting gloom for 25 years. I find him to be closer to Cramer than he is to Faber, but just my opinion. Everyone seems to like to follow someone different and I believe if you follow them long enough they will all be sometimes right and sometimes wrong.
What is your point exactly? All I said is that commodity prices are currently tanking and that is exactly what is happening.
I would also not use short term trends as evidence of "L" shaped price movements. I don't think commodities are going to decline because they are currently declining. After all I've been talking about deflation for over a year. You know back when you guys were yelling about inflation because...ahem short term price movements.
I am worried about deflation, too. What can I do to protect my meagre assets in the event of deflation. I have some mortgage debt, and it's not going to go away for several years. In light of that, what are some successful ways to survive in a deflationary period?
Mainly because the goods for export are too expensive for the domestic market. The price you will pay means that we do not get the same goods here.
China makes some of the cheapest products around, they aren't making high end products. So, if the products are too expensive for the domestic market what exactly are they going to purchase? Is China going to out-source to an even cheaper country so its citizens can afford to purchase products?
Quote:
Originally Posted by ocpaul20
People save because there is not much of a state system of health and pension. There is a fledgling one, but people still have to rely on their savings after they retire or not retire at all. Many people invest in real estate and the (one) son perhaps gets given an apartment to live in when he gets married. Old peoples homes are not common at all, as the daughter/son is expected to look after the parents when they get older.
Which is to say that savings isn't for consumption of gadgets which is just my point. Domestic consumption is not in a position to replace consumption from the US, Europe etc. The high savings rate makes it seem as if they have money to spend, but they don't.
Obviously, there is something wrong with this story from even first sight. So, the Chinese have a bunch of savings, but they would love to use that income to consume the same gadgets we do. So.....ahem....why aren't they?
There are certainly cultural issues at play here, but there are other things that explain their high savings right. The Chinese don't have a mature financial system and hence don't have access to credit in the same way Americans (or Europeans etc) do. This requires a higher savings rate. So comparing the savings rate in the US vs China isn't very telling. Much of that savings can't be spent on gadgets.
For example, say auto loans only became available to the wealthy in the US. This would cause an increase in the savings rate because people would have to save for a car instead of taking out an auto loan. But, the increased savings rate doesn't translate into an increased number of cars purchased. As far as economic activity goes, both situations are pretty much the same.
Chinese products have been bid up due to the credit expansion. Now that deflation is the (temporary) name of the game, all of that purchasing power WILL be utilized by the Chinese to buy their own products instead of sending them here.
These things don't happen overnight. But, we are seeing the deleveraging evident from China, from the likelihood of selling Treasuries to fund their stimulus package and to slow down their consumption of these overpriced cr*p bonds paying 2.x%.
The price of these tennis shoes, toys, and other assorted goodies will actually be cheaper due to the substraction of shipping costs. They don't have to be sent across the ocean to us anymore.
Also, places like Vietnam offer even cheaper labor and opportunities for the Chinese to utilize.
Chinese products have been bid up due to the credit expansion. Now that deflation is the (temporary) name of the game, all of that purchasing power WILL be utilized by the Chinese to buy their own products instead of sending them here.
Are you serious? I mean really? Firstly, the sorts of products China sells have seen next to no inflation. In fact this is perhaps a big reason we didn't see much inflation from the credit expansion during this decade.
The Chinese domestic demand is simply not replacing American and European demand. But why would it? This idea never made sense, as if when others stopped buying the products the Chinese would magically get the funds and interest to purchase the products.
Perhaps the idea was that the government would keep the empty factories there until domestic demand materialized one day?
Quote:
Originally Posted by ViewFromThePeak
These things don't happen overnight. But, we are seeing the deleveraging evident from China, from the likelihood of selling Treasuries to fund their stimulus package and to slow down their consumption of these overpriced cr*p bonds paying 2.x%.
They don't need to sell treasuries to fund their stimulus package, they don't even need to stop buying treasuries. I posted an article more than once about this topic. Perhaps you didn't read it because it doesn't fit your dogma.
Just out of curiosity though. Why exactly does China need a stimulus package? Aren't the Chinese buying up all the products that they aren't exporting now with all that phantom savings and purchasing power?
Quote:
Originally Posted by ViewFromThePeak
Also, places like Vietnam offer even cheaper labor and opportunities for the Chinese to utilize.
So, if Vietnam was truly cheaper (you know you have to look at more than mere labor costs....) why haven't American/European companies shifted all production to the country?
They don't need to sell treasuries to fund their stimulus package, they don't even need to stop buying treasuries. I posted an article more than once about this topic. Perhaps you didn't read it because it doesn't fit your dogma.
So, if Vietnam was truly cheaper (you know you have to look at more than mere labor costs....) why haven't American/European companies shifted all production to the country?
I'm sorry but where in that article did it say they weren't going to buy treasuries? How can they stop buying treasuries (or a similar asset) without letting their currency float? They can't.
Did you actually read the article? Or were you just hoping we wouldn't?
Yes, they have shifted some work to Vietnam. But that isn't the point. If Vietnam truly was that much cheaper, why is anybody still in China? Perhaps because Vietnam isn't that much cheaper.....
I am worried about deflation, too. What can I do to protect my meagre assets in the event of deflation. I have some mortgage debt, and it's not going to go away for several years. In light of that, what are some successful ways to survive in a deflationary period?
Hi kinkytoes,
Cash. However one never knows what may happen to a given currency so even better is combining it with foreign currency cash funds, gold and silver. The big winner is Yen for now. It turns investors were borrowing Yen to finance their operations and is deflating faster than the dollar.
If we are having deflation, how can we have a run on the dollar at the same time?
Food and heating prices are contracting?
Deflation isn't uniform. Real estate and stocks are deflating rapidly, but some consumable goods are not.
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