IMO consumer demand is contracting faster than retail capacity. We won't be able to close retail square footage fast enough to generate supply constraints pushing up prices.
By the way, for those wondering what CR was like before,...that last thread comes close. That's why we need squirrel recipes once in a while (for us smart asses.)
My first job was at Woolworths. Tammy Faye Baker used to come in and she filled the bottom of her cart with Maybelline Great Lash Mascara. Obviously she used a lot of it.
RD- the biggest problem is not the fricking rent- it is the entire cost of the supply chain, replicating it, establishing credit, finding manufacturers, suppliers, credit, etc.
When you roll up a big retailers, costs will go up- the suppliers just lost a customer, so will have to spread the overhead over fewer units, and will briefly compete with the bk'ed close outs.
When the supply chain is already marginal, you get cascading bk's.
So ... buy now or be priced out forever?
Exit | Homepage | 11.26.08 - 10:53 pm
Unless, of course, you want to be forced to explain to your grandchildren that they were your one and only thought when you didn't take advantage of what somebody thinks is a sure thing.
IMO consumer demand is contracting faster than retail capacity. We won't be able to close retail square footage fast enough to generate supply constraints pushing up prices.
This is the real world manifestation of deflation.
This is why I think people have it backwards - they look at the deflation in the monetary supply as a problem to be solved.
They ignore that money is just an engineered proxy for the real economy and that the monetary deflation is simply the money doing its job and reflecting what's happening in the real world.
So they think by stopping the monetary deflation they can stop it's real world analog. By making more dollars and credit the real world excess capacity goes away.
I think all they do is break the relationship between money and the real world.
Curing deflation is like curing your fuel gauge of reporting that your gas tank is empty.
It doesn't fill your tank up with gas; it just makes your fuel gauge useless.
Citizen AllenM,
I'm not too worried about replicating supply chains or even new credit conduits. This isn't the 1970s when British dock strikes that dried up the supply of Raleigh Bicycles. I've installed memory in client computers on Friday that was manufactured in Hong Kong on Monday. In fact I can see this as a chance to replace some inefficient components of the industrial network.
I imagine that given the quality of many goods presently produced, plus the two-sided coin of rapid technological advancement / high energy input requirements of many products, buying now would result in obsolescence relatively soon.
From a food standpoint - Woolies aint' food. Yet. But refrigeration requires power, and dried goods have long but not indefinite shelf lives.
Some goods, like clothes and furniture, even when not subject to the vagaries of fashion - and YOU try telling your woman she can't have "something new" when there's money in the bank and she's looking at 3 year old clothes - also have durability issues dependent on construction quality and wear and tear.
RD- yes, for small order specialty stuff- you are correct.
But for nationally distributed goods in massive quantities, well, that is another case.
Imagine what would happen when the dollar falls by 75%- where do you find cheaper suppliers?
That is when Wal-Mart hits the wall- at that point they will face the dollar store competitors stocked with Kmart/Sears surplus that they are blowing out cheap and their entire foreign supply chain demands a huge increase or no goods.
And foreign buyers are willing to pay more than Chez Wally for fricking toilet paper.
Expand your thoughts to a full blown argentine style collapse.
dc1000 - continuing fro the previous thread - I only know that European banks are/were more leveraged than US banks, which suggests that the European shadow banking system is no less if not bigger than the US
Rob Dawg writes:
IMO consumer demand is contracting faster than retail capacity. We won't be able to close retail square footage fast enough to generate supply constraints pushing up prices.
Only the most efficient/lowest cost for a given product level will survive.
I see deflation just in domestic job demand.
crispy&cole writes:
The number of retailers calling in quits before the holiday is amazing...what happens in January?
I think it should scare us how many are giving up hope before the season. They know November is X percent better than October and December should be Y percent to Z percent better than November. People are going into hiding . There is no push to outspend the Jones for many of the 'consumer class.' This really is a paradigm shift.
Wow... I've always been a proponent of things happening fast (but back in 2006/2007). To see it happen now is amazing...
Earlier today, on the news, heard that on-line sales are projected to be flat/down slightly, which would be a first in however long that stat has been compiled.
The number of retailers calling in quits before the holiday is amazing...what happens in January?
crispy&cole
We go motorcycle golfing on abandoned Bakersfield courses and play paintball in the East Hills Mall Mervyn's and fly our r/c helicopters in the GOTTSCHALKS and run nitro cars in the Harris.
Rob Dawg writes:
IMO consumer demand is contracting faster than retail capacity. We won't be able to close retail square footage fast enough to generate supply constraints pushing up prices.
What to do with all those vacant strip malls? Only so many PETCOs and nude bars with pull tabs can one town accommodate on the miracle mile.
ac - and you got to believe that bankers are only waiting for the holiday season to be over to start pulling in their lines and pushing retailers in BK, now that they got all the cash they could hope for
if you really want some good ole days on CR, when do we start talking about public transportation??
LOL sorry guys.
MrM: Again, i'll be the first to admit when i dont know something and nope, i dont know nothing about the delta between the shadow banking in EURO and USD lands. sorry. but i do know that USD is at large bigger and tends to lead the pack in terms of 'innovatio
Luxury retailer Saks Inc. is introducing a "poison pill" into its share structure, which is generally done to avert hostile takeovers.
The company said Wednesday its board declared a distribution of one preferred share purchase right on each of the company's common shares. The rights will be exercisable if a person or group acquires 20 percent or more of Saks' shares, or starts a tender offer that would lead to them owning as much.
The move comes in the wake of Mexican billionaire mogul Carlos Slim Helu increasing his stake in Saks in recent weeks. He bought nearly 7.6 million shares of the company over a four-day period, according to filings with the Securities and Exchange Commission, becoming the company's largest shareholder.
I loved my Woolworth in NY so much,40 years ago at 18 that is about the only store I could afford, I loved that make up counter, the sales ladies were nice and knowledgeable.I would send eye shadows to all to my friends in Europe who were all dying for American Make- up. We also had an Alexander,next to Bloomingdales on third Avenue. As we grew up so did our pocket book luckily, and we liked Gimbel's,B Altman, Bonwitt Teller (my favorite forever) I can't shop anymore, it is too depressing, even Bergdorf is not what it used to be, too garish,too much arrogance these days....I miss my department stores. I miss the 70' in NYC. Give me back a good 1970' deflation!
There's 111 choices
Don't listen to those little voices
I don't let the guilty feeling shake me
You can have your cake and eat it baby
We're riding on the escalator of life
We're shopping in the human mall
We're dancing on the escalator of life
Won't be happy 'til we have it all
I don't see where you get your confidence to ask us about "the three things" 1) risk free rate 2) default risk 3) inflation expectations
My common-sense is telling me you're falling into an efficient market hypothesis and you actually admitted it in the prior thread. A lack of credit risk is neither bullish nor bearish. As investors we don't look for "good" things, we look for "worthwhile" things. i.e. the ratio of price to value. Treasuries are risk-free but look at the interest rate you get.
Ok.
Now look at the interest on corporate bonds. AXP, GE... the yields there are quite nice. If they don't go bk and pay you back, your YTM is very good. Does the extra safety of treasuries warrant this huge gap?
If you think treasuries are a good investment because of those 3 factors you mention, then you probably thought treasuries were good investments from the time Carter was president, until today. Because these factors were all true for almost all of that time. Yet, if you had invested in treasuries, you would have missed a huge 25-year bull market in stocks, houses, and other products with credit risk.
And NOW that these credit-risk products are actually yielding a lot (houses still have 20% downside but I mean stocks and corporates and commercial paper etc) (and even agencies), you think it's a good idea to run to Mr. Paulson's 3%+ long term rate. No way. I am holding 90-day CD's in FDIC-insured accounts, and selectively buying stocks and maybe at some point i'll buy a piece of real estate. Why would I commit my money to these treasuries if, at any instant, i might get an amazing opportunity in credit-risk products?
i dont really have an answer for you. i think i liken it to setsers dark matter. its one of those things you can identify from its consequences without actually putting your finger on it.
but since i'm talking into a vacuum in this dead thread, i'll move on to the next one
I am glad you left the vacuum of space and dark matter.
You do know that a lot of this financial innovation was done by folks with advanced degrees in physics, engineering, and systems science. no kidding. now that is scary. like some freaky superconductor supercollider that splits up debt, fiat currency, "real" assets, and trades into weirdly named quarks. no we have a big black hole that is sucking in everything that passes within reach of the vortex. so i prefer the black hole analogy rather than dark matter with the central banks trying to generate enough gravity, some call it a heavy bottom, to keep us from facing oblivion. so the wall street masters of the universe created a black hole and are relying on the conjuring wizards of the interest to repair this tear in the fabric of space and time.
I have no problem with a xerox of the PWA, AAA, TVA, NIRA, FERA, CCC, CWA; but if we have a WPA that buys postmodern shit I'll be first to burn down Washington
fallonPDX writes:
so the wall street masters of the universe created a black hole and are relying on the conjuring wizards of the interest to repair this tear in the fabric of space and time.
Damn, that was a Doctor Who episode was it not? The British rock!
Yikes! I am quoting my own comments.! Am I in some parallel universe? Which condensed matter string am I on?
before i say anything else i just wanted to say, great comments guys (gals). excellent discussion! sorry if i'm so blunt sometimes, i truly appreciate the discussion more than my own position.
Teams of gunmen stormed luxury hotels, a popular restaurant, hospitals and a crowded train station in coordinated attacks across India's financial capital, killing at least 101 people, taking Westerners hostage and leaving parts of the city under siege Thursday, police said. A group of suspected Muslim militants claimed responsibility...The attackers specifically targeted Britons and Americans at the hotels and restaurant, witnesses said. Officials said at least 120 people were wounded.
Alex Chamberlain, a British citizen who was dining at the upscale Oberoi hotel, told Sky News television that a gunman ushered 30 to 40 people from the restaurant into a stairway and, speaking in Hindi or Urdu, ordered everyone to put up their hands."They were talking about British and Americans specifically. There was an Italian guy, who, you know, they said: 'Where are you from?" and he said he's from Italy and they said 'fine' and they left him alone. And I thought: 'Fine, they're going to shoot me if they ask me anything and thank God they didn't," he said."
"India has been wracked by bomb attacks the past three years, which police blame on Muslim militants intent on destabilizing this largely Hindu country. Nearly 700 people have died."
Kind of goes under the radar when it is not your country where the attacks. So, is this terrorism or crime?
funny you should say all that. its odd. its not that i personally think that UST is a good bet. i dont have one single dollar there. i'm in cash, stable real estate, and speculative deals. i wouldnt put a buck in the ust market.
but i do believe there is a market there even if i'm not a part of it.
its about your investment expectations, restrictions, covenants, etc.
i just think deflation, productivity and overall demand destruction for stuff will keep UST interest rates low and hopefully the concomitant private rate debts as well.
its crazy. financial markets were over-run, over analyzed, still are over analyzed, math geek, black boxed to death. yet they always will be.
simple fact is that the sample size of data points wrt to financial occurrences is so large that modern statistical theory DEMANDS attention to the patterns it perceives.
as much as the dogmas of "efficient markets" and/or "stocks for the long run" or "random walk" do.
Well sometimes governing involves using illusions to get people to do what's in their best interest.
~~~~~~
I'm referring to tipping points. As of right now there are many viable , profitable businesses that may go BK due to no fault of their own ... if monetary inflation or getting into the short term paper markets saves them then ....
I hope that Mexican millionaire Carlos Slim Helu buys Saks Fifth Avenue and Neiman and Barney's and Bergdof. He should own all those Philistines !!!
In Europe we had le Bon Marche' and La Samaritaine
2 great department stores for the people, incredibly chic in its simplicity. Simple sensible fashion, where one's personality was allowed to shine. And then came the guys :Galiano, Karl, and hundred others and the dream died.
And just to make sure, I also think this debate should stay open. Inflation vs. deflation is a sensitive subject for the bearish community. When oil divided us in H1 2008, I opted for deflation and shorted oil. I still think deflation isn't over (just like Faber, John Jansen, and crispy). One thing I learned during this crisis is to trust common sense of those who, to outsiders, seem to have done little research yet get it right all the time. c&c is among those people. He got it right all the time.
I don't know if you remember but some guy who came here in July 2007 and told us Citi was gonna implode. Sounded weird cause we were all just considering the implosion of 2 Bear funds but... he was right! Today I am slowly shifting my view towards inflationism. It started by reading Yves Smith, who also had it right and also called oil's crash. But I'm not sure yet...
One thing Charlie Munger pointed out once is that he doesn't see why inflation and interest rates MUST be related. I think he meant that there could be orderly devaluation without the long end taking a hit. And evene if it does, does it take a hit as a cause or a consequence of the devaluation. Plaza-Louvre confuses this answer. So... I don't know. Even if I believe LT treasuries are a ripoff, do I short them or go long gold?...or something else? All those questions are complicated as hell, but for some reason my favorite two wys of playing it are gold miner stocks, assuming attractive valuations, and short the long end.
The number of retailers calling in quits before the holiday is amazing...what happens in January?
While there are PR hits to calling it "quits," some merchants are filing BK not to liquidate but for the automatic stay protection. Under the UCC, suppliers have special rights to reclaim inventory after failure of non-payments. The retailer keeps the goods and kicks the repayment can down the road.
I'm referring to tipping points. As of right now there are many viable , profitable businesses that may go BK due to no fault of their own ... if monetary inflation or getting into the short term paper markets saves them then ....
You cannot save something by destroying the foundation upon which it is built.
You cannot tear down the walls of your house to use as firewood to surive the winter.
One day you will wake up in the freezing cold with no firewood and no house.
so how can one orderly unwind with something that was a complex derivatives model interacting with other complex derivatives models interacting with the messy messy real world.
you probably cannot and it is lot of guess work and trial and error.
"simple fact is that the sample size of data points wrt to financial occurrences is so large that modern statistical theory DEMANDS attention to the patterns it perceives.
as much as the dogmas of "efficient markets" and/or "stocks for the long run" or "random walk" do."
Modern investment appears to be built around the belief that you can always model for any risk, however unknown it is.
There is no way to model for human behaviour. How do you model for jingle mail?
It's amazing that after 70 years there are a couple of simple things that still seem to work.
36% dti and 20% down mortgages
Keeping loans on a banks books
Maximum 10:1 leverage
so i guess realistically, its the most likely in the long term, i mean medium term. especially given the natural state of the government being an inability to do the right thing.
guess thats why i got a 30 yr fixed on my house and not a one month adjustable.
dc1000 writes: 'I wouldn't put a buck in the ust market'.
Just saw an article 'Is the Fed mortgaging its future?'(don't have the link) which stated our central bank is 'lending or selling off most of its hoard of U.S. Treasuries'...interesting the Fed is dumping Treasuries...wonder why?
dc1000(Unrated) writes:
for the life of me i can't even remember the arguments around why the usd was so low in april.
does anyone?
dc1000 | 11.27.08 - 12:42 am | #
Been lurking tonight & catching up...
One thing I would ask: "If I don't know/understand why the dollar was weak in April - why would I think it should be stronger in December?" I would answer both before I'd buy puts or calls on the dollar.
BTW - I don't have a position on the dollar (other than use it everyday).
I'm not convinced one way or the other what the consequences of what is currently going on are going to be and where I'm going to commit my funds. A 18 months ago I felt differently, saw a "financil tsunami" coming and invested accordingly. Did well with it. For now I keep a small portion of my "shorts", rest in cash, and wait until it becomes clearer.
We have seen Bernanke enact already some of his potential actions:
... Historical experience tends to support the proposition that a sufficiently determined Fed can peg or cap Treasury bond prices and yields at other than the shortest maturities. The most striking episode of bond-price pegging occurred during the years before the Federal Reserve-Treasury Accord of 1951. ...
... The Fed can inject money into the economy in still other ways. For example, the Fed has the authority to buy foreign government debt, as well as domestic government debt. Potentially, this class of assets offers huge scope for Fed operations, as the quantity of foreign assets eligible for purchase by the Fed is several times the stock of U.S. government debt. ...
However, the key IMO, if deflation persists, is the last resort which I have mentioned before many times in the past few months:
Although a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today, it's worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from U.S. history is Franklin Roosevelt's 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934.17 The economy grew strongly, and by the way, 1934 was one of the best years of the century for the stock market. If nothing else, the episode illustrates that monetary actions can have powerful effects on the economy, even when the nominal interest rate is at or near zero, as was the case at the time of Roosevelt's devaluation. ...
Everyone then was front running what Benny's doing now. The helicopter printing presses speech he probably wishes he had never made. That's why they let Lehman fail, to pop the commodity bubble and force capital back into the US. The Lehman failure was not an accident or a mistake.
I was feeling all tinfoil for thinking that, and the larger purpose might be to force the deleveraging that has been fuelling the dollar hunt now in force...driving money into safe haven UST's and not incidentally supporting the value of certain large UST and dollar holdings...
The chosen survivors raised margin on the hedgies to 35%, trade against them, took out London as a financial hub, drove oil prices down taking out Russia and crippled Iran and Venezuela, plus prevented capital flight along with making oversea asserts cheap as the US mafia arm of the IMF primarily benefits US corporations. Hanky is a lot of things but I don't think he's stupid.
"I've installed memory in client computers on Friday that was manufactured in Hong Kong on Monday. In fact I can see this as a chance to replace some inefficient components of the industrial network."
This is a broad comment, using the above as an example of fairly typical American beliefs.
Where was the silicon mined? And where was it purified? How about the other elements critical in that chip? That chip was not magically born in Hong Kong and then air freighted, it was combined from materials and labor on several continents, almost certainly. Is the silicon sitting on some dock in Africa (a good source, at least according to Siemens) waiting for a broke ship owner to pick up a cargo without any letter of credit? To send to a refiner which is no longer bothering to pay for raw materials as the refined stock it possesses is already a dead weight that the bank has threatened to no longer support?
What is happening right now is pretty fundamental - it is not a question of who could cut a few hours or dollars off an Asian delivery of chips.
This is what is scary about so many Americans living in a post industrial economy - many really seem to think that what they see around them is just like watching a TV show - everything done in an hour, with all the messy bits simply playing off screen.
Talk to some people who work in a real industrial economy - the problem isn't inefficient components of an industrial supply chain, the problem is having those components owned by people with other goals than the health of one's economy (a broad number of Germans remain deeply disturbed at companies being bought by foreign 'Finanzinvestoren' - that is, investors whose only interest is extracting as much money as possible in as short of time as possible, regardless of its effects to the company, its workers, or the broader German economy). To stay concrete with memory chips - how many factories (the word 'fab' sounds like 'fad' to me) does America possess to manufacture them? And why do Americans assume the entire world is only oriented in serving American needs above anyone else's?
The strange thing is, America has been part of that squeezing out of inefficient (or perhaps better said as not profitable enough compared to things like financial engineering) manufacturing for most of my adult life - and most Americans think this is a good thing.
What happens when a Hong Kong chip supplier simply says no US dollars? Is that an increase in efficiency in the industrial network? And whose?
i have been chasing threads with this comment for a while. it is usually the last post.
if tenants in my apartment wrote 1000 insurance policies on my refrigerator breaking down the payout would be many times the value of the fridge when it eventually broke, causing some distortions in the building's finances.
furthermore, if the policies were payable in cookies i bake in my kitchen the demand for the cookies i make would shoot through the roof after the fridge died since every contract would have to be settled in my cookies (money).
this is what is going on globally and it is absurd. the dollar has risen solely due to the short squeeze from the settling the fraudulent, unbacked insurance derivatives (cds etc.). the liquidity black hole lets the fed print as it pleases with no immediate ramifications. the printed money is being used to take over corporate america at fire sale prices. this is how ben's helicopter works.
In order for the scam to continue it is absolutely imperative that the entire world pretend that there are not maybe 4 or 5 times more credit default swap derivatives out there than the value of world gdp.
This is the white elephant in the room that few will mention. Except, in this case, it is more like a trojan white elephant with a short sparking fuse for a tail.
rent_to_own, you are right. The world is an overly US centric global economy in terms of consumption and Finance. Efficiency on a global scale means less than the efficiency we are used to applying to plants whose products have not international competitors...and whose customers have no international appetites...even Iceland does not qualify.
Are you worried about the transition ahead as the US is shifted away from its 70% consumption GDP?
Me too.
Woolies has been circling the drain for some time. The shops are horrible and badly need investment. They never came up with an answer to either big out-of-town centres, or after the planning regs choked those off, to e-commerce competitors. They have surprisingly huge turnover still, but practically no margin.
And then the clever dick owners decided to sell and lease back all the prime location high street stores, which means the firm has to pay a huge rent bill. But hey, they got their special dividend.
After the smoke clears, there will opportunities everywhere for the kinds of people who built America in the first place.
Assuming we still have private property and the rule of law.
The loss of Woolworths is sad, but I'm not worried about creating a replacement. It's not like the people who made the thing in the first place were a different species.
I have heard many economists provide the text book answer on why deflation is a bad thing. Usually it goes something like "if people know prices are going to fall they with hold their purchases causing even greater economic contraction"
It seems to me that assumes two things- rationality on the part of consumers and self control. Neither of those are descriptive of American consumers. They clearly have no self control (shopping is an addiction not a utility) and certainly have no rationality. While else would somebody pay 20%+ on a credit card purchase. If American consumers were so concerned about price declines they wouldn't have charged it on a card and purchased it a year later effectively 20% cheaper.
"Neither of those are descriptive of American consumers. They clearly have no self control (shopping is an addiction not a utility) and certainly have no rationality."
That is why it is being forced on them. This isn't an accident or a mistake.
"Assuming that the $699 low on 23 October 2008 turns out to be the actual low point of the correction, and that remains to be proven, then we can conclude that we have seen the low point for Major TWO. That will allow us to update my original back of the envelope template to much higher levels, as follows:
Major ONE up from $256 to $1,015 (actually 4 times the $255 low);
Major TWO down from $1015 to $699, say $700 (a decline of 31%);
Major THREE up from $700 to $3,500 (a Fibonacci 5 times the $500 low);
Major FOUR down from $3,500 to $2,500 (a 29% decline);
Major FIVE up from $2,500 to $10,000 (also a 4 fold increase, same as ONE)
Once again, you can pick your number for the gain in FIVE and multiply it by $2,500. The numbers become astronomical and can really only be possible in a runaway inflationary environment, something which many thinking people are suggesting has become a possibility as a result of the actions taken during the current crisis."
CR is global in reach... China to Britai
I'm thinking about joining a cult. Does anybody have any suggestions?
It's time to start looking at fresh approaches to dealing with this economic downturn.
Now, how many folks understand after all of these bk's you get higher prices?
Less competition, and those going out of business sales cease and liquidation is over.
Someday this war's gonna end...
I'm thinking about joining a cult.
I thought CR was a cult.
Buy Woolworth's stock now the bottom is in.
Now, how many folks understand after all of these bk's you get higher prices?
Less competition, and those going out of business sales cease and liquidation is over.
Someday this war's gonna end...
Citizen AllenM | 11.26.08 - 10:51 pm | #
So ... buy now or be priced out forever?
Smaller orders, so loss of scale economy in the manufacturers, etc.
These collapses are going to be inflationary after the collapse.
Nothing but ugly coming in several years as these enterprises can not be readily replicated.
Someday this war's gonna end...
IMO consumer demand is contracting faster than retail capacity. We won't be able to close retail square footage fast enough to generate supply constraints pushing up prices.
Buy anything you need at liquidation prices, but just don't plan for those prices to be available after those supplies are used up.
Ask dryfly, he has been through it in the rustbelt before.
Someday this war's gonna end...
By the way, for those wondering what CR was like before,...that last thread comes close. That's why we need squirrel recipes once in a while (for us smart asses.)
Woolworth? I remember as a child being lost in a Woolwoth's in Garden Grove, California in 1970; and I was punished accordingly.
By the way, for those wondering what CR was like before,...that last thread comes close.
Yeah but I was hoping Broward would break out one of his information diffusion models and apply it to the inflation/deflation paradox.
My first job was at Woolworths. Tammy Faye Baker used to come in and she filled the bottom of her cart with Maybelline Great Lash Mascara. Obviously she used a lot of it.
PTL. That was a different bubble. Appx 1974-75.
RD- the biggest problem is not the fricking rent- it is the entire cost of the supply chain, replicating it, establishing credit, finding manufacturers, suppliers, credit, etc.
When you roll up a big retailers, costs will go up- the suppliers just lost a customer, so will have to spread the overhead over fewer units, and will briefly compete with the bk'ed close outs.
When the supply chain is already marginal, you get cascading bk's.
Watch what happens here when Sears/Kmart drops.
That is when TSHTF for retail.
Someday this war's gonna end...
So ... buy now or be priced out forever?
Exit | Homepage | 11.26.08 - 10:53 pm
Unless, of course, you want to be forced to explain to your grandchildren that they were your one and only thought when you didn't take advantage of what somebody thinks is a sure thing.
woolies and mfi are 2 of the shittiest shops in the UK. good riddance.
Watch what happens here when Sears/Kmart drops.
That is when TSHTF for retail.
Someday this war's gonna end...
Citizen AllenM | 11.26.08 - 10:58 pm
Sears Holdings Corporation Share Price Chart | SHLD - Yahoo! Finance
Where's the bottom?
VV - crap, my kids are only 9 and 7. Grandkids?!
I do wonder, though. What kind of world will they inhabit, my sons, in 30 years?
exit: Well, not to put too fine a point on it , but what if he's right?
Yeah but I was hoping Broward would break out one of his information diffusion models and apply it to the inflation/deflation paradox.
They're still at it back there and Broward chimed in,...you may get your wish.
IMO consumer demand is contracting faster than retail capacity. We won't be able to close retail square footage fast enough to generate supply constraints pushing up prices.
This is the real world manifestation of deflation.
This is why I think people have it backwards - they look at the deflation in the monetary supply as a problem to be solved.
They ignore that money is just an engineered proxy for the real economy and that the monetary deflation is simply the money doing its job and reflecting what's happening in the real world.
So they think by stopping the monetary deflation they can stop it's real world analog. By making more dollars and credit the real world excess capacity goes away.
I think all they do is break the relationship between money and the real world.
Curing deflation is like curing your fuel gauge of reporting that your gas tank is empty.
It doesn't fill your tank up with gas; it just makes your fuel gauge useless.
Citizen AllenM,
I'm not too worried about replicating supply chains or even new credit conduits. This isn't the 1970s when British dock strikes that dried up the supply of Raleigh Bicycles. I've installed memory in client computers on Friday that was manufactured in Hong Kong on Monday. In fact I can see this as a chance to replace some inefficient components of the industrial network.
VV
I imagine that given the quality of many goods presently produced, plus the two-sided coin of rapid technological advancement / high energy input requirements of many products, buying now would result in obsolescence relatively soon.
From a food standpoint - Woolies aint' food. Yet. But refrigeration requires power, and dried goods have long but not indefinite shelf lives.
Some goods, like clothes and furniture, even when not subject to the vagaries of fashion - and YOU try telling your woman she can't have "something new" when there's money in the bank and she's looking at 3 year old clothes - also have durability issues dependent on construction quality and wear and tear.
As in, 7 and 9 year old boys.
Still, there is merit in AllenM's stance.
RD- yes, for small order specialty stuff- you are correct.
But for nationally distributed goods in massive quantities, well, that is another case.
Imagine what would happen when the dollar falls by 75%- where do you find cheaper suppliers?
That is when Wal-Mart hits the wall- at that point they will face the dollar store competitors stocked with Kmart/Sears surplus that they are blowing out cheap and their entire foreign supply chain demands a huge increase or no goods.
And foreign buyers are willing to pay more than Chez Wally for fricking toilet paper.
Expand your thoughts to a full blown argentine style collapse.
Someday this war's gonna end...
The number of retailers calling in quits before the holiday is amazing...what happens in January?
dc1000 - continuing fro the previous thread - I only know that European banks are/were more leveraged than US banks, which suggests that the European shadow banking system is no less if not bigger than the US
OK...did my bit...bought a Coach bag for daughter, on-line, for a Christmas present...can I haz pony, now?
Rob Dawg writes:
IMO consumer demand is contracting faster than retail capacity. We won't be able to close retail square footage fast enough to generate supply constraints pushing up prices.
Only the most efficient/lowest cost for a given product level will survive.
I see deflation just in domestic job demand.
crispy&cole writes:
The number of retailers calling in quits before the holiday is amazing...what happens in January?
I think it should scare us how many are giving up hope before the season. They know November is X percent better than October and December should be Y percent to Z percent better than November. People are going into hiding . There is no push to outspend the Jones for many of the 'consumer class.' This really is a paradigm shift.
Wow... I've always been a proponent of things happening fast (but back in 2006/2007). To see it happen now is amazing...
Got Popcorn?
Neil
Woolies is still in business? How quaint. 5 and dimes are now dollar stores. I guess they didn't raise prices soom enough.
Banking and retailing are the easiest businesses in the world. The base accounting is simple and offering value for price is quite easy.
It is good that the rif raf are going under. More for the survivors. That's the way it should work.
The number of retailers calling in quits before the holiday is amazing...what happens in January?
Maybe people will start thinking about doing more important things with their lives than just shopping.
One can hope anyhow...
Earlier today, on the news, heard that on-line sales are projected to be flat/down slightly, which would be a first in however long that stat has been compiled.
The number of retailers calling in quits before the holiday is amazing...what happens in January?
crispy&cole
We go motorcycle golfing on abandoned Bakersfield courses and play paintball in the East Hills Mall Mervyn's and fly our r/c helicopters in the GOTTSCHALKS and run nitro cars in the Harris.
Rob Dawg writes:
IMO consumer demand is contracting faster than retail capacity. We won't be able to close retail square footage fast enough to generate supply constraints pushing up prices.
What to do with all those vacant strip malls? Only so many PETCOs and nude bars with pull tabs can one town accommodate on the miracle mile.
IMO consumer demand is contracting faster than retail capacity.
~~~~~~~
Yep, CRE is in big trouble ... but aren't we all in some way ...
LOL!!
ac - and you got to believe that bankers are only waiting for the holiday season to be over to start pulling in their lines and pushing retailers in BK, now that they got all the cash they could hope for
When the malls are pretty vacant at least we'll have some thread music.
crispy&cole writes:
The number of retailers calling in quits before the holiday is amazing...what happens in January?
Sit around and read economic and finance blogs to find out what the hell just happened...
and take notes with the smartpen from livescribe while recording your last wishes into the damn thing (just go buy a tablet PC for God's sake!).
What to do with all those vacant strip malls?
Shop Hard, Shop Harder, Shop Hard With A Vengance. Except starring Arnold Swartzenegger.
ac asks:
You should have voted for Obama.
You should have voted for Obama.
~~~~~~~~~~
The Clinton Cult ?
Thread music:
YouTube -
I can't believe somebody didn't call this one right away.
Yancey Ward...or join Sarah Palin's church in Wasilla?
I am praying with The One.
As cult's go...at least the O has hot co-eds in his. Got to like tattoos and rings in interesting places though.
Yeah...I know what happens January, I can only guess who that is
Yancey - dude - do you still try to place bets on last weeks Lotto, too?
The numbers are already out.
Get a new shtick, or, at least be funny.
if you really want some good ole days on CR, when do we start talking about public transportation??
LOL sorry guys.
MrM: Again, i'll be the first to admit when i dont know something and nope, i dont know nothing about the delta between the shadow banking in EURO and USD lands. sorry. but i do know that USD is at large bigger and tends to lead the pack in terms of 'innovatio
Dawg... oh geez. well, dc1000 wanted to talk about public transportation. That qualifies, doesn't it?
dc1000 writes:
if you really want some good ole days on CR, when do we start talking about public transportation??
Probably the first week of February as part of the Economic Recovery Stimulus.
Who isn't shorting reits ... ?
hold your hand up ...
Luxury retailer Saks Inc. is introducing a "poison pill" into its share structure, which is generally done to avert hostile takeovers.
The company said Wednesday its board declared a distribution of one preferred share purchase right on each of the company's common shares. The rights will be exercisable if a person or group acquires 20 percent or more of Saks' shares, or starts a tender offer that would lead to them owning as much.
The move comes in the wake of Mexican billionaire mogul Carlos Slim Helu increasing his stake in Saks in recent weeks. He bought nearly 7.6 million shares of the company over a four-day period, according to filings with the Securities and Exchange Commission, becoming the company's largest shareholder.
Business Week Online > File Not Found
Isn't the official name going to be SCAM?
Stimulus
Covering
All
Markets
How many Mall owners are in the audience .. ?
We've got subpoenas ...
Woolworth?
Ah the food counter.....those hotdogs on toated split white pieces of bread...
I loved my Woolworth in NY so much,40 years ago at 18 that is about the only store I could afford, I loved that make up counter, the sales ladies were nice and knowledgeable.I would send eye shadows to all to my friends in Europe who were all dying for American Make- up. We also had an Alexander,next to Bloomingdales on third Avenue. As we grew up so did our pocket book luckily, and we liked Gimbel's,B Altman, Bonwitt Teller (my favorite forever) I can't shop anymore, it is too depressing, even Bergdorf is not what it used to be, too garish,too much arrogance these days....I miss my department stores. I miss the 70' in NYC. Give me back a good 1970' deflation!
"Rob Dawg writes:
Thread music:
YouTube - ? v=WE8D4tHOg7k
I can't believe somebody didn't call this one right away."
Definitely on the down escalator right now...
ac, fantastic. BINGO.
Money = Medium of Exchange
There's 111 choices
Don't listen to those little voices
I don't let the guilty feeling shake me
You can have your cake and eat it baby
We're riding on the escalator of life
We're shopping in the human mall
We're dancing on the escalator of life
Won't be happy 'til we have it all
dc1000,
I don't see where you get your confidence to ask us about "the three things" 1) risk free rate 2) default risk 3) inflation expectations
My common-sense is telling me you're falling into an efficient market hypothesis and you actually admitted it in the prior thread. A lack of credit risk is neither bullish nor bearish. As investors we don't look for "good" things, we look for "worthwhile" things. i.e. the ratio of price to value. Treasuries are risk-free but look at the interest rate you get.
Ok.
Now look at the interest on corporate bonds. AXP, GE... the yields there are quite nice. If they don't go bk and pay you back, your YTM is very good. Does the extra safety of treasuries warrant this huge gap?
If you think treasuries are a good investment because of those 3 factors you mention, then you probably thought treasuries were good investments from the time Carter was president, until today. Because these factors were all true for almost all of that time. Yet, if you had invested in treasuries, you would have missed a huge 25-year bull market in stocks, houses, and other products with credit risk.
And NOW that these credit-risk products are actually yielding a lot (houses still have 20% downside but I mean stocks and corporates and commercial paper etc) (and even agencies), you think it's a good idea to run to Mr. Paulson's 3%+ long term rate. No way. I am holding 90-day CD's in FDIC-insured accounts, and selectively buying stocks and maybe at some point i'll buy a piece of real estate. Why would I commit my money to these treasuries if, at any instant, i might get an amazing opportunity in credit-risk products?
From the previous thread (is this legal?)
dc1000 writes:
fallon,
i dont really have an answer for you. i think i liken it to setsers dark matter. its one of those things you can identify from its consequences without actually putting your finger on it.
but since i'm talking into a vacuum in this dead thread, i'll move on to the next one
I am glad you left the vacuum of space and dark matter.
You do know that a lot of this financial innovation was done by folks with advanced degrees in physics, engineering, and systems science. no kidding. now that is scary. like some freaky superconductor supercollider that splits up debt, fiat currency, "real" assets, and trades into weirdly named quarks. no we have a big black hole that is sucking in everything that passes within reach of the vortex. so i prefer the black hole analogy rather than dark matter with the central banks trying to generate enough gravity, some call it a heavy bottom, to keep us from facing oblivion. so the wall street masters of the universe created a black hole and are relying on the conjuring wizards of the interest to repair this tear in the fabric of space and time.
I have no problem with a xerox of the PWA, AAA, TVA, NIRA, FERA, CCC, CWA; but if we have a WPA that buys postmodern shit I'll be first to burn down Washington
Jeez, Exit, you take it too seriously, almost like a Scientologist.
cremebrulee, woolworth was the best. sigh. i miss my childhood one. replaced with a TGIF years ago.
Nobody got my playing around?
Dawg,
nNturally I liked the sign on the door..
"All exits final"
See Yancey, that's what I'm talking about. THAT'S funny.
Hmm, I didn't hear about this earlier in the day. Seems AIG got more cash, 40 billion more from the Fed.
Expired
I thought this was part was very important...
AIG said it will use a portion of the $40 billion investment to pay off part of the previous loan from the Federal Reserve.
fallonPDX writes:
so the wall street masters of the universe created a black hole and are relying on the conjuring wizards of the interest to repair this tear in the fabric of space and time.
Damn, that was a Doctor Who episode was it not? The British rock!
Yikes! I am quoting my own comments.! Am I in some parallel universe? Which condensed matter string am I on?
ac, fantastic. BINGO.
Money = Medium of Exchange
Comrade Peronista
The way I would say it:
Money is just a message. No different than a letter you'd send to a relative.
Think of a dollar as a post-it note that says "You have X amount of wealth".
When you create more such notes you don't actually create more wealth.
You just create lies about wealth that doesn't exist.
And in turn promises made in terms of those notes (i.e. USD debt) become lies too.
Monetary reflation does not create wealth.
It creates lies.
Comrade Lurker,
That's what I mean when I say "drinking seawater."
Rob Dawg,
it is called transubstantiation.
I want ac for Chairman of Federal Reserve.
Monetary reflation does not create wealth.
~~~~~~~
No but it may salvage wealth if used properly.
Having said that I wouldn't trust the current Fed to use it ...
drinking what?
Now that's a closed system. Except for the fuel it took to launch them into space. And the research it took to develop the system. And...
Well, I guess it isn't so closed after all.
before i say anything else i just wanted to say, great comments guys (gals). excellent discussion! sorry if i'm so blunt sometimes, i truly appreciate the discussion more than my own position.
If anyone missed it. This is not being lent out. It is reserves of Lucky 9.
http://research.stlouisfed.org/fred2/fredgraph?chart_type=line&s[1][id]=BASE&s[1][range]=5yrs
dc1000. no worries here man.
"more than my own position"
dc1000
And your position is...
Islamic militancy:
Some 100 killed as gunmen rampage in India city
Teams of gunmen stormed luxury hotels, a popular restaurant, hospitals and a crowded train station in coordinated attacks across India's financial capital, killing at least 101 people, taking Westerners hostage and leaving parts of the city under siege Thursday, police said. A group of suspected Muslim militants claimed responsibility...The attackers specifically targeted Britons and Americans at the hotels and restaurant, witnesses said. Officials said at least 120 people were wounded.
Alex Chamberlain, a British citizen who was dining at the upscale Oberoi hotel, told Sky News television that a gunman ushered 30 to 40 people from the restaurant into a stairway and, speaking in Hindi or Urdu, ordered everyone to put up their hands."They were talking about British and Americans specifically. There was an Italian guy, who, you know, they said: 'Where are you from?" and he said he's from Italy and they said 'fine' and they left him alone. And I thought: 'Fine, they're going to shoot me if they ask me anything and thank God they didn't," he said."
"India has been wracked by bomb attacks the past three years, which police blame on Muslim militants intent on destabilizing this largely Hindu country. Nearly 700 people have died."
Kind of goes under the radar when it is not your country where the attacks. So, is this terrorism or crime?
probert,
funny you should say all that. its odd. its not that i personally think that UST is a good bet. i dont have one single dollar there. i'm in cash, stable real estate, and speculative deals. i wouldnt put a buck in the ust market.
but i do believe there is a market there even if i'm not a part of it.
its about your investment expectations, restrictions, covenants, etc.
i just think deflation, productivity and overall demand destruction for stuff will keep UST interest rates low and hopefully the concomitant private rate debts as well.
AIG said it will use a portion of the $40 billion investment to pay off part of the previous loan from the Federal Reserve.
This is pretty much the definition of ponzi finance.
Sorry, you will have to copy paste the whole link.
ac:
"It creates lies.
ac"
dude, right on the actual bills it says FAITH doesnt it?
fair enough
Monetary reflation does not create wealth.
~~~~~~~
No but it may salvage wealth if used properly.
Having said that I wouldn't trust the current Fed to use it ...
Well sometimes governing involves using illusions to get people to do what's in their best interest.
That much I'll admit.
But again, I haven't seen that we have that kind of finesse when it comes to manipulating the money supply.
fallonPDX:
its crazy. financial markets were over-run, over analyzed, still are over analyzed, math geek, black boxed to death. yet they always will be.
simple fact is that the sample size of data points wrt to financial occurrences is so large that modern statistical theory DEMANDS attention to the patterns it perceives.
as much as the dogmas of "efficient markets" and/or "stocks for the long run" or "random walk" do.
who is right? if anyone who knows!
Russian leader visits Venezuela in show of defiance
Russian fleet visits Venezuela.
AFP: Russian leader visits Venezuela in show of defiance
A classic cold war response to this:
4th Fleet reconstituted, Southern Command
New Mayport fleet, commander uplifting for base | Shorelines.com
8 years ago this wouldn't even have been a possibility. The empire falls. Good riddance.
Well sometimes governing involves using illusions to get people to do what's in their best interest.
~~~~~~
I'm referring to tipping points. As of right now there are many viable , profitable businesses that may go BK due to no fault of their own ... if monetary inflation or getting into the short term paper markets saves them then ....
I hope that Mexican millionaire Carlos Slim Helu buys Saks Fifth Avenue and Neiman and Barney's and Bergdof. He should own all those Philistines !!!
In Europe we had le Bon Marche' and La Samaritaine
2 great department stores for the people, incredibly chic in its simplicity. Simple sensible fashion, where one's personality was allowed to shine. And then came the guys :Galiano, Karl, and hundred others and the dream died.
ok gotcha,
And just to make sure, I also think this debate should stay open. Inflation vs. deflation is a sensitive subject for the bearish community. When oil divided us in H1 2008, I opted for deflation and shorted oil. I still think deflation isn't over (just like Faber, John Jansen, and crispy). One thing I learned during this crisis is to trust common sense of those who, to outsiders, seem to have done little research yet get it right all the time. c&c is among those people. He got it right all the time.
I don't know if you remember but some guy who came here in July 2007 and told us Citi was gonna implode. Sounded weird cause we were all just considering the implosion of 2 Bear funds but... he was right! Today I am slowly shifting my view towards inflationism. It started by reading Yves Smith, who also had it right and also called oil's crash. But I'm not sure yet...
One thing Charlie Munger pointed out once is that he doesn't see why inflation and interest rates MUST be related. I think he meant that there could be orderly devaluation without the long end taking a hit. And evene if it does, does it take a hit as a cause or a consequence of the devaluation. Plaza-Louvre confuses this answer. So... I don't know. Even if I believe LT treasuries are a ripoff, do I short them or go long gold?...or something else? All those questions are complicated as hell, but for some reason my favorite two wys of playing it are gold miner stocks, assuming attractive valuations, and short the long end.
The number of retailers calling in quits before the holiday is amazing...what happens in January?
While there are PR hits to calling it "quits," some merchants are filing BK not to liquidate but for the automatic stay protection. Under the UCC, suppliers have special rights to reclaim inventory after failure of non-payments. The retailer keeps the goods and kicks the repayment can down the road.
i just think deflation, productivity and overall demand destruction for stuff will keep UST interest rates low
That may have worked in the past, but in the world's greatest debtor country critically dependent upon imported energy? Don't hold your breath.
I'm referring to tipping points. As of right now there are many viable , profitable businesses that may go BK due to no fault of their own ... if monetary inflation or getting into the short term paper markets saves them then ....
You cannot save something by destroying the foundation upon which it is built.
You cannot tear down the walls of your house to use as firewood to surive the winter.
One day you will wake up in the freezing cold with no firewood and no house.
dc1000,
so how can one orderly unwind with something that was a complex derivatives model interacting with other complex derivatives models interacting with the messy messy real world.
you probably cannot and it is lot of guess work and trial and error.
which sounds about where ben and hank are at.
what. a. mess.
probert,
Ever read Janszen's KaPOOM! theory?
"simple fact is that the sample size of data points wrt to financial occurrences is so large that modern statistical theory DEMANDS attention to the patterns it perceives.
as much as the dogmas of "efficient markets" and/or "stocks for the long run" or "random walk" do."
Modern investment appears to be built around the belief that you can always model for any risk, however unknown it is.
There is no way to model for human behaviour. How do you model for jingle mail?
It's amazing that after 70 years there are a couple of simple things that still seem to work.
36% dti and 20% down mortgages
Keeping loans on a banks books
Maximum 10:1 leverage
The UK Has roughly 1/5 our population -- thus this is the population equivalent of losing 150,000 american jobs
probert:
i was with you until this one:
One thing Charlie Munger pointed out once is that he doesn't see why inflation and interest rates MUST be related.
they dont call it 'fixed income' for nothing.
ac | 11.26.08 - 11:12 pm | #
The map is not the territory...
That's some catch, that catch 22...
Macy's has -$180mn of tangible equity
Time for a new bank holding company?
NYTimes - At Least 1 Dead in Explosion at U.S. Embassy in Afghanistan. Spreading?
fallon and anonymous:
no kidding. what. a. mess.
i mean, the easiest fall back is hyper inflation.
so i guess realistically, its the most likely in the long term, i mean medium term. especially given the natural state of the government being an inability to do the right thing.
guess thats why i got a 30 yr fixed on my house and not a one month adjustable.
You cannot tear down the walls of your house to use as firewood to surive the winter.
~~~~~~
You don't start with the walls ... you start with the furniture, and if you have enough furniture you make it ... ala the Fed balance sheet expansion.
Whether we make it is another question ...
Oh and I don't know what their policy is in valuing their land, and inventory. could be a lot worse
The growth through debt model needs to retire
ALERT breaking news:
attacks in india and their effect on markets.
Details at:
MarketWarnings: effect of attacks in india mumbai on stock markets
especially given the natural state of the government being an inability to do the right thing.
Now you're talkin!
USD/EUR Currency Conversion Chart - Yahoo! Finance
that links sums it up really.
Looks like a short squeeze...the sequel is...?
for the life of me i can't even remember the arguments around why the usd was so low in april.
does anyone?
GM Asks U.S. FAA to Bar Public Tracking of Leased Corporate Jet
GM Asks U.S. FAA to Bar Public Tracking of Leased Corporate Jet - Bloomberg.com
"or the life of me i can't even remember the arguments around why the usd was so low in april.
does anyone?"
The amazing decoupling fairy-tale.
The amazing decoupling fairy-tale.
or the EU raising rates ... ?
How'd that work out ?
i'm off to bed after this one.
mmcklnl,
you're probably right. i think it was around then that i felt a change in the interest differentials coming and thought bullish usd.
i'm out. its been fun tonight. i reread some of the earlier posts and i think 'tini time had the upper hand.
this is a cool place.
night.
dc1000
Happy Thanksgiving ...
Looks like a short squeeze...the sequel is...?
~~~~
May be a Santa Claus rally ...
More Whip Saw Ahead ...
dc1000 writes: 'I wouldn't put a buck in the ust market'.
Just saw an article 'Is the Fed mortgaging its future?'(don't have the link) which stated our central bank is 'lending or selling off most of its hoard of U.S. Treasuries'...interesting the Fed is dumping Treasuries...wonder why?
dc1000(Unrated) writes:
for the life of me i can't even remember the arguments around why the usd was so low in april.
does anyone?
dc1000 | 11.27.08 - 12:42 am | #
Been lurking tonight & catching up...
One thing I would ask: "If I don't know/understand why the dollar was weak in April - why would I think it should be stronger in December?" I would answer both before I'd buy puts or calls on the dollar.
BTW - I don't have a position on the dollar (other than use it everyday).
I'm not convinced one way or the other what the consequences of what is currently going on are going to be and where I'm going to commit my funds. A 18 months ago I felt differently, saw a "financil tsunami" coming and invested accordingly. Did well with it. For now I keep a small portion of my "shorts", rest in cash, and wait until it becomes clearer.
As to the deflation/inflation debate, I think it is hugely important to study the 2002 Bernanke speech.
http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.htm
We have seen Bernanke enact already some of his potential actions:
... Historical experience tends to support the proposition that a sufficiently determined Fed can peg or cap Treasury bond prices and yields at other than the shortest maturities. The most striking episode of bond-price pegging occurred during the years before the Federal Reserve-Treasury Accord of 1951. ...
... The Fed can inject money into the economy in still other ways. For example, the Fed has the authority to buy foreign government debt, as well as domestic government debt. Potentially, this class of assets offers huge scope for Fed operations, as the quantity of foreign assets eligible for purchase by the Fed is several times the stock of U.S. government debt. ...
However, the key IMO, if deflation persists, is the last resort which I have mentioned before many times in the past few months:
Although a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today, it's worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from U.S. history is Franklin Roosevelt's 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934.17 The economy grew strongly, and by the way, 1934 was one of the best years of the century for the stock market. If nothing else, the episode illustrates that monetary actions can have powerful effects on the economy, even when the nominal interest rate is at or near zero, as was the case at the time of Roosevelt's devaluation. ...
i'm supposed to be in bed, but whatever.
dry, it was more of an expression than anything to emphasize the disconnect between the reality on the ground and in the market.
the point is that by april i finally couldnt hold out any longer and exclaimed, long usd!
expectations on interest rate differentials have as much of an impact as actual interest rate differentials at times.
it just felt like a bottom and sea change in april '08 vis a vis the dollar.
tonight was a doozey for me. one 'tini too many perhaps.
From previous thread:
We are already experiencing the greatest debt forgiveness in history:
The largest debtors in this country ARE the banks. Deposits represent the largest liability of any (cough) industry in this country.
Pavel, not to worry, your theist society is alive and well, my friend.
"does anyone?"
Everyone then was front running what Benny's doing now. The helicopter printing presses speech he probably wishes he had never made. That's why they let Lehman fail, to pop the commodity bubble and force capital back into the US. The Lehman failure was not an accident or a mistake.
Anon,
I was feeling all tinfoil for thinking that, and the larger purpose might be to force the deleveraging that has been fuelling the dollar hunt now in force...driving money into safe haven UST's and not incidentally supporting the value of certain large UST and dollar holdings...
"I was feeling all tinfoil for thinking that"
The chosen survivors raised margin on the hedgies to 35%, trade against them, took out London as a financial hub, drove oil prices down taking out Russia and crippled Iran and Venezuela, plus prevented capital flight along with making oversea asserts cheap as the US mafia arm of the IMF primarily benefits US corporations. Hanky is a lot of things but I don't think he's stupid.
"I've installed memory in client computers on Friday that was manufactured in Hong Kong on Monday. In fact I can see this as a chance to replace some inefficient components of the industrial network."
This is a broad comment, using the above as an example of fairly typical American beliefs.
Where was the silicon mined? And where was it purified? How about the other elements critical in that chip? That chip was not magically born in Hong Kong and then air freighted, it was combined from materials and labor on several continents, almost certainly. Is the silicon sitting on some dock in Africa (a good source, at least according to Siemens) waiting for a broke ship owner to pick up a cargo without any letter of credit? To send to a refiner which is no longer bothering to pay for raw materials as the refined stock it possesses is already a dead weight that the bank has threatened to no longer support?
What is happening right now is pretty fundamental - it is not a question of who could cut a few hours or dollars off an Asian delivery of chips.
This is what is scary about so many Americans living in a post industrial economy - many really seem to think that what they see around them is just like watching a TV show - everything done in an hour, with all the messy bits simply playing off screen.
Talk to some people who work in a real industrial economy - the problem isn't inefficient components of an industrial supply chain, the problem is having those components owned by people with other goals than the health of one's economy (a broad number of Germans remain deeply disturbed at companies being bought by foreign 'Finanzinvestoren' - that is, investors whose only interest is extracting as much money as possible in as short of time as possible, regardless of its effects to the company, its workers, or the broader German economy). To stay concrete with memory chips - how many factories (the word 'fab' sounds like 'fad' to me) does America possess to manufacture them? And why do Americans assume the entire world is only oriented in serving American needs above anyone else's?
The strange thing is, America has been part of that squeezing out of inefficient (or perhaps better said as not profitable enough compared to things like financial engineering) manufacturing for most of my adult life - and most Americans think this is a good thing.
What happens when a Hong Kong chip supplier simply says no US dollars? Is that an increase in efficiency in the industrial network? And whose?
i have been chasing threads with this comment for a while. it is usually the last post.
if tenants in my apartment wrote 1000 insurance policies on my refrigerator breaking down the payout would be many times the value of the fridge when it eventually broke, causing some distortions in the building's finances.
furthermore, if the policies were payable in cookies i bake in my kitchen the demand for the cookies i make would shoot through the roof after the fridge died since every contract would have to be settled in my cookies (money).
this is what is going on globally and it is absurd. the dollar has risen solely due to the short squeeze from the settling the fraudulent, unbacked insurance derivatives (cds etc.). the liquidity black hole lets the fed print as it pleases with no immediate ramifications. the printed money is being used to take over corporate america at fire sale prices. this is how ben's helicopter works.
In order for the scam to continue it is absolutely imperative that the entire world pretend that there are not maybe 4 or 5 times more credit default swap derivatives out there than the value of world gdp.
This is the white elephant in the room that few will mention. Except, in this case, it is more like a trojan white elephant with a short sparking fuse for a tail.
the dollar rally is a short covering rally.
rent_to_own, you are right. The world is an overly US centric global economy in terms of consumption and Finance. Efficiency on a global scale means less than the efficiency we are used to applying to plants whose products have not international competitors...and whose customers have no international appetites...even Iceland does not qualify.
Are you worried about the transition ahead as the US is shifted away from its 70% consumption GDP?
Me too.
Woolies has been circling the drain for some time. The shops are horrible and badly need investment. They never came up with an answer to either big out-of-town centres, or after the planning regs choked those off, to e-commerce competitors. They have surprisingly huge turnover still, but practically no margin.
And then the clever dick owners decided to sell and lease back all the prime location high street stores, which means the firm has to pay a huge rent bill. But hey, they got their special dividend.
After the smoke clears, there will opportunities everywhere for the kinds of people who built America in the first place.
Assuming we still have private property and the rule of law.
The loss of Woolworths is sad, but I'm not worried about creating a replacement. It's not like the people who made the thing in the first place were a different species.
I have heard many economists provide the text book answer on why deflation is a bad thing. Usually it goes something like "if people know prices are going to fall they with hold their purchases causing even greater economic contraction"
It seems to me that assumes two things- rationality on the part of consumers and self control. Neither of those are descriptive of American consumers. They clearly have no self control (shopping is an addiction not a utility) and certainly have no rationality. While else would somebody pay 20%+ on a credit card purchase. If American consumers were so concerned about price declines they wouldn't have charged it on a card and purchased it a year later effectively 20% cheaper.
"Neither of those are descriptive of American consumers. They clearly have no self control (shopping is an addiction not a utility) and certainly have no rationality."
That is why it is being forced on them. This isn't an accident or a mistake.
Interesting Elliott wave analysis of the gold market. At the end, ties into all the hoopajoop lately.
Thank God for glod!
Elliott Wave Gold Update 23
"Assuming that the $699 low on 23 October 2008 turns out to be the actual low point of the correction, and that remains to be proven, then we can conclude that we have seen the low point for Major TWO. That will allow us to update my original back of the envelope template to much higher levels, as follows:
Major ONE up from $256 to $1,015 (actually 4 times the $255 low);
Major TWO down from $1015 to $699, say $700 (a decline of 31%);
Major THREE up from $700 to $3,500 (a Fibonacci 5 times the $500 low);
Major FOUR down from $3,500 to $2,500 (a 29% decline);
Major FIVE up from $2,500 to $10,000 (also a 4 fold increase, same as ONE)
Once again, you can pick your number for the gain in FIVE and multiply it by $2,500. The numbers become astronomical and can really only be possible in a runaway inflationary environment, something which many thinking people are suggesting has become a possibility as a result of the actions taken during the current crisis."