-- Posted Friday, 28 December 2012 | | Disqus
[Inflationary pressures are not exactly rampant right now, notwithstanding the huge increase in the cost of living imposed on us by Obamacare. For your interest, we present below some observations with a deflationist theme that were left in the Rick’s Picks forum yesterday by Cam Fitzgerald, an occasional guest commentator here. In our opinion, he gets the big picture just about right. RA]
There’s no doubt that deflationary pressures are still the overriding concern of most Western nations. That deflation itself is at our gate is hardly even debated anymore, as it is now widely acknowledged that the coming wave of baby boomer retirements will lower consumption , hold home values flat in real terms and push up Medicare costs for at least the next decade. Ongoing deleveraging and the prospect of rising savings rates and falling consumption could prove to be very damaging to economic performance while lowering growth and pushing us into recession. Jobs growth is still tepid, and it is difficult to imagine this improving substantially as public debt is finally dealt with at the policy level while taxes rise and program spending is cut.
Others have asserted here that we will deflate first and have nasty inflation later. I agree. The worry is just how bad the inflation might be at the later stages, but my guess is that it will take years to play out. We who watch the trends will have time to adjust if we pay attention to the signs and use our heads to avoid the shoals that lie ahead. We have been fortunate, though. The worst of our worries have not yet materialized. That is not to suggest that they are not lying latent, awaiting the right circumstances to spring on us in surprise. Instability abounds, and any broad shake-up on the macro level has the potential to trigger a financial conflagration. Lets just say a small prayer that the wheels do not come off the wagon in the meantime, that common sense rules the day, and that bipartisan accommodations are made in the best interests of the country and global community.
Food Inflation First
My own view, as I have mentioned in the past, is that inflation will creep into our lives in the agricultural sector and food costs first. Corn and soy will play an increasing role in future inflation. Should a war erupt, we can also count on oil to be a primary force in driving costs around the globe. The combination of rising energy and food costs have the potential to make a dramatic cocktail, and that combination will come as a surprise to most who do not heed the signals. Many [in this forum] see the risks. Actually, most investors see the broad set of problems with clarity, but the majority are too early or too late with an investment remedy.
It is a crapshoot where timing is concerned. The gold camp is ahead of itself right now, while the Armageddon of a bond market rollover is not as close as many would have us believe. Interest rates are flat without any real signs they might rise, and competitive currency devaluation has now become the name of the game across the globe. We might understand the endgame, but knowing how and when to take advantage of is quite another story.
Euro Is Still There
Nor is the dissolution of the euro near despite the repetitive bleatings of the gloomer camp who fixate on debt alone while ignoring the social, political and historical reasons for it coming into being in the first place. We do not have hyperinflation either, nor are we in a true depression despite the evidence that things are really pretty bitter for millions of people in America and Europe who are watching in dismay as their living standards drop by the month.
Ambivalence towards stocks on the other hand is epidemic even as the circumstances arise for a shift to equities despite the prospect of declining quarterly profits. We are swimming in a sea of irony and confusing signals. It is times like this when it pays to focus on technical patterns while trying to avoid investing based on large-picture theory or dynamics that are not playing out according to anyone’s perceived time frames.
Gold Worshipers’ Mistake
Those who worship gold seem to be making the most mistakes lately where timing is concerned, and in some respects I think they are wasting their efforts in trying to protect wealth from evaporating at a time when posted inflation rates are low and the dollar is still holding up relatively well (much to their disgust). We should be striving to stay objective about day-to-day market moves and keeping some distance from the emotional debates and big-theory ideas that are not panning out according to anyone’s schedule. That is preferred to tail-chasing and betting big on theories about how things “should” play out when in fact something unexpected might be looming on the horizon. I don’t make bets on the collapse of the dollar or the bond market, for example, since no one can predict when such events will occur, assuming they occur at all. I also won’t obsess over what the gold price “should” be doing versus what it is actually doing
The hundreds of memorable rationalizations for pricing precious metals based on everything influence, including the Mayan calendar, is a waste of time and effort, in my opinion. Most of the quasi-religious adherents seem stuck in a mental warp, unable to envision a real future through the fog of their own fantasies. I try my best to ignore them all. Where investing is concerned, talking about things that may or may not pan out is just blowing hot air.
Too Many Variables
Not that I believe an understanding of history and market dynamics is a waste of time; rather, the number of variables at play is so large that only those who keep close daily tabs on the markets have any real hope of turning a buck. Let’s not forget we are investing to make money and keep ahead of the curve while avoiding all the pitfalls put in our path. We need to tune-out the noise and set aside preconceived notions about the many factors related to debt, deleveraging, easing and credit that might otherwise colour our thinking from day to day.
In that regard, it simply pays to go with the assessment of guys who consistently deliver good results, especially if you don’t have the time to follow the twists and turns yourself. All other commentary amounts to little more than worthless news blurbs and fluff, and most of us don’t have the time to follow up on the many crazy assertions anyway.
That, in a nutshell, is why I am a big fan of Rick’s site and his daily calls. This post is an unabashed and unsolicited plug for him this Christmas season. [Thanks, Cam! Your check is in the mail. RA] Best of luck to all in 2013. It looks like it will be a very “interesting” year.
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-- Posted Friday, 28 December 2012 | Digg This Article
| Source: GoldSeek.com
