Gyroscopic Investing

Treasuries responded negatively to a rise in the CPI reading as expected. Equities on the other hand, including REITs, which have historically increased during periods of rising inflation, gained in value. Gold on the other hand is flat. Is gold only expected to rise once inflation exceeds 2,3 or 4%?

buddtholomew wrote: Treasuries responded negatively to a rise in the CPI reading as expected. Equities on the other hand, including REITs, which have historically increased during periods of rising inflation, gained in value. Gold on the other hand is flat. Is gold only expected to rise once inflation exceeds 2,3 or 4%?

Gold is such a tiny market but it's most definately global.

I think what's happening here budd is people are expecting the FED to raise ST rates sooner since the CPI is now exceeding the target.

They will do no such thing. They will instead raise the CPI target. ST rates ain't going up until long after the people are screaming about prices, I think.

Regarding sotcks and bonds......it looks like the momentum for treasuries is kaput (we'll see). Stocks however......well this is a bull market for the record books. It is a beast. Short sellers have been chewed up and spit out.

If you follow the Doomer-Porn Zero Hedge, the drop in bonds may be in part due to the "leak" of an alleged plan by the Fed to initial "exit  fees" on bonds to stampede bond holders in stocks...

http://www.zerohedge.com/news/2014-06-1 ... fees-gates

PP67 wrote: If you follow the Doomer-Porn Zero Hedge, the drop in bonds may be in part due to the "leak" of an alleged plan by the Fed to initial "exit  fees" on bonds to stampede bond holders in stocks...

http://www.zerohedge.com/news/2014-06-1 ... fees-gates

This was being discussed on CNBC this morning so I don't think Zero Hedge is cracking the case.

... I'll have to add CNBC to my Doomer Porn list...

PP67 wrote: ... I'll have to add CNBC to my Doomer Porn list...

I just read in Barron's and the Financial Times that the Fed folks are analyzing this. It makes sense. They need someone to hold the bag and take the inflation losses.

Folks, this is another word for outright default. If you loan 100 bucks out and only get 90 back it doesn't matter if the lender couldn't pay or if some gangster took the extra 10. They need bond holders to take inflation losses because the people holding stocks and metals don't want to. They also need these markets to stay propped up to keep the phony recovery nonsense humming.

How can it be a recovery if central banks are buying almost all the bonds and threatning to fine anyone who sells!?!?!?!?!

It's a jobless recovery where nobody is saving any money and the debt is pilling up. It's a Krugman recovery, doomed to fail worse than the last one.

Harry Browne was right when he said government officials are very creative when they appear stuck in a tree.

Maybe they'll sucker the Americans into another war and we'll accept the lower standard of living that's coming as "the price for freedom". Judging by the people on this board who should know better......this is probably likely.

You make everything sound catastrophic, much like those at CNBC and Zerohedge.

buddtholomew wrote: You make everything sound catastrophic, much like those at CNBC and Zerohedge.

KShartle is our resident doom-porner, gold-bugger!  Only doodle races past him in the depths of nihilism.

Oh, I may get a wee little "bitter" myself now and then, but it's all for a good cause!

MachineGhost wrote:

buddtholomew wrote: You make everything sound catastrophic, much like those at CNBC and Zerohedge.

KShartle is our resident doom-porner, gold-bugger!  Only doodle races past him in the depths of nihilism.

Oh, I may get a wee little "bitter" myself now and then, but it's all for a good cause!

I scanned the CNBC column and there was only mention of corporate bonds, not treasuries. Not sure that is accurate, but more realistic nonetheless.

buddtholomew wrote:

MachineGhost wrote:

buddtholomew wrote: You make everything sound catastrophic, much like those at CNBC and Zerohedge.

KShartle is our resident doom-porner, gold-bugger!  Only doodle races past him in the depths of nihilism.

Oh, I may get a wee little "bitter" myself now and then, but it's all for a good cause!

I scanned the CNBC column and there was only mention of corporate bonds, not treasuries. Not sure that is accurate, but more realistic nonetheless.

More realistic?

I guess they don't need to "fine" you for selling treasuries, they can just say you only get 90 cents on the dollar.

This will have the effect of discouraging T-bond sellers and encourage people to buy them since the main alternative (corp bonds) will effectively have their yield lowered through a fine.

I know I know that's a really good thing and will work out to everyone's advantage, no problems here, nothing to see, move along, this is perfectly normal, just a little stimulus needed 

Now I doubt they'll go this route, at least today, but it shows they will consider anything to prevent yields from rising since that will be devastating to corp profits and the US govt budget.

Kshartle wrote: Now I doubt they'll go this route, at least today, but it shows they will consider anything to prevent yields from rising since that will be devastating to corp profits and the US govt budget.

It all depends on which yields rise.  Long will rise if the economy recovers and then corporations will be able to reinvest in projects that will return more than their weighted cost of capital instead of parking it in cash.  Since corporate profits come at expense of public and government savings, I suspect we'll see more and more strikes, wage contract hikes, higher minimum and/or living wages and other "clawbacks" to address "our" increasing socio-economic imbalance.

But exit controls do work, unfortunately.  They nip the emotionalist-induced panic selling in the bud and bring calmer and more rational waters for the duration of the control.  Look at Malaysia in the Asian Currency Crisis.  I suspect this is what the Fed is really looking at especially at hedge funds.  A back-end load isn't gonna do the job, though.

Anyway, the below article is very interesting in what Mrs. Watanabe is doing about their new inflation expectations that seems to be taking hold in Japan:

http://www.businessweek.com/articles/20 ... ncy-market

I don't think Mrs. Watanaba gets it.  They should be buying gold, not speculating with up to 400:1 leverage on other currencies.  It'll be all over when the yen rises, which is possible with foreign investors flowing into the stock market or its exports being paid for.  Inflation expectations is a virtuous cycle, until it isn't.

MachineGhost wrote: corporate profits come at expense of public and government savings

WTF #1 and WTF are are government savings?

corp profits come at the expense of public savings!?!? Do you really think businesses are more profitable if people have no savings or lots of savings?

Yeah, I suppose if everyone blew every dollar they had today corp profits would tick up temporarily. After that they would languish. Savings are required for capital investement to increase productivity and boost profits over time.

Ohh I forgot everyone beleives that savings are magically printed. Money grows on trees and all we need is a printing press and poof, instant savings.

Please have this discussion elsewhere. You both end up dominating the thread with your back and forth bantering. I fear you are driving other posters away from this forum. I know I am becoming less and less interested in posting here.

buddtholomew wrote: Please have this discussion elsewhere. You both end up dominating the thread with your back and forth bantering. I fear you are driving other posters away from this forum. I know I am becoming less and less interested in posting here.

What do you mean?  I thought my response was on topic.  How the Japanese are responding the their rise in CPI and gold, etc. is directly relevant to the topic.  I can't speak for KShartle's off topic derailments, would you be happier if I just ignored him?

MachineGhost wrote:

buddtholomew wrote: Please have this discussion elsewhere. You both end up dominating the thread with your back and forth bantering. I fear you are driving other posters away from this forum. I know I am becoming less and less interested in posting here.

What do you mean?  I thought my response was on topic.  How the Japanese are responding the their rise in CPI and gold, etc. is directly relevant to the topic.  I can't speak for KShartle's off topic derailments, would you be happier if I just ignored him?

Actually I discussed the CPI and the stock bond movement's also. PP67 derailed with the doom porner "exit fee" talk on bonds. Way to go PP67 

MG, I might be happier if you did!    j/k

Alright, I'll lighten-up. Just have a dufficult time interpreting the responses while sifting through the "other" content.

buddtholomew wrote: Alright, I'll lighten-up. Just have a dufficult time interpreting the responses while sifting through the "other" content.

Just understand budd that we are all doomed. 

haha, sorry for any derailment. Talking about the movement of asset prices usually takes me to what I see are the causes and the likely future and the implications of that yadda yadda............