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Re: [RT] Re: Inflation and the markets



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In order to benefit from productivity gains you need a consumer able to purchase the items.  If the consumer is broke or so deep in debt that they are unable to buy there is no gain to increased productivity other than inventory increases.
 
All the mumbo jumbo about productivity, cost of goods, etc. is based upon a consumer able to buy.  The numbers that I used were gained from sources that I deem reliable.  When people have to choose between food and utilities, or food and medicine, or buying gas to get to work and the mortgage payment it doesn't make any difference how many extra widgets a person can produce if there is no one to buy them.
 
If China has a 19% inflation rate and cost of goods produced there rises 19% than 90% of the products at Wal-Mart will rise in price.  Inflation in China is one of the reasons that production facilities are moving to Vietnam.  The fall of the dollar is one of the reasons that everything denominated in dollars cost more dollars. 
 
We have a serious problem that can't be solved by throwing money at it.  There are various reasons to buy stocks or commodities none of which is based upon the greater need.  If one is strapped for cash and there is no home equity to tap anymore then the investment portfolio is the only thing left to obtain cash. 
 
I am neither a bull nor a bear.  I trade based upon what the charts tell me.  Under the worst of times there are stocks and commodities that rise and under the best of times there are stocks and commodities that fall in price. What is the next bubble after the commodity bubble bursts?  Right now you can't stop the rise in steel and coal stocks and you can't find support for the financials or the builders.  There is no floor for the auto stocks right now, but the rail stocks are screaming.  Do you bet on the individual stocks or do you go to the ETFs? 
 
If you have $1000 to invest you trade in one venue and if you have $100,000 plus you are trading in another venue.  The one thing to remember at all times is that the stock market is based upon the greater fool theory.
 
----- Original Message -----
Sent: Sunday, May 18, 2008 6:32 AM
Subject: Re: [RT] Re: Inflation and the markets

This is an interesting discussion and one in which I'd like to join with
my take.

Milton Friedman stated that inflation is and always will be nothing more
than a monetary phenomenon. I believe that this makes a lot of sense.
It hearkens back to the simplicity of the barter system of trade.

You bring up an important point, namely, that productivity gains can
offset inflationary growth in the monetary base. I believe this makes
sense also. If we can produce more stuff with fewer resources, then the
price of that stuff should come down relative to everything else.
Right? If we increase the money supply by the same amount, give or take
a bit, then I would think that price reductions from productivity
improvements would be erased. Perhaps remaining about the same as it
were before the inflation of the money supply. So, why is that maneuver
by central bankers necessary at all? Why can't consumers just keep the
benefits derived from these productivity improvements and passed along
to the masses, creating a higher standard of living for all?

What am I missing?

Just my thoughts.

Dan

hostmaster wrote:
>
> Ira's post in thinly veiled nonsense. Yes, the Saudi's still have
> almost 2 million bbl/day reserve output available. However, the
> Saudis CORRECTLY point out that an increase in production by them
> would not have any material effect on the markets. The markets
> themself are setting the price largely due to speculation in futures
> trading (the sort of thing this list is really supposed to be about
> but that Ira's article totally ignored to comment upon). A look at
> the price fluctuations compared to net changes in inventories shows
> they are decoupled and therefore therefore we can conclude price is
> not currently linked to supply/demand. In fact the net inventory
> changes in crude oil (both in the US and globally) show that prices
> are rising while inventories are rising. Rising inventories indicate
> a declining demand (or at least demand in excess of supply). Either
> way one wishes to interpret it the conclusion is that price is
> decoupled from supply and demand and an increase in supply would
> merely increase inventories without moderating prices.
>
> Likewise, Ira's rant goes on about inflation and interest rates and
> money supply expansion without discussing productivity. While I won't
> attempt to argue that productivity gains completely offset some of the
> money growth supply factors, the fact Ira completely ignores that part
> of the equation again exposes his tirade for what it is (as opposed to
> any kind of sound financial analysis). I have been a member of this
> list long enough to know that Ira is not a fool nor unaware of these
> counterbalancing economic factors. Therefore I can only conclude his
> article was authored deliberately in a way to justify a viewpoint
> rather than to provide a financial analysis of any kind. That's just
> my opinion but if you go back and reread his tripe in detail I think
> you will find it funny instead of freightening.
>
> Boater805
>
> At 11:55 AM 5/17/2008, you wrote:
>
>> First of all, I seriously doubt if the Saudi's can raise output. I
>> strongly suspect they are at full production now.
>>
>> As to filling up the reserves, Bush is hell bent to keep the reserves
>> up rather than use them for a short term solution to high prices. (A
>> solution which would do little to help the price problem anyway).
>>
>> Ira's post offers some sobering thoughts but what would happen if oil
>> came down? What if it came down to $80? And if we stopped promoting
>> the insane idea of bio fuels driving up food prices? If grain came
>> down 50% and meat 30%? Then what would the consumer situation look
>> like? Science fiction? I don't think so. I think the whole ethanol
>> craze is being seen for just what it is, crazy. A fuel that costs
>> more to make, pollutes worse than fossil fuels, and drives food
>> through the roof is certainly not the answer. Atomic energy and
>> hydrogen fuel cells are where I'm putting my energy dollars from this
>> point forward. Solar and wind will be minor players, especially for
>> home use but they do little or nothing for transportation and large,
>> commercial purposes.
>>
>> So, a lot of the problems can be solved by simply forgetting about
>> ethanol and I feel there is a large amount of speculation in oil
>> now. We moved from 100 to 125 in days but demand most certainly
>> didn't increase by 25% in days. Who knows, maybe things will work
>> out after all.
>>
>> Bob
>>
>> At 01:46 PM 5/17/2008, you wrote:
>> >And strangly Mr.Bush justifies Saudi for not raising oil outputs,not
>> >only that he was not in a favour of stopping filling oil reserve
>> >near Gulf of Mexico...very strange attitude and this has been
>> >discussed among all leading newpapers round the world.
>> >--- In realtraders@yahoogroups.com
>> <mailto:realtraders%40yahoogroups.com>, "Ira" <mr.ira@xxx> wrote:
>> > >
>> > > It is time to take a good look at where we are at this time. In
>> >the first quarter of this year more than 158,000 families lost their
>> >homes to foreclosure. The American public is going deeper in debt
>> >every day. In a society where 70% of the economy is driven by
>> >consumer spending, inflation and debt are economy killers. Millions
>> >of people have homes that are worth less than the mortgage amount on
>> >their home. When they look at the economics of the situation will
>> >they pay the inflated mortgage payments or walk away from the
>> >house? Family homes were the main source of their wealth and now
>> >with that gone they have no place to go for that extra money they
>> >need to pay the ever-increasing cost of living. Duke Power said
>> >that they are cutting off utilities to 50 people a day because of
>> >unpaid utility bills. Whether the government wants to admit it or
>> >not we are in a recession. We are also in an inflationary spiral
>> >that won't quit. The government is pumping liquidity into the
>> >system at an alarming rate to save the financial institutions that
>> >created a large portion of the problem.
>> > >
>> > >
>> > >
>> > > The balance of the article is on the web site if you are
>> >interested.
>> > >
>> > >
>> > >
>> > > Just one man's opinion.
>> > >
>> > > Ira
>> > > www.delta100.com <http://www.delta100.com/>
>> > >
>> > > No virus found in this outgoing message
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>> <http://www.pctools.com/free-antivirus/>
>> > >
>> >
>> >
>> >
>> >------------------------------------
>> >
>> >Yahoo! Groups Links
>> >
>> >
>> >
>>
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>> Version: 8.0.100 / Virus Database: 269.23.20/1452 - Release Date:
>> 5/17/2008 6:26 PM
>

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