From one of Rosenberg's recent letters regarding 70s vs 2000s, commodity prices and inflation pass through: -------------------------- LACK OF PASS-THROUGH FROM THE COMMODITY RUSH TO FINAL CONSUMER PRICES There seems to be quite a bit of concern that inflation is going to rear its ugly head now that commodity prices have bounced back so sharply. Well, I went back to the other five major commodity bull markets back to the early 1970s and compared the run-up in the CRB index to the surge in the CPI to get a gauge as to how much âpass-throughâ there was into final-stage consumer pricing. Historically, there is a 37% pass-through, averaging out those cycles. In other words, for every 10% increase in the CRB, 3.7% of that advance found its way to the U.S. consumer. But in the 2002-2007 cycle, a 118% surge in commodity prices only managed to translate into a 21% increase in the CPI â for an 18% pass-through. That was the smallest spill-over ever from the commodity sector to the consumer â half of what we usually see (in the second half of the 1970s, by way of comparison, the passâthrough was 83%!). Also keep in mind that in the 2002-07 cycle we had a booming leveraged U.S. economy, which took the unemployment rate down to 4.4% at the low (versus 9.4% now) and industry capacity utilization (CAPU) rates up to 81% (versus 69% now). The story was that even with the drop in the unemployment rate and rise in the CAPU rate, the output gap in the U.S.A. never fully closed in the last expansion â the Fed never allowed the economy to breach its full capacity limit (closer to 4.0% unemployment rate and 82% CAPU) which made it very difficult for final stage manufacturers and retailers to pass on much of the surge in raw material costs. We now have a one-trick pony when it comes to the commodity story and it is Chinese demand. While the U.S. economy did manage to expand on the back of soaring housing wealth and surging credit growth from 2002-07, it played a secondary role in the bull market in resource prices. So from my lens, if U.S. retailers had difficulty passing along commodity costs in the last cycle when credit was abundant, I fail to see how they are going to do so in the current and prospective environment of declining household credit growth, rising savings rates and near-record excess capacity in the product and labour market.
The Mods here are Perma Bears too. No wonder, I'm outta here. You all just missed a 40% and going higher rally. U suck...
That's good for the 1% of investors who weren't on margin, didn't need to liquidate to raise cash for living expenses when they got fired and couldn't find work, and managed to sit through an 89% 3-year decline without getting flustered and selling out. The other 99% got well and truly raped. Also, breaking even after 10-20 years is hardly a great achievement, when government bonds would have paid safe reliable interest year after year with little volatility or risk.
Great thread. But we all fall into the trap of treating and measuring the symptoms, ie unemployment, cpi, gdp changes etc... The major cause is bad debt. And not unlike pollution, it is not easily wiped out. What do you do with trash? You bury it, sink it in the ocean, or burn it. Nonetheless, trash assumes a new form and renders either new land, ocean space or air less useful. Garbage is merely moved, transferred, and assumes a new medium. Same with toxic debts. They are "moved" from the private sector to the balance sheets of nations' Treasuries and Central banks which ultimately affect their future spending and stimulus actions. Does the trash end there, on the balance sheets of Treasury depts and Central Banks? No, it eventually seeps into the global bond markets. When someone buys a government bond, they in effect are vulnerable to that government held toxic debt. The bond market will determine if and when we have a depression. It cannot be tamed, it is bigger and more powerful than any government, and its players are globally diffused and thus not easily influenced. The bond market will be the ultimate "decider" and no country can fight it. It will tell us and others and by doing so, can cause a depression.
GTFO troll. You're exactly like stock_trd3r, never posting a single comment of substance, but idiotic, drive-by comments (mostly off topic).
I'm neither a bear or a bull. I'm a daytrader so its irrelevant to me. I can change my view every day or hour. This thread is about comparing the Great Depression to today. The way I see it the fundamentals of the economy are horrible and getting worse. I suppose I can have a bearish view because this rally as you call it may be nothing more than a slight correction. Who knows... maybe it will be one of the biggest rallies in history. I admit I can be wrong because my economic indicators are laggards, whereas the stock market is a leading indicator. Now in terms of missing a 40% rally, very few called the exact bottom. Don't forget that if the S&P 500 drops 50% it requires a 100% rally to reach the same point. But I will say this for those that have made 20% returns in equities, what does it mean when the dollar has dropped 20% against other world currencies (this was posted in another thread)? The investor hasn't gained anything and this profit is an illusion. Unless your hedged against the U.S. dollar or buy U.S. stock in other strong currencies, your 20% paper profit is essentially 0%. Happy trading... I'm actually bullish today and am watching to break 950
With manufacturing job losses in China, many are "returning home"... to once again scratch out a subsistence living on the peasant family farm. We Americans won't be able to do that.
I wouldn't mind having a ranch, small farm and living a simple life... this is actually how I want to retire. The problem is that I cannot see my neighbors giving up their material possessions to pursue this lifestyle. America is an overly consumerist culture. I really think people would rather commit suicide before giving up their BMWs, fine-dining, heading to the country and resorting to the simple life. This actually happened frequently during the Great Depression. Many of the rich that lost everything committed suicide instead of starting over.