Thank you very much for posting the link. I have read Napier's book and have been looking for this information for a while. Good to know what he is thinking. (I'm not a CLSA client).
Why do people blindly assume that a deflationary fallout cant happen? The market is telling you that it is happening.
I feel what you are saying. It's absolutely confusing. I honestly don't think anyone knows what's to come, but I would not be so bold as to rule out deflation as this ratio indicates, because this global deleveraging means that much of the fiat money being printed and given to the financial sector is being 'tucked away' to clean up balance sheets, and not re-loaned, at the same time that consumer and business cap ex spending is plummeting.
No problem. I think this ratio is fascinating. Makloda made a comment earlier in the thread that I'm still thinking about. These are complex times.
The Talking Heads want us to believe that deflation is the worst of all worlds. It's not. And while the Fed can probably stop deflation if they print money willy-nilly, too much inflation is a bad thing too... in fact, historically it has been the "Destroyer Of Worlds".
The def theory has it's merits. But don't forget, M3 was going up faster than a combination nanotech, internet search engine and auction site IPO. So we've built up a lot already that need destroying. Is it a lot compared to what we need to delever away? Is it a lot more? Is it only a single digit fraction? Beats me. But I also see the feds spending money so fast it makes all the previous governments look like tightfisted Scots. And I see the next batch laughing and saying they'll spend even more. And the public can easily be molified with their now expected annual "rebate" check. We'll be at 100 trillion debt before anybody can say "Holy #@*& batman!" And if that's not introducing enough money in the system, the feds can spend more faster until there is. There's no question that (if they want to) the US government can end deflation right quick.
People are missing the point. ASSETS can deflate in REAL terms even if money is printed. Sending 100K to everyone will definitely inflate the dollar, but will the people get RICHER in real terms, no they will still get poorer. The FED is under the impression that as long as more money is printed the economy can carry on functioning in ever inflating bubble that moves from one asset class to another. This game of hot potatoe can only be played for a limited time until ALL assets finally correct in real terms. The value of the dollar is COMPLETELY irrelevant. Only the value of assets against an inflation adjusted benchmark. Those values cannot be sustained by merely printing more money, that is the equivalent of saying that Zimbabwe should have the strongest economy since they print the most and "keep deflation in check." Whether that will happen however, remains to be seen. As I understand this Q ratio, its already at undervalued levels. So whether it gets even more undervalued is a big if.
Doesn't concern you... that if they did exactly that, foreign bond holders fearing infaltionary consequences would likely dump their treasury holdings & causing interest rates to sky? And the value of the $USD would plummet... again causing foreign holders to dump. So... Bennie gives each of us $500K and tells us to "pay off your house, pay off your credit cards, and go buy a new HDTV"... Except then the world would want 25% interest on our bonds to compensate them for the de facto default risk they'd be taking. Printing too much money is WORSE in the long run than suffering deflation..
With Billions of $ going into gov. bonds for a guaranteed LOSS over the next 3 months the BIG money must not see value in stocks right now. Why the hell would they lock into bonds with a negative yield if they werent scared shitless about something coming down the pipe!! If you are long stay hedged.....