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Tuesday, January 13, 2015

Tuesday morning news

That previous post should lure 'em all in like catnip.

Now here's the news:

BI - old age and stretched valuations have never caused a bull market to end, evarrr. Sure, but the market can futz around for 6 months doing nothing while people realize this.

Calculated Risk - the recovery in US heavy truck sales. Therefore sell the S&P, I guess.

Gavyn Davies - the global deflation shock. It's all kinda weird. There's the good deflation of collapsing commodity prices, and that'll help consumers. But there's also the structural deflation in the EZ, and that's bad for US exporters. But on top of that, now the emerging markets are going to see lower consumer inflation, so as long as they ain't oil producers they might buck the EM structural bear trend! Quote:
In fact, headline inflation in the eurozone has already fallen to -0.2 per cent in December 2014, and it is now likely to track at about -0.4 per cent for much of 2015, returning to around 0.8 per cent in early 2016. This assumes that ex energy inflation tracks at around 0.5 per cent, close to where it has been in recent months. Unlike in the US, “bad” deflation has been taking hold in the eurozone since 2013 (see the blue line in the graph). The great concern for the ECB is that good deflation will now unhinge price expectations, making bad deflation even worse.

What will be the impact of this decline in US and eurozone inflation on the global economic outlook? After much debate, a consensus is now emerging that the decline in price inflation, with wage inflation remaining roughly unchanged, will result in a major boost to real consumers’ expenditure in the developed economies.

According to J.P. Morgan, this is already clearly visible in the data, with real retail sales in the developed economies now growing at an annualised rate above 3 per cent. Growth in real consumers’ expenditure should touch 5 per cent in the US in coming quarters, and it may reach 2 per cent in the eurozone. This is now beginning to impact industrial production, which is rising at an annual rate of 3.5 per cent in the developed economies.
Gavyn helps by reminding us that Eurozone structural deflation has already been around for years. It's not something new, so quit piddling yourself, Whitey. His summary:
This shock should have been good for non oil equities, which have indeed risen by 6 per cent, and bad for the energy sector, where stock prices have fallen by 15 per cent. Reduced inflation should have brought down 10 year government bond yields, which have indeed fallen by 50 basis points. And the rise in the dollar also looks rational, given the relative absence of bad deflation in the US.

Financial markets often misread economic fundamentals, but I think not this time.
So quit piddling yourselves! Everything is still fine. - PM ETFs still seeing outflows. I like that! If gold is going up while people are selling ETFs, then imagine what gold will do once people switch back to buying!

Goldchat - goldbugs have already experienced their little hyperinflationary event. I just love the snark of this:
"I put it to you that gold and silver bugs have experienced their worst dream only in the opposite in that all their options on gold and silver aka their junior mining stocks have wiped them out in much the same way that a hyperinflationary event would have done."
Ouch! That one hit right in the nads! I should maybe start listening to Dominic Frisby's podcasts. They sound entertaining. - a trader just bet a fortune on a $130 pop in gold by March. To da moon, Alice!

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