As we sift through the numbers out today, we find that the economy did indeed contact last year. Once again the revisions...
What we have is indecision between inflation and deflation. The housing (which is estimated to be around 1/3 consumer) is imploding and the feds are throwing any and all money to try and prop it. This is very deflationary. In fact so much so that it is causing debts to explode. NY is in trouble, Cal is in trouble etc.
This is why given the choice the fed will always push inflation over deflation. They can always pay back with less dollars whereas in deflation everything collapses under debt burdens.
So while we are imploding with debt making our economy very deflationary, we have the emerging markets exploding driving up every commodity under the sun. If we were as great an economy as we were in past years, our slowdown would effect commodities. However, (sorry folks this does not mean I am UN American just realist) we are no longer the big cheese. Many are starting to figure this out. What we cut back on in consumption is picked up by other countries coming along.
My bet is more inflation of commodities and a contraction of our own economy. Much to the dismay of most economists. It will be awhile before they figure this out.
So long natural resources and short bonds. Remember most of our debt is to foreigners. They will demand more interest from the U.S. in the futures pushing down bond prices.
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5 comments:
Good call Dell.
I always knew I could count exactly on the opposite of what the gov. stats are telling us.
Alex
Since you are talking about inflation and deflation, here's a very good article about these cycles:
http://www.ldusa.com/roger/kond_overview.htm
Dear Dell,
I'm watching dba, oih, kol , ung carefully for upturns..I think I see it with ung.
I just put on a nice calendar jan and sept 45...what do you think?
I just put on a nice bear call on iyr...commercial real estate is starting to fall..what do you think?
The commercial Real Estate should become soft as well and with the bear call, all it has to do is stay flat and you make money.
I think the natural resources have not found the correction bottom yet. But what do I know. That is why I trade calendars. If the bottom is not in just yet you will be fine rolling out. If the bottom is in and I am a few days late, I still will be okay.
It will be interesting to see if the bottom is in.
If Cramer said the bottom was in on natural resources, then I would know we still have some more to go. ;)
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