Forget Inflation! Market Fundamentals are Appalling

15 years ago

Market Fundamentals are Appalling

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As recommended by John Mauldin;

'Montier and Edwards speak quite forcefully about the problems they see in the market today, and they are truly Outside the Box thinkers.'

'They are, in a word, skeptics, and at this juncture most deeply skeptical of any and all notions that 'the worst is over.' The recession, which has barely begun, is more likely to be deep than shallow, market valuations are hideously expensive and the -flation policymakers should be worried about starts with de-, not in-. For their reasons, keep reading, if you dare.'

Interesting...

Cheers,

Dave Donhoff

Leverage Planner

Here is a link that might be useful: Market Fundamentals are Appalling

Comments (10)

lucy
15 years ago
Dave - maybe others won't say anything, but while you've been very helpful to people about their finances in general, this (and another one) post is more or less spam and I guess no one wants to get into it... even if the info might be good. Spam is just not done here.
dave_donhoff
Original Author
15 years ago
Lucy,
What are you talking about? Do you know what SPAM is?

If so, how do you see my contributions as SPAMming?

Random groundless accusations are just not done here (or at least they are quite rare anymore ;~)

Cheers,
Dave Donhoff
Leverage Planner
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Hi Chelone, What's with the listing of your magazines? Was that meant for this thread? Or are you saying that all of those are your cause for belief that "deregulation in banking has encouraged the shocking lending practices that have lead to the present circumstance."? I'm sorry I screwed your name up. I'm usually pretty good about that, and historicially I've been "on the money" with your's, I think. No worries, no offense taken (the mix-up, as I stated, is so extremely common outside of written communications that I'm virtually never offended by it... no even when an offender points out in hindsight that she *MEANT* it to be offensive at the time ;~) I'm either thick-skinned, or thick-skulled (depending who you ask) that way. My own philosophy about investing (WHEN and how) is very different than your's, Dave (sorry again!). I believe in retiring debts efficiently before the term. What do you believe in when the term is too short to efficiently eliminate the leverage, in respect to a person's actual life (not the arbitrarily set term of the loan)? My own portfolio has seen a downturn, but not a terribly precipitous one, frankly. Mostly, I think, because I have paid my major debts in full and now have the option of directing current contributions (that would have be directed to debt/interest payments) to longer term investments. If you look at a comparison of a pre-funded sum growing on a compounding basis (even minus the interest charges considered if the funds were from leverage,) versus a "drip-funded" scheme of the same monthly payment... you'll apparently be quite surprised at how dangerous the "eliminate the leverage, then drip the investment" strategy actually is. I am reasonably certain you will find fault with it all. I'm OK with that. I know that the properties I own are owned "free and clear". I know also that my portfolio is reasonably (within my "risk toleranace") conservative relative to the times frames I have in mind. I'm glad to know you are blissful. ;~) "Broadbrush" is workin' just fine for me. I'll keep that in mind when I see future claims or statements, and pull in the reigns of my accuracy expectations. Here's to your blissful seasons; that you are confronted by no surprises you weren't anticipating, and that you remain safe without having to be aware! Dave Donhoff Leverage Planner
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lucy
15 years ago
It looks like you're selling your services, but if I'm wrong, then I apologize.
nycefarm_gw
15 years ago
No Lucy, he is not selling anything, he is educating us without personal gain. I value his opinion...
dave_donhoff
Original Author
15 years ago
Hi Lucy,

OK... let's call a spade a shovel; YES... I am a service professional and I do sell my financial services. YES, people can (and do) decide to contact me for help after they've read my postings... and I like that ;~)

HOWEVER; if you'll actually read the content of the posts you find from me, you'll see that I am very disciplined to *NEVER* sell, promote nor solicit my services in the communities.

I figure that just being generous with answers to questions, and contributing the raw and polished information that I read & find valuable daily, is enough for some people to see who I am, and perhaps decide if they want to find me & chat with me more, ofboards, whenever that time comes.

The post here you are responding to has no content about me whatsoever... and I hope it didn't offend you.

Cheers,
Dave Donhoff
Leverage Planner
dreamgarden
15 years ago
nycefarm-"No Lucy, he is not selling anything, he is educating us without personal gain. I value his opinion..."

I do too.
behaviorkelton
15 years ago
Deflation? Wow! That would certainly be a change in direction.

So who benefits (or survives) in a deflationary market?

Does this mean a dollar would be worth more?

Is deflation more worrisome than inflation?
(maybe I should read that link... but it looks too much like a "come on")
ian_bc_north
15 years ago
Hello Kelton,
In a deflationary environment people put off major purchases because they expect prices to fall.
The result is lower economic activity and higher unemployment.
In a deflationary environment cash is king.
The people who benefit are those who get a regular income in cash which will buy more.
The last period of extended deflation in North America was the Great Depression which for many is the defining economic disaster of the last 100 years in North America.

I would suggest that for people in Zimbabwe inflation is part of the defining economic disaster there.
dave_donhoff
Original Author
15 years ago
Hi Kelton,

So who benefits (or survives) in a deflationary market?

Be definition, a deflationary environment is when hard assets become less valuable relative to cash. Thus, those who are more liquid in cash or its equivalents benefit.

Does this mean a dollar would be worth more?

Exactly... and in some markets you can already see this in spades.

In San Diego, for example, if you have $500,000 you can buy almost twice as much home today than 3 years ago. That directly makes the dollar itself twice as valuable (in that market.)

Is deflation more worrisome than inflation?

Nope... just different. If you understand it, you can manage your life within it.

NOW: BEWARE!!!
We are almost never in a UNIVERSALLY deflationary nor inflationary environment!

Currently we can see a bifurcation of inflation/deflation in some areas, and an almost neutral environment in others.

Consumed commodities are experiencing INFLATION... which is to say that a dollar buys less gasoline, less wheat, and less bananas.

Hard assets are experiencing DEFLATION (as in the above San Diego example,) HOWEVER... the degree of deflation is relative to the local areas in the case of real estate.

The measured response by the Federal Reserve and Treasury (namely, the non-manipulation of short term interest rates,) has it appear that soft-asset deflation and hard asset inflation are roughly cancelling each other out enough to avoid monkeying from the high-authority side.

IN SHORT, the markets ACTUALLY seem to be sorting themselves out in just about the most orderly and organized fashion we could have ever have hoped for, where the sequential deflationary popping of the stock markets in 2000, and then the real estate and credit markets in 2007/2008 are being counterbalanced by fairly non-catastrophic inflation in the consumer markets.

cheers,
Dave Donhoff
Leverage Planner
stinkbone
15 years ago
But in reference to the original post here...congress is bailing out the morgage mess with fixed FHA loans up to 115% LTV; as early as today congress will vote on regulating oil markets to curb speculation which may bring the cost down to $80 a barrel; my citigroup stock has gone up 50% in a week. Maybe the worst is over...

Forget Inflation! Market Fundamentals are Appalling

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lucy

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Forget Inflation! Market Fundamentals are Appalling

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