Author Topic: Deflation hedges  (Read 135525 times)

ERICOPOLY

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Re: Deflation hedges
« Reply #10 on: December 04, 2014, 03:33:44 PM »
lower commodity prices means you can make stuff cheaper.
productivity gains mean you can make stuff cheaper.

lower commodity prices mean consumers can buy more stuff with same paycheck, leading to higher factory utilization and employment gains,

higher productivity means we make products with fewer people.

lately I believe productivity has disappointed during an environment of cheaper commodities.  Isn't this a bullish combination for capacity utilization and employment gains? Somehow I believe that is a headwind to deflation.

What was first, deflation or lower oil prices?

Well in Japan they had deflation even with rising commodity prices.

We're not seeing deflation here yet, but we are seeing lower commodities.  Real purchasing power is rising as is employment.  So far anyway   :-X


ni-co

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Re: Deflation hedges
« Reply #11 on: December 04, 2014, 10:41:37 PM »
lower commodity prices means you can make stuff cheaper.
productivity gains mean you can make stuff cheaper.

lower commodity prices mean consumers can buy more stuff with same paycheck, leading to higher factory utilization and employment gains,

higher productivity means we make products with fewer people.

lately I believe productivity has disappointed during an environment of cheaper commodities.  Isn't this a bullish combination for capacity utilization and employment gains? Somehow I believe that is a headwind to deflation.

What was first, deflation or lower oil prices?

Well in Japan they had deflation even with rising commodity prices.

We're not seeing deflation here yet, but we are seeing lower commodities.  Real purchasing power is rising as is employment.  So far anyway   :-X

I have been thinking about it a lot lately and I'm still not sure about it. Why did we have high(er) oil prices in the face of the whole shale gas revolution only a few months ago? To me, it seems more probable that the prices are reacting to deflationary pressures from all around the world (but the US). I'm really curious whether we will see this working out as economic stimulus for the US economy or more as importing deflation.

Gundlach talked about this lately: http://video.cnbc.com/gallery/?video=3000333313
He is using oil as a leading indicator for the CPI.
« Last Edit: December 04, 2014, 10:48:38 PM by ni-co »

petec

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Re: Deflation hedges
« Reply #12 on: December 18, 2014, 01:48:03 AM »
lower commodity prices means you can make stuff cheaper.
productivity gains mean you can make stuff cheaper.

lower commodity prices mean consumers can buy more stuff with same paycheck, leading to higher factory utilization and employment gains,

higher productivity means we make products with fewer people.

lately I believe productivity has disappointed during an environment of cheaper commodities.  Isn't this a bullish combination for capacity utilization and employment gains? Somehow I believe that is a headwind to deflation.

What was first, deflation or lower oil prices?

Well in Japan they had deflation even with rising commodity prices.

We're not seeing deflation here yet, but we are seeing lower commodities.  Real purchasing power is rising as is employment.  So far anyway   :-X

I have been thinking about it a lot lately and I'm still not sure about it. Why did we have high(er) oil prices in the face of the whole shale gas revolution only a few months ago? To me, it seems more probable that the prices are reacting to deflationary pressures from all around the world (but the US). I'm really curious whether we will see this working out as economic stimulus for the US economy or more as importing deflation.

Gundlach talked about this lately: http://video.cnbc.com/gallery/?video=3000333313
He is using oil as a leading indicator for the CPI.

I recall going to a dinner arranged on this board before the 2009 annual dinner and someone asked Sam Mitchell: inflation or deflation?   He said: both, and what really matters is when one turns into the other.

I'm inclined to think he's right, and I think commodity prices coming down are deflationary at first, and that is so good for the economy that Eric's thesis plays out and we get wage growth and a little inflation.

But the third order effect is that, with those elements of the economy normalised, CBanks can and might have to raise rates, and it is quite possible that that will cause havoc.

Now, by the time you get to third order events your chance of making a correct prediction is so small as to make the exercise pointless!   But I can see how Prem's 2011 forecast of a possible decade of flattish nominal GDP with bouts of deflation might come true.

But then I suppose any forecast *might* come true ;)

« Last Edit: December 18, 2014, 01:51:18 AM by petec »
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Luckyone77

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Re: Deflation hedges
« Reply #13 on: January 07, 2015, 08:55:19 AM »
So, Europe officially slips into deflation with todays news. What does it mean and how exactly can you calculate what that means to FFH's deflation plays and the value of the company? I'm a marketing major not a Finance major, so, go easy guys.

A part of me is thinking it's time to buy more of their stock but FFH's "tech stocking picks" (Dell and Blackberry) seem to be SO off the mark that it gives me pause and concern about what they're thinking at times. I've spoken with 2 highly placed tech executives or tech board members (not a Blackberry employee) who thinks there's not a happy ending there. Frankly, they just laugh it off. Of course, they could all be wrong and Watsa could have the last laugh or FFH might simply be too stubborn to admit they've got a loser on their hands. Time will tell.

"The urge to save humanity is almost always a false face for the urge to rule it." - H.L. Mencken

giofranchi

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Re: Deflation hedges
« Reply #14 on: January 07, 2015, 09:12:16 AM »
FFH's "tech stocking picks" (Dell and Blackberry) seem to be SO off the mark that it gives me pause and concern about what they're thinking at times. I've spoken with 2 highly placed tech executives or tech board members (not a Blackberry employee) who thinks there's not a happy ending there. Frankly, they just laugh it off. Of course, they could all be wrong and Watsa could have the last laugh or FFH might simply be too stubborn to admit they've got a loser on their hands. Time will tell.

The fact investment mistakes are often made is just a part of this life… And no one can do anything about that, but accept it as a matter of fact!

Probably FFH invested a bit too much in Blackberry… and now all they are doing is trying to defend their investment as best as they can… But I would be very surprised if they deploy new capital that way from now on!

Of course, in the end what truly matters are overall results. And until now FFH has proven to be able to achieve very satisfactory overall investment results! ;)

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meiroy

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Re: Deflation hedges
« Reply #15 on: January 12, 2015, 06:03:45 PM »
The US will not go into real deflation.

The crash in commodities and oil is due to oversupply and NOT a drop in real demand.

These lower costs will boost demand and growth in the US.

That's it. Add Europe and China numbers to it and the outcome is the same.

If you live in the USA this year consider yourself a lucky bastard.

Carry on.
« Last Edit: January 12, 2015, 06:05:42 PM by meiroy »

One World Trader

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Re: Deflation hedges
« Reply #16 on: January 12, 2015, 07:51:24 PM »
Sorry I cannot believe that an increase in supply means an increase in demand. Why would anything be more "in demand" if it can be obtained more easily?? Whether I think of an example in socks or stocks it doesn't seem to add up!! :)

meiroy

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Re: Deflation hedges
« Reply #17 on: January 12, 2015, 08:11:41 PM »
Sorry I cannot believe that an increase in supply means an increase in demand. Why would anything be more "in demand" if it can be obtained more easily?? Whether I think of an example in socks or stocks it doesn't seem to add up!! :)

I wrote:
"The crash in commodities and oil is due to oversupply and NOT a drop in real demand.

These lower costs will boost demand and growth in the US."


Now that oil is much cheaper, do you think people will use more, the same, or less?

If the economy grows due to lower oil and commodities costs (and other external factors), would aggregate demand increase or decrease?




« Last Edit: January 12, 2015, 08:23:07 PM by meiroy »

One World Trader

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Re: Deflation hedges
« Reply #18 on: January 13, 2015, 09:59:11 AM »
My friend, I don't know anyone who goes to the pump to fill up for work and has another tank of gas they fill because the stuff is selling for half price. I think people use the same amount if not a tad more.

With returns on money in the bank at .1 percent with little wage increases and inflation at 2-3 percent per year the average person is seeing their effective purchasing power decrease over the past few years. Factor the last few years of this in and people are really hurting. So the little they are saving in gas like you suggest cannot be going back into growing the economy if they have to pay off the average americans credit card debt, which is 15,611. BTW that Iignores the white houses recent push to..yup you guessed it...raise the gas tax.

 It's what they want you to believe though. :)

Tim Eriksen

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Re: Deflation hedges
« Reply #19 on: January 13, 2015, 10:10:24 AM »
My friend, I don't know anyone who goes to the pump to fill up for work and has another tank of gas they fill because the stuff is selling for half price. I think people use the same amount if not a tad more.

With returns on money in the bank at .1 percent with little wage increases and inflation at 2-3 percent per year the average person is seeing their effective purchasing power decrease over the past few years. Factor the last few years of this in and people are really hurting. So the little they are saving in gas like you suggest cannot be going back into growing the economy if they have to pay off the average americans credit card debt, which is 15,611. BTW that Iignores the white houses recent push to..yup you guessed it...raise the gas tax.

 It's what they want you to believe though. :)

I think you are missing his point.  It is a basic principle in economics that a higher price leads to decreased usage, and conversely a lower price leads to increased usage.  Not for every individual but in aggregate.  Of course you could argue that demand is the relatively the same regardless of price for certain products, but it doesn't take much increase to bring supply and demand back in line.   For oil we are talking about a 1% change in usage.  Will lower prices increase travel.  Historically it does.