Economic Hardship in a Deflation and OA

[Mighty Hal]

Delekkerste seems to be growing into the anti-Krazy Kat.

 

I'm not disagreeing with what he's posted -- I've heard that high end collectibles and artwork are often the last things to fall in price during a recession and, when they fall, they often fall severely -- but I'm hoping that he's not right.

 

I'm currently negotiating to buy my most expensive piece ever...and I'd hate to think I'm buying at the top of the market.

[OhioLurker-migration]

Delekkerste is not turning into an anti-kk - he has always been a perma bear on collectibles. This deflation will pass and collectibles will likely go higher.

You know what they say 'Inflate or die'.

 

I personally think KK has been right and will likely continue to be so.

 

I like this article [although its about gold not collectibles]:

 

http://www.321gold.com/editorials/moriarty/moriarty102108.html

 

'THINGS' are where its at.

 

 

[Ares]

Delekkerste is not turning into an anti-kk - he has always been a perma bear on collectibles. This deflation will pass and collectibles will likely go higher.

You know what they say 'Inflate or die'.

 

I personally think KK has been right and will likely continue to be so.

 

I like this article [although its about gold not collectibles]:

 

http://www.321gold.com/editorials/moriarty/moriarty102108.html

 

'THINGS' are where its at.

 

 

HI Kat

[delekkerste]

I personally think KK has been right and will likely continue to be so.

 

I like this article [although its about gold not collectibles]:

 

http://www.321gold.com/editorials/moriarty/moriarty102108.html

 

'THINGS' are where its at.

 

If "things" are where it's at, remind me to be elsewhere. The CRB Index of commodity prices is down 40% in 3 1/2 months; real estate prices are sinking all over the world; gold is down 23%, silver is down 53% and oil is down 50% from their 2008 highs; and now the fine art bubble is popping in much the same manner as it did in 1990. If the art and collectibles business was in such robust shape, Sotheby's stock price wouldn't be down 73% year to date.

 

The best part of the article you referenced was this line: "I was dead wrong, and I feel bad, especially for the new readers who have only just recently shown an interest in the resource stocks. But if it's any consolation, my accounts are down just as much as yours." At least he is owning up to being wrong, even if he's still singing the same wrong tune. I know a guy who invested most of his stock portfolio in companies of the sort this guy writes about. Guess what, as of the first week of October, he had lost more than 70% year-to-date and our mutual friend describes his mood as "almost suicidal".

 

Investing in "things", even gold and art, on the cusp of the worst deflation this country has experienced since the Great Depression? No, thank you, that's just plain KRAZY.

[spider9698]

I need to buy a bigger mattress

 

[OhioLurker-migration]

Deflation in paper money? Backed by nothing?

They will print, print, print. If gold was our currency then deflation would be for real. This dis-inflationary period is temporary. Prices will rise. This will all end up being an inflationary holocaust.

 

Bernanke says he is 'sterilizing' all the money. You dont really believe this nonsense?

 

http://www.marketoracle.co.uk/Article6866.html

 

http://www.marketoracle.co.uk/Article6609.html

 

 

SHE AINT GOING TO FLY FOREVER

 

http://quotes.ino.com/chart/?s=NYBOT_DX&v=d12

[jkrk]

Deflation in paper money? Backed by nothing?

They will print, print, print. If gold was our currency then deflation would be for real. This dis-inflationary period is temporary. Prices will rise. This will all end up being an inflationary holocaust.

 

Bernanke says he is 'sterilizing' all the money. You dont really believe this nonsense?

 

http://www.marketoracle.co.uk/Article6866.html

 

http://www.marketoracle.co.uk/Article6609.html

 

 

SHE AINT GOING TO FLY FOREVER

 

http://quotes.ino.com/chart/?s=NYBOT_DX&v=d12

 

Betting on inflation in the long term? Makes sense. The problem is that we might be facing the 100 year flood and many will go broke and forced from their assets before inflation reigns.

 

Betting on collectables versus all other assets? A very, very low probability. Think necessities before buying an asset that merely reflects excess liquidity. Think food commodities, metals, energy, water, etc. first. Collectables come near the bottom.

 

THe irony- Even the masses know that we must eventually reflate. They are positioned with "stuff" but no cash. Will the middle class be wiped out (as usual)

before assets shine? If we are witnessing the 100 year flood look for sharply lower prices as the middle class liquidates whatever they can to raise cash.

[delekkerste]

Betting on inflation in the long term? Makes sense. The problem is that we might be facing the 100 year flood and many will go broke and forced from their assets before inflation reigns.

 

Absolutely. If you are the U.S., you can only inflate your way out of debt one time before the world loses faith in you and you turn into a banana republic. While I do believe that it will probably be the ultimate solution, this is something that could literally be years or decades away, so to hoard gold and other hard assets *now*, as we are entering one of the all-time great deflationary periods in history, doesn't make a lot of sense.

 

Many people will indeed be liquidated out of their assets and be stuck with huge losses on their inflation hedges and hard assets. Platinum is down 63% from its recent highs, gold down 27%, silver down 54%, palladium down 70% - all these conspiratorial goldbug arguments for hard assets based on shoddy and superficial analysis that KrazyKat is posting here and in other threads make no sense whatsoever.

 

For what is really going on in the world, let me crib from my own post in the "Gold $500" thread in the Water Cooler:

 

"The price of bullion continues to plummet as the dollar continues its relentless surge (now trading at $1.28/euro and $1.63/pound in Asia at the moment) as dollar liquidity continues to tighten. Aside from technical corrections, the dollar looks to be in a bull market for some time to come as the current account deficit, which flooded the world with excess dollar liquidity, is now shrinking rapidly and creating a liquidity shortage. Meanwhile, we have seen a meltdown in dollar financed asset values but no shrinkage on the liability side of the balance sheet, the repayment of which will provide a structural demand for dollars for years to come in the absence of a renewed expansion of trade deficits.

 

The small fry public and the goldbugs with their faulty analytical tools have it wrong again as usual. They are hoarding gold [and art and other "hard assets"] at a time when dollar liquidity is tightening and the inflation threat has been replaced by a massive deflationary threat."

[delekkerste]

Meanwhile, forget the canard about foreign buyers propping prices up - the dollar just hit a fresh 5+ year high agaiinst the British pound as the U.K. and European economies and markets hit the skids.

 

 

King Says BOE Will Act as U.K. Recession Seems Likely

 

By Brian Swint and Jennifer Ryan

 

Oct. 22 (Bloomberg) -- Bank of England Governor Mervyn King said Britain's worst banking crisis since World War I is likely to push the economy into a recession, requiring policy makers to act ``promptly'' to prevent inflation from slowing too much.

 

``The combination of a squeeze on real take-home pay and a decline in the availability of credit poses the risk of a sharp and prolonged slowdown in domestic demand,'' King said in a speech to executives in Leeds, England yesterday. The Monetary Policy Committee ``will act promptly to ensure that inflation remains on track to meet our target.''

 

King said house prices will continue to fall and the pound may depreciate further in his first explicit acknowledgement that a U.K. recession is likely. The financial crisis led Gordon Brown's government to bail out the British banking system and minutes published today showed policy makers voted unanimously to cut rates in an emergency session on Oct. 8.

 

``We are far from the end of the road back to stability,'' King said. ``But the plan to recapitalize our banking system, both here and abroad, will I believe come to be seen as the moment in the banking crisis of the past year when we turned the corner.''

 

The pound slid to the lowest level in more than five years against the dollar after King's comments. The U.K. currency fell to $1.6203, the lowest level since September 2003, and traded at $1.6396 as of 10:23 a.m. in London.

[Mac Man]

Betting on inflation in the long term? Makes sense. The problem is that we might be facing the 100 year flood and many will go broke and forced from their assets before inflation reigns.

 

Absolutely. If you are the U.S., you can only inflate your way out of debt one time before the world loses faith in you and you turn into a banana republic. While I do believe that it will probably be the ultimate solution, this is something that could literally be years or decades away, so to hoard gold and other hard assets *now*, as we are entering one of the all-time great deflationary periods in history, doesn't make a lot of sense.

 

Many people will indeed be liquidated out of their assets and be stuck with huge losses on their inflation hedges and hard assets. Platinum is down 63% from its recent highs, gold down 27%, silver down 54%, palladium down 70% - all these conspiratorial goldbug arguments for hard assets based on shoddy and superficial analysis that KrazyKat is posting here and in other threads make no sense whatsoever.

 

For what is really going on in the world, let me crib from my own post in the "Gold $500" thread in the Water Cooler:

 

"The price of bullion continues to plummet as the dollar continues its relentless surge (now trading at $1.28/euro and $1.63/pound in Asia at the moment) as dollar liquidity continues to tighten. Aside from technical corrections, the dollar looks to be in a bull market for some time to come as the current account deficit, which flooded the world with excess dollar liquidity, is now shrinking rapidly and creating a liquidity shortage. Meanwhile, we have seen a meltdown in dollar financed asset values but no shrinkage on the liability side of the balance sheet, the repayment of which will provide a structural demand for dollars for years to come in the absence of a renewed expansion of trade deficits.

 

The small fry public and the goldbugs with their faulty analytical tools have it wrong again as usual. They are hoarding gold [and art and other "hard assets"] at a time when dollar liquidity is tightening and the inflation threat has been replaced by a massive deflationary threat."

 

I'm assuming your argument doesn't really pertain though to the casual collector who spends only a small percent of his annual income on hobby-related expenses (i.e. 1-2%)? I might be ripe for the picking here, but I've a solid, 30-year fixed mortgage, roughly 15% or more going into savings/ investments (100% of which has been CDs or low risk funds). My wife and I both are teachers (not a commodity field), so am I wrong to not feel AS worried as this makes me feel I SHOULD? :shrug: Do I expect to feel a hard pinch in the coming months/years? Sure do! But I have a hard time thinking I'm going under too. But then again, maybe that's because we're not pouring our money into hard assets like collectibles (not that I could ever imagine doing so outside of hobby-related purposes).

[OhioLurker-migration]

 

 

I seem to remember someone once saying that trees dont grow to the sky?

 

http://quotes.ino.com/chart/?s=NYBOT_DX&v=dmax

 

This was predicted.

 

It will pop.

 

And when it does, **oh boy**

 

 

[Mister Trent]

The pound slid to the lowest level in more than five years against the dollar after King's comments. The U.K. currency fell to $1.6203, the lowest level since September 2003, and traded at $1.6396 as of 10:23 a.m. in London.

 

Thankfully I own my own home and have never owned a credit card (if the money's in my account, I write a cheque . . . if it isn't, I keep to my budget).

 

Now to switch back to buying art from within the UK (I'll post a 'UK Art Day' within the next week or two) . . .

[Pirate]

The pound slid to the lowest level in more than five years against the dollar after King's comments. The U.K. currency fell to $1.6203, the lowest level since September 2003, and traded at $1.6396 as of 10:23 a.m. in London.

 

Thankfully I own my own home and have never owned a credit card (if the money's in my account, I write a cheque . . . if it isn't, I keep to my budget).

 

Now to switch back to buying art from within the UK (I'll post a 'UK Art Day' within the next week or two) . . .

 

I just did my biggest dollar amount art purchase and since I work for a college, don't make mess. I keep on selling parts of my comic collection to buy art.

 

I have two judge dredd pages I need to post sometime. I love UK art.

[jjonahjameson1]

Perhaps someone more attuned to the nuances of global investor mentality can help me understand something with the condition of recent markets & $US dollar valuation (Gene are you reading this?):

 

So, the US Government (read: taxpayers) are incurring a debt of $700 Billion to help pump liquidity back into their markets (I think that number will ultimately be $2.5-$3 Trillion, but I digress), and property values are tanking (and continue to decrease). People are in a holding pattern when it comes to spending and cash is King.

 

So, given all of the above, can someone please explain to me, logically, why the $US is increasing in value compared to other currencies from countries with significantly stronger (not larger) economies? Are foreign investors actually purchasing $US dollars as a hedge against weakening global economy? Yeesh!

[delekkerste]

The mechanism by which the dollar is strengthening is pretty clear:

 

"Dollar liquidity continues to tighten. Aside from technical corrections, the dollar looks to be in a bull market for some time to come as the current account deficit, which flooded the world with excess dollar liquidity, is now shrinking rapidly and creating a liquidity shortage. Meanwhile, we have seen a meltdown in dollar financed asset values but no shrinkage on the liability side of the balance sheet, the repayment of which will provide a structural demand for dollars for years to come in the absence of a renewed expansion of trade deficits."

 

The Fed has greatly expanded its balance sheet, but it's not like dollars are flooding the system now, quite the contrary. There is an insatiable demand for dollars as carry trades unwind, capital is repatriated from plummeting foreign markets, etc. If the sheer amount of debt caused the currency to tank, then Japan would be a banana republic by now. Clearly, other factors are at work.

 

I would also disagree that the dollar is strengthening against currencies of countries with "significantly stronger economies". Maybe Canada is in better shape (but, for how much longer - nobody cares about the oil sands when crude oil is at $66/bbl.), but the U.K. and Europe clearly are not; most of Europe printed negative GDP in the third quarter whereas the U.S. didn't (though it probably will this quarter).

 

Technical corrections aside, I would look for continued dollar strengthening over the next year.

[comix4fun]

Technical corrections aside, I would look for continued dollar strengthening over the next year.

 

 

Dude, seriously...how is your " " button not worn out?

[Claudio]

Perhaps someone more attuned to the nuances of global investor mentality can help me understand something with the condition of recent markets & $US dollar valuation (Gene are you reading this?):

 

So, the US Government (read: taxpayers) are incurring a debt of $700 Billion to help pump liquidity back into their markets (I think that number will ultimately be $2.5-$3 Trillion, but I digress), and property values are tanking (and continue to decrease). People are in a holding pattern when it comes to spending and cash is King.

 

So, given all of the above, can someone please explain to me, logically, why the $US is increasing in value compared to other currencies from countries with significantly stronger (not larger) economies? Are foreign investors actually purchasing $US dollars as a hedge against weakening global economy? Yeesh!

 

People actually feel that the rest of the world will be hurt more than the US. That is why the dollar is increasing in value. Plus, the US is the driving force of the global economy. The thinking is that when we get out of this slowdown, the US will lead. All the other govies will have to print money just as much as we do.

 

Another interesting fact is that several foreign companies actually held currency hedges that went to the extreme. They hedged so much that it became speculation and some are going bk because of it. Unwinding these trades can also be a reason for the drop in foreign currencies.

[adamstrange]

Betting on inflation in the long term? Makes sense. The problem is that we might be facing the 100 year flood and many will go broke and forced from their assets before inflation reigns.

 

Absolutely. If you are the U.S., you can only inflate your way out of debt one time before the world loses faith in you and you turn into a banana republic. While I do believe that it will probably be the ultimate solution, this is something that could literally be years or decades away, so to hoard gold and other hard assets *now*, as we are entering one of the all-time great deflationary periods in history, doesn't make a lot of sense.

 

 

You make the choice sound like "banana republic" or "deflation." Can there not be a modest inflation (3 - 5%) without going into either extreme?

 

Why do you think it years before inflation would be used a "solution?" If it's the easy way out what makes you think that the current or next set of politicians would fail to go that route?

[OABUG-migration]

Betting on inflation in the long term? Makes sense. The problem is that we might be facing the 100 year flood and many will go broke and forced from their assets before inflation reigns.

 

Absolutely. If you are the U.S., you can only inflate your way out of debt one time before the world loses faith in you and you turn into a banana republic. While I do believe that it will probably be the ultimate solution, this is something that could literally be years or decades away, so to hoard gold and other hard assets *now*, as we are entering one of the all-time great deflationary periods in history, doesn't make a lot of sense.

 

 

You make the choice sound like "banana republic" or "deflation." Can there not be a modest inflation (3 - 5%) without going into either extreme?

 

Why do you think it years before inflation would be used a "solution?" If it's the easy way out what makes you think that the current or next set of politicians would fail to go that route?

 

We shall see if the currency markets want to ignore twin deficits, a policy of printing infinite money / lower rates, and trade deficts of 1/2 Billion to a trillion dollars. I conceed, maybe Reagan was right and 'deficits dont matter'.

 

http://www.financialsense.com/Market/barbera/2008/1021.html

[tth2]

have never owned a credit card

Wow, is that even possible anymore? How do you book flights, hotel reservations, car rentals, make online purchases, etc.?

 

Do you go everywhere with huge wads of cash in your pockets? Most places won't take checks anymore, at least not without a credit card.